1964 (12) TMI 28 - HC - VAT and Sales Tax

Issues Involved:
1. Liability of sales tax on goods delivered within West Bengal but intended for use outside the state.
2. Determination of the place of delivery and appropriation of goods under the contract.
3. Applicability of Article 286 of the Constitution concerning inter-State sales.
4. Interpretation of section 5(2)(a)(v) of the West Bengal Finance (Sales Tax) Act, 1941.

Detailed Analysis:

1. Liability of Sales Tax on Goods Delivered within West Bengal but Intended for Use Outside the State
The primary issue is whether the sale of goods delivered within West Bengal but intended for use in Kanpur, Uttar Pradesh, is subject to sales tax under the West Bengal Finance (Sales Tax) Act, 1941. The petitioner argued that the goods were meant for transportation outside West Bengal and thus should be exempt from sales tax. In contrast, the respondents contended that the delivery was completed in Calcutta, making the sale subject to West Bengal sales tax.

The court held that the sale was completed within West Bengal as the goods were delivered to the inspecting authority in Calcutta. The contract did not impose any obligation on the petitioner to ensure the goods' onward dispatch to Kanpur. Therefore, the sale was subject to sales tax in West Bengal.

2. Determination of the Place of Delivery and Appropriation of Goods under the Contract
The petitioner argued that the goods were appropriated to the contract at Kanpur, and thus, the title in the goods did not pass to the buyer within West Bengal. The court examined the contract and the conduct of the parties, concluding that the delivery was completed in Calcutta. The goods were inspected and accepted by the inspecting authority in Calcutta, and the petitioner billed the government for the entire value on the same day. Thus, the place of delivery and appropriation of goods was in Calcutta.

3. Applicability of Article 286 of the Constitution Concerning Inter-State Sales
The petitioner contended that the sales were inter-State sales and exempt from sales tax under Article 286 of the Constitution. The court referred to various precedents, including the Supreme Court's decision in Endupuri Narasimham v. State of Orissa, which established that for a sale to be considered inter-State, the contract must involve the movement of goods from one state to another. In this case, the contract did not mandate the petitioner to transport the goods to Kanpur; hence, the sale did not qualify as an inter-State sale under Article 286.

4. Interpretation of Section 5(2)(a)(v) of the West Bengal Finance (Sales Tax) Act, 1941
The petitioner sought exemption under section 5(2)(a)(v) of the said Act, which exempts sales of goods dispatched to an address outside West Bengal. The court held that the exemption applies only when the goods are dispatched by or on behalf of the dealer to an address outside West Bengal. In this case, the goods were delivered and accepted in Calcutta, and there was no evidence that the petitioner dispatched the goods to Kanpur. Therefore, the petitioner was not entitled to the exemption under section 5(2)(a)(v).

Conclusion
The court concluded that the sale was completed within West Bengal, making it subject to sales tax under the West Bengal Finance (Sales Tax) Act, 1941. The petitioner's arguments regarding inter-State sales and appropriation of goods at Kanpur were rejected. The application was dismissed, and the rule was discharged with no order as to costs.

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