Allowed

Bhopal Sugar Industries Ltd. Madhya Pradesh and Another v. D. B. Dube, Sales Tax Officer, Bhopal Region, Bhopal and Another

Supreme Court21 Dec 19621962 INSC 393 · [1964] 1 S.C.R. 4811962 INSC 393

Case brief

AI extract

What is this about?

A company assessed to sales tax on motor spirit and lubricants consumed for its own vehicles challenged the 'retail sale' definition as beyond State legislative competence. The Supreme Court held self-consumption is not a 'sale' within the constitutional entry, struck down that clause as ultra vires but severable, and quashed the assessment order founded on it.

What the court decided

AI extract

Bhopal Sugar Industries Ltd. Madhya… — Constitutional and Fundamental Rights | Supreme Court (1964)

¶1

4tU

¶2

1 S.C.R. SUPREME COURT REPORTS

¶3

BHOPAL SUGAR INDUSTRIES LTD. ~IADHYA PRADESH, AND ANOTHER

¶4

Ifft D11...b.t, 21.

¶5

¶6

D. B. DUBE, SALES TAX OFFICER, BHOPAL REGION, BHOPAL AND ANOTHER

¶7

(B. P. SINHA, c. ]., P. B. GAJENDIU.GADKAR, K N. W ANCHOO, K. C. DAS GUPTA and J C. SHAH,. JJ.)

¶8

Sal~· Tax-Oon8umption by Beller-Tax on aak of good.s- Le~islrufre competence-Government of India Act, 1935 (26 and :!I; Geo. 5, Oh. 42), Sch. 7, Entry 54, List II-Madhya Pradesh Sales of Mo!or Spirit and Lubricant• Taxation Act, 1957 (M. P. 4 of 1%8), 88. 2 (l), 3.

¶9

The first petitioner, a company, manufacturc1 sugar and also sells motor spirit, high speed diese 1 oii and lu.bricants and maintains a petroleum pump in the State of Madhya Pradesh. _In the assessment proceedings in respect of sales of rr.iotor spirit and diesel oil, the petitioner was sought to be assessed in respect of petroleum and oil consumed by the petitioner for its own motor vchichs out of the stock held/by it. The petitioner challenged that part of the assessment on the ground1 that the definition of "retail sale" by s. 2 (1) of the Act which seeks to render consumption by the owner of motor spirit . liable to be taxed by virtue of s. 3 of the Ac:t is beyond the legislative competence of the State and that the unconstitu· tional levy infringes the fundamental rights of the petitioner under Art. 19(l)(f) and(~) of the Constitution of India.

¶10

Held, that a sale for the purpose of entry "Tax on the sale of goods" requires the concurrence of four clements (1) partico competent to contract; (2) mutual assent; (3) a thing, the absolute or general property in which is transferred from the seller to the buyer; ond (4) a prfr.c in money paid or promised; and tha.t the transaction which does not conform to the tradi- tional concept of sale cannot be regarded as one within the co1npetence of the State Legislature to tax.

¶11

The State of Madra/ v. Gannon Dunkerky & Oo. (Madras) Ltd., [1959) S. C. -R. 379, referred to.

¶12

482 SUPREl\fE COURT R[PORTS [1964] VOL.

¶13

1961

¶14

BJi.fial s.,., '°""'";,, Lli. ., DttN, Sa/11 7 a Offi«•

¶15

Htld, further, that b'· s. 2(1) the normal concept of sale is sought to be rr.Iarged by bringing in the comumption by the owner of the goods in which he deal~ v.·hich "'all not a ccaale1 within the meaning of Entry 54, List II, Sch. 7 of the Governrrent of Jndia Act, 1935, and therefore, the order of the Salct 1'ax OHicr.r which \'as fr>11nded on an ultra vim proviaion ·Cl.! itctf unconstitutional and could not be sustained.

¶16

Omr.1xAL Jc;msnrrnox : Pelition :\o. Soi of 19111.

¶17

Petition under Art. 32 of the Constitution of lr.dia for the cnforcem~nt of Fundamental Rights.

¶18

S. T. Deaai, J. B. Dadacha11ji, 0. C. l/ atliur and l!uvinder Narain, for the petitioners.

¶19

B. Sen, K. L. Hiithi and /. Y. Shroff, for the r~spondrnts.

¶20

I 962. December 21. The .Judgment of the Court \1 a,- delivered by

¶21

.u.~. J.

¶22

SHAil, ].-Bhopal Sugr Industries Ltd. (the first petitioner) is a public limited Company incorporated under the lndiau Companies Act, l!ll:I, and the second petiioner is :i. shareholder and a Director of the Cc>inpany. The Company is a manufacturer of sugar and owns a fleet of motor trucks and othrr motor vehiclrs. The Company also carries on the busin!'Ss 0f sdling motor spirit, J.igh speed diesel oil, and l1Jbriraut~ and maintains a ·petroleum pump at Schore j,, the State 0f Madhya Pradesh. Between April I, l!l:)g, and March 31, 1960, the Company used~ for its motor vehicles 8908 g2.llons of petroleum, 40719 gallons of high speed diesel oil and lubricants of th~ value of Rs. 2,45:!.47 nP. The first respondent who is the assessing authority under the Madhya Pradesh Sales of Motor Spirit. and Lubricants Taxation !\ct, 4 of 19.51. assessed the Company to pay sales ta :t in respect of motor-spirit aod lubricants

¶23

l S.C.R. SUPREME COURT REPORTS

¶24

¶25

483

¶26

used by the Company out of the stock held by it for its own vehicles, because in his view such consump· tion amounted to sales within the meaning of the Act.

¶27

By this petition under Art. 32 of the Constitution it is claimed that the definition of 'retail sale' in s. 2 ( l) of the Act which seeks to render consumption by the owner of motor-spirit liable to tax under the Act by virtue of s. 3 is beyond the competence of the State Legislature and hence void and the order of the first respondent seeking to impose liability upon the Company for payment of tax infringes the fundamental rights of the Company under Art. 19 (1) (f) and (g) of the Constitution.

¶28

1962

¶29

Bhopal Su1ar l•""41ri#1 L". v. Ne, Salu 1~1111 O.frw .sr.M,J.

¶30

Section 2 (k) of the Madhya Pradesh Sales of Motor Spirit and Lubricants Taxation Act defines a 'retail dealer' as meaning "any person who, on commission or otherwise, sells or keeps for sale motor spirit or lubricant for the purpose of consumption by the person by whom or on whose behalf it is or may · be purchased". Section 2 (1) defines 'retail sale' as meaning "a sale by a retail dealer of motor spirit or lubricant to a person for the purpose of consumption by the person by whom or on whose behalf it is or may be purchased and includes the consumption by a retail dealer himself or on his behalf of motor spirit or lubricants sold to him for retail sale;" (The defini: tion is followed by an explanation which is not material for the purpose of this appeal.) Section 3 is the charging section. It provides that subject ta the provisions of the Aet, there shall be levied on all retail sales of motor spirit and lubricants effected after the commencement of the Act, tax at the rates specified in the table setout therein.

¶31

The Company is registered under s. 4 of the Act as a retail dealer. Bys. 2 (1) consumption by a retail dealer himself or on his own behalf of motor spirit or lubricants sold to him for retail sale is included in the definition of 'retail sale' Thereby tliC

¶32

484 SUPREME COUl<.T REPORTS [1964) VOL.

¶33

IHI

¶34

BM{>oJ Sut"' lrulw1rU1 L".

¶35

Y. Dub1, Salis Ta1 Offirir

¶36

SMA, J.

¶37

Legislature h3S attempted to enlarge the normal con· cept of sale, and has included therein consumption for his own purposes by the retail dealer of motor spirit and lubricants so¹ d to him for retail sale, and hy s. 3 such consumption is nude taxable as sale. Bnt this Court held in 'l'he Sta.te of .llridrr1.~ v. Um11ion Dunfrulcy & Co. (Jfolfm,q) Ltd. (¹ l. that the txpression 'sale of goods' in Enrrv 48, List II, in Sch. VII of the; Government of India Act, l!l!lii, has the same meaning as in the Indian Sale of Goons Act, 1930, and therefore in a transaction of sale of goods which is liable to tax thcr1· must be concurrence of the following four elements. viz :

¶38

(I) Parties competent to contract:

¶39

('.?) mutual assl'nt;

¶40

(3) a thing. the absolute or general property in which is tramfrrrcd from the seller to the buyer; and

¶41

(-1) a price in mouey paid or promised.

¶42

A tramaction · which doe< not conform to this tradition:il concept of s;dc cannot be regarded as one in respect of which the State Lgilaturc is competent to enact an Act impo>ing liabilit~ for payment of tax. It was observed at p. 407 :

¶43

"A power to enact a law with respect to tax on sale of goods under Entry 18 must, to be intm !'ire.<, be one relating in fact to sale of good<, and accordinqlv, the Provincial L('gi;lature cannot, in the purported exercise of its power to tax sak-s, tax tramactiom which are not sale< bv merely enactin~ that thev shall be deemed to be sales."

¶44

In Omman D•mkerley ,f· Company's CtJ"" (¹ 1, this C.ourt was called upon to comidcr whether in a <I) [!9~9) 5.C.11.. S79.

¶45

!:iUPRE:!E COURT REPORTS

¶46

485

¶47

l S.C.R.

¶48

building contract which is one, entire and indivisible, there is sale of goods. It was held by the Court that the Provincial Legislature was not competent under Entry 48, List II, Sch. VII of the Government of India Act, 1935, to impose tax op the supply of materials· used in such a contract treating it as a sale. The decision of the Court did not rest upon any peculiar character of a building contract. It was held on the larger ground canyassed in that case, that the expression 'sale of goods' within the meaning of relevant legislative entry had. the same connotation as 'sale of goods' in the Indian Sale of Goods Act, 1930, and therefore the State Legislature bad 110 power· to enact legislation to levy tax under Entry 48 of List II in respect of transactions which were not of the nature of sales of g0ods strictly so call· ed; and a building contract not being a transaction in which there was a sale of materials bv the contractor who constructed the building, th~ State, .was not competent to enact legislation to impose tax on the supply of materials used in a building contract treating it as a sale. It was therefore, held that the definition of sale in the Madras General Sales Tax Act IX of 19311 was to the extent of the extensfon invalid.

¶49

1962

¶50

JJ/wpal Sugar I1uhu1ri.s Lit/, •• Dube, Snlu Ta~ Offi"r

¶51

SW, J,

¶52

In Ganoon Dunkerley & Company's Clise (¹ ), the validity of s. 2 (h) (ii) of the Madras General Sales Tax ·Act, 1939, as amended by Act XXV of 1947, in so far as it included goods included in a works contract fell to be determined, in the light of the competence of the Provincial Legislature under Entry 48, List II, in Seventh Schedule of the Government of India Act, 1935. Under the Consti· tution the relevant entry conferring legislative power upon States to tax sale of goods in Entry 5t .List II. As the scheme of division of legislative power under the Constitution has remained unaltered, the principle of Gannon Dunkerley's case (¹ ), applies

¶53

(•l (19991 s. c. a. 379.

¶54

4811 SUPREME COURT REPORTS [l!lll4) VOL.

¶55

¶56

B,..,,/ Suli•"' ln1'rulrUI J. y, D.61, ~Ju T ox Offi"'

¶57

Mala, J.

¶58

in adjudging the validity of the provisions of the Madhya Pradesh Act 4 of I !lii8.

¶59

Consumption by an owner of goods in which he deals is therefore not a sale within the meanini? of the Sale of Goods Act and therefore it is not 'sale of goods' within the meaning of Entry ii4, List II, Sch. VII of the Constitution. The legislative power for levying tax on sale of goods being restricted to enacting legislation for levying tax on transactions which conform to the definition of sale of goods within the meaning of the Indian Sale of Goods Act, 1!)30, the extended definition which includes consumption by a retail dealer himself of motor spirit or lub.ricants sold to him for retail sale is beyond the competence of the St~te Legislature. But the clause in the definition ins. 2 (I) "and includes the consumption by a retail dealer himself or on his behalf of motor spirit or lubricant sold to him for retail sale" which is ultru vire" the State Legislature because of Jack of competence under Entry 54 in List II, Sch. VII of the Constitution is severable, from the rest of the definition, and that clause alone must be declared invalid.

¶60

The Sales Tax Oflicer has sought to impose liability for payment of tax in rrspcct of motor spirit and lubricants consum::d by the company for its own vehicles rth·ing solely upon the definition in s. 2 (I) of the Act. He has observed :

¶61

"The definition under the said section clarifies the retail sale and consumption by a retail dealer. Since the retail sale has been clearly defined and consumption by self has been included in the retail sale; I do not agree with the contention of dealer's counsel (that the goods consumed for the vehicles of the deal<'r are not liable to tax under s. 3) and taxed on

¶62

I S.C.R. SUPREME COURT REPORTS 487

¶63

the goods consnmed by the dealer, as above.'' The order of the Sales Tax Officer founded upon a part of the statute which is ultm vires ca1inot be sustained.

¶64

Counsel for the State of Madh)·a Pradesh contends in this petition that the Company is not the owner of the motor spirit and lubricants in which it deal- : it is merf'ly a commission agent for sale in respect of the goods supplied to it by the Caltex (India) Ltd., and on that account ct)nsumption for ·his own purpose of goods belonging to his principal amounts to sale within the meaning of the first part of the definition of s. 2 (I) of the Act. But the Sales Tax· Officer has not decided the case under the first part of the definition of 'retail sale' : he has expressly founded his decision on the second part of the- definition. In the circumstances we do not feel called upon to express any opinion on the qm:stfon whether the Company is liable to pay sales tax in respect of goods consumed for its motor-vehicles during the period in question. If it is competent to the Sales Tax Officer to adopt a proceeding, to bring to tax consumption of goods by the Company for its own vehicles, relying upon the first part of the definition ·of 'retail sale' in s. 2 (1), because of the terms of the agreement and· other relevant surrounding circumstances, it will be open to him to do so.

¶65

1962

¶66

Bhopal S11~ 11r /u:Jus1rit1 ltd. Duh1, Sale1 v. T °" Offim

¶67

SittJli, J.

¶68

The petition will therefore be allowed and a writ will issue declaring that the order of asse•sment made by the first respondent dated December 21l, 1960, in so far as it relates to levy of tax on motor spirit and lubricants consumed during the period of assessment for the vehicles of the Company is in valid. The respondents will pay the costs of this petition to the Company.

¶69

Peli tion allowtd.

Bhopal Sugar Industries Ltd. Madhya Pradesh and Another v. D. B. Dube, Sales Tax Officer, Bhopal Region, Bhopal and Another

Case brief

What is this about?

What the court decided

Bhopal Sugar Industries Ltd. Madhya Pradesh and Another v. D. B. Dube, Sales Tax Officer, Bhopal Region, Bhopal and Another

Case brief

What is this about?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

Lakshmi Narain versus First Additional District :Judge, Allahabad

Kharak Singh versus the State of U. P. & Others

Om Prakash Gupta versus Rattan Singh and Another

Bhopal Sugar. Industries Ltd., Madhya Pradesh versus D. P. Dube, Sales Tax Officer, Bhopal Region, Bhopal

State of West Bengal versus Union of India

Shri Durga Prasad & Another versus the Banaras Bank Limited