1965 (12) TMI 110 - SC - VAT and Sales Tax

Whether in law the revising authority was right in holding that the sales in dispute were not for delivery outside Uttar Pradesh and that the applicant was not entitled to a rebate under section 5 of the Uttar Pradesh Sales Tax Act, 1948? Held that - Appeal allowed.The assessee-mills is entitled to rebate under section 5. High Court erred in relating despatch instructions to the mode of performance of the contract. The revising authority was not right in holding that the sales in dispute were not for delivery outside Uttar Pradesh.

Summary

Issues Involved:
1. Interpretation of "delivery" in Section 5 of the Uttar Pradesh Sales Tax Act, 1948.
2. Entitlement to rebate under Section 5 for sales delivered outside Uttar Pradesh.
3. Legal implications of despatch instructions in sales contracts.

Issue-wise Detailed Analysis:

1. Interpretation of "delivery" in Section 5 of the Uttar Pradesh Sales Tax Act, 1948:
The primary issue was whether the term "delivery" in the expression "sales of such goods for delivery outside Uttar Pradesh" in Section 5 of the Act referred to actual delivery or constructive delivery. The Court agreed with the Madras High Court's interpretation in India Coffee and Tea Distributing Co. Ltd. v. The State of Madras, which held that "delivery" should be understood as physical delivery rather than constructive delivery. The Court emphasized that the object of Section 5 was to encourage the export of goods manufactured in Uttar Pradesh. Hence, interpreting "delivery" to mean actual physical delivery outside the state would better fulfill the legislative intent.

2. Entitlement to rebate under Section 5 for sales delivered outside Uttar Pradesh:
The assessee-mills claimed a 50% rebate on sales of sugar delivered outside Uttar Pradesh. The Sales Tax Officer allowed the rebate for sales to parties outside Uttar Pradesh but denied it for sales to parties within Uttar Pradesh, even if the sugar was dispatched outside the state. The High Court upheld this view, asserting that the contract must explicitly state that the goods would be delivered outside Uttar Pradesh to qualify for the rebate. However, the Supreme Court disagreed, stating that the contract, which included despatch instructions, implied that the goods were intended for delivery outside the state. Thus, the assessee-mills were entitled to the rebate under Section 5.

3. Legal implications of despatch instructions in sales contracts:
The Court examined whether despatch instructions formed part of the sales contract. The High Court had previously ruled that despatch instructions did not constitute a term of the contract and were merely related to its execution. The Supreme Court, however, found that the despatch instructions were indeed part of the contract. The contract required actual delivery at a location specified later through despatch instructions, which were integral to the contract's formation rather than its performance. This interpretation meant that the sales were for delivery outside Uttar Pradesh, entitling the assessee-mills to the rebate.

Conclusion:
The Supreme Court set aside the High Court's judgment and concluded that the assessee-mills were entitled to the rebate under Section 5 of the Act. The Court held that the revising authority was incorrect in determining that the sales in dispute were not for delivery outside Uttar Pradesh. The appellant was awarded costs incurred in the High Court and the Supreme Court. The appeal was allowed.