PETITIONER:
STATE OF PUNJAB & ORS.
Vs.
RESPONDENT:
DEWAN'S MODERN BREWERIES LTD.
DATE OF JUDGMENT16/03/1979
BENCH:
UNTWALIA, N.L.
BENCH:
UNTWALIA, N.L.
PATHAK, R.S.
CITATION:
1979 AIR 1158 1979 SCR (3) 568
1979 SCC (2) 210
ACT:
Punjab General Sales Tax Act 1948-Sales effected on
permits prescribing price, quantity and the person to whom
goods should be sold-Sales tax if could be levied-Tax levied
retrospectively-Validity of-Concensuality if lacking where
dealer did not know that tax was to be paid.
HEADNOTE:
The sales tax authorities levied tax on the sales of
liquor effected by the respondent who was a wholesaler in
that commodity. Impugning the levy, the respondent contended
in the High Court that when it sold liquor against permits
issued by the authorities there was no volition because the
price and the quantity of goods to be sold and the person to
whom sold were all fixed and therefore there was no sale in
the eye of law which would attract tax. The Department, on
the other hand, contended that even when goods were sold
against a permit there was still an area of volition in that
the parties could decide on the quality and brand of liquor,
the quantity, whether in bulk or in instalments, the size of
the package and so on, all of which showed that there was no
restraint on the volition of the parties and therefore there
was sale which attracted tax.
A single judge of the High Court, following a decision
of the Division Bench of the same High Court in Jagatjit
Distilling and Allied Industries Ltd. v. The State [28 STC
709], quashed the order of assessment. A Division Bench
dismissed the appeal in limine.
Allowing the State's appeal
^
HELD: The transactions were sales exigible to tax. [571
G]
1. The decision of this Court in Vishnu Agencies (Pvt.)
Ltd. v. Commercial Tax Officer, [1978] 2 SCR 433 justifies
imposition of sales tax on the sale of liquor on permits. A
conspectus of the provisions of the Punjab Excise Act and
the Rules shows that there is an area of agreement
sufficient enough for the parties to bring, by their
volition, the impugned transactions within the ambit of
sales. [570 G; 571 A]
Vishnu Agencies (P) Ltd. etc. v. Commercial Tax Officer
JUDGMENT:
Jagatjit Distilling and Allied Industries Ltd. v. The
State, 28 STC 709 overruled.
2(a) It is well settled that sales tax could be imposed
retrospectively. Therefore, even though in this case the tax
was levied retrospectively by a validation ordinance, the
respondent would be deemed to have entered the trade and
carried it on the basis that it would be liable to pay sales
tax. [571 D]
569
(b) Even assuming that the respondent carried on the trade
thinking that it would not be liable to pay sales tax, the
area of concensuality still left for the purpose of agreeing
to the final terms of the transactions between the
respondent and its retail dealers was quite sufficient for
the application of the ratio of Vishnu Agencies. [571 F-G]
&
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2028 of
1974.
Appeal by Special Leave from the Order dated 6-9-1975
of the Punjab and Haryana High Court in L.P.A. No. 516/73.
Hardev Singh and R. S. Sodhi for the Appellants.
L. N. Sinha, P. P. Singh and E. C. Agarwala for the
Respondent.
The Judgment of the Court was delivered by
UNTWALIA J.-The respondent-company in this appeal by
special leave has a Distillery and Brewery at Jammu. It
maintains wholesale depots at various places in the State of
Punjab, the main depot being at Ludhiana. As a whole-seller
it supplied Indian made foreign liquor to permit holders on
the permits issued by the respective Excise and Taxation
Officers, the competent authorities under the Punjab Excise
Act and the Rules framed thereunder. Sales tax under the
Punjab General Sales Tax Act, 1948 was imposed in respect of
the sales aforesaid by an order of assessment dated the 30th
November, 1972. The respondent, thereupon filed a Writ
Petition in the High Court for the quashing of the said
order and to restrain the appellants from recovering the
amount of Rs. 46,396.22 paise from the petitioner. The main
ground of attack on the imposition of sales tax was that the
alleged sales were not sales in the eye of law as the
respondent had no volition in the distribution of liquor
which was received from the manufacturing concern at Jammu.
The prices were fixed by the competent authorities and the
respondent had to charge the fixed price from its retailers
holding L-2, L-4, L-5 and L-10 licences. The respondent
company holds L-1 licence which is meant for whole-sale
dealers. The State contested the application and in its
counter asserted that the excise trade like many other
trades, or even more, had to be regulated and controlled by
various Rules and Regulations and in spite of all the
restrictions placed thereby an area was still left where the
whole-seller and the retail purchaser had to arrive at an
agreement by their volition. According to the case of the
appellants “the quality and brand of Foreign Liquor, lifting
of the specified quantity in bulk liter or in instalments,
the size of packages (i.e. Bottles, pints, or Nips) and mode
of payment (cash or credit or part payment) and
570
the prices, are the matters which are decided by the
petitioner and his purchasers and there is no law or rule
restricting the volition or liberty of the petitioner in
this respect.”
Following a Division Bench decision of the Punjab &
Haryana High Court in Jagatjit Distilling and Allied
Industries Ltd. v. The State(1) a learned single Judge of
that Court allowed the writ application and quashed the
assessment order. A Letters Patent appeal from the said
order was dismissed in limine. Hence this appeal.
This case, in our opinion, is squarely covered by a
recent decision of this Court delivered by a Bench of seven
Judges in M/s Vishnu Agencies (Pvt.) Ltd. etc. v. Commercial
Tax Officer and others etc.(2) The High Court in the case of
Jagatjit Distilling and Allied Industries Ltd. (supra) had
mainly relied upon two decisions of this Court to hold that
the transactions in that case were not sales. The said
decisions are M/s New India Sugar Mills Ltd. v. Commissioner
of Sales Tax, Bihar(3) and Chittar Mal Narain Das v.
Commissioner of Sales Tax U.P.(4). In the case of Vishnu
Agencies (supra) the former case was considered in paragraph
36 to 39 of A.I.R. volume at pages 463-464 and it was held
that the view expressed in the majority judgment was not
good law and the one contained in the minority judgment was
approved. Chittar Mal’s case was also considered in
paragraph 44-45 at page 467 and it was distinguished on the
ground that the said decision “can be justified only on the
view that clause 3 of the Wheat Procurement Order envisages
compulsory acquisition of wheat by the State Government from
the licensed dealer.” But then the criticism in that case of
the Full Bench decision of the Allahabad High Court in
Commr. Sales-tax, U.P. v. Ram Bilas Ram Gopal(5) “which held
while construing cl. 3 that so long as there was freedom to
bargain in some areas the transaction could amount to a sale
though effected under compulsion of a Statute” was not
endorsed. It is, therefore, plain that to that extent
Chittar Mal’s case is also not good law. The decision of the
High Court in Jagatjit’s case is no longer good law.
We have examined the various relevant provisions of the
Punjab Excise Act and the Rules framed thereunder. We find
that an area of agreement sufficient enough for the parties
to cover by their volition to bring the transactions in
question within the ambit of sales was left in the field.
Broadly speaking the stand taken on behalf of the
571
appellants in their counter was correct, except that in
regard to the fixation of price we assume in favour of the
respondent-company that the price had been fixed, as usually
it is so in the excise trade. Even so the decision of this
Court in Vishnu Agencies (supra) and the various other
previous decisions reviewed therein justifies in law the
imposition of sales tax by the impugned order in question.
Mr. Lal Narayan Sinha tried to distinguish the decision
in Vishnu Agencies (supra) by pointing out that sales-tax
for the period in question was imposed by the Punjab General
Sales Tax (Amendment and Validation) Ordinance, 1972 which
was promulgated on the 15th November, 1972 with
retrospective effect. The respondent-company, counsel
submitted, cannot be said to have entered into the trade and
carried it on during this period by a volition as it did not
know that sales-tax would be chargeable for this period and,
therefore, it had not realised sales-tax from its customers.
He drew our attention to paragraph 33 of the judgment of
this Court in Vishnu Agencies at page 461. In our opinion
the argument of the learned counsel is not sound and for two
reasons. Firstly, it is well settled and it was not disputed
that sales-tax could be imposed retrospectively. That being
so the respondent-company will be deemed to have entered the
trade and carried it on the basis that it would be liable to
pay sales-tax. Secondly, even assuming it was not so, what
has been pointed out in the begining of paragraph 33 as a
primary fact of willingness to trade in the commodity
strictly on the terms of Control Orders is only one of the
reasons which led to the decision that an area of agreement
between the parties was left to their consensus. In our
opinion such a part of the area as the one hinted at is not
very important and does not form the whole and sole basis of
the conclusions arrived at in the case of Vishnu Agencies.
Even assuming in favour of the respondent-company that it
did not carry on the trade thinking that it would be liable
to pay sales-tax, the area of consensuality still left in
the field for the purpose of agreeing to the final terms of
the transactions between the company and its retail dealers
was quite sufficient for the application of the ratio of
Vishnu Agencies. Having considered all that was submitted on
behalf of the respondent-company we find that there is no
escape from the conclusion in this case that the
transactions in question were sales exigible to sales-tax.
For the reasons stated above, we allow this appeal with
costs in this Court only. The judgment and order of the High
Court are set aside.
P.B.R. Appeal allowed.
572