Introduction

• In this case the Supreme Court held that once a sale of goods takes place, the State becomes entitled to impose tax on sale or purchase of goods.
• For construction of the words "sale of goods", the Court is not necessarily required to fall upon the definition of sale of goods, as contained in the Sales of Goods Act, 1930 (SOGA).
• It has to be governed by its enlarged definition under Clause (29-A) to Article 366 of the Constitution of India, 1950.

Facts

• One company M/s. Swaroop Vegetables Products Industries Ltd owned a sugar mill.
• The company executed the deed of licence in favor of appellant. And appellant executed a performance guarantee to ensure performance of the said Deed of Licence.
• It was agreed between the parties that a major part of the licence fee would be paid in the shape of molasses.
• The appellant was held liable to pay trade tax for the assessment year 1987-88.
• This order was passed by the Assistant Commissioner, Trade Tax.
• The company filed an appeal against this order before the Deputy Commissioner.
• Deputy commissioner held that molasses having been supplied in lieu of rent, the same would not fall within the definition of ‘sale’ and it was a barter or exchange.
• Then the appeal was preferred by the respondent before the Trade Tax Tribunal.
• The tribunal dismissed the appeal and found the appeal is barred by limitation.
• Another appeal was also filed by the appellant against the order of Deputy commissioner that the Deputy Commissioner granted the benefit of his earlier order but in other respects, the appeal was dismissed
• This appeal was also dismissed by the Trade Tax Tribunal.
• A writ petition was filed by the Company questioning the validity of the order before the High Court. The Revenue also filed a revision petition, being Sales Tax before the High Court.
• The High court allowed the revision petition of Revenue. Hence the present appeal was filed by the appellant.
• The contention of the appellant was that the payment of "price" being an essential component of a ‘sale’, the arrangements entered into by and between the parties hereto, cannot be held to be a ‘sale’ within the meaning of the Uttar Pradesh Trade Tax Act, 1948?

Issues Involved

• Whether the adjustment of price of molasses from the amount of licence fee would amount to ‘sale’ within the meaning of Uttar Pradesh Trade Tax Act, 1948?

Observation

• The Supreme Court dismissed the appeal and held that in this case, the concept of goods is not in dispute. Molasses are indisputably goods. It can be transferred for a definite price.
• In terms of Section 2(h) of the U.P. Trade Tax Act, 1948, a ‘sale’ would mean a transfer of property in goods in any way otherwise than by way of a mortgage, hypothecation, charge or pledge for cash or deferred payment or other valuable consideration.
• Parties by mutual consent only have agreed to adjust the price of molasses supplied with the amount of licence fee. It was not a transaction by way of transfer of stock. It was also not a transfer by way of a mortgage or lease.
• The transactions between the parties are in effect and substance involve passing of monetary consideration. It would, thus, come within the purview of the expression "any other valuable consideration".
• Once an essential component of ‘sale’ takes place, Sales tax would, indisputably, be payable.
• It was, therefore, not correct to contend that the licence fees were being paid by the appellant by way of supply of molasses.
• The definition of 'sale', thus, is different from the provisions of the Sale of Goods Act, 1930.

Conclusion

• A transfer of the right to use any goods for any purpose either for cash or deferred payment or other valuable consideration, would come within the purview of the definition of ‘sale’ under the U.P. Trade Tax Act, 1948.