# STATE OF PUNJAB & ORS v. DEWAN'S MODERN BREWERIES LTD

- **Citation:** [1979] 3 S.C.R. 568
- **Court:** Supreme Court of India
- **Decided:** 1979-03-16
- **Bench:** N. L. Untwalia, R. S. Pathak
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-of-punjab-ors-v-dewan-s-modern-breweries-ltd-7650
- **Pages:** 4

## Headnote

Punjab General Sales Tax Act 1948-Sales effected on permits prescribing
price, quantity and the person to whom goods should be sold-Sales tax if j' /
could be levied-Tax levied retrospectively-Validity of-Concensuality if lacking where dealer did not know that tax was to be paid.
The sa]es tax authorities levied tax on the sales of liquor effected by the
respondent who was a whole saler in that commodity. Impugning the levy, the
respondent contended in the High Court that when it sold liquor against permits issued by the authorities there was no volition because the price and 1he
quantity of goods to be sold and the person to whom sold were all fixed and
therefore there "'as no sale in the eye of law which would attract tax. The
Department, on the other hand, contended that even when goods were sold
against a permit there was still an area of volition in that the parties could
decide on the quality and brand of liquor, the quantity, whether in bulk or in
instalments. the size of the package and so on, all of which showed that thf.re
was no restraint on the volition of the parties and therefore there was sale
which attracted tax.
A single judge of the High Court, following a decision of the Division
Bench of the same High Court in Jagatiit Distilling and Allied Industries Ltd.
v. The State [28 STC 709], quashed the order of assessment. A Division Bench
dismissed the appeal in limine.
Allowing the State's appeal
HELD : The transactions were sales exigible to tax. [571 G]
1. The decision of this Court in Vishnu Agencies (Pvt.) Ltd. v. Commercial
Tax Officer, [1978] 2 SCR 433 justifies imposition or sales tax on the sale
of liquor on permits. A conspectus of the provisions of the Punjab Excise Act
and the Rules shows that there is an area of agr~ement sufficient enough for
the parties to bring, by their volition, the impugned transctions within the
ambit of sales. [570 G; 571 A]
Vishnu Agencies (P) Ltd. etc. v. Commercial Tax Officer &
Ors.
Etc.,
[1978] 2 SCR 433; followed.
Jagatiit Distilling and Allied Industries Ltd. v. The State, 28 STC 709 overruled.
2 (a) It is well settled that sales tax could be imposed retrospectively.
TI1erefore, even though in this case the tax was levied retrospectively by a
validation ordinance, the respondent would be deemed to have entered the trade
and carried it on on the basis that it would be, liable to pay sales tax. [571 DJ
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PUNJAB v. MODERN BREWERIES ( Untwalia, !.)
5 6 9
'(b) Even assuming that the respondent carried on the trade thinking that
it would not be liable to pay sales tax, the area of concensuality still left for
the purpose of agreeing to the final terms of the transactions between the res·
pendent and its retail dealers was quite sufficient for the application of the
ntio of Vishnu Agencies. [571 F-G]
C1vn, APPELLATE JURISDICTION : Civil Appeal No. 2028
1974.
of
Appeal by Special Leave from the Order dated 6-9-1975 of the
'( Punjab aud Haryana High Court in LP.A. No. 516/73 .
.._..
Hardev Singh and R. S. Sodhi for the Appellants.
A
B
L. N. Sinha, P. P. Singh and E. C. Agarwala for the Respondent.
C

## Text

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568
STATE OF PUNJAB & ORS.
v.
DEWAN'S MODERN BREWERIES LTD.
March 16, 1979
[N. L. UNTWALIA AND R. S. PATHAK, JJ.J
Punjab General Sales Tax Act 1948-Sales effected on permits prescribing
price, quantity and the person to whom goods should be sold-Sales tax if j' /
could be levied-Tax levied retrospectively-Validity of-Concensuality if lacking where dealer did not know that tax was to be paid.
The sa]es tax authorities levied tax on the sales of liquor effected by the
respondent who was a whole saler in that commodity. Impugning the levy, the
respondent contended in the High Court that when it sold liquor against permits issued by the authorities there was no volition because the price and 1he
quantity of goods to be sold and the person to whom sold were all fixed and
therefore there "'as no sale in the eye of law which would attract tax. The
Department, on the other hand, contended that even when goods were sold
against a permit there was still an area of volition in that the parties could
decide on the quality and brand of liquor, the quantity, whether in bulk or in
instalments. the size of the package and so on, all of which showed that thf.re
was no restraint on the volition of the parties and therefore there was sale
which attracted tax.
A single judge of the High Court, following a decision of the Division
Bench of the same High Court in Jagatiit Distilling and Allied Industries Ltd.
v. The State [28 STC 709], quashed the order of assessment. A Division Bench
dismissed the appeal in limine.
Allowing the State's appeal
HELD : The transactions were sales exigible to tax. [571 G]
1. The decision of this Court in Vishnu Agencies (Pvt.) Ltd. v. Commercial
Tax Officer, [1978] 2 SCR 433 justifies imposition or sales tax on the sale
of liquor on permits. A conspectus of the provisions of the Punjab Excise Act
and the Rules shows that there is an area of agr~ement sufficient enough for
the parties to bring, by their volition, the impugned transctions within the
ambit of sales. [570 G; 571 A]
Vishnu Agencies (P) Ltd. etc. v. Commercial Tax Officer &
Ors.
Etc.,
[1978] 2 SCR 433; followed.
Jagatiit Distilling and Allied Industries Ltd. v. The State, 28 STC 709 overruled.
2 (a) It is well settled that sales tax could be imposed retrospectively.
TI1erefore, even though in this case the tax was levied retrospectively by a
validation ordinance, the respondent would be deemed to have entered the trade
and carried it on on the basis that it would be, liable to pay sales tax. [571 DJ
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PUNJAB v. MODERN BREWERIES ( Untwalia, !.)
5 6 9
'(b) Even assuming that the respondent carried on the trade thinking that
it would not be liable to pay sales tax, the area of concensuality still left for
the purpose of agreeing to the final terms of the transactions between the res·
pendent and its retail dealers was quite sufficient for the application of the
ntio of Vishnu Agencies. [571 F-G]
C1vn, APPELLATE JURISDICTION : Civil Appeal No. 2028
1974.
of
Appeal by Special Leave from the Order dated 6-9-1975 of the
'( Punjab aud Haryana High Court in LP.A. No. 516/73 .
.._..
Hardev Singh and R. S. Sodhi for the Appellants.
A
B
L. N. Sinha, P. P. Singh and E. C. Agarwala for the Respondent.
C
The Judgment of the Court was delivered by
UNTWALIA J.-The respondent-company in this appeal by special
1eave has a Distillery and Brewery at Jammu.
It maintains wholesale depots at various places in the State of Punjab, the main depot
being at Ludhiana. As a whole-seller it supplied Indian made foreign
liquor to permit holders on the permits issued by the respective Excise
and Taxation Officers, the competent authorities under the Punjab
Excise Act and the Rules framed thereunder.
Sales tax under the
Punjab General Sales Tax Act, 1948 was imposed in respect of the
sales aforesaid by an order of assessment dated the 30th November,
1972.
The respondent, thereupon filed a Writ Petition in the High
Court for the quashing of the said order and to restrain the appellants
from recovering the amount of Rs. 46,396.22 paise from the petitioner.
The main ground of attack on the imposition of sales tax was that the
-alleged sales were not sales in the eye of law as the respondent had
no volition in the distribution of liquor which was received from the
manufacturing concern at Jammu.
The prices were fixed by
the
·Competent authorities and the respondent had to charge the fixed price
from its retailers holding L-2, L-4, L-5 and L-10 licences.
The respondent company holds L-.1 licence which is meant for whole-sale
dealers.
The State contested the application and in its counter asserted that the excise trade like many other trades, or even more, had to
·be regulated and controlled by various Rules and Regulations
and
inspite of all the restrictions placed thereby an area was still left where
the whole-seller and the retail purchaser had to arrive at an agreement by their volition. According to the case of the appellants "the
·~uahty a.nd bra?d .of Foreign Liquor, lifting of the specified quantity
m b~lk liter or m mstalments, the size of packages (i.e. Bottles, pints,
<Or Nips) and mode of payment (cash or credit or part payment) and
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570
SUPREME COURT REPORTS
[1979] 3 s.c.R.
the prices, are the matters which are decided by the petitioner and'
his purchasers and there is no law or rule restricting the volition•
or liberty of the petitioner in this respect."
Following a Division Bench decision of the Punjab & Haryana High
Court in Jagatjit Distilling and Allied Industries Ltd. v. The State(')
a learned single Judge of that Court allowed the writ application and
quashed the assessment order.
A Letters Patent appeal from tl:1<i .srud
order was dismissed in !imine. Hence this appeal.
This case, in our opinion, is squarely covered by a recent decision
of this Court delivered by a Bench of seven Judges in Mjs Vishnu
Agencies (Pvt.) Ltd. etc. v. Commercial Tax Officer and others ei'c.(2)
The High Court in the case of Jagatjit Distilling and Allied Indu.stries
Ltd. (supra) had mainly relied upon two decision's of this Court to hold
that the transactions in that case were not sales.
The said decisions
are Mis New India Sugar Mills Ltd. v. Commissioner of Sales Tax,
Bihar(3) and Chittar Mal Narain Das v. Commissioner of Sales Tax
U.P.('). In the case of Vishnu Agencies (supra) the former case was
considered in paragraph 36 to 39 of A.I.R. volume at pages 463-464
and it was held that the view expressed in the majority judgment was not
good law and the one contained in the minority judgment was approved.
Chittar Mal's case was also considered in paragraph 44-45 at page 467
and it was distinguished on the ground that the said decision "can he
justified only on the view that clause 3 of the Wheat Procurement Order
envisages compulsory acquisition of wheat by the State Government
from the licensed dealer." But then the criticism in that case of the
Full Berich decision of the Allahabad High Court in Commr. Sales-tax,
U.P. v. Ram Bi/as Ram Gopal(') "which held while construing cl'.
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that so Ion!( as there was freedom to bargain in some areas the transaction could amount to a sale though effected under compulsion of a
Statute" wa~ not endorsed.
It is, therefore, plain that to that extent
Chittar Mal's case is also not good law.
The decision of the High
Court in Jagatjit's case is no longer goog law.
We liave examined the various relevant provisions of the Punjab
Excise Act and the Rules framed thereunder.
We find that an area
of agreement sufficient enough for the parties to cover by their volition to bring the transactions in question within the ambit of sales was
left in the field.
Broadly speaking the stand taken on behalf of the
(I) 28 S.T.C. 709
(2) [1978! 2 S.C.R.
433~A.I.R. 1978 S.C. 449.
(3) 14 S.T.C. 316~[1963] Suppl. 2 S.C.R. 459.
(4) 26 S.T.C. 344~[1971] 1 S.C.R. 671.
(5) A.LR. 1970 All. 518.
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PUNJAB v. MODERN BREWERIES (Untwalia, !.)
5 71
.appellants in their counter. was correct, except that in regard to the
fixation of price we assume in favour of
the respondent-companJ
that the price had been fixed, as usually it is so in the excise trade.
Even so the decision of this Court in Vishnu Agencies (supra) and
the various other previous decisions reviewed therein justifies in law
:the imposition of sales tax by the impugned order in question.
Mr. Lal Narayan Sinha tried to distinguish the decision in Vishnu
Agencies (supra) by pointing out that sales-tax for the period in
question was imposed by the Punjab General Sales Tax (Amendment
and Validation) Ordinance,
1972
which
was
promulgated on
the
15th November,
1972
with
retrospective
effect.
The
respondent-company, counsel submitted, cannot be said to have
entered into the trade and carried it on during this period by a
volition as it did not know that sales-tax would be chargeable for
this period and, therefore, it had not realised sales-tax from its
customers.
He drew our attention to paragraph 33 of the jud~ment
of this Court in Vishnu Agencies at page 461. In our opinion t11e
argument of the learned counsel is not sound and for two reasons.
Firstly, it is well settled and it was not disputed that sales-tax could
be impoied retrospectively.
That being so the respondent-company
will be deemed to have entered the trade and carri¢ it on the basis
that it would be liable to pay sales-tax. Secoudly, even assuming it
was not so, what has been pointed out in the begining of paragraph
'33 as a primary fact of willingness to trade in the commodity strictly
·On the terms of Control Orders is-only ohe of the reasons which led
to the decision that an area of agre0ment between the parties was
left to their consensus. In our opmion such a part of the area as the
one hinted at is not very important and does not form the whole and
sole basis of the conclusions arrived at in the case of Vishnu Agencies.
Even assuming in favour of the respondent-company that it did not
carry on the trade thinking that it would be liable to pay sales-tax, the
area of consensuality still left in the field for the purpose of agreeing
to the final terms of the transactions between the company and its
retail dealers was quite sufficient for the application of the ratio of
Vishnu Agencies. Having considered all that was submitted on behalf
of the respoudent-company we find that there is no escape from the
conclusion in this case that the iransactions in question were sales
exigible to sales-tax.
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For the reasons stated above, we allow this appeal with costs in
·this Court only.
The judgment and order of the High Court are set
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'P.B.R.
Appea~ allowed.