Full Judgment Text
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PETITIONER:
BOARD OF REVENUE ETC.
Vs.
RESPONDENT:
A. M. ANSARI ETC.
DATE OF JUDGMENT17/03/1976
BENCH:
SINGH, JASWANT
BENCH:
SINGH, JASWANT
RAY, A.N. (CJ)
BEG, M. HAMEEDULLAH
CITATION:
1976 AIR 1813 1976 SCR (3) 661
1976 SCC (3) 512
CITATOR INFO :
R 1976 SC1860 (10)
E&D 1985 SC1293 (115)
R 1988 SC1845 (11)
ACT:
Indian Stamp (Andhra Pradesh Extension and Amendment)
Act XIX of 1959-Arts. 31(c) and 35(c)-Scope of-Lease and
licence-Distinction.
Sales Tax-Whether payable on annual auction Sales.
HEADNOTE:
Under the terms and conditions of sale the respondents,
who were the highest bidders at an auction of forest
produce, were called upon to pay stamp duty on the
agreements to be executed by them as if they were leases of
immovable property falling under Art. 31(c) and on the
deposits of security as mortgages under art. 35(c) of the
Indian Stamp Act, 1899 as also sales tax on the bid amounts.
In a petition under art. 226, the respondents contended that
the right to pluck, collect and take away the forest produce
was not a right or interest in immovable property within the
meaning of art. 31(c) of the Stamp Act, the security
deposits were not mortgages nor did the Government carry on
any business of sale and, as such, they were not liable to
pay the amounts demanded. The High Court allowed the
petitions.
Dismissing the State’s appeal,
^
HELD : The acquisition by the respondents not being an
interest in the soil but merely a right to cut the fructus
naturales, the agreements possessed the characteristics of
licences and did not amount to leases so as to attract the
applicability of art. 31 (c) of the Stamp Act. [667D]
Firm Chhotabhai Jethabai Patel & Co. & Ors. v. The
State of Madhya Pradesh, [1953] S.C.R. 476 and Mahadeo v.
State of Bombay 1959 S.C.J. 1021: A.I.R. 1959 S.C. 735
referred to.
(1) A study of the definitions of immovable property
occurring in the Transfer of Property Act, the Registration
Act and the General Clauses Act shows that it is the
creation of an interest in immovable property or a right to
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possess it that distinguishes a lease from a licence. A
licence does not create an interest in the property to which
it relates while a lease does. In the case of a lease there
is transfer of a right to enjoy the property. For the
purpose of deciding whether a particular grant amounts to a
lease or a licence, it is essential to look to the substance
and essence of the agreement and not to its form. [665F-G]
Associated Hotels of India Ltd. v. R. N. Kapoor A.I.R.
1959 S.C. 1262; Kauri Timber Company Limited v. The
Commissioner of Taxes, [1913] A.C. 771 (776) Marshall v.
Green (1875) L.R.I.C.P.I.D. 35 and Firm Chhotabhai Jethabai
Patel & Co. & Ors. v. The State of Madhya Pradesh [1953]
S.C.R. 576 referred to.
Mahadeo v. State of Bombay 1959 S.C.J. 1021: AIR 1959
S.C. 735 distinguished.
In the instant case the salient features emerging from
the agreements are (i) that they were made for a short
duration of 9 to 10 months; (ii) they did not create any
estate or interest in the land and (iii) the respondents
were not granted exclusive possession and control of the
land but were merely granted the right to pluck, cut, carry
away and appropriate the forest produce, present or future.
The right to go on the land was only ancillary to the real
purpose of the contract. [667C-D]
662
(2) The respondent could not be called upon to pay
stamp duty under Art. 35(c) of the Stamp Act. For an
instrument to fall within the definition of mortgage deed
contained in s. 2(17) of the Stamp Act it is necessary that
it should satisfy the essential conditions by creating a
right over or in respect of a specified property in favour
of another person. [671D; 670G]
In the instant case there is nothing in the relevant
clause of the sale notice to indicate that any right over or
in the security deposits was created in favour of the State
Government. [671A]
Reference under Stamp Act, Section 46 15 I.L.R. Mad.
134 and Rishidev Sondhi v. Dhampur Sugar Mills A.I.R. 1947
All. 190 F.B. approved.
(3) (a) The respondents were not liable to pay sales
tax. It cannot be said that the Government, by holding
auction of forest produce, carried on business in the sale
of that class of goods, which is an essential condition to
make the respondents liable to pay sales tax. [670D]
State of Gujarat v. Raipur Manufacturing Co. Ltd.
(1967) 19 S.T.C. 1(S.C.) followed.
(b) The consideration of profit motive cannot be
regarded as an essential ingredient of the term ’business’
in view of the amendment in the definition of ’dealer’ in
1966. The auctions were carried on only annually and not at
frequent intervals. The important element of frequency being
lacking it cannot be held that the Government was carrying
on the business of sale of forest produce. [669D-E]
P.T.C.C.S. Merchants Union v. State of A.P., (1958) 2
An. W.R. 100: (1958) 9 S.T.C. 723; Raja Bhairabendra v.
Superintendent of Taxes (1958) 9 S.T.C. 60; Orient Paper
Mills Ltd. v. The State of Madhya Pradesh and Ors. (1971) 28
S.T.C. 532; Deputy Commissioner of Agricultural Income-Tax
and Sales Tax, Quilon v. Travancore Rubber and Tea Co.
(1967) 20 S.T.C. 520 (S.C.); Deputy Commissioner of
Agricultural Income-tax and Sales Tax, Quilon v. Midland
Rubber and Produce Co. Ltd. [1970] 25 S.T.C. 57 (S.C.)
Ramakrishna Deo v. The Collector of Sales Tax, Orissa (1955)
6 S.T.C. 674 referred to.
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JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 67 to
122 and 238 of 1969.
From the Judgment and Decree dated the 21-8-67 of the
Andhra Pradesh High Court in Writ Petitions Nos. 489, 491,
537, 538, 539, 540, 541, 561, 635, 636, 638, 639, 677, 684,
686, 688, 695, 710, 711, 712, 713, 714, 715, 716, 717, 718,
719, 811, 812, 813, 830, 831, 832, 853, 854, 855, 867, 870,
1146, 1216, 1219, 1260, 1261, 1265, 1284, 1285, 1292, 1293,
1294, 1309, 1310, 1340, 1446, 1447, 1697 and 687 of 1967
respectively.
P. Ram Reddy, B. Parthasarthi for the Appellants.
K. J. John and J. B. Dadachanji for Respondent in CAs.
67, 78, 79, 100, 101, and 103 of 1969.
G. Narayana Rao for Respondent in CAs. 69-73/69.
H. K. Puri and R. V. Pillai for Respondents in CAs Nos.
77, 83, 89, 90, 93, 95, 96, 102 and 120/69.
The Judgment of the Court was delivered by
JASWANT SINGH, J.-This bunch of Civil Appeals Nos. 67-
122 238 of 1969 by certificate granted under Article
133(1)(b) of the Constitution by the High Court of
Judicature of Andhra Pradesh at
663
Hyderabad by its order dated June, 28, 1968 against its
common judgment and order dated August 21, 1967, passed in
Writ Petition Nos. 489, 491, 537 to 541, 635, 684, 685, 687,
688, 830 to 832, 561, 1219, 715 to 719, 812, 813, 1216, 677,
638, 639, 695, 853 to 856, 636, 867, 870, 1146, 1285, 1260,
1261, 1284, 1292, 1293, 1294, 1309, 1310, 1340, 1447, 1697
and 1265 of 1967 which raise interesting questions of law
relating to the interpretation of some of the provisions of
the Indian Stamp Act, 1899 and the Andhra Pradesh General
Sales Tax Act, 1957 shall be disposed of by this judgment.
The facts giving rise to these appeals are: The Forest
Department of the Government of Andhra Pradesh after giving
a sale notice held, in accordance with the terms and
conditions thereof, an auction in 1967 in respect of various
items of forest produce viz. timber, fuel, bamboos, minor
forest produce, beedi leaves, tanning barks, parks mohwa
etc. Clause 23 of the notice inter alia required the
contractors to pay within 10 days of the receipt of the
confirmation orders of the competent authority: (a) the
balance of the 1st instalment amount, as might be fixed by
the Divisional Forest Officer, (b) 6 1/4% of the bid amount
as security deposit; (c) sales tax on the bid amount at the
rates current at the time of the sale. Clause 60 of the
notice provided that the contractors would at all times
comply with the provisions of the Indian Stamp (Andhra
Pradesh Extension and Amendment) Act XIX of 1959, and the
Andhra Pradesh Court Fees and Suits Valuation Act, 1956, and
all the rules that might, from time to time, be in force
thereunder.
The respondents herein being the highest bidders in
respect of some items of the forest produce were called upon
to pay in terms of the above noted conditions the stamp duty
on the agreements to be executed by them as if they were
leases of immovable property falling under Article 31 (c) of
the Indian Stamp Act, 1899. They were also called upon to
pay sales tax on the bid amount in terms of clause (23) of
the sale notice. They were further called upon to pay stamp
duty on the deposits made by them by way of security as
mortgages, falling within Article 35(c) of the Stamp Act.
Aggrieved by the said notices, the respondents filed the
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aforesaid petitions under Article 226 of the Constitution
for issue of appropriate writs etc. declaring the aforesaid
demand notices as illegal and void and restraining the
appellants from enforcing or taking any proceeding for the
levy and recovery of the amounts mentioned therein. The
respondents contended before the High Court that as the
right to pluck, collect and take away beedi leaves and to
cut and carry away bamboos, standing timber etc. was not a
right or interest in immovable property so as to attract
Article 31(c) of the Stamp Act, there could be no question
of payment by them of the stamp duty. The respondents also
challenged the demand made from them for payment of sales
tax on the bid amount on the ground that as the Government
did not carry on any business of sale, the demand was
illegal. They further challenged the demand of stamp duty
under Article 35(c) of the Stamp Act pleading that the
security deposits were not mortgages so as to attract the
provisions of the said Article of the Stamp Act.
664
The petitions were contested by the appellants herein
who contended inter alia that pursuant to clause (60) of the
terms and conditions of the sale notice, the respondents
were bound to pay the stamp duties that were chargeable in
view of the extension of the Indian Stamp Act to the whole
of the State of Andhra Pradesh by the Indian Stamp (Andhra
Pradesh Extension and Amendment) Act XIX of 1959 with effect
from April 1, 1959, and repeal of the Hyderabad Stamp Act,
and the rules, notifications, instructions etc. made or
issued thereunder: that the right acquired by the
respondents was not merely a right to collect, appropriate
and sell beedi leaves that had already grown but also the
right to collect, use and sell beedi leaves that would
subsequently grow on the standing trees and their branches
taking nourishment from the land during the period of lease
which showed that the respondents obtained under the
agreement an interest in immovable property. The appellants
further contended that the respondents were, according to
the sale notice, liable to pay sales tax on the bid amount
as also the stamp duty on security deposits which fell
within the definition of mortgages as contemplated by the
Stamp Act.
On a careful consideration of the respective stands of
the parties, the High Court negatived the contentions of the
appellants and allowed the petitions. Aggrieved by the
Judgment and order of the High Court, the appellants applied
for certificate under Article 133(1)(b) of the Constitution
which, as already stated, was granted to them. This is how
the appeals are before us.
Three questions fall for consideration in these
appeals. The first question that we are called upon to
determine is whether the agreements which the respondents
were called upon to execute in respect of the aforesaid
rights relating to forest produce were in the nature of
leases or licences.
It is necessary in this connection to notice at the
outset the distinction between a lease and a licence by
reference to the relevant Acts. Section 2 (16) of the Stamp
Act defines the lease as meaning a lease of immovable
property but this definition, it would be noted, is neither
exhaustive nor self-explanatory. We are, therefore, driven
to find out the true meaning of the term by turning to the
Transfer of Property Act. Section 105 of the said Act
defines ’lease’ as follows :-
"A lease of immovable property is a transfer of a
right to enjoy such property, made for a certain time,
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express or implied, or in perpetuity in consideration
of a price paid or promised, or of money."
’Licence’ is defined in section 52 of the Easement Act,
1882 as under:-
"Where one person grants to another, or to a
definite number of other persons, a right to do, or
continue to do, in or upon the immovable property of
the grantor, something which would, in the absence of
such right, be unlawful, and such right does not amount
to an easement or an interest in the property, the
right is called a licence".
665
The expression ’immovable property’ is not defined in
the Stamp Act but is defined in section 3 of the Transfer of
Property Act, section 2(6) of the Registration Act and
section 3(26) of the General Clauses Act. An idea as to the
meaning of the expression can also be gleaned from section
2(7) of the Sales of Goods Act. According to learned counsel
for the appellants, it is the definition of ’immovable
property as given in section 3 (26) of the General Clauses
Act that has to be applied in determining. whether the
agreements in question fall within the definition of ’lease’
or not. It would be useful at this stage to set out in
juxtaposition the definitions of ’immovable property’ as
contained in the aforesaid Acts, as also the definition of
goods as given in the Sale of Goods Act:-
------------------------------------------------------------
Section 3(26) of Section 3 of Section 2(6) of Section 2(7)
General Clauses Transfer of Registration Sale of
Act. Property Act. Act. Goods Act.
------------------------------------------------------------
"Immovable pro- In this Act, "Immovable pro- In this Act,
perty" shall unless there perty" includes unless there
include land, is something land, buildings is anything
benefits to repugnant in hereditary repugnant in
arise out of the subject allowances, the subject
land, and or context rights to or context,
things attached "immovable ways, lights, "goods"
to the earth, property" ferries, or means every
or permanently does not any other bene- kind of mov-
fastened to any- include stand- fits to arise able pro-
thing attached ding timber, out of land, perty other
to the earth. growing crops and things than action-
or grass. attached to the able claims
earth or per- money; and
manently fas- includes
ened to any- stock and
thing which is shares, grow
attached to the ing crops,
earth, but not grass and
standing timber things atta-
growing crops ched to or
nor grass. forming part
of the land
which are
agreed to be
severed
before or
under the
contract or
sale.
------------------------------------------------------------
A close study of the above definitions shows that it is
the creation of an interest in immovable property or right
to possess it that distinguishes a lease from a licence. A
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licence does not create an interest in the property to which
it relates while a lease does. There is in other words
transfer of a right to enjoy the property in case of a
lease. As to whether a particular transaction creates a
lease or a licence is always a question of intention of the
parties which is to be inferred from the circumstances of
each case. For the purpose of deciding whether a particular
grant amounts to a lease or a licence, it is essential,
therefore, to look to the substance and essence of the
agreement and not to its form. We are fortified in this view
by the decision of this Court in Associated Hotels of India
Ltd. v. R. N. Kapoor where Subba Rao, J. (with whom Das, J.
agreed) observed:
"If a document gives only a right to use the property
in a particular way or under certain terms while it
remains in possession and control of the owner thereof,
it will be a licence. The legal possession, therefore,
continues to be
666
with the owner of the property, but the licensee is
permitted to make use of the premises for a particular
purpose. But for the permission, his occupation would
be unlawful. It does not create in his favour any
estate or interest in the property. There is therefore,
clear distinction between the two concepts. The
dividing line is clear though sometimes it becomes very
thin or even blurred. At one time it was thought that
the test of exclusive possession was infallible and if
a person was given exclusive possession of a premises,
it would conclusively establish that he was a lessee.
But there was a change and the recent trend of judicial
opinion is reflected in Errington v. Errington [1952] 1
All ER 149, wherein Lord Denning reviewing the case law
on the subject summarizes the result of his discussion
thus at p. 155:
"The result of all these cases is that, although a
person who is let into exclusive possession is, prima
facie, to be considered to be tenant, nevertheless he
will not be held to be so if the circumstances negative
any intention to create a tenancy."
The Court of Appeal again in Cobb v. Lane [1952] I
All ER 1199, considered the legal position and laid
down that the intention of the parties was the real
test for ascertaining the character of a document. At
p. 1201, Somervell L.J., stated:
"..... The solution that would seem to have been
found is, one would expect, that it must depend on the
intention of the parties".
Denning L.J. said much to the same effect at p.
1202:
"The question in all these cases is one of
intention: Did the circumstances and the conduct of the
parties show that all that was intended was that the
occupier should have a personal privilege with no
interest in the land?"
The following propositions may, therefore, be
taken as well-established: (1) To ascertain whether a
document creates a licence or lease, the substance of
the document must be preferred to the form: (2) the
real test is the intention of the parties-whether they
intended to create a lease or a licence; (3) if the
document creates an interest in the property, it is a
lease; but, if it only permits another to make use of
the property, of which the legal possession continues
with the owner, it is a licence; and (4) if under the
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document a party gets exclusive possession of the
property, ’prima facie’ he is considered to be a
tenant, but circumstances may be established which
negative the intention to create a lease."
The crucial tests to be employed in cases of the
present nature can be gathered from the observations made by
Lord Shaw while delivering the judgment of the Board in
Kauri Timber Company Limited v.
667
The Commissioner of Taxes(1). According to those
observations, in order, an agreement can be said to partake
of the character of lease, it is necessary that the grantee
should have obtained an interest in and possession of land.
If the contract does not create an interest in land then to
use the words of Lord Coleridge, C.J. in Marshall v.
Green(2) the land would be considered as a mere warehouse of
the thing sold and the contract would be a contract for
goods.
For the purpose, therefore, of ascertaining the
intention of the parties and finding out the character of
the agreements in question, it is necessary to notice the
salient features of the agreements. The first salient
feature of the agreements is that they were for a short
duration of nine to ten months. The second important feature
of the agreements is that they did not create any estate or
interest in land. The third salient feature of the
agreements is that the respondents were not granted
exclusive possession and control of the land but were merely
granted the right to pluck, cut, carry away and appropriate
the forest produce that might have been existing at the time
of the contract or which might have come into existence
during the short period of the currency of the agreements.
The right to go on the land was only ancillary to the real
purpose of the contract. Thus the acquisition by the
respondents not being an interest in the soil but merely a
right to cut the fructus naturales, we are clearly of the
view that the agreements in question possessed the
characteristics of licences and did not amount to leases so
as to attract the applicability of Article 31(c) of the
Stamp Act.
The conclusion arrived at by us gains strength from the
judgment of this Court in Firm Chhotabhai Jethabai Patel and
Co. & Ors. v. The State of Madhya Pradesh where contracts
and agreements entered into by person with the previous
proprietors of certain estates and mahals in the State under
which they acquired the rights to pluck, collect and carry
away tendu leaves, to cultivate, culture and acquire lac,
and to cut and carry away teak and timber and miscellaneous
species of trees called hardwood and bamboos were held in
essence and effect to be licences.
There is, of course a judgment of this Court in Mahadeo
v. State of Bombay(4) where seemingly a somewhat different
view was expressed but the facts of that case were quite
distinguishable. In that case apart from the bare right to
take the leaves of tendu trees, there were further benefits
including the right to occupy the land, to erect buildings
and to take away other forest produce not necessarily
standing timber, growing crop or grass and the rights were
spread over many years.
For the foreging reasons, the first question has to be
decided in favour of the respondents.
The second question that falls for consideration is
whether the respondents could be validly called upon to pay
the sales tax. For
668
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the decision of this question, it is necessary to examine a
few provisions of the Andhra Pradesh General Sales Tax Act,
1957. The charging section is section 5 which in so far as
it is relevant for the purpose of these appeals runs thus:-
"5. Levy of tax on Sales or Purchases of Goods:-
(1) Every dealer (other than a casual trader and an
agent of a non-resident dealer) whose total turnover
for a year is not less than Rs. 25,000 and every agent
of a nonresident dealer whatever be his turnover for
the year, shall pay a tax for each year, at the rate of
four paise on every rupee of his turnover:
"Every casual trader shall pay a tax at the rate
of four paise on every rupee of his turnover:
Provided that a dealer in jaggery shall pay a tax
at the rate of two paise on every rupee upto the 31st
March 1966 and at the rate of three paise on every
rupee on and from the 1st April 1966, of his turn-over
irrespective of the quantum of turnover".
The term ’dealer’ has been defined in section 2(e) of
the Act as follows:-
"dealer" means any person who carries on the
business of buying, selling, supplying or distributing
goods, directly or otherwise, whether for cash, or for
deferred payment, or for commission, remuneration or
other valuable consideration, and includes (i) the
Central Government, a State Government, local
authority, a company, a Hindu undivided family or any
society (including a co-operative society), club, firm
or association which carries on such business ......"
The term ’business’ has been defined in section 2(bbb)
of the Act as follows:-
" ’business’ includes-(i) any trade, commerce, or
manufacture or any adventure or concern in the nature
of trade, commerce or manufacturing whether or not with
trade, commerce, manufacture, adventure concern is
carried on or undertaken with a motive to make gain or
profit and whether or not any gain or profit accrues
therefrom; and
(ii) any transaction in connection with, or
incidental or ancillary to, such trade, commerce,
manufacture, adventure or concern".
’Sale’ is defined in section 2(n) 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 any transfer of materials for money
consideration in the execution of a
669
works contract provided that the contract for the
transfer of such materials can be separated from the
contract for the services and the work done, although
the two contracts are embodied in a single document or
in the supply or distribution of goods by a society
(including a co-operative society), club, firm or
association to its members, but does not include a
mortgage, hypothecation or pledge of, or a charge on,
goods".
In order that the sales tax should be payable by the
respondents in accordance with the obligation imposed on
them by clause (23) of the sale notice, it is necessary that
the Government of Andhra Pradesh should have been carrying
on the business of selling the forest produce. In State of
Gujarat v. Raipur Manufacturing Co. Ltd., this court while
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examining the term ’business’ in another context observed
that ’whether a person carries on business in a particular
commodity must depend upon the volume, frequency, continuity
and regularity of transactions of purchase and sale in a
class of goods and the transactions must ordinarily be
entered into with a profit motive. The Court further went on
to observe that when a subsidiary product is turned out in
the factory of the assessee regularly and continuously and
it is being sold from time to time, an intention to carry on
business in such product may be reasonably attributed to the
assessee. As the consideration of profit motive cannot be
regarded an essential constituent of the term ’business’ in
view of the amendment introduced in the definition of the
term ’dealer’ in 1966, what we are left to consider is
whether the other ingredients of the term ’business’ viz.
volume, frequency, continuity and regularity of transactions
of sale and purchase are satisfied in the instant cases. The
auctions of the forest produce by the Government of Andhra
Pradesh are admittedly carried on only annually and not at
frequent intervals. Thus the important element of frequency
being lacking in the instant cases, it cannot be held that
the said Government was carrying on the business of sale of
forest produce. In P. T. C. C. S. Merchants Union v. State
of A.P. where a person who grew agricultural products and
incidentally sold the same, it was held that no sales tax
was payable as it could not be said that the person carried
on business. A similar view was expressed in Raja
Bhairabendra v. Superintendent of Taxes where standing sal
trees grown spontaneously in his Zamindari were sold by the
Zamindar by auction and the purchasers were permitted to
fell the trees and sell them after sawing and other
processes.
In Orient Paper Mills Ltd. v. The State of Madhya
Pradesh & Ors. it was held that the State Government or the
forest department could not, merely by selling the forest
produce grown on their land, be regarded as carrying on any
business of buying, selling, supplying or distributing goods
and therefore in respect of mere sales of forest produce,
neither the State Government nor the forest department was a
dealer within the meaning of the definition in section 2(d)
of the M.P. General Sales Tax Act, 1958. In Deputy
Commissioner
670
of Agricultural Income-tax and Sales Tax, Quilon v.
Travancore Rubber and Tea Co. and Deputy Commissioner of
Agricultural Income-tax and Sales Tax, Quilon v. Midland
Rubber and Produce Co. Lt. where the only facts established
were that the assessee converted the latex tapped from its
rubber trees into sheets and effected a sale of those sheets
to its customers and the conversion of latex into sheets was
a process essential for the transport and marketing of the
produce, it was held that the department had not been able
to discharge the onus of proving that the assessee was
carrying on business and was, therefore, a dealer within the
meaning of section 2(b) of the Central Sales Tax Act, 1956.
In Ramakrishna Deo v. The Collector of Sales Tax, Orissa
where Maharaja of Jeypore had sold the sal trees from his
forest for preparing sleepers, it was held that he was not a
dealer within the meaning of the Orissa Act because he was
not carrying on the business of selling or supplying the
goods for the reason that the element of purchase, one of
the necessary ingredients of the business was absent.
In view of the foregoing discussion, we find ourselves
unable to hold that the Government of Andhra Pradesh by
holding auction of forest produce carried on business in the
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sale of that class of goods. As such, the respondents could
not be made liable to pay the sales tax.
There now remains for consideration only the last
question as to whether the security deposits made by the
respondents were in the nature of mortgages so as to make
the respondents liable to pay the stamp duty under Article
35(c) of the Stamp Act. For the determination of this
question, it is necessary to scrutinize the definition of
’mortgage deed’ as contained in section 2(17) of the Stamp
Act which runs thus:-
"2(17). Mortgage-deed includes every instrument
whereby, for the purpose of securing money advanced, or
to be advanced, by way of loan, or an existing or
future debt, or the performance of an engagement, one
person transfers, or creates to, or in favour of,
another, a right over or in respect of specified
property".
A bare perusal of the above definition makes it clear
that in order that an instrument should fall within the
above definition, it is necessary that the instrument should
satisfy the essential conditions by creating a right over or
in respect of a specified property in favour of another
person.
Bearing in mind the above mentioned essential
requisites of a deed of mortgage let us examine clause (17)
of the sale notice to which alone our attention has been
invited. Clause (17) runs thus:-
"Earnest money deposit to be returned-The earnest
money deposits of all bidders except those of the
successful bidders collected at the time of sale
according to condition 5 above, will be returned to the
depositors, on the conclusion
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of the sales provided that the officer conducting the
sale, may if he considers it advisable, retain the
deposits of any bidders".
There is nothing in the above clause to indicate that
any right over or in the security deposits was created in
favour of the State Government.
In Reference under Stamp Act, section 46(1) where a
licence issued to an arrack renter expressly required as one
of its conditions that the licensee should deposit a sum
equal to three months’ rental as a security for the due
performance of the contract and the licensee executed a
muchalka stating that he agreed to all the terms and
conditions mentioned in the licence, it was held that
neither the licence nor the muchalka taken separately or
together fulfilled the conditions of a mortgage as defined
in the Stamp Act i.e., neither thereby actually created an
interest in the deposit in favour of the Government.
In Rishidev Sondhi v. Dhampur Sugar Mills it was held
that an instrument in which specific sums have been offered
as security is not a mortgage deed within the meaning of
section 2(17) as money is not ‘specified property’.
In view of the above we have no manner of doubt that
the respondents could not be called upon to pay the stamp
duty under Article 35(c) of the Stamp Act.
In the result the appeals fail and are hereby dismissed
with costs.
P.B.R. Appeals dismissed.
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