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TMI Blog2007 (4) TMI 362X X X X Extracts X X X X X X X X Extracts X X X X ..... he time granted, the petitioners would be entitled to receive interest at the rate of 16 per cent per annum on the differential amount from the date of default. - Civil Appeals Nos. 4158-4186 of 2001, & 5341-5344 of 2001, - - - Dated:- 27-4-2007 - ARIJIT PASAYAT DR. AND LOKESHWAR SINGH PANATA JJ. Rakesh Dwivedi and B.A. Mohanti, Senior Advocates (Amit Singh, Ms. Mukti Choudhary, Mrs. Kirti Renu Mishra and Ashok Mathur, Advocates, with them) for the appellants. Anil Divan, Senior Advocate (B. Sen, Swetaketu Mishra, S. Singh and Janaranjan Das, Advocates, with him) for the respondents. -------------------------------------------------- R.K. PATRA J. Is the purchase of kendu leaves by the petitioners an inter-State trade or intra-State trade. This is the limited question that arises for consideration in this batch of writ petitions. As common issue is involved in all these cases, they were heard together and are disposed of by this judgment. For the sake of convenience, we have referred to the pleadings and documents of OJC No. 9724 of 2000. The case of the petitioners briefly stated is as follows: Petitioner No. 2 is one of the shareholders of petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o certain documents (which will be dealt with hereinafter) and relying on the decision of the Supreme Court in Commissioner of Sales Tax, U.P. v. Bakhtawar Lal Kailash Chand Arhti [1992] 87 STC 196 and decisions of the Patna High Court in D.R. Garg and Company v. State of Bihar [1986] 63 STC 183 and Indian Explosives Limited v. State of Bihar [1993] 89 STC 417 contended that the transaction in question is out and out an inter-State trade. Shri S.D. Das, learned Standing Counsel for the department, on the other hand submitted that the ontract envisaged in the tender call notice did not provide for movement of goods from one State to another. The seller, viz., the OFDC is no way concerned with what the petitioners do with respect of the kendu leaves purchased by them and the movement of kendu leaves to West Bengal has no link with the sale itself. According to him, the sale did not occasion the movement of goods so as to constitute intertate trade and therefore, it has been rightly assessed with the local sales tax. In support of this, he placed reliance on the decisions of the Supreme Court in Commissioner of Sales Tax, U.P. v. Suresh Chand Jain [1988] 70 STC 45 and of this court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orm "H" within 15 days from the date of receipt of an order relating to his selection as purchaser, failing which, the said order of selection shall be liable to be cancelled. Sub-rule (13) provides that purchaser shall take delivery of kendu leaves from such depots or stores as intimated by the Divisional Forest Officer during the currency of the purchaser's agreement. Under sub-rule (14) if the purchaser during the currency of the agreement establishes a bidi factory in order to provide employment to the residents of the State, he shall be entitled to rebate of two per cent of the annual purchase price paid by him. Rule 6 deals with grant of transport permit. Sub-rule (1) of rule 6 lays down that an application for issue of permit under section 3(2)(b) in the prescribed form "C" has to be made to the Divisional Forest Officer; sub-rule (2) states that the permit shall be in the prescribed form "D". Rule 9 deals with grant of certificate of sale. It lays down that the Government or their officer or agent while selling kendu leaves to any such person shall grant to such person a certificate of sale in form "F". CENTRAL ISSUE: Section 3(a) of the Central Sales Tax Act, 1956 so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of Bihar [1986] 63 STC 183 (Patna) It is a case from Patna High Court. The question came up for examination was whether the purchases of khair billets and/or forest products from the forest department in the State of Bihar constituted inter-State sale? The writ petitioners purchased khair billets and khair woods in the State of Bihar for consumption in their factory in Uttar Pradesh at Ijatnagar. The contract of sale provided that buyers should pay sales tax or any other tax as applicable on the khair billets in the State of Bihar and the delivered produce would be transported duly covered by permits issued by Corporation and routed through the check-posts prescribed by the Corporation. The court found that there was agreement and as an incident of the contract the purchasers were not entitled to any personal volition with respect to the goods. The physical delivery of goods with the right of disposal occurred in the State outside Bihar pursuant to the purchase made in the State of Bihar. In the circumstances, it was held to be sale in course of inter- State trade. (ii) Commissioner of Sales Tax, U.P. v. Bakhtawar Lal Kailash Chand Arhti [1992] 87 STC 196 (SC): The questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... desh. The Tribunal accepted those facts and rejected the contention of the department. In the reference made at the instance of the Revenue, the High Court found that the goods were moved out of Uttar Pradesh in pursuance of agreement for sale entered into between the assessee and the customers. The existence of transit form was taken note of but it was not decisive. As the goods moved out of the State in pursuance of the contract entered into between the seller and purchaser, the High Court held the transaction amounting to Rs. 21,050 to be inter-State sale. The Commissioner of Sales Tax filed an appeal against the decision of the High Court. The Supreme Court concurred with the finding recorded by the High Court and rejected the appeal. It may be seen that as a matter of fact, it was found by the Supreme Court that the goods were moved out of Uttar Pradesh in pursuance of an agreement of sale entered into between the assessee and the customers. (ii) Similipahar Forest Development Corporation Limited v. State of Orissa [1995] 96 STC 627 (Orissa). It was a case decided by this court. The Similipahar Forest Development Corporation (in brief "Corporation") was carrying on the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the purchasers and the sale/purchase did not occasion movement of goods from State of Orissa to outside the State. The basic ingredients to attract section 3(a) of the Act were found absent. Therefore, the sale was held to be intra-State sale and not inter-State. Keeping the aforesaid legal position in view, let us examine the facts and circumstances of the case at hand. There is no dispute that the petitioner No. 1 is a purchaser duly registered with the OFDC It duly submitted its tender pursuant to the tender sale notice (annexure 1). It's bid was accepted pursuant to which agreement was executed between the petitioner No. 1 and the Managing Director of the OFDC (annexure 3). The Divisional Manager, OFDC, Balangir Kendu Leaf Division, in his letter dated November 13, 2000 wrote to the Sub-divisional Manager, Padampur Sub-division, requesting him to give delivery of the stock to the petitioner No. 1 on receipt of the transport permit from the Divisional Forest Officer, Kendu Leaf, Padampur. In the copy which was forwarded to the Divisional Forest Officer, Kendu Leaf, Padmapur Division, the Divisional Manager requested him to issue necessary transport permit in favour of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two months of receipt of writ from this court. If the excess amount is not paid within the time granted, the petitioners would be entitled to receive interest at the rate of 16 per cent per annum on the differential amount from the date of default. The writ petitions are allowed. No costs. P.K. MISHRA J. I agree. The judgment of the court was delivered by Dr. ARIJIT PASAYAT J. Appellants-State of Orissa and the Orissa Forest Department Corporation Ltd., (in short, "the Corporation") in these appeals call in question legality of the judgment rendered by a division Bench of the Orissa High Court allowing the writ petitions filed under article 226 of the Constitution of India, 1950 (in short, "the Constitution"). Writ petitions were filed by the respondents on the plea that the transactions between them and the Corporation were in course of inter-State trade and, therefore, only sales tax under the Central Sales Tax Act, 1956 (in short, "the Central Act") and not the Orissa Sales Tax Act, 1947 (in short, "the State Act") was leviable. Accordingly, prayer was made for a declaration that levy and collection of tax under the State Act was unauthorised, without jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tral Rules ). It was noted by the High Court that section 3(2)(b) of the Kendu Leaves Act lays down that notwithstanding anything contained in sub-section (1), leaves purchased from Government or any officer or agent specified in the said sub-section by any person for manufacture of bidis within the State or by any person for sale outside the State may be transported by such person outside the unit under a permit to be issued in that behalf by such authority as may be prescribed and the permits so issued shall be subject to such conditions as may be prescribed. The High Court also referred to rule 5B which deals with disposal of kendu leaves. Particular reference was made to sub-rule (10) and sub-rule (11) of the said rule. Under sub-rule (11) the purchaser is required to execute an agreement in the prescribed form H within 15 days from the date of receipt of an order relating to his selection as purchaser failing which the said order of selection shall be liable to be cancelled. Sub-rule (13) provides that purchaser shall take delivery of kendu leaves from such depots or stores as indicated by the Divisional Forest Officer during the agreement. Rule 6 deals with grant of transpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that even in case of intra-State trade, the transport permits were required. There was in each case an agreement with the Corporation and nowhere it stipulates that the goods could only be taken outside the State. After the sale was completed in the State of Orissa, the purchaser was free to take it to any destination. The nature of the transaction has to be concluded on the basis of the common intention of the parties. The seller had no knowledge as to what is the ultimate destination. Mere knowledge to the seller is not sufficient. Something more is necessary. There was no material to show that the seller's intention was of inter-State trade. The permit issued for outside the units is only for the convenience of the purchasers, where the goods pass is immaterial. Learned counsel for the Corporation submitted that the permit was issued to facilitate transport and there was no binding obligation and compulsion to take them outside the State. Learned counsel for the Corporation further stated that though a casual reading of clause 3.13 gives an impression that there was no definite point of sale spelt out in the agreement, yet a complete reading of the agreement in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be sufficient, yet the cumulative effect of the factual scenario has to be considered. At this juncture, it is relevant to take note of a few decisions on the question of inter-State sale. Strong reliance was placed by learned counsel for the State on a decision of this court in Balabhagas Hulaschand v. State of Orissa [1976] 2 SCC 44 See[1976]37 STC207(SC)., more particularly, the position highlighted at page 52 See page214 of 37 STC. which reads as follows: "12. Furthermore, we can hardly conceive of any case where a sale would take place before the movement of goods. Normally what happens is that there is a contract between the two parties in pursuance of which the goods move and when they are accepted and the price is paid the sale takes place. There would, therefore, hardly be any case where a sale would take place even before the movement of the goods. We would illustrate our point of view by giving some concrete instances: Case No. I. A is a dealer in goods in State X and enters into an agreement to sell his goods to B in State Y. In pursuance of the agreement A sends the goods from State X to State Y by booking the goods in the name of B. In such a case it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t arose for consideration in that case, viz., whether an agreement of sale is included within the definition of 'sale' as defined in the Central Sales Tax Act. Be that as it may, the true position has since been explained in the later decision in Khosla and Co See[1979]43 STC 457(SC).. It is immaterial whether a completed sale precedes the movement of goods or follows the movement of goods, or for that matter, takes place while the goods are in transit. What is important is that the movement of goods and the sale must be inseparably connected. The ratio of Balabhagas is this: if the goods move from one State to another in pursuance of an agreement of sale and the sale is completed in the other State, it is an inter-State sale. The observations relied upon by Sri Sehgal do not constitute the ratio of the decision and cannot come to the rescue of the appellant-State. Indeed, if one looks to the language employed in clause (a) of section 3 it seems to suggest that the movement of goods follows upon and is the necessary consequence of the sale or purchase, as the case may be, and not the other way round." In the said judgment the view expressed by this court in Union of India v. K.G. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... occasioned such movement; and (3) it is also not necessary for a sale to be deemed to have taken place in the course of inter-State trade or commerce, that the covenant regarding inter-State movement must be specified in the contract itself. It would be enough if the movement was in pursuance of and incidental to the contract of sale (page 801(6) SCC p.737, para 9). The learned Judge added that it was held in a number of cases by the Supreme Court that if the movement of goods from one State to another is the result of a covenant or an incident of the contract of sale, then the sale is an inter-State sale. . . . 17(7). This decision may be usefully contrasted with another decision between the same parties, which is reported in State of Bihar v. Tata Engineering Locomotive Co. Ltd. [1971] 2 SCR 849(8). In that case, the turnover in dispute related to the sales made by the company to its dealers of trucks for being sold in the territories assigned to them under the dealership agreements. Each dealer was assigned an exclusive territory and under the agreement between the dealers and the company, they had to place their indents, pay the price of the goods to be purchased and ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or should be incidental thereto. What is important is that the movement of goods and the sale must be inseparably connected. It is not necessary that there should be an existence of contract of sale incorporating the express or implied provision regarding inter-State movement of goods. Even if hypothetically it is stated that such a requirement is necessary in the facts of the present case such implied stipulation does exist. This is referable to clause 3.7 of the agreement. At this juncture it is also relevant to take note of clause 3.13 which reads as follows: "The successful tenderer shall pay security deposit at 25 per cent of the full purchase price of the lot(s) within 15 days of issue of ratification order provided that where the tenderer makes purchase for purpose of export outside India, he may, if he so elects and on furnishing the requisite papers in support thereof, tender the security deposit in the form of bank guarantee (BG) to the extent of 20 per cent of the full sale value of the stock purchased in the prescribed form valid for a period of not less than one year and the said BG shall be released after finalisation of the export deal." Though, learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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