1976 (7) TMI 151 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the turnover represented sales in the course of inter-State trade as defined in section 3 of the Central Sales Tax Act, 1956.
2. Whether the property in the goods passed in Andhra Pradesh or Tamil Nadu.
3. The applicability of Supreme Court decisions to the present case.

Issue-wise Detailed Analysis:

1. Whether the turnover represented sales in the course of inter-State trade as defined in section 3 of the Central Sales Tax Act, 1956.
The primary issue was whether the disputed turnover represented sales that took place in the course of inter-State trade or commerce as defined in section 3 of the Central Sales Tax Act, 1956. The court noted that section 3(a) states, "A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase occasions the movement of goods from one State to another." The court found that the movement of goods from Tamil Nadu to Andhra Pradesh was indeed occasioned by the sales in question, as the goods were dispatched from the petitioner's Madras factory to various places in Andhra Pradesh based on indents placed by officers of the Andhra Pradesh Government. The court concluded that these movements were a result of a covenant or incident of the contract of sale.

2. Whether the property in the goods passed in Andhra Pradesh or Tamil Nadu.
The petitioner argued that the property in the goods passed only in Andhra Pradesh because the supplies were subject to inspection and acceptance by the officers of the Agriculture Department of Andhra Pradesh. The court, however, clarified that the issue was not about where the property in the goods passed but whether the sales represented inter-State sales. The court emphasized that the movement of goods from one State to another was the result of a covenant or incident of the contract of sale, making the location where the property passed immaterial for determining the nature of the sales under section 3(a) of the Central Sales Tax Act, 1956.

3. The applicability of Supreme Court decisions to the present case.
The court examined several Supreme Court decisions to determine their relevance to the present case. In Tata Iron and Steel Co. Limited v. S. R. Sarkar, the Supreme Court had stated that a sale is subject to tax under the Central Sales Tax Act if the movement of goods from one State to another is a result of a covenant or incident of the contract of sale. The court found that this principle applied to the present case, as the contract required the petitioner to supply goods from its Madras factory, making the movement of goods an incident of the contract of sale.

In Balabhagas Hulaschand v. State of Orissa, the Supreme Court provided illustrations to explain when a sale would be considered inter-State. The court distinguished the present case from the illustrations, noting that there was no evidence that the petitioner's staff took delivery of the goods in Andhra Pradesh and then sold them locally. The court concluded that the movement of goods was occasioned by the contract of sale, making the sales inter-State in nature.

The court also referred to Manganese Ore (India) Ltd. v. Regional Assistant Commissioner of Sales Tax, where the Supreme Court affirmed that the movement of goods under a contract of sale falls within section 3(a) of the Central Sales Tax Act, regardless of where the property in the goods passes.

The court dismissed the petitioner's reliance on sections 23, 26, and 41 of the Sale of Goods Act and the decision in Commissioner of Sales Tax, Eastern Division, Nagpur v. Husenali Adamji and Co., as these dealt with the passing of property and not the nature of inter-State sales.

Conclusion:
The court concluded that the turnover in question was liable to be taxed under the Central Sales Tax Act, 1956, as the sales were deemed to have taken place in the course of inter-State trade or commerce. Consequently, the petition was dismissed with costs.

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