Puttaswamy,.

( 1 ) ON a reference made by one of us, these cases were posted before a Division

bench for disposal.

( 2 ) A statutory Board called the coffee Board (the Board) which was formerly

called the Indian Coffee Market expansion Board constituted and functioning under

the Coffee Act of 1942 (Central Act VI of 1942) (the Coffee act) is the common

petitioner before us and the principal question that arises for our determination is

whether it is exigible to purchase tax or not under Section 6 of the Karnataka Sales

Tax Act of 1957 (Karnataka Act 25 of 1957) (kst Act ). In order to decide that

principal and certain other allied questions, it is necessary to notice the facts that

are not also in dispute in the first instance.

( 3 ) ON the out break of the II World war, the Indian Coffee that enjoyed precious

export markets in European and other advanced countries lost them and the

industry was facing a crisis. With the object of rehabilitating the industry and placing

it on a sound footing, accepting the recommendations of a conference held thereto,

the then Viceroy and governor General of India, promulgated the Coffee Market

Expansion Ordinance (Ordinance No. 13 of 1940) on 14-12-1940 inter alia

establishing the Board from 21-12-1940. The said Ordinance continued by another

ordinance, was replaced by a permanent enactment of the then British indian

legislature titled as the Coffee market Expansion Act (Act 7 of 1942), but by later

amendments made, is now briefly titled as the Coffee Act.

( 4 ) THE Board is constituted under section 4 of the Coffee Act. The Board is

charged with the duty to administer the coffee Act, exercise the powers and

functions enjoined on it under that Act. The Board is a registered dealer under the

KST Act and the Central Sales Tax act of 1956 (Central Act No. 74 of 1956) (cst

Act) on the file of the Commercial tax Officer (Legal-A) Bangalore (cto ). Amongst

a variety of functions and powers that are rot material for our purpose, the Board

procures all coffee grown in the country and markets the same in and outside the

country on which the Sales Tax authorities under the KST Act have either proposed

or levied purchase tax under Section 6 of the KST Act on the Board.

( 5 ) FOR the period from 1-4-1974 to 31-3-1975, the Assistant Commissioner of

Commercial Taxes (Assessment-I) bangalore (act) completed his assessment on 2

12-1978 (Annexure-A in Writ petitions Nos. 15536 to 15540 of 1982 to the

documents of which we will hereafter refer) under the KST Act, however accepting

the exemption claimed by the petitioner and did not subject its purchase turn over

to purchase tax under section 6 of the KST Act In his show cause notice No. SMR

59/81-82 dated 25-7-1981 (Annexure-C) the Commissioner of Commercial Taxes in

Karnataka, bangalore (commissioner) evidently in conformity with the opinion

expressed by him in his D. O. letter No MSA. CR 34/78-79 dated 18-7-1981

(Annexure-B) addressed to the Chairman of the Board, a course that was not very

commendable but was not rightly made an issue, has proposed to suo motu revise

the said order of the ACCT and levy purchase tax on the purchase turn over for the

aforesaid assessment year. "on an examination of the return filed by the petitioner

under the KST act for the period from 1-4-1975 to 31-3-1976, the CTO expressing

that the same was incomplete and incorrect, issued a proposition notice on 10-3

1982 (Annexure-D) inter alia proposing to bring the purchase turn over during the

said period to purchase tax under Section 6 of the KST Act. On 31-5-1983

(Annexure-H) the CTO overruling the objections urged thereto by the petitioner, has

completed his assessment for the said period levying a sum of Rs. 5,97,28 359-30

as purchase tax under section 6 of the KST Act and an additional tax of Rs.

59,72,835-93 under Section 6b of the KST Act. ""for the assessment years 1976- 77,

1977-78, 1978-79, 1979-80 and 1980-81, the CTO has completed his regular

assessments on 18-6-1983, 27 7-1983 and 5-9-1983 subjecting the purchase turn

overs effected during the aforesaid years to a purchase tax of Rs 8,70,18,295-00; rs.

8,31,85,560-00; Rs. 7,70,11,240-00; rs. 9,2,9 68,459-43 and Rs. 7,53,87,448-59

respectively. ""in Writ Petition Nos. 15536 to 15540 of 1982 the petitioner has

challenged the show cause notice issued by the commissioner, the proposition

notice issued by the CTO and the assessment order made by him thereto In Writ

petitions Nos. 13981, 17071, 170/2, 19285 and 19118 of 1983 the petitioner has

challenged the assessment orders made by the CTO. "

( 6 ) THE petitioner has challenged the validity of Sections 2 (t) and 6 of the kst Act

on the ground that they contravene the Coffee Act, Articles 265 and 300-A of the

Constitution.

( 7 ) THE petitioner has urged that under the Coffee Act when the growers

compulsorily deliver the coffee grown by them, which it receives, extinguishing all

rights over the same for marketing in and outside the country, in law and fact, it

was nothing but compulsory acquisition and was not a sale or purchase to attract

the levy of purchase tax under section 6 of the KST Act. Alternatively, the petitioner

has urged that even if there was a compulsory sale or purchase, then also it only

acts as a trustee or agent of the growers, for which reason, it was not exigible to

purchase tax under section 6 of the KST Act. Lastly, the petitioner has urged that all

export sales directly effected by it were in the course of export which were immune

from purchase tax in terms of Article 286 of the constitution. On these grounds, the

petitioner had sought for appropriate reliefs from this Court.

( 8 ) THE respondents have resisted these writ petitions without, however, filing

their returns in any of them, though the dimensions of the cases and the questions

raised called for such a course, which would have considerably helped us in

satisfactorily deciding them. "the respondents have urged that Sections 2 (t) and 6

of the KST Act were valid. ""the respondents disputing the legal basis and claim of

the petitioner, have urged that compulsory delivery were nothing but sales and

purchases and it was exigible to purchase tax under section 6 of the Act. The

respondents have urged that export sales from the pool coffee were not in the

course of export and were not immune from tax under Article 286 of the

Constitution. "

( 9 ) M/s. Consolidated Coffee Limited, a public limited company, owning extensive

coffee estates in Karnataka and other States, one Sri K. S. Eswaran of bangalore, a

coffee planter, Sriyuths c. D. Vinaya Prasad and Pradeep Kumar of Mudigere,

Chickmagalur District, representing an Association called mudigere Planters

Association for themselves and on behalf of the Association have intervened and

whole heartedly supported the Board.

( 10 ) SRI F. S. Nariman, learned senior Advocate of the Supreme Court bar assisted

by Sri R. J Babu of Bangalore Bar have appeared for the petitioner. Sri N. Santosh

Hegde, learned Advocate general of the State had appeared for the respondents in

all the cases. Sriyuths v. P. Raman, learned Senior Advocate of the Supreme Court

Bar assisted by T. Subbarao and K. P. Kumar of Bangalore bar, P. K. Kurien Senior

Advocate of cochin Bar and B. Veerabhadrappa of bangalore Bar have appeared for

the intervenors.

( 11 ) BOTH sides and the intervenors that supported the petitioner have relied on a

large number of rulings in support of their respective cases and we will refer to them

at the appropriate stages.

( 12 ) EVEN before examining the contentions, it is necessary to notice that all the

questions that arise in these cases, have to be examined and decided without

reference to the amendments made to the Constitution by the 46th Constitution

Amendment Actof 1982 that came into force from 2-3-1983 for the reasons that all

the assessments in these cases relate to the period prior to that date and the

enabling provisions of the Constitution had not been availed by the karnataka State

so far and at any rate for the assessment periods involved in these cases.

( 13 ) WE first propose to deal with two minor contentions and then deal with the

substantial questions that were seriously debated before us.

( 14 ) AS on 1-11-1956 on which day the new State of Mysore now called as

karnataka comprising of the areas specified in Section 7 of the States

Reorganisation Act, came into being there were 5 sets of Sales Tax Laws in the five

integrating areas of the State detailed in section 40 of the KST Act. The new state

by virtue of the powers derived by article 246 (3) and Entry No. 54 of the state of

the 7th Schedule to the Constitution enacted the uniform KST Act repealing all the

earlier enactments on the subject The KST Act came into force on 1-10-1957. The

KST Act as originally enacted which has undergone a large number of amendments

from time to time by Section 5 provided for levy of sales tax on sales as stipulated in

that section.

( 15 ) SECTION 2 (t) of the KST Act which defines the term sale with various

amendments made to that provision, but not on and after 1-4-1974, reads thus:

" (t) "sale" with all its grammatical variations and cognate expressions means every

transfer of the property in goods by one person to another in the course of trade or

business for cash or for deferred payment or other valuable consideration, but does

not include a mortgage, hypothecation, charge or pledge explanation (1)-A transfer

of property involved in the supply or distribution of goods by a society (including a

co-operative society), club, firm, or any association to its members, for cash or for

deferred payment or other valuable consideration whether or not in the course of

business, shall be deemed to be a sale for the purposes of this Act. Explanation (3)

(a) The sale or purchase of goods shall be deemed, for the purposes of this Act, to

have taken place in the State wherever the contract of sale or purchase might have

been made, if the goods are within the state, - (i) in the case of specific or

ascertained goods at the time the contract of sale or purchase is made ; and (ii) in

the case of unascertained or future goods, at the time of their appropriation to the

contract of sale or purchase by the seller or by the purchaser, whether the assent of

the other party is prior or subsequent to such appropriation (b) Where there is a

single contract of sale or purchase of goods situated at more places than one, the

provisions of clause (a) shall apply as if there were separate contracts in respect of

the goods at each of such places. Explanation (3a) - Every transaction of supply by

way of or as a part of any service or in any other manner whatsoever, of goods,

being food or any other article for human consumption or any drink (whether or not

intoxicating) where such supply or service is for cash, deferred payment or other

valuable consideration, shall be deemed to be a sale of those goods by the person

making the supply and purchase of those goods by the person to whom such supply

is made ; explanation (4) - Notwithstanding anything to the contrary contained in

this Act or any other law for the time being in force, two independent sales or

purchases shall, for the purposes of this Act, be deemed to have taken place,- (a)

when the goods are transferred from a principal to his selling agent and from the

selling agent to the purchaser, (b) when the goods are transferred from the seller to

a buying agent and from the buying agent to his principal, if the agent is found in

either of the cases aforesaid,- (i) to have sold the goods at one rate and to have

passed on the sale proceeds to his principal at another rate, or (ii) to have

purchased the goods at one rate and to have passed them on to his principal at

another rate, or (iii) not to have accounted to his principal for the entire collections

or deductions made by him in the sales or purchases effected by him on behalf of

his principal, or (iv) to have acted for a fictitious or non-existent principal ; "

( 16 ) SECTION 6 of the KST Act, as originally enacted regulated the exemptions

and reductions of taxes leviable under the KST Act. But, the Mysore sales Tax

(Amendment) Act, 1970 (Mysore Act 9 of 1970) which came into force from 1-4

1970 (vide sub-section (2) of Section 1 of the said Amending Act) replaced the

earlier Section 6 with a new section providing for levy of purchase tax in the State

for the first time as stipulated in that Section.

( 17 ) SECTION 6 as introduced by Act 9 of 1970 with amendments made to the

same thereafter by the Mysore Act No. 78 of 1976 which regulates the levy of

purchase tax in the State reads thus :" 6. Levy of purchase tax under out in

circumstances.-Subject to the provision of sub-section (5) of Section 5, every

dealers to in the course of his business purchases and for able goods in

circumstances in which no under section 5 is leviable on the sale price of such goods

and, " (i) either consumes such goods in the manufacture of other goods for sale or

otherwise or disposes of such goods in any manner other than by way of sale in the

State, or (ii) despatches them to a place outside the State except as a direct result

of sale or purchase in the course of inter-state trade or commerce, shall be liable to

pay tax on the purchase price of such goods at the same rate at which it would have

been leviable on the sale price of such goods under Section 5. Provided that this

section shall not apply- (i) in respect of sale or purchase of goods specified in the

Fourth Schedule,- (a) which are taxable at the point of purchase ; and (b) which

have already been subjected to tax under sub-section (4) of section 5 (ii) in respect

of sale or purchase of goods specified in the Second Schedule which have already

been subjected to tax under clause (a) of subsection (3) of Section 5. "

( 18 ) SECTION 2 (t) and Section 6 of the KST Act are challenged by the petitioner

and a declaration is sought to strike them down. But, in seeking that declaration the

petitioner has not elaborated as to how and for what reason they are constitutionally

invalid.

( 19 ) IN the prayers made, the petitioner has urged that the aforesaid provisions

are violative of the Coffee Act. But, at the hearing, learned counsel for the petitioner

did not elaborate as to how and why they violate the Coffee Act and are liable to be

struck down by this court. On this short ground, this challenge of the petitioner to

Sections 2 (t) and 6 of the KST Act calls for our rejection without any discussion.

( 20 ) IN its petitions, the petitioner has urged that Sections 2 (t) and 6 are violative

of Article 265 and 300-A of the constitution. But, even here the contention is as bald

as it could be, which were also not highlighted at the hearing. On this ground itself

we must reject this challenge of the petitioner.

( 21 ) ALL the Article 265 of the Constitution provides is that a person shall not be

subjected to a tax without the authority of law. The Act is a law imposing purchase

tax in the State. Article 265 has hardly any relevance to sustain the challenge of the

petitioner to sections 2 (t) and 6 of the KST Act.

( 22 ) ARTICLE 200-A of the Constitution, which provides that a person shall not be

deprived of his property except by the authority of law, does not provide for

immunity from taxation. Article 300-A does not also help the petitioner to sustain its

challenge to Sections 2 (t) and 6 of the KST Act.

( 23 ) ON the foregoing discussion itself the challenge, of the petitioner to sections 2

(t) and 6 of the KST Act calls for our rejection.

( 24 ) SECTION 2 (t) that defines the term sale as in all other sales tax enactments

in the country is within the legislative competence of the State legislature and does

not contravene any of the provisions of the Constitution. In more than one case, the

Supreme Court has upheld the validity of similar provision. We see no merit in the

challenge of the petitioner to Section 2 (t) of the KST Act and we reject the same.

( 25 ) SECTION 6 of the Act is within the legislative competence of the State

legislature and is not violative of any of the provisions of the Constitution. In the

State of Tamilnadu v M. K. Kandaswami and others (36 STC 191) [LQ/SC/1975/219] the supreme Court

reversing, the" decision of the Madras High Court upholding Section 7a of the

Madras General Sales Tax act that corresponds to Section 6 of the kst Act, approved

the principles enunciated by the Kerala High Court in Yusuf shabeer and Others v.

State of Kerala and others (32 STC 359) [LQ/KerHC/1973/156] and Malabar Fruit products Company,

Bharananganam, Kottayam and Others v. The Sales Tax Officer, palai and Others

(30 STC 537) [LQ/KerHC/1972/30] which had upheld a similar provision in Kerala general Sales Tax Act.

On the principles enunciated in Kandaswamis case, the challenge to Section 6 of the

KST Act is without any merit.

( 26 ) SRI Raman has urged that purchase tax levied on the Board by Section 6 of

the KST Act was really a tax on growers or agriculturists who were exempted from

payment of sales tax by the exception added to Explanation-2 of section 2 (k) (vi) of

the KST Act and applying the legal principle of what cannot be done directly cannot

be done indirectly discussed on pages 78 to 80 craies on Statute Law, 6th Edition

under the heading "fraud upon an Act not tolerated". Section 6 should be struck

down or should be so construed as not empowering levy of purchase tax on

compulsory purchases by the Board under the Coffee Act.

( 27 ) IN its petitions, the petitioner has not urged this plea. When the petitioner,

who is primarily concerned with the exigibility or otherwise of taxes had not urged

this plea, an intervenor that can only support or oppose a ground urged by either of

the parties, cannot challenge the same that too on an entirely different ground. We

are of the view that on this short ground, we must reject this contention urged by

Sri Raman. But, we will however assume that the petitioner had also urged this plea

and examine its tenability or otherwise also.

( 28 ) WE are of the view that this very contention urged by Sri Raman stands

rejected by the Supreme Court in kandaswamis case. In Kandaswamis case the

Supreme Court dealing with the construction and validity of Section 7a of the

Madras General Sales Tax Act referring to the situation of a grower being exempted

from payment of sales tax but the purchaser being subjected to purchase tax has

upheld the same. If that is so, there is nothing incongrous in the Board being

subjected to purchase tax under the KST Act.

( 29 ) AS ruled by the Supreme Court in Kandaswamis case, the taxable event is the

purchase and it is on that taxable event, the purchase tax is levied on the taxable

person on the taxable goods. Whether the taxable person that bears the tax can or

cannot pass on that burden on others, if that is permitted by law, is a matter for him

to decide But, that right if any of the taxable person with which we are not

concerned cannot affect the validity or otherwise of Section 6 or the validity or

otherwise of a levy under that provision at all.

( 30 ) EVEN otherwise, we are also of the view that this contention urged by sri

Raman is plainly opposed to the well accepted rule of construction of taxation

statutes admirably stated by Rowlatt.. in Cape Brandy Syndicate v Inland Revenue

commissioner [ (1921) 1 K. B p. 64 at 71] to the effect that "in a taxing Act one has

to look merely on what is clearly said. There is no room for any intendment. There is

no equity about a tax. There is no presumption to tax. Nothing is to be read in,

nothing is to be implied. " that has become classical, approved by the Supreme

Court and this Court in more than one case. What follows from this is that the

principles stated in Craies on statute Law under the heading fraud upon an Act not

tolerated and the various rulings noticed in that text or the ruling of the Supreme

Court in Commissioner of Income-Tax, Bangalore v B. C. Srinivasa Setty (128 ITR

294) that interpreted the assessability or otherwise of goodwill to capital gains under

the Income Tax Act, 1961 do not really bear on the point and assist Sri Raman. We

see no merit in this contention of Sri Raman and we reject the same. With this we

now proceed to deal with the substantial contentions urged for the petitioner.

( 31 ) SRI Nariman has urged that the board in procuring coffee from growers under

the Coffee Act, acts as a trustee or as an agent of growers and was, therefore, not

exigible to purchase tax under Section 6 of the KST Act.

( 32 ) WE are of the view that this contention of Sri Nariman is concluded by the

ruling of the Supreme Court in State of Kerala and Another v Bhavani Tea Produce

Co. Ltd. , punalur (AIR 1966 Supreme Court 677) and, therefore a detailed

examination of the same is not called for. In Bhavani Tea Produce Co. Limiteds case

a Constitution Bench of the supreme Court speaking through Hidayatullah,. (as His

Lordship then was) examining the scheme of the Coffee Act and the position of the

Board vis-a-vis a grower and his exigibility to takes under the Madras Plantations

Agricultural income-tax Act of 1955 has rejected a similar contention in these

words :"the Coffee Board is neither a trustee nor even an agent of the planter. "sri

Nariman is right that this conclusion reached by the Court is without any discussion

and reason. We, however venture to think that the Supreme Court reached this

conclusion as it was as obvious as it was inevitable. But, even then that hardly

makes any difference on its binding nature on us under Article 141 of the

Constitution. We are of the view that this statement of law equally governs this

contention of the petitioner with reference to its liability, if any, under the KST Act

and the same, therefore calls for our rejection,

( 33 ) IN The Indian Coffee Board, Batlapundu v. The State of Madras (y S T. C.

292) (to be hereafter referred to as First coffee Boards case) a Division Bench of

the High Court of Madras consisting of satyanarayana Rao and Rajagopalan,.

examined this very contention of the petitioner on its liability for taxes under the

then Madras General Sales Tax Act of 1939 that was then in force and rejected the

same in these words :"the argument on behalf of the petitioner strenuously urged

was that the Board was merely an agent of the producer and as the sale by the

producer of his produce is excluded from the "turnover" definition in the Act, there

is no justification for imposing the tax on the assessee. In support of this argumentreliance was placed upon the decision,of the Judicial Committee in Welden v. Smith [ (1924) A. C. 484]. We do not think that this argument is sound. There is no

question of any agency between the producer and the Board, as there is no

contract, express or implied, between them, nor is the Board constituted

representative of the producer under the provisions of the statute. The Board does

not hold the goods on behalf of the producer. After the goods enter the pool after

delivery they become the absolute property of the Board and the producer, a

registered owner, has no right or claim to the goods except to share in the sale

proceeds after the goods are sold in accordance with the provisions of the Act

Welden v Smith was a case in which there was an agreement between the

Government and the producer of the wheat and the question that arose for

consideration was whether the Government were liable for damage to the goods

while in their custody. . . . . . . . . . . . . . . . "in Bhavani Tea Produce Co. Limiteds

case the Supreme court has not referred to this case. But, this principle is in accord

with the enunciation made in Bhavani Tea Produce Co. Limiteds case. If that be so,

then the enunciation made by their Lordships of the Madras high Court, if we may

say so. with great respect, is absolutely correct and unexceptionable. Even

otherwise, we are of the view that the same is sound and we are in complete

agreement with the views expressed therein.

( 34 ) ON the above discussion, we see no merit in this contention of the petitioner

and we reject the same.

( 35 ) SRI Nariman has urged that all the Coffee grown and compulsorily delivered

to the Board by the growers under the Coffee Act in form, reality and substance was

nothing but compulsory acquisition and was not a sale or purchase to attract

purchace tax under section 6 of the KST Act.

( 36 ) SRI Hegde refuting the contention of Sri Nariman has urged that coffee grown

and delivered by growers to the Board under the Coffee Act was no more than a

compulsory sale and purchase with an element of consensua- lity which clearly

attracts purchase tax under Section 6 of the KST Act.

( 37 ) IN K. P. Varghese v Income Tax officer, Ernukulam and another (AIR 1981 sc

1922) Bhagwati,. (as His Lordship then was) speaking for the bench referring to

various passage expressed by Lord denning and Judge learned Hand on the

progressive rule of Construction of statutes has expressed thus :". . . . . . . . THE

task of interpretation of a statutory enactment is not a mechanical task. It is more

than a mere reading of mathematical formulae because few words possess the

precision of mathematical symbols. It is an attempt to discover the intent of the

legislature from the language used by it and it must always be remembered that

language is at best an imperfect instrument for the expression of human thought

and as pointed out by Lord denning, it- would be idle to expect every statutory

provision to be "drafted with divine pre-science and perfect clarity". We can do no

better than repeat the famous words of Judge learned Hand when he said". . . . . . .

. . . . . . . . . it is true that the words used, even in their literal sense, are the primary

and ordinarily the most reliable, source of interpreting the meaning of any writing ;

be it a statute, a contract or anything else. But, it is one of the surest indexes of a

mature and developed jurisprudence not to make a for tress out of the dictionary;

but to remember that statutes always have some purpose or object to accomplish,

whose sympathetic and imaginative discovery is the surest guide to their meaning".

We must not adopt a strictly literal interpretation of Section 52 sub section (2) but

we must construe its language having regard to the object and purpose which the

legislature had in view in enacting that provision and in the context of the setting in

which it occurs. We cannot ignore the context and the collocation of the provisions

in which Section 52 sub-section (2) appears, because, as pointed out by Judge

Learned Hand in most felicitous language :". . . . . . . . the meaning of a sentence

may be more than that of the - separate words, as a melody is more than the notes,

and no degree of particularity can ever obviate recourse to the setting in which all

appear, and which all collectively create". Keeping these observations in mind we

may now approach the construction of Section 52 sub-section (2 ). "in C.

Arunachalam v. Commissioner of Income Tax (ILR 1984 (2) Karnataka 1387) a Full

Bench of this Court of which one of us (Puttaswamy,.) was a member, reviewing all

the authorities has expressed on the same topic thus :"so far as the fiscal statutes

are concerned, we must remember one more principle. The provisions in a fiscal

statute are not to be so construed as to furnish a chance of escape and a means of

evasion". Bearing these and other well settled rules of construction of statutes, it is

necessary to ascertain the true scope and ambit of the relevant provisions touching

on the rival contentions urged before us.

( 38 ) THE Coffee Act provides for two types of delivery. , one called internal sale

quota and the other compulsory delivery. The term internal sale quota is defined

in Section 2 (h) of the Coffee act as that portion stated in terms bulk or weight, or

the whole of the coffee produced by the estate in the year, which a registered

estate is permitted under this Act to sell in the Indian market. The power to

regulate internal sale quota and its modalities are primarily dealt in Section 22 of the

Coffee Act. On the very definition of the internal sale quota, and its modalities

detailed in Section 22 of the Coffee Act, which only provides for fixation of the

percentage of delivery and a sale thereto, there would be a contractual sale and

purchase under the Sale of Goods Act and such purchases by the Board would

undoubtedly attract purchase tax under Section 6 of the K. ST Act.

( 39 ) BUT, the Board has asserted that for the last 40 years, internal sale quota

had not been resorted to under the Coffee act and has not been in operation (vide

para 5 of the writ petitions) which assertion has not been denied by the

respondents. In the absence of a denial of that plea, this Court must accept the

same and examine the case of the petitioner only on that basis. Even otherwise,

there is no reason even to doubt the correctness of the said assertion of the

petitioner. We must, therefore, proceed to examine the case of the petitioner that

internal sale quota system was not in operation and that it was the second mode of

compulsory delivery that was in operation, at any rate for the assessment years in

issue What then is its legal effect is the next question and to answer the same it is

first necessary to know what is meant by compulsory acquisition or eminent

domain as it is called in America.

( 40 ) THE princ;ple of compulsory acquisition or eminent domain, an essential

attribute of sovereignity of every modern State, is based on two legal maxims or

principles and they are (1) salus Populi eit Suprema lex,. e. , the welfare of the

people or the public is the law paramount and (2) necessitus publica major est

quam Privata,. e. , public necessity is greater than private. Nichols on Eminent

Domain (1950 Edition) a classic authority on the subject defining eminent domain

as the power of the sovereign to take property for public use without the owners

consent (vide para 1. 11 page 2 of Vol. I) elaborates the same in these words : ". . .

. This definition expresses the meaning of the power in its irreducible terms : (a)

Power to take, (b) Without the owners consent, (c) For the public use. All else that

may be found in the numerous definitions which have received judicial recognition is

merely by way of limitation or qualification of the power. As a matter of pure logic it

might be argued that includion of the term "for the public use" is also by way of

limitation. In this connection, however, it should be pointed out that from the very

beginning of the exercise of the power the concept of the "public use" has been so

inextricably related to a proper exercise of the power that such element must be

considered as essential in any statement of its meaning. The "public use" element is

set forth in some definitions as the "general welfare" the "welfare of the public", the

"public good", the "public benefit" or "public utility or necessity". It must be

admitted, despite the logical accuracy of the foregoing definition and despite the

fact that the payment of compensation is not an essential element of the meaning of

eminent domain, that it is an essential element of the valid exercise of such power.

Courts have "defined eminent domain so as to include this universal limitation as an

essential constituent of its meaning. It is much too late in the historical development

of this principal to find fault with such judicial utterances The relationship between

the individuals right to compensation and the sovereigns power to condemn is

discussed in Thayers cases on Constitutional Law. "but while this obligation (to

make compensation) is thus well established and clear let it be particularly noticed

upon what ground it stands, via. , upon the natural rights of the individual. On the

other hand, the right of the state to take springs from a different source, viz. , a

necessity of government. These two, therefore, have not the same origin ; they do

not come, for instance, from any implied contract between the state and the

individual, that the former shall have the property, if it will make compensation; the

right is no mere right of pre-emption, and it has no condition of compensation

annexed to it, either precedent or subsequent. But, there is a right to take, and

attach to it as an incident, an obligation to make compensation ; this latter, morally

speaking, follows the other, indeed like a shadow, but it is yet distinct from it, and

flows from another source. " (4) Conclusion :"accordingly, it is now generally

considered that the power of eminent domain is not a property right, or an exercise

by the state of an ultimate ownership in the soil, but that it is based upon the

sovereignty of the state. As the sovereign power of the state is broad enough to

cover the enactment of any law affecting persons or property within its jurisdiction

which is not prohibited by some clause of the constitution of the United states, and

as the taking of property within the jurisdiction of a state for the public use upon

payment of compensation is not prohibited by the constitution of the United States,

it necessarily follows that it is within the sovereign power of a state, and it needs no

additional justification". Cooley in his treatise on the Constitutional Limitations

Chapter XV expresses the same view at page 524 in these words:". . . . . . . . . . . .

MORE accurately, it is the rightful authority which must rest in every sovereignty to

control and regulate those rights of a public nature which pertain to its citizens in

common and to appropriate and control individual property for the public benefit, as

the public safety, convenience or necessity may demand "wheantons International

Law, Edited by A. Berriedale Keith, 6th Edition vol. II explains the same in these

words:"the right of the state to its public property or domain is absolute, and

excludes that of its own subjects as well as other nations. The national proprietary

right, in respect of those belonging to private individuals, or bodies corporate, within

its territorial limits, is absolute so far as it excludes that of other nations; but in

respect to the member of the State, it is paramount only, and forms what is called

the eminent domain; that is the right, in case of necessity or for the public safety, of

disposing of all the property of every kind within the limits of the state". In Charanjit

Lal Chowdhury v The union of India and others (AIR 1951 Supreme Court p. 41 at

53) Mukherjea,. (as His Lordship then was) while examining the scope and ambit of

Article 31 of the Constitution that was part of our constitution, then, has stated on

the subject thus :" (48) It is a right inherent in every sovereign to take and

appropriate private property belonging to individual citizens for public use. This

right, which is described as eminent domain in American Law, is like the power of

taxation, and offspring of p3litical necessity, and it is supposed to be based upon an

implied reservation by government that private property acquired by its citizens

under its protection may be taken or its use controlled for public benefit irrespective

of the wishes of the owner". In State of Karnataka and another etc. v ranganatha

Reddy and another (AIR 1978 sc 215 [LQ/SC/1977/287] ) the Supreme Court reversing the decision of

this Court and upholding the validity of the Karnataka Contract Carriages

(Acquisition) Act, 1976 has ruled that the power of acquisition can be exercised both

in respect of immovable and movable properties of every kind.

( 41 ) THE Statement of objects and reasons accompanying the bill that ultimately

became the Coffee Act, sets out the objects in these words :" I After the outbreak of

the present war the Indian coffee industry lost certain important foreign markets.

There was therefore a great slump in the prices of coffee. A Coffee Control

conference consisting of the interests affected was held in September 1940 to

consider the steps that could be taken to save the industry from collapse. After full

consideration of the recommendations made at the Conference, the Coffee Market

Expansion Ordinance, 1940, was promulgated providing for the necessary assistance

to the Indian Coffee Industry by regulating the export of coffee from, and the sale of

coffee in, British India, and other connected means. 2. The duration of the

Ordinance was limited in order to make proposals for legislation after gaining

experience and after ascertaining the wishes of the coffee interests in the matter. 3.

A second Coffee Control Conference of the coffee interests was accordingly

convened on the 20th October, 1941. The Conference recognized that the control

scheme has been greatly beneficial to the coffee industry in its present crisis and

unanimously made the following recommendations : " (1) that the control scheme

as generally embodied in the Ordinance should be continued by legislation and that

its duration be for the period of the war and one coffee crop year thereafter, and (2)

that the control should be limited to estates with area of 10 acres or more but

provision should be made whereby control may be extended, if necessary, over

estates with areas below 10 acres. These recommendations were endorsed by the

Standing advisory Committee of the Legislature attached to the Commerce

Department. 4. In view of the general agreement of all interests for the

maintenance of the coffee control scheme it is proposed to continue control by

legislation, and the present Bill is designed to achieve this object". The Coffee Act

has been enacted to regulate the development of Coffee industry in the country.

The a vowed object of the Coffee Act is not to acquire coffee grown by the growers

and vest the same in the Board for distribution for a public purpose.

( 42 ) THE Board is chosen as the instrumentality for the administration of the

Coffee Act. In reality the Board is only a statutory trading or commercial

organization which becomes apparent from Section 7 of the Coffee Act and rule 8 of

the Coffee Rules 1955 (the rules) which provide for the establishment of a

propoganda committee, a marketing committee, a research committee, a

development committee and a coffee quality committee.

( 43 ) THE Coffee Act does not compel a person to become a grower. But, when a

person becomes a grower then he is required to register himself as a grower, file

returns and deliver or sell the coffee grown by him to the Board with a guarantee or

right to receive payment of its value or price from the Board (vide section 25 (6) of

the Coffee Act.)

( 44 ) SECTIONS 11 and 12 of the Coffee act regulate the levy and payment of

customs and Excise duties on the coffee produced and exported from the country

and the manufacturing process. Both these duties are levied on the growers and are

payable by them to Central government which, however, is free to repay them to

the Board for development of coffee industry in the country. These provisions when

closely examined really establish that what is grown by growers and delivered to

Board was not at all compulsory acquisition but was a sale. If it was compulsory

acquisition and there was payment of compensation, then these provisions would

not have found their place in the Act at all. We need hardly say that levy of Customs

and excise duties on compensation is something unheard, an incongruity and an

anchronism. The obligation to pay these duties or taxes to Government are

consistent with the concept of sale to the board and are clearly inconsistent with the

concept of compulsory acquisition at all.

( 45 ) SECTION 15 of the Act empowers the Central Government to control the sale

price of coffee in the country. Sections 27 to 29 regulate the curing of coffee.

Section 30 provides for creation of two funds called a general fund and a pool fund.

Section 34 of the Act and the subsidiary rules in great detail regulate the accounting

and the administration of the general and pool funds.

( 46 ) SECTION 4s (1) of the Coffee Act empowers the Central Government to make

Rules to carry out the purposes of the Act. Section 48 (2) (xviii) and (xix) empower

the Central Government to regulate the internal sale quota and the manner in which

the Board shall exercise its powers of buying or selling coffee. Rule 34 of the Rules

framed by the central Government exhaustively deals with the general and pool

funds. Rule 34 (2) (d) directs the Board to specify the amounts spent in purchasing

coffee from registered owners. Rule 38b empowers the Board to make advances to

growers in accordance with the terms and conditions framed and approved by the

Central government. Rule 38-C empowers the board to make ad hoc and final

payments to growers. Rule 40 provides for purchasing and selling of Coffee by the

Board in the internal market The language of all these general provisions that

deliberately employ the terms sale and purchase and nowhere employ the term

acquisition militate against the case urged by the Board before us.

( 47 ) WITH this it is now necessary to closely examine Sections 17 and 25 of the

coffee Act, which are the fulcrum of the case urged by the Board before us and they

read thus :"control of sale. Export and Re-import of Coffee 17. No registered owner

shall sell or contract to sell in the Indian market coffee from any registered estate if

by such sale the internal sale quota allotted to that estate is exceeded ; nor shall a

registered owner sell or contract to sell in the Indian Market any coffee produced on

his estate in any year for which no internal sale quota is allotted to the estate. 25.

(1) All coffee produced by a registered estate in excess of the amount specified in

the internal sale quota allotted to that estate or when no internal sale quotas have

been allotted to estates, all coffee produced by the estate shall be delivered to the

Board for inclusion in the surplus pool by the owner of the estate or by the curing

establishment receiving the coffee from the estate. Provided that where no internal

sale quotas have been allotted to estates, the Chairman may allow the owner of any

estate to retain with himself for purposes of consumption by his family and for

purpose of seed, such quantity of coffee as the Chairman may think reasonable ;

provided further that where the central Government is satisfied that it is not

practicable for any class of owners producing coffee in any specified area to comply

with the provisions of this Sub-Section on account of the small quantity of coffee

produced by them or on account of their estates being situated in a remote locality,

the central Government may, by notification in the Official Gazette ; exempt such

class of owners from the provisions of this Sub-Section. (2) Delivery shall be made

to the board in such places at such times and in such manner as the Board may

direct, and such directions may provide for partial delivery to the surplus pool at any

time whether or not at that time the internal sale quota has been exceeded and the

coffee delivered shall be such as to represent fairly in kind and quality the produce

of the estate. The Board may reject any consignment offered for delivery which

does not satisfy this requirement; but shall not reject any consignment merely for a

defect in curing. (3) Coffee delivered for inclusion in the surplus pool shall upon

delivery to the Board remain under the control of the Board which shall be

responsible for storage, curing where necessary, and marketing of the Coffee. (4)

The Board shall from time to time prepare a differential scale for the valuation of

coffee, and shall in accordance with that scale classify the coffee in each

consignment delivered for inclusion in the surplus pool according to its kind and

quality and shall make an assessment of its value based on its quantity, kind and

quality. (5) The Board may, with the consent of a registered owner treat as having

been delivered for inclusion in the surplus pool any coffee from such estate which

the registered owner may agree to have so treated. (6) When Coffee has been

delivered or is treated as having been delivered for inclusion in the surplus pool, the

registered owner whose coffee has been so delivered or is treated as having been so

delivered shall retain no rights in respect of such coffee except his right to receive

the payments referred to in Section 34. "the first part of Section 17 prohibits a

grower from selling any coffee in the Indian market without fulfilling the obligation

of internal sale quota allotted to his estate by the Board. The provision made in this

part of this section only aids in fulfilling the obligations of internal sale quota system

by growers, which as noticed earlier, has not been in operation for about 40 years.

From this it follows that the first part of Section 17 of the Coffee Act has really no

relevance to decide the question.

( 48 ) THE second part of Section 17 deals with that situation when internal sale

quota system is not in operation by prohibiting the grower from selling to any other

person other than the Board. This prohibition or compulsion on the grower to sell

coffee only to the Board and no other created in this Section by itself or in

conjunction with other provisions of the Act does not make the coffee delivered by

the grower as one in the process of compulsory acquisition or eminent domain,

the true import of which we have earlier noticed.

( 49 ) SECTION 25 ( 1) requires a grower to deliver all coffee grown by him to the

board for inclusion in the surplus pool. The two provisos appended to Section 25 (1)

are not material for our purpose. Section 25 (2) empowers the Board to direct a

grower to deliver in whole or in part coffee grown by him at such time and place as

may be directed in that behalf. But, such delivery by the grower should fairly

represent in kind and quality for which directions are issued by the Board. By this

the Board is empowered to procure coffee from growers of the required quality and

quantity at such intervals and places as is found necessary for its ultimate marketing

operations of coffee in the country and abroad. The last part of Section 25 (2)

empowers the Board to reject any consignment offered for delivery that does not

satisfy its earlier directions. But, that power of rejection cannot be exercised for

defects in curing over which the grower has really no control. In respect of all coffee

delivered Sections 35 (2) and (3) of the Act makes the Board responsible for its

storage, during and marketing of coffee. 49-2. Section 25 (4) empowers the board

to prepare differential scales for the valuation of coffee on the basis of the quality

and quantity and make payment to the growers. Section 25 (5) empowers the Board

to treat any coffee delivered by a registered owner as if it is delivered by him with

reference to the registered estate owned by him. Section 25 (6) declares that when

coffee has been delivered, the grower ceases to be the owner of such coffee and

that the Board will be its owner, however, subject to his right to receive payment for

the same in accordance with Section 34 of the coffee Act and the rules made

thereto for that purpose.

( 50 ) SECTIONS 17 and 25 of the Coffee act cast a legal obligation on every grower

to deliver or sell all coffee grown by him to the Board which has a corresponding

power or duty to receive or purchase the same, theh dispose all such coffee and

make payments to the growers in terms of the Act and the Rules. We must

remember that coffee is a commercial crop and an important foreign exchange

earner providing gainful employment to many In keeping with the scheme and

object of the Act, these and other provisions really establish a marketing agency for

securing a fair price to the growers and consumers but at the same time ensuring

quality control of the product. The penal provisions in the Act are intended to secure

the purposes and objects of the Act and are not made to punish any general crime

against the Society and the State.

( 51 ) ON a careful analysis of all the provisions of the Coffee Act in general and

Sections 17 and 25 in particular visa-vis the true principles of compulsory acquisition

or eminent domain we find it difficult to hold that on compulsory delivery by growers

to the Board, there would be compulsory acquisition of coffee by the Board and any

such conclusion to borrow the inimitable language of Viscount Simonds in Kirkness

(Inspector of Taxes) v. John Hudson and Company limited (1955 A. C. 696 at p.

707) would be a grave misuse of language.

( 52 ) BEFORE examining the Australian enactments and the cases of the Australian

High Court on which great reliance was placed by Sri Nariman, it is well to

remember a note of warning administered by the judicial committee of the Privy

council in Ezra v. The Secretary of State and Others (30 Cal. 36) [LQ/CalHC/1902/117] and Imambandi v.

Mutsaddi (45 Cal. 878 at page 904 (PC)) in relying on foreign declsiens In

imabandis case their Lordships expressed thus :"their Lordships cannot help

deprecating the practice which seems to be growing in some of the Indian Courts of

referring largely to foreign decisions. However useful in the scientific study of

comparative jurisprudence, judgments of Foreign Courts, to which indian

practitioners cannot be expected to have access, based often on considerations and

conditions totally differing from those- applicable to or prevailing in India, are only

likely to confuse the administration of justice. "in the matter of The Central

Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938 (AIR

1939 F C. ] i STC 1 at p. 35) Sir Maurice Gwyer, cj on the same topic expressed

thus :"the decisions of Canadian and australian Courts are not binding upon us, and

still less those of the united States, hut, where they are relevant, they will always be

listened to in this Court with attention and respect, as the judgments of eminent

men - accustomed to expound and illumine the principles of a jurisprudence similar

to our own ; and if this Court is so fortunate as to find itself in agreement with

them, it will deem its own opinion to be strengthened and confirmed. But, there are

few subjects on which the decisions of other Courts require to be treated with

greater caution than that of federal and provincial powers for in the last analysis the

decision must depend upon the words of the Constitution which the court is

interpreting ; and since no two Constitutions are in identical terms, it is expremely

unsafe to assume that a decision on one of them can be applied without

qualification to another. This may be so even where the words or expressions used

are the same in both cases ; for a word or a phrase may take a colour from its

context and bear different senses accordingly. "in Automobile Transport (Rajasthan)

limited v Slate of Rajasthan and others (AIR 1962 SC 1406 [LQ/SC/1962/152] ) S. K. Das,. (as his

Lordship then was) speaking for the majority of the Supreme Court reiterated these

principles in these words :"this Court pointed out in the atiabari Tea Co. case (1961)

1 SCR 809 [LQ/SC/1960/173] : (AIR 1961 S. C. 232), that it would not be always safe to rely upon the

American or Australian decisions in interpreting the provisions of our constitution.

Valuable as those decisions might be in showing how the problem of freedom of

trade, commerce and inter-course was dealt with in other federal constitutions, the

provisions of our Constitution must be interpreted against the historical background

in which our Constitution was made ; the background of problems which the

Constitution makers tried to solve according to the genius of the Indian people

whom the Constitution makers represented in the Constituent assembly". Bearing

this note of warning, we now proceed to examine the rulings of the Australian High

Court.

( 53 ) IN the State of New South Wales and another v The Commonwealth and

others (20 CLR 54) referred to as Wheat case the High Court of Australia was

examining the validity of the Wheat acquisition Act of 1914 enacted by the state of

New South Wales as violative of section 92 of the Australian Constitution that

guaranteed inter-State freedom, trade and commerce in Australia. As the very title

of that Act and its material provisions show that that Act in express terms and in

substance provided for acquisition of wheat grown in the State of New South Wales.

The Coffee Act is not on pari materia with the Wheat Acquisition Act, and therefore,

the principles stated in Wheat case, which appears to have considerably influenced

the later rulings of that Court in dealing with the regulatory measures do not bear

on the construction of the Coffee Act and the question that arises before us.

( 54 ) IN The Peanut Board v. The rock Hampton Haibour Board (48 CLR 266)

referred to as Peanut Boards case, the high Court of Australia in examining an

appeal filed by that Board against the decision of the Supreme Court of queensland

that had dismissed its suit on the facts narrated at pages 267 to 269 of the report,

had to construe the scope and ambit of the Primary Producers organization and

Marketing Act of 1926 of New South Wales and an order made thereunder and its

validity or otherwise with reference to Section 92 of the Australian Constitution. On

the scope and ambit of that Act, that has relevance, Rich,. with whom the learned

chief Justice concurred expressed thus :"it therefore remains only to consider

whether the operative instruments affecting to deal with peanuts do or do not

interfere with the freedom of inter- state trade. This should be done weighing

compulsory acquisition as a matter perhaps characterizing the enactments, but not

of necessity determining their effect. The feature which at once challenges attention

is that these instruments provide a means of marketing. They are concerned with

establishing a compulsory pool through which growers producing peanuts for sale

must dispose of their product for distribution and receive their reward. The pith and

substance of the enactment is the establishment of collective "sale and distribution

of the proceeds of the total crop and the concomitant abolition of the growers

freedom to dispose of his product voluntarily in the course of trade and commerce,

whether foreign, inter-State or intra- state. Section 15 of the Act of 1926 provides

that "all the commodity" shall be delivered by the growers to the marketing board,

and that "all the commodity" so delivered shall be deemed to have been delivered to

the board for sale by the board, "who shall account to the growers thereof for the

proceeds thereof after making all lawful deductions therefrom for expenses and

outgoings and deductions of all kinds in consequence of such delivery and sale or

otherwise under these Acts" (see. 15 (1) (2) as modified by the Order in Council ).

Sub- sec 3 of sec. 15 penalizes the sale or delivery of any of the "commodity" to, or

the purchase or the receipt of any of the "commodity" from, any person except the

board. These provisions operate even although the governor in council does rot

resort to compulsory acquisition. It was said by Mr. Mitchell that the provisions

authorizing the borrowing of money constituted the chief purpose of the compulsory

acquisition. If this means that the control of the marketing of peanuts is a

subordinate or consequential purpose of the instruments, I cannot agree. The ability

to borrow upon the whole crop may afford an advantage, if not an incentive, in the

concentration of the "commodity" in the hands of one marketing authority. But, the

weight attached to supposed advantages arising from the policy adopted in these

enactments is not material. What is -material is whether the scope and object of the

enactments as gathered from their contents are to deal with trade and commerce

including inter-State trade and commerce. In examining this question one cannot fail

to observe that compulsory acquisition is resorted to as a measure towards ensuring

that the whole crop grown in Queensland is available for collective marketing by the

central authority. The case is not one in which a State seeks to acquire the total

production of something it requires for itself and its citizens. It is interposing in the

course of trade in the "commodity" an organization established for the purpose of

carrying out one of the functions of trade. In my opinion the enactment controls

directly the commercial dealing in peanuts by the grower and aims at, and would,

apart from Sec 92 accomplish. the complete destruction of his freedom of

commercial disposition of his product. Part of this freedom is guaranteed by Section

92. Accordingly the Primary Producers Organization and Marketing act, 1926-1930

and the order in Council thereunder are ineffectual to prevent the grower of peanuts

from disposing of them in inter-State trade and commerce and the appellant Board

had no title to the peanuts the subject matter of this action". Starke, Dixon and

Mctiernan,. in their separate opinions concurred with rich,. expressing themselves

thus :"the policy of the Act is doubtless to preserve and protect primary producers in

Queensland, but the method adopted for achieving that policy, as gathered from the

words of the Act itself, is the compulsory regulation and control of all trade,

domestic, inter- state and foreign. The volume of trade is not restricted, but the

producers are restricted, and are prevented from engaging in inter State and other

trade in peanuts. Their peanuts are compulsorily taken from them for that purpose,

pooled, and the disposal thereof placed in the hands and under the control of the

board It is a compulsory marketing scheme, entirely restrictive of any freedom of

action on the part of the producers. The Act confers the power of acquisition with

the object of placing restrictions on all trade, domestic inter-State and foreign, and,

following the decision of His majesty in Council in James v Conan (1932 AC 542 =

47 CLR 386), I think the Act operates in contravention of section 92 of the

Constitution, and so far as it does so is necessarily void. (Per Starke,.) ". . . . . . . . It

compels every grower to dispose of his peanuts to the statutory board in order that

it may conduct the marketing of the commodity as a whole in the interests of the

growers collectively, and it acquires the property in the peanuts as and when they

come into existence in order to insure that the grower producing them for sale shall

not exercise his former freedom of selling them by an ordinary transaction of

commerce whether intra-State or inter-State. (Per Dixon,.) ". . . . . . . . Gathered

from the effect which has been wrought by these provisions of the Act and Order in

Council, their primary object or real object or pith and substance is, in my opinion,

to constitute an authority for marketing peanuts, to vest in it an owner all peanuts

produced in Queensland during the period for which it was to operate, to prevent all

persons other than the board from buying or selling peanuts, to give it the exclusive

right to engage in trade and commerce in peanuts whether inter-State, intra State,

or overseas, to make it unlawful for any other person to engage in this trade and

commerce, to regulate the manner in which the board should conduct its business

and to require it to account to the growers for the profits it derived from the sale of

the commodity which it acquired from them". (Per Metiernan,.) evatt,. who

dissented on the violation or otherwise of the order made under the Marketing Act

with Section 92 of the Australian Constitution, that being the question that arose for

decision in that case, however, really concurred with, the majority on the scope and

ambit of that Act by expressing thus :"the general nature of the scheme disclosed by

the Act and Order in council is to induce co-operation in an industry the

maintenance of which is considered essential by the Queensland Parliament and

Government. The initiative lies with the growers and compulsion is introduced only

under conditions which ensure that the will of the majority shall be carried into

effect. The entire product is pooled and then sold by an authority which is directly

representative of the producers, but, is assisted by a government expert. This

system of pooling is well known in the States of Australia, and has been employed

for many years. Without, it the individual grower may receive little reward for his

labours, and may even be unable to continue producing at all. With it, however, the

pooled product facilitates financing over a lengthy period, and the industry and those

dependent upon it may be saved from disaster. In the case of the Peanut Board

there are three outstanding features of the scheme of control One is the vesting of

the commodity in the board as owner. As has been seen, this is not made an

essential of every marketing board. The second feature is the period of control

which in this special case extends over a period of ten years. This long period makes

the scheme bear, very definitely, the aspect of a regulation of the industry itself,

each person proposing to produce the commodity well knowing that his reward will

be dependent upon an extended operation of the pooling system. The third feature

is the complete absence from the scheme of any intention to discriminate against, or

specially concern itself with, any inter-State trade in peanuts. "we have carefully

read the Australian Act also made available to us by Sri Babu. We are of the view

that the use of the expression acquisition in some of the opinions of the learned

Judges is not in the sense of compulsory acquisition or eminent domain by the State

but has been used for compulsory delivery by the growers or purchase by the Board,

which is also the other expression that has been used by all of them at more than

one place We are, therefore, of the opinion that the ratio in Peanut boards case

does not really assist the petitioner. This is also true of the original decision

rendered by Webb.. of the Supreme Court, Brisbane.

( 55 ) WHAT is true of Peanut Boards case is also true of the two other cases in (i)

The Milk Board (New South Wales) v. Metropolitan Cream Private Limited (62 clr

116)and (ii) Crothers v. Sheil (49 clr 399) of that very Court that really followed

Peanut Boards case with reference to similar enactments.

( 56 ) IN M/s. Chhitter Mal Narain Das v. Commissioner of Sales Tax (AIR 1970

supreme Court 2000) the Supreme Court dealing with the U P. Wheat Procurement

(Levy) Order, 1959 which compelled the dealers to deliver 50% of the stocks to

Government expressed that it was a case of acquisition and, therefore, it was not

exigible to sales tax under the U. P. Sales Tax Act, 1948. But, that is not the position

in the present cases and the ratio in that case to the extent it is not overruled in

M/s. Vishnu Agencie, (Pvt.) ltd. v. Commercial Tax Officer and others (AIR 1978

Supreme Court 449) does not bear on the point On this very conclusion, it is hardly

necessary to examine the Full Bench ruling of the Punjab and haryana High Court in

M/s. Krishna Rice mills. Ambala Cantt. v State of Haryana and others (AIR 1980

Punjab and Haryana 278) in which that Court has only held that the enunciation in

Chhitter Mal narain Das is still good law. In Bagalkot Udyog Limited v Slate of

Karnataka (43 STC 352) [LQ/KarHC/1979/13] a Division Bench of this court dealing with the liability of a

dealer compelled to deliver cement to state Trading Corporation under the cement

Control order distinguished chhitter Mal Narain Das case, as we have done here.

( 57 ) IN First Coffee Boards case the madras High Court rejecting the claim of the

Board that it was not a dealer in the sale of coffee procured from growers referring

to Peanut and Milk Boards cases expressed thus :"the object of such Acts is to

provide means for obtaining what is thought to be the proper price for the produce

and for benefiting consumers from being charged what were thought to be

excessive prices. The petitioners learned counsel attempted to distinguish the

Australian cases on the ground, that the Acts under consideration in those cases

expressly vested the product in the board, whereas there is no such express

provision in the Coffee Market expansion Act. We do not think that this really alters

the situation. The effect of the provisions of the Act does undoubtedly vest the

coffee in the board, as it is expressly provided in the Act that after delivery to the

pool the registered owner has no other right except to partake in the distribution of

the sale proceeds of the pool. The function of the Board and its legal position are in

our opinion undoubtedly those of a seller of goods which are owned by it and which

are vested in it absolutely. As in the case of the statutory Board in the Peanuts case,

the sales effected by the assessee were in the course of trade and commerce, even

as the sales would have been in the course of trade and commerce had there been

no Board and the sales been by the producers themselves. We are therefore in

entire agreement with the view of the Tribunal that the assessee was a dealer and

therefore the assessee was rightly assessed to sales tax on the turnover". We are in

respectful agreement with these views.

( 58 ) ON the above analysis of all the provisions of the Coffee Act and the rules and

in particular Sections 17 and 25, with due regard to the meaning and principles of

compulsory acquisition, we are of the considered opinion that when growers

compulsorily deliver their coffee to the Board for marketing, that would not result in

compulsory acquisition as contended by Sri Nariman. We, therefore, reject this

contention of Sri Nariman.

( 59 ) SRI Nariman has next contended that in the compulsory sales and purchases

of coffee under the Coffee Act, con- sensuality was totally lacking as in compulsory

sales arising under the control orders and the principles enunciated by the Supreme

Court in Vishnu Agencies case had no application at all.

( 60 ) SRI Hegde refuting the contention of Sri Nariman has urged that in the

compulsory sales and purchases under the Coffee Act, there was consensuality and

therefore, the Board was exigible to purchase tax under Section 6 of the Act as held

by the Supreme Court in Vishnu agencies case.

( 61 ) WE first consider it useful to deal with the applicability or otherwise of Vishnu

Agencies case.

( 62 ) IN Vishnu Agencies case a larger bench of seven learned Judges dealt with

compulsory sales and their exigibility to sales tax under the West Bengal Cement

control Act, 1948 analogous to Cement control order and Andhra Pradesh Paddy

procurement (Levy) Order under the essential Commodities Act. Sri Nariman is right

that in Vishnu Agencies case the Supreme Court was dealing with essential

commodities that are generally in short supply, their distribution and their ultimate

exigibility to taxes under the Sales Tax Acts in the country and had no occasion to

deal with the Coffee act which is an unique Act with no comparison in the country.

( 63 ) IN its 61st report submitted to government of India on 21-5-1974 the law

Commission of India then presided over by Mr. Justice Gajendragadkar, retired Chief

Justice of India, in Chapter-1c deals with sale of controlled commodities. In that

report the Law commission could not deal with the later decision rendered by the

Supreme Court on 16-12-1977 in Vishnu Agencies case though the same has

referred to the decision rendered by Salil Kumar Datta,. reported in 77 Calcutta

Weekly Notes p. !41, which was obviously in appeal before a Division Bench of that

Court, out of which the. appeal before the supreme Court ultimately arose.

( 64 ) WE are of the view that the ruling of the Supreme Court in Vishnu agencies

case deals with cases of compulsory sales governed by one or the other law in the

country and does not restrict itself to cases of only controlled commodities that are

in short supply. In his separate but concurring opinion that is how Beg,. deals with

the matter and has examined the question. We are of the view that the distinction

made by Sri Nariman to pursuade us that the principles enunciated in Vishnu Agenciess case had no application is without a difference. We must, therefore, proceed to examine the question in the light of the principles enunciated by the Supreme court in Vishnu Agencies case.

( 65 ) WE have earlier noticed that the extended meaning of the terms tax on sale

or purchase of goods incorporated by the 46th Amendment had no application which

necessarily means that exposition in The State of Madras v Gannon dunkerley and

Company (AIR 1958 Supreme court 560) the correctness of which was only doubted

but not overruled in Vishnu agencies case, which is also the basis of that very

decision, at any rate, governs these cases.

( 66 ) IN Gannon Dunkerley and Companys case on the meaning of the term sale

occurring in Entry 48 of Government of India Act of 1935 corresponding to Entry 54

of the State List of the constitution, the Court expressed thus :" (46) To sum up, the

expression sale of goods in Entry 48 is a nomenjuris, its essential ingredients being

an agreement to sell movables for a price and property passing therein pursuant to

that agreement". In Vishnu Agencies case the Supreme court has proceeded to

examine compulsory sales on this basis only. We must therefore, proceed to

examine the same on that basis only.

( 67 ) IN M/s. New India Sugar Mills limited v Commissioner of Sales Tax, bihar (AIR

1963 Supreme Court 1207) hidayatullah,. (as his Lordship then was) in his

dissenting opinion has traced the law of sales tax from the earliest times to the

modern times, the constitutional provisions made in the Government of India Act,

1935 in that behalf that found their way in the new Constitution of the country, with

which the Supreme court in Vishnu Agencies case has expressed its approval. We

must keep that opinion of Hidayatullah, J (as his lordship then was) at the forefront.

In Andhra Sugars Limited and another etc. v. State of Andhra Pradesh and others

(AIR 1968 Supreme Court 599) an unanimous constitution Bench of the Supreme

Court speaking through Bachawat,. that had earlier decided the Indian Steel and

Wire products Limited v S ate of Madras (AIR 1968 Supreme Court 478) treating the

majority decision in New India Sugar mills Limiteds case as only a decision on the

facts of that case, expressed thus :" (4) Under Section 4 (1) of the Indian Sale of

Goods Act, 1920, 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 By

Section 3 of this Act, the provisions of the Indian contract Act, 1872 apply to

contracts of sale of goods save in so far as they are inconsistent with the express

provisions of the later Act. Section 2 of the Indian Contract Act provides that when

one person signifies to another his willingness to do or to abstain from doing

anything with a view to obtaining the assent of the other to such act or abstinence,

he is said to make a proposal. When the person to whom the proposal is made

signifies his assent thereto, the proposal is said to be accepted. A proposal when

accepted becomes a promise. Every promise and every set of promises forming the

consideration for each other is an agreement. There is mutual assent to the proposal

when the proposal is accepted and in the result an agreement is formed. Under

Section 10 all agreements are contracts if they are made by the free consent of

parties competent to contract for a lawful consideration and with a lawful object and

are not by the Act expressly declared to be void. Section 13 defines consent. Two or

more persons are said to consent when they agree upon the same thing in the same

sense. Section 14 defines free consent. Consent is said to be free when it is not

caused by coercion, undue influence, fraud, misrepresentation or mistake as defined

in Sections 15 to 22. Now, under Act no. 45 of 1961 and the Rules framed under it,

the canegrower in the factory zone is free to make or not to make an offer of sale of

cane to the occupier of the factory. But, if he makes an offer, the occupier of the

factory is bound to accept it. The resulting agreement is recorded in writing and is

signed by the parties. The consent of the occupier of the factory to the agreement is

not caused by coercion, undue influence, fraud, misrepresentation or mistake. His

consent is free as defined in section 14 of the Indian Contract Act though he is

obliged by law to enter into the agreement. The compulsion of law is not coercion as

defined in section 15 of the Act. In spite of the compulsion, the agreement is neither

void nor voidable. In the eye of the law, the agreement is freely made. The parties

are competent to contract. The agreement is made for a lawful consideration and

with a lawful object and is not void under any provisions of law. The agreements are

enforceable by law and are contracts of sale of sugarcane as defined in Section 4 of

the Indian Sale of Goods Act. The purchases of sugarcane under the agreement can

be taxed by the State Legislature under entry 54, List -. (5) Long ago in 1702 Holt,

C. said in Lane v. Cotton (1701) 1 Ld Raym 646 = 91 ER 17 : "when a man takes

upon himself a public employment, he is bound to serve the public as far as his

employment goes, or an action lies against him for refusing. The doctrine that one

who takes upon a public employment is bound to serve the public was applied to

innkeepers and common carriers. Without lawful excuse, an innkeeper cannot refuse

to receive guests at his inn, and a common carrier cannot refuse to accept goods

offered to him of carriage. See Halsburys laws of Ergland, 3rd Edn. Vol. 4 article

375 and Vol. 21, Article 938. A more general application of the doctrine was arrested

by the growth of the principle of laissez faire which had its heyday in the midnineteenth

century. Thereafter, there has been a gradual erosion of the laissez faire

concept. It is now realized that in the public interest, persons exercising certain

callings or having monopoly or near monopoly powers should sometimes be charged

with the duty to serve the public, and, if necessary, to enter into contracts. Thus

Section 66 of the Indian Railways act, 1890 compels the railway administration to

supply the public with tickets for travelling on the railway upon payment of the usual

fare. Section 22 of the Indian Electricity Act, 1910 compels a licensee to supply

electrical energy to every person in the area of supply on the usual terms and

conditions. Cheshire and Fifoot in their Law of Contract, sixth Edn. p. 23 observe

that for reasons of social security the State may compel persons to make contracts.

One of the objects of act No. 45 of 1961 is to regulate the purchase of

sugarcane by the factory owners from the canegrowers. The canegrowers scattered

in the villages had no real bargaining power. The factory owners or their combines

enjoyed a near monopoly of buying and could dictate their own terms. In this

unequal contest between the cane growers and the factory owners the law stepped

in and compelled the factory to enter into contracts of purchase of cane offered by

the canegrowers on prescribed terms and conditions. (6) In Indian Steel and Wire

Products ltd. v. State of Madras, Civil Appeals nos. 1968-1970 of 1966 Dt-11-9-67

(A 1r 1968 SC 478) [LQ/SC/1967/264] , the Court held that sales of steel products authorized by the

Controller under Clauses 4 and 6 of the Iron and Steel (Control of Production and

Distribution) Order, 1941 were exigible to tax under Entry 54, list. The Court found

that the parties had entered into contracts of sale though in view of the order the

area of bargaining between the buyer and the seller was greatly reduced, hegde,.

speaking for the Court said that as a result of economic compulsions and changes in

the political outlook the freedom to contract was now being confined gradually to

narrower limits. We have here a case where one party to a contract of sale is

compelled to enter into it on rigidly prescribed terms and conditions and has no

freedom of bargaining. But, the contract, nonetheless, is a contract of sale on the

special facts of that case, the majority decision was that there was no offer and

acceptance and no contract resulted. That decision should not be treated as an

authority for the proposition that there can be no contract of sale under compulsion

of a statute. It depends upon the facts of each case and the terms of the particular

statute regulating the dealings whether the parties have entered into a contract of

sale of goods". In Vishnu Agencies case the Supreme Court overruling the majority

decision in M/s. New India Sugar Limiteds case and expressing its concurrence with

the minority opinion of Hidayatullah,. (as His Lordship then was) the exposition in

Indian Steel and Wire Products Limiteds Andhra Sugars Limiteds and Salar Jung

Sugar Mills Limited v. State of Mysore (AIR 1972 Supreme Court 87) cases, has

ruled that consensuality was not excluded in compulsory sales and purchases

regulated by law. On the factors that should guide in deciding such consensuality,

mutual assent or bargain, the Court has expressed thus :"32. These limitations on

the normal right of dealers and consumers to supply and obtain the goods, the

obligations imposed on the parties and the penalties prescribed by the Control order

do not, in our opinion, militate against the position that even-tually, the parties must

be deemed to have completed the transactions under an agreement by which one

party bound itself to supply the stated quantity of goods to the other at a price not

higher than the notified price and the other party consented to accept the goods on

the terms and conditions mentioned in the permit or the order of allotment issued in

its favour by the concerned authority. Offer and acceptance need not alwa s be in

an elementary form, nor indeed does the Law of Contract or of Sate of Goods

require that consent to a contract must be express. It is common place that offer

and acceptance can be spelt out from the conduct of the parlies which covers not

only their acts but omissions as well. Indeed, on occasions, silence can be more

eloquent than eloquence itself. Just as correspondence between the parties can

constitute or disclose an offer and acceptance, so can their conduct This is because,

law does not require offer and acceptance to conform to any set pattern or formula.

33. In order, therefore, to determine whether there was any agreement or

consensuality between the parties, we must have regard to their conduct at or about

the time when the goods changed hands. In the first place, it is not obligatory on a

trader to deal in cement nor on any one to acquire it. The primary fact, therefore, is

that the decision of the trader to deal in an essential commodity is volitional Such

volition carries with it the willingness to trade in the commodity strictly on the terms

of Control Orders. The consumer too, who is under no legal compulsion to acquire

or possess cement, decides as a matter of his volition to obtain it on the terms of

the permit or the order of allotment issued in his favour. That brings the two parties

together, one of whom is willing to supply the essential commodity and the other to

receive it. When the allottee presents his permit to the dealer, he signifies his

willingness to obtain the commodity from the dealer on the terms stated in the

permit. His conduct reflects his consent. And when, upon the presentation of the

permit, the dealer acts upon it, he impledly agrees to supply the commodity to the

allottee on the terms by which he has voluntarily bound himself to trade in the coir.

modity. His conduct too reflects his consent. Thus, though both parties are bound to

comply with the legal requirements governing the transactions, they agree as

between themselves to enter into the transaction on statutory terms, one agreeing

to supply the commodity to the other on those terms and the other agreeing to

accept it from him on the very terms. It is therefore, not correct to say that the

transactions between the appellant and the allottees are not consensual. They, with

their free consent, agreed to enter into the transactions. 34. We are also of the

opinion that though the terms of the transaction are mostly predetermined by law, it

cannot be said that there is no area at all in which there is no scope for the parties

to bargain. 38. Hidayatullah,. who delivered a dissenting opinion observed after

reviewing the position both under the english and the Indian Law, that though it

was true that consent makes a contract of sale, such consent "may be express or

implied and it cannot be said that unless the offer and acceptance are there in an

elementary form, there can be no taxable sale". Taking the view that on obtaining

the necessary permit, the sugar mills on the one hand the the Government of

Madras on the other agreed to "sell" and "purchase" sugar could admit of no doubt,

the learned Judge said that when the Province of Madras after receiving the permit,

telegraphed instructions to despatch sugar and the mills despatched it, "a contract

emerged and consent must be implied on both sides though not expressed

antecedently to the permit". The Controller brought the seller and the purchaser

together, gave them permission to supply and receive sugar leading thereby to an

implied contract of sale between the parties. The learned judge accepted that there

was an element of compulsion in both selling and buying, perhaps more for the

supplier than for the receiver, but, according to him, "a compelled sale is

nevertheless a safe" and "sales often take place without volition of a party". The

learned Judge summed up the matter pithly thus : "so long as the parlies trade

under controls at fixed price and accept these as any other law of the realm because

they must, the contract is at the fixed price both sides having or deemed to have

agreed to such a price. Consent under the law of contract need not be express, it

can be implied. . . . . . . . The present is just another example of an implied contract

with an implied offer and implied acceptance by the parties". Adverting to the

construction of the Legislative entry 48 of List-II, VII Schedule to the Government of

India Act, 1935, the learned Judge observed that the entry had to be interpreted in

a liberal spirit and not cut down by narrow technical considerations. "the entry in

other words should not be shorn of all its content to leave a mere husk of legislative

power. For the purposes of legislation such as on sales tax it is only necessary to

see whether there is a sale, express or implied. . . . . . . . The entry has its meaning

and within its meaning there is a plenary power. If a sale express or implied is found

to exist then the tax must follow". 39. We are of the opinion that the true position in

law is as is set out in the dissenting judgment of Hidayatullah,. and that, the view

expressed by Kapur and Shah,. in the majority judgment, with difference, cannot be

considered as good law. 45. We would, however, like to clarify that though

compulsory acquisition of property wouid exclude the element of mutual assent

which is vital to a sale, the learned Judges were, with respect not right in holding in

chitter Mal (AIR 1970 SC 2000 [LQ/SC/1970/276] ) that even if in respect of the place of delivery and

the place of payment of price, there could be a consensual arrangement, the

transaction will not amount to a sale (p. 677) (of SCR) : (at page 2004 of AIR ). The

true position in law is as stated above, namely, that so long as mutual assent,

express or implied, is not totally excluded the transaction will amount to a sale. The

ultimate decision in Chitter Mal can be justified only on the view that cl. 3 of the

Wheat Procurement Order envisages compulsory acquisition of wheat by the State

Government from the licensed dealer. Viewed from this angle, we cannot endorse

the Courts criticism of the Full Bench decision of the Allahabad High Court in

Commr. , sales-tax, U P v. Ram Bilas Ram Gopal, air 1970 All 518 [LQ/AllHC/1969/28 ;] ">1970 All 518 [LQ/AllHC/1969/28 ;] [LQ/AllHC/1969/28 ;] which held while

construing cl. 3 that so long as there was freedom to bargain in some areas the

transaction could amount to a sale though effected under compulsion of a statute.

Looking at the scheme of the u. P. Wheat Procurement Order, particularly cl. 3

thereof, this Court in chitter Mal seems to have concluded that the transaction was,

in truth and substance, in the nature of compulsory acquisition, with no real

freedom to bargain in any area, Shah,. expressed the Courts interpretation of cl. 3

in no undertain terms by saying that "it did not envisage any consensual

arrangement. 49. This resume of cases, long as it is, may yet bear highlighting the

true principle underlying the decisions of this Court which have taken the view that a

transaction which is effected in compliance with the obligatory terms of a statute

may nevertheless be a sale in the eye of a law. But, as observed by Hidayatullah,. in

his dissenting judgment in that case, consent may be express or implied and offer

and acceptance need not be in an elementary form (page 510 ). It is interesting that

the General Editor of the 1974 edition of "benjamins sale of Goods" says in the

preface that the editors decided to produce an entirely new work partly because

commercial institutions, modes of transport and of payment, forms of contract,

types of goods, market areas and marketing methods, and the extent of legislative

and governmental regulation and intervention, had changed considerably since

1868, when the 1st edition of the book was published. The formulations in

Benjamins 2nd edition relating to the conditions of a valid sale of goods, which are

reproduced in the 8th edition, evidently require modification in the light of

regulatory measures of social control. Hidayatullah,. in his minority judgment

referred to above struck the new path ; and Bachawat,. who spoke for the Court in

Andhra Sugars (AIR 1968 sc 599 [LQ/SC/1967/292] ) went a step ahead by by declaring that "the

contract is a contract of sale and purchase of cane, though the buyer is obliged to

give his assent under compulsion of a statute (page 716) (of SCR) : (At p. 606 of

AIR ). The concept of freedom of contract, as observed by Hegde. in Indian Steel

and Wire Products (AIR 1968 SC 478 [LQ/SC/1967/264] ) has undergone a great deal of change even in

those countries where it was considered as one of the basic economic requirements

of a democratic life (p. 490 ). Thus, in Ridge Nominees ltd. (1952 Ch. 376) the Court

of appeal, while rejecting the argument that there was no sale because the essential

element of mutual assent was lacking, held that the dissent of the share holder was

overriden by an assent which the statute imposed on him, fictional though it may

be, that a sale may not always require the consensual element mentioned in

Benjamin on Sale, 8th Edition, page-2 and that there may in truth be a compulsory

sale of property with which the owner is compelled to part for a price against his will

(pages 405-406 ). Decisions in cases of compulsory acquisition, where such

acquisition is patent as in kirkness, 1955 0 AC 696 or is inferred as in Chitter Mal

(AIR 1970 SC 2000 [LQ/SC/1970/276] ) fall in a separate and distinct class. The observations of Lord

Reid in Kirkness that sale is a nomen juris - the name of a particular consensual

contract have therefore to be understood in the context in which they were made,

namely, that compulsory acquisition cannot amount to sale. In Gannon dunkerley

(AIR 1958 SC 560 [LQ/SC/1958/40] ), Venkatarama Aiyar,. was influenced largely by these

observations (see pages 411, 412 and 425) (of SCR) ; (at p 577 of air) and by the

definition of sale in benjamins 8th edition, Gannon Dunkerley involved an

altogether different point and is not an authority for the proposition that there

cannot at all be a contract of sale if the parties to a transaction are obliged to

comply with the terms of a statute. Since we are putting in a nutshell what we have

discussed earlier, we would like to reiterate in the interest of uniformity and

certainty of law that, with great deference the majority decision in New india Sugar

Mills (AIR 1963 SC 1207 [LQ/SC/1962/396] ) is not good law. The true legal position is as is stated in

the minority judgment in that case and in Indian steel and Wire Products (AIR 1968

SC 478), Andhra Sugars (AIR 1968 SC 599 [LQ/SC/1967/292] ), Salar Jung Sugar Mills (AIR 1972 sc 87 [LQ/SC/1971/570] )

and Oil and Natural Gas Commission (AIR 1976 SC 2478 [LQ/SC/1976/303] ). . . . " what emerges from

this ruling is that there must be an element of consensuality even in compulsory

sales governed by law and if there is an element of consensuality however minimal

that may be, which can be express or implied, then that would be a sale or purchase

for purposes of sale of Goods Act and the same would be exigible to sales or

purchase tax as the case may be under the relevant Sales-tax law of the country.

( 68 ) SRI Nariman has also relied on paras 69 to 70 of Benjamins Sale of goods

(latest Edition) dealt under caption compulsory acquisition of goods and supply of

goods under a. public duty respectively to contend that in the compulsory sales

under the Coffee Act, there cannot be consensuality at all.

( 69 ) BENJAMINs Sale of Goods is a high and classic authority on the law of sale of

Goods in England, codified in that country in the Sale of Goods Act of 1893 on

which the Sale of Goods Act of 1920 of our country also is generally modelled. But,

that high authority cannot over-ride the law declared by the supreme Court in

Vishnu Agencies and other cases referring to Benjamin, Cheshire and Fifoots Law of

Contracts, friedmans Law in a Changing Society, the Constitution of our country, its

philosophy and its economic conditions. We may with advantage refer to the very

scholarly and stimulating treatises of. Julius Stone (i) "social Dimensions of law and

Justice" 1977 Edition on the topic "freedom of Contract" pages 251 to 254 of

Chapter 5 "individual Interests or Conditions of Individual Life in society" and again

on topic "positive action for the adjustment of conflicts with economic security,

efficiency and progress" pages 467-469, (2) Human Law and Human Justice of the

same author on the topic "traditional legal restraints on abstract liberty in order to

secure liberty of contract" pages 96 and 97 of chapter 3 "metaphysical

Individualism"; and (3) Seervai Constitutional law of India Vol. II 3rd Edition paras

22-34 to 22-83 (pages 1913 to 1951) which without any doubt considerably weaken

the accuracy of the statements found in benjamins Sale of Goods or atleast call for

modification in their application to the present day conditions in our country. We

must, therefore, proceed to examine with reference to the law of our country as

declared by the Supreme court only but however, steering clear of controversies

raised by eminent authors like Seervai, which we now proceed to do.

( 70 ) THE Coffee Act does not compel a person to become a grower and grow

coffee against his will or volition. A person is free to become a grower of coffee or

not. When a person becomes a grower of Coffee which is within his own volition, he

however becomes a grower subject to the provisions of the coffee Act. What is true

of a new entrant is also true of those that were growing coffee on the day the

Coffee Act came into force and have continued thereafter as growers. In other

words, every one agrees or undertakes to grow coffee in the country subject to the

regulatory provisions of the Coffee Act. This volition exercised by the growers of

coffee is analogous to the volition exercised by a person when he decides to become

a trader in controlled commodities. On principle, form and substance, this volition

exercised by both is one and the same and it is not possible to distinguish one from

the other.

( 71 ) BUT, Sri Nariman has urged that the volition exercised by the grower was

irrelevant and that in the trading activity of the grower, the Coffee Act leaves him no

choice at all.

( 72 ) WHAT is necessary to ascertain in all cases of compulsory sales is whether

there was an element of consensual- ity in such sales at one or the other stage of

the same. When so examined as that should be, we rind no merit in this connection

of Sri Narirmn.

( 73 ) SECTION 25 (2) of the Coffee Act empowers the Board to reject any coffee

offered for delivery contrary to any of the directions given by it except for a defect

in curing. We are of the view that this power conferred on the Board or even the

right of a buyer analogous to section 37 of the Sale of Goods Act shows that there

was an element of consensuality in the compulsory sales regulated by the Coffee

Act.

( 74 ) BUT, Sri Nariman has urged that on a combined reading of Sections 17 and

25, the Board had no right to reject what was delivered as coffee and therefore, the

element of consensuality was completely excluded.

( 75 ) THE power conferred by Section 25 (2) of the Coffee Act must be read subject

to the very requirements of that and all other provisions of the Act. When a grower

sells coffee that has become totally unfit for human consumption for one or the

other valid reason, such a grower cannot compel the Board to purchase such coffee

on the ground that it was Coffee and thus endanger public safety and also pay its

value or price. In the very nature of things, these things cannot be foreseen or

enumerated exhaustively. We are also of the view that the power conferred on the

board cannot be restricted in the manner suggested by Sri Nariman.

( 76 ) ON the above discussion, we hold that the power of rejection conferred on the

Board has an element of con- sensuality in the compulsory sales under the Coffee

Act.

( 77 ) WHEN a grower delivers Coffee to the Board, the Coffee Act extinguishes his

title and absolutely vests the same in the Board however, preserving his right for

payment of its value or its price thereof in accordance with the provisions of that

Act. The amount paid by the board to the grower under the Act is the value or price

of coffee in conformity with the detailed accounting done thereto under the Coffee

Act. The amount paid to the grower is neither compensation nor dividend. The

payment of price to the grower is an important element to determine the

consensuality in the sale and the sale itself under Section 4 (1) of the Sale of Goods

Act.

( 78 ) SECTION 34 (2) of the Coffee Act confers a right on a grower to opt for

immediate payment of the price of coffee delivered by him. The fact that growers

have not exercised that right so far or are not likely to exercise that right has no

relevance on the nature of the right conferred by the Coffee Act. The Act also

ensures periodical payments of price to the growers. The Rules provide for

advancing loans to growers. Without a shadow of doubt these elements lead us to

hold that in the compulsory sale of coffee, there was an element of consensuality.

( 79 ) WE are of the view that the aforesaid three important elements each one by

itself or in combination without even reference to various other elements detailed by

the learned Advocate General clearly establish consensuality in the compulsory sale

or purchase under the coffee Act and the purchases made by the Board fall within

the ratio of Vishnu agenciess case.

( 80 ) IN Bhavani Tea Produce Company Limiteds case a Constitution Bench of the

Supreme Court had to examine whether the Coffee grown and delivered by Bhavani

Tea Produce Company Limited prior to 1-4-1955 which maintained its accounts tn

mercantile system of accounting was exigible or not to Agricultural Income-tax

under the Madras plantation Agricultural Income-tax Act (Madras Act 5 of 1955)

later titled as madras Agricultural Income-tax Act. In deciding that the Court framed

the very question that arises for our determination examined all the provisions of

the Coffee act and in particular Sections 17 and 25 of that Act and answered the

same in these words :". . . . WAS there a sale to the Coffee board The answer

must be in the affirmative. The Coffee Board is neither a trustee nor even an agent

of the planter. It is not accountable to the owner, except as to payment for coffee

received and valued according to the differential prices. All coffee which the Coffee

Board obtains under the coffee Act is put in a pool and gets mixed up with other

coffee. Coffee in the pool is disposed of on behalf of the Coffee Board. The Coffee

Board only pays a proportionate price to the planter. Even though the planter does

not actually sell coffee to the Coffee board there is in reality a sale by operation of

law as a result of which the planter ceases to be the owner of coffee the moment he

has handed over his produce to the Coffee Board. He is then entitled to receive

payment and is not concerned any more with his coffee. The unsold coffee is not

returned to him and he does not enjoy any rights of ownership in it. The Coffee

Board can pledge it and sell it as and when it likes. In these circumstances it is plain

that the handing over of coffee by the planter amounts to a sale to the coffee Board

and the payment of the price is from the sale of all the coffee in the surplus pool

unless the planter settles for immediate payment. The system of account must make

a difference. If it were a cash system income would be taxable when actually

received but in the mercantile system it would be taxable in the year in which the

relevant entry is made about the sale of coffee to the Coffee Board. "we are of the

view that this enunciation is a complete answer to the contention urged for the

petitioner and the same cannot be distinguished on any principle at all.

( 81 ) IN Puthutotam Estates (1943) limited v. Agricultural Income-tax Officer (45

1tr 86) a Division Bench of the madras High Court consisting of Rajamannar,. and

Jagadisan,. had to consider the same question that arose in bhavani Tea Produce

Company Limiteds case on similar facts. In answering that question, the Court

speaking through rajamannar, CJ expressed thus :"the cases now before us all

relate to agricultural income from coffee plantations. Coffee is grown on the land

and the berries collected and they are delivered to the Coffee Board. That delivery is

in pursuance of a statutory sale. The sale proceeds therefore constitute the income.

As the learned Advocate General put it, the taxable event is the conversion of the

coffee produce into money. This kind of income will fall under section 2 (a) (2) (iii)

of the Act, that is, it is income derived from land in the State by the sale by a

cultivator of the produce raised by him. Now it is obvious that the transaction of sale

takes place when the produce is delivered to the coffee Board. The price is

tentatively fixed at the time but it is liable to adjustment subsequently. Often it

takes time before the entire sale price is realised. "with these principles the Supreme

court in Bhavani Tea Produce Company limiteds case has expressed its concurrence. In Amalgamated Coffee Estates limited v. State of Kerala (45 1tr 351) (Kerala), the Kerala High Court concurring with the views expressed by the madras High Court in Puthutotam Estates case has taken a similar view with which also the Supreme Court has expressed its concurrence in Bhavani Tea produce Company Limiteds case.

( 82 ) IN First Coffee Boards case the court dealt with the taxability or otherwise of

the Board under the Madras general Sales Tax Act of 1939 (Madras act IX of 1939)

that was then in force analogous to the KST Act. In that case the Court speaking

through Satya- narayana Rao. examining the Madras act and the Coffee Act held

that the board was a dealer within the meaning of that term and was exigible to the

sales Tax thereunder When once the board is held to be a dealer, it also follows

from the same that there is a sale from the grower, purchase by the board and then

a sale by the Board. We are of the view that on these principles with which we are

in respectful agreement, the contention urged for the petitioner has no merit.

( 83 ) ON the foregoing discussion, we hold that there is no merit in this contention

of Sri Nariman and we reject the same.

( 84 ) SRI Nariman has urged that all export sales directly made by the Board must

be held as purchases in the course of exportion which purchase tax under section 6

of the Act cannot be levied, such a construction alone would subserve the purposes

of Article 286 of the constitution and Section 5 of the CST act before or after its

amendment by the central Sales Tax (Amendment) Act, 1976 (cst Amendment

Act ).

( 85 ) SRI Hegde has urged that all purchases made were only for export and were

not in the course of export which do not decidedly earn exemption under Article

286 of the Constitution from payment of purchase tax under section 6 of the Act.

( 86 ) WE first consider it useful to broadly notice notice the coffee deliveries to the

Board and their exports from this country.

( 87 ) ALL coffee compulsorily delivered by the growers in the country to the board

without reference to the rival contentions urged before us, which we have earlier

dealt, which is unnecessary to repeat, are pooled by the Board by storing the same

at one or the other storing centres in the country. At the stage of pooling or initial

purchase with which only we are concerned coffee is not purchased for" internal or

external or ex-port sales. All the coffee so pooled is not earmarked of specified for

intra- state, inter-State or export sales. All the pooled coffee is graded and their

sales in and outside the country are then regulated by the Board. The Board sells

considerable quantities to authorised exporters under a tightly regulated system

called export auctions and those auction purchasers export the same in terms of

prior agreements with foreign buyers. In addition td all these, the board directly

exports considerable quantities of coffee to foreign buyers from out of the pooled

coffee, But, in all this, the Board does not purchase or take delivery of any specific

coffee or goods of any grower and export the same under prior contracts of sale.

The Board does not purchase any specific coffee of any specific grower for purposes

of direct exports at all. In the very nature of things that is not also possible to do for

the Board. With this brief analysis of the operations which necessarily include direct

exports by the Board, we will examine whether such direct export sales earn the

exemption from payment of purchase tax under Article 286 of the constitution of

India or not.

( 88 ) ARTICLE 286 of the Constitution that places certain restrictions on the taxing

power of State, in the course of imports, exports and inter-State sales empowers

parliament to formulate the principles for determination on all of them and levies to

be made thereon The cst Act enacted by the Parliament after the 4th Amendment to

the Constitution formulates the principle for determining in the course of import of

goods into and export of goods cut of the territory of India.

( 89 ) IN Coffee Board, Bangalore v. Joint Commercial Tax Officer, Madras, and

another (25 STC 528) [LQ/SC/1969/457] (to be hereafter referred to as Second Coffee Boards case)

which was a case filed by the Board raised the very contention as the CST act then

stood and the Supreme Court by majority rejected the same. Therein hidayatullah,.

speaking for the majority explained the meaning of the term in the course of export

in these words :"the phrase "sale in the course of export" comprises in itself three

essentials : (i) that there must be a sale, (ii) that goods must actually be exported,

and (iii) the sale must be a part and parcel of the export. Therefore either the sale

must take place when the goods are already in the process of being exported which

is established by their having already crossed the customs frontiers, or the sale must

occasion the export. The word "occasion" is used as a verb and means "to cause" or

"to be the immediate cause of". Read in this way the sale which, is to be regarded

as exempt is a sale which causes the export to take place or is the immediate cause

of the export. The export results from the sale and is bound up with it. The word

"course" in the expression "in the course of" means "progress or process of", or

shortly "during". The phrase expanded with this meaning reads "in the progress or

process of export" or "during export". Therefore the export from India to a foreign

destination must be established and the sale must be a link in the same export for

which the sale is held. To establish export a person exporting and a person

importing are necessary elements and the course of export is between them.

Introduction of a third party dealing independently with the seller on the one hand

and with the importer on the other breaks the link between the two, for then there

are two sales one to the intermediary and the other to the importer. The. first sale is

not in the course of export for the export begins from the intermediary and ends

with the importer. Therefore, the tests are that there must be a single sale which

itself causes the export or is in the progress or process of export. There is no room

for two or more sales in the course of export. The only sale which can be said to

cause the export is the sale which itself results in the movement of the goods from

the exporter to the importer. The course of export may be established by agreement

or by force of law. To be the former the agreement between the seller and the

buyer must envisage an export out of India who then become exporter and importer

respectively. By force of law a person selling the goods may be compelled to sell

them only in an ex-port sale but that too is not essential different from the first. In

either case there is a seller and a buyer who by reason of the sale also become

exporter and importer respectively. Any other buyer who is not himself the importer

buys for export even if export ultimately results. It is to bring out these results that

Parliament has recognised only two cases of sale in the course of import : (a) where

the sale is effected by a transfer of documents of title to goods after the goods have

crossed the customs frontiers that is to say the goods are already on the way to the

importer and (b) when the sale itself causes the export to take place that is to say

the exporter and importer negotiate and complete a sale which without more would

result in the export of the goods. No other sale can qualify for the exemption under

Section 5 (1) read with Article 286 (1) (b ). "these principles again reiterated in

mod. Serajuddin v. The State of Orissa (36 STC 136) [LQ/SC/1975/162] in any event, decidedly govern

the period of assessments prior to 31-3-1976. On these principles the purchases

made by the Board and the export sales made prior to 31-3-1976 were not in the

course of export but were only purchases made for export and therefore, they do

not qualify for exemption provided by Article 286 of the constitution.

( 90 ) IN Consolidated Coffee Limited v. Coffee Board, Bangalore (46 STC 164) [LQ/SC/1980/187] the

Supreme Court has examined the true import of Section 5 (3) of the CST act as

amended by Act 103 of 1976 and tulzapurkar,. who spoke for the Bench has

expressed on the same thus :"section 5 (1) was construed by this court in the

context of two sales (though both were closely connected with the ultimate

exportation of the goods out of India) rather very strictly in the two cases, namely,

the Coffee boards case (25 STC 528) [LQ/SC/1969/457] and the mohd Serajuddins case (36 STC

136 ). In the former case, in regard to the very export auctions conducted by the

coffee Board for the avowed purpose of exporting the coffee through the registered

exporters (which are the subject matter of the instant writ petitions) this Court

negatived the claim that the sales of coffee at such auctions were made "in the

course of export" within the meaning of Section 5 (1) on the ground there were two

sales, one by the Coffee Board to the intermediary (registered exporter) and the

other by the intermediary to the importer and that the first sale was not "in the

course of export" for the export began from the intermediary and ended with the

importer and that the introduction of the intermediary (registered exporter) between

the seller (Coffee Board) and the importing buyer broke the link. This Court laid

down the test that there must be a single sale which itself caused the export and

there was no room for two or more sales being "in the course of export". In other

words, notwithstanding the compulsion to export arising from clauses 26, 30 and 31

of the auction conditions the penultimate sale was held to be not in the course of

export. The latter case (Mohd. Serajuddins case) was stronger than the Coffee

Boards case inasmuch as the penultimate sales (two contracts for sale of mineral

ore entered into by mohd Serajuddin with the State trading Corporation) were so

inextricably connected with the final sales (two corresponding contracts for sale of

the identical goods entered into by the S. T C with the foreign buyers) that the

former were to stand cancelled if the latter for any reason fell through and viceversa

and further the penultimate sales were effected to implement the contracts

with the foreign buyers and even then following the ratio of the Coffee Boards case

this Court held that the penultimate sales (Mohd. Serajuddins contracts with the

STC) were not sales in the course of export. Negativing the contentions that the

contracts between Mohd. Serajuddin and the S T C. and the contracts between the

S. T. C. and the foreign buyer formed integrated activities in the course of export,

this Court took the view that the crucial words in Section 5 (1) showed that only if a

sale occasioned the export, it would be in the course of export and that the two sets

of contracts were separate and independent and Mohd. Serajuddin was under no

contractual obligation to the foreign buyer either directly or indirectly and that his

rights and obligations were only against the S T. C. It will thus appear clear that

even when the S. T. C. had with it foreign buyers contracts and Mohd. Serajuddins

contracts with the S. T. C had been entered into for the purpose of implementing

such foreign buyers contracts, this Court held that the sales between mohd.

Serajuddin and the S. T. C. were not sales in the course of export. It was at this

stage. e. , when section 5 (1) was interpreted by this Court in the aforesaid manner

that the Parliament felt the necessity of enacting section 5 (3) for the purpose of

giving relief in respect of penultimate sales that immediately precede the final

(export) sales provided the former satisfy the conditions specified therein. The

Statement of Objects and reasons in this behalf runs thus : "according to Section 5

(1) of the central SALES TAX ACT, 1956, a sale or purchase of goods can qualify as

a sale in the course of export of the goods out of the territory of India only if the

sale or purchase has either occasioned such export or is by a transfer of documents

of title to the goods after the goods have crossed the customs frontiers of India. The

Supreme Court has held (vide Mohd. Serajuddin v State of Orissa, 36 STC 136) [LQ/SC/1975/162] that

the sale by an Indian exporter from India to the foreign importer alone qualifies as a

sale which has occasioned the export of the goods. According to the Export control

Orders exports of certain goods can be made only by specified agencies such as the

State Trading Corporation. In other cases also, manufacturers of goods, particularly

in the small scale and medium sectors, have to depend upon some experienced

export house for exporting the goods because special expertise is needed for

carrying on export trade. A sale of goods made to an export canalising agency such

as the state Trading Corporation or to an export house to enable such agency or

export house to export those goods is compliance with an existing contract or order

is inextricably connected with the export of the goods. Further, if such sales do not

qualify as sales in the course of export, they would be liable to State sales tax and

there would be a corresponding increase in the price of the goods. This would make

our exports uncompetitive in the fiercely competitive international markets. It is,

therefore, proposed to amend, with effect from the beginning of the current

financial year, Section 5 of the Central Sales tax Act to provide that the last sale or

purchase of any goods preceding the sale or purchase occasioning export of those

goods out of the territory of India shall also be deemed to be in the course of such

export if such last sale or purchase took place after, and was for the purpose of

complying with, the agreement or order for, or in relation to, such

export" (Emphasis supplied)"two things become clear from this statement : first, the

Mohd. Serajuddins decision is specifically referred to as necessitating the

amendment and secondly penultimate sales made by small and medium scale

manufacturers to an export canalizing agency or private export house to enable the

latter to export those goods in compliance with existing contracts or orders are

regarded as inextricably connected with the export of the goods and hence

earmarked for conferral of the benefit of the exemption. But, here again, "existing

contract" with whom is not clarified In other words, on this crucial point the

statement is silent and does not throw light on whether the existing contract should

be with a foreign buyer or will include any agreement with a local party containing a

covenant to export. Therefore, the question will again depend upon proper

construction and, as we have said above, in the matter of construction the two

aspects discussed earlier show that by necessary implication "the agreement"

spoken of by Section 5 (3) refers to the agreement with a foreign buyer. Having

come to the conclusion that on proper construction the expression "the agreement"

occurring in Section 5 (3) refers to the agreement with a foreign buyer and does not

include any agreement with a local party containing a covenant to export, the next

question that arise for our consideration is as to when does the penultimate sale

(the sale of coffee at export auctions conducted by the Coffee Board to the

registered exporters) takes place,. e. , becomes complete by the passing of the

property in the coffee sold thereat to the registered exporters The determination

of the point of time at which the property in the coffee passes to the registered

exporters becomes necessary because before that the agreement with or order from

a foreign buyer in respect of those goods must come into existence to implement

which the penultimate sale must have taken place. Having regard to the above

discussion it is clear to us that in the penultimate sales (sales of coffee effected to

the registered exporters at export auctions conducted by the Coffee board) the

property in the coffee sold thereat passes to the buyer immediately upon payment

of full price, weighment and setting apart of the coffee for delivery to the buyer

under clauses 19 and 20 of the auction conditions and it would be at this stage. e. ,

just before this stage is reached that the agreement with or order from a foreign

buyer must be available or produced in order to attract Section 5 (3) of the central

SALES TAX ACT, 1956, 1956. "at any rate these principles govern cases of last sales

or penultimate sales by small exporters through the established export organizations

like State trading Corporation or the Board that satisfy the requirements of Section 5

(3) of the CST Act as amended by Act No. 103 of 1976 and their claim for exemption

from payment of sales tax under the sales-tax laws of the country. On the

application of these principles that govern the assessments made on and after 1-4

1976 the position of the Board unfortunately had not altered and has remained the

same. From this it follows that the purchases made and exports made would still be

for export only and not in the course of export to earn exemption under Article 286

of the Constitution.

( 91 ) CONSOLIDATED Coffee Limiteds case is not an authority for the claim of the

petitioner to claim exemption on its purchases, their pooling and their ultimate

export from payment of purchase tax under Section 6 of the KST Act. When closely

examined, this case, which only reiterates the earlier cases of second coffee Boards

and Serajuddins cases, except to the extent that the principles enunciated stood

modified by the amendment made to the CST Act, on the true scope of which is now

a direct authority, far from supporting the case of the petitioner supports the case of

the respondents.

( 92 ) IN Consolidated Coffee Limiteds case, the Supreme Court did not consider the

exigibility or otherwise of the export sales to purchase tax under section 6 of the

KST Act. But, that fact as pointed out by the Supreme Court in Smt. Somawanti and

others v The State of punjab and others (AIR 1963 Supreme court 151-para 22 at

pages 160 and 161) does not in any way affect its binding nature under Article 141

of the Constitution. We cannot therefore, examine any of the questions that are

concluded against the petitioner in these cases, though we hardly doubt the

correctness of the facts stated by the Board.

( 93 ) SRI Nariman has lastly contended that even if export sales directly made by

the Board were held to be not in the course of export they have to be treated as

deemed local sales within the State of Karnataka in terms of Explanation 3 (a) (ii)

to Section 2 (t) of the KST Act on which ground all the purchases made cannot be

subjected to purchase tax under Section 6 of the KST Act.

( 94 ) WE are of the view that all the purchases made and the exports if any made

by the Board thereafter on any principle will not be local sales within the State of

Karnataka. Explanation 3 (2) (ii) to Section 2 (t) of the KST Act has hardly any

relevance to hold that the later export sales were local sales to avoid liability under

Section 6 of the kst Act. We are of the view that this contention is also opposed to

the principles enunciated by the Supreme Court in kandaswamys case.

( 95 ) IN P. P. M. Thangiah Nadar v The state of Tamilnadu (46 STC 67) [LQ/MadHC/1979/496] followed in

p. S. Sankaralinga Nadar v The Commissioner for Commercial Taxes, Board of

Revenue madras-5, and another (49 STC 302) [LQ/MadHC/1979/504] and d. A. Sathvanarayana Chettiar v

The State of Tamilnadu (49 STC 303) [LQ/MadHC/1979/507] all of which have been decided by one and the

same bench of the Madras High Court consisting of Sethuraman and

balasubrahmanyan,. of the Madras High Court on 19-11-1979 and 22-11-1979 which

were characterised by one of the learned counsel as not consistent and even

contradictory, but which is not so, the question as has arisen did noc arise and,

therefore, those rulings are of no assistance to the petitioner.

( 96 ) ON the foregoing discussion, we hold that the direct export sales made by the

petitioner for the period in challenge were not in the course of export and they do

not qualify for exemption of purchase tax under Section 6 of the KST act.

( 97 ) SRI Raman has urged that Sales- tax and the consequent purchase tax on

coffee was leviable only on coffee that was fit for human consumption at the rates

stipulated from time to time under section 5 (1) of the KST Act and not at the rates

specified in Section 5 (2) of that act.

( 98 ) AS pointed out by the Supreme court in Kandaswamys case purchase tax is

leviable on goods that are subject to sales tax but are not so subjected to tax on the

taxable person. For determining taxable goods and the rates, we must necessarily

fall back on Section 5 of the KST Act.

( 99 ) ENTRY No. 43 of the second schedule to the KST Act providing for levy of

sales tax on coffee at all material times at the rate of 10 percent does not make any

distinction and difference on raw coffee, cured coffee and roasted coffee. On the

other hand, the entry coffee takes in itself all kinds of coffee including coffee

beans. On the plain language of Entry No. 43 of the Second schedule we cannot

hold that only roasted or powdered or coffee only fit or ready for human

consumption was taxable under Section 5 (3) (a) of the Act, which has to be the

basis for levy of purchase tax under Section 6 of the KST act.

( 100 ) SECTION 5 (1) of the Act applies to cases which are not covered by the

succeeding provisions and the schedules appended to the Act. The levy of sales tax

on coffee falls under Entry No. 43 of second Schedule and is governed by section 5

(3) (a) of the KST Act and not by Section 5 (1) of that Act

( 101 ) WE are concerned with the levy of purchase tax from 1-4-1974 and onwards.

From 1-4-1974 and onwards, the rate of sales tax on coffee had remained at 10 per

cent and, therefore, the levy of purchase tax at that rate was in order.

( 102 ) ON the above discussion, we find no merit in this contention of Sri Raman

and we reject the same.

( 103 ) IN this assessment orders the cto has also imposed additional tax under

Section 6b of the KST Act. The levy of additional tax on the purchase tax is also

authorized and is in conformity with that provision. We, cannot, therefore take

exception to the levy of additional tax on the purchase tax imposed by the CTO.

( 104 ) IN his assessment made on 5-9-1983 for the assessment periods 1979-80

and 1980-81 the CTO has imposed surcharge on the purchase tax levied under

Section 6 of the KST Act. The levy of surcharge is authorized by Section 6c of the

KST Act. This levy is in conformity with Section 6c of the Act. We cannot, therefore,

take exception to the same.

( 105 ) AS the respondents succeed, the question of this Court directing the

repayment of the amounts paid by the petitioner with any interest thereon in

pursuance of the interim order made on 20-2-1985 does not arise and the same is

not therefore made.

( 106 ) AS all the contentions urged for the petitioner fail these writ petitions are

liable to be dismissed. We, therefore, dismiss these writ petitions and discharge the

rule issued in all these cases But, in the circumstances of the cases, we direct the

parties to bear their own costs. Orders on the oral application made by the

petitioner for certificate of fitness to appeal to the Supreme Court under Art. 133

and 134a. of the Constitution. Immediately after we pronounced our order

dismissing these writ petitions Sri Babu seeks for a certificate of fitness to appeal to

the Supreme Court of India under Articles 133 (1) and 134 (A) of the constitution on

the ground that the questions raised and decided by me are substantial questions of

law of general importance and they need to be decided by the Supreme Court of

India. 2. Sri Hegde in opposing the oral application made by Sri Babu contends that

the questions raised and decided are concluded by the Supreme Court. 3. We are of

the view that the two questions, whether the compulsory deliveries of coffee to the

petitioner by the growers under the Coffee Act, a unique act in the country with no

comparison are compulsory acquisitions or compulsory sales and whether in the

compulsory sales there was consensuality or not, raised and decided in these that

have not so far been decided by the Supreme court and likely to arise in other

States also, are substantial questions of law of general importance and they need to

be decided by the Supreme Court of India. We, therefore, allow the oral applications

made by the petitioner in these cases and grant a certificate of fitness to appeal to

the Supreme Court under articles 133 (1) and 134-A of the Constitution of India and

direct the Registrar to issue the necessary certificates thereto to the petitioner.

Order on the oral application made by the petitioner for stay Sri Babu prays for stay

of the operation of our order for a period of 12 weeks from this day. Sri Hegde prays

for time till 21-8-1985 to ascertain factual details and make his submissions. We

grant this request of Sri Hegde and direct these cases to be posted before this

Bench on 21-8-1985 at 10-30 a. m. to consider the prayer of the petitioner for stay.

Order on the oral application made by the petitioner for stay 22-8-1985 we have

again heard the parties on the prayer made for stay of the operation of our order. 2.

For the assessment year 1974-75, the Commissioner has issued notice under

Section 22-A of the KST Act proposing to revise the assessment order for the said

year for the reasons stated therein. As we have upheld the case urged for the

revenue, we do not see any justification to stay the proceedings before the

Commissioner for the assessment year 1974-75. We, therefore, reject the prayer of

the petitioner for stay of the proceedings before the Commissioner for the

assessment year 1974-75 3. Sri Babu, in our opinion, very rightly, submits that the

Board is in custody of a sum of Rupees two crores eight lakhs collected either as

contingency deposit or as balance amount remaining in the pool fund account

corresponding to the assessment years 1975 to 1981. We do not see any

justification for the Board withholding the payment of the aforesaid sum to the

state. Sri Babu prays for one months time for payment of this sum to the state. We

are of the view that this request of Sri Babu is fair and reasonable and we grant the

same. 4. Sri Hegde, in our opinion, very fairly and rightly, submits that the

respondents will not enforce the demands for the outstanding amounts for a period

of ten weeks from this day to enable the petitioner to obtain necessary certified

copies and certificate of fitness and move for stay before the Supreme Court. We

record this submission of Sri Hegde. In view of this submission of Sri Hegde, we do

not consider it necessary to say the operation of our order in respect of the

outstanding amounts. 5. We need hardly say that all payments made by the

petitioner to the respondents will be subject to the orders to be made by the

Supreme Court of India. 6. We dispose of the prayer of the petitioner for stay in the

above terms.