# BHOPAL SUGAR INDUSTRIES LTD. ~IADHYA PRADESH, AND ANOTHER v. 4tU D. B. DUBE, SALES TAX OFFICER, BHOPAL REGION, BHOPAL AND ANOTHER

- **Citation:** [1964] 1 S.C.R. 481
- **Court:** Supreme Court of India
- **Decided:** 1964
- **Bench:** B. P. Sinha, P. B. Gajendiu.Gadkar, K N. W Anchoo, K. C. Das Gupta, J C. Shah
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/bhopal-sugar-industries-ltd-iadhya-pradesh-and-another-v-4tu-d-b-dube-sales-tax-2915
- **Pages:** 7

## Headnote

Sal~· Tax-Oon8umption by Beller-Tax on aak of good.sLe~islrufre competence-Government of India Act, 1935 (26 and
:!I; Geo. 5, Oh. 42), Sch. 7, Entry 54, List II-Madhya Pradesh
Sales of Mo!or Spirit and Lubricant• Taxation Act, 1957 (M. P.
4 of 1%8), 88. 2 (l), 3.
The first petitioner, a company, manufacturc1 sugar and
also sells motor spirit, high speed diese 1 oii and lu.bricants and
maintains a petroleum pump in the State of Madhya Pradesh.
_In the assessment proceedings in respect of sales of rr.iotor
spirit and diesel oil, the petitioner was sought to be assessed
in respect of petroleum and oil consumed by the petitioner for
its own motor vchichs out of the stock held/by it. The
petitioner challenged that part of the assessment on the ground1
that the definition of "retail sale" by s. 2 (1) of the Act which
seeks to render consumption by the owner of motor spirit
. liable to be taxed by virtue of s. 3 of the Ac:t is beyond the
legislative competence of the State and that the unconstitu·
tional levy infringes the fundamental rights of the petitioner
under Art. 19(l)(f) and(~) of the Constitution of India.
Held, that a sale for the purpose of entry "Tax on the sale
of goods" requires the concurrence of four clements (1) partico
competent to contract; (2) mutual assent; (3) a thing, the
absolute or general property in which is transferred from the
seller to the buyer; ond (4) a prfr.c in money paid or promised;
and tha.t the transaction which does not conform to the traditional concept of sale cannot be regarded as one within the
co1npetence of the State Legislature to tax.
The State of Madra/ v. Gannon Dunkerky & Oo.
(Madras) Ltd., [1959) S. C. -R. 379, referred to.
Ifft
D11...b.t, 21.
1961
BJi.fial s.,.,
'°""'";,, Lli.
.,
DttN, Sa/11 7 a
Offi«•
.u.~. J.
482 SUPREl\fE COURT R[PORTS [1964] VOL.
Htld, further, that b'· s. 2(1) the normal concept of sale
is sought to be rr.Iarged by bringing in the comumption by the
owner of the goods in which he
deal~ v.·hich "'all not a ccaale1
within the meaning of Entry 54, List II, Sch. 7 of the Governrrent of Jndia Act, 1935, and therefore, the order of the Salct
1'ax OHicr.r which \\'as fr>11nded on an ultra vim proviaion
~·Cl.! it~ctf unconstitutional and could not be sustained.
Omr.1xAL Jc;msnrrnox : Pelition :\o. Soi of
19111.
Petition under Art. 32 of the Constitution of
lr.dia for the cnforcem~nt of Fundamental Rights.
S. T. Deaai, J. B. Dadacha11ji, 0. C. l/ atliur
and l!uvinder Narain, for the petitioners.
B. Sen, K. L. Hiithi and /. Y. Shroff, for the
r~spondrnts.
I 962. December 21.
The .Judgment of the
Court \1 a,- delivered by
SHAil, ].-Bhopal Sug~r Industries Ltd. (the
first petitioner) is a public limited Company incorporated under the lndiau Companies Act, l!ll:I, and
the second peti~ioner is :i. shareholder and a Director
of the Cc>inpany.
The Company is a manufacturer
of sugar and owns a fleet of motor trucks and othrr
motor vehiclrs. The Company also carries on the
busin!'Ss 0f sdling motor spirit, J.igh speed diesel oil,
and l1Jbriraut~ and maintains a ·petroleum pump at
Schore j,, the State 0f Madhya Pradesh. Between
April I, l!l:)g, and March 31, 1960, the Company
used~ for its motor vehicles 8908 g2.llons of petroleum,
40719 gallons of high speed diesel oil and lubricants
of th~ value of Rs. 2,45:!.47 nP. The first respondent
who is the assessing authority under the Madhya
Pradesh
Sales of Motor Spirit. and Lubricants
Taxation !\ct, 4 of 19.51\. assessed the Company to
pay sales ta :t in respect of motor-spirit aod lubricants
'
l S.C.R. SUPREME COURT REPORTS
483
used by the Company out of the stock held by it for
its own vehicles, because in his view such consump·
tion amounted to sales within the meaning of the Act.
By this petition under Art. 32 of the Constitution it is claimed that the definition of 'retail sale' in
s. 2 ( l) of the Act which seeks to render consumption
by the owner of motor-spirit liable to tax under the
Act by virtue of s. 3 is beyond the comp

## Text

1 S.C.R.
SUPREME COURT REPORTS
BHOPAL SUGAR INDUSTRIES LTD.
~IADHYA PRADESH, AND ANOTHER
v.
4tU
D. B. DUBE, SALES TAX OFFICER,
BHOPAL REGION, BHOPAL AND ANOTHER
(B. P. SINHA, c. ]., P. B. GAJENDIU.GADKAR,
K N. W ANCHOO, K. C. DAS GUPTA and
J C. SHAH,. JJ.)
Sal~· Tax-Oon8umption by Beller-Tax on aak of good.sLe~islrufre competence-Government of India Act, 1935 (26 and
:!I; Geo. 5, Oh. 42), Sch. 7, Entry 54, List II-Madhya Pradesh
Sales of Mo!or Spirit and Lubricant• Taxation Act, 1957 (M. P.
4 of 1%8), 88. 2 (l), 3.
The first petitioner, a company, manufacturc1 sugar and
also sells motor spirit, high speed diese 1 oii and lu.bricants and
maintains a petroleum pump in the State of Madhya Pradesh.
_In the assessment proceedings in respect of sales of rr.iotor
spirit and diesel oil, the petitioner was sought to be assessed
in respect of petroleum and oil consumed by the petitioner for
its own motor vchichs out of the stock held/by it. The
petitioner challenged that part of the assessment on the ground1
that the definition of "retail sale" by s. 2 (1) of the Act which
seeks to render consumption by the owner of motor spirit
. liable to be taxed by virtue of s. 3 of the Ac:t is beyond the
legislative competence of the State and that the unconstitu·
tional levy infringes the fundamental rights of the petitioner
under Art. 19(l)(f) and(~) of the Constitution of India.
Held, that a sale for the purpose of entry "Tax on the sale
of goods" requires the concurrence of four clements (1) partico
competent to contract; (2) mutual assent; (3) a thing, the
absolute or general property in which is transferred from the
seller to the buyer; ond (4) a prfr.c in money paid or promised;
and tha.t the transaction which does not conform to the traditional concept of sale cannot be regarded as one within the
co1npetence of the State Legislature to tax.
The State of Madra/ v. Gannon Dunkerky & Oo.
(Madras) Ltd., [1959) S. C. -R. 379, referred to.
Ifft
D11...b.t, 21.
1961
BJi.fial s.,.,
'°""'";,, Lli.
.,
DttN, Sa/11 7 a
Offi«•
.u.~. J.
482 SUPREl\fE COURT R[PORTS [1964] VOL.
Htld, further, that b'· s. 2(1) the normal concept of sale
is sought to be rr.Iarged by bringing in the comumption by the
owner of the goods in which he
deal~ v.·hich "'all not a ccaale1
within the meaning of Entry 54, List II, Sch. 7 of the Governrrent of Jndia Act, 1935, and therefore, the order of the Salct
1'ax OHicr.r which \\'as fr>11nded on an ultra vim proviaion
~·Cl.! it~ctf unconstitutional and could not be sustained.
Omr.1xAL Jc;msnrrnox : Pelition :\o. Soi of
19111.
Petition under Art. 32 of the Constitution of
lr.dia for the cnforcem~nt of Fundamental Rights.
S. T. Deaai, J. B. Dadacha11ji, 0. C. l/ atliur
and l!uvinder Narain, for the petitioners.
B. Sen, K. L. Hiithi and /. Y. Shroff, for the
r~spondrnts.
I 962. December 21.
The .Judgment of the
Court \1 a,- delivered by
SHAil, ].-Bhopal Sug~r Industries Ltd. (the
first petitioner) is a public limited Company incorporated under the lndiau Companies Act, l!ll:I, and
the second peti~ioner is :i. shareholder and a Director
of the Cc>inpany.
The Company is a manufacturer
of sugar and owns a fleet of motor trucks and othrr
motor vehiclrs. The Company also carries on the
busin!'Ss 0f sdling motor spirit, J.igh speed diesel oil,
and l1Jbriraut~ and maintains a ·petroleum pump at
Schore j,, the State 0f Madhya Pradesh. Between
April I, l!l:)g, and March 31, 1960, the Company
used~ for its motor vehicles 8908 g2.llons of petroleum,
40719 gallons of high speed diesel oil and lubricants
of th~ value of Rs. 2,45:!.47 nP. The first respondent
who is the assessing authority under the Madhya
Pradesh
Sales of Motor Spirit. and Lubricants
Taxation !\ct, 4 of 19.51\. assessed the Company to
pay sales ta :t in respect of motor-spirit aod lubricants
'
l S.C.R. SUPREME COURT REPORTS
483
used by the Company out of the stock held by it for
its own vehicles, because in his view such consump·
tion amounted to sales within the meaning of the Act.
By this petition under Art. 32 of the Constitution it is claimed that the definition of 'retail sale' in
s. 2 ( l) of the Act which seeks to render consumption
by the owner of motor-spirit liable to tax under the
Act by virtue of s. 3 is beyond the competence of the
State Legislature and hence void and the order of the
first respondent seeking to impose liability upon the
Company for payment of tax infringes the fundamental rights of the Company under Art.
19 (1) (f) and
(g) of the Constitution.
Section 2 (k) of the Madhya Pradesh Sales of
Motor Spirit and Lubricants Taxation Act defines a
'retail dealer'
as meaning "any person who, on
commission or otherwise, sells or keeps for sale motor
spirit or lubricant for the purpose of consumption by
the person by whom or on whose behalf it is or may ·
be purchased".
Section 2 (1) defines 'retail sale' as
meaning "a sale by a retail dealer of motor spirit or
lubricant to a person for the purpose of consumption
by the person by whom or on whose behalf it is or
may be purchased and includes the consumption by a
retail dealer himself or on his behalf of motor spirit
or lubricants sold to him for retail sale;" (The defini:
tion is followed by an explanation which is not
material for the purpose of this appeal.) Section 3
is the charging section. It provides that subject ta
the provisions of the Aet, there shall be levied on all
retail sales of motor spirit and lubricants effected
after the commencement of the Act, tax at the rates
specified in the table setout therein.
The Company is registered under s. 4 of the
Act as a retail dealer. Bys. 2 (1) consumption by a
retail dealer himself or on his own behalf of motor
spirit or lubricants sold to him for retail sale is included in the definition of 'retail sale'
Thereby tliC
1962
Bhopal Su1ar
l•""41ri#1 L".
v.
Ne, Salu
1~1111
O.frw
.sr.M,J.
IHI
BM{>oJ Sut"'
lrulw1rU1 L".
Y.
Dub1, Salis Ta1
Offirir
SMA, J.
484 SUPREME COUl<.T REPORTS [1964) VOL.
Legislature h3S attempted to enlarge the normal con·
cept of sale, and has included therein consumption
for his own purposes by the retail dealer of motor
spirit and lubricants so1d to him for retail sale, and
hy s. 3 such consumption is nude taxable as sale.
Bnt this Court held in 'l'he Sta.te of
.llridrr1.~ v. Um11ion Dunfrulcy & Co. (Jfolfm,q) Ltd. (1l. that the
txpression 'sale of goods' in Enrrv 48, List II, in Sch.
VII of the; Government of India Act, l!l!lii, has the
same meaning as in the Indian Sale of Goons Act,
1930, and therefore in a transaction of sale of goods
which is liable to tax thcr1· must be concurrence of
the following four elements. viz :
(I) Parties competent to contract:
('.?) mutual assl'nt;
(3) a thing. the absolute or general property in
which is tramfrrrcd from the seller to the
buyer; and
(-1) a price in mouey paid or promised.
A tramaction · which doe< not conform to this
tradition:il concept of s;dc cannot be regarded as one
in respect of which the State L~gi~laturc is competent
to enact an Act impo>ing
liabilit~ for payment of
tax.
It was observed at p. 407 :
"A power to enact a law with respect to tax on
sale of goods under Entry 18 must, to be intm
!'ire.<, be one relating in fact to sale of good<,
and
accordinqlv, the Provincial L('gi;lature
cannot, in the purported exercise of its power
to tax sak-s, tax tramactiom which are not sale<
bv merely enactin~ that thev shall be deemed
to be sales."
In Omman D•mkerley ,f· Company's CtJ"" (1 1,
this C.ourt was called upon to comidcr whether in a
<I) [!9~9) 5.C.11.. S79.
l S.C.R.
!:iUPRE:\!E COURT REPORTS
485
building contract which is one, entire and indivisible,
there is sale of goods. It was held by the Court that
the Provincial Legislature was not competent under
Entry 48, List II, Sch. VII of the Government of
India Act, 1935, to impose tax op the supply of
materials· used in such a contract treating it as a sale.
The decision of the Court did not rest upon any
peculiar character of a building contract. It was
held on the larger ground canyassed in that case,
that the expression 'sale of goods' within the meaning
of relevant legislative entry had. the same connotation as 'sale of goods' in the Indian Sale of Goods
Act, 1930, and therefore the State Legislature bad
110 power· to enact legislation to levy tax under
Entry 48 of List II in respect of transactions which
were not of the nature of sales of g0ods strictly so call·
ed; and a building contract not being a transaction in
which there was a sale of materials bv the contractor
who constructed the building,
th~ State, .was not
competent to enact legislation to impose tax on the
supply of materials used in a building contract
treating it as a sale. It was therefore, held that the
definition of sale in the Madras General Sales Tax
Act IX of 19311 was to the extent of the extensfon
invalid.
In Ganoon Dunkerley & Company's Clise (1),
the validity of s. 2 (h) (ii) of the Madras General
Sales Tax ·Act, 1939, as amended by Act XXV
of 1947, in so far as it included goods included in a
works contract fell to be determined, in the light of
the competence of the Provincial Legislature under
Entry 48,
List II, in Seventh Schedule of the
Government of India Act, 1935. Under the Consti·
tution the
relevant entry
conferring legislative
power upon States to tax sale of goods in Entry 5t
.List II. As the scheme of division of legislative
power under the Constitution has remained unaltered,
the principle of Gannon Dunkerley's case (1), applies
(•l (19991 s. c. a. 379.
1962
JJ/wpal Sugar
I1uhu1ri.s Lit/,
••
Dube, Snlu Ta~
Offi"r
SW, J,
mz
B,..,,/ Suli•"'
ln1'rulrUI
J.
y,
D.61, ~Ju T ox
Offi"'
Mala, J.
4811
SUPREME COURT REPORTS [l!lll4) VOL.
in adjudging the validity of the provisions of the
Madhya Pradesh Act 4 of I !lii8.
Consumption by an owner of goods in which he
deals is therefore not a sale within the meanini? of
the Sale of Goods Act and therefore it is not 'sale of
goods' within the meaning of Entry ii4,
List II,
Sch. VII of the Constitution. The legislative power
for levying tax on sale of goods being restricted to
enacting legislation for
levying tax on transactions
which conform to the definition of sale of goods
within the meaning of the Indian Sale of Goods
Act, 1!)30, the extended definition which includes
consumption by a retail dealer himself of motor spirit
or lub.ricants sold to him for retail sale is beyond
the competence of the St~te Legislature.
But the
clause in the definition ins. 2 (I) "and includes the
consumption by a retail dealer himself or on his
behalf of motor spirit or lubricant sold to him for
retail sale" which is ultru vire" the State Legislature
because of Jack of competence under Entry 54 in
List II, Sch. VII of the Constitution is severable,
from the rest of the definition, and that clause alone
must be declared invalid.
The Sales Tax Oflicer has sought to impose
liability for payment of tax in rrspcct of motor
spirit and lubricants consum::d by the company for
its own vehicles rth·ing solely upon the definition in
s. 2 (I) of the Act.
He has observed :
"The definition under the said section clarifies
the retail sale and consumption by a retail
dealer. Since the retail sale has been clearly
defined and
consumption
by self has been
included in the retail sale; I do not agree with
the
contention of dealer's counsel (that the
goods consumed for
the vehicles of the deal<'r
are not liable to tax under s. 3) and taxed on
I S.C.R.
SUPREME COURT REPORTS 487
the goods consnmed by the dealer, as above.''
The order of the Sales Tax Officer founded upon a
part of the statute which is ultm vires ca1inot be
sustained.
Counsel for the State of Madh)·a Pradesh
contends in this petition that the Company is not the
owner of the motor spirit and lubricants in which it
deal- : it is merf'ly a commission agent for sale in
respect of the goods supplied to it by the Caltex
(India) Ltd., and on that account ct)nsumption for
·his own purpose of goods belonging to his principal
amounts to sale within the meaning of the first part
of the definition of s. 2 (I) of the Act.
But the
Sales Tax· Officer has not decided the case under the
first part of the definition of 'retail sale' : he has
expressly founded his decision on the second part of
the- definition. In the circumstances we do not feel
called upon to express any opinion on the qm:stfon
whether the Company is liable to pay sales tax in
respect of goods consumed for its motor-vehicles
during the period in question. If it is competent to
the Sales Tax Officer to adopt a proceeding, to bring
to tax consumption of goods by the Company for its
own
vehicles, relying upon the first part of the
definition ·of 'retail sale' in s. 2 (1), because of the
terms of the agreement and· other relevant surrounding circumstances, it will be open to him to do so.
The petition will therefore be allowed and
a writ will issue declaring that the order of asse•sment made by the first respondent dated December 21l,
1960, in so far as it relates to levy of tax on motor
spirit and lubricants consumed during the period of
assessment for the vehicles of the Company is in valid.
The respondents will pay the costs of this petition to
the Company.
Peli tion allowtd.
1962
Bhopal S11~ 11r
/u:Jus1rit1 ltd.
v.
Duh1, Sale1 T °"
Offim
SittJli, J.