vil Appeal Nos
2346 47 of 1978 Etc
From the Judgment and Orders dated 581976 of the Madras High Court in TC Nos 436 and 437 of 1971
R Mohan and RA Perumal for the Appellant
TA Ramachandran and Mrs Janaki Ramachandran for the Respondents
The Judgment of the Court was delivered by SABYASACHI MUKARJI J
Special leave granted in Special Leave Petitions C Nos
10539 4704 and 92 1 of 1979
305 These appeals by leave under Article 136 of the Consti tution are from the orders of the High Court of Madras involving a common question though for different assessment years
It would be appropriate to deal with Civil Appeal Nos 2346 4778 and the facts in other appeals are essen tially the same
The assessee in these cases had entered into contracts with the Universities and other educational institutions in the country for printing question papers for the said educa tional institutions
The assessee in the demand notes pre pared gave the charges for printing blocks packing charges handling charges delivery charges postage value of paper and value of packing materials separately in the relevant assessment years
The question involved is whether the taxable turnover should also include the printing and block making charges or not
It appears from the judgment of the High Court that for the assessment year 1966 67 the printing charges amounted to Rs9967500 and block making charges amounted to Rs292395 totaling Rs10259895
Similarly so far as the assessment year 1968 69 is con cerned the printing charges amounted to Rs 133137 and blockmaking charges amounted to Rs 536175 totaling Rs 13849875
The controversy involved in these appeals was whether these two amounts were includable in the assessable turnover of the respondent in the respective years in question
The case of the assessee was that the contract entered into between her and the respective educational institutions was a contract of work and labour and in the performance of that contract incidentally she had to sell paper to them and hence except to the extent of the cost of paper in respect of the other amounts received by her she was not liable to pay sales tax
On the other hand the Government s stand was that the contract was for the sale of printed materials by the respondent to the respective educational institutions and therefore the entire amount will have to be taken into account as turnover liable to tax
In other words would printing question papers and incidentally supplying the papers upon which such questions were printed entail the entire cost to be liable to sales tax
As was put before us the question is can one sell printed question papers and charge for the same The High Court mentioned that till 1963 the assessee was herself doing the printing and the Tribunal held that during that period only the cost of paper was includable in the taxable turnover
With effect from 3111963 the printing was done by a firm of which the assessee s sons and daugh ters were partners
The contract however continued 306 to be entered into between the assessee and the respective educational institutions
According to the Govt
 as appears from the judgment of the High Court this made a difference and as such the order of the Tribunal in the previous years could not govern the assessment for the respective years referred to above
The Tribunal however held against the revenue holding that only the value of paper was liable to be included in the taxable turnover of the assessee
The correctness of that decision was challenged before the High Court by two Revision Cases under section 38 of the Tamil Nadu General Sales Tax Act 1959 hereinafter called the Act 
The High Court on an analysis of the facts and the several decisions came to the conclusion that printing of question papers involved confidentiality of the materials to be printed and held that apart from the paper nothing else could be includ ed in the total taxable turnover of the assessee
The High Court came to the conclusion that the contract entered into between the assessee and the University and other education al institutions was a composite contract ie a contract for work and labour as well as a contract for sale of the paper
It was contended on behalf of the revenue that in case of sale of all printed materials the sales tax was liable on the entire work
In that view of the matter if the liability for sale of printed material would include the entire price then there was no authority according to the revenue to treat the question papers differently
It is however clear as the High Court noted that the printing of question papers of educational institutions was an extremely and highly confidential matter
This is the first aspect of the matter which must be borne in mind
It was emphasised that such printing could not be entrusted to any press of one s choice and the Universities and other educational institutions were only obliged to enter into such contracts with those in whom they have got the highest confidence so that the printer would not divulge the questions to be printed by himher and will preserve the confidential nature of the transaction
Therefore in printing question papers entrusted by educational institutions to the printer the value included the price of the confidentiality and the confidence reposed in the printer
It has to be borne in mind that the price paid for such confidentiality and trust is not the price for the sale of goods
In case of printing of other materials just like letter heads bills account books or even printing works like a novel story poem or drama subject to copyrights the technical excellence and the professional efficiency of the printer among other things might enter into calculation for entrusting the job to a particular printer and the performance thereof
Howev er the position is different in case of printing of confi dential matters like question 307 papers of the Universities or other educational institu tions
The value paid for such printing job includes to a large extent the price of not only the technical and profes sional work but also the value if it could be measured in terms of money of the confidence and faith reposed that the printing materials should not be disclosed to anyone save to be returned back to the University or the educational insti tutions to be dealt with in accordance with its obligations
The High Court noticed these points and came to the conclusion that in view of these peculiar features which will be present in the printing of matters which are confi dential in nature and will not be present in other case the contracts pre dominantly being contracts for work with confidence and faith should be treated mainly as contracts for labour and not contracts for sale of any goods such as printed materials
It may be that in the execution of the contracts and for the purpose of completing the work the parties might enter into the contracts for sale of the paper and in this context it was a composite contract which can be split up into contract for sale of paper and contract for work and labour
Relying on a decision of this Court in Govt
of Andhra Pradesh vs Guntur Tobaccos Ltd XVI STC 240 the High Court was of the view that the cost of paper shown separately in the contract would be liable to tax and except for that cost of paper and the material supplied in other respect the contract was a contract for work and labour and there could not be any liability for sales tax
According to the High Court this would cover the printing charges
Blocks it was found were destroyed after the question papers had been printed
Hence there was no question of sale of blocks or passing of the property
The High Court so held
Following the aforesaid position in other matters which are the subject matters of other appeals where the _High Court held accordingly it dismissed the revision applica tion of the revenue
Aggrieved thereby the appellant has come up to this Court by leave
Our attention was drawn by both Mr Mohan learned counsel for the appellant and Mr Ramchandran counsel for the respondent to the decision of this Court in Govt
of Andhra Pradesh vs Guntur Tabacco Ltd supra where this Court laid down that a contract for work in the execution of which goods are used may take one of three forms
The con tract may be for work to be done for remuneration and for supply of materials used in the execution of the works for a price it 308 may be a contract for work in which the use of materials is accesssory or incidental to the execution of the work or it may be a contract for work and use or supply of materials though not accessory to the execution of the contract is voluntary or gratuitous
In the last class there is no sale because though property passed it did not pass for a price
Whether a contract is of the first or the second class must depend upon the circumstances if it is of the first it is a composite contract for work and sale of goods where it is of the second category it is a contract for execution of work not involving sale of goods
In our opinion the aforesaid tests lay down correct criteria for determining the question
Mr Mohan appearing for the revenue pressed before us that the said principle requires clarification
He emphasised that Press has no ownership over the materials or papers upon which the ques tions were printed
Who then Mr Mohan posed was the owner author or the paper setter of the University or the educational institution or the printing Press In our opin ion when the questions are set on a piece of paper and sent for printing the University remains the owner until it divulges these to the intending candidates or the students
But that is a matter which is relevant in the method of communication of the questions to the candidates appearing in the examination
The means employed for such communica tion entail use of mind confidence trust for the material paper and the technical skill of printing
It is a combina tion of these various factors that results in printing the question papers and the payment made in the process entails a composite payment for all these and can only be dissected and determined in the way laid down by the principle enunci ated in the aforesaid decision
Our attention was however drawn by Mr Mohan to a decision of the Bombay High Court in Saraswati Printing Press vs Commissioner of Sales Tax Eastern Division Nag pur X STC 286
There the petitioner Press itself purchased the stationery and did printing work upon it according to the orders of individual customers and supplied the printed stationery to the customers
It was held that there the petitioner had produced a commercial commodity which was capable of being sold or supplied and when the petitioner sold the printed stationery to its customers it sold goods to the customers upon which sales tax was leviable
In those circumstances it was held that the transactions done by the said petitioner Press were not in the nature of works con tracts but were sales of goods and therefore recourse to rule 53 of the rules could not be made
It was further held that as the petitioner did not immediately dispose of the stationery purchased by 309 it in favour of its constituents but kept it in the Press and did printing work upon it and then supplied the finished product to its constituents the provisions of clause iv of Explanation I of clause m of section 2 were not at tracted
The High Court relied on the decision of the Allahabad High Court reiterating the principle that it is necessary to determine the substance of the contract and as the sub stance of the contract is that skill and labour that had been exercised for the production of the article and sale of material is only ancillary to that
In our opinion the principle upon which the High Court relied is not applica ble in case of transactions of printing of question papers
Question papers as such after being printed are neither available commercially nor available to any community commercial or otherwise save under specific circumstances for the candidates appearing at a particular time in an examination
Mr Mohan also drew our attention to the decision of Andhra Pradesh High Court in State of Andhra Pradesh vs Sri Krishna Power Press Vizianagaram XI STC 498
There the court reiterated that a transaction which results in the transfer of property in finished goods to another person cannot be described as a works contract
It was further held that where the assessee Press itself pur chased stationery and did printing work upon it according to the orders of individual customers and supplied the printed stationery to the customers at an agreed price the transac tion was sales liable to sales tax and not works contract
The fact that the goods prepared by the assessee could not be exhibited for sale to the general public is not decisive of the issue
According to the High Court the only test is whether the contract is for the sale of finished product
Mr Mohan relying on the aforesaid observations submitted that the goods prepared by the assessee could not be sold to other customers the person who placed order could be com pelled to accept it or claim damages from the printers
He submitted that even in a case where goods are prepared according to the specific requisition to suit the require ments of individual customer yet printing materials sup plied thereto have been held to be sale of goods and he drew our attention to the several decisions referred to by the High Court of Andhra Pradesh in aid of his propositions
Normally it may be that the goods prepared by the assessee which could not be exhibited for sale would not be decisive of the matter and could in certain circumstances be sales liable to sales tax but in all circumstances it depends upon the nature of the sale and the nature of the transac tion involved
Printing of question papers at the behest of University or educational institutions is rather a delicate and confidential type of work and the price paid for supply ing such printed question 310 papers or printed matters entails primarily the confidence and secondly the skill and to a very small measure the material
If that is the position then in our opinion it cannot be categorised entailing sale of goods but it is rather a contract for works done
Mr Mohan also relied on the decision of the Madras High Court in PM Venkatachalam Pillai vs The State of Madras XXIII STC 72 where it was held that when a transaction is claimed to be a works contract a decision on the question depends on the particular facts
The primary point to bear in mind in such cases is what is the intention of the par ties viewing the transaction as a whole do they intend an apportionment or view the transaction on compartmental basis as that which represents labour and that which represents sale of the materials
Different tests may be applied in answering such a question as the stage of passing of proper ty risk and the like
But all these tests converge towards finding out what is the intention of the parties
There the question was whether the assessee s turnover consisted of the aggregate of labour charges and the cost of materials in printing work or of outright sales of finished commodity
The assessee relied on certain bills which showed the cost of materials and labour charges but he did not produce order books or other documents
The Tribunal found that the sepa rate entries were only a make believe apportionment for the purpose of sales tax and that what was sold was only a finished product
In those findings the Tribunal justified on the materials to uphold the liability for sales tax
As emphasised by the Division Bench of the Madras High Court the entire transaction should be viewed and the intention of the parties found out
Our attention was drawn by Mr Mohan to the decision of the Orissa High Court in the case of State of Orisssa vs Ramnath Panda XXVlI STC 98
There the High Court held that in the case of an assessee a printer supplying printed materials where the customers supply paper and the assessee does nothing except printing on it the contract is one of labour and there is no sale
Where the customer enters into an agreement that he would separately pay for the paper and the assessee would merely print on it then also there is no sale
Where the customer does not enter into any separate agreement but merely asks the assessee to supply the printed materials the contract is indivisible and the supply of printed materials is a sale liable to sales tax
In such a case charging separately for the paper and printing in the bill issued to the customer does not alter the essential character of the agreement which is for the purchase of printed materials
311 Our attention was also drawn to another decision of Andhra Pradesh High Court in SRP Works and Ruby Press vs State of Andhra Pradesh XXX STC 195
There the petitioner was running a printing press supplying cinema tickets printed on paper of different colours to the customers
The customers obtained samples from the petitioner and then placed orders giving specifications
The petitioner while making out bills gave break up figures showing the cost of paper and the cost of printing separately and the total cost
The assessing authority assessed the petitioner only on the value of the paper for printing the tickets and granted exemption in respect of printing charges on the ground that they represented the cost of labour
The Deputy Commissioner revised the order and held that the transac tions involved were sales of finished goods viz the tickets and not merely of paper
The Tribunal agreed with the finding of the Deputy Commissioner and confirmed the order
On a revision it was held by the High Court on a consideration of some of the orders placed by the customers that the orders were specifically for printing and supply of tickets
The fact that break up figures were given in the bills was not decisive or conclusive in determining the question whether there were two contracts one for supply of paper and the other for printing
We agree that the transaction under its true perspective must be viewed and the intention of the parties must be found out
Our attention was drawn to the decision of the High Court of Kerala in The Sales Tax Officer Special Circle 11 Palghat vs 1
V Somasundaran 33 STC 68
In that case by printing something on paper as in the cases of printing letter heads invitation cards wedding invitations judg ments of courts or ration cards the printed matter does not become paper products within the meaning of that expression in item 42 of Schedule I to the Kerala General Sales Tax Act 1963
The High Court found that in such a case a further question arises as to whether it was sale of goods which could be taxed at all points
In order to spell out a contract of sale there must be an agreement which may be express or inferred from the circumstances
There can be an agreement for work and labour or there can be one for sale of goods
If essentially the agreement is one for work and labour complete exemption from taxation should be allowed
If on the other hand it is a contract for sale the whole turnover should be taxed
A contract for printing of judgment of courts is essen tially a contract for work and labour and there is no justi fication for bifurcating that contract into two different contracts one for cost of labour and 312 the other for sale of paper
Imposition of sales tax on the turnover relating to printing of judgments of courts is therefore unwarranted
In the case of contracts relating to the printing of ration cards it is in the nature of job works and it is essentially a contract for the sale of finished articles
In PT Varghese vs State of Kerala 37 STC 171 the assessee who was conducting a press and printing bill books vouchers receipt books letter heads question papers and notices as ordered by his clients contended that he only executed a works contract for which he used his own paper that the sale of paper used for printing could not be taxed under the Kerala General Sales Tax Act 1963 as he was not the first seller of paper in the State and that the remu neration received by him from his clients for the work and labour could not also be taxed under the Act
It was held that the question really was whether the contract was for the sale of paper as well as for work and labour or whether it was a contract for printed materials as such or whether it was a contract for work and labour
If it was a contract for sale of paper and for work it would be a composite contract where it might be possible to separate the sale from the work
If on the other hand it was a contract for printed materials what was sold was not paper but printed materials
If the contract was for work and labour in which the use of materials was merely accessory or incidental it would be a works contract which would not involve any sale and the charges received would not be assessable to tax under the Sales Tax Act and that the assessee s contract with the customers was not a contract for sale of paper in which labour was also involved making it a composite trans action which was capable of bifurcation into a contract for sale of materials and a contract for work and labour
What was sold was something other than paper
It could not be said that printed materials such as bills books vouchers and the like were mere paper or products of paper
Hence the supply of bills books vouchers etc
was liable to be taxed under the Act as finished products
It was further held that the question papers however were the subject matter of a contract for work and labour and the charges realised by the assessee for printing them were not liable to tax
The High Court at page 176 of the report observed Only in respect of those goods to which title has passed as a result of contract can it be said that the goods have been sold
Where a person buys a Picasso or a Ravi Varma he does not intend to buy or pay for the canvas or the paint although canvas and paint are involved in the production of 313 the painting and title to such materials is transferred to him
But such transfer of title to the materials is not pursuant to any agree ment for the sale of the materials as such
It would never have been in his mind to pay separately for the materials and for the labour
What the buyer buys is a finished product which is a work of article On the other hand when a person gets his manuscript print ed as an article or a book of verses the printer does no more than a mechanical or technical job
The printer does not create the article or the poem but merely renders his services to print which is in the nature of a job work
The manuscript as such is the result of the skill industry and scholarship of the author
In such a case there is no sale of the article or book by the printer nor would it be possible in such a case to spell out an agreement for the sale of materials such as paper or ink which may have been incidentally used in the production of the printed work
While the painter sells a finished product which is a work of art quite distinct and different from the materials used in its pro duction the printer merely does a job work involving no sale one is the work of an artist who is endowed with the finer qualities of imagination and taste and the other that of an artisan who is trained as a mechanic or technician A printer of judgments for exam ple does not produce and sell them his work is purely that of a technician
This court has therefore held that printing of judgments is only a works contract
The work of a printer in certain cases may involve more than print ing he may be a producer of finished articles such as bill books vouchers and the like
When such articles are printed and sold to the customers what is sold is not paper or paper products but printed materials which are finished products
Such contracts cannot be considered as contracts for the sale of paper coupled with an agreement to render service
The sale of paper had never been the subject matter of the agreement between the parties
Like in the case of painting which is a fin ished product being a work of art the bill books and voucher are new products being printed materials and the sale of such goods does not involve a composite contract which can be bifurcated into an agreement for the sale of goods be they canvas and paint or paper and ink and an agreement for work 314 In our opinion the High Court tightly applied the test in that case
Further our attention was drawn by Mr Mohan to a decision of the Madras High Court in AS Hameed Bha rath Press vs State of Tamil Nadu 54 STC 379
There the Tribunal found that the contracts between the assessee and his customers were indivisible contracts under which the assessee undertook to deliver printed material in accordance with the customer s instructions and therefore considered the receipts in the assessee s business as representing turnover in sales of goods taxable under the Tamil Nadu General Sales Tax Act 1959 and that the order form was a make believe and did not reflect the real nature of the transactions between the assessee and his customers
It was held that given the finding by the Tribunal the printed conditions in the order form were not to be accepted at face value and that the transactions between the assessee and the customers involved only the supply of printed material at a price
The High Court held that the decision of the Tribunal that the entire receipts in the assessee s business must be held to be sales turnover liable to tax under the Act must be upheld
As mentioned hereinbefore the High Court was dealing entirely with sample printed materials of order forms of bill books
The Allahabad High Court had to consider this question in Commissioner of Sales Tax vs Uma Art Press 56 STC 300
The decision in that case rested on the facts of that case and in the nature of the contentions urged before us in this case it would not be relevant to discuss the said decision in greater details
In Chandra Bhan Gosain vs The State of Orissa  Ors XIV STC 766 at 769 it was reiterated that in case of a composite contract how to determine whether there was sale of goods or there was works to be done depended upon the facts of each case and the intention of the parties what was the essence of the contract has to be found out
This court had to consider in CST Gujarat vs Ms Sabarmati Reti Udyog Sahakari Mandali Ltd 38 STC 203 whether the contract was a works contract or contract for sale
There the assessee had entered into a contract with the Public Works Department of the Govt
of Gujarat for the manufacture and supply of kiln burnt bricks to that department
The contract was found to be in a tender for supply of materi als containing a memorandum of the conditions
The nature of the work was described as manufacturing and supplying kiln burnt bricks for construction
In the tender the assessee stated the condition and analysing the decision in the light of Chandra Bhan Gosain s case this Court held that the contract was one for sale and not a works contract
315 Mr Mohan further drew our attention to the observations of the English decision in Marcel Furriers Ltd vs Tapper There the defendant on behalf of his wife ordered from the plaintiffs a firm of furriers a mutation mink coat
The defendant s wife selected skins of the colour she desired and specified the style of the coat she required directing that it should be made with the skins running horizontally
Her instructions were carried out but the coat was eventually rejected by her
The plain tiffs brought an action against the defendant claiming Pound 950 for work done and materials supplied in the making of the coat
By his defence the defendant pleaded that the contract was one for the sale of goods of the value of Pound 10 or over and was unenforceable pursuant to section 4 of the Sale of Goods Act 1893 of England by reason of the fact that there was no note or memorandum in writing of the contract signed by the party to be charged or his agent
It was held that although a high degree of skill and craftsman ship might be required in making of the coat the contract was no more than one for the making of an article for the special use of the customer by someone whose business it was to make it
The nature of the transaction therefore was that it was one for the making and supply of a particular article at a price and not one for work and labour done and materials supplied and there being no memorandum in writing to satisfy the requirements of section 4 of the Sale of Goods Act 1893 the contract was unenforceable
Hence the principle following from the decision is that the nature of transaction has to be found out whether it is making and supply of particular article or printing material
Mr Ramchandran however submitted before us that in view of the principles laid down by this Court in The State of Madras vs Gannon Dunkerley  Co Madras Ltd IX STC 353 and Hindustan Aeronautics Ltd vs State of Karnataka 55 STC 314 the High Court was right
He submitted that the contract in essence was for supply of question papers which are not commercial commodities
The blank papers ceased to be the property of the dealer the moment questions were printed on these
These are the exclusive properties of the University or other educational institutions and were to be kept secret until the University chose to divulge these at the time of the examinations
The dealer cannot deal with the printed question papers
Upon printing he lost his capacity to contract ceased to be the sole owner and could not sell to anybody he chose
He had to hand over the entire question papers to the University
It was a special kind of job entrusted for confidence reposed and for the delicate matter of the job to be performed
The work in connection therewith was predominantly 316 in the transaction
The material and the skill in doing so both are incidental
In that view of the matter he submitted that the High Court was right and indeed a contract for sale pre supposes the capacity in the dealer to contract with regard to the finished item
For this reliance was placed on the observations of this Court in The State of Madras s case supra and also on Hindustan Aeronautics Ltd s case supra at pages 320 323  327
The thing pro duced must have individual existence as the sole property of the party who produced it which can be passed on for a price in order to be a sale
Reliance was placed on the observations in Patnaik  Co vs The State of Orissa XVI STC 364 and TV Sundram lyengar  Sons vs The State of Madras 35 STC 24
The test is whether work and labour are bestowed on anything that can properly become the subject of sale
The court has to find out the primary object of the transaction and intention of the parties
In this connec tion it is necessary to rely on the observations of this Court in Hindustan Aeronautics Ltd s case supra at pages 327333 334 of the report
The primary difference between a contract for work or service and a contract for sale is that in the former there is in the person performing or rendering service no property in the thing produced as a whole notwithstanding that a part or even the whole of the material used by him may have been his property
Where the finished product supplied to a particular customer is not a commercial commodity in the sense that it cannot be sold in the market to any other person the transaction is only a works contract
See the observation in The Court Press Job Branch Salem vs The State of Tamil Nadu 54 STC 383 and Commissioner of Sales Tax MP vs Ratna Fine Arts Printing Press 56 STC 77
In our opinion in each case the nature of the contract and the transaction must be found out
And this is possible only when the intention of the parties is found out
The fact that in the execution of a contract for work some materials are used and the propertygoods so used passes to the other party the contractor undertaking to do the work will not necessarily be deemed on that account to sell the materials
Whether or not and which part of the job work relates to that depends as mentioned hereinbefore on the nature of the transaction
A contract for work in the execu tion of which goods are used may take any one of the three forms as mentioned by this Court in The Government of Andhra Pradesh vs Guntur Tobaccos supra
317 In our opinion the contract in this case is one having regard to the nature of the job to be done and the confi dence reposed for work to be done for remuneration and supply of paper was just incidental
Hence the entire price for the printed question papers would have been entitled to be excluded from the taxable turnover but since in the instant case the deemed notes prepared by the assessee showed the costs of paper separately it appears that it has treated the supply of paper separately
Except the materials supplied on the basis of such contract the contract will continue to be a contract for work and labour and no liabil ity to sales tax would arise in respect thereof
The High Court was therefore fight in the view it took in Civil Appeals Nos 2346 234778
The facts in the other appeals are identical
All these appeals are dismissed accordingly but without in the facts and circumstances of the case any order as to costs
GN Appeals dismissed


Summary:
The is a Central Enact ment providing for the control of the production supply and distribution trade and commerce in certain specified essen tial commodities Section 3 of the Act confers power on the Central Government to provide for regulating or prohibiting the production supply and distribution thereof and trade and commerce therein if it is of the opinion that it is necessary or expedient so to do for maintaining or increas ing supply of any essential commodities or of securing their equal distribution and availability on fair price
The Central Government issued the Notification No GSR 800 dated June 9 1978 delegating its powers under section 31 of the Act to the State Governments to make orders in respect of the matters specified in the various sub clauses of sub section 2 of section 3 in 244 relation to foodstuffs subject to certain conditions speci fied therein
By clause 2 of the Notification the Central Government while delegating its powers under section 3 to the State Government for issuing orders in respect of mat ters specified therein expressly placed restriction on the State Government relating to any matters specified in clauses a c d and f of sub section 2 of section 3 to the extent that while making an order pertaining to any of the matters specified in the said clauses the State Government shall obtain prior concurrence of the Central Government
The State Government of Andhra Pradesh in exercise of its powers under section 31 of the Act as delegated to it by the Notification GSR 800 dated June 9 1978 made the Andhra Pradesh Scheduled Commodities Dealers Licensing and Distribution Order 1982 after obtaining prior concurrence of the Central Government
This order sought to regulate the sale and purchase of scheduled commodities as specified in schedule I to the Order
Edible oil seeds and edible oil were included in the said Schedule
The State Government issued a circular order dated June 21 1985 containing directions regulating the transport and export of groundnut seeds and oil outside the State
The oil millers and traders were permitted to export oil and groundnut seeds only on the condition that they deliver oil to the State Government at a fixed price in proportion of one tome of oil for every three tonnes to be transported outside the State
Similar conditions were imposed in re spect of groundnut seeds
The oil millers and traders were required to execute undertaking for complying with the directions issued by the State Government
The respondents who were oil millers and traders carry ing on business in the sale and purchase of groundnut seed and groundnut oil which is edible challenged the validity of the 1982 Order and the 1985 Circular in writ petitions to the High Court
A Single Judge quashed the order of the State Government on the findings that the directions con tained therein violated Articles 191g and 301
On appeal by the State Government a Division Bench held that the order of the government was violative of section 32f section 331 B and section 35 of the as the directions contained in the order amounted to imposition of levy which could not be done without obtaining the prior concurrence of the Central Government in terms of section 32f of Act
It further held that the directions contained in the 245 Government Order were outside the purview of the State Government under clause 12 of the Andhra Pradesh Scheduled Commodities Dealers Licensing and Distribution Order 1982
No finding was however recorded on the question wheth er the Order violated the constitutional guarantee of free trade under article 301
In the appeals to this Court it was contended on behalf of the appellants that the directions contained in the Government Order dated 21st June 1985 were issued by the State Government in exercise of its powers under clause 122 of the Andhra Pradesh Scheduled Commodities Dealers Licensing and Distribution Order 1982 which had been made by the State Government with the prior concurrence of the Central Government in exercise of powers conferred by sec tion 3 of the and that the directions were legal and valid
Dismissing the appeals HELD 1
The High Court has rightly struck down the directions issued by the State Government
The directions contained in the Government Circular Order dated June 21 1985 are illegal and void as the same have been issued in exercise of and in contravention of the power delegated to the State Government under the Notification No GSR 800 dated June 9 1978
256E 253F 2
The 1982 Order which was framed by the State Govern ment in exercise of the delegated powers does not contain any provision placing any restriction on the transport or movement of edible oil or oil seeds nor it provides for imposition of compulsory levy further it does not fix any price
253C D 3
The directions issued by the State Government by its Circular Order dated June 21 1985 placing restrictions on the movement of oil seeds and oil and imposing compulsory levy and requiring millers and traders to sell oil seeds and oil at a price fixed by it are outside the purview of 1982 Order
These directions have no sanction of law
253D E 4
If the State Government was facing any problem it could have made amendments to the 1982 Order regulating matters specified in clauses d and f of section 32 of the Act after obtaining prior concurrence of the Central Government
No such course was followed
253E F 246 5
The State Government s directions requiring the millers and traders to sell groundnut oil to the State Government is a matter directly specified within the terms of section 32f of the Act
The State Government had no authority to place any such restriction without the prior concurrence of the Central Government
254G H 6
The purpose and object for obtaining prior concur rence is to ensure availability of essential commodity throughout the country
The State Governments are not autho rised to impose restrictions on the movement of the essen tial commodities as it would have reflection in other States both in regard to the price and in regard to the availabili ty of the commodity for distribution
The Central Government has the responsibility of maintaining a balance between the interest of the various States and ensuring the availability of essential commodities for distribution at a fair price in other States also
All relevant aspects are necessary to be scrutinised by the Central Government in giving or refusing its concurrence not merely from the point of view of the State imposing restrictions but bearing in mind the condi tions of trade and industry and the demand and supply of the concerned commodities in other States
Unless the Central Government is satisfied that it would be in the interest of all concerned it may withhold concurrence for imposing restrictions on free movement of essential commodities
254C E 7
A delegate is not entitled to exercise powers in excess or in contravention of the delegated powers
If any order is issued or framed in excess of the powers delegated to the authorities such order would be illegal and void
251B C 8
The power of the authorities specified in sub clause 11 of clause 12 of the Order to issue instructions and directions is limited to the subject matter of the 1982 Order
Such directions and instructions cannot pertain to regulate matters which are not covered or dealt with by the 1982 Order
Such directions and instructions cannot pertain to regulate matters which are not covered or dealt with by the 1982 Order
255F G 9
The State Government could not impose any restriction on the export of groundnut seed or oil to outside the State and further it could not issue directions for the compulsory levy at the specified price in view of the limitations placed on exercise of its powers under the notification dated June 9 1978
What it could not do directly could not be permitted to be done indirectly by virtue of clause 12 of the 1982 Order
The scope and ambit of clause 122 of the 1982 Order did not authorise the State 247 Government to impose the restrictions in the Circular Order dated June 21 1985
256B C