1982 (3) TMI 247 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the sales effected by M/s. Parrys Confectionary Limited to the Canteen Stores Department (India), Bombay, are inter-State sales under section 3(a) of the Central Sales Tax Act.
2. Whether the assessee is entitled to exemption under section 8(2A) of the Central Sales Tax Act.

Detailed Analysis:

1. Inter-State Sales Determination:
The primary issue was whether the sales of confectionery goods by M/s. Parrys Confectionary Limited to the Canteen Stores Department (India), Bombay, constituted inter-State sales under section 3(a) of the Central Sales Tax Act. The department contended that the sales occasioned the movement of goods from Tamil Nadu to Bombay, thereby qualifying as inter-State sales. Conversely, the assessee argued that the sales were local, with goods delivered to the Madras Installation of the Canteen Stores Department, and that the subsequent despatch to Bombay was managed by the Madras Installation.

The court examined several documents, including orders, invoices, military credit notes, and correspondence, which indicated that the goods were consigned and invoiced to the Canteen Stores Department (India), Madras depot, and not directly to Bombay. The court found that the sale was completed within Tamil Nadu, as the property in the goods passed to the Canteen Stores Department (India), Madras, before the goods were despatched to Bombay. The court emphasized that the movement of goods was managed by the Canteen Stores Department (India), Madras, acting as the agent for the Canteen Stores Department (India), Bombay.

2. Clause No. 6 and Right of Rejection:
The Additional Government Pleader argued that clause No. 6 of the purchase terms, which allowed the Canteen Stores Department (India) to reject goods upon arrival in Bombay, indicated that the property in the goods passed only upon acceptance in Bombay, thus making the sales inter-State. The court rejected this argument, stating that the right of rejection did not affect the completion of the sale within Tamil Nadu. The risk of the goods was borne by the purchaser during transit, and the supplier's responsibility only came into play after a notice of rejection was served within one week of delivery.

3. Precedent Cases:
The court distinguished the present case from the Supreme Court decisions in Oil India Ltd. v. Superintendent of Taxes and Balabhagas Hulaschand v. State of Orissa. In those cases, the movement of goods was a direct result of the contract of sale, leading to inter-State sales. However, in the present case, the movement of goods from Tamil Nadu to Bombay was not occasioned by the sale contract but occurred after the sale was completed within Tamil Nadu.

The court also referred to State of Mysore v. G. Thimmappa and Son, where the Supreme Court held that the movement of goods by the buyer after the sale did not constitute an inter-State sale. Applying this principle, the court concluded that the sale to the Canteen Stores Department (India), Madras, was completed before the goods were despatched to Bombay.

4. Exemption under Section 8(2A):
Given the court's conclusion that the sales were not inter-State sales, it was unnecessary to address the question of exemption under section 8(2A) of the Central Sales Tax Act.

Conclusion:
The court set aside the orders of the Tribunal, holding that the sales in question were not inter-State sales within the meaning of section 3(a) of the Central Sales Tax Act. Consequently, the tax revision cases were allowed, with no order as to costs.