Citation Codes

Equivalent Citations

citation codes

Case Number

Tax Revision Case No. 32 of 1961

Judges

Satyanarayana Raju
Venkatesam, JJ.

Acts

Section 2(n) of the Ahdhra Pradesh General Sales Tax Act, VI of 1957, (hereinafter called "the Act")
Rule 5 (2) of the Hyderabad General Sales Tax Rules, 1950,
Rule 6 (i) of the Andhra Pradesh General Sales Tax Rules
Section 2(5) provides, as also Section 2(n),
Sales Tax Act

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Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

This revision arises from an order of the Sales Tax Appellate Tribunal, Hyderabad, in T.A. No. 467 of 1960. The assessee, Hyderabad Chemicals and Fertilizers Limited (a manufacturer of a sugar-cane fertilizer mixture), supplied the fertilizer mixture during the assessment year 1957–58 to, among others, Nizam Sugar Factory Limited (the sugar factory). The central dispute before the Tribunal and in this revision was the amount to be taken as the price per ton (and hence the turnover) of the fertilizer mixture supplied to the sugar factory.

The parties agreed that 1,300 tons of a specifically formulated fertilizer mixture would be supplied. The sugar factory supplied 1,000 tons of groundnut oil-cake (one ingredient) to be used in the mixture; the assessee purchased the other ingredients subject to price confirmation by the sugar factory. The assessee fixed the mixture price by reference to ingredient costs and manufacturing charges at Rs. 308-98 nP. per ton (ex-works Bodhan), but the bills showed a rebate credited for the value of the groundnut oil-cake (stated at Rs. 186-48 nP. per ton of mixture), and the sugar factory was to pay the balance (stated as Rs. 122-50 nP. per ton in some documents; the billed rate that appeared was Rs. 307-73 nP. per ton due to small variation in an ingredient price).

The assessee claimed that the value of groundnut oil-cake supplied by the sugar factory should be excluded from turnover (arguing there was no sale or transfer of the mixture or that the transaction was a works contract warranting allowances). The assessing authority and the Appellate Tribunal treated the price as an all-inclusive price (Rs. 308-98 / Rs. 307-73 per ton as billed) and included the full amount in the turnover. Aggrieved, the assessee filed this revision.

Legal Issues Presented

Whether the price (and consequently the turnover) of the fertilizer mixture supplied to the sugar factory is the all-inclusive price shown in the correspondence and bills (approximately Rs. 308-98 nP. / Rs. 307-73 nP. per ton), or only the net cash balance shown after crediting the value of groundnut oil-cake (Rs. 122-50 nP. per ton) — i.e., whether the value of the groundnut oil-cake supplied by the buyer should be excluded from turnover.

Arguments of the Parties

Assessee's Arguments

The assessee contended that the effective price to be taken for turnover was only Rs. 122-50 nP. per ton (the balance after deducting the groundnut oil-cake value), and thus turnover should exclude the value of the groundnut oil-cake supplied by the sugar factory.
Before the Appellate Tribunal the assessee also argued that the transactions were in the nature of a works contract and that allowances for labour (as provided under the rules) should be given; this position could not be substantiated before the Tribunal.
The assessee relied on a number of authorities (cases) to support contentions regarding the nature of the contract and treatment of supplied materials.
The assessee relied on a letter from the sugar factory (dated 25 March 1960) asserting that the groundnut oil-cake was supplied free of cost, that no bill was raised by the assessee for it, and that the property in the oil-cake vested in the sugar factory throughout (arguing the assessee acted only as bailee).
The counsel argued alternatively that the value credited might be treated as a discount for purposes of deduction under the rules.

Revenue / Respondent's Arguments (as found in the record)

The assessing authority and the Appellate Tribunal held that the agreed price for the fertilizer mixture was an all-inclusive price (Rs. 308-98 / billed Rs. 307-73 nP. per ton) covering ingredients and manufacturing charges, and that the bills (which showed a rebate for the groundnut oil-cake) nonetheless established the total consideration for sale.
The department did not accept the assessee's contention that there was no sale or transfer of property in the mixture or that there was a works contract; it treated the transaction as a sale with consideration partly in cash and partly in kind (the groundnut oil-cake supplied by the buyer).

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
State of Andhra Pradesh v. Sri Krishna Power Press, Vizianagaram [1960] 11 S.T.C. 498	Where a printer supplies finished printed stationery at an agreed price (having purchased or used materials), the transaction is a sale (not a works contract); the decisive test is whether the contract is for the sale of finished products. Distinction between sale and work & labour contract (per Benjamin's Treatise).	The Court applied the distinction to hold that because the sugar factory did not supply all or the principal materials, and the contract was for the finished fertilizer mixture, the transaction was a sale of the completed chattel rather than a works contract.
South India Metal Works and Rolling Mills v. The State of Madras [1960] 11 S.T.C. 507	Where a dealer remelts/repurposes customer-supplied scrap (with no purchase of the scrap), what is received by the customer in return is conversion work — not a sale; no element of purchase/sale of raw material by the dealer was found.	The Court distinguished this authority on facts, holding it was not applicable because in the present case the facts established a sale (the assessee had treated the supplied oil-cake as value in the transaction) rather than a pure conversion/bailment scenario.
H. Abdul Bakshi & Brothers v. The State of Andhra Pradesh [1960] 11 S.T.C. 526	Where a dealer purchases a material solely for consumption in the business (not as an item of trade), such purchases may not attract tax under the relevant rule (Rule 5(2) of the Hyderabad General Sales Tax Rules, 1950).	The decision was noted (on its own factual point) to show circumstances where purchased materials used in processing are treated differently, but it did not directly undermine the present conclusion that the transaction here was a sale of the finished mixture.
Guntur Tobaccos Ltd. v. Government of Andhra [1961] 12 S.T.C. 668	Where a contract for re-drying and packing entrusted tobacco by customers is indivisible and the dealer charged an-inclusive rate for re-drying and packing, the State cannot tax the supply of materials used in such an indivisible contract as though those materials were sold (following State of Madras v. Gannon Dunkerley & Co.).	The Court relied on this Full Bench principle to explain the distinction between indivisible works contracts and sales; it concluded, however, that the contract before it was a contract for the finished fertilizer mixture (sale) and not an indivisible works contract of that type.
State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. [1958] 9 S.T.C. 353	Where a contract is one, entire and indivisible, the State cannot treat the materials used in such a contract as sold for purposes of imposing sales tax; sale and agreement must relate to the same subject-matter.	The Court referred to this leading principle when discussing the nature of contracts and affirmed that, because the agreement here related to the sale of the finished mixture (not an indivisible works contract), the Gannon Dunkerley principle did not assist the assessee.
Vishweshwaradass Gokuldass v. The Government of Madras [1962] 13 S.T.C. 113	Even a barter or exchange can constitute a sale under the Sales Tax Act, provided there is a transfer of property in the goods in the course of trade or business.	The Court used this authority to support the proposition that receiving groundnut cake as part-payment (instead of cash) does not alter the character of the transaction as a sale of the entire fertilizer mixture.

Court's Reasoning and Analysis

The Court's analysis proceeded in a series of factual and legal steps, each grounded in documentary evidence and statutory definitions:

Factual examination: The Court closely examined the correspondence (letters of 30 March, 5 April, 12 April and subsequent communications) and the bills. These documents consistently showed that the parties agreed a cost/price for the fertilizer mixture computed from ingredient costs and manufacturing charges (Rs. 308-98 nP. per ton as computed; bills showed Rs. 307-73 nP. per ton due to minor variation). The bills also showed a rebate/credit for the value of the groundnut oil-cake supplied by the sugar factory.
Characterisation of the transaction: From the correspondence and billing practice the Court found that the assessee agreed to sell the fertilizer mixture at the all-inclusive price. The sugar factory's supply of groundnut oil-cake resulted in credit being given for its value; but that did not convert the nature of the agreement into something other than a sale.
Statutory definitions applied: The Court relied on Section 2(n) of the Andhra Pradesh General Sales Tax Act defining "sale" to include transfer of property in goods for cash, deferred payment or any other valuable consideration. It also relied on Section 2(5) defining "turnover" as the total amount set out in the bill of sale (or charged) as the consideration, including sums charged for anything done in respect of goods at or before delivery.
Integration of documents and statute: Because the bills set out the aggregate consideration (Rs. 307-73 per ton as billed), and because consideration may include "any other thing of value", the Court concluded the consideration comprised both cash and the value of the groundnut oil-cake supplied by the sugar factory. The mere act of deducting the value of the oil-cake in the bills did not alter the total amount set out as consideration.
Accounting evidence and absence of bailment proof: The Court noted that the assessee credited the value of the oil-cake to the sugar factory's account and debited it to raw materials, indicating the company treated it as a purchase rather than as an item held under bailment. There was no evidence that the oil-cake was treated as the assessee's property or that detailed accounts were rendered to the sugar factory for the oil-cake quantity. The letter from the sugar factory (dated 25 March 1960) asserting bailment was addressed after assessment and was treated as an opinion on law; the Court declined to rely on it.
Distinguishing authorities: The Court reviewed the cases cited by the assessee and explained why their facts or principles did not assist the assessee. Authorities holding that certain conversion or indivisible contracts are not sales were distinguished on facts (e.g., where the processor did not purchase materials from the customer). Authorities showing barter can amount to sale were applied to show part-payment in kind does not negate a sale.
Discount argument rejected: The assessee's argument that the deduction for the groundnut oil-cake was a discount under Rule 6(i) of the Andhra Pradesh General Sales Tax Rules was rejected. The Court interpreted "discount" (citing an ordinary dictionary meaning) as a deduction from price for prompt or advance payment or similar; the value credited for supplied oil-cake did not fit that meaning and therefore could not be treated as a deductible "discount" under the rule.
Conclusion of analysis: From the combined documentary record, statutory definitions, accounting treatment, and case law distinctions, the Court agreed with the Tribunal that the contract was for the sale of the finished fertilizer mixture at the all-inclusive price shown in the bills and that turnover must be computed on that basis.

Holding and Implications

DISMISSED WITH COSTS

Holding:

The revision is dismissed. The Appellate Tribunal's conclusion that the price of the fertilizer mixture is an all-inclusive price (reflected in the bills at approximately Rs. 307-73 / Rs. 308-98 nP. per ton) is affirmed. The turnover must be calculated on the aggregate value set out in the bills, which includes the value of the groundnut oil-cake supplied by the sugar factory as part of the consideration.
The assessee's alternative contentions — that the transaction was a works contract, that the value credited was a discount, or that the arrangement amounted to bailment — were rejected.

Direct consequences and implications:

The assessee remains liable for sales tax computed on the full turnover as determined by the bills (i.e., the all-inclusive per-ton price), and the Tribunal's order is upheld.
The revision was dismissed with costs; the order records Advocate's fee of Rs. 100. No new legal precedent was created by this opinion — the Court applied existing statutory definitions and established authorities to the facts of the case.

This summary is limited to information expressly contained in the provided opinion and does not introduce factual or legal materials beyond that text.

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Hyderabad Chemicals And Fertilizers Ltd. v. The Deputy Commissioner, Commercial Taxes (Appeals) Kurnool

1. This tax revision case is directed against the order of the Sales Tax Appellate Tribunal, Hyderabad, in T.A. No. 467 of 1960 on its file. The only question argued is, whether the price of the goods supplied, viz., the sugar-cane fertilizer mixture (for brevity called the fertilizer mixture) is Rs. 308-98 nP., or Rs. 122-50 nP. per ton. The assessing authority and the Tribunal held that the price of the fertilizer mixture was an all-inclusive price of Rs. 308-98 nP., and the turnover was calculated on that basis.

2. The facts relevant for an appreciation of the contention raised are as follows: The assessee, the Hyderabad Chemicals and Fertilizers Limited, Secunderabad (hereinafter called "the assessee company"), a joint stock company, are manufacturers of the fertilizer mixture. During the assessment year 1957-58, it effected sales of the said mixture, among others, to the Nizam Sugar Factory Limited (hereinafter called "the sugar factory"), which is also a joint stock company engaged in the business of manufacturing sugar primarily, and the Government of Andhra Pradesh. Before the assessing authority, the assessee's turnover in relation to both of them was disputed, but, both before the Appellate Tribunal as well as before us, the contention is confined only to the sales made to the sugar factory.

3. The assessee-company agreed to supply to the sugar factory 1,300 tons of the fertilizer mixture having the following ingredients:

77.7 parts of groundnut oil-cake containing 6% organic.

12.5 ammonium sulphate containing 20% inorganic nitrogen.

6.3 parts of single superphosphate containing 16% phosphoric acid.

3.5 muriate potash containing 58% potash.

100'00 parts.

(This mixture analysis is as follows) :

7'55% nitrogen (2.5% inorganic and 5'05% organic).

100% P. 205.

2'00% potash.

4. It was further agreed that the sugar factory should supply the assessee-company 1,000 tons of groundnut oil-cake to be used in this mixture, and that the assessee-company would purchase the other ingredients at prices subject to the confirmation by the sugar factory. Taking into account the cost of the ingredients and the manufacturing charges, the price of the fertilizer mixture was fixed at Rs. 308-98 nP. per ton, ex-works, Bodhan. It was also stipulated that a rebate would be given in the bills for the value of the groundnut oil-cake at Rs. 186-48 nP. per ton, and the buyer would arrange payment of the balance of Rs. 122-50 nP. per ton of the mixture. The assessee-company, on these facts, claimed exemption from the turnover in respect of the sum of Rs. 2,47,585-60 nP. on the ground that it represented the value of the groundnut oil-cake supplied by the sugar factory. The contention was that there was no sale of the fertilizer mixture to the sugar factory by the assessee-company, nor a transfer of the property in the same. That contention was not accepted by the department. On appeal to the Appellate Tribunal, the assessee-company contended that the transactions are in the nature of works contract, and that allowances should be given for the labour as provided under the rules. The Appellate Tribunal came to the conclusion that the contract was for the sale of the ultimate product, viz., the fertilizer mixture as such, and that the entire value of the fertilizer mixture supplied had to be taken as the sale price, or the turnover, and that no deduction could be made for the value of the groundnut oil-cake supplied. Aggrieved by that decision, the assessee-company has preferred this revision.

5. In order to test the validity of the assessee's contention, it is necessary that the correspondence and the bills be perused. By a letter dated 30th March, 1957, the sugar factory wrote that it was willing to place an order for 1,300 tons of the fertilizer mixture containing the ingredients in the proportion as stated above. The letter recited that in order to calculate the price of the mixture, they should know the price of single superphosphate and muriate and potash. The cost of ammonium sulphate was agreed to be calculated at Rs. 380-10-0 per ton as usual, and that the usual packing and crushing charges of Rs. 42-8-0 per ton of mixture would be allowed. By a letter dated 5th April, 1957, the sugar factory placed an order for 1,300 tons of the fertilizer mixture, the ingredients and their proportion being as stated above. It was further mentioned that the sugar factory would arrange for the supply of 1,000 tons of groundnut oil-cake to be used in the mixture, and that the assessee-company had to make its own arrangements for the purchase of other ingredients, prices subject to the confirmation of the sugar factory. After knowing the exact rates of the ingredients, the sugar factory would fix a definite price for the fertilizer mixture. It also mentioned that the necessary bags for packing would be supplied by the sugar factory to the assessee-company's factory at Bodhan. On 12th April, 1957, the assessee-company addressed another letter. Therein rates of the several ingredients per ton were mentioned. Regarding groundnut oil-cake delivered, an approximate cost at Rs. 240 per ton was fixed.

6. Then the following statement was made :-

According to the prices of raw materials mentioned above, the mixture will cost Rs. 308-98 nP. as per details below :-

777 parts groundnut cake @ Rs. 240 ... Rs. 186-48 nP.

I2'5 parts A. sulphate @ Rs. 380 ... 47-50

6'3 parts superphosphate @ Rs. 250 ... 15-75 "

3.5 parts sulphate of potash @ Rs. 450 ... " 15-75 "

265-48 "

And manufacturing expenses as already

agreed to @ Rs. 43-8-0 per ton ... Rs. 43-50 nP.

Cost per ton of mixture ex-works Bodhan ... 308-98

7. We shall, as usual, give rebate in our bills for the value of groundnut cake used in the mixture at Rs. 186-48 nP. per ton of mixture and you will arrange payment to us for the balance value at Rs. 122-50 nP. per ton of mixture.

8. The sugar factory, by its letter dated 20th April, had substantially accepted the price quoted by the assessee-company in its letter dated 12th April, 1957, and, deducting the price of groundnut cake supplied by it, agreed to pay at Rs. 121 per ton of the mixture. The bills drawn by the assessee-company on the sugar factory for the various orders also showed that the price of the mixture was Rs. 307-73 nP. (instead of Rs. 308-98 nP.) the slight difference arising on account of the variation in the price of one ingredient, and the value of the groundnut cake was deducted.

9. This correspondence and the bills make it abundantly clear that the assessee-company agreed to sell the fertilizer mixture at the rate specified and that it was an-inclusive price which covered the cost of all the ingredients and manufacturing charges etc. ; since the sugar factory supplied one ingredient, viz., groundnut cake, credit was given for its value, and the balance alone was collected from it.

10. The contention of Sri R. Bhaskara Row, the learned counsel on behalf of the assessee-company is that the price fixed is not Rs. 307-73 nP. per ton, but only Rs. 122-50 nP. per ton and that the turnover should be calculated only on that basis. This contention, to our mind, has no force. In order to satisfy the sugar factory that the price fixed is fair and reasonable having regard to the market price of the several ingredients and the manufacturing charges, the details have been worked out as stated above, and the assessee agreed to supply the fertilizer mixture at Rs. 307-73 nP. per ton, ex-works, Bodhan. It is futile to contend that the fertilizer mixture is not the property of the assessee-company, or that there was no transfer in that property by it to the sugar factory at the price stated above, simply because one of the ingredients was supplied by it.

11. Unable to substantiate the contention raised before the Tribunal that it was a works contract, the learned counsel took up the stand before us that the price of the mixture is not Rs. 307-73 nP., but only Rs. 122-50 nP. This contention also cannot prevail. Section 2(n) of the Ahdhra Pradesh General Sales Tax Act, VI of 1957, (hereinafter called "the Act") defines "sale" thus;-

'Sale' with all its grammatical variations and cognate expressions means every transfer of the property in goods by one person to another in the course of trade or business, for cash, or for deferred payment, or for any other valuable consideration, and includes....

12. According to Section 2(5) of the Act, "turnover" means :

The total amount set out in the bill of sale (or if there is no.bill of sale, the total amount charged) as the consideration for the sale or purchase of goods (whether such consideration be cash, deferred payment or any other thing of value) including any sums charged by the dealer for anything done in respect of goods sold at the time of or before the delivery of the goods and any other sums charged by the dealer, whatever be the description, name or object thereof.

13. It is clear from the definition of "sale" that the consideration of sale can be cash or deferred payment or any other valuable consideration. In the instant case, it is evident that the consideration for the supply of each ton of the fertilizer mixture was payment of Rs. 307-73 nP., which consisted partly in cash, and partly in the value of groundnut oil-cake supplied by the sugar factory.

14. The definition of "turnover" clarifies the position still more, as "turnover" means the total amount set out in the bill of sale, as the consideration for the sale or purchase of goods, and that such consideration can be cash, deferred payment, or any other thing of value. As already stated, all the bills would clearly show the cost of the fertilizer mixture supplied on each occasion was Rs. 307-73 nP. per ton. It is, no doubt, true that the price of the groundnut oil-cake supplied was deducted. Section 2(5) provides, as also Section 2(n), that the consideration may be' either cash, deferred payment, or any other thing of value. The deduction of the value of the groundnut oil-cake on account of its having been supplied by the sugar factory does not therefore alter the total amount set out in the bill of sale. In other words, the turnover must be deemed to be the aggregate value arrived at on the total quantity supplied at the rate of Rs. 307-73 nP. per ton.

15. It may also be mentioned that the value of the groundnut oil-cake received from the sugar factory was credited to the sugar factory's account, and debited to its raw material account in its books which indicates that the company treated the oil-cake as a purchase from the factory at the aggregate price, but not as the subject-matter of a bailment. It was also not established that the oil-cake was treated as the property of the assessee-company. No evidence is placed before us that an account was rendered to the sugar factory in respect of the: the total quantity of the oil-cake supplied. The intention of the parties appears to be that credit should only be given for the oil-cake supplied, but that the contract was essentially one for the sale of the fertilizer mixture at the price fixed between them.

16. The authorities relied on by the learned counsel for the petitioner in support of his contention may now be considered, viz., The State of Andhra Pradesh v. Sri Krishna Power Press, Vizianagaram [1960] 11 S.T.C. 498, The South India Metal Works and Rolling Mills' v. The State of Madras [1960] 11 S.T.C. 507, H. Abdul Bakshi and Brothers, Hyderabad v. The State of Andhra Pradesh [1960] 11 S.T.C. 526, The Guntur Tobaccos Ltd., Gunlur v. Government of Andhra (now Andhra Pradesh) [1961] 12 S.T.C. 668 and Vishweshwaradass Gokuldass v. The Government of Madras [1962] 13 S.T.C. 113.

17. The question for consideration in The State of Andhra Pradesh v. Sri Krishna Power Press [1960] 11 S.T.C. 498 was, whether in a case where the printing press itself purchased stationery and did the printing work upon it, as per the orders of the customers, and supplied the printed stationery at an agreed price, the transactions were sales liable to sales tax, and not works contracts, it was held that they were sales liable to sales tax. The learned Judges held that the fact that the goods prepared by the assessee would not be exhibited for sale to the general public is not decisive of the matter, but the only test is, whether the contract is for the sale of finished products. They followed the disinction between a sale, and the work and labour contract, pointed out in Benjamin's Treatise on Sale, 8th Edition, which is apposite :

3. Accordingly

(i) Where the employer delivers to a workman either all or the principal materials of a chattel on which the workman agrees to do work, there is a bailment by the employer, and a contract for work and labour, or for work, labour and materials (as the case may be), by the workman. Materials added by the workman on being affixed to or blended with the employer's materials, thereupon vest in the employer by accession, and not under any contract of sale.

(ii) Where the workman supplies either all or the principal materials, the contract is a contract for sale of the completed chattel, and any materials supplied by the employer when added to the workman's materials vest in the workman by accession.

18. In the instant case, the sugar factory did not supply all, of the principal, materials. It has supplied only the groundnut oil-cake, and it cannot be said that there is a bailment of the groundnut cake to which the materials added by the workmen were affixed of blended. On the other hand, considering the chemical process undergone by all the ingredients it is a contract for sale of the completed chattel, viz., the fertilizer mixture, which became vested in the assessee. Even according to this principle, the transaction is a sale of a finished article.

19. The decision in H. Abdul Bakshi & Brothers, Hyderabad v. The State of Andhra Pradesh [1960] 11 S.T.C. 526 is to the effect that a dealer who carried on business in hides and skins, and who purchased tanning bark for use in the process of tanning raw hides and skins was not liable to pay tax on the purchases of tanning bark under Rule 5 (2) of the Hyderabad General Sales Tax Rules, 1950, as the assessee did not carry on the business in the tanning bark, but purchased them only for consumption in the business.

20. In Guntur Tobaccos Lid. v. Government of Andhra (now Andhra Pradseh) [1961] 12 S.T.C. 668 a Full Bench of this Court laid down that where the assessee engaged in the business of re-drying raw tobacco entrusted to them by their customers, packed the re-dried tobacco in water-proof packing materials purchased by them, and delivered the tobacco thus packed to .their customers charging them an-inclusive rate for re-drying and packing, the contract was one entirely indivisible, and it was not within the competence of the State Legislature to impose a tax on the supply of materials used in such contract treating it as a sale. The decision of the Supreme Court in State Of Madras v. Gannon Dunkerley & Co., (Madras) Ltd. [1958] 9 S.T.C. 353 was followed in that case. My learned brother, Satyanarayana Raju, J., who spoke for the Court, observed at page 674 thus :

Now, there can be three types of contracts : for work and labour simply, a mixed contract of labour and materials, and another for goods sold and delivered. The first and last categories of contract present no difficulty. With regard to the first of them, there is no sale, for the supply of labour and work is not a contract of sale of goods, as labour and work cannot be deemed to be 'goods' in any sense of the term. With regard to the third of them, the transaction is indisputably one of sale but where, as here, there is a mixed contract of work and labour and materials, the question is whether the work and labour is of the essence of the contract or whether it is the materials that are supplied. It is possible that even in this class of cases, the parties might enter into distinct and separate contracts, one for the transfer of materials for money consideration and the other for payment of remuneration for services and for work done. In such a case there are really two agreements though in form there is only one contract.

21. Now, both under the common law and the statute law relating to sale of goods, to constitute a transaction of sale, there should be an agreement, express or implied, relating to transfer of the goods to be completed by the passing of title in those goods. As pointed out by their Lordships of the Supreme Court in State of Madras v. Gannon Dunkerley and Co. [1958] 9 S.T.C. 353 it is of the essence of this concept that both the agreement and the sale should relate to the same subject-matter.

22. At page 675, it was further observed :-

The principle emerging from the decision of their Lordships (i.e. State of Madras v. Gannon Dunkerley and Company (Madras) Limited [1958] 9 S.T.C. 353) therefore, is that where the contract is one, entire and indivisible, it is not within the competence of the State Legislature to impose a tax on the supply of the materials used in such a contract treating it as a sale.

23. Applying these principles to the case on hand, it is clear that the contract between the parties is not for work and labour, or, a mixed contract of labour and materials called "works contract" in the Act, but a contract for the finished fertilizer mixture de hors its ingredients. To accede to the contention of the petitioner's Advocate would be to break up the transaction into its constituent parts, and hold that there was a sale of some of the ingredients used for the manufacture of the mixture, and a contract for work and labour, which, as stated above, is not the true position.

24. These decisions, to the extent they point out the distinction between the contract of work and labour involving the use of materials, and a contract for the sale of goods, are not of much relevance, as the learned counsel for the petitioner rightly conceded that the contract is not a "works contract" within the meaning of the Act, but contended that the price of the fertilizer mixture was only Rs. 122-50 nP. Even so those decisions, as pointed out above, do not support even his alternative submission.

25. In South India Metal Works and Rolling Mills v. The State of Madras [1960] 11 S.T.C. 507 a Bench of the Madras High Court held that in a case where the assessee collected scrap metal from his customers, melted it and supplied them manufactured sheets and rings, there was no purchase of the scrap by the assessee, and there was, therefore, no element of sale when the sheets and rings were handed over to the customer and what was collected from the customer was in substance and effect the charges for converting the old metal into new sheets and rings and there was no liability on the assessee to pay any sales tax. It was found by the learned Judges that there being no purchase of the scrap, the assessee had no property in the sheets or the rings made therefrom, and there was no sale involving an element of transfer, and that what all happened was that in lieu of the old scrap of metal, the customer received the purified metal cast into sheets and rings.

26. This decision was followed in Vishweshwaradass Gokuldass v. The Government of Madras [1962] 13 S.T.C. 113. These two decisions, therefore, would not render any assistance to the petitioner as the facts therein are different.

27. In Vishweshwaradass Gokuldass v. The Government of Madras [1962] 13 S.T.C. 113 it was held that even a barter or exchange of goods might become a sale under the Sales Tax Act provided there is transfer of property in the goods and such transfer is in the course of trade or business. The fact that instead of receiving cash, the assessee received groundnut cake of that value towards part-price of the fertilizer mixture would not therefore make the transaction anything but a sale of the entire fertilizer mixture.

28. The learned counsel for the petitioner next relied on a letter dated 25th March, 1960, from the sugar factory to the effect that it supplied free of cost 1,000 tons of groundnut oil-cake to the assessee-company during the year 1957-58 for the manufacture and supply of 1,300 tons of fertilizer mixture under the terms and conditions and that no bill was raised against the assessee company for the said supply, and that the transaction was not a sale of groundnut oil-cake. The letter also mentioned that the property in the groundnut oil-cake at all stages till the supply of the fertilizer mixture under the contract vested in the sugar factory, and that the position of the assessee-company in respect of the groundnut oil-cake supplied was merely that of bailee. That letter was given after the order of assessment was passed on 15th December, 1958. The letter purports to express opinion on a question of law, whether the groundnut oil-cake supplied was the subject-matter of a bailment or not. We are not therefore prepared to place any reliance on this letter.

29. The learned counsel then argued that the assessee is entitled to claim deduction of the value of the groundnut as a discount. This contention has to be rejected straightaway. Rule 6 (i) of the Andhra Pradesh General Sales Tax Rules states:

The tax or taxes under Sections 5, 6, or notified under Section 9(1) shall be levied on the net turnover of a dealer. In determining the net turnover, the amounts specified in Clauses (a) to (1) shall, subject to the conditions specified therein, be deducted from the total turnover of a dealer-

(a) all amounts allowed as discount, provided that such discount is allowed in accordance with the regular practice of the dealer or is in accordance with the terms of a contract or agreement entered into in a particular case and provided also that the accounts show that the purchaser has paid only the sum originally charged less the discount.

30. The meaning of the word "discount" is given in the Concise Oxford Dictionary as "deduction from amount due or price of goods in consideration of its being paid promptly or in advance ; deduction from amount of bill of exchange etc., by one who gives value for it before it is due... ." It, therefore, follows that the exemption claimed in respect of the value of groundnut oil-cake cannot be treated as discount.

31. No other question has been argued. We are, therefore, not inclined to differ from the order of the Tribunal.

32. The revision case fails, and is dismissed with costs.

33. Advocate's fee Rs. 100.

Hyderabad Chemicals ... v. The Deputy Commissio...