1969 (2) TMI 158 - SC - VAT and Sales Tax

Whether, on the facts and circumstances of the case, the sales of manganese ore by the non-applicant were in the course of inter-State trade and therefore exempt from tax under the old Act or were intrastate sales in this State and therefore liable to tax under the old Act? Held that - Appeal allowed. On the facts and circumstances of this case the sales of manganese ore by the appellant were in the course of inter-State trade and, therefore, exempted from tax under the C. P. and Berar Sales Tax Act, 1947, and the question of law referred to the High Court must be answered in favour of the appellant and against the Commissioner of Sales Tax, Madhya Pradesh.

Summary

Issues:
Interpretation of section 3(a) of the Central Sales Tax Act, 1956 in the context of inter-State sales of manganese ore. Determination of whether the sales of manganese ore by the appellant were in the course of inter-State trade and exempt from tax under the C.P. and Berar Sales Tax Act, 1947.

Analysis:
The appellant, a mining company, sold manganese ore to various buyers outside the State of Madhya Pradesh under written contracts. The sales tax authorities assessed these sales for tax, but the Board of Revenue held them exempt under the C.P. and Berar Sales Tax Act, 1947. The High Court, however, ruled against the appellant, stating that the sales were intrastate and taxable. The key issue revolved around whether the movement of goods from one state to another was occasioned by the terms of the contracts, as per section 3(a) of the Central Sales Tax Act, 1956.

The court referred to precedents like Tata Iron & Steel Co. Ltd. v. S.R. Sarkar and Cement Marketing Co. v. State of Mysore to interpret section 3(a). It was established that sales occasioning the movement of goods from one state to another due to the contract terms are considered inter-State sales. The contracts in question involved the movement of manganese ore from Madhya Pradesh to Maharashtra for weighment at Gondia, a crucial aspect in determining the price. The movement to Gondia was a direct consequence of the contract terms, making the sales inter-State as per section 3(a) of the Central Sales Tax Act.

The court disagreed with the High Court's interpretation and held that the sales of manganese ore were indeed in the course of inter-State trade, exempting them from tax under the C.P. and Berar Sales Tax Act, 1947. The decision was based on the direct consequence of the contract terms on the movement of goods, aligning with previous judgments. Consequently, the court allowed the appeal, setting aside the High Court's ruling and directing in favor of the appellant.

In conclusion, the judgment clarified the application of section 3(a) of the Central Sales Tax Act in determining inter-State sales, emphasizing the role of contract terms in occasioning the movement of goods. The decision provided a consistent interpretation in line with established legal principles, ultimately exempting the appellant's sales of manganese ore from tax under the relevant legislation.