1969 (12) TMI 105 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the transactions of subsequent despatch are to be regarded as intra-State sales or inter-State transactions.
2. Applicability of section 3(a) and section 3(b) of the Central Sales Tax Act to the transactions in question.

Issue-wise Detailed Analysis:

1. Intra-State Sales vs. Inter-State Transactions:
The primary issue before the court was whether the transactions involving the subsequent despatch of goods should be classified as intra-State sales completed at Kanpur or as inter-State transactions. The assessee argued that the sales were inter-State, falling under section 3(b) of the Central Sales Tax Act, as the property in the goods passed upon endorsement of the railway receipt in favor of the ex U.P. party. Alternatively, they argued that the movement of goods from Kanpur to outside U.P. was occasioned by the contract of sale, thus falling under section 3(a). The Commissioner of Sales Tax contended that the property in the goods passed at the mill gate, making the subsequent despatch merely an accommodation for the buyer, and thus the sales were intra-State.

2. Applicability of Section 3(a) and Section 3(b) of the Central Sales Tax Act:
Section 3 of the Central Sales Tax Act defines when a sale or purchase of goods occurs in the course of inter-State trade or commerce. Clause (a) applies if the sale occasions the movement of goods from one State to another, while clause (b) applies if the sale is effected by a transfer of documents of title to the goods during their movement from one State to another. The court examined whether these clauses were applicable to the transactions in question.

Detailed Analysis:

Intra-State Sales vs. Inter-State Transactions:
The court analyzed the terms and conditions of the contract, particularly paragraph 1, which stated that all goods sold were deemed to have been sold ex mill delivery. This indicated that the property in the goods passed at the mill, and any subsequent despatch was merely to accommodate the buyer. The court noted that the railway receipts showing the assessee as consignee did not change this position. The court referenced the Supreme Court decision in Tata Iron and Steel Co. Ltd. v. S.R. Sarkar, which clarified that clauses (a) and (b) of section 3 are mutually exclusive. The court concluded that the property in the goods passed at the mill gate, and the sales were intra-State.

Applicability of Section 3(a) and Section 3(b):
The court first considered clause (b) of section 3, which requires that the sale be effected by a transfer of documents of title during the movement of goods. The court found that the property in the goods was intended to pass ex mill, as stipulated in paragraph 1 of the contract. The fact that the railway receipts were sent to third parties outside U.P. did not change this. The court cited Gordhandas LaIji v. B. Banerjee, where it was held that the act of shipping goods outside India was a transaction apart from the contract under which the property passed. The court concluded that clause (b) of section 3 did not apply.

Next, the court examined clause (a) of section 3, which requires that the movement of goods be the result of a covenant or incident of the contract of sale. The court noted that paragraph 1 of the contract expressly contemplated ex mill delivery, and any subsequent despatch was at the discretion of the assessee. The court referenced Bharatkhand Textile Manufacturing Co., Ltd. v. State of Gujarat, where it was held that the sales did not occasion the movement of goods from one State to another. The court concluded that clause (a) of section 3 did not apply either.

Conclusion:
The court held that the sales in question were intra-State sales, as the property in the goods passed at Kanpur, and the terms of the contract supported this conclusion. The sales did not fall under the definition of inter-State sales as per section 3 of the Central Sales Tax Act. The reference was answered accordingly, and the Commissioner of Sales Tax was entitled to costs.