JUDGMENT S.C. Manchanda, J.
1. This is a case stated under Section 11(1) of the U.P. Sales Tax Act (hereinafter referred to as the Act). The question referred is:-
Whether the giving of bullion by a dealer in exchange for purchase of ready-made ornaments manufactured by goldsmiths is a 'sale of bullion' within the meaning of the U.P. Sales Tax Act or is a barter or exchange transaction and, accordingly, does not come within the purview of the said Act ?
2. The facts lie within a narrow compass. The assessee is a dealer in bullion and ornaments. The relative assessment year is 1956-57. The assessee disclosed a turnover of Rs. 2,05,000 for ornaments and Rs. 1,60,014 for bullion. The Sales Tax Officer rejected the accounts and determined the turnover at Rs. 4,05,000 and apportioned this between the turnover of ornaments and bullion at Rs. 2,00,000 and Rs. 2,05,000, respectively. Aggrieved by that order, the assessee filed an appeal to the Judge, Sales Tax (Appeals), who reduced the turnover to Rs. 3,80,000 (Rs. 1,80,000 for ornaments and Rs. 2,00,000 for bullion). Against this order both the department and the assessee went up in revision. According to the department the small reduction in the gross turnover was unjustified. On the other hand, the assessee reiterated its contention that on the facts found by the Judge (Appeals) that obtaining new ornaments by giving in exchange bullion from his own stock plus manufacturing charges to the goldsmiths did not amount to a sale of bullion and as such that part of the transaction was not liable to sales tax and the Judge (Appeals) had erred in treating the bullion so given in exchange for the ornaments as suppression of sales of bullion. The Judge (Revisions) rejected the appeal of the department, and accepting the contention and appeal of the assessee, reduced the turnover of bullion by Rs. 1,40,000. Hence, this reference at the instance of the Commissioner under Section 11(1) of the Act.
3. Mr. Raja Ram Agarwal, learned Junior Standing Counsel contends, that in the circumstances of the case, bullion given in exchange for gold ornaments manufactured by Sunars was a "sale" by the assessee and even if it was only an "exchange" or "barter" it should, in the circumstances of the case, have been treated as a sale. He relied upon a passage from Halsbury's Laws of England (Volume 34), Simonds Edition, page 5, paragraph 1. The relevant portion whereof reads :-"Sale is the transfer by mutual assent of the ownership of a thing from one person to another for a money price. Where the consideration for the transfer consists of other goods or some other valuable consideration not being money the transaction is called exchange or barter ; but in certain circumstances it may be treated as one of sale." It was also contended that the definition of "sale" as given in the U.P. Sales Tax Act is much wider than that found under the Sale of Goods Act, and, therefore, even if no money consideration passed in the exchange of bullion for ornaments it would, nevertheless, be a "sale" within the meaning of Section 2, Clause (h), of the U.P. Sales Tax Act, as the transfer of bullion would be a valuable consideration for the transfer of the gold ornaments. Clause (h) of Section 2 reads :-
(h) Sale.-This means within its grammatical variations and cognate expressions any transfer of property for cash or deferred payment or other valuable consideration.
4. Bullion was, undoubtedly, the stock-in-trade of the assessee's business and it was certainly not given as cash for the purchase of ornaments, and, as such, it might have been possible for the department to contend that bullion was given as "other valuable consideration' within the meaning of Section 2(h) of the Act. The intention of inserting these words may have been to bring within the net of the Sales Tax Act all such transactions. Such a view would appear to have been accepted by Govinda Menon, J., as he then was, injaya-rama Chettiar, In re, [1948] 1 S.T.C. 168 by holding :-
Because of the words 'other valuable consideration' in the Madras General Sales Tax Act, 1939, the scope and amplitude of the word sale was much larger than under the Sale of Goods Act, 1930.
5. It was further pointed out in that case that "every sale under the Sale of Goods Act was certainly a sale under the General Sales Tax Act, but every sale under the General Sales Tax Act will not come within the definition of the term under the Sale of Goods Act." The facts of that case were more or less similar to the facts of the present case and the department could well have taken advantage of it but for a subsequent decision of the Supreme Court in the State of Madras v. Gannon Dunkerley & Co., Madras A.I.R. 1958 S.C. 560. In that case the vires of the words "other valuable consideration" contained in the definition of "sale" in the Madras General Sales Tax Act came up for consideration. After tracing the evolution of the law relating to the sale of goods from Roman Law to the time of the promulgation of the Indian Sale of Goods Act, 1930, and the coming into existence of the Constitution of India, it was held :-
A power to enact a law with respect to tax on sale of goods under Entry 48 (in List II, Government of India Act, 1935) must, to be intra vires, be one relating in fact to sale of goods and, accordingly, the Provincial Legislature cannot, in the purported exercise of its power to tax sales, tax transactions which are not sales by merely enacting that they shall be deemed to be sales...
Sales tax was not a subject which came into vogue after the Government of India Act, 1935. It was known to the framers of that statute and they made express provision for it under Entry 48. Then it becomes merely a question of interpreting the words, and on the principle, already stated, that words having known legal import should be construed in the sense which they had at the time of the enactment, the expression 'sale of goods' must be construed in the sense which it has in the Sale of Goods Act.
6. A contention based on the aforesaid passage of Halsbury's Laws of England was also raised but it was repelled by the Supreme Court.
7. In this view of the matter, the words "other valuable consideration" which occur in Section 2(h), and which do not find a place in the definition of "sale" in the Sale of Goods Act, must be held to be ultra vires the scope of the Provincial or State Legislatures. Those words, at best, can be interpreted, on the basis of the rule of ejusdem generis to mean payment, i.e., by cheque, bills of exchange or any such other negotiable instruments. But they cannot possibly cover a case where no price is paid and the transaction is merely one of exchange or barter. Therefore, in the present case where gold bullion was an item of the stock-in-trade and it was exchanged for ornaments which also formed a part of the stock-in-trade of the assessee's business, it is difficult, if not impossible, to equate bullion with cash or coins, cheque or a negotiable instrument. The definition of bullion is "uncoined gold and silver in mass." Bullion is not sovereign or guinea and as such, particularly when it happens to constitute the stock-in-trade of the assessee's business, it cannot be treated as cash or deferred cash payment within the meaning of Section 2(h) of the Act, and therefore will not satisfy the definition of "sale" in the Sale of Goods Act, which has the same meaning as in the U.P. Sales Tax Act.
8. It cannot be denied that if a person has gold lying at home and he gives it to the goldsmith to convert it into ornaments, no sale of gold takes place. Then again, if the assessee in the present case, had given to the goldsmith the requisite quantity of gold lying with him before the ornaments were prepared, the transaction would not have amounted to a sale. Merely because gold ornaments when ready were brought to the assessee for purchase and he replaced the gold content thereof from his stock-in-trade will not alter the true nature or character of the transaction. It is no doubt true, as pointed out by Lord Greene, M.R., in Henriksen v. Grafton Hotel [1943] 11 I.T.R. (Suppl.) 10 "that it frequently happens in income-tax cases that the same result in the business sense can be secured by two different legal transactions one of which may attract tax and the other, not. This is no justification for saying that a taxpayer who has adopted a method which attracts tax is to be treated as though he had chosen a method or device different from the other." That principle however has no application to the facts of the present case, where the character and nature of the transaction, whether the gold was given prior or after the manufacture of the ornaments, remained the same. The transaction would not be a sale within the meaning of Section 2(h) of the Act. Such an interpretation may prevent the department from obtaining sales tax from the assessee twice over on the same quantity of gold or bullion, i.e., when it exchanges it for equivalent weight of gold ornaments and again when the gold ornaments are sold by it, but that cannot be helped in view of the law as it stands.
9. For the reasons given above, the question is answered by saying that the transaction was not a sale but only exchange or barter, and, therefore, did not fall to be assessed within the meaning of Section 2(h) of the Act. The department will pay the costs of this reference to the assessee, which is assessed at Rs. 100.
M.H. Beg, J.
10. The facts giving rise to this reference have been discussed fully by my learned brother Manchanda, J., in the answer given by him. I would only like to add some reasons for coming to the same conclusion.
11. The contentions of Mr. Raja Ram Agarwal appearing for the Sales Tax Commissioner, seemed to us to imply that the definition of "sale" in Section 2(h) of the U.P. Sales Tax Act of 1948 (hereinafter referred to as the Act) is wider than the definition of "sale" in Section 4 of the Sale of Goods Act. The last-mentioned provision defines a contract of sale of goods as one "whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price." "Price" is defined, in Section 2(10) of the Sale of Goods Act, as "money consideration for a sale of goods". When asked whether his contention was that the definition of "sale" in Section 2(h) of the Act. was wider than the definition of "sale of goods" found in the Sale of Goods Act, Mr. Agarwal frankly conceded that he could not put forward such an argument. The reason for the position adopted by Mr. Agarwal is clear. It has been held by the Supreme Court of India in State of Madras v. Gannon Dunkerley & Co. [1958] 9 S.T.C. 353 that the expression "sale of goods" is a nomen juris, and a power to tax "sale of goods" within the legislative competence of the Provincial Legislature, under the Government of India Act, 1935, which is relevant here, would not extend beyond the power to tax what is "sale of goods" in the legal sense. The constitutional validity of any provision of the Act is neither before us nor can it be canvassed on a reference to this Court under Section 11 of the Act after the view taken by their Lordships of the Supreme Court in Venkataraman & Co. v. State of Madras 60 I.T.R. 112. Nevertheless, in deciding which of the two possible constructions of a a legislative provision is to be adopted, I think we should prefer an interpretation which, while it is reasonably acceptable, also avoids constitutional invalidity. Such a rule of interpretation has been repeatedly laid down by the Supreme Court, even in those cases where violation of fundamental rights of citizens may be involved : (See Kedar Nath v. State of Bihar A.I.R. 1962 S.C. 955; Govind Lalji v. State of Rajasthan A.I.R. 1963 S.C. 1638 and Corporation of Calcutta v. Liberty Cinema A.I.R. 1965 S.C. 1107).
12. Mr. Agarwal contended that since the definition of "sale" in Section 2(h) of the Act covers a transfer of property for cash as well as for "other valuable consideration" it must include such consideration as gold which was "readily convertible into cash" and was as good as cash. He went on to argue that such a meaning given to the term "sale" found in Section 2(h) of the Act was within the scope of the definition of "sale" in the Sale of Goods Act. The argument involves the addition of some explanatory words after "other valuable consideration" such as: which is readily convertible into cash. We cannot add to or insert or read words into the statutory provision which may make the concept of sale wide enough to include barter pure and simple. The only reasonable way of interpreting Section 2(h) of the Act, without adopting a construction which may affect the constitutional validity of the definition, as it stands, is to construe the words "other valuable consideration" ejusdem generis if that is possible. We have, therefore, to consider whether the ejusdem generis rule would apply here. That rule, embraced within the principle of "noscitur a sociis" was thus stated by Lord Campbell in R. v. Edmundson (1859) 28 L.J.M.C. 213 at p. 215: "Where there were general words following particular and specific words, the general words must be confined to things of the same kind as those specified." By applying this rule the presumed intention of the Legislature is used to restrict the ambit of wide and general expressions.
13. It is evident that the Act itself is intended to deal with sales and not with transactions which are legally beyond the legal connotation of the term "sale". At least that is a legitimate presumption which can be overridden if the definition of "sale" given in the Act goes clearly beyond its legal meaning. That legal meaning has become fixed as pointed out by their Lordships of the Supreme Court in State of Madras v. Gannon Dunkerley & Co. [1958] 9 S.T.C. 353 I do not think that we can impute to the Legislature an intention to go deliberately beyond the legally fixed meaning of the term "sale" unless we are driven to such a conclusion by the language of the statute.
14. The concept of sale was distinguished from barter or exchange long ago in our own ancient jurisprudence as well as in Roman Law. In Roman Law, "sale of goods", known as emptio venditio, in which the title to the goods passed from the vendor to the purchaser, was a very different transaction from what was known as a "specificatio" of the kind in which the ownership of the substance used remained with the person to whom the metal or other substance belonged. In the case before us, the substance, such as gold with a goldsmith, who converts it into an ornament, was convertible back into its original form, say by melting. In such "specificatio" there is no transaction such as the "specificatio" of Roman Law, but the practice adopted by the assessee seems to be a convenient business usage designed to avoid the necessity of formal handing over of gold under contracts for piece-work. The transactions with which we are concerned here are mere barters of bullion for bullion together with the payment of wages for the work done by the goldsmiths. Neither in form nor in substance can such a transaction be looked upon as a "sale" in the legal sense of that term. There are no specific words used in Section 2(h) of the Act which may lead to the inference that such transactions which are beyond the purview of a "sale", as it is ordinarily understood in law, must be meant to be included here.
15. Mr. Agarwal tried to draw our attention to the varying definitions of the term "sale" given in particular enactments in England. We are, however, not concerned here with any enactment where the term "sale" may have a peculiar meaning for the purposes of that particular enactment. We are concerned with a rather general taxing statute which purports to deal with sales in their ordinary legal sense and which does not seem to go beyond that. The general legal conception of a sale is that of "a. transmutation of a property of a right from one man to another in consideration of a sum of money as opposed to barters, exchanges and gifts": (See Gill v. Eagleston 187 N.W. P. 871 quoted at page 58 in "Words and Phrases", Vol. 38, West Publishing Co.).
16. The term "money" has also a legal meaning as well as a popular sense both of which bar the inclusion of bullion or metal of any kind as such in the concept of "money". After all, we are not concerned with what may pass for money in exceptional conditions or under the special usages and customs of a peculiar or commercially backward or primitive society. Legally speaking, "money" is just what is "legal tender", or what a tradesman is legally bound to accept under the law of the country. The term "money" is explained in the Shorter Oxford English Dictionary as follows :-
In modern use applied indifferently to coin and to such promissory documents representing coin (esp. bank notes) as are currently accepted as a medium of exchange...
17. The term "cash" is narrower than "money". The words "deferred payment or other valuable consideration" used in Section 2(h) of the Act, merely enlarge the ambit of the consideration beyond "cash", but they do not, in my opinion, carry it outside the scope of the term "money". The words "other valuable consideration" are general as compared with the two preceding more specific terms "cash" and "deferred payment". "Cash" and "deferred payment" are also considerations. Hence, all the conditions for the applicability of the "ejusdem generis" rule are satisfied and the expression "other valuable consideration" can and must be interpreted restrictively here. It seems intended to cover cheques and promissory notes or negotiable instruments which serve the purpose of "money" in modern commercial practice and usage and which can be included in the concept of "money".
18. For the reasons given above, I concur with the interpretation of the definition of "sale" in Section 2(h) of the Act given by my learned brother.