DHAMPUR SUGAR MILLS LTD. versus COMMISSIONER OF TRADE TAX, U.P.

Citation: [2006] SUPP. 2 S.C.R. 673 · Decided: 12-05-2006 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Dismissed

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Judgment (excerpt)

DHAMPUR SUGAR MILLS LTD. 
A 
v. 
COMMISSIONER OF TRADE TAX, U.P. 
MAY 12, 2006 
[S.B. SINHA AND P.K. BALASUBRAMANYAN, JJ.] 
B 
Uttar Pradesh Trade Tax Act, 1948: 
Section 2(h)-Definition of sale-Interpretation of-Held-As it was 
inclusive, it has to be given a broad meaning-Transfer of right to use any 
C 
goods for any purpose either for cash or deferred payment or other valuable 
consideration, would come within its purview. 
Licence for right to use of a sugar mill-Major part of licence fee paid 
in shape of molasses-Liability to tax-Held: There was no transfer of 
molasses with further right to sell-Molasses were not supplied in terms of 
licence as quantity of supply was not fixed-As both molasses and sugar were 
controlled commodities they were sold at Government notified price, licence 
fees was not paid by supply of molasses-'--/( was not a case of barter or 
exchange as there was possibility that quantity of molasses produced in 
sugar mill and required to be transferred would exceed amount of licence 
fee payable for particular year-Transfer of molasses was not by way of 
transfer of stock or mortgage or lease-As it was transfer of ownership in 
goods where/or buyer was to pay price to seller, transaction was "sale" 
within meaning of Act and liable to tax-Instead of cash, price of molasses 
was adjusted from the amount payable by licencee to owner as considera:ion 
for use of mill-Transactions involved passing of monetary consideration, 
and came within purview of "any other valuable consideration"-lt was 
especially so as both parties were aware that they have to fulfill their 
respecti~~ terms of obligations on monetary terms-It was adjustment of 
price of molasses supplied with amount of licence fee. 
Constitution of India, 1950-Article 366(29-A)-Transfer of right to 
Ilse goods with title thereto remaining with transferee-Held it would also 
be a sale-Even a lease of goods would be a sale-Transaction may amount 
to sale/or purpose of levy of Sales Tax though essential ingredient of a sale 
D 
E 
F 
G 
as defined in the Sale of Goods Act, 1930, may be absent. 
H 
673 
674 
SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R. 
A 
Appellant entered into a Deed of Licence for right to use of a sugar 
B 
c 
D 
mill with a company owning it. Pursuant to it, a performance guarantee 
was executed wherein it was agreed between the parties that a major 
part of the licence fee would be paid in the shape of molasses. The 
appellant was held to be liable to pay trade tax in terms of the Uttar 
Pradesh Trade Tax Act, 1948 by Assistant Commissioner, Trade Tax. 
In appeal, the Deputy Commissioner, Trade Tax, held that molasses 
having been supplied in lieu of rent, the same would not fall within the 
definition of "sale" and it was a barter or exchange. Against it respondent 
did not succeed in appeal before the Trade Tax Tribunal but their 
revision thereafter before High Court was allowed. Hence the present 
appeal. 
Appellant contended that (i) an exchange or barter cannot be said 
to be a sale within the meaning of the relevant provisions of the Act, 
and that the expression "price" would mean only cash or deferred 
payment (ii) sale for the purpose of the Act of 1948 will have the same 
meaning as what is contained in the Sale of Goods Act, 1930. 
Respondent submitted that the intention of the parties as to 
whether the transaction in question would be a "sale" within the 
meaning of the Act must be gathered from the term of the licence itself 
E 
and upon a perusal of same, it is clear that the transaction would 
constitute a sale within meaning of Section 2(h) of the Act of 1948. 
Dismissing the appeal, the Court 
F 
HELD : 1.1. By reason of Clause 29-A of Article 366, as title to 
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H 
the goods, although, may remain with the transferee, a transfer of right 
to use the goods would also be a sale. Even a lease of goods would be 
a sale. Thus, by reason of the said definition, though an essential 
ingredient of a sale as defined in the Sale of Goods Act, 1930, may be 
absent, the transaction may amount to a sale for the purpose of levy 
of Sales Tax under the Act. What has not been altered by reason of the 
said provision is the meaning of the word "goods". (688-D-E] 
Mis. Gannon Dunkerley & Co. & Ors. v. State of Rajasthan, (19931 
1 sec 264, relied on. 
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.. 
DHAMPUR SUGAR MILLS LTD. 1•. COMMISSIONER OF TRADE TAX, U.P. 
675 
1.2. The State of Uttar Pradesh has amended the definition of sale 
A 
in consonance with Cla

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