Holding

The adjustment of molasses against the licence fee is a sale within the meaning of Section 2(h) of the Uttar Pradesh Trade Tax Act, 1948, and is liable to trade tax.

Summary

Dhampur Sugar Mills Ltd entered into a licence deed to use a sugar mill, agreeing to pay the licence fee largely in molasses. The revenue department assessed trade tax on the molasses, treating it as a sale under the Uttar Pradesh Trade Tax Act, 1948. The appellant argued that the molasses payment was a barter, not a sale, and that "price" meant only cash. The Supreme Court examined the definition of "sale" in Section 2(h) of the Act, which incorporates the constitutional definition under Article 366(29‑A) and includes transfer of the right to use goods for any consideration, including non‑cash. It held that molasses is "goods", the adjustment of its value against the licence fee constitutes "other valuable consideration", and the transaction is a sale liable to tax. Consequently, the appeal was dismissed.

Issues considered

The meaning of "sale" under Section 2(h) of the Uttar Pradesh Trade Tax Act, 1948, especially in relation to non‑cash consideration.
Whether the adjustment of molasses against the licence fee amounts to a barter/exchange or a taxable sale.
Whether molasses qualifies as "goods" within the meaning of the Act and Article 366(29‑A).

Legislation cited

Constitution of Indias. Article 366(29-A)
Sale of Goods Act, 1930
Uttar Pradesh Trade Tax Act, 1948s. 2(c), s. 2(ee), s. 2(h)

Subjects

saletrade taxUttar Pradesh Trade Tax Actdefinition of salemolasseslicence feetransfer of right to usevaluable considerationbarterexchangeArticle 366(29-A)goods

Judgment

DHAMPUR SUGAR MILLS LTD. A
v.
COMMISSIONER OF TRADE TAX, U.P.

MAY 12, 2006

[S.B. SINHA AND P.K. BALASUBRAMANYAN, JJ.] B

Uttar Pradesh Trade Tax Act, 1948:

Section 2(h)-Definition of sale-Interpretation of-Held-As it was
inclusive, it has to be given a broad meaning-Transfer of right to use any C
goods for any purpose either for cash or deferred payment or other valuable
consideration, would come within its purview.

Licence for right to use of a sugar mill-Major part of licence fee paid
in shape of molasses-Liability to tax-Held: There was no transfer of
molasses with further right to sell-Molasses were not supplied in terms of
D
licence as quantity ofsupply was not fixed-As both molasses and sugar were
controlled commodities they were sold at Government notified price, licence
fees was not paid by supply of molasses-'--/( was not a case of barter or
exchange as there was possibility that quantity of molasses produced in
sugar mill and required to be transferred would exceed amount of licence E
fee payable for particular year-Transfer of molasses was not by way of
transfer of stock or mortgage or lease-As it was transfer of ownership in
goods where/or buyer was to pay price to seller, transaction was "sale"
within meaning of Act and liable to tax-Instead of cash, price of molasses
was adjustedfrom the amount payable by licencee to owner as considera:ion
F
for use of mill-Transactions involved passing of monetary consideration,
and came within purview of "any other valuable consideration"-lt was
especially so as both parties were aware that they have to fulfill their
respecti~~ terms of obligations on monetary terms-It was adjustment of
price of molasses supplied with amount of licence fee.
G
Constitution of India, 1950-Article 366(29-A)-Transfer of right to
Ilse goods with title thereto remaining with transferee-Held it would also
be a sale-Even a lease ofgoods would be a sale-Transaction may amount
to sale/or purpose of levy ofSales Tax though essential ingredient of a sale
as defined in the Sale of Goods Act, 1930, may be absent. H
673
674 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A Appellant entered into a Deed of Licence for right to use of a sugar
mill with a company owning it. Pursuant to it, a performance guarantee
was executed wherein 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 to be liable to pay trade tax in terms of the Uttar
Pradesh Trade Tax Act, 1948 by Assistant Commissioner, Trade Tax.
B In appeal, the Deputy Commissioner, Trade Tax, 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. Against it respondent
did not succeed in appeal before the Trade Tax Tribunal but their
revision thereafter before High Court was allowed. Hence the present
c appeal.

Appellant contended that (i) an exchange or barter cannot be said
to be a sale within the meaning of the relevant provisions of the Act,
and that the expression "price" would mean only cash or deferred
payment (ii) sale for the purpose of the Act of 1948 will have the same
D
meaning as what is contained in the Sale of Goods Act, 1930.

Respondent submitted that the intention of the parties as to
whether the transaction in question would be a "sale" within the
meaning of the Act must be gathered from the term of the licence itself
E and upon a perusal of same, it is clear that the transaction would
constitute a sale within meaning of Section 2(h) of the Act of 1948.

Dismissing the appeal, the Court

F HELD : 1.1. By reason of Clause 29-A of Article 366, as title to
the goods, although, may remain with the transferee, a transfer of right
to use the goods would also be a sale. Even a lease of goods would be
a sale. Thus, by reason of the said definition, though an essential
ingredient of a sale as defined in the Sale of Goods Act, 1930, may be
absent, the transaction may amount to a sale for the purpose of levy
G of Sales Tax under the Act. What has not been altered by reason of the
said provision is the meaning of the word "goods". (688-D-E]

Mis. Gannon Dunkerley & Co. & Ors. v. State of Rajasthan, (19931
1 sec 264, relied on.
H
- DHAMPUR SUGAR MILLS LTD. 1•. COMMISSIONER OF TRADE TAX, U.P.

1.2. The State of Uttar Pradesh has amended the definition of sale
in consonance with Clause 29-A of Article 366 of the Constitution. The
675

definition of 'sale', thus, is different from the provisions of the Sale of
A

Goods Act, 1930, as in terms thereof a contract of sale of goods would
be deemed to be a contract of sale or transfer of property in the goods
to the buyer for price. However, in terms of Section 2(h) of the U.P.
Trade Tax Act, 1948, a sale would mean a transfer of property in goods
B
in any way otherwise than by way of a mortgage, hypothecation, charge
or pledge for cash or deferred payment or other valuable consideration.
The definition being an inclusive one must be given a broad meaning.
A transfer of the right to use any goods for any purpose either for cash
or deferred payment or other valuable consideration, would come C
within the purview of the said definition. [687-B-E]

Mis. Sunrise Associates v. Govt. of NCT of Delhi & Co., decided by
S.C. on 28th April, 2006, relied on.

State of Madras v. Gannon Dunkerley & Ors., [1958] SCR 379;
D
Bharat Sanchar Nigam Ltd & Anr. v. Union ofIndia & Ors., [2006] 3 SCC .
l; Tata Consultancy Services v. State of A.P., [2005) l SCC 308; Devi Das
Gopal Krishnan & Ors. v. State of Punjab & Anr., [1967) 3 SCR 557 and
CIT, A.P. v. Motor & General Stores (P) Ltd, [1967) 3 SCR 876, AIR
(1968) SC 200, distinguished. E

2.1. Deed of Licence does not contain any prov1smn that the
appellant was required to transfer to the company, the molasses produced
by it, by exercising its exclusive right to use the sugar mill, in lieu of
the licence fee or otherwise. The Performance Guarantee Deed entered F
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 handover the
entire quantity of molasses to the Company and the appellant had no
right to sell it to any other person. [685-A-Bj
G
2.2. The quantity of supply was not fixed and would depend upon
the working of the sugar mill. It there was to be any excess or shortage
in molasses to be delivered towards the amount of licence fee, the same
. was required to be made good by either of the parties. It is, therefore,
not a case where molasses were required to be supplied, in terms of the H
A
676 SUPREME COURT REPORTS [2006) SUPP. 2 S.C.R.

provisions of the licence. Both molasses and sugar, were controlled
commodities in the year 1988. The appellant, as also the Company, were
required to sell molasses and sugar at the price notified by the
-
Appropriate Government. In terms of the Act, the manufacturer would
be a dealer. It was, therefore, not correct to contend that the licence fees
were being paid by the appellant by way of supply of molasses. In terms
B of the Deed of Licence, the appellant is responsible to manufacture in
the same capacity as that of the owner. It has to pay the licence fee in the
manner laid down in the deed of licence. The performance guarantee is
not a part of the Deed of Licence in the sense that by reason thereof the
terms and conditions for grant of the licence including that of payment
c of the licence fee, are not controlled by it. [685-G-H, 686-A-CI

2.3. The amount of licence fee is fixed. Only a sum of Rs. 6 lakhs
is to be adjusted from the amount of security deposit. In each year,
having regard to the said term, different amount of licence fee was
payable. Supply of molasses would depend upon the production in the
D
mill. The price payable there for was also variable. In a given situation,
having regard to the extent of production, the appellant, at the end of
the licence year, may become entitled to some amount from the Company
as it is possible, having regard to the agreed terms, that the appellant
was required to transfer the entire quantity of molasses produced in the
E said sugar mill, the amount of molasses supplied would exceed the
amount of licence fee found to be payable for a particular year. If, in
respect of such excess molasses, the Company was required to pay any
amount to the appellant, it cannot be said that the parties have entered
into a contract for supply of molasses produced in the sugar mill by the
F appellant herein favour of the Company by way ofa barter or exchange.
It is inconceivable in law that a licence fee can be a subject matter of
barter or exchange. A barter or exchange indisputably is distinct and
different from a sale. A contract of sale denotes a transfer of property
in goods by mutual consent. Such a transfer of ownership must be in
relation to transfer from one person to another. The consideration
G would be a price in the form of money. Only when the consideration
for transfer consists of other goods, it may be an exchange or barter.
Such is not the position here. (687-F-H, 688-A-BI

2.4. Molasses manufactured in the sugar mills, was the property
H of the appellant and it answers the description of "goods". In view of
DHAMPUR SUGAR MILLS LTD. v. COMMISSIONER OF TRADE TAX, U.P. 677

the terms and conditions of the Deed of Licence, the appellant was the A
owner thereof. The Company was to use the molasse for the purpose
of manufacture of sugar in its factory. Transfer of such molasses by the
appellant to the Company, would not be a transfer by way of transfer
of stock. It is transfer of the ownership in goods wherefor the Company
was to pay the price to the appellant. The transaction, therefore,
answers the description of "sale" within the meaning of the provisions B
of the U.P. Trade Tax Act, 1948. For each supply of molasses the
appellant would be entitled to the price thereof. The amount towards
to price of the goods could be paid either by way of cash or deferred
payment. Instead of cash, the price of molasses was to be adjusted from
the amount payable by the appellant to the owner by way of consideration c
for use of the mill. Such a mutual arrangement is merely one of the
purpose of adjusting the accounts. [690-D-F)

2.5. 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", which D
expression would take colour from deferred payment being a monetary
payment, but does not loose its character of some other monetary
payment by way of mutual arrangement. (690-G-H)

2.6. An adjustment of price in a case of this nature would come
within the purview of the term "other valuable consideration", inasmuch
E
as both the appellant and the Company, were aware that they have to
fulfil their respective terms of obligations, i.e., (i) payment of licence fee
on monetary terms; and (ii) payment of price of molasses supplied by
the appellant to the Company, which is again on monetary terms.
Parties, therefore, by mutual consent only have agreed to adjust the F
price of molasses supplied with the amount of licence fee. The rate for
supply of molasses was to be determined by the Central Government.
In that view of the matter, presumably only party or the other shall
make good the shortfall or the excess upon taking into consideration the
price of molasses fixed by the Central Government. The transaction G
does not constitute an exchange or barter. It was not a transaction by
way of transfer of stock. It was also not a transfer by way of a mortgage
or lease. (688-F-H, 689-A)

3. Money is a legal tender. Cash is, however, narrower than money.
The words "deferred payment" and "other valuable consideration" H
678 SUPREME COURT REPORTS (2006] SUPP. 2 S.C.R.

A enlarge the ambit of consideration beyond cash only. Entry 54 of List
II of the Seventh Schedule to the Constitution of India provides for "sale
of goods". Once a sale of goods takes place, the State becomes entitled
to impose tax on sale or purchase of goods. (690-H, 691-A-BI

CIVIL APPELLATE JURISDICTION Civil Appeal No. 2635 of2006.
B
From the Judgment and Order dated 21.5.2004 of High Court of
Judicature at Allahabad in Trade Tax Revision No. 1866 of 1993.

Dushyant Dave, Prasenjit Keshwani, Bharat Singh, Amol Chitale and
C Mrs. V.D. Khanna for the Appellant.

Dinesh Dwivedi, Rajeev Dubey and Kamlendra Mishra for the
Respondent.

The Judgment of the Court was delivered by
D
S.B. SINHA, J. : Leave granted.

Whether the adjustment of price of molasses from the amount oflicence
fee would amount to sale within the meaning of Uttar Pradesh Trade Tax
E Act, 1948 ('the Act', for short), is the question involved in this appeal which
arises out of the judgment and order dated 21.5 .2004 passed by the High
Court of Judicature at Allahabad in Trade Tax Revision No.1866 of 1993.

The basic facts are not in dispute. One Mis. Swaroop Vegetables
Products Industries Ltd. ('the Company', for short) owned and possessed a
F sugar mill known as Sir Shadilal Sugar and General Mills situated at
Mansurpur District, Muzaffarnagar in U.P. A Deed of Licence was executed
by the said Company in favour of the appellant herein on 3.9.1987; pursuant
whereto and in furtherance whereof, the appellant herein executed a
performance guarantee to ensure performance of the said Deed of Licence
G dated 3.9.1987. In terms of the said agreement dated 3.9.1987, a performance
guarantee was executed by the appellant herein, wherein it was agreed to by
and between the parties that a major part of the licence fee would be paid
in the shape of molasses. The contention of the appellant all along was and
still is that it is in lieu of the consideration for the right to use the said sugar
H mill, i.e., the licence fee. The app~llant was required to handover molasses
DHAMPUR SUGAR MILLS LTD. v. COMMISSIONER OF lRADE TAX, U.P. [SINHA, J.) 679

to the said Company for an amount equivalent to the licence fee and such A
a transaction would not constitute a sale of molasses so as to attract the
provisions of the Act.

It is not in dispute that for the assessment year 1987-88, the appellant
was held to be liable to pay trade tax to the extent of Rs.3, I 9,699.12p. by
an order of assessment dated 30.7.1991 passed by the Assistant Commissioner,
B
Trade Tax, Najibabad. The Company, however, preferred an appeal
thereagainst as it was said to be the person aggrieved by the said order of
assessment dated 30. 7.1991 on the premise that in the terms of the agreement
between the parties, the Company would be ultimately held liable for
reimbursing the appellant to the extent of the amount of tax paid. In appeal C
No.128/91, the Deputy Commissioner, Trade Tax, Moradabad held by order
dated 9.1.1992, 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.
However, it was directed that in the pending appeal preferred by the
appellant, the amount assessed on molasses would be reduced. D
In the meantime, the appellant also preferred an appeal against the said
order of assessment and by an order dated 6.2.1992, the Deputy Commissioner
granted the benefit of his earlier order dated 9.1.1992 to it, but in other
respects, the said appeal was dismissed. Aggrieved by and dissatisfied with
the said order dated 9 .1.1992, an appeal was preferred thereagainst by the E
respondent herein before the Trade Tax Tribunal. The said appeal was found
to be barred by limitation and on the said ground alone it was dismissed by
an order dated 26.8.1992. However, the respondent preferred another appeal
before the Trade Tax Tribunal against the order dated 6.2.1992. An appeal
was also preferred by the appellant herein before the said Tribunal questioning F
the order dated 6.2.1992 passed by the Deputy Commissioner (Appeal),
Trade Tax in so far as it refused relief to the petitioner on various other
grounds. Both the appeals were heard together. By an order dated 26/
28.6.1993, the appeal preferred by the Revenue was dismissed on the
premise that the issues stood concluded by the dismissal of the second appeal
of the department against the order dated 9.1.1992. However, the Company G
was proceeded against by the Revenue for imposition of tax for the
assessment year 1988-89 purported to be in terms of Section 3F of the Uttar
Pradesh Trade Tax Act, 1948 on the licence fee of Rs.56 lakhs on the ground
that the said sum was paid to it by the appellant herein by way of
consideration for the right to use the goods. A writ petition was filed by H
680 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A the Company questioning the validity of the said order. The Revenue also
filed a revision petition, being Sales Tax Revision No.1866/93, before the
High Court against the order dated 26/28.6. 93 in Second Appeal No.446/92
(87-88) U.P., Second Appeal No.447/92 (87-88) Centre and Second Appeal
No.283/92. The writ petition filed by the Company was allowed by an order
dated 17.2.1998 holding that 'sugar mill' was not 'goods' and hence 'licence
B fee' for its use was not exigible to trade tax.

However, revision petition filed by the Revenue herein was allowed by
the High Court by reason of the impugned order. The appellant is, thus,
before us.
c
Mr. Dushyant Dave, learned Senior Coun~el appearing on behalf of the
appellant, submitted that an exchange or barter, in view of a large number
of decisions of this Court cannot be said to be a sale within the meaning of
the relevant provisions of the Act. Reliance in this behalf was placed on
Mis. Gannon Dunkerley & Co. & Ors. v. State of Rajasthan & Ors., [1993]
D
1 SCC 364. The learned counsel urged that the expression "price" would
mean only cash or deferred payment. Reliance in this behalf has been placed
on Devi Das Gopal Krishnan & Ors. v. State of Punjab & Ors., [1967] 3
SCR 557.

E It was further submitted that in view of the decision of this Court in
Mis. Gannon Dunkerley & Co. (supra) even after the Forty-sixth Constitution
Amendment Act, for the purpose of Entry 54 List II of the Seventh Schedule
of the Constitution, subject to the exception contained in Article 366(29-A),
the meaning of the terms "goods" or "deemed sales" would remain the same.
F Reliance in this regard was placed on Bharat Sanchar Nigam Ltd & Anr.
v. Union of India & Ors.. [2006] 3 SCC I.

With regard to the essentials of a sale for the purpose of the Sales Tax
Act, the word "sale" will have the same meaning as what is contained in
the Sale of Goods Act, 1930, it was argued. Hence, the impugned judgment
G is wholly unsustainable. Learned counsel contended that the payment of
"price" being an essential component of a sale, the arrangements entered into
by and between the partie~ hereto, cannot be held to be a sale within the
meaning of the said Act or otherwise.

H Mr. Dinesh Dwivedi, learned Senior Counsel appearing on behalf of
DHAMPUR SUGAR MILLS LID. 1·. COMMISSIONER OF TRADE TAX, U.P. [SINHA, J.] 681

the respondent, on the other hand, submitted that the intention of the parties, A
as to whether the transaction in question would be a "sale" within the
meaning of the Act must be gathered from the terms of the licence itself and
upon a perusal of the relevant terms of the said deed, it is clear that the
transaction would constitute a sale.

The U.P. Trade Tax Act, 1948 was enacted to provide for the levy of B
tax on the sale or purchase of the goods. "Sale" has been defined in Section
2(h) of the U.P. Trade Tax Act, 1948. The said provision reads as under:

"2(h) "sale" with its grammatical variations and cognate expression,
means any transfer of property in goods (otherwise than by c
way of a mortgage, hypothecation, charge or pledge) for cash
or deferred payment or other valuable consideration and
includes-

(i) a transfer, otherwise than in pursuance of a contract, of
property in any goods for cash, deferred payment or D
other valuable consideration;

(ii) a transfer of property in goods (whether as goods or in
some other form) involved in the execution of a works
contract;
E
(iii) the delivery of goods on hire purchase or any system of
payment by instalments;

(iv) a transfer of the right to use any goods for any purpose
(whether or not for a specified period) for cash, deferred F
payment or other valuable consideration;

(v) the supply of goods by any unincorporated association
or body of persons to a member thereof for cash, deferred
payment or other valuable consideration; and
G
(vi) the supply, by way of or as part of any service or in any
other manner whatsoever of goods, being food or any
other article for human consumption or any drink (whether
or not intoxicating) where such supply or service is for
cash, deferred payment or other valuable consideration."
H
682 SUPREME COURT REPORTS (2006] SUPP. 2 S.C.R.

A The tenns "Manufacturer" and "dealer" are defined in Sections 2 (ee)
and 2(c) of the said Act, which are as under :

"2(ee) "manufacturer" in relation to any goods means the.dealer
who makes the first sale of such goods in the State after their
manufacture and includes,
B
(i)(a) a dealer who sells bicycles m completely knocked
down fonn,

(ii)(a) a dealer who makes purchases from any other dealer
not liable to tax on his sale under the Act other than
c sales exempted under section 4, 4-A and 4-AAA."

2(c) "dealer" means any person who carries on in Uttar Pradesh
(whether regularly or otherwise) the business of buying,
selling, supplying or distributing goods directly or indirectly,
for cash or deferred payment or for commission, remuneration
D or other valuable consideration and includes -

(i) a local authority, body corporate, company, any co-
operative society or other society, club, finn, Hindu
undivided family or other association of persons which
E carries on such business;

(ii) a factor, broker, arhati, commission agent, de! credere
agent, or any other mercantile agent, by whatever name
called, and whether of the same description as
hereinbefore mentioned or not, who carries on the
F business of buying, selling, supplying or distributing
goods belonging to any principal, whether disclosed or
not;

(iii) an auctioneer who carries on the business of selling or
auctioning goods belonging to any principal, whether
G disclosed or not, and whether the offer of the intending
purchaser is accepted by him or by the principal or
nominee of the principal;

(iv) a government which, whether in the course of business
or otherwise, buys, sells, supplies or distributes goods,
H
DHAMPUR SUGAR MILLS LTD. v. COMMISSIONER OF TRADE TAX, U.P. [SINHA, J.] 683

directly or otherwise for cash or for deferred payment A
or for commission, remuneration or other valuable
consideration;

(v) every person who acts within the State as an agent of
a dealer residing outside the State, and buys, sells,
supplies or distributes goods in the State or acts on B
behalf of such dealer as '-

(A) a mercantile agent as defined in the Sale of Goods
Act, 1930; or

(B) an agent for handling of goods or documents of title c
relating to goods; or

(C) an agent for the collection or the payment of the
sale price of goods or as a guarantor for such
collection or such payment; D
(vi) a firm or a company or other body corporate, the
principal office or headquarter whereof is outside the
State, having a branch or office in the State, in respect
of purchases or sales, supplies or distribution of goods
through such branch or office: E

PROVIDED that a person who sells agricultural or horticultural
produce grown by himself or grown on any land in which he has
an interest, whether as owner, usufructuary mortgagee, tenant, or
otherwise, or who sells poultry of dairy products from fowls or F
animals kept by him shall not, in respect of such goods, be treated
as a dealer.

(vii) every person who carries on the business of transfer of
property in goods (whether as goods or in some other
form) involved in the execution of a works contract; G
(viii) every person who carries on business of transfer of the
right to use any goods for any purpose.(whether or not
for a specified period) for cash deferred payment or
other valuable consideration;"
H
684 SUPREME COURT REPORTS (2006] SUPP. 2 S.C.R.

A The question, which arises for our consideration, is whether the
transaction involves a transfer of property or a transfer of a right to use any
goods or not.

The appellant herein, indisputably, carried on the business of manufacture
of sugar and molasses. It does not use the molasses itself. The stock of
B molasses has not been transferred by the Appellant. The stock of molasses,
indisputably, used to be transferred to a company. The Company was the
owner of the mill. The premises of the mill had been taken on lease,
although, termed as a licence for a period of I0 years. By reason of the
purported Deed of Licence, the appellant has been allowed exclusive use of
c the sugar mill along with its plant, machinery, fixtures and fittings, etc. The
appellant had taken over the whole sugar mill. The Company has not
retained any control over the operation of the said mill. In terms of the said
Deed, the appellant was to pay a sum of Rs.56 lakhs per annum by way of
licence fee for the use of the entire sugar mill complex. Such licence fee
was payable at the end of every year of the licence, i.e., from Ist July to
D 30th June of the succeeding year. The licensee was to pay during the period
of the licence, all rates and taxes leviable by the Government or local
authorities on the factory. Clause 8 of the said Deed of Licence, inter alia,
is as under:

E "8. That the Licensee shall be entitled to claim and utilize all
quotas/permits/licenses/rights /permission/amenities and other
facilities and entitlements that were available to the Sugar Mills
hereto before."

By reason of the provisions of the said licence, the ultimate control over
F the affairs of the sugar mill vested with the appellant. Clause 11 provides
that the licensee was granted full liberty to repair/replace the plant and
machinery, if necessary, for the proper running of the sugar mill and to carry
out the civil construction work, wherever considered necessary. In terms of
Clause 18 of the purported Deed of Licence, the licensee was required to
G execute a performance guarantee in favour of the owner to ensure performance
on its part and the Company was required to assure the appellant that it would
not in any manner put any hindrance to the running of the mill during the
period of the licence and the Company would also ensure that none of its
creditors as on date including its Bankers, take any steps to hinder the
working of the mill.
H
DHAMPUR SUGAR MILLS LTD.'" COMMISSIONER OF TRADE TAX, U.P. [SINHA, J.] 685

It is beyond any controversy that the mode and manner in which the A
licence fee was to be paid, is not the subject matter of the said Deed. In
other word;;, the Deed of Licence does not contain any provision that the
appellant was required to transfer to the company, the molasses produced
by it, by exercising its exclusive right to use the sugar mill, in lieu of the
licence fee or otherwise. The Performance Guarantee Deed entered into by
the appellant herein was a mechanism to pay the licence fee. By reason of
B
the said performance guarantee, only a provision has been made· in terms
whereof the appellant was required to handover the entire quantity of
mofasses to the Company and the appellant had no right to sell it to any
other person. Clause I of the said Performance Guarantee Deed speaks of
furnishing of the security of Rs.50 lakhs to the Company as an interest free c
deposit. Out of the said sum, a sum of Rs.6 lakhs was to adjusted towards
payment of the licence fee of Rs.56 lakhs, as a result whereof, the security
amount would be reduced proportionately on completion of each year of
licence. Only the unadjusted amount of security, in terms of the said Deed,
was required to be refunded by the Company to the appellant at the time of
D
handing over possession of the mill. Clauses 4 and 5 of the said Performance
Guarantee Deed read as under:

"4. That Licence Fee in question will be paid in shape of Molasses
and the quantity thereof shall depend upon the working of the
Sugar Mill. E
5. That at the end of every Licence Year i.e. 30th June the value
of Molasses will be ascertained on the basis of rates notified
by the Government for the relevant year. In case there is any
excess or shortage towards the amount of Licence Fee, the F
same will be made good by either of the parties as the case
may be."

The said provisions are required to be read conjointly. For the purpose
of supply of molasses, the rates notified by the Government was required
to be taken into consideration. The quantity of supply was not fixed and G
would depend upon the working of the sugar mill. If there was to be any
excess or shortage in molasses to be delivered towards the amount of licence
fee, the same was required to be made good by either of the parties. A
dispute resolution mechanism between the parties is contained in Clause 6
of the said Deed of Performance Guarantee. It is, therefore, not a case where H
686 SUPREME COURT REPORTS (2006] SUPP. 2 S.C.R.

A molasses were required to be supplied, in terms of the provisions of the
licence. Both molasses and sugar, were controlled commodities in the year
1988. The appellant, as also the Company, were required to sell molasses
and sugar at the price notified by the Appropriate Government. In terms of
the Act, the manufacturer would be a dealer. The appellant, therefore, was
a dealer. It was, therefore, not correct to contend that the licence fees were
B being paid by the appellant by way of supply of molasses. In terms of the
Deed of Licence, the appellant is responsible to manufacture in the same
capacity as that of the owner. It has to pay the licence fee in the manner
laid down in the deed of licence. The performance guarantee is not a part
of the Deed of Licence in the sense that by reason thereof the terms and
C conditions for grant of the licence including that of payment of the licence
fee, are not controlled by it. The definition of"sale" has undergone a change
after coming into force of the Forty Sixth Constitution Amendment Act.
Clause 29-A of Article 366 of the Constitution of India defines "sale" to
mean:

D "366. (29-A) "tax on the sale or purchase of goods" includes-

(a) a tax on the transfer, otherwise than in pursuance of
a contract of property in any goods for cash, deferred
payment or other valuable consideration;

E (b) a tax on the transfer of property in goods (whether
as goods or in some other form) involved in the execution
of a works contract;

(c) a tax on the delivery of goods on hire-purchase or
any system of payment of instalments;
F
(d) a tax on the transfer of the right to use any goods
for any purpose (whether or not for a specified period)
for cash, deferred payment or other valuable consideration:

(e) a tax on the supply of goods by any unincorporated
G
association or body of persons to a member thereof for
cash, deferred payment or other valuable consideration;

(f) a tax on the supply, by way of or as part of any
service or in any other manner whatsoever, of goods,
H being food or any other article for human consumption
DHAMPUR SUGAR MILLS LTD. 1·. COMMISSIONER OF TRADE TAX, U.P. [SINHA, J.] 687

or any drink (whether or not intoxicating), where such A
supply or service, is for cash, deferred payment or other
valuable consideration,

and such transfer, delivery or supply of any goods shall be deemed
;- .
to be a sale of those goods by the person making the transfer,
delivery or supply and a purchase of those goods by the person to B
whom such transfer, delivery or supply is made;"

The State of Uttar Pradesh has amended the definition of sale in
consonance with Clause 29-A of Article 366 of the Constitution.
c
The definition of'sale', thus, is different from the provisions of the Sale
of Goods Act, 1930, as in terms thereof a contract of sale of goods would
be deemed to be a contract of sale or transfer of property in the goods to
the buyer for a price. However, 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
D
cash or deferred payment or other valuable consideration. The definition
being an inclusive one must be given a broad meaning. 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 said
definition. E

The performance clause contained in Clause 18 of the Deed of Licence
does not govern the other terms and conditions of the licence. The amount
of licence fee is fixed. Only a sum of Rs.6 lakhs is to be adjusted from the
amount of security deposit. In each year, having regard to the said term,
F
different amount of licence fee was payable. Supply of molasses would
depend upon the production in the mill. The price payable therefor was also
variable. In a given situation, having regard to the extent of production, the
appellant, at the end of the licence year, may become entitled to some amount
from the Company as it is possible, having regard to the agreed terms, that
the appellant was required to transfer the entire quantity of molasses G
produced in the said sugar mill, the amount of molasses supplied would
exceed the amount of licence fee found to be payable for a particular year.
If, in respect of such excess molasses, the Company was required to pay any
amount to the appellant, in our opinion, it cannot be said that the parties have
entered into a contract for supply of molasses produced in the sugar mill by H
688 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A the appellant herein in favour of the Company by way of a barter or
exchange.

It is inconceivable in law that a licence fee can be a subject matter of
barter or exchange. A barter or exchange indisputably is distinct and
different from a sale. A contract of sale denotes a transfer of property in
B goods by mutual consent. Such a transfer of ownership must be in relation
to transfer from one person to another. The consideration would be a price
in the form of money. Only when the consideration for transfer consists of
other goods, it may be an exchange or barter. Such is not the position here.

c In State ofMadras v. Gannon Dunkerley& Co., [1958] SCR379, relied
upon by Mr. Dave, this Court was concerned with a question as to whether
any transfer of property in goods was involved in the execution of a works
contract.

By reason of Clause 29-A of Article 366, the ratio in Gannon Dunkerley
D & Co. (supra) has been overcome, as title to the goods, although, may remain
with the transferee, a transfer of right to use the goods would also be a sale.
Even a lease of goods would be a sale. Thus, by reason of the said definition,
though an essential ingredient of a sale as defined in the Sale of Goods Act,
1930, may be absent, the transaction may amount to a sale for the purpose
E of levy of Saies Tax under the Act. What has not been altered by reason
of the said provision is the meaning of the word "goods". In this case, the
concept of goods is not in dispute. Molasses ls indisputably goods. It can
be transferred for a definite price.

F An adjustment of price in a case of this nature, in our opinion, therefore,
would come within the purview of the term "other valuable consideration",
inasmuch as both the appellant and the Company, were aware that they have
to fulfil their respective terms of obligations, i.e., (i) payment of licence fee
on monetary terms; and (ii) payment of price of molasses supplied by the
appellant to the Company, which is again on monetary terms. Parties,
G therefore, by mutual consent only have agreed to adjust the price of molasses
supplied with the amount of licence fee. The rate for supply of molasses
was to be determined by the Central Government. In that view of the matter,
presumably one party or the other shall make good the shortfall or the excess
upon taking into consideration the price of molasses fixed by the Central
H government. The transaction, in our opinion does not constitute an exchange
DHAMPUR SUGAR MILLS LID. 1•. COMMISSIONER OF TRADE TAX, U.P. [SINHA, J.) 689

or barter. It was not a transaction by way of transfer of stock. It was also A
not a transfer by way of a mortgage or lease.

In Bharat Sanchar Nigam Ltd. & Anr. v. Union ofIndia & Ors., [2006]
3 SCC 1, whereupon Mr. Dave placed strong reliance, this Court has clearly
held that the content of a concept would not remain static and an interpretation
of the Constitution vis-a-vis the statute framed in view of the amendments B
in the Constitution, may be given different meanings. But, what had been
held therein was that an incorporeal right involved in the said decision was
not "goods" for the purpose of imposition of Sales Tax, as Electromagnetic
waves being not capable of being abstracted or consumed in the sense that
they are not extinguished by the user or otherwise, they are not marketable c
and/or a subscriber to a telephone service may not have intended to purchase
or obtain any right to use electromagnetic waves. It was held that the
transaction by which mobile phone connection is given, is a service and not
a sale of goods. It is, however, interesting to note the following observations:
D
"We cannot anticipate what may be achie.ved by scientific and
technological advances in future. No one has argued that at present
electromagnetic waves are abstractable or are capable of delivery.
It would, therefore, appear that an electromagnetic wave (or radio
frequency as contended by one of the counsel for the respondents),
does not fulfil the parameters applied by the Supreme Court in Tata E
Consultancy for determining whether they are goods, right to use
of which would be a sale for the purpose of Article 366(29-A)(d)."

The subject matter involved in the said decision of Bharat Sanchar
Nigam Ltd. & Anr. (supra) primarily was held not to be within the purview
F
of definition of"goods" as the contract between the telecom service provider
and the subscriber was merely to receive, transmit and deliver messages of
the subscriber through a complex system of fibre optics, satellite and cables.

This Court, it may be noticed, in a recent Constitution Bench judgment
in Mis. Sunrise Associates v. Govt. of NCT of Delhi & Ors., (pronounced G
on 28th April, 2006), has opined that the sale of lottery ticket or a railway
ticket may not be a sale of goods.

In Tata Consultancy Services v. State ofA. P., [2005] I SCC 308, a CD
containing software was held to be goods within the meaning of the A.P. H
690 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A General Sales Tax Act, 1957.

Devi Das Gopal Krishnan & Ors v. State of Punjab & Anr.. [1967]
3 SCR 557 and CIT. A.P. v. Motor & General Stores (P) Ltd., [1967] 3 SCR
876 : AIR (1968) SC 200 were relied upon by Mr. Dave for the proposition
that the expression "valuable consideration" takes colour from the preceding
B expression "cash or deferred payment". The said decision is not an authority
for the proposition that cash or deferred payment cannot be by way of
adjustment. If the parties intended to adjust their own dues, having regard
to different transactions in terms whereof both the parties to the said
transaction were required to pay in cash or by way of deferred payment, the
c same would not militate against the interpretation of the expression "valuable
consideration", although, the term "valuable consideration" in the changed
context (in view of the Constitution amendment) may be viewed differently.
But, having regard to the fact situation obtaining in this case, we may not
have to go into the said question.

D
Molasses manufactured in the sugar mills, was the property of the
appellant and it answers the description of "goods". In view of the terms
and conditions of the Deed of Licence, the appellant was the owner thereof.
The Company was to use the molasses for the purpose of manufacture of
sugar in its factory. Transfer of such molasses by the appellant to the
E Company, would not be a transfer by way of transfer of stock. It is transfer
of the ownership in goods wherefor the Company was to pay the price to
the appellant. The transaction, therefore, beyond any doubt, answers the
description of"sale" within the meaning of the provisions of the U.P. Trade
Tax Act, 1948. For each supply of molasses the appellant would be entitled
F to the price thereof. The amount towards the price of the goods could be
paid either by way of cash or deferred payment. Instead of cash, the price
of molasses was to be adjusted from the amount payable by the appellant
to the owner by way of consideration for use of the mill. Such a mutual
arrangement is merely one for the purpose of adjusting the accounts. The
transactions between the parties are in effect and substance involve passing
G of monetary consideration. It would, thus, come within the purview of the
expression "any other valuable consideration", which expression would take
colour from deferred payment being a monetary payment, but does not loose
its character of some other monetary payment by way of mutual arrangement.
The parties are not bartering or exchanging any goods so that the element
H of monetary consideration is absent. Money is a legal tender. Cash is,
DHAMPUR SUGAR MILLS LTD v. COMMISSIONER OF TRADE TAX, U.P. [SINHA, J.) 691

however, narrower than money. The words "deferred payment" and "other A
valuable consideration" enlarge the ambit of consideration beyond cash only.
Entry 54 of List 11 of the Seventh Schedule to the Constitution of India
provides for "sale of goods". 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", now the Court is not necessarily
required to fall upon the definition of sale of goods, as contained in the Sale
B
of Goods Act, 1930. It has to be governed by its enlarged definition under
Clause (29-A) to Article 366 of the Constitution of India. Once an essential
component of sale takes place, Sales tax would, indisputably, be payable.
By reason of such an arrangement by the parties, the State is not creating
a new taxable event nor imposing a new tax which was unknown in law. c
In fact, the transaction entered into by the parties even does not provide
for any camouflage to evade tax. They are clear and unambiguous.

We, therefore, are of the opinion that the High Court cannot be said D
to have committed any error in passing the impugned judgment.

In regard to the submissions of the learned counsel for the parties that
as no appeal was preferred from the order dated 30.7.1991, wherein the
Company was the appellant, the respondent must be held to have accepted
the order, is not acceptable to us, as, admittedly, the appellant itself is liable E
to pay the tax. The contentions of the appellant that having regard to the
transaction entered into by and between the parties and no sale having taken
place, they are not liable to pay any tax, will not be correct. Non-filing of
the appeal against the said order dated 30.7.1991, would not take away the
effect of order of assessment passed as against the appellant by the Assessing F
Authority. Therefore, for the reasons aforementioned, we do not find any
merit in the contentions of the appellant. Consequently, the appeal is
dismissed.

No costs.
G
v.s. Appeal dismissed.