Case: The State Of Tamil Nadu Vs. Sri Srinivasa Sales Circulation Etc

be a sale at all. Consequently, the High Court held that since the transactions involved in the scheme of the assessee are not sale, the assessee are not liable to be taxed as sales under Section 3(1) of the Act and, therefore, allowed the revision, set aside the order of the Assessing Officer, Appellate Assistant Commissioner and the Tribunal against which these appeals and special leave petitions have been directed as the orders in the connected appeals and the special leave petitions are based on the orders and findings recorded by the High Court in Sri Srinivasa Sales Circulation v. State of T.N. 13. The learned counsel appearing for the appellant State, vehemently urged that in the light of the facts found on record the disputed transaction were sales as defined under Section 4 of the Sale of Goods Act and, therefore, the Assessing Officer had rightly brought the same under the net of taxation under the provisions of the Act. It was submitted that the High Court was not right in holding that the title in the goods that passed to the customers was not under any contract of sale between the respondent and their customers and strenuously urged that the tenor of the scheme clearly indicated that the title in the goods passed to the customers pursuant to a contract of sale between the respondent and their customers and the transaction was squarely covered by Section 4 of the Sale of Goods Act. Contrary to this, the learned counsel appearing for the respondent sought to support the impugned order for the reasons assigned by the High Court has submitted that the transactions involved in the scheme of the assessee are not liable to tax as sales tax under Section 3(1) of the Act. 14. It may be stated that in order to constitute a sale under the Sale of Goods Act, it is essential to establish that there is an agreement between the parties for transfer of title to the goods and that such agreement should be supported by money consideration and as a result of the transaction the goods, article or the property must actually pass to the purchaser. It is settled law that the expression sale under the Sales Tax Act has to be understood with reference to the definition of "sale of goods" under the Sale of Goods Act. But if the title of the goods passes without any contract between the parties, express or implied, there is no sale. Similarly, if the consideration of the transfer is not money, but some other valuable consideration, it may amount to exchange or barter but not a sale in the strict sense of the law for the purposes of taxation. We shall, therefore, examine whether under the facts and circumstances of the present case, the transfer of article by the respondent-assessee to its customers under the scheme floated by it constitutes a sale against payment of price of that article. 15. As stated earlier, in the foregoing paras of this judgment, the coupon of the company is sold to the customer A on payment of Rs 5. Whereafter, the customer A receives three coupons for Rs 16 which he sells to three persons for Rs 5 each and appropriates the amount so received by himself. When each of the three parties to whom the coupons are sold by A, further sell their coupons to other namely B, C and D, one cycle is completed and the customer A in turn receives the article of his choice as mentioned by him in the coupon from the company. In this process, as stated earlier, the company dispatches a letter to its customer A advising him to sell the three order forms to three members and take that money himself. Not only this, the assessee company further addresses a letter to the customer A in the printed form conveying their thanks to him and that they have received three original order forms and the letter, stating further that as soon as the V.P.Ls. are cleared by paying Rs 16 each, they will send him the required article by registered parcel. Thereafter, the company ultimately dispatches the article of his choice to the customer A with a covering letter advising him to receive the article by paying the stated amount. From these facts, it is clear that there may not be a formal contract for sale and purchase of the article in any specific form, but such a contract may be spelt out from the correspondence and interaction between the parties. In the present case an implied contract between the parties is spelt out when the company offers the coupon(s) against payment and the article of the choice is ultimately sent to the customer for payment of price which is accepted by the customer. There is thus offer and acceptance. If the contents of the entire scheme, as reproduced above, are minutely looked into, it substantially amounts to sale. We find that all the attributes, characteristics and requirements of a sale are present in the transaction. In fact the transaction is so designed and framed by the company by adopting a circuitous method for sale of their goods which amounts to nothing but a sale, and the same is liable to assessment under the Act. This view is further strengthened from the fact that during the relevant assessment year the respondent-company sent articles to its various customers under the scheme of the value of Rs 1, 36, 665.00, which were purchased by the respondent-company for a sum of Rs 1, 03, 709.25 and, thus, earned a profit to the tune of Rs 32, 955.75. The business so run by the respondent is with a view to earn profit out of the sale by adopting a circuitous device with a view to evade the payment of tax. In our considered opinion, the High Court, therefore, was not justified in taking the view that it was not a sale transaction assessable to tax.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]14. It may be stated that in order to constitute a sale under the Sale of Goods Act, it is essential to establish that there is an agreement between the parties for transfer of title to the goods and that such agreement should be supported by money consideration and as a result of the transaction the goods, article or the property must actually pass to the purchaser. It is settled law that the expression sale under the Sales Tax Act has to be understood with reference to the definition of "sale of goods" under the Sale of Goods Act. But if the title of the goods passes without any contract between the parties, express or implied, there is no sale. Similarly, if the consideration of the transfer is not money, but some other valuable consideration, it may amount to exchange or barter but not a sale in the strict sense of the law for the purposes of taxation15. As stated earlier, in the foregoing paras of this judgment, the coupon of the company is sold to the customer A on payment of Rs 5. Whereafter, the customer A receives three coupons for Rs 16 which he sells to three persons for Rs 5 each and appropriates the amount so received by himself. When each of the three parties to whom the coupons are sold by A, further sell their coupons to other namely B, C and D, one cycle is completed and the customer A in turn receives the article of his choice as mentioned by him in the coupon from the company. In this process, as stated earlier, the company dispatches a letter to its customer A advising him to sell the three order forms to three members and take that money himself. Not only this, the assessee company further addresses a letter to the customer A in the printed form conveying their thanks to him and that they have received three original order forms and the letter, stating further that as soon as the V.P.Ls. are cleared by paying Rs 16 each, they will send him the required article by registered parcel. Thereafter, the company ultimately dispatches the article of his choice to the customer A with a covering letter advising him to receive the article by paying the stated amount. From these facts, it is clear that there may not be a formal contract for sale and purchase of the article in any specific form, but such a contract may be spelt out from the correspondence and interaction between the parties. In the present case an implied contract between the parties is spelt out when the company offers the coupon(s) against payment and the article of the choice is ultimately sent to the customer for payment of price which is accepted by the customer. There is thus offer and acceptance. If the contents of the entire scheme, as reproduced above, are minutely looked into, it substantially amounts to sale. We find that all the attributes, characteristics and requirements of a sale are present in the transaction. In fact the transaction is so designed and framed by the company by adopting a circuitous method for sale of their goods which amounts to nothing but a sale, and the same is liable to assessment under the Act. This view is further strengthened from the fact that during the relevant assessment year the respondent-company sent articles to its various customers under the scheme of the value of Rs 1, 36, 665.00, which were purchased by the respondent-company for a sum of Rs 1, 03, 709.25 and, thus, earned a profit to the tune of Rs 32, 955.75. The business so run by the respondent is with a view to earn profit out of the sale by adopting a circuitous device with a view to evade the payment of tax. In our considered opinion, the High Court, therefore, was not justified in taking the view that it was not a sale transaction assessable to tax