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TMI Blog1968 (8) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... he Madhya Pradesh High Court dated 26th November, 1965, in Miscellaneous Civil Case No. 318 of 1964. The respondent, who carries on business of selling manganese ore, was assessed to sales tax under section 18(3) of the Madhya Pradesh General Sales Tax Act, 1958 (2 of 1959), for the period 1st October, 1957, to 30th September, 1958, by the Sales Tax Officer, Balaghat, in respect of sales of manganese ore by the respondent of the value of Rs. 2,77,976.45. The respondent took the matter in appeal to the Appellate Assistant Commissioner of Sales Tax. It was contended on behalf of the respondent that the entire turnover was of sales in the course of export of manganese ore out of India and, alternatively, the sales were inter-State sales, and, therefore, not liable to be taxed under the Madhya Pradesh General Sales Tax Act, 1958 (hereinafter called "the Act"). The objection was rejected by the Appellate Assistant Commissioner, who dismissed the appeal. In second appeal the Board of Revenue accepted the contention of the respondent that the sales were in the course of inter-State trade or commerce, and, therefore, could not be assessed to sales tax under the Act. Taking this view the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asions the movement of goods from one State to another; or (b) is effected by a transfer of documents of title to the goods during their movement from one State to another." The interpretation of section 3(a) of the Central Sales Tax Act was the subject-matter of consideration by this court in Tata Iron & Steel Co. Ltd., Bombay v. S.R. Sarkar(1) and Shah, J., speaking for the majority of the Bench, observed as follows: "In our view, therefore, within clause (b) of section 3 are included sales in which property in the goods passes during the movement of the goods from one State to another by transfer of documents of title thereto: clause (a) of section 3 covers sales, other than those included in clause (b), in which the movement of goods from one State to another is the result of a covenant or incident of the contract of sale, and property in the goods passes in either State." This observation of Shah, J., was cited with approval by this court in Cement Marketing Co. v. State of Mysore [1963] 14 S.T.C. 175., and again in State Trading Corporation v. State of Mysore [1963] 14 S.T.C. 188. In the later case, Sarkar, J., observed thus: "The question then is, did the sales occasion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . of the price will be paid on receipt of the goods at that port. The High Court took the view that these two contracts also involved despatch of goods outside the State of Madhya Pradesh and delivery thereof at a place outside the State, and so, the sales fell under section 3(a) of the Central Sales Tax Act. On behalf of the appellant the Attorney-General put forward the argument that the High Court had misconstrued all the four contracts in respect of their true legal effect. It was contended that the High Court did not give proper consideration to the fact that two of the four contracts provided delivery of the goods f.o.r. loading point in the State of Madhya Pradesh and the transportation of the goods from the State to a place outside was subsequent to the passing of the title to the buyers within the State of Madhya Pradesh. We are unable to accept the argument put forward by the Attorney-General as correct. Having examined the terms of the four contracts in the present case, we are satisfied that the performance of each one of the contracts necessarily involved the movement of goods from the State of Madhya Pradesh to the State of Maharashtra or to the State of Andhra Prade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a in fulfilment of the terms of the contract. In our opinion, this is a very important feature of the two contracts and in order to fulfil the requirement of the clause, the seller had necessarily to move the goods by rail across the frontier of Madhya Pradesh. In regard to these two contracts therefore the movement of goods was a direct and necessary consequence of the important covenant with regard to the fixation of price. It follows that the sales under these two contracts were inter-State sales within the language of section 3(a) of the Central Sales Tax Act and were not liable to be taxed under the Madhya Pradesh General Sales Tax Act. The legal position with regard to other two contracts, viz., the con- tracts dated 10th November, 1956, and 29th May, 1958, with M/s. B.P. Khemka & Co. is the same. The relevant portions of the contract dated 10th November, 1956, are to the following effect: "An agreement of sale, made and entered into on this tenth day of November, nineteen hundred fifty-six between Buyers: B.P. Khemka Private Ltd., 5, Clive Row, Calcutta-1, having their branch office at New Colony, Nagpur-1. Sellers: Allwyn Cooper, Wardha Road, Nagpur-1. IT IS AGREED AS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ton plus railway freight from loading station to the port of Vishakhapatnam will be the F.O.R. Vishakhapatnam Port rate. The buyers shall pay at Rs. 150 per long ton to the sellers and the actual railway freight to the railway authorities on account and on behalf of the sellers. The said price is based on 48 per cent. Mn. with unitage Rs. 3 (three) per ton for each per cent. of Mn. above 48 per cent. Mn., fraction pro rata. Payment: 90 per cent. value of the ore, on the basis of the quantity indicated on the analysis report, shall be paid to the sellers by the buyers on receipt of satisfactory analysis report from Messrs. Essen & Company, Nagpur. The balance 10 per cent. value shall be paid and the account finally settled after the goods have been loaded, weighed, despatched to the port and the goods have been finally received in the plots of the buyers at the port. The final invoice shall be prepared by the sellers on the basis of the analysis results obtained from Messrs. Hughes & Davies, Bombay, after ascertaining the weight of the ore from the railway weigh- bridge at Gondia. Weight: First weighments of wagons as recorded at Gondia railway weigh-bridge shall be final and bin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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