1959 (9) TMI 38 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of section 5(v) of the Madras General Sales Tax Act for exemption of turnover.
2. Determining the place of delivery for sales of tea grown on the lands owned by the assessees.
3. Analysis of the agreement between the assessees and the buyers for actual delivery of goods outside the Madras State.

The judgment by the High Court of Madras involved two revision cases concerning the assessments to sales tax for 1953-54 filed by two tea dealers. The disputed turnovers in the cases were related to the sale price of tea grown on lands owned by the assessees and sold to a company outside the Madras State. The assessees claimed exemption under section 5(v) of the Madras General Sales Tax Act, which exempts sales of tea grown by the seller for delivery outside the state. The conditions for exemption under this section required that the tea was grown by the seller, the sale was intended for delivery outside Madras, and the actual delivery was made outside the state. The court found that the tea was grown on lands owned by the assessees and was delivered outside Madras, satisfying two conditions. The key issue was whether the sale was intended for delivery outside the state.

The Sales Tax Appellate Tribunal had held that the delivery outside Madras should be deemed as delivery in pursuance of the contract made by the buyers with their own purchasers, not by the assessees. However, the High Court emphasized that the focus should be on where the actual delivery was intended and made, not where the property passed to the buyer. The court highlighted that the agreement between the assessees and the buyers indicated an intention for actual delivery outside Madras. The buyers had the option to designate the place of actual delivery, and they exercised this option by instructing the sellers to send the goods to various places outside the state. The court concluded that while constructive delivery was given to the buyers within Madras, actual delivery was intended and made only at the places designated by the buyers outside the state, entitling the assessees to the exemption claimed.

In determining the place of delivery, the court stressed that the intention to deliver outside Madras did not need to be expressed at the time of the contract itself. It was sufficient if, at the time of the contract, the actual delivery was contemplated, and the place of delivery was left to be determined later. The court held that once the option for the place of delivery was exercised by either party, it indicated an intention to effect actual delivery at that designated place. Therefore, in this case, the assessees and the buyers had agreed that actual delivery would be made at the places designated by the buyers outside the Madras State. As a result, the court allowed the revision petitions, granting the assessees the exemption claimed under section 5(v) of the Madras General Sales Tax Act.