Case: Vishnu Agencies (Pvt.) Ltd. Etc Vs. Commercial Tax Officer &amp; Ors. Etc

the policy of the legislature towards contract, and the law today interferes at numerous points with the freedom of the parties to make what contract they like ..."44. This intervention is especially necessary today when most contracts entered into by ordinary people are not the result of individual negotiation. It is not possible for a private person to settle the terms of his agreement with the British Railway Board or with the local electricity authority. The standard form contract is the rule. He must either accept the terms of this contract in toto or go without. Since however, it is not feasible to deprive oneself of such necessary services, the individual is compelled to accept on those terms. In view of this fact, it is quite clear that freedom of contract is now largely an illusion" (Ansons Law of Contract, 23rd Edn., pages 3-4).45. Anson is perhaps over-optimistic in saying that there has been a fundamental change in social outlook and in the legislative policy towards contract. Anyway, with the high ideals of the preamble and the directive principles of out Constitution there has to be such a fundamental change in judicial outlook. Instances given in Cheshire and Anson have their parallels in India too, wherein freedom of contract has largely become an illusion. The policy of out Parliament in regard to contracts including those involved in sale of goods has still to reflect recognition of the necessity for a change, which could be done by a suitable modification of the definition of "sale" of goods.46. It all began with the reliance in Gannon Dunkerley on the statement in the 8th Edition 1950 of Benjamin on Sal that to constitute a valid sale there must be a concurrence of four element one of which is "mutual assent". The statement is a reproduction of what the celebrated author had said in the 2nd and last edition prepared by himself in 1873. The majority judgment in New India Sugar Mills also derives sustenance from the same passage in Benjamins 8th edition. But as observed by Hidayatullah, J., his dissenting judgment in that case consent may be express or implied and offer and acceptance need not be in elementary form. It is interesting that General Editor of the 1974 edition "Benjamins Sale of Goods" says in the face that the editors decided to producer entirely new work partly because commercial institutions, modes of transport and payment, forms of contract, types of goods, market areas and marketing methods, and the extent of legislative and governmental regulation and intervention, had changed considerably since 1868, when the 1st edition of the book was published. The formulations in Benjamins 2nd edition relating to the conditions of a valid "sale" of goods, which are reproduced in the 8th edition, evidently require modification in the light of regulatory measures of social control. Hidayatullah, J., in his minority judgment referred to above, struck the new path; and Bachawat, J., who spoke for the court in Andhra Sugar, went a step ahead by declaring that "the contract is a contract of sale and purchase of cane, though the buyer is obliged to give his assent under compulsion of a statute". The concept of freedom of contract as observed by Hedge, J., in India Steel and Wire Products, has undergone a great deal of change even in those countries where it was considered as one of the basic economic requirements of a democratic life. Thus, in Ridge Nominees Ltd. 29, the Court of Appeal, while rejecting the argument that there was no sale because the essential element of mutual assent was lacking, held that the dissent of the shareholder was overriden by an assent which the statute imposed on him, fictional though it may be, that a sale may not always require the consensual element mentioned in Benjamin on Sale, 8th Edition, page 2, and that there may in truth be a compulsory sale of property with which the owner his compelled to part for a price against his will, Decisions in cases of "compulsory acquisition", where such acquisition is patent as in Kirkness or is inferred as in Chittar Mal fall in a separate and distinct class. The observations of Lord Reid in Kirkness that "sale" is a nomen juris the name of a particular consensual contract - have therefore to be understood in the context in which they were made, namely, the compulsory requisition cannot amount to sale. In Gannon Dunkerley, Venkatarama Aiyar, J., was influenced largely by these observations and by the definition of "sales" in the Benjamins 8th edition. Gannon Dunkerley involved an altogether different point and is not an authority for the proportion that there cannot at all be a contract of sale if the parties to a transaction are obliged to comply with the terms of a statute. Since we are putting in a nutshell what we have discussed earlier, we would like to reiterate in the interest of uniformity and certainty of law that with great deference, the majority decision in New India Sugar Mills is not good law. The true legal position is as is stated in the minority judgment in that case and in India Steel and Wire Products, Andhra Sugars, Salar Jung Sugar Mills and Oil and Natural Gas Commission. To the extent to which Cement Distributors Pvt. Ltd. is inconsistent with these judgment, it is also, with respect, not good law.47. The conclusion which, therefore, emerges is that the transaction between the appellant, M/s. Vishnu Agencies (Pvt.) Ltd., and the allottees are sales within the meaning of S. 2(g) of the Bengal Finance (Sales Tax) Act, 1941. For the same reason, transactions between the growers and procuring agents as also those between the rice millers on the one hand and the wholesalers or retailers on the other are sales within the meaning of S. 2 n) of the Andhra Pradesh General Sales Tax Act, 1957. The turnover is accordingly exigible to sales tax or purchase tax as the case may be.

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

Explanation:
0[ds]15. According to these definitions of "sale" in the West Bengal and Andhra Pradesh Sales Tax Acts, transactions between the appellants on the one hand and the allottees or nominees on the other are patently sales because, indisputably, in one case the property in cement and in the other, property in paddy and rice was transferred for cash consideration by the appellants; and in so far as the West Bengal case is concerned, property in the goods did not pass to the transferees by way of mortgage hypothecation, charge or pledge. But that isprinciple that in interpreting a constituent or organic statute, that construction most beneficial to the widest possible amplitude of its powers must be adopted has been examined over the years by various courts, including this court, and is too firmly established to meritdecisions have taken the view that a Constitution must not be construed in a narrow and pedantic sense, that a broad and liberal spirit should inspire those whose duty is to interpret it, that a Constitution of a Government living and organic thing which of all instruments has the greatest claim to be construed ut res magis valeat quam pereat that the legislature in selecting subjects of taxation is entitled to take things as it finds them is rerum natura and that it is not proper that a court should deny to such a legislature the right of solving taxation problems unfettered by a priori legal categories which often derive from the exercise of legislative power in the same constitutional unit.The view expressed in Gannon Dunkerley that the words "sale of goods" in entry 48 must be interpreted in the sense which they bear in the Sale of Goods Act, 1930, and that the meaning of those words should not be left to fluctuate with the definition of "sale" in laws relating to sales of goods which might be in force for the time being may, with respect, bear further consideration but that may have to await a more suitableAttorney-General vs. Edison Telephone company of London, a question arose whether the Edison Telephone Company, London, infringed by installation of telephones, the exclusive privilege of transmitting telegrams which was conferred upon the Postmaster-General under an Act of 1869. The decision depended on the meaning of the word "telegraph" in the Acts of 1863 and 1869. The company contended that since telephones were unknown at the time when those Acts were passed, the definition of "telegraph" could not comprehend "telephones". That contention was negatived by an English Court. In Regulation and Control of Radio Communication in Canada, In re, a similar question arose as to whether "broadcasting" was covered by the expression "telegraph and other works and undertakings" in S. 92(10)(a) of the Constitution Act of 1867. The Privy Council answered the question in the affirmative and was apparently not impressed by the contention that broadcasting was not known as a means of communication at the time when the Constitution Act was passed. These decisions proceed on the principle that if after the enactment of a legislation, new facts and situations arise which could not have been in the contemplation of the legislature, statutory provisions can justifiably be applied to those facts and situations so long as the words of the statute are in a broad sense capable of containing them. This principle, according to the view expressed in Gannon Dunkerley, did not apply to the interpretation of entry 48, a view which, in out opinion, is capable of further scrutiny. It is, unnecessary in these appeals to investigate the matter any further because, the position which emerges after putting on the words of entry 48 the same meaning which those words bear in the sale of Goods Act, 1930, is that, in order to constitute a sale, it is necessary that there should be an agreement between the parties. In other words, the effect of the construction which the court put on the words of entry 48 in Gannon Dunkerley is that a sale is necessarily a consensual transaction and, if the parties have no volition or option to bargain, there can be no sale. For the present purposes, this view may be assumed to reflect the correct legal position but even so, the transactions which are the subject-matter of these appeals will amount to sales.These limitations on the normal right of dealers and consumers to supply and obtain the goods, the obligation imposed on the parties and the penalties prescribed by the Control Order do not a out opinion, militate against the position that eventually, the parties must be deemed to have completed the transactions under an agreement by which one party bourn outsell to supply the stated quantity of goods to the other at a price not higher than the notified price and the other party consented to accept the goods on the terms and conditions mentioned in the permit or it order of allotment issued in its favour by the concerned authority. Officer and acceptance need not always be in the elementary from, nor indeed does the Law of Contract or of Sale of Goods require thus consent to a contract must be express. It is common place that officer and acceptance can be spelt out from the conduct of the parties which covers not only their acts but omissions as well. Indeed, on occasion silence can be more eloquent the eloquence itself. Just as correspondence between the parties can constitute disclose an offer and acceptance, so can their conduct. This is because, law was not require officer and acceptance to conform to any set pattern or formula.24. In order, therefore, to determine whether there was any agreement consensuality between the parties, we have regard to their conduct at or about time when the goods changed hands the first place, it is not obligatory on a trader to deal in cement nor on any case acquire it. The primary fact, therefore, that the decision of the trader to deal in an essential commodity is volitional. Such volition carries with it the willingness trade in the commodity strictly on terms of the Control Orders. The consumer too, who is under no compulsion to acquire or possess cement, decides as a matter of his volition to it on the terms of the permit or the of allotment issued in his favour brings the two parties together, one of whom is willing to supply the commodity and the other to receive. When the allottee presents his permit the dealer, he signifies his willingness obtain the commodity from the dealer the terms stated in the permit. His conduct reflects his consent. And when, upon the presentation of the permit, the dealer acts upon it, he impliedly agrees to supply the commodity to the allottee on the terms by which he has voluntarily bound himself to trade in the commodity. His conduct too reflects his consent. Thus, though both parties are bound to comply with the legal requirements governing the transaction, they agree as between themselves to enter into the transaction on statutory terms, one agreeing to supply the commodity to the other on those terms and the other agreeing to accept it from him on the very terms. It is, therefore, not correct to say that the transactions between the appellants and the allottees are not consensual. They, with their free consent, agreed to enter into the transactions.Strong reliance was placed by the factory owners in Andhra Sugars on the majority judgment of Kapur and Shah, JJ., in New India Sugar Mills Ltd. vs. Commissioner of sales Tax, to which we must refer here. The "admitted course of dealing" between the parties in the case was that the Governments of various consuming State used to intimate to the sugar controller of India, from time to time, their requirements of sugar and similarly, the factory owners used to send to the sugar controller of India statements of stock was sugar held by them. On a consideration of the request received from the State Government and the statements of stock received from the factories, the sugar controller used to make allotment of sugar. The allotment order was addressed by the sugar controller to the factory owner direction him to supply sugar to the State Government in question in accordance with the dispatch instruction receive from the competent officer of the State Government. A copy of the allotment order was simultaneously sent to the State Government concerned, on receipt which the competent authority of the State Government sent to the factory concern detailed instructions about the destination to which the sugar was to be despatch as also the quantities of sugar to despatched to each place. The Madras Government which, under this arrangement received its quota of sugar from New India Sugar Mills, also laid down the procedure of payment. The Patna High court having held that the supply of sugar by the mills to the province of Madras was liable to be taxed under the Bihar sales Tax Act, 1947, the mills filed an appeal to this court which was decided by the Bench of three learned Judges. Kapur and Shah, JJ., held that since the mills were compelled to carry out the direction of the controller and since they had no volition in the matter of supply of sugar to the state of Madras, there was no offer by them to the State Government and no acceptance by the latter. Shah, J., speaking for the majority, observed that a contract of sale between the seller and the buyer is a prerequisite to a sale and since there was no such contract, the transaction in question which the Bihar sales tax authorities sought to was not exigible to sales tax.29. Hidayatullah, J., who delivered a dissenting opinion, observed after reviewing the position both under the English and the Indian law, that though it was true that consent makes a contract of sales, consent "may be express or implied and it cannot not be said that unless the offer and acceptance are there in an elementary from, there can be taxable sale". Taking the view that on obtaining the necessary permit, the sugar mills on the one hand and the Government of Madras on the order agreed to "sell" and "purchase" sugar could admit of no doubt, the learned Judge said that when the Province of Madras after receiving the permit, telegraphed instruction to despatch sugar and the mills despatch it, "a contract emerged and consent must be implied on both sides though not expressed antecedently to the permit". The controller brought the seller and the purchaser together, gave them permission to supply and receive sugar leading thereby to be implied contract of sale between the parties." The learned Judge accepted that there was annulment of compulsion in both selling and buying, perhaps more for the supplier than for the receiver, but, according to him "a compelled sale is nevertheless a sale" and "sales often take place without volition of a party". The learned Judge summed up the matter pithily thus : "So long as the parties made under controls at fixed price and accept there as any other law of the realm because they must, the contract is at the fixed price both sides having or deemed to have agreed to such a price. Consent under the law of contract need not be express, it can be implied ..... The present is just another example of an implied contract with an implied offer and implied acceptance by the parties". Adverting to the construction of the legislative entry 48 of list II, seventh schedule to the Government of India Act, 1935, the learned Judge observed that the entry had to be interpreted in a liberal spirit and not cut down by narrow technical considerations. "The entry in other words should not be shorn of all its content to leave a mere husk of legislative power. For the purposes of legislative such as on Sales-tax it is only necessary to see whether there is a sale, express or implied ..... The entry has its meaning and within its meaning there is a plenary power. If a sales express or implied is found to exist then the tax must follow".30. We are of the opinion that the true position in law is as is set out in the dissenting judgment of Hidayatullah, J., and that the view expressed by Kapur and Shah, JJ., in the majority judgment, with deference, cannot be considered as good law. Bachawat, J., in Andhra Sugars case was, with respect, right in cautioning that the majority judgment of Kapur and Shah, JJ., in New India Sugar Mills case should not be treated as an authority for the proposition that there can be no contract of sale under compulsion of a statute". Rather than saying what, in view of the growing uncertainty of the true legal position on the question, we are constrained to say namely, that the majority judgment in New India Sugar Mills case is not good law. Bachawat, J. preferred to adopt the not unfamiliar manner of confining the majority decision to "the special facts of that case".31. The majority judgment in New India Sugar Mills case is based predominantly on the decision of this court in Gannon Dunkerleys case to which we have referred at length in another context.Thus, the two reasons given the court in support of its conclusion was firstly, that a building contract there no agreement, express or implied, to "goods" and secondly, that property in the building materials does not pass in the materials regarded as "goods" but it passes as part of immovable property. In New India Sugar Mills case, the commodity with which the court was concerned was sugar and was delivered as sugar just as in the instant case, the commodity with which we are concerned is cement which was delivered as cement. That meets the first reason in Gannon Dunkerley case. As regards the second, it is quite clear that the tax was demanded after the commodity had charged hands or, putting it in the words of the Sale of Goods law, after property in it had passed. With great respect, therefore, the majority in New India Sugar Mills case was in error in saying that "the ratio decidendi of that decision Gannon Dunkerley case must govern this case". The question before us which was the very question involved in New India Sugar Mills viz., whether a transaction effected in accordance with the obligatory terms of a statute can amount to a "sale" did not arise in Gannon Dunkerley.This resume of cases, long as it is, may yet bear highlighting the true principle underlying the decisions of this court which have taken the view that a transaction which is effected in compliance with the obligatory terms of a statute may nevertheless be a sale in the eye of a law. The Indian Contract Act which was passed in 1872 contained provisions in its seventh chapter compressing Ss. 76 to 123 relating to sale of goods which were repeated on the enactment of a comprehensive law of sale of goods in 1930. The Contract Act drew inspiration from the English law of contract which is almost entirely the creation of English courts and whose growth is marked by features which are peculiar to the social and economic history of England. Historically, the English law of contract is largely founded upon the action on the case for assumpsit, where the essence of the matter was the undertaking. The necessity for acceptance of the undertaking or the promise led the earlier writers on legal theories to lay particular emphasis on the consensual nature of contractual obligations. It was out of the importance which political philosophers of the eighteenth century gave to human liberty that the doctrine was evolved that every persons should be free to pursue his own interest in the way he thinks best and therefore law ought to give effect to the will of the parties as expressed in their agreement. Adam Smith in his famous work on "The Wealth of Nations" propounded in 1776 the view that the freedom of contract must as far as possible be left unimpaired. Gradually, as would appear from Friedmanns Statement in Law in a Changing Society 1959, Ch. 4, freedom of contract - the freedom to contract on whatever terms might seem most advantageous to the individual - became a cornerstone of nineteenth century laissez faire economics. Champions of individualist social philosophy who protested against legal and social restrictions in order to advance the policies of expansion and exploitation pursued by industry and commerce won their battle and "freedom of contract was one of the trophies of victory" (see Ansons Law of Contract, 23rd Edn., page 3). The freedom and sanctity of contract thus became "the necessary instruments of laissez faire, and it was the function of the courts to foster the one and to vindicate the other. Where a man sowed, there he should be able to reap" (see Cheshire and Fifoots Law of Contract, 8th Edn., page 19). It is significant that the maxim itself - laissez faire, laissez passer - which derived from eighteenth century France - has been commonly attributed to Gournay, at first a merchant and later one of the intendants of commerce and a friend of Turgot. Turgot attributes the phrase laissez nous faire to another merchant, Legendre, who is said to have used it in impressing upon Colbert the desire on the part of the mercantile community for non-interference by the State. When Colbert asked a meeting of French businessmen what the State might do to assist them, Legendre pointedly replied, "laissez nous fair". The underlying assumption of the laissez fair doctrine turns on an optimistic view of the nature of the universe and on the conception of a "natural order" or system of economic harmonies which will prevail and work out to mankinds advantage in the absence of positive regulation (see International Encyclopedia of the Social Science 1968 Edn., edited by David L. Sills, Vol. 8 page 546, and Encyclopaedia of the Social Sciences, edited by Edwin R.A. Seligman, Vol. IX, pages 15-16).42. Towards the close of the nineteenth century it came to be realised that private enterprise, in order to be socially just, had to ensure economic equalityvery freedom of contract with its corollary, the freedom to compete, was merging into the freedom to compete, and in the last resort competition and combination were incompatible. Individualism was yielding to monopoly, where strange things might well be done in the name of liberty. The twentieth century has seen its progressive erosion on the one hand by opposed theory and on the other by conflicting practice. The background of the law, social political and economic, has changed. Laissez faire as an ideal has been supplanted by social security; and social security suggests status rather than contract. The State may thus compel persons to make contracts, as where, by a series of Road Traffic Acts from 1930 to 1960, a motorist must insure against third-party risks; it may, as by the Rent Restriction Acts, prevent one party to a contract from enforcing his rights under it; or it may empowers a tribunal either to reduce or to increase the rent payable under a lease. In many instances a statute prescribes the contents of the contract. The Moneylender, Act, 1927, dictates the terms of any loan caught by its provisions; the Carriage of Goods by Sea Act, 1924, contains 6 pages of rules to be incorporated in every contract for the carriage of goods by sea from any port in Great Britain or Northern Ireland to any other port; the Hire-Purchase Act, 1965, inserts into hire-purchase contracts a number of terms which the parties are forbidden to exclude; successive Landlord and Tenant Acts from 1927 to 1954 contain provisions expressed to apply notwithstanding and agreement to the contrary. The erosion of contract by statute continues briskly; and there are no immediate signs of aand Fifoots Law of Contract, 8th Edn., pages 21-22).43. In the words of Ansonof contract is a reasonable social ideal only to the extent that equality of bargaining power between contracting parties can be assumed, and no injury is done to the economic interests of the community at large. In the more complicated social and industrial conditions of a collectivist society it has creased to have much idealistic attraction. It is now realised that economic equality often does not exist in any real sense, and that individual interests have to be made to subserve those of the community. Hence there was been a fundamental change both in out social outlook and in the policy of the legislature towards contract, and the law today interferes at numerous points with the freedom of the parties to make what contract they like ...This intervention is especially necessary today when most contracts entered into by ordinary people are not the result of individual negotiation. It is not possible for a private person to settle the terms of his agreement with the British Railway Board or with the local electricity authority. The standard form contract is the rule. He must either accept the terms of this contract in toto or go without. Since however, it is not feasible to deprive oneself of such necessary services, the individual is compelled to accept on those terms. In view of this fact, it is quite clear that freedom of contract is now largely an illusion" (Ansons Law of Contract, 23rd Edn., pages 3-4).45. Anson is perhaps over-optimistic in saying that there has been a fundamental change in social outlook and in the legislative policy towards contract. Anyway, with the high ideals of the preamble and the directive principles of out Constitution there has to be such a fundamental change in judicial outlook. Instances given in Cheshire and Anson have their parallels in India too, wherein freedom of contract has largely become an illusion. The policy of out Parliament in regard to contracts including those involved in sale of goods has still to reflect recognition of the necessity for a change, which could be done by a suitable modification of the definition of "sale" of goods.46. It all began with the reliance in Gannon Dunkerley on the statement in the 8th Edition 1950 of Benjamin on Sal that to constitute a valid sale there must be a concurrence of four element one of which is "mutual assent". The statement is a reproduction of what the celebrated author had said in the 2nd and last edition prepared by himself in 1873. The majority judgment in New India Sugar Mills also derives sustenance from the same passage in Benjamins 8th edition. But as observed by Hidayatullah, J., his dissenting judgment in that case consent may be express or implied and offer and acceptance need not be in elementary form. It is interesting that General Editor of the 1974 edition "Benjamins Sale of Goods" says in the face that the editors decided to producer entirely new work partly because commercial institutions, modes of transport and payment, forms of contract, types of goods, market areas and marketing methods, and the extent of legislative and governmental regulation and intervention, had changed considerably since 1868, when the 1st edition of the book was published. The formulations in Benjamins 2nd edition relating to the conditions of a valid "sale" of goods, which are reproduced in the 8th edition, evidently require modification in the light of regulatory measures of social control. Hidayatullah, J., in his minority judgment referred to above, struck the new path; and Bachawat, J., who spoke for the court in Andhra Sugar, went a step ahead by declaring that "the contract is a contract of sale and purchase of cane, though the buyer is obliged to give his assent under compulsion of a statute". The concept of freedom of contract as observed by Hedge, J., in India Steel and Wire Products, has undergone a great deal of change even in those countries where it was considered as one of the basic economic requirements of a democratic life. Thus, in Ridge Nominees Ltd. 29, the Court of Appeal, while rejecting the argument that there was no sale because the essential element of mutual assent was lacking, held that the dissent of the shareholder was overriden by an assent which the statute imposed on him, fictional though it may be, that a sale may not always require the consensual element mentioned in Benjamin on Sale, 8th Edition, page 2, and that there may in truth be a compulsory sale of property with which the owner his compelled to part for a price against his will, Decisions in cases of "compulsory acquisition", where such acquisition is patent as in Kirkness or is inferred as in Chittar Mal fall in a separate and distinct class. The observations of Lord Reid in Kirkness that "sale" is a nomen juris the name of a particular consensual contract - have therefore to be understood in the context in which they were made, namely, the compulsory requisition cannot amount to sale. In Gannon Dunkerley, Venkatarama Aiyar, J., was influenced largely by these observations and by the definition of "sales" in the Benjamins 8th edition. Gannon Dunkerley involved an altogether different point and is not an authority for the proportion that there cannot at all be a contract of sale if the parties to a transaction are obliged to comply with the terms of a statute. Since we are putting in a nutshell what we have discussed earlier, we would like to reiterate in the interest of uniformity and certainty of law that with great deference, the majority decision in New India Sugar Mills is not good law. The true legal position is as is stated in the minority judgment in that case and in India Steel and Wire Products, Andhra Sugars, Salar Jung Sugar Mills and Oil and Natural Gas Commission. To the extent to which Cement Distributors Pvt. Ltd. is inconsistent with these judgment, it is also, with respect, not good law.47. The conclusion which, therefore, emerges is that the transaction between the appellant, M/s. Vishnu Agencies (Pvt.) Ltd., and the allottees are sales within the meaning of S. 2(g) of the Bengal Finance (Sales Tax) Act, 1941. For the same reason, transactions between the growers and procuring agents as also those between the rice millers on the one hand and the wholesalers or retailers on the other are sales within the meaning of S. 2 n) of the Andhra Pradesh General Sales Tax Act, 1957. The turnover is accordingly exigible to sales tax or purchase tax as the case may be.