1967 (2) TMI 84 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Meaning of inter-State trade or commerce.
2. Determination of whether the sales in question were inter-State sales.
3. Applicability of the West Bengal Finance (Sales Tax) Act, 1941.
4. Interpretation of Section 3 of the Central Sales Tax Act, 1956.
5. Relevance of the movement of goods under the contract of sale.
6. Analysis of the term "incident of the contract of sale."

Issue-wise Detailed Analysis:

1. Meaning of Inter-State Trade or Commerce:

The principal point in this appeal was the meaning of inter-State trade or commerce. The appellant, a manufacturer and supplier of aluminum utensils, submitted tenders for the supply of aluminum utensils to the Government of India. The contract specified that the goods were to be delivered free at A.I.I.G.S., Hastings, and then onward to the Commandant C.O.D., Kanpur. The appellant claimed that these sales were inter-State sales and thus exempt from the West Bengal Finance (Sales Tax) Act, 1941.

2. Determination of Whether the Sales in Question Were Inter-State Sales:

The appellant argued that the sales were inter-State sales because the goods were intended to be moved from one State to another as an incident of the contract of sale. The appellant relied on various Supreme Court decisions to support this claim. The authorities, however, held that the sales were completed within West Bengal and were liable to sales tax under the West Bengal Act. The High Court had to determine whether the movement of goods was a covenant or an incident of the contract of sale, making it an inter-State sale.

3. Applicability of the West Bengal Finance (Sales Tax) Act, 1941:

The appellant, a dealer under the West Bengal Act, claimed a deduction for the sales under Section 5(2)(a)(v) of the Act, which exempts sales in the course of inter-State trade or commerce. The Commercial Tax Officer disallowed the claim, and subsequent appeals were also rejected. The High Court had to examine whether the sales fell under the exemption provided by the West Bengal Act.

4. Interpretation of Section 3 of the Central Sales Tax Act, 1956:

Section 3 of the Central Sales Tax Act defines inter-State trade or commerce as sales that occasion the movement of goods from one State to another or are effected by a transfer of documents of title during their movement. The Supreme Court has held that for a sale to be considered inter-State, the movement of goods must be a result of a covenant or an incident of the contract of sale.

5. Relevance of the Movement of Goods Under the Contract of Sale:

The appellant argued that the movement of goods from Calcutta to Kanpur was incidental to the contract. The High Court examined whether the contract necessarily involved the movement of goods from one State to another. The Court referred to various Supreme Court decisions, including Tata Iron and Steel Co. Ltd. v. S.R. Sarkar and Others, K.G. Khosla and Co. (P) Ltd. v. Deputy Commissioner of Commercial Taxes, and Singareni Collieries Co. Ltd. v. Commissioner of Commercial Taxes, to determine the relevance of the movement of goods under the contract.

6. Analysis of the Term "Incident of the Contract of Sale":

The Court analyzed the term "incident of the contract of sale" as used in previous Supreme Court judgments. The appellant argued that the expression "incident of the contract of sale" was broader than "covenant of a contract of sale" and included any contract where the goods were intended to be moved from one State to another. The Court, however, concluded that for a sale to be in the course of inter-State trade or commerce, there must be a sale of goods and a transport of those goods from one State to another under the contract of sale. The Court held that the movement of goods must be a term or covenant of the contract or a result of such a term or covenant.

Conclusion:

The High Court concluded that the sales in question were not in the course of inter-State trade or commerce. The goods were delivered and the property in the goods passed to the buyers in West Bengal. The transportation of the goods from Calcutta to Kanpur was made by or on behalf of the buyer, and the seller had nothing to do with it. Therefore, the transactions were subject to sales tax under the West Bengal Act. The appeal was dismissed with costs.

Separate Judgment:

GHOSE, J. concurred with the judgment and agreed with the dismissal of the appeal.