1988 (4) TMI 423 - HC - VAT and Sales Tax

Issues Involved:

1. Whether the sale of gold laces, gold braids, and gold jhallars to the President of India through the Secretary was rightly held as an inter-State sale under Section 3(a) of the Central Sales Tax Act, 1956.
2. Whether the movement of goods was a result of a covenant or incident of the contract of sale.
3. The relevance of the mode of transportation in determining the nature of the sale.
4. The applicability of case laws such as Tata Iron and Steel Co. Ltd. v. S.R. Sarkar, Balabhagas Hulaschand v. State of Orissa, and K.G. Khosla and Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes.

Detailed Analysis:

1. Inter-State Sale Under Section 3(a) of the Central Sales Tax Act, 1956:

The primary issue was whether the sale of gold laces, gold braids, and gold jhallars to the President of India through the Secretary was an inter-State sale as defined under Section 3(a) of the Central Sales Tax Act, 1956. The section states that 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 examined the agreement and found that the movement of goods from the assessee's state to New Delhi was indeed a result of the contract of sale, thus qualifying it as an inter-State sale.

2. Movement of Goods as a Result of Covenant or Incident of Contract of Sale:

The court analyzed whether the movement of goods was due to a covenant or an incident of the contract of sale. The agreement specified that the goods were to be delivered within two months of receiving the order and were subject to approval by the Secretary to the President. The court concluded that the movement of goods was indeed pursuant to the agreement, as the assessee personally carried the goods to Rashtrapati Bhawan, New Delhi, to fulfill the contractual obligation. The court rejected the hypothetical argument that the goods could have been diverted for other purposes, emphasizing that the delivery was intended for the buyer as per the contract.

3. Mode of Transportation and Its Relevance:

The assessee argued that since the goods were personally carried and not dispatched by rail or other means in the buyer's name, it could not be considered an inter-State sale. The court dismissed this argument, stating that the decisive factor was whether the goods were moved in accordance with the contract terms, not the mode of transportation. The court highlighted that the movement of goods was a result of the contractual obligation, irrespective of how they were transported.

4. Applicability of Case Laws:

The court referenced several case laws to support its judgment:

- Tata Iron and Steel Co. Ltd. v. S.R. Sarkar: The Supreme Court held that a sale occasions the movement of goods from one State to another when the movement is a result of a covenant or incident of the contract of sale.
- Balabhagas Hulaschand v. State of Orissa: The court noted that an agreement to sell, even if the property did not pass, is an element of sale under Section 3(a). The Supreme Court's observation that goods move normally in pursuance of a contract between two parties supported the conclusion that the movement of goods in this case was pursuant to the contract.
- K.G. Khosla and Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes: The court found this case particularly relevant, where the Supreme Court held that the movement of goods from Belgium to India was in pursuance of the contract conditions, even though the goods were not consigned in the buyer's name.

The court also referenced Oil India Ltd. v. Superintendent of Taxes, where it was held that the inter-State movement need not be specified in the contract itself but must be incidental to the contract of sale.

Conclusion:

The court upheld the view of the Appellate Tribunal, affirming the concurrent findings of the Sales Tax Officer and the Assistant Commissioner (Judicial). The revision was dismissed, and it was concluded that the sale of goods to the President of India through the Secretary was rightly held as an inter-State sale under Section 3(a) of the Central Sales Tax Act, 1956. The movement of goods was indeed a result of a covenant or incident of the contract of sale, and the mode of transportation did not alter this conclusion. The court's decision was supported by relevant case laws, and the petition was dismissed with no order as to costs.

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