Kondaiah, J.
1. This batch of writ petitions challenging the levy of sales tax on sales of rice by the millers to the retail or wholesale dealers and in their turn to the customers and the purchase of paddy by procuring agents from the producers in the State may broadly be classified into three categories. The petitioners in W.P. Nos. 1981 of 1966, 542, 1057, 1397, 3630 and 3632 of 1967, 714, 1208, 1584 and 1849 of 1968 and 181 and 3447 of 1969 are the retailers. W.P. Nos. 1214 and 1216 to 1221 of 1969 and Special Appeals Nos. 1 and 2 of 1969 are by the paddy procuring agents, and others are by the millers.
2. The after-effects of the second world 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 the agriculturists. The petitioners are challenging the action of the sales tax authorities in these writ petitions. The case of the procuring agents stands on the same footing as that of the rice millers with this difference that in the former the purchase of paddy and in the latter it is the sale of rice that is sought to be taxed. The transactions by the retail dealers stand on a different footing.
3. Messrs T. Anantha Babu, P. Rama Rao and G. Subbarayan, learned counsel appearing for the millers contend that the transactions entered into by their clients pursuant to the requisition orders issued by the Civil Supplies Department are not 'sales' exigible to sales tax. The learned Government Pleader for the State and Messrs N. Rajeswara Rao and Sudhakara Rao, learned counsel for the retail dealers contend contra.
4. The questions that arise for decision are:
(1) Whether on the facts and in the circumstances the supply of rice by the rice millers to the retail dealers of specified quantities at controlled prices pursuant to the requisition orders issued by the Civil Supplies Department are 'sales' exigible to sales tax under the Andhra Pradesh General Sales Tax Act, 1957?
(2) If question No. (1) is answered in the negative, whether the retail dealers otherwise called ' non-millers' are liable to pay sales tax on the sales of rice effected by them in favour of the customers and the ration cardholders?
5. For a proper appreciation of the principal question, it is necessary to advert to the legal position as to what is meant by 'sale' exigible to sales tax. By virtue of entry 54 in List II of the Seventh Schedule of the Constitution of India the A.P. State Legislature is competent to enact the A.P. General Sales Tax Act, 1957 (hereinafter called the 'Act') to levy a tax on the sale or purchase of goods other than newspapers that takes place within the State. Section 2(n) of the Act defines 'sale' as 'every transfer of the property in goods by one person to another in the course of trade or commerce, for cash, or for deferred payment, or for any other valuable consideration....' Section 5 of the Act is the charging section. Paddy is liable to tax at the first point of purchase whereas rice is liable to tax at the point of first sale in the State.
6. It is settled law that the concept of sale under the Act has to be understood as a 'sale of goods ' within the meaning of Section 4 of the Sale of Goods Act. In order to constitute 'sale of goods' within the meaning of Section 4 of the Sale of Goods Act, there must exist ingredients of (1) a bargain, or agreement of sale; (2) the payment or promise of payment of price; (3) the delivery of goods and (4) the transfer of property to the buyer from the seller. Everyone of the aforesaid ingredients is essential to the transaction being termed as ' sale of goods' completed or concluded. See Poppatlal Shah v. State of Madras A.I.R. 1953 S.C. 274 at 276, State of Madras v. Gannon Dunkerley A.I.R. 1958 S.C. 560, Bhopal Sugar Industries v. D.P. Dube A.I.R. 1964 S.C. 1037 and I.S. & W. Products v. State of Madras A.I.R. 1968 S.c. 478 at 480. Where all the requisite ingredients or elements of sale within the meaning of Section 4 of the Sale of Goods Act are regulated or controlled by any statute or control order pursuant to which the transaction relating to supply of the goods whether it be rice, paddy or any other commodity takes place, such transaction does not amount to 'sale of goods' exigible to sales tax under the provisions of the Act, as there is no element of volition or scope for any choice or option for the transacting parties to complete the contract. 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 parties 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 order.
7. We shall now turn to the case law on the subject. In I.S. & W. Products v. State of Madras A.I.R. 1968 S.C. 478, it was held that sale of iron and steel products by the Indian Steel and Wire Products Ltd., to various buyers pursuant to the orders of the Iron and Steel Controller in exercise of his powers under the Iron and Steel (Control of Production and Distribution) Order, 1941, was exigible to sales tax under the Madras General Sales Tax Act, as on a construction of various provisions of control orders it was found that the parties can negotiate in respect of the manner and place of delivery of stocks and the payment of price though in other respects the control orders prevail. The learned Judge, Hegde, J., who spoke for the Court ruled at page 485 thus:
It would be incorrect to contend that because law imposes some restrictions on freedom to contract, there is no contract at all. So long as mutual assent is not completely excluded in any dealing, in law it is a contract.
8. In Andhra Sugars Ltd. v. State of A.P. A.I.R. 1968 S.C. 599, compulsory purchase of sugarcane from a grower within the factory zone, by the occupier of the factory pursuant to the provisions of the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Act (45 of 1961) was held to be a 'sale' exigible, to sales tax within the Act. Bachawat, J., who spoke for the court succinctly laid down the law on this aspect of the case at page 604 thus:.Consent is said to be free when it is not caused by coercion, undue influence, fraud, misrepresentation or mistake as defined in Sections 15 to 22. Now, under Act No. 45 of 1961 and the Rules framed under it, the cane-grower in the factory zone is free to make or not to make an offer of sale of cane to the occupier of the factory. But if he makes an offer, the occupier of the factory is bound to accept it. The resulting agreement is recorded in writing and is signed by the parties. The consent of the occupier of the factory to the agreement is not caused by coercion, undue influence, fraud, misrepresentation or mistake. His consent is free as denned in Section 14 of the Indian Contract Act though he is obliged by law to enter into the agreement. The compulsion of law is not coercion as defined in Section 15 of the Act. In spite of the compulsion, the agreement is neither void nor voidable. In the eye of the law, the agreement is freely made. The parties are competent to contract. The agreement is made for a lawful consideration and with a lawful object and is not void under any provisions of law. The agreements are enforceable by law and are contracts of sale of sugarcane as denned in Section 4 of the Indian Sale of Goods Act. The purchases of sugarcane under the agreement can be taxed by the State Legislature under entry 54, List II.
See State of Rajasthan v. Karam Chand Thappar and Bros. [1969] 23 S.T.C. 210 (S.C.)
9. A Full Bench of the Allahabad High Court in Commissioner of Sales Tax v. Ram Bilas Ram Gopal [1969] 24 S.T.C. 508 (F.B.) has held that transactions relating to supply of foodgrains to the State Government by licensed dealers under the U. P. Wheat Procurement (Levy) Order, 1959, are 'sales' exigible to sales tax under the U. P. Sales Tax Act, 1948.
10. The decision of the Supreme Court in New India Sugar Mills Ltd. v. Commissioner of Sales Tax [1963] 14 S.T.C. 316 (S.C.) is an authority for the proposition that where all the ingredients or elements constituting the expression 'sale of goods' are controlled or regulated by the control orders or any statute without any scope for mutual agreement between the transacting parties, such transaction is not a 'sale' within the meaning of Section 4 of the Sale of Goods Act. In that case, the assessee-manufacturer of sugar in Bihar who supplied sugar to the State of Madras at controlled prices pursuant to the orders of the Sugar Controller did not enter into any agreement with the purchaser of the sugar. In those circumstances, it was held that the despatches of sugar by the Bihar manufacturer to the State of Madras did not amount to 'sales' liable to sales tax under the Bihar Sales Tax Act. The decision of the Privy Council in Kirkness (Inspector of Taxes) v. John Hudson & Co. Ltd. [1955] A.C. 696 (P.C.) is a case where it was found on the facts that the transaction in question was a 'compulsory acquisition' but not a 'sale'.
11. The aforesaid discussion yields the following results:
(1) The concept of sale within the meaning of Section 2(n) of the A. P. General Sales Tax Act is that 'sale of goods' specified in Section 4 of the Sale of Goods Act.
(2) In order to constitute 'sale of goods' the requisite elements or ingredients of sale, viz., a bargain or agreement of sale, the payment or promise of payment of price, the delivery of goods and the transfer of property to the buyer from the sellers, must be present.
(3) No transaction of sale without an agreement to transfer title in the goods, whether it be by mutual discussion and consent of parties or due to superimposition or compulsion by a statute or control order, is exigible to sales tax under the Act.
(4) Where the parties are obliged due to the compulsion of law to enter into an agreement of sale of goods, such an agreement is not void or voidable but valid and binding on them as it is made for a lawful consideration and with a lawful object. The consent of the contracting parties, in such circumstances, must be held to be free and lawful but not the result of any fraud, coercion, undue influence and misrepresentation.
(5) Where the parties have a choice or option to mutually agree upon any one or more of the elements or ingredients of sale, although the other elements are controlled or regulated by the statute or control orders, the transaction must be held to be a 'sale' within the meaning of Section 4 of the Sale of Goods Act and hence exigible to sales tax.
(6) Where all the requisite ingredients or elements of sale are controlled or regulated by a statute or control order, whereby the contracting parties have been left without any choice or option but to transact business due to statutory compulsion, such transaction must be termed as a 'compulsory acquisition' of property but not a 'sale' within the meaning of the Sale of Goods Act exigible to sales tax.
12. We shall now turn to the facts of the present case and consider the principal question on the application of the aforesaid principles.
13. 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 the stock-holder 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 title 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.
14. There is another weighty reason to reject the contention of the petitioners-millers. The very control orders referred to above disclose that the millers have charged the retail 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 Act.
15. As the procuring agents 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 State.
16. 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.
17. 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 1964-65. 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 appeals.
18. The submission of Sri T. Ramam that the Deputy Commissioner cannot revise an order which was the subject-matter of the appeal decided by the Sales Tax Appellate Tribunal cannot 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.
20. In the result, the writ petitions filed by the rice millers, viz. W. P. Nos. 1017, 1214, 1216 to 1221, 3005,3085, 3086, 3088, 3090, 3306, 3327, 3401, 3837, 3838, 3866, 3878, 3919, 3920, 4232, 4233, 4243, 4244, 4269, 4270 and 4430 of 1969 are dismissed with costs. Special Appeals Nos. 1 and 2 and T.R.C. No. 27 of 1969 are also dismissed with costs. The writ petitions filed by the retail dealers, viz., W. P. Nos. 181 and 3447 of 1969, 1981 of 1966, 542, 1057, 1397, 3630 and 3632 of 1967, 714, 1208, 1584 and 1849 of 1968 are allowed with costs.