Case: Kotha Narasimham Amburi Kotaiah And Others Vs. State Of Andhra Pradesh And Others

ts of the second word war and the enormous growth in the population without any corresponding increase in production had resulted in the acute shortage and short supply in essential commodities in the country. In order to check the tendency of unsocial elements who busily engaged themselves in hoarding the essential articles with the ulterior object of selling them at soaring prices, the Central and State Legislatures and the Governments have stepped in and promulgated the Essential Commodities Supplies Act and various Control Orders to control and regulate the supply and distribution of those articles at fair prices. The Andhra Pradesh Paddy Procurement (Levy) Orders and the Andhra Pradesh Paddy and Rice (Declaration and Requisition of Stocks) Order, 1964, are two such control orders. By virtue of the provisions of the former orders, the paddy growers in the State are compelled to sell their paddy only to the licensed procuring agents appointed by the State Government at the prices fixed by it. The agriculturist has a choice to select his own procuring agent, but cannot sell to any private purchaser. The procuring agents in their turn have to supply to the rice millers in the State at controlled prices. The millers after converting paddy into rice in their mills have to declare their stocks to the Civil Supplies Department. Pursuant to the orders issued by the Civil Supplies Department the rice millers have to supply the requisite quantity of rice to the wholesale or retail dealers at the price fixed by them. The sales tax authorities have sought to tax the transactions relating to the supply of rice by the millers to the wholesale or retail dealers and the transactions of sale made by the retailers to their customers and the purchase of paddy by the procuring agents from thee petitioners are challenging the action of the sales tax authorities in these writ petitions.

Reasoning: The contracting parties are only forced by virtue of the statute or the control orders to transact business without any choice or option left to them in respect of any one of the essential ingredients or elements of sale. Such a transaction, in our considered opinion, must be termed an acquisition, but not a sale of goods. However, if any one or more of the essential ingredients or elements of sale is or are left to the choice or volition of the transacting parties such a transaction in spite of the supply of goods by one party to another being regulated or controlled in respect of other elements of sale by any statute or control orders, be held to be a sale exigible to sales tax. In other words, although the parries had to agree to transact business on account of the superimposition of the control orders in respect of some of the requisites of sale, the transaction must be found to be a sale but not an acquisition, if the contracting parties are at liberty to have their own choice to agree with regard to one or more ingredients of sale such as place, time and mode of delivery of goods or payment of price or any such similar factors. Unless and until the volition or choice of the contracting parties to mutually agree upon any one of the requisite elements of sale irrespective of such element being very material or minor, it cannot be said that the parties are left without any choice in respect of entering upon a mutual agreement. The heart of the matter is that there should be an agreement between the parties so as to make such a transaction a valid and complete sale. It does not matter whether such an agreement is on account of mutual free will or due to superimposition by a statute or control order6. We shall now turn to the fact of the present case and consider the principle question on the application of the aforesaid principles.In order to find out the nature of the transactions in question, it is relevant and material to look to the provisions of the Andhra Pradesh Paddy and Rice (Declaration and Requisition of Stocks) Order, 1964. As pointed out earlier, the procuring agents who purchase paddy from the agriculturists at controlled prices had to supply paddy to the rice millers at the prices fixed by the State Government. The rice millers after converting paddy into rice, had to declare the stocks of rice held by them, to the Civil Supplies authorities who pass orders directing them to supply rice at controlled prices to the wholesale or retail dealers. Clauses 4 and 5 of the Control Order provide for the requisitioning and disposal of stocks by the dealers from time to time. The price payable, quantity of rice to be supplied and the identity of the transferee have been determined as per the orders issued by the Civil Supplies Department. Clauses 6 and 7 of the Control Order provide for levy of penalties on ther if he fails to comply with the orders of the Controller relating to the supply of rice. We are concerned in these writ petitions with similar control orders for the years 1964, 1965, 1966 and 1967. The provisions of the control orders for the subsequent years are similar to those of the Control Order 1964 referred to above. The effect of the control orders, therefore, is that the rice miller has to sell the rice only to the Government up to 1965 and thereafter certain percentage to the Food Corporation, a statutory body, or its agents and the balance to the persons as per the orders of the District Collector at such prices as fixed by the State Government under the control orders. Though the miller cannot sell to whomsoever he likes except to the State Government, Food Corporation or its agents at prices fixed by the control orders, he has a choice with regard to the mode of payment of the price and delivery to be effected in respect of these transactions. The contracting parties, i.e., the rice miller and the retail dealer are entitled to mutually agree amongst themselves in respect of the place, time and manner of the transport and delivery of the goods and the price payable under the contracts. The parties are no doubt compelled under the control orders to transact the sale of rice of definite quantity at a controlled price by definite parties but with a choice to have an agreement with regard to the mode, place and time of delivery of goods to be effected and the price payable. Though the agreement to purchase rice by the retailer and the sale by the miller are superimposed by the control orders, the transaction must, none the less, be held to be a sale as it is a contract entered into by the parties according to law but not vitiated by any fraud, misrepresentation or coercion. The consent of the parties to the agreement of sale of rice in the instant cases can by no stretch of reasoning be held to be void or voidable though they are obliged under the control orders to enter into such an agreement. Indisputably, the contract is for valid consideration and the actual tittle in the goods has passed from the miller to the retail dealer. The transaction, therefore, must, on the application of the principles referred to above, be held to be a complete and valid sale within the meaning of section 4 of the Sale of Goods Act and hence exigible to sales tax under the Andhra Pradesh General Sales Tax Act.There is another weighty reason to reject the contention of the. The very control orders refereed to above disclose that the millers have charged the retailer dealers not only the price at the controlled rate but also included in their bills, the sales tax payable on those transactions. The retail dealers have in fact paid sales tax to the millers on the purchases made by them as they happened to be the first sales of rice within the State. The millers having collected from the retail dealers cannot now turn round and urge that the transactions are not sales exigible to sales tax as they have no choice in the transactions except to obey the orders of the Civil Supplies Department. The provisions of the control orders themselves have to be considered to arrive at a correct conclusion relating to the exact nature of the very transactions in question. One of the clauses in the control orders relating to the collection of sales tax must be taken to be a pointer or factor by which it can be held that the parties at the time of entering into the contract knew full well and in fact proceeded on the footing that the transaction in question was a sale exigible to sales tax under the ActAs the procuring agent are admittedly the first purchasers of paddy from the ryots and their case stands on the same footing as that of the rice millers, they must be held to be liable to pay sales tax on their first purchases of paddy within the State, just as the rice millers are liable to pay sales tax on their first sales of rice to the retail dealers within the State7. For these reasons, we answer question No. (1) in the affirmative and against the petitioners. In this view, it is unnecessary for us to decide the next question as the retail dealers would not be liable to pay sales tax on their sales of rice to the customers or the ration cardholders as the same would not be first sales within the State liable to tax under the provisions of the Act.The contention of Mr. S. Venkata Reddy for the appellants in Special Appeals Nos. 1 and 2 of 1969 that the Revenue Board, instead of remitting the matter to the assessing authority erred in disposing of the appeals without affording the assessees an opportunity cannot be given effect to. Firstly, the proceeding before the Revenue Board is different from that of the Sales Tax Appellate Tribunal. The Board also is entitled to take evidence if asked for by the assessee. The appellant has not availed of the opportunity of adducing evidence before the Revenue Board. Secondly, it appears the assessment had to be completed within four years from the date of the service of the original assessment order which relates to the assessment year. In the circumstances, we are unable to agree with the learned counsel that the impugned orders are vitiated by any irregularity or error of jurisdiction justifying our interference in these special appealsThe submission of Sri T. Ramam that the Deputy Commissioner cannot revise an order which was ther of the appeal decide by the Sales Tax Appellate Tribunalcannot be entertained in T.R.C. No. 27 of 1969. The assessee is at liberty to raise this point before the concerned authority and have adjudication of his rights, if any.