ORDER
D. Basu, J.
1. Though this Application under Article 226 is a voluminous document, the case of the petitioner may be briefly stated as follows: The petitioner, Associated Electrical Industries (India) Private Ltd., a registered dealer, submitted its return on 29-12-58 to the Sales Tax Authorities in respect of the financial year ending 31-10-58, in which return he claimed exemption from sales tax for the sum of 56 lakhs and odd, being the amount invoiced in respect of transactions which took place prior to July, 1957, on two-fold grounds, viz., that there was no transaction of sale in respect of this amount, or, if there was any such transaction it was a sale in course of the import of the goods into the territory of India and that, accordingly, no sales tax was payable on the amount referred to.
2. The Commercial Tax Officer (Respondent No. 1), by his order dated 20-2-61 (Annexure 'C' to the application--page 26), rejected the claim for exemption and made the impugned assessment and demanded a tax of Rs. 2,31,867.95 nP. The petitioner by the letter in (Annexure 'J' page 118), demanded justice from the Commercial Tax Officer and this letter summarises, in brief, his case in the present Application. Its grievance is that out of the sum claimed for exemption before respondent 1, the sum of Rs. 33,70,831.18 nP. represented the C. I. F. value of the goods imported by the petitioner for and on behalf of the Punjab State Electricity Board and that the impugned order of the Commercial Tax Officer rejecting the exemption with respect to this amount was illegal and!without jurisdiction on the following grounds--(1) That it did not constitute a 'sale' inasmuch as (a) the petitioner was never the owner of the said goods and never transferred property in goods to the Punjab State Electricity Board and (b) it was an indivisible contract for supply of work, labour and materials and for the erection of immovable property and not a transaction or sale of goods. (2) That even if it was a 'sale', such sale took place in the course of the import of the goods into the territory of India and shall accordingly be exempted from sales tax by virtue of Article 286(1)(b) of the Constitution. (3) That the 'sale' did not take place within the State of West Bengal and accordingly, it was a sale taking place outside the State within the meaning of Article 286(1)(b), read with Section 4 of the Central Sales Tax Act, 1956.
3. The petitioner, accordingly, prays that the impugned order of the respondent No. 1 as well as the notice issued by the respondent No. 1 dated 21-2-61 after rejection of the claim for exemption (Vide Aunexure 'C' page 31) be quashed by a writ of certiorari and the respondents be directed not to give effect to the said order or notice or to demand or collect say sales tax from the petitioner in respect of the impugned transaction, referred to above. In the Application the Commercial Tax Officer has been impleaded by his official designation as respondent No. 1. The officer who is at present holding his office has been impleaded as respondent No. 2, Respondent No. 3is the Punjab State Electricity Board which, it is stated in the petition, has been impleaded as a proper party, without any relief being claimed against it. Respondent No. 2 has filed a counter-affidavit on behalf of the respondent No. 1 and himself. In this affidavit it is denied that the petitioner imported the goods for and on behalf of the Punjab State Electricity Board and it is contended that the petitioner imported these goods for selling the same to the East Punjab Government. It is also contended that it is the petitioner who had property in the goods and not the Chief Engineer of the Government of Punjab. There was according to the counter-affidavit, a transaction of sale with respect to the amount referred to in the application and the transaction involved a contract for the sale of goods as well as for rendering services, the two contracts being separable from each other. It is also averred that the sale took place within the State of West Bengal after the goods had been imported from the U. K. from the manufacturer and that, accordingly, exemption under Article 286 was not available. It has also been contended that the application under Article 226 is not maintainable because the petitioner has failed to resort to its statutory remedies.
4. The points for decision in this case are--(a) whether the transaction represented by the sum of Rs, 33,70,831.18 nP. was a transaction of sale of goods to the Punjab Government or the Punjab State Electricity Board, (b) whether it was a composite contract for the supply of works, labour and materials, (c) whether it represented a sale in the course of import, (d) whether the sale took place outside the State of West Bengal, (e) whether the application is barred by alternative remedies.
5. The petitioner has already paid, under protest, half of the tax assessed.
6. Point (a).
It should be pointed out at the outset that there has been an unnecessary battle at the earlier stages of this proceeding as to what was the exact amount of exemption claimed before the Respondent 1 and whether that officer properly appreciated the extent of that claim and the like. But the claim in this application, which I have made sure by a specific query to the learned Advocate for the petitioner, is confined to the claim for exemption from the tax assessed on the sum of Rs. 33 lakhs and odd which represents the transaction with the Punjab State Electricity Board (Respondent 3).
7. The first point for decision, therefore, is whether the Supply of machinery and other materials to the Board by the petitioner constituted a 'sale' within the meaning of Entry 54 of List II of the Constitution and Section 2(g) of the Bengal Finance (Sales Tax) Act, 1941 (hereinafter referred to as the 'Bengal Act') so as to authorise respondent 1 to tax such transaction.
8. It is fairly settled (vide State of Madras v. M/s. Gannon Dunkerley and Co. (Madras) Ltd. : [1959]1SCR379 that the word 'sale' in the legislative Entry has the same meaning as it has under the well-established general law, so that there is no competence to impose a tax on a transaction which does not constitute a 'sale' within the meaning of Section 4 of the Sale of Goods Act, 1930, the relevant portion of which is as follows:
'A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price ........Where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale but where the transfer ........ is to take place at a future time or subject to same condition thereafter to be fulfilled, the contract is called an agreement to sell'.
9. The Supreme Court, accordingly, sums up (p. 577, ibid) that the essential ingredients of a sale, in order to give rise to the legislative power to tax are--(i) An agreement to sell movables; (ii) for a price; (iii) and property passing therein pursuant to that agreement.
9a. These are also the essential ingredients in the definition of sale given in Section 2(g) of the Bengal Act.
'Sale means any transfer of property in goods for cash or deferred payment or other valuable consideration, including a transfer of property involved in the execution of a contract, but does not include a mortgage, hypothecation, charge or pledge'.
10. The contention of the petitioner in the case before me is that the contract in question is not a sale because it does not involve a 'transfer of property' from the petitioner to respondent 3 because the petitioner never became the owner of the goods which were imported by the petitioner and supplied to respondent 3.
11. In order to appreciate this point, the arrangement under which the goods were imported and supplied by the petitioner has to be analysed. This is stated in para 10 of the application and file letter of the Punjab Government (P. W. D.), Electricity Branch, dated 18-1-56, by which thetender of the petitioner was accepted. This letter is at Ann, D. (p. 33). It appears that the Punjab Government, had invited tenders for the import and supply of some generators and other electrical machinery and that the petitioner had submitted its tender on 16-9-55. The petitioner's statement that this Electricity Branch of the Punjab Government was succeeded by a statutory body called the Punjab State Electricity Board (respondent 3) created under the provisions of the Electricity (Supply) Act, 1948, is not denied.
12. One of the conditions of the contract, as disclosed by Ann. D, was that the equipment to be supplied was to be manufactured in England by the firm specified in Ann. D; that they would, after import be co-ordinated by the petitioner and that the petitioner would be responsible for the transport, insurance and handling of the material up to the Indian port of entry and also beyond the port of entry, if so required. Government also reserved to itself the right to inspect the goods during the course of the manufacture as well as afterwards, The 'price' of the equipment to be supplied by the petitioner was detailed per item as 'F. O. B.' price plus 'extra for C. I. F.' and the Government was described as 'Purchaser'. It is to be noted that within 60 days of the receipt of the letter in Ann. D, the petitioner should execute a written contract with the Government, embodying the terms of the tender and acceptance and it was further stipulated that such contract should operate and also, be interpreted as a contract under the Indian Sale of Goods Act, 1930. Such a contract has, in fact, been drawn up and it is in Ann. F (p. 46) but it has not yet been executed by the parties, even though the parties have accepted its terms. That, however, is not material for the purposes of the present proceeding and it is possible to discover the relevant terms and the nature of the agreement from Anns. Dand F and to dispose of the application on the basis thereof.
13. It is to be noted that apart from the supply of the equipment, the petitioner was also to supply the services of competent Engineers who would supervise and be responsible for the erection of the plant, and for which services, the petitioner was to get Rs. 120/- per day, with stipulated travelling allowances etc. for each of such Engineers. This aspect of the contract as to the supply of services will be dealt with under the next point.
14. But what is important in the present context is the stipulation that the price would be payable by instalments and that only up to 90% will be payable on the arrival of the goods at the Indian port of entry. The balance of the price will be payable
'after completion of the acceptance tests and the commissioning of the plant'.
15. It is, thus, evident that the 'delivery' of the goods to be supplied and the full payment of the price will take place after the plant is erected and put to work. If the contract were to be treated as a contract of sale within the meaning of the Sale of Goods Act, it would be evident that there would be a transfer of property in the goods from the petitioner to respondent 3 after the plant had been erected and commissioned.
16. The petitioner's contention is that it never became the owner of the goods which were imported.
For this purpose Mr. Meyer, on behalf of the petitioner, relies upon the arrangement under which the import was made, which is not to be found in Ann. D, but in Ann. E, dated 7-2-56, by which the Government gave the requisition order for the 'manufacture, supply and delivery, C. I. F. Calcutta' of the equipment. In this letter it is stated:
'We have already applied for the Import Licence; as soon as it is received we will intimate you the number of the Licence.'
17. By the next letter of 25-9-57 (Ann. E, p. 43), Government gave the import Licence number as follows:
'The material ordered under our above requisition are covered by Government of India Import Licence No. A 127081/56/AU/CCI/HQ........'
18. The petitioner's case on this point is to be found in para 14 onwards of the application. It is admitted that the goods were imported by the petitioner under a letter of authority issued by the Import Controller in favour of the petitioner at the request of the licence-holder, i.e., the Punjab Government. It is also evident that it was an Actual User's Licence and that the procedure relating to the grant of such licence and the letter of Authority are to be found in App. 47 of the Government, publication instituted 'Import Trade Control Policy'. The petitioner strongly relies on the statement made in this Appendix that a letter of authority is granted only in those cases where the licensee bona fide requires the services of an agent for effecting the import. On behalf of the petitioner, Mr. Meyer has strongly relied upon para 3(a) of this Appendix which is as follows:
'......the person or firm in whose favour ithas been issued will act purely as an agent of the licensee and the goods imported will be the property of the licence-holder both at the time of the clearance through the Customs and subsequent thereto. ...... The licensee shall not cause or permit theholder if the letter of authority to dispose of the goods'.
19. Obviously, the respondent's case would violate the positive prohibition contained in the concluding sentence of the above paragraph, because it does not contain any exception in favour of a sale of the imported goods by the holder of the letter of authority to the licensee himself. The prohibition referred to above is also inscribed, as might be expected, on the face of the licence, a copy of which has been included in Ann. H of the application (p. 111). The concluding condition of the licence also expressly provides:
'It shall be deemed to be a condition of every licence that the goods for the import of which the licence is granted shall be the property of the licensee at the time of the import'.
20. In the present proceeding, however the Court is not called upon to determine whether the Government of Punjab or respondent 3 has committed a breach of the condition of the licence or the Import Policy of the Government of India by entering into a contract for sale of the goods to itself by the holder of the letter of authority and if so, what would be the liability at law of the Punjab Government or the respondent.
21. What I am to determine is whether the goods were imported by the petitioner as an agent of respondent 3 or the Punjab Government or as a seller. This can be determined only from the terms of the agreement in Ann. D and not from the collateral terms of the Import licence. It is difficult to hold that there cannot be a contract of sale between two parties if it is in violation of the terms of the licence obtained by one of them or if it is in breach of the administrative policy of the Government.
22. The nature of the contract, as I have said, can and have to be ascertained from the agreement embodied in Anns. D, and F. An analysis of theseterms will clear up not only whether the transaction constitutes a sale or agency, but also the next point, namely, whether it is a 'works contract' or a composite but divisible contract for the sale of materials us well as the rendering of certain services for a separately specified remuneration.
23. (i) The first thing to be noted is that the agreement expressly describes itself as a contract within the meaning of the Sale of Goods Act and in Ann. D the Government is described as the 'purchaser' and the price of the materials to be supplied is stated item by item. Of course, the labels used by the parties are not conclusive as to the nature of a transaction, but they indicate what they themselves understood the nature of the transaction to be.
24. (ii) What is more important is that the contract is not a works contract, for the erection of the plant, for a lump sum. It is not that the petitioner was to erect the plant for a stipulated remuneration, involving the supply of materials and labour in such erection. Neither the terms of Ann. D nor the terms of Ann. F say that the petitioner is, to get a lump remuneration for the erection of the plant. In fact, as I have said, petitioner's part in the erection of the plant is limited to the supply of Engineers for the purpose of supervising the erection and the remuneration to be given to the petitioner for this service is not a remuneration for erection of the plant, but an estimated sum per each Engineer supplied by way of his salary, allowances and the like, in Clause 10 of Ann. G (p. 67) it isclearly stipulated that 'The contract however covers supervision of erection only.' Nowhere it is stated in Ann. D or H that the petitioner is to erect the plant after supplying the materials. The contract is for supply of the materials for the price mentioned against each item and for the supply of personnel for supervision of thework of erection in consideration of the separately specified amount with respect to each Engineer supplied.
25. (iii) Above all, the nice arguments raised by Mr. Meyer with reference to the terms of the Import Licence (which, I am constrained to say, discloses an uncomfortable state of affairs in this part of the governmental administration) are repelled by the terms of Clause 12 of Ann. H which, I should quote in so far as it is material:
'Except in the event of default ........ theownership of and title to the material herein specified ...... shall not pass from the Contractor (i.e.the petitioner) until all payments due hereunder, including deferred payment ........ shall have beenfully made and the material herein specified shallremain the property of the Contractor, whatever be the mode of its attachment to the reality of other property, until fully paid for....................After the Contractor's obligations ...... have beendischarged fully, especially with regard to the quantity, quality and use of the material and all payments due under this contract made, the Contractor shall obtain a completion certificate from the Purchaser in token of final transfer of Title to Material from the Contractor to the Purchaser and termination of the Contractor's contractual obligations'.
26. It unmistakably shows that, in spite of anything in the import policy of the Government of India or the terms of the import licence, as between the parties it was stipulated that the petitioner was to have title to the materials which wereimported and that such title would pass to respondent 3 after the payment was made in full. The supply of the materials to respondent 3, thus, constituted a 'sale' and justified the imposition of a sales tax.
27. Point (B). The foregoing findingalso answers point (b). Of course, 'the definition in Section 2 (g) of the BengalAct is sweeping enough to include the power to tax a transfer of materials involved in any 'execution of contract', but since Dunkerely's case, : [1959]1SCR379 it has been established that notwithstanding any such provision in a statute, there is no sale and no power to impose sales tax where the contract is a composite and indivisible agreement for the execution of a work such as a building, and the supply of materials is only an ingredient of such contract. On the other hand, in several other decisions delivered by the Supreme Court, Venkatarama Ayar J., the same Judge who spoke for the Court in Dunkerley's case, : [1959]1SCR379 has explained that if the supply of materials for a money consideration and the rendering of services for a separate remuneration are stipulated by distinct and separable covenants, a tax on the sale of materials cannot be questioned: Banarasiv. State of M. P. : [1959]1SCR427 ; Peare Lal v. State of Punjab, : [1959]1SCR438 .
28. My finding recorded above is that the contract in Ann. D is of the latter class. Hence, the sale of materials is taxable. From para 9 of the application it is apparent that the impugned assessment relates to Rs. 33 lakhs odd which represents the price of the materials supplied to respondent 3 and no part of the additional remuneration stipulated for the supply of Engineers has been included in the assessment.
29. In the circumstances, the present point taken on behalf of the petitioner must also fail.
30. Point (d). I propose to take up point (d) before point (c).
31. The question is whether the sale in question took place outside the State of West Bengal within the meaning of Article 286(1)(b), read with Section 4 of the Central Sales Tax Act, 1956. It may be mentioned that the provisions of Section 4(2) of the Central Act, which is relevant, is substantially reproduced in Expl. 2 to Section 2(g) of the Bengal Act
32. Section 4(2) of the Central Sales Tax Act has two sub-clauses. Sub-clause (a) deals with ascertained goods and Sub-clause (b) deals with unascertained or future goods. Sub-clause (b) of Clause (2) says:
'A sale or purchase shall be deemed to take place inside a State if the goods are within the State-
(b) in the case of unascertained or tutored goods, at the time of their appropriation to the contract of sale by the seller or by the buyer whether assent of the other party is prior to or subsequent to such an appropriation'.
32a. Together with this we are to read Section 23 of the Sale of Goods Act, 1930 which is as follows-
'Sale of unascertained goods and appropriation.-
(1) Where there is a contract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be express or implied, and may be given either before or after the appropriation is made.
Delivery to carrier.--(2) Where in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer, and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the contract'.
33. In the present case, though the full payment of the price and transfer of title is deferred until the plant is erected, Ann. H at p. 93 of the application clearly states that the 'place of delivery is C. I. F. Indian port of Entry, i.e., Calcutta' and the period of delivery as above is, stated at p. 94. It is, thus, clear that though the assent of the buyer is reserved until the erection of the plant, so far as the seller is concerned, there is an unconditional appropriation by delivering the goods at Calcutta which is in West Bengal. The goods being within West Bengal at the time of the appropriation, the State had jurisdiction to tax. Hence, the present ground must also fail.
34. Point (c). The petitioner stands on a much stronger ground on the present point, taken under Article 280(1)(b) of the Constitution, which exempts from sales tax a 'sale or purchase of goods where such sale or purchase takes place in the course of the import of the goods into ...... the territoryof India'. By reason of Clause (2) of Article 286. as substituted by the Constitution (Sixth Amendment) Act, 1956 the meaning of the expression 'in the course of import' has to be determined with reference to Section 5(2) of the Central Sales Tax Act, 1956 which says:
'A sale or purchase or goods shall be deemed to take place in the course of the import of the goods into the territory of India only if the sale or purchase either occasions such import or is effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India'.
35. It is clear that if the petitioner succeeds in showing that the sale in question 'occasioned the import' of the materials from the United Kingdom to India, he shall be entitled to the exemption under Article 286(1)(b). There has been a mass of legalliterature as to when a sale may be said to have occasioned the import and it is now settled that a sale will come within this expression when the movement of the goods from abroad into the territory of India is caused by a covenant in the contract between the seller and the buyer and that it is to be distinguished from the first sale effected by an importer after he has imported the goods into the territory of India vide State of Travancore-Cochin v. Sharmugha Vilas Casuewnut Factory, : [1954]1SCR53 : Cement Marketing Co. v. State of Mysore (unreported) (Since reported in : [1963]3SCR777 . From the terms of the contract entered into between the petitioner and the Punjab Government (predecessor-in-interest of respondent 3), it is clear that the import of the materials by the petitioner from the manufacturers in the United Kingdom and the sale to respondent 3 are parts of the same transaction. Even the name of the manufacturer in the U. K. is stipulated by the buyer in the contract. The view taken by respondent 1 that it is an inter-state sale effected after import is not correct. There is not the least doubt that it is because of the contract of sale between the parties that the materials had their movement from the U. K. to India. In short it is, the contract of sale between the parties which has 'occasioned the movement of the goods' into the territory of India, by way of import.
36. I, therefore, hold that the impugned assessment contravenes Article 286(1)(b) of the Constitution in so far as it relates to the transaction between the petitioner and respondent No. 3, for the sum of Rs. 33,70,831.18 nP. as referred to in para 9 of the application.
37. Point (e). It is now settled that where fundamental rights arc violated, the question of alternative remedies as a bar to relief under Article 226 does not arise. It is also settled that the imposition of a sales tax in contravention of the prohibition contained in Article 286 constitutes an infringement of the fundamental right guaranteed to the assessee under Article 19(1)(g) (vide State of Bombay v. United Motors, : [1953]4SCR1069 ; Himmatlal v. State of M. P. : [1954]1SCR1122 .
38. If so, the plea of respondent 1 that the application should be refused on the ground of the petitioner's omission to pursue the further statutory remedies must be rejected.
39. In the result, the application must be allowed in part. An order in the nature of certiorari shall issue, quashing the order of assessment in Ann. C to the application in part, i.e., in so far as it assesses the tax on the transaction of Rupees 33,70,831.18 nP. between the petitioner and respondent 3; and respondent 1 shall be restrained, by an order in the nature of mandamus, from enforcing the said assessment order against the petitioner without allowing the exemption in respect of the aforesaid transaction.
40. There will be no order as to costs.