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Judgment
R.S. Garg, J.
This order shall also dispose of M.C.C. No. 774/86 M/s Bharat Aluminium Co. Ltd. v. Commissioner of Sales Tax as both the references arise out of the common order dated 5.12.79 passed in Appeal NoS. 334-V/77 and 335-V/77 decided by the Board of Revenue. These references are u/s 44 (1) of the M.P. General Sales Tax Act, 1958;
The brief facts leading to the reference are the applicant is a Govt. of India undertaking and was assessed to tax under the M.P. General Sales Tax Act, 1958 and the Central Sale Tax Act, 1956. The applicant is engaged in the business of manufacture of alumina. In September, 1972, the applicant received 1000 metric tonnes of alumina hydrate from M/s Hindalco which was to be repaid within a period of 6 months in the form of clacined alumina in equivalent weight of hydrate. According to the applicant he had made a security deposit with M/s Hindalco RS. 800/- per metric tonnes of alumina hydrate. During the assessment year 73-74, the applicant returned 652 metric tonnes of calcined alumina for which a refund of RS. 1244/- per metric tonne was given by M/s Hindalco. The applicant contended that the transaction in fact was a ''barter'' while the Asstt. Commissioner of Sales Tax has wrongly considered it to be a sale. Being aggrieved by the order of the Asstt. Commissioner of Sales Tax an appeal was taken before the Dy. Commissioner of Sales Tax, which was dismissed. In the second appeal it was contended by the Applicant that the transaction was in fact in the nature of ''barter'' and was not a sale as defined either under the provisions of the Sale of Goods Act 1930 or u/s 2 (n) of the M.P. General Sales Tax Act, 1958. The Board of Revenue held that it was not a case of barter but in fact as the price element was introduced, it was a case of sale. The Board of Revenue however was of the opinion that as the applicant was under an impression that it was a case of barter, an opportunity should be given to him to produce ''C'' form in respect of the above inter-state sales and 6 months period was granted to them. Being aggreived by the order passed by the Board of Revenue, an application u/s 44 of the State Act for reference to this Court was made. The Board of Revenue feeling satisfied that the matter raises question of law has made this reference to the Court on the following question:
Whether in the facts and circumstances of the case, the Board of Revenue was justified that the transaction in terms of agreement dated 14.3.72 between the applicant and M/s Hindalco was in the nature of sale and not barter ?
Learned counsel appearing for the petitioner contended that the Board of Revenue was wrong in holding that it was a case of sale and not barter. He also submitted that the agreement under which the petitioner was to receive the goods and was to supply back would show that it was a case of barter and not sale. He also submitted that under the agreement title did not pass to the petitioner, therefore, the transaction could not be regarded to be a ''sale''. On the other hand, Shri Jha learned G.A. submitted that on a true construction, the agreement would show that it is a case of sale because the petitioner was called upon to supply something other than what was received by him and it was not a case of barter. He also submitted that on the date when the petitioner received the goods, he also acquired title to the goodS.
For proper appreciation of the rival contentions it is necessary to refer to the terms of the agreement which are are under :-
Where as Hindalco has agreed to supply on loan 1000 metric tonnes of alumina hydrate to Balco and whereas Balco is desirous of taking the said supply on loan, this indenture presents witness that the said loan shall be made on the following terms and conditions :-
Hindalco shall loan to Balco 1000 metric tonnes of alumina hydrate and this shall be repaid by Balco by the middle of 1973 in the shape of calcined alumina in equivalent weight of hydrate. The rate of repayment of loan shall be subject to the condition that Korba Alumina Plant of Balco commences production from 1st December, 72 failing which the date will be extended but not later than 31st Dec. 1973. The alumina hydrate shall be dispatched by Hindalco from Renukoot to Korba on ''freight to pay'' basis and the freight charges thereof shall be borne by Balco.
Thetransit risk from Renukoot to Korba store house shall be covered by Balco. Balco will give security deposit to Hindalco at the rate of RS. 800/- per metric tones of alumina hydrate on dry basiS. This security deposit will carry on interest.
The security deposit mentioned in para 8 above will be refunded by Hindalco to Balco on receipt of calcined alumina by Hindalco, RS. 1244/- per metric tonne.
Relying upon the Commissioner of I.T. v. M.G. Stores (1), the counsel for the petitioner contended that the presence of money consideration is an essential element in a sale. If the consideration is not money but some other valuable consideration it may be an exchange or barter but not a sale. According to him both under the sale of Goods Act and the Transfer of Property Act, sale is a transaction of transfer of property in the goods or immovable property and for a money consideration. To out mind this authority does not help the petitioner because ''sale'' is defined under the provisions of M.P. General Sales Tax Act as under :-
S. 2 (n) - ''sales'' with all its grammatical variations and cognate expressions means any transfer of property in goods for cash or deferred payment or for other valuable consideration and includes a transfer of property in goods involved in the supply of distribution of goods by a society or club or any association to its members, but does not include a mortgage, hypothecation charge or pledge, and the word ''purchase'' shall he construed accordingly :-
Explanation I. (........)
Explanation II.-(a) Notwithstanding anything contained in the Indian Sale of Goods Act 1930(III of 1930). a sale or purchase of goods shall be deemed, for the purposes of this Act. to have taken place in the Stale where over the contract of sale or purchase might have been made, if the goods are within the Stale -
(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: and
(b) where there is a single contract of sale or purchase of goods situated at more place 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;
According to this definition any transfer of property in goods for cash or deferred payment or for other valuable consideration including a transfer of property in goods involved in the supply of distribution of goods would amount to a sale. The concept of sale as given in S. 4 of Sale of Goods Act. would not be applicable to M.P. General Sales Tax Act, 1958. The Supreme Court while considering the difference between the exchange and barter held as under :-
The definition of exchange in S-118 of the Transfer of Property Act is not limited to immovable property but it extends also to barter of goodS. It is clear therefore that both under the Sale of Goods Act and the Transfer of Property Act, sale is a transfer of property in the goods or of the ownership in immovable property for a money consideration. But in exchange there is a reciprocal transfer of interest in the immovable property, the corresponding transfer of interest in the movable property being denoted by the words ''barter.'' The difference between a sale and an exchange is this, that in the former the price is paid is money, whilst in the latter it is paid in goods by way of barter.
In a sale the price is paid in money while in case of exchange it is paid in goods by way of barter. In the instant case the applicant/Company was to receive 1000 metric tones of alumina hydrate and it was to be repaid in the shape of clacined alumina in equivalent weight of hydrate. It is not in dispute that 1000 metric tones of alumina hydrate is equivalent of 652 metric tones of calcined alumina. The petitioner/Company was to give security deposit to M/s Hindalco @ RS. 800/- per metric tonne of alumina hydrate on dry basiS. This security deposit was to be refunded by M/s Hindaco to the applicant on receipt of claimed alumina @ RS. 1244/- per metric tonne. As observed by the Supreme Court the only difference between a sale and an exchange is that in the former the price is paid in money whilst in the latter it is paid in goods by way of barter. In the instant case the applicant was to receive alumina hydrate and was not to repay the loan by giving alumina hydrate and was called upon to return claimed alumina in equivalent weight of hydrate. The price of the 2 items is different. The items are also different. It cannot therefore be held that the petitioner was to receive loan of 1000/- metric tones of alumina hydrate and was required to repay the same, but in fact the petitioner was called upon to supply claimed alumina in equivalent weight of hydrate. This authority therefore does not help the petitioner, but on the other hand it clearly lays down that even in a barter price is to be paid in goodS.
In the matter of State of Tamilnadu v. Anandam (1), the Supreme Court held that the Court has to find out the primary object of the transaction and intention of the partieS. The Supreme Court has held as under :-
The primary difference between a contract for work of service and a contract for sale is that in the former there is in the person performing or rendering service no property in the thing produced as a while, notwithstanding that a part or even the while of the material used by him may have been his properly. Where the finished product supplied to a particular customer is not a commercial commodity in the sense that it cannot be sold in the market to any other person, the transaction is only a works contract.
The Supreme Court further held that in each case the nature of the contract and the transaction must be found out and this is possible only when the intention of the parties is found.
From the agreement it is clear that alumina hydrate was to be received by the petitioner from Hindalco and was to be supplied back in form of claimed alumina. The goods so returned are different. The value of claimed alumina is RS. 1244/- per metric tonne while the security deposit made for alumina hydrate was @ RS. 800/- per metric tonne. The prices are different and the goods are not similar. Under these circumstances it cannot be held that the petitioner received the goods as a loan. In effect and substance the property in goods passed for the price in favour of the petitioner though, the agreement between the parties was termed as a loan agreement and the price was termed as the security. The petitioners in fact became the owners of the property the day they receive it. If the agreement entered into between the parties was not honoured by the petitioner, then M/s Hindalco at best could forfeit the alleged security which was in fact the price of goodS. We have no hesitation in holding that the transaction between the parties was a sale.
The balance-sheet of the applicant/company for the year 1973-74 shows that the petitioner/company was also selling claimed alumina and alumina hydrate in the open market. It is not the case of the applicant that the goods so received from M/s Hindalco were kept separately and had undergone particular chemical change and the very same goods were returned back to M/s Hindalco. The agreement between the parties may be called by any name, but it prima facie shows that it is a case of sale. If the petitioner was not to return the goods in either of the forms, M/s Hindalco could only forfeit the security deposit. According to the agreement the said security deposit was to be refunded by Hindalco to the petitioner only on receipt of claimed alumina. The petitioner was not returning the same items but was supplying different material. The amount of alleged security was to be adjusted when the petitioner was to supply claimed alumina. This conclusively shows that the petitioner received alumina hydrate @ RS. 800/-per matric tonne and were selling claimed alumina @ RS. 1244/- per matric tonne. The Board of Revenue, in our opinion, was not wrong, in holding that the agreement between the parties showing that it was a case of loan, was in fact a sale.
We answer the question referred to us in affirmative in favour of the revenue and against the assessee.