1988 (5) TMI 352 - SC - VAT and Sales Tax

Whether they were inter- state sales? Held that - Appeal dismissed. The conclusions arrived at by the Tribunal as well as the High Court that the sales by the Chemical Co. to the Trading Co. were inter-state sales cannot be faulted and the learned counsel for the appellant has not advanced a single reason showing how that conclusion is incorrect

Summary

Issues:
1. Determination of the nature of sales made by the Chemical Company to the Trading Company.
2. Assessment of whether the sales were inter-state or intra-state.
3. Interpretation of the agreement dated 9th August, 1957.
4. Application of Section 3 of the Central Sales Tax Act, 1956.
5. Appeal against the decision of the Tribunal and the High Court.

Analysis:
The case involved an appeal against a judgment of the High Court of Madras regarding sales made by the Chemical Company to the Trading Company. The agreement between the two companies dated 9th August, 1957, stipulated that all products manufactured by the Chemical Company would be sold to the Trading Company for a specified period. The sales were to be made on a principal-to-principal basis, with payment terms and delivery arrangements outlined in the agreement. However, the agreement did not specify the booking stations, destination stations, or sale prices. The Tribunal observed two sets of sales: one between the Chemical Company and the Trading Company, and the second between the Trading Company and out-of-state buyers. The Tribunal concluded that the sales by the Chemical Company to the Trading Company were inter-state sales, as the delivery was considered to be through the transfer of documents of title rather than physical delivery of goods.

The Appellate Assistant Commissioner initially treated both sets of sales as inter-state sales, but the Tribunal disagreed, considering the manner in which the sales were executed. The Tribunal analyzed the actual sales transactions and found that the movement of goods from Tamil Nadu to outside states was due to the terms of the contracts, making the sales inter-state transactions under Section 3 of the Central Sales Tax Act, 1956. The High Court upheld the Tribunal's decision, leading to an appeal by the State of Tamil Nadu. The Supreme Court affirmed the Tribunal and High Court's findings, emphasizing that the nature of the sales had to be determined based on the actual terms of the contracts and instructions from out-of-state buyers.

The Supreme Court rejected the State's appeal, noting that the agreement from 1957 was a general agreement, and the specific terms of the sales had to be considered to determine the nature of the transactions. The Court agreed with the Tribunal and High Court that the sales by the Chemical Company to the Trading Company were inter-state sales, as evidenced by the delivery method and movement of goods. The Court referenced a previous case to support this conclusion. Consequently, the appeal was dismissed, affirming the inter-state nature of the sales and upholding the decisions of the lower courts.