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TMI Blog1977 (5) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... r the amount of Rs. 1,536.00 and Rs. 8,726.40 respectively were found defective and adequate proof in respect of export sales amounting to Rs. 2,300.78, Rs. 9,931.83 and Rs. 1,452.64 had not been furnished, so no exemption was allowed in respect of the same and these sales were taxed at 10 per cent under the Central ST Act. 4. The claim of concessional rate of tax at 3 per cent in respect of sales amounting to Rs. 140, Rs. 17,942.42p. and Rs. 4,150.70p. in the first, second and fourth quarters respectively was disallowed and the said sales were taxed at 10 per cent under the Central ST Act. 5. Packing expenditure involving Rs. 1,367.50p. Rs. 980.50p., Rs. 207 and Rs. 365.25p. in the first, second, third and fourth quarters respectively were added to the gross turnover and taxed at 10 per cent under the Central ST Act. 6. The sample sales of Rs. 650.11 was taxed at 5 per cent under the Local Act. 7. The dealer claimed exemption under the Local Act in respect of sales made to the Ministry of Defence amounting to Rs. 8,81,254.21p., Rs. 5,11,591.62p. and Rs. 13,87,276.51p. in the first, third and fourth quarter respectively—total Rs. 27,80,122.34. The learned assessing auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocal registered dealer" but they were wrongly taxed. It was contended by the dealer that the said sales were made by Super Bazar for and on behalf of the appellant and those sales were duly returned by the said Super Bazar and taxed in the hands of the Bazar. The learned Addl. Commissioner observed that the point to be determined was whether the sales in question were that of the Super Bazar or of the dealer and for this purpose in view he remanded the case to the assessing authority with the direction that in case there was evidence to show that the sales belonged to the dealer., the sales shall be taxed in hands of the dealer irrespective of the fact that the Super Bazar had been taxed for the said sales or not. 11. The assessing authority had not accepted the claim of the dealer for tax free sales in respect of the miscellaneous goods which as stated above consisted of Gurda Kapoora, head, foot and bone. The learned Addl. Commissioner held that while Gurda kapoora and head should be treated as 'meat' and exempted from tax, the sales of foot and bones should be taxed and for this also he remanded the case to the assessing authority. 12. Not satisfied with the orders of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther enquiry. Point No. 2 : Sales through Bills No. 1409 1410 : The claim of the dealer in respect of export of goods made through bill Nos. 1409 and 1410 was not accepted as the custom certificate were found defective. It was admitted by the learned counsel of the dealer that there was no mention of the bill number in those certificates. The authorities below were thus justified in not accepting the claim in respect of sales covered by these two bills. 14. It is, however, contended that if these sales were held not in the course of export outside India, they should be treated as local sales and taxed under the Local Act. To this there can be no objection. This plea is accepted. Point No. 3 : Export out of India— The claim of export amounting to Rs. 2,309.78p., Rs. 9,931.83p., and Rs. 1.452.64p. was disallowed for want of evidence. In fairness, it is conceded by Shri A.C. Chawla, learned counsel for the dealer that in fact, there was no evidence to prove that these sales were in the course of export outside India. These sales should, however, be considered as local sales and taxed accordingly. Point No.4 : Sample sales—It admitted that the price for the samples su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of law enunciated by the learned Addl. commissioner but when the dealer was before the taxing authorities and he was co-operating with them, proper thing would have been to ascertain the correct position before acting on doubts and surmises. It appears to me to be necessary in the interest of justice to examine afresh whether the meat and bacon were sold in sealed containers. Point No. 7 Packing Expenses : This claim was not pressed by Shri A.C. Chawla, the learned counsel for the dealer. Hence it is decided against the dealer: Point No. 8 Sales to the Ministry of Defence—The dealer asserted that he sold goods worth Rs. 27,80,122.34p. to the ministry of Defence and claimed that these sales were exempt from tax under the Local Act. These sales were, however, held to be sales in the course of inter-State trade or commerce by the authorities below and taxed at 10 per cent under the Central ST Act. 17. In appeal the learned Addl. Sales tax Commissioner held that the agreement was made with the Ministry of Food and Agriculture which was not Ministry of Defence or for that matter a subordinate office of Ministry of Defence and, therefore, the sales could not be exempt under r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation of despatch. The guarantee was 9 months from the last day of the month of tendering. Place of manufacture was the factory of the dealer at New Delhi. 21. The fourth document is a letter of November, 1970 sent by the dealer to Officer Commanding Composite Food Laboratory A.SC informing that the store was ready for inspection. It was mentioned therein that nearest railway station was New Delhi. 22. The fifth document is a copy of the "Special Conditions of Contract for the Supply of canned Ham, Bacon and Pork Sausages". This document deals with the submission of offers, signing of tenders, delivery of tender, delivery of tender, earnest money quality, packing, marking, place of manufacture, delivery, rejected supply, inspection of supplies consignee, sampling procedures, advance samples, supply of raw material, inspection of raw and packing materials, reports and returns, warrantee, payment, arbitration, bank guarantee, production of Income Tax. 23. On the basis of the above documents the learned assessing authority arrived at the conclusion that the movement of goods from Delhi to outside Delhi was occasioned from the contract of sale and was an integral part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sity be moved outside Delhi. The goods may as well be moved to a place within Delhi itself. It is quite a different matter that after receiving the goods at the station of despatch, the goods were sent outside Delhi but that will not make the sale to be in the course of inter-State trade or commerce. 25. "Despatch" no doubt means to send or to dispose but it does not further mean to send outside a State. 'Despatch' of the goods may be within as well as outside a State but to bring the sale within the mischief of inter-State sale the contract itself should indicate that the goods were to be moved from one State to another. Except to say that the dealer was required to transport the goods upto the station of despatch the contract does not speak further and say that the goods so supplied would be moved outside Delhi. In the absence of such indication in the contract itself, it would not be proper to infer that the movement of goods for a place outside Delhi was occasioned as a result of the contract. 26. The dealer produced two Military Credit notes to show that the goods were despatched by Rep. Composite food Laboratory A.SC Delhi to the Officer Commanding R.H.S.D. Railwala and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the contract of sale. It implies that the delivery outside the State should be in pursuance of the covenant or as an incident of the contract of sale. It must be an integral part of the contract of sale itself that the goods crossed the border from one State to another. It would not amount to inter-State sale if the buyer takes delivery of goods and then despatches them to another State. The contract of sale itself must provide that the goods shall be transported from one State to another. 29. The learned counsel for the dealer has cited a large number of decisions of the Supreme Court and various High courts in support of his contention that the sales to Ministry of defence were not inter-State sales. When the facts are clear and unambiguous to show that in the present case the sale or purchase did not occasion the movement of goods from one State to another, it will, to my mind, be unnecessarily burdening this judgment if all those decisions are referred. It would, in my opinion, be sufficient to go through the following decisions of the Supreme Court in order to appreciate the correct position of law. 30. In Tata Iron Steel Co. Ltd. vs. S.R. Sarkar and Other(1) Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the territory of India and exports the goods and even if the seller has the knowledge that the goods are intended by the purchaser to be exported such a transaction is not in the course of export for the seller does not export the goods, and it is not his concern as to how the purchaser deals with the goods. Such a transaction without more cannot be regarded as one in the course of export because etymologically "in the course of export" contemplates an integral relation or bond between the sale and the export. At the other end is a transaction under a contract of sale with a foreign buyer under which the goods may under the contract be delivered by the seller to a common carrier for transporting them to the purchaser. Such a sale would indisputably be one for export, whether the contract and delivery to the common carrier are effected directly or through agents. But in between lie a variety of transactions in which the question whether the sale is one for export or is one in the course of export i.e. it is a transaction which has occasioned the export, may have to be determined on a correct appraisal of all the facts. No single test can be laid as decisive for determining th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yer and that privity was essential the rigid rule of privity of contract should be relaxed in consideration of equity and justice and a realistic approach should be adopted. The nature of entering into contracts through the channel of the Corporation raised in reality a presumption of the Corporation being an agent of the appellant in the integrated transaction. 36. It was held by the Supreme Court by majority:— (i) that the Corporation alone agreed to sell the goods to the foreign buyer and was the exporter of the goods. There was no privity of contract between the appellant and the foreign buyer. The privity of contract was between the Corporation and the foreign buyer. The immediate cause of the movement of goods and export was the contract between the foreign buyer who was the importer and the Corporation who was the exporter and shipper of the goods. All relevant documents were in the name of the Corporation whose contract of sale was the occasion of the export. The expression "occasions" in s. 5 of the Act means the immediate and direct cause and, but for the contract between the Corporation and the foreign buyer, there was no occasion for export. Therefore, the export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court that before a sale can be said to take place in the course of inter-State trade or commerce, the following conditions must be satisfied:— (i) There is an agreement to sell which contains stipulation, express or implied regarding the movement of goods from one State to another; (ii) In pursuance of that agreement the goods in fact moved from one State to another; (iii) Ultimately a concluded sale took place in the State where the goods were sent and that State was different from the State from whcih the goods moved. 38. In English Electric Company of India Ltd. vs. The Deputy commercial Tax Officer(6) the Supreme Court reiterated that when and the movement goods from one State to another is an incident of the contract of sale, it is a sales in the course of inter-State trade falling under s. 3(a) of the Central ST Act, 1956. It does not matter in which State the property in the goods passes. What is decisive is whether the sale is one which occasions the movement of goods from one State to another. The inter-State movement must be the result of a covenant, express or implied in the contract of sale or an incident of the contract. It is not necessary that the sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure was made to the Defence. The Officer Commanding Composite food Laboratory also certified that the supplies were made to Defence. There cannot, therefore, be any manner of doubt that the sale was made to the Ministry of Defence. 42. The learned Addl. Commissioner went on to say:— "A further condition in r. 29(iii) is that the goods sold must be for official use. This term implies that the goods in question should be such as could be used officially. Eatable items such as the dealer has sold have no official use at all. Even if it be presumed that the feeding of army is for official purpose, it is further noteworthy that the goods are not used but are consumed." 43. 'Consume' according to Chamber's twentieth Century dictionary means to destroy by wasting, fire, evaporation etc. To use up, to devour, to waste or spend, to exhaust. 44. The same dictionary defines 'use' to mean to put to some purpose, to avail oneself of. 45. Thus from these two definitions, there appears to me to be no substantial difference between 'consumption' and, use in the context of this case. If the army or defence forces consume the goods, will it not mean that they have used the same they h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, Composite food Laboratory, A.SC Old Secretariat, Delhi, Ministry of Defence. Thus, the requirements to proviso to R. 29(ii) have, in my opinion, been satisfied. 51. For the reasons thus stated, I am satisfied that the goods were sold to the Ministry of Defence for official use, and, therefore, such sales are exempt from levy of sales tax. This point, is accordingly decided in favour of the dealer. 52. In view of the discussion made above, Appeals No. 1988/STT and 1989/STT are partly allowed and the impugned orders are modified to the extent indicated below: (i) The dealer is not liable to pay tax on the sales of goods made though Super Bazar. (ii) The sales effected through Bill No. 1409 1410 amounting to Rs. 1,536.00 and Rs. 8,776.00 respectively—total Rs. 10,312 will be treated as sales under the Local Act and will be taxed according to that Act. (iii) Sales of goods of the value of Rs. 2,300.78p. Rs. 9931.83p. and Rs. 1.452.64p., will be treated as sales under the Local Act and taxed accordingly. (iv) Sales of foot and bones will be exempt from tax. (v) The cases are remanded to the assessing authority to determine whether the meat and becon were sold i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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