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1968 (8) TMI 162 - SC - VAT and Sales TaxWhether, in the facts and circumstances of the case, the disputed sales of manganese amounting to Rs. 2,77,976.45 were sales in the course of inter-State trade and commerce or were intrastate sales? Held that - Appeal dismissed. The movement of manganese ore from the State of Madhya Pradesh to Vishakhapatnam outside the State was a direct result of the covenant of these contracts. It follows that these two sales also were inter-State sales under section 3(a) of the Central Sales Tax Act and were not liable to be taxed under the Madhya Pradesh General Sales Tax Act.
Issues Involved:
1. Whether the disputed sales of manganese ore amounting to Rs. 2,77,976.45 were sales in the course of inter-State trade and commerce or were intrastate sales. Issue-wise Detailed Analysis: 1. Nature of Sales: Inter-State or Intra-State The core issue was whether the sales of manganese ore by the respondent were inter-State sales or intra-State sales, which would determine the applicability of the Madhya Pradesh General Sales Tax Act, 1958. The respondent was assessed to sales tax under section 18(3) of the Madhya Pradesh General Sales Tax Act, 1958, for the period from 1st October 1957 to 30th September 1958. The respondent contended that the entire turnover was either in the course of export out of India or inter-State sales, and thus not liable under the Madhya Pradesh General Sales Tax Act, 1958. The Appellate Assistant Commissioner rejected the respondent's contention and dismissed the appeal. However, the Board of Revenue accepted that the sales were in the course of inter-State trade or commerce and remanded the matter for assessment under the Central Sales Tax Act, 1956. 2. High Court's Reference The Madhya Pradesh High Court was referred to decide whether the disputed sales were in the course of inter-State trade and commerce or were intrastate sales. The High Court held that the disputed sales were in the course of inter-State trade of manganese ore. 3. Constitutional Amendments and Legislative Framework The sales took place after the amendment of Article 286 of the Constitution by the Constitution (Sixth Amendment) Act, 1956, which omitted the explanation to the first clause and inserted new clauses (2) and (3). These clauses allowed Parliament to formulate principles for determining when a sale or purchase of goods takes place in the course of inter-State trade or commerce. The Central Sales Tax Act, 1956, was enacted under this power, and Section 3(a) of the Act defined inter-State trade as sales that occasion the movement of goods from one State to another. 4. Interpretation of Section 3(a) of the Central Sales Tax Act The court referred to previous judgments, including Tata Iron & Steel Co. Ltd. v. S.R. Sarkar and Cement Marketing Co. v. State of Mysore, which clarified that a sale occasions the movement of goods from one State to another when the movement is the result of a covenant or incident of the contract of sale. 5. Examination of Contracts The court examined four contracts under which the sales took place: - Contract with M/s. Ram Bahadur Thakur & Co. (22nd July 1957): The price was f.o.r. Katangjhiri railway siding, and the first weighment at Gondia weigh-bridge was the basis for final accounts. The High Court held that the movement of goods across the State frontier was necessary to fulfill the contract terms. - Contract with M/s. Jyoti Brothers (7th March 1958): Similar clauses regarding f.o.r. Katangjhiri railway siding and weighment at Gondia weigh-bridge indicated that the movement of goods was a direct consequence of the contract. - Contracts with M/s. B.P. Khemka & Co. Private Ltd. (10th November 1956 and 29th May 1958): These contracts included railway freight to Vishakhapatnam Port in the price, and the final payment was contingent upon the receipt of goods at the port. The movement of goods to Vishakhapatnam was thus a direct result of the contract. 6. Court's Conclusion The court concluded that the performance of each contract necessarily involved the movement of goods from Madhya Pradesh to other states, fulfilling the criteria of inter-State sales under Section 3(a) of the Central Sales Tax Act. Consequently, these sales were not liable to be taxed under the Madhya Pradesh General Sales Tax Act. Final Judgment The Supreme Court upheld the High Court's judgment that the disputed sales were in the course of inter-State trade and commerce. The appeal was dismissed with costs.
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