M/S NEW INDIA SUGAR MILLS LTD. versus COMMISSIONER OF SALES TAX, BIHAR

Citation: [1963] SUPP. 2 S.C.R. 459 · Decided: 26-11-1962 · Supreme Court of India · Bench: J.L. KAPUR · Disposal: Appeal(s) allowed

Judgment (excerpt)

2 S.C.R. 
SUPREME COURT REPORTS 
459 
M/S NEW INDIA SUGAR MILLS LTD. 
v. 
COMMISSIONER OF SALES TAX, BIHAR 
(J. L. K.APtra, M. HIDAYATULLAH and 
SHAH, JJ.) 
Sales Taz-Sugar Control-Allotment by Oontrolkr-
Supply of Sugar under al/olment order-If amounts to eak-
Bihar Sales Taa; Act 1947 (Bihar 19 of 1947), s. 2 (g)-Sugar 
and Sugar Product. Oonlrol Order 1946-Sak of Goods Acl, 1930 
(3 of 1930), a. ~Governmem of India Acl, 1935 (26. Geo. 5 
Oh. 2), Seven/Ji Schedule, !Mt II, Entry 48. 
Under the Sugar and Sugar Products Control Order, 1946, 
the consuming States intimated to the Sugar Controller of India 
their requirements of sugar and the factory owners sent state· 
ments of stocks of sugar hdd by them. The Controller made 
allotments to various States and addressed 
orders to the 
factory owners directing them to supply sugar to the States in 
question in accordance with the despatch instructions from the 
State Governments. Under such allotment orders, the assesses, 
a sugar factory in Bihar, despatched sugar to the State of 
Madras. The State of Bihar treated these transactions as sales 
and levied sales tax thereon, under the Bihar Sales Act, 194 7. 
The assesses contended that the despatches of the sugar pursuant 
to the directions of the Controller did not amount to sales and 
that no sales tax was exigible on such transactions. 
Held (per Kapur and Shah,,U, Hidayatullah,J., dissenting), 
that the transactions did not amount to sales and were not liable 
to sales tax. .Under Entry 48, List II of Government of India 
Act, 1935, the Provincial Legislature had no power to levy 
sales taxes on a transaction which was not of the nature of a 
sale of goods, as understood in the Sale of Goods Act. To 
constitute a sale of goods, 
property in the goods must be 
transferred from the seller to the buyer under a contract of sale. 
A contract of ,sale between the sdler and the buyer is a pre· 
requisite to a sale. Despatches of sugar under the directions of the 
Controller were not the result of any such contract of sak. 
There was no offer by the assesses to the State of Madras and no 
acceptance by the latter; the asse= was, under the Control 
Order, compelled to carry out the directions of the Controller 
and it had no volition in the matter. Intimation by the State 
1962 
NawmlHr, 26. 
1962 
M/sNew India 
Sugar Mills Ltd. 
v. 
Commission1r of 
Sales Tax, Bi/uu 
460 SUPREME COURT REPORTS [1963] SUPP. 
of its requirement of sugar to the controller or communi-
cation of the allotment order to the assesses did not amount to 
an offer. 
Nor did the mere compliance with despatch instru-
ctions issued by the Controller, which the assessee could not 
decline to carry out, amount to acceptance of an offer or to 
making of an offer. A contract of sale postulates exercise of 
volition on the part of the contracting parties. 
State of MadMB v. Gannon 
Dunkerley &: Oo., [1959] 
S. C. R. 379, relied on. 
The ToJa Iron &: Steel Oo. Lt,d. v. The State of Bihar, 
[1958] S. C. R. 1355, explained. 
Per Hidayatullah, J.-In these transactions there was a 
sale of sugar for a price and sales tax was payable in respect 
thereof. Though consent is necessary for a sale, it may be ex-
press or implied, and it cannot be said that unless the offer and 
acceptance are in an elementary direct form there can be no 
taxable sale. The controller permitted the as•esses to supply 
sugar of a stated quality and quantity to the State of Madras; 
thereafter the two parties agreed to "sell" and "purchase" the 
sugar. So long as the parties trade under controls at fixed price 
they must be deemed to have agreed to such a price; there was 
an implied contract with an implied offer and an implied accep-
tance. The same is the position with respect to the quality and 
quantity fixed by the Controller. When the State, after receiv-
ing the permit., sent instructions to the assesses to despatch sugar 
and the assesses despatched it, a contract emerged and consent 
must he implied on both sides though not expressed antecedently 
to the permit. 
State of MadrlJ8 v. Gannon Dunkerley 
Oo., 
[1959] 
S.C.R. 379 and The Toia Iron and Steel Oo. Ltd. v. The State of 
Bihar,. [ 1958] S. C. R. 1355, explained. 
CIVIL APPELLATE jURISDIOTION : Civil Ap}>f'al 
No. 237 of 1961. 
Appeal by special leave from the judgment and 
order dated September 30, 1958, of the Patna High 
Court in M.J.C. No. 5 of 1956. 
B. T. Desa·i and B. P. Mahesllwari, for the 
appellant. 
S. P. Varma, 

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