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TMI Blog1979 (3) TMI 176X X X X Extracts X X X X X X X X Extracts X X X X ..... A.D. Mathur, Advocates, for the respondents. E.C. Agarwala, Advocate, for R.N. Sachthey, Advocate, for the appellants. Lal Narain Sinha, Senior Advocate (K.K. Jain, S.K. Gupta, pramod Dayal and Bishamber Lal, Advocates, with him), for respondent No. 1. -------------------------------------------------- The judgment of the Court was delivered by CHANDRACHUD, C.J.- This appeal by certificate raises an interesting controversy between the sales tax authorities in the Union Territory of Delhi and those in Haryana, the question being as to which of the two authorities can assess respondent 1 to sales tax. One of the reliefs sought by respondent 1 is that until the sales tax authorities of the two territories settle their differences, no sales tax should be levied or recovered from it since, it does not know to whom to pay the tax. This controversy arises on the following facts. Respondent 1 is a private limited company called K.G. Khosla Co. (P.) Ltd., having its head office in the Union Territory of Delhi at 1, Deshbandhu Gupta Road, New Delhi. The company carries on business in air compressors and garage equipments which it manufactures in its factory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of sales tax on the same sale transactions, the company prayed by its writ petition to the High Court to resolve the controversy between the sales tax authorities of the two States and decide the question of their respective jurisdiction to assess its turnover. The State of Haryana contended by its counter-affidavit to the writ petition that the goods were manufactured by the company at Faridabad in pursuance of contracts of sale with outside purchasers, that those goods were appropriated to the various contracts of sale in the State of Haryana and that the movement of the goods from Faridabad to Delhi and onwards was caused as a necessary incident of the contracts of sale made by the company. The sales, according to the State of Haryana, had taken place at Faridabad during the course of inter-State trade. The Union of India, on the other hand, contended that the goods were brought from Faridabad to Delhi and were thereafter sold by the company to the various purchasers outside Delhi. These sales, according to the Union of India, were governed by the Bengal Finance (Sales Tax) Act, 1941, as extended to Delhi, their situs being the Union Territory of Delhi. The Delhi High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Levy and collection of tax and penalties.-(1) The tax payable by any dealer under this Act on sales of goods effected by him in the course of inter-State trade or commerce, whether such sales fall within clause (a) or clause (b) of section 3, shall be levied by the Government of India and the tax so levied shall be collected by that Government in accordance with the provisions of sub-section (2), in the State from which the movement of the goods commenced." There is a proviso to section 9(1) to which it is unnecessary to refer since it has no application. In the light of these provisions, what has to be considered is whether the sales effected by respondent 1 occasioned the movement of goods from one State to another State, which, on the facts of the instant case, would mean, from the State of Haryana to the Union Territory of Delhi. It is only if a sale occasions the movement of goods from one State to another that it can be deemed to have taken place in the course of inter-State trade or commerce within the meaning of section 3(a) of the Act. Clause (b) of section 3 is not relevant for our purpose. The course and manner of its business have been set out by respondent 1 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e performance of contracts made at Delhi. Goods conforming to agreed specifications having been manufactured at Faridabad, the contracts of sale could be performed by respondent 1 only by the movement of the goods from Faridabad with the intention of delivering them to the purchasers. Thus, the movement of the goods was occasioned from Faridabad to Delhi as a result or incident of the contracts of sale made in Delhi. It is true that in the instant case the contracts of sale did not require or provide that goods should be moved from Faridabad to Delhi. But it is not true to say that for the purposes of section 3(a) of the Act it is necessary that the contract of sale must itself provide for and cause the movement of goods or that the movement of goods must be occasioned specifically in accordance with the terms of the contract of sale. The true position in law is as stated in Tata Iron and Steel Co. Ltd., Bombay v. S.R. Sarkar [1960] 11 S.T.C. 655 at 667, 679 (S.C.); [1961] 1 S.C.R. 379 at 391, 407., wherein Shah, J., speaking for the majority, observed that clauses (a) and (b) of section 3 of the Act are mutually exclusive and that section 3(a) covers sales in which the movement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Locomotive Co. Limited v. Assistant Commissioner of Commercial Taxes [1970] 26 S.T.C. 354 at 377, 380 (S.C.); [1970] 3 S.C.R. 862 at 866, 870., on which the Union of India relies, proceeds on a different consideration and is distinguishable. The appellant therein carried on the business of manufacturing trucks in Jamshedpur in the State of Bihar. The sales office of the appellant in Bombay used to instruct the Jamshedpur factory to transfer stocks of vehicles to the stock-yards in various States after taking into account the production schedule and requirements of customers in different States. The stocks available in the stock-yards were distributed from time to time to dealers. The transfer of the vehicles from the factory to the various stock-yards was a continuous process and was not related to the requirement of any particular customer. It was the stock-yard in-charge who appropriated the required number of vehicles to the contract of sale out of the stocks available with him. Until such appropriation of vehicles was made, it was open to the company to allot any vehicle to any purchaser or to transfer the vehicles from the stock-yard in one State to a stock-yard in another Sta ..... 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