1964 (3) TMI 76 - HC - VAT and Sales Tax

Issues Involved:
1. Whether there was a completed sale of timber by the petitioner to the Director in Madhya Pradesh and whether the property in the goods passed in that State.
2. Whether the goods were delivered for consumption outside the State as a direct result of the sale.

Detailed Analysis:

1. Completed Sale and Passing of Property:
The petitioner-firm, with its head office in Kanpur and a branch in Madhya Pradesh, entered into a contract with the Director-General of Stores, Supplies and Disposals, Government of India, for the supply of timber. The Sales Tax Officer assessed the petitioner to sales tax for the period from 1st January, 1952, to 31st December, 1952, which was upheld by the Appellate Assistant Commissioner and the Commissioner of Sales Tax. The petitioner contended that the sales were not liable to tax under section 27-A of the Central Provinces and Berar Sales Tax Act, 1947, and Article 286 of the Constitution. The Sales Tax Officer concluded that the property in goods passed to the buyer within Madhya Pradesh, and the delivery of goods at places outside the State was not a direct result of the sale for consumption outside the State. The Appellate Assistant Commissioner and the Commissioner of Sales Tax affirmed this view.

The court emphasized that the sale was "F.O.R. Mandla Fort," indicating that the timber was delivered to the Director at that place. The petitioner lost the right and power of disposal over the timber upon despatch and received ninety percent of the price upon proof of despatch. The court concluded that the property in timber passed to the Director at Mandla Fort, and the goods were actually delivered there.

2. Delivery for Consumption Outside the State:
The petitioner argued that the timber was sent for consumption outside Madhya Pradesh and was delivered as a direct result of the sale for consumption in the States of the consignees, invoking the Explanation to Article 286(1) of the Constitution. The respondents contended that the property in goods passed within Madhya Pradesh, and the subsequent movement of goods was for better enjoyment of what had been acquired.

The court noted that the term "F.O.R. Mandla Fort" indicated that the actual delivery was at Mandla Fort, and the subsequent transportation was not a condition attached to the contract of sale but was according to the purchaser's instructions. The court referred to the legal principles in Halsbury's Laws of England and the Supreme Court decisions, emphasizing that the term "F.O.R." fixes the point at which the property passes and the risk falls upon the buyer. The court rejected the applicability of section 39 of the Sale of Goods Act, 1930, as the contract stipulated delivery "F.O.R. Mandla Fort," ruling out the operation of section 39.

The court concluded that the transport and delivery of timber by rail to consignees outside the State were not actual deliveries to the purchasers as a direct result of the sale transactions. The movement of timber was subsequent to the completion of the sale in Madhya Pradesh, and the tax liability accrued in this State. The court dismissed the petitioner's contention that some sales had delivery places outside the State, as no such plea was raised before the taxing authorities.

Conclusion:
The court found no ground for issuing a writ of certiorari to quash the assessment order and the decisions upholding it. The petition was dismissed with costs, and the counsel's fee was fixed at Rs. 200. The outstanding amount of security deposit, if any, after deduction of costs, was ordered to be refunded to the petitioner.

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