1991 (4) TMI 351 - SC - VAT and Sales Tax

Whether the sale that took place between the manufacturer and the Marketing Company can be taken to be covered by the explanation? Held that - Appeal dismissed. What has been found as a fact in the statement of the case is that there was preceding local sales complete in every respect within Madhya Pradesh by which title to the cement had passed from the appellant to the Marketing Company. The concept of inter-State sale as brought in by the Sixth Amendment or in the subsequent statute known as the Central Sales Tax Act, 1956, was not in existence for the relevant period now under consideration. The finding recorded by the authorities is that the delivery of the cement was not the direct result of such sale or purchase of the cement outside the State. In the absence of such privity the explanation is not attracted to the transactions.

Summary

Issues:
- Interpretation of the Madhya Pradesh General Sales Tax Act, 1958
- Application of the explanation to article 286(1)(a) in relation to sales tax
- Determination of inter-State vs. intra-State sales
- Analysis of the contractual relationship between manufacturers and the Marketing Company
- Examination of preceding local sales within Madhya Pradesh
- Impact of the Sixth Amendment of the Constitution in 1956 on sales tax matters

Analysis:
The Supreme Court heard appeals related to separate decisions of the Madhya Pradesh High Court under the Madhya Pradesh General Sales Tax Act, 1958. The appellant, a cement manufacturer, had an arrangement with the Cement Marketing Company of India Ltd., where the Marketing Company acted as the exclusive sales manager for the cement manufactured by various companies, including the appellant. The dispute centered on whether the sales were inter-State or intra-State transactions. The Court referred to the case of Rohtas Industries Ltd. v. State of Bihar [1961] 12 STC 615 to analyze the contractual terms between the manufacturer and the Marketing Company, concluding that there was a sale between them.

The Court emphasized that the presence of the explanation to article 286(1)(a) was crucial in determining the tax liability. The explanation, repealed by the Sixth Amendment of the Constitution in 1956, specified the state where goods were delivered for consumption. The Court found that in this case, preceding local sales within Madhya Pradesh had occurred before the transactions in question, and the delivery of cement was not a direct result of sales outside the state. Therefore, the explanation did not apply to these transactions.

Despite attempts to rely on later decisions regarding the Central Sales Tax Act, the Court upheld the findings that the cement delivery did not result from sales outside the state for consumption. The Court dismissed the appeals, affirming the High Court decisions and highlighting that the explanation did not apply in this context. The judgment aligned with the authorities' conclusions and the precedent set by Mod. Serajuddin v. State of Orissa [1975] 36 STC 136, leading to the dismissal of the appeals without costs.