# STATE OF RAJASTHAN & ANR v. M/S. KARAM CHAND THAPPAR & BROS. LTD

- **Citation:** [1969] 1 S.C.R. 861
- **Court:** Supreme Court of India
- **Decided:** 1968-08-27
- **Bench:** J. C. Shah, V. Ramaswami, A. N. Grover
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-of-rajasthan-anr-v-m-s-karam-chand-thappar-bros-ltd-4532
- **Pages:** 8

## Headnote

D
Sales Tax-Sale-Ingredients of-Supply of coal at price fixed by
Colliery Control Order-If constitutes sale.
Soles Tax Laws Validation Act (7 of 1956)-Composite order dealing
with assessment year
1955-56-If could be split uo and validated upto
Seotember 6. 1955.
The respondent-assessee, had its head office at Calcutta and a branch
office at Jaipur and was registered as a 'dealer' under the Rajasthan Sales
Tax Act, 1954.
Under a contract with the Equitable Coal Ccmpany, the
assessee acquired monopoly rights to supply coal in Rajasthan and sold
coal as the agent of the Equitable Coal Company. Under an agreement
dated April 28, 1955 the assessee supplied coal to the State of Rajasthan.
The Sales Tax Officer, Jaipur, included in the turnover df the assessee in
the year 1955-56, the sales of coal to the State of Rajasthan.
In a writ petition filed by the assessee, the High Court held : '( 1) that
the supply of coal to the State of Rajasthan did not constitute sale as
the supply was controlled by a statutory order, namely the Colliery Control Order, 1945; and (2) that even if there was a sale it would be interstate sale, and even though the
assessee
was liable to pay sales tax in
respect of inter-State sale between April 1, 1955 and September 6, 1955
E
because of Sales Tax Laws Validation Act, 1956 the order of assessment
in the instant case was not valid, as it was a composite
order
for
the
entire assessment year 1955-56.
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In appeal to this Court,
HELD : (1) Under the Colliery Control Order, coal may be supplied
to a purchaser under a contract and the effect of the Control Order, was
only to super-impose upon the agreement between the parties the rate 1
fixed the Con~rol Order. Therefore in the present case, the four elements
necessary to render turnover from sale of goods liable to sales tax namely
(a) competency of parties, (b) mutual assent of the parties, (c) passing
of property in the goods supplied to the purchaser, and (d) payment or
promise of payment df price were present and the transaction would be
a sale of goods within the meaning of the Rajasthan Sales Tax Act. [864
F-H; 865 A, 866 G]
State of Madras v. Gannon
Dunkerley
&
Co.
(Madras)
Ltd.,
[1959] S.C.R. 379, Indian Steel & Wire Products Ltd. v. State of Madras,
21 S.T.C. 138 (S.C.) and Andhra SugC'rs Ltd, v. State of Andhra Pradesh
21 S.T.C. 212 (S.C.), followed.
New India Sugar Mills Ltd. v. Commissioner of Sales Tax,
Bihar,
[1963] Supp. 2 S.C.R. 459 on. which reliance was placed by the High
Court. has no application to the present case, because, the
condition
requiring mutual assent of the parties was not present in that case. [865 B.]
• (2) An order of assessment of sales tax challenged by a taX payer,
could be split up and dissected so as to uphold it insofar as it related to
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862
SIJPRF."'IE COURT REPORTS
[1969] I S.CR .
items ol :-ale v,:hich could he separated and taxed for
different
periods.
A
Therefore, a \vrit of 11u111da1nus \\·ould issue in the present case directing
the State not to realise sales-tax onlv in respect of transactions of
sale
which \Vere not taxable. that is. sales after Scptcrnhcr 6. 1955, 1867 F-Ci;
868 BJ
State of Ja111111u an1I Kasl1111ir v. Caltex (India) Ltd. 17 S.T.C.
612,
(S.C.) followed.
There is no inconsistency hetwcen the principle of lhe case of Ram
Narain Sons Ltd. v. Asst/. Commissioner of Sales Tax, [1955) 2 S.C.R.
483; 6 S.T.C. 627 on which respondent relied and that of the ca"' or
Caltex (/11dia) Ltd. [867 G-H)
OV!L APPELLATE Jt;RISDICTION : Civil Appeal No.
1364
of 1966.
Appeal from the judgment and order dated April 20, 1965
of the Rajasthan High ('nun in D.R. Civil Writ Petition No. 45
of 1959.
Niren De, Solicitor-Genera/ and K. Baldev Mehta, for the
appellants.
S. P. Mehta, N. N. Bhallachariyya, Bh111·1w'li K111nari, and
J. B. Dadaclumji, for the respondent.
B. Sen, G. S. Chatterjee and P. K. Bose, for the intervener.

## Text

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STATE OF RAJASTHAN & ANR.
v.
M/S. KARAM CHAND THAPPAR & BROS. LTD.
August 27, 1968
B
[J. C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.J
D
Sales Tax-Sale-Ingredients of-Supply of coal at price fixed by
Colliery Control Order-If constitutes sale.
Soles Tax Laws Validation Act (7 of 1956)-Composite order dealing
with assessment year
1955-56-If could be split uo and validated upto
Seotember 6. 1955.
The respondent-assessee, had its head office at Calcutta and a branch
office at Jaipur and was registered as a 'dealer' under the Rajasthan Sales
Tax Act, 1954.
Under a contract with the Equitable Coal Ccmpany, the
assessee acquired monopoly rights to supply coal in Rajasthan and sold
coal as the agent of the Equitable Coal Company. Under an agreement
dated April 28, 1955 the assessee supplied coal to the State of Rajasthan.
The Sales Tax Officer, Jaipur, included in the turnover df the assessee in
the year 1955-56, the sales of coal to the State of Rajasthan.
In a writ petition filed by the assessee, the High Court held : '( 1) that
the supply of coal to the State of Rajasthan did not constitute sale as
the supply was controlled by a statutory order, namely the Colliery Control Order, 1945; and (2) that even if there was a sale it would be interstate sale, and even though the
assessee
was liable to pay sales tax in
respect of inter-State sale between April 1, 1955 and September 6, 1955
E
because of Sales Tax Laws Validation Act, 1956 the order of assessment
in the instant case was not valid, as it was a composite
order
for
the
entire assessment year 1955-56.
F
G
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In appeal to this Court,
HELD : (1) Under the Colliery Control Order, coal may be supplied
to a purchaser under a contract and the effect of the Control Order, was
only to super-impose upon the agreement between the parties the rate 1
fixed the Con~rol Order. Therefore in the present case, the four elements
necessary to render turnover from sale of goods liable to sales tax namely
(a) competency of parties, (b) mutual assent of the parties, (c) passing
of property in the goods supplied to the purchaser, and (d) payment or
promise of payment df price were present and the transaction would be
a sale of goods within the meaning of the Rajasthan Sales Tax Act. [864
F-H; 865 A, 866 G]
State of Madras v. Gannon
Dunkerley
&
Co.
(Madras)
Ltd.,
[1959] S.C.R. 379, Indian Steel & Wire Products Ltd. v. State of Madras,
21 S.T.C. 138 (S.C.) and Andhra SugC'rs Ltd, v. State of Andhra Pradesh
21 S.T.C. 212 (S.C.), followed.
New India Sugar Mills Ltd. v. Commissioner of Sales Tax,
Bihar,
[1963] Supp. 2 S.C.R. 459 on. which reliance was placed by the High
Court. has no application to the present case, because, the
condition
requiring mutual assent of the parties was not present in that case. [865 B.]
• (2) An order of assessment of sales tax challenged by a taX payer,
could be split up and dissected so as to uphold it insofar as it related to
•
•
862
SIJPRF."'IE COURT REPORTS
[1969] I S.CR .
items ol :-ale v,:hich could he separated and taxed for
different
periods.
A
Therefore, a \vrit of 11u111da1nus \\·ould issue in the present case directing
the State not to realise sales-tax onlv in respect of transactions of
sale
which \Vere not taxable. that is. sales after Scptcrnhcr 6. 1955, 1867 F-Ci;
868 BJ
State of Ja111111u an1I Kasl1111ir v. Caltex (India) Ltd. 17 S.T.C.
612,
(S.C.) followed.
There is no inconsistency hetwcen the principle of lhe case of Ram
Narain Sons Ltd. v. Asst/. Commissioner of Sales Tax, [1955) 2 S.C.R.
483; 6 S.T.C. 627 on which respondent relied and that of the ca"' or
Caltex (/11dia) Ltd. [867 G-H)
OV!L APPELLATE Jt;RISDICTION : Civil Appeal No.
1364
of 1966.
Appeal from the judgment and order dated April 20, 1965
of the Rajasthan High ('nun in D.R. Civil Writ Petition No. 45
of 1959.
Niren De, Solicitor-Genera/ and K. Baldev Mehta, for the
appellants.
S. P. Mehta, N. N. Bhallachariyya, Bh111·1w'li K111nari, and
J. B. Dadaclumji, for the respondent.
B. Sen, G. S. Chatterjee and P. K. Bose, for the intervener.
The Judgment of the Court was delivered by
Shah, J.
The respondent-hereinafter called 'the assessee'-
has its Head Office at Calcutta and a Branch Office at Jaipur,
and is registered as a "dealer" under the Rajasthan Sales
Tax
Act, 1954.
Under a contract dated September 2, 1948, with
the Equitable Coal Company the assessee acquired
monopoly
rights to supply on behalf of the collieries, coal in certain areas
including Rajasthan.
Under an agreement
dated
April
28,
1955, with the State of Rajasthan the assessee supplied coal to
the State Power Houses up to May 19, 1958. The Sales Tax
Officer, City Circle A, Jaipur, assessed to tax the turnover of
the assessee in the year 1955-56 from the supply of coal to the
State of Rajasthan.
The a~sessee then moved a petition under Art. 226 of
the
Constitution in the High Court of Rajasthan for a writ quashing
the order of assessment of the Sales Tax
Officer.
The
High
Court accepted the plea that the assessec was not a dealer within
the meaning of the Act and quashed the assessment.
In appeal
oy the State of Rajasthan against the order of the High Coun,
this Court held that the assesscc was a dealer within the meaning of the explanation to s. 2 ( f) of the Raja,than Sales. Tax
Act, since the assessee was an agent for sale for the Eqmtable
Coal Company which carried on the business of buying, selliig
or supplying goods in the State. But this Coun remitted the case
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RAJASTHAN V. K. C. THAPPAR (Shah, J.)
863·
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to the High Court for determination of certain other questions
which were not decided.
The High Court on remand held that there was no sale of
coal by the assessee to the State of Rajasthan; that in any event
the sales were inter-State sales from the collieries in other States
to the State of Rajasthan and that the Sales Tax Laws ValidaB
tion Act 7 of 1956 which validated the levy of sales tax on
inter-State sales till September 6, 1955, did
not
operate to
validate the order of assessment, which was a composite order
for the entire assessment year 1955-56. The High Court again
issued a writ quashing the assessment.
The State of Rajasthan
has appealed to this Court with certificate granted by the High
c
Court under Art. 133(1)(a) of the Constitution.
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In support of the appeal the Solicitor-General
urged
two·
contentions :-
\ 1) In relying upon the judgment of this Court in
New India Sugar Mills Ltd. v. Commissioner of Sales
Tax, Bihar(') in support of the conclusion that there was
no sale of coal within the meaning of Rajasthan Sales
Tax Act, the High Court seriously erred; and
(2) that the order of assessment made by the
Sales Tax Officer for the financial year 1955-56 is not
liable to be quashed insofar as it relates to the period
April 1, 1955, to September 6, 1955, in view of the
provisions of the Sales Tax Laws Validation Act 7 of
1956.
Under the agreement dated September 2, 1948, with the
Equitable Coal Company Ltd. the assessee was granted a monopoly right to supply coal in certain areas including the territory
of Ra.iasthan.
The assessee was to arrange despatches to cover
the quantities of coal reserved on its account by the Equitable
Coal Company. This Court in the judgment dated October 9,
1964, held that the assessee was an agent of the Equitable CoaT
Company and sold coal on behalf of that Company. Under the
agreement dated April 28, 1955, with His Highness the Rajpramukh of the State of Rajasthan the assessee was to supply
coal to the Rajasthan Government in accordance with the specifications and on the terms set out therein. The assessee undertook thereby to supply coal at controlled rates F.O.R. Colliery
and to arrange all the transport and safe delivery of coal at
Jaipur Power House.
At all times material in this appeal,
supply of coal
was
governed by the Colliery Control Order, 1945. By cl. 4 of the
Qrder, the Central Government was competent to fix the prices;
(1) ['1963] Supp. 2 S.C.R. 459.
•
964
SlJPREMF. COURT REPORTS
[1969) J S.C.R.
at which coal may be sold by colliery owners.
By cl. 5 the
colliery owners and their agents were prohibited from selling or
agreeing to sell or offering to sell coal at a price different from
the price fixed in that behalf under cl. 4.
By cl. 6 it was provided that where a colliery owner has signified to the
Deputy
Coal Controller (Distribution) in writing his willingness to sell
<lirect to consumers and an allotment is made
by the
Deputy
Coal Controller to a consumer with his consent for such direct
sale, the coal shall he delivered to the consumer at the price
fixed under cl. 4, and no commission or other charges c\cept
brokerage shall he paid in addition.
By cl. 8 the Central Government was authorised to issue from time to time such directions as it thought fit to any colliery owner regulating the disposal
of his stocks of coal or of the expected output of coal in the
colliery during any period, including directions a' to the grade,
size and quantity of coal which may be disposed of and persons
or class or description of persons to whom coal shall or shall
not be disposed of, the order of priority to be observed in ~;uch
disposal, and the stocking of coal on
Government
account.
Clause 12-E provided that no person shall acquire or purcha.>c
or agree to acquire or purchase any coal from a colliery, and
no colliery owner or his agent shall despatch or agree to despatch or transport any coal from the colliery except under the
authoritv and in accordance with the conditions contained in a
general 'or ,5pccial authority of the Central Government.
Under the Colliery Control Order, coal may
be
supplied
under directions issued by the Central Government upon
the
colliery owner to any person without an agreement express or
implied between the colliery owner and such other person : coal
may also be supplied under a contract between the colliery to
a purchaser at the price fixed by the Central Government.
In
the present case there was between the State of Rajasthan and
the assessee acting as an agent of the Equitable Coal Company
an agreement to sell coal.
The price
chargeable
was
fixed
under the Colliery Control Order.
The effect of the Control
Order was only to superimpose upon the agreement between the
parties the rate fixed under the Order.
But on that account it
cannot be said that the relation between the supplier and
the
person to whom the coal was supplied was not contractual. The
contract between the parties was only modified by the statutory
provisions.
This Court in State of Madras v. Gannon D11nkerley & Co.
(Madras) l,t</.( 1 ) held that to render turnover from sale of
goods liable to tax under the Sales Tax Acts,
there must be
concurrence of four elements in the sale--( I) parties competent to contract; (2) mutual assent of the parties;
(3)
thiag
(I) [1959] S.C.R. 379.
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RAJASTHAN V. K. C. THAPPAR (Shah, J.)
S6S
absolute or general, property in which is trans~erred from. the
sell.er to the buyer; and ( 4) price in money. paid or ;iro_rm~ed.
In the present case all the four elements exist.
The prmc1ple
of the decision of this Court in Mis New India Sugar Mills Ltd's
case(') which the High Court regarded as
decisive
has
n.o
application to this. case.
In that case it was foun~. that co'.1-ditions (1), (3) & (4) were present, but not condition (2), smce
there was no mutual assent between the
parties.
The facts
found in that case were that the States in need of sugar intimated to the Sugar Controller from time to time their requirements, and similarly the factory owners
sent
to
the Sugar
Controller statements of stock of sugar held by them.
The
Sugar Controller then made allotments taking into consideration
the supply position and the requirements of
the States.
The
Sugar Controller then intimated the allotment order to the factory owner, directing him to supply sugar to the State Governll'ents in accordance with the despatch
instructions
received
from the State Government. A copy of the allotment order was
also sent to the State Governments concerned,
on receipt of
which the competent authority of the State Govermnent sent to
the factory concerned instructions about. the destination to which
the sugar was to be despatched and the quantity of sugar to be
despatched.
On these facts it was held that there was no contractual relation between the State Government and the factory
owner.
The Sugar Controller directed the
manufacturer
of
sugar to supply sugar to the State Government and the factory
owner complied with the direction.
This Court in two recent
judgments has held that when goods, supply of which is
controlled by statutory orders, are delivered pursuant to contract of
sale, the principle of the case in Mis New India Sugar Mills
Ltd.'s case(') has no application.
In the Indian Steel & Wire
Products Ltd. v. The State of Madras('), the facts were these :
sale and purchase of iron and steel products was at the relevant
time controlled by the Iron and Steel (Control of Production
and Distribution) Order, 1941. An intending purchaser of iron
or steel goods placed his order for supply of materials through
the Iron & Steel Controller, agreeing that the order was placed
subject to the provisions of the schedule regarding prices
etc.
and the terms and conditions of business (including payment)
of the registered producer on whom the order would be placed
by the Iron & Steel Controller.
The indent was forwarded to
.the producer for delivery of the material in accordance with any
general or special directions of the Iron & Steel Controller. The
works order issued by the producer provided that all
orders
booked were subject to his terms of business and general understanding in force at the time of booking the orders and despat~h
"f goods. It was open to the producer to supply the goods
ordered at his convenience, and to fix the time and mode of
(1) [1963] Supp. 2. S.C.R. 459.
(2)
21 S. T.C. 138.
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86(;
SL'PREME COIJRT REPORTS
[ 1969] I S.C.R.
payment of the price of the goods supplied.
It was held
that
A
the transactions resulting in the supply of the steel products to
the purchaser amounted to sales and were liabie to sales tax.
In Andhra Sugars Ud. and Anr. v. The State oj
Andhra
Pradesh and Ors. ( 1 ), under the Andhra Pradesh Sugarcane
(Regulation of Supply and Purchase) Act, I 961, on the declaration of a factory zone for the purposes of supply of cane to a
factory during a particular crushing season, the occupier of the
factory was bound to purchase such quantity of cane grown in
!hat area and offered for sale to that factory as might be determined by the Cane Commissioner. The Act prohibited the cane
growers in a factory zone from supplying or selling cane to any
factory or other persons otherwise than in accordance with the
provisions of the Schedule to the Act.
Under the Rules framed
under that Act, the cane grower may within the period specified offer to supply cane grown in that area to the occupier of
the factory, and the occupier of the factory was bound to enter
into an agreement with the cane grower for the purchase of the
cane offered.
The prescribed agreement
provided
that
the
occupier of the factory agreed to buy and the cane !!rower agreed
to sell during the crushing season certain sugarcane crop grown
in the area, and at the minimum price notified by the Government from time to time, upon the terms and conditions
mentioned in the agreement.
Under the Act and the Rules framed
thereunder, the cane grower in the factory zone was free to make
or not to make an offer of sale o! cane to the occupier of the
factory.
But if he made an offer, the occupier of the
factory
was "9und to accept it.
The resulting agreement was recorded
in writing and was signed hy the parties.
The consent of the
occupier of the factory to the agreement, it was held, was free,
and in spite of statutory compulsion, the agreement was neither
void nor voidable.
Purchases of sugarcane
under the
agreement could. it was held, be taxed by the State Le~islature under
the Act enacted in exercise of the power conferred under Entry
54, List II, of Sch. VT! to the Constitution of India.
There was in the present case an agreement of sale between
the parties competent to contract and in pursuance of the agreement of sale. property in the goods supplied passed to the purchaser for price agreed to be paid. The transaction was. therefore. one of sale of goods within the meaninp. of the Rajasthan
Sales Tax Act.
Counsel for the assessec made no serious attempt to support
the iudrment of the 'High Court which was largely
inHuence<l
hy the decision in Mis New India SuRar Mi// ca<e(')-a cas•
founded on a djfferent principle
hut he contended that since
fl) 21 STC. 212.
(1) [19631Supp.2 S.C.R. 459.
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RAJASTHAN v. K. C. THAPPAR (Shah, J.)
867
the sales tax authorities had made assessment for
the
entire
period April 1, 1955 to March 31, 1956, even if it be held that
upon enactment of the Sales Tax Laws Validation Act 7 of
1956 the assessee was liable to pay tax in respect of the transactio~s of sale whic]). admittedly took place in the course of interState trade or commerce, during the period April 1, 1955
to
September 6, 1955, the order of assessment could not be upheld
in part.
Counsel placed reliance upon two judgments of this
Court in Ram Narain Sons Ltd. v. Assistant Commissioner of
Sales Tax and Others('); and Provincial Government of
Madras v. J. S. Basappa( 2 ). In Ram· Narain Sons Ltd.'s case(')
it was held by this Court that when an assessment cornsists of a
single undivided sum in respect of the totality of the property
treated . as assessable, inclusion in it of certain items of property
which by virtue of a provision of law were expressly exempted
from taxation renders the assessment invalid in toto, and therefore a composite assessment relating to the pre-Constitution as
well as the post-Constitution periods of which the part relating
to the post-Constitution period was invalid in its entirety and
was liable to be set aside.
The principle of that case was
reiterated in J. S. Basappd s case(').
In the present case the Solicitor-Genera! submits that on the
finding recorded by this Court in the appeal filed in the earlier
judgment it was held that the owner of the goods was the Equitable Coal Company and the assessee was merely the agent of
that Company and coal was supplied in the course of inter-State
sales. The State was entitled to levy tax for the period April l,
1955 to September 6, 1955 both days inclusive, by virtue of
the provisions of the Sales Tax Laws Validation Act 7 of 1956,
and the order of assessment levying tax on the turnover for that
period could be upheld.
Counsel relied upon the judgment of this Court in State of
Jammu and Kashmir v. Caltex (India) Ltd.( 3 ) in which this
Court directed that the order of assessment for the period January 1, 1955 to May, 1959 challenged by the tax payer could be
split up and dissected so as to uphold it insofar as it related to
items of sale which could be separated and taxed for different
periods, and a writ of mandamus would issue directing the State
not to realize sales tax only in respect of transactions of sale
which were not taxable.
There is no inconsistency between the
principles of the cases of Ram Narain Sons Ltd.(') and Caltex
(India) Ltd.(2 )
In Ram Narain Sons Ltd.'s case(') this Court,
after declaring that the assessment was invalid, directed that
the matter will go back to the Assessment Officer for rea~sessment of the appellants in accordance with law : see pp.
(I) 6 S.T.C. 627.
(2)
15 S.T.C. 141.
(l) 17 S.T.C. 612.
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868
SUPREME COURT REPORTS
[1969] i S.C.R.
638 & 643.
In Caltex (India) Ltd.'s case(') the Court issued
a writ of mandamus prohibiting the State from realizing
sales
tax with regard to the transactions on which the sales tax was
not validated by the Sales Tax Laws
Validation
Act.
1956.
The effect of the two orders is the same.
A writ of mandamus will issue directing the State of Rajasthan not to realize sales tax except with regard lo the transactions of sale between the period April I, 1955 and
September
6, 1955, both days inclusive. The Sales Tax Officer who is also
one of the appellants in this case will make appropriate modifications in the order of assessment in the light of the judgment
of this Court.
In view of the divided success, there will l:Je no
order as to costs throughout.
V.P.S.
Appeal allowed in part.
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(I) 17 S.T.C. 612. (S.C.)
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