Case: Sales Tax Officer, Pilibhit Vs. Budh Prakash Jai Prakash

an action for unliquidated damages. Similarly, if an agreement to sell be broken by the seller, the buyer has only a personal remedy against the seller. The goods are the property of the seller and he can dispose of them. They may be taken in execution for his debts, and if he becomes bankrupt they pass to his trustee in bankruptcy. But if there has been a sale, and the seller breaks his engagement to deliver the goods, the buyer has not only a personal remedy against the seller but also the usual proprietary remedies in respect of the goods themselves, such as the actions for conversion and detinue. Again, if there be an agreement for sale and the goods perish, the loss as a rule falls on the seller, while if there has been a sale the loss as a rule falls upon the buyer."Thus, there having existed at the time of the enactment of the Government of India Act, 1935, a well-defined and well-established distinction between a sale and an agreement to sell it would be proper to interpret the expression "sale of goods" in Entry 48 in the sense in which it was used in legislation both in England and India and to hold that it authorises the imposition of a tax only when there is a completed sale involving transfer of title.6. This conclusion is further strengthened, when regard is had to the nature of the levy.Section 3 of the Act provides for a tax being imposed at three pies in the rupee on the turnover of the assessee, and "turnover" is defined in section 2(i) as "the aggregate of the proceeds of sale by a dealer", and that would consist of the price and any charges paid at the time of the delivery of the goods, as provided in Explanation I.The substance of the matter is that the sales tax is a levy on the price of the goods, and the reason of the thing requires that such a levy should not be made, unless the stage has been reached when the seller can recover the price under the contract. It is well settled that an action for price is maintainable only when there is a sale involving transfer of the property in the goods to the purchaser. Where there is only an agreement to sell. then the remedy of the seller is to sue for damages for breach of contract and not for the price of the goods.The law was thus stated in - "Colley v. Overseas Exporters, 1921-3 KB 302 at pp. 309 310 (A):"In former days an action for the price of goods would only lie upon one or other of two counts. First upon the indebitatus count for goods sold and delivered, which was pleaded as follows: Money payable by the defendant to the plaintiffs for goods sold and delivered by the plaintiff to the defendants: Bullen and Leake, Precedents of Pleading. 3rd ed., p.38. This count would not lie before delivery - - Boulter v. Arnott, (1833) 1 Cr and M 333 (B). The count was applicable when upon sale of goods the property has passed and the goods had been delivered to the purchaser and the price was payable at the time of the action brought. Secondly, upon the indebitatus count for goods bargained and sold, which was pleaded as follows: Money payable by the defendant to the plaintiff for goods bargained and sold by the plaintiff to the defendant : Bullen and Leake, p.39. This count was applicable where upon a sale of goods the property had passed to the purchaser and the contract had been completed in all respects except delivery, and the delivery was not a part of the consideration for the price or a condition precedent to its payment. If the property had not passed the count would not lie: - "Atkinson v. Bell, (1828) 8 B and C 277 (C). In my view the law as to the circumstances under which an action will lie for the price of goods has not been changed by the Sale of Goods Act, 1893."That is, also the law in this country under section 55 of the Sale of Goods Act. the only exception to this rule is when, under an agreement between the parties, the price is payable on a day certain irrespective of delivery, and that is not material for the purpose of the present discussion.7.The position therefore is that a liability to be assessed to sales tax can arise only if there is a completed sale under which price is paid or is payable and not when there is only an agreement to sell, which can only result in a claim for damages. It would be contrary to all principles to hold that damages for breach of contract are liable to be assessed to sales tax on the ground that they are in the same position as sale price.The power conferred under Entry 48 to imposed a tax on the sale of goods can therefore be exercised only when there is a sale under which there is a transfer of property in the goods, and not when there is a mere agreement to sell. The State Legislature cannot, by enlarging the definition of "sale" as including forward contracts arrogate to itself a power which is not conferred upon it by the Constitution Act, and the definition of "sale" in section 2(h) of Act XV of 1948 must, to that extent, be declared ultra vires.For the same reason, Explanation III to section 3(h) which provides that forward contracts "shall be deemed to have been completed on the date originally agreed upon delivery", and section 2-B which an acts that,"Notwithstanding anything contained in section 3, the turnover of any dealer in respect of transaction of forward contracts, in which goods are not actually delivered, shall be taxed at a rate not exceeding rupees two per unit as may be prescribed."Must also he held to be ultra vires.

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

Explanation:
0[ds]6. This conclusion is further strengthened, when regard is had to the nature of the levy.Section 3 of the Act provides for a tax being imposed at three pies in the rupee on the turnover of the assessee, and "turnover" is defined in section 2(i) as "the aggregate of the proceeds of sale by a dealer", and that would consist of the price and any charges paid at the time of the delivery of the goods, as provided in Explanation I.The substance of the matter is that the sales tax is a levy on the price of the goods, and the reason of the thing requires that such a levy should not be made, unless the stage has been reached when the seller can recover the price under the contract. It is well settled that an action for price is maintainable only when there is a sale involving transfer of the property in the goods to the purchaser. Where there is only an agreement to sell. then the remedy of the seller is to sue for damages for breach of contract and not for the price of theposition therefore is that a liability to be assessed to sales tax can arise only if there is a completed sale under which price is paid or is payable and not when there is only an agreement to sell, which can only result in a claim for damages. It would be contrary to all principles to hold that damages for breach of contract are liable to be assessed to sales tax on the ground that they are in the same position as salepower conferred under Entry 48 to imposed a tax on the sale of goods can therefore be exercised only when there is a sale under which there is a transfer of property in the goods, and not when there is a mere agreement to sell. The State Legislature cannot, by enlarging the definition of "sale" as including forward contracts arrogate to itself a power which is not conferred upon it by the Constitution Act, and the definition of "sale" in section 2(h) of Act XV of 1948 must, to that extent, be declared ultrathe same reason, Explanation III to section 3(h) which provides that forward contracts "shall be deemed to have been completed on the date originally agreed upon delivery", and section 2-B which an acts that,"Notwithstanding anything contained in section 3, the turnover of any dealer in respect of transaction of forward contracts, in which goods are not actually delivered, shall be taxed at a rate not exceeding rupees two per unit as may bealso he held to be ultra vires.