1976 Supreme(SC) 457

SUPREME COURT OF INDIA
H.R. KHANNA AND V.R. KRISHNA IYER, JJ.
State of M.P. and others, Appellants
Versus
Orient Paper Mills Ltd., Respondent.
Civil Appeal No. 49 of 1972,
D/- 23-11-1976. 688
Advocates appeared
Mr. Ram Panjwani, Advocate and Mr. H. S. Parihar Advocate, for Mr. I. N. Shroff, Advocates, for Appellants; Mr. B. Sen, Sr. Advocate (Mrs. Leila Seth and Mr. T. M. Sen, Advocates and Mr. Praveen Kumar, Advocate, for Mr. O. P. Khaitan, Advocates with him), for Respondent.

Headnote:

Indian Forest Act - Section 82 - General Sales Tax Act, 1958 - Sale of Goods Act - Section 64-A - Madhya Pradesh General Sales Tax Act - MHST Act - Section 2 (o) - Constitution of India, 1950 - Article 226 – Claim of compensation - Collecting sales tax illegally - Possession of lands - Whether transaction styled lease does at all involve sale of goods - Whether Forest Department is liable to sales tax on timber covered by demise - Whether it works out a sale of goods under two concerned statutes - Whether or not whole or any portion of such turnover is liable to tax but after deducting amount if any refunded by dealer to a purchaser in respect of any goods purchased and returned by purchaser within prescribed period - State has challenged this finding in appeal before us - Validity of attempted exaction is gut issue in these proceedings although the center of gravity on this forensic stage has shifted from question of forest department being a dealer to whether the transaction styled lease does at all involve sale of goods - From no dealer no sales tax to no sale, no sales tax is the shift in epicenter of the argument caused by an amendment to the sales tax statute legislated after and on account of the very judgment under appeal. Suffice it to say for the present no sale, no sales tax is a legal truism - It may by mentioned right here that the respondent before us is not directly liable to pay sales tax even assuming that the lease deed involves sale of goods - Forest department of government is admittedly a registered dealer for the relevant period and it is claimed by the appellant State that it was liable qua dealer to pay tax on sales of timber and by virtue of Section 64-A of Sale of Goods Act such sum which became livable only after the agreement was entered could be recovered from the purchaser-respondent - It is virtually admitted in this appeal, as stated earlier that both parties are registered dealers under the relevant Sales Tax Act. Nor is it in dispute that if the appellant forest department were liable to pay sales tax for the sales of timber which were alleged to have taken place, the respondent, in turn would be liable to make good that sum in view of the plain provision in Section 64A of the Sale of Goods Act – Held, Case before us has to be decided on the facts and the law which form the backdrop to the decision - Court have already held that the crucial fact to be found before we can designate the transaction as sale of goods is to scan and see whether the lease deed really deals with sale of timber - Court are clear that there is sale of bamboo and salai wood under the contract and in the contemplation of the parties they are to be cut and severed, pursuant to the contract itself. It follows that the finding of the High Court on this point is correct - A diligent and considered amendment has fulfilled the legislative purpose - Had State lost the appeal before us on another point that is as to whether royalty was price for sale of goods - Whole amendatory effect would have been an exercise in futility or a legislative - In view of court finding that there is a sale of goods under contract State is entitled to succeed - Court briefly indicated court mind and even otherwise by way of abundant caution rightly urged that his client had a good case for reduction of the quantum of tax even if sales tax was payable by the Forest Department which could be shifted to the respondent by virtue of Section 64 of the Sale of Goods Act. He prayed for an opportunity to establish that he was being called upon to foot a larger bill than was legally tenable - Court regard this a reasonable request and, indeed for State has very rightly agreed with this prayer of the respondent - For one thing amending Bill whereby the liability was being de novo fastened was enacted into law after the judgment of High Court. Read with Section 82 of Indian Forests Act, amount was being recovered as if it were land revenue - This process deprived the respondent of his right to challenge quantification of tax - It is fair - and State agrees to be fair - that the respondent should be enabled to prove his case that the sum claimed was much higher than could be legitimately recovered brought to our notice that rate of tax on sales to a registered dealer if the commodity was to be consumed within State for manufacturing purposes was less than general rate in view of Section 8 of Madhya Pradesh General Sales Tax Act - Appellant on other hand was seeking to recover at higher rate. Moreover even lesser rate – Moreover even lesser rate varied over year - Thus arithmetic’s of the case had also to be gone into before the actual sum due from the Forest Department to the Sales Tax Department was fixed - More could not be exacted from the respondent - These reasons persuade us to allow the appeal and remand the case for consideration of quantum of tax that State in Forest Department was legally liable to pay as a dealer to Sales Tax Department - Forest Department made a demand on respondent and required him to furnish a declaration necessary to reduce rate of tax latter ignored the request -This according to him had an impact on the eventual liability Court do not propose to investigate this aspect at the present stage but leave it to be raised by the State before the High Court - Appeal is allowed