1968 (8) TMI 182 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the disputed turnover of Rs. 29,68,749.97 for the year 1965-66 should be included in the assessable turnover under the Central Sales Tax Act.
2. Whether the transactions in question qualify as inter-State sales under Section 3(a) of the Central Sales Tax Act, 1956.

Detailed Analysis:

Issue 1: Inclusion of Disputed Turnover in Assessable Turnover
The petitioners, a public limited company with branches in multiple states, sought a writ of prohibition to restrain the first respondent from including Rs. 29,68,749.97 in the assessable turnover for the year 1965-66. The petitioner argued that this amount should not be included as it did not qualify as inter-State sales. The petitioner contended that orders were booked by customers with out-of-State branches, and goods were sent from the Madras branch to fulfill these orders. They argued that these transactions did not meet the criteria for inter-State sales under Section 3(a) of the Central Sales Tax Act, 1956.

In response, the first respondent argued that the goods had moved from Madras due to orders placed by customers with the petitioner's branches outside the state. Therefore, the turnover was assessable under the Central Sales Tax Act as inter-State sales. The court found that the petitioner's argument was premature and could not be granted at this stage.

Issue 2: Qualification as Inter-State Sales
The court examined the modus operandi of the transactions, particularly focusing on the operations between the Madras branch and the Bombay branch. The buyers placed orders with the Bombay branch, which then communicated with the Madras branch to fulfill these orders. The goods were sent from Madras to the buyers in Maharashtra, with the Bombay branch acting as an intermediary.

The court noted that the correspondence and documentation indicated that the goods were dispatched from Madras to fulfill specific orders from buyers, and the price was quoted F.O.R. Madras. The court emphasized that the movement of goods from one state to another under a contract of sale is a key criterion for an inter-State sale under Section 3(a) of the Central Sales Tax Act.

The court further elaborated on the nature of a contract of sale, stressing that it involves mutual obligations and intentions of the parties, which are often reflected in their conduct and correspondence. The court rejected the petitioner's argument that the transactions were merely consignment sales between branches, noting that the goods were dispatched directly to the buyers and not to replenish stock at the Bombay branch.

The court concluded that the transactions in question did qualify as inter-State sales, as the movement of goods from Madras to the buyers in other states was occasioned by specific contracts of sale. The court also highlighted that the presence of an intermediary (the Bombay branch) did not alter the inter-State nature of the transactions.

Conclusion:
The court dismissed the writ petition, holding that the disputed turnover was rightly included in the assessable turnover under the Central Sales Tax Act. The court also clarified that each case must be examined individually to determine whether the criteria for inter-State sales are met. The petitioner was ordered to pay costs of Rs. 250.