Swaroop Vegetables\u00a0 Products Industries Ltd. (company) owned and possessed\u00a0\u00a0\u00a0 a\u00a0 sugar mill. A\u00a0 Deed of Licence was executed by the company in favour of\u00a0 \u00a0the appellant on 3.9.1987; pursuant whereto, the appellant herein executed a performance guarantee to ensure performance of the said Deed of Licence dated 3.9.1987, wherein it was agreed to by and between the parties that a major part\u00a0\u00a0\u00a0\u00a0\u00a0 of the licence fee would be paid in the shape of molasses. For AY 1987-88, the Department held the appellant liable to pay trade tax under the U.P.\u00a0 Trade Tax\u00a0\u00a0 Act, 1948 (for short \u201cthe Act\u201d) on payment made in terms of molasses. The appellate authority held that the molasses having been supplied in lieu of rent,\u00a0\u00a0\u00a0 the same did not fall within the definition \u201csale\u201d and it was a barter or exchange. Theappeals, after passing through different levels, reached the Apex Court.<\/p>\n
\u00a0<\/p>\n
Whether the adjustment of price of molasses from the amount of licence fee would amount to \u201csale\u201d within the meaning of Uttar Pradesh Trade Tax Act, 1948 (\u2018the Act\u2019, for short)?<\/p>\n
\u00a0<\/p>\n
The court was of the view that the deed of licence did not contain any provision requiring the appellant to\u00a0 transfer to\u00a0 the company,\u00a0 the molasses produced by\u00a0 it, by exercising its exclusive right to use the sugar mill, in lieu of the licence\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 fee or otherwise. The performance guarantee deed entered into by the appellant herein was a mechanism to pay the licence fee. By reason of the said performance guarantee, only a provision has been made in terms whereof the appellant was required to hand over the entire quantity of molasses to the company and the appellant had no right to sell it to any other person. In terms of the deed of licence, the appellant wasresponsible to manufacture\u00a0 in the same capacity\u00a0 as that of the owner.\u00a0 It had to pay the licence fee in the manner laid down in the deed\u00a0\u00a0\u00a0\u00a0\u00a0 of licence. The performance guarantee was not a part of the deed of licence in<\/p>\n
\u00a0<\/p>\n
\u00a0<\/p>\n
the sense that by reason thereof the terms and conditions for grant of the licence including that of payment of the licence fee, were not controlled by it.<\/p>\n
A licence fee cannot be the subject-matter of barter or exchange. A barter or exchange indisputably is distinct and different from a sale. A contract of sale denoted a transfer of property in goods by mutual consent. Such a transfer of ownership must be a price in the form of money. Only when the consideration\u00a0\u00a0\u00a0\u00a0 for transfer consists of other goods, it may be an exchange or barter. Such is not\u00a0\u00a0 the position here. The transaction in the present case answers the description of \u201csale\u201d within the meaning of the provisions of the U.P. Trade Tax Act, 1948. It comes within the purview of the expression \u201cany other valuable consideration\u201d, which expression would take colour from deferred payment being a monetary payment, but does not loses its character of some other monetary payment by\u00a0 way of mutual arrangement.<\/p>\n
\u00a0<\/p>\n
There is no barter or exchange in as much as there is no transfer of property in goods for valuable consideration. However, the Court cautioned that adjustments would be subject to tax. The words \u201cdeferred payment\u201d and \u201cother valuable consideration\u201d enlarge the ambit of consideration beyond cash only. However, only when there is sale of goods, the State becomes entitled to impose tax on the sale\u00a0\u00a0\u00a0 or purchase of goods. (CA No. 2635 of 2006 (Arising out of SLP (C) No. 1811 of 2005 dt. 12-5-2006)<\/p>\n
Editorial<\/em><\/strong>: Section 7 of\u00a0 the CGST Act\u00a0 provides for scope of\u00a0 supply.\u00a0 Tax\u00a0 is\u00a0 on supply. Sale or transfer of property in goods is a form of supply. Hence, article 366(19-A) would not be\u00a0 of\u00a0 relevance under GST\u00a0 regime. Further, there\u00a0 is no definition of \u201csale price\u201d or \u201cdealer\u201d or \u201cturnover\u201d under the CGST Act. Section 2(31) defines consideration. It may be in money or otherwise. Thus, barter would also be subject to GST. Adjustments are; even otherwise, well known methods of payment. Hence, the above ruling may not be of much significance under the GST regime. However, what would be the value of such barter is a question to be decided in as much as, according to me, the valuation rules do not provide for valuation of barter of goods or services or both.<\/p>\n \u00a0<\/p>\n \u201cPublic opinion alone can keep a society pure and healthy.\u201d<\/em><\/p>\n – Mahatma Gandhi<\/p>\n","protected":false},"excerpt":{"rendered":" Uttar Pradesh Trade Tax Act, 1948
\nS. 2(h): Sale- Section 2(h), U.P. Trade Tax Act, 1948 after amendment in consonance with Art. 366(29-A) of the Constitution \u2013 Concept of \u201cbarter\u201d and \u201cexchange\u201d explained \u2013 Since in terms of the Act the manufacturer is a dealer, held, it could not be said that the supply of molasses is the present case was a mode of payment of licence fee [Constitution of India, Article 246, 366(29-A) and Schedule VII List II Entry 54]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[5],"tags":[],"class_list":["post-13142","post","type-post","status-publish","format-standard","hentry","category-gst-law"],"acf":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p9S2Rw-3pY","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13142","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/comments?post=13142"}],"version-history":[{"count":1,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13142\/revisions"}],"predecessor-version":[{"id":13143,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13142\/revisions\/13143"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/media?parent=13142"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/categories?post=13142"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/tags?post=13142"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}