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TMI Blog1958 (5) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... e Member, Sales Tax Board, Assam, who will hereinafter be called Member, submitted a statement of the case along with his opinion. In his opinion, the questions Nos. (1) and (2) should be answered in the affirmative and the question No. (3) in the negative. The facts relevant for the determination of the questions are that Sri Birendra Nath Guha, partner of the business known as Messrs B.N. Guha Co., hereinafter called the applicant was registered as a dealer under the Assam Sales Tax Act, 1947, the registration number being DHU-985. The applicant carried on business in the name and style of B.N. Guha Co., and was the sole proprietor thereof. His principal business consists in the purchase of sal sleepers and sale thereof to the railway department of the Government of India, as well as to private railway and public bodies. On 4th of February, 1954, the applicant entered into an agreement with the President, Eastern Group Sleepers Control, acting for and on behalf of the President of India to supply and deliver to the State, wooden sleepers to the number, description and quantity at the price or prices and at the times and places and in the manner detailed in Schedule IV appen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. These clauses will also be relevant in considering the other two questions referred to us. The agreement purports to be one for the supply of wooden sleepers as will be evidenced from the preamble to the agreement which is as follows: "Whereas the contractor has agreed to supply and deliver to the State wooden sleepers to the number and of the description and quality and at the price or prices and at the times and places and in the manner detailed in the Schedule". In the body of the agreement also it is laid down that the petitioner agreed that he will duly supply and deliver the said sleepers to the number and of the description given in the Schedule. The conditions of the contract are numerous and set out in part 2 of the agreement. The time is the essence of the contract and provision has been made for granting an extension in condition 2. Condition 3(a) reads as follows: "The prices named in the Schedule shall cover everything required to be done by the contractor in terms of the specification and conditions of contract including all loading and handling charges connected with the inspection and delivering of the sleepers on rail and taxes and impositions in respect of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce with the instructions contained in clauses 5(a), (b), (c) and (d) above". Clause 5(f): "Immediately after the branding of passed sleepers the contractor, or his agent shall have a dot of white paint put on each sleeper near the Sleeper Passing Officer's brand". Clause 5(g): "The contractor shall make all arrangements with the railway concerned for the lease of an adequate plot or plots of land at stations where he desires to offer sleepers for inspection and bear the charges thereof ". Clause 8 then provides that the contractor shall supply at his own expense all labour and implements required for examination and passing of the sleepers. Clause 9 provides for the powers of the Sleeper Passing Officer. Clause 10 provides that the Sleeper Control Officer shall give the contractor a passing certificate of the number passed and rejected at such station in accordance with the provisions of the agreement. Paragraph 11(a) provides as follows: " After passing the contractor shall apply to, and obtain from, the Sleeper Control Officer, Eastern Group, his orders as to the despatch of the passed sleepers which will then be disposed of by the contractor either by handing over to the consig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sleepers rejected by the Sleeper Control Officer shall be deemed to be non-delivered and all sleepers are to be at the risk of the contractor until fully delivered and finally accepted at destination. 11(h) provides that any sleeper received by the consignee without the brand mark of the Sleeper Passing Officer and the private mark of the contractor shall be liable to be rejected and the Sleeper Control Officer may auction these and any sleepers rejected by him on re-inspection at the best price obtainable by him and until sale such sleepers shall lie at the contractor's risk. The contractor shall be entitled to receive credit for the net proceeds of the sale only after deducting the expenses mentioned in clause 11(j) below. 11(i) provides that if there is any shortage in the number of sleepers received by the consignee in any particular consignment, i.e., covered by a single railway receipt, the contractor shall be paid for all sleepers shown on the tally receipt provided all sleepers received by the consignee are passed sleepers and have not been rejected by the Sleeper Control Officer but if any part of such consignment consists of unpassed sleepers they shall be rejected and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer, and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the contract". This section comprises of two parts: The first part provides that the property in the goods passes to the buyer as soon as the goods are appropriated to the contract either by the seller with the assent of the buyer or by the buyer with the assent of the seller. The second part provides that in the absence of any appropriation by assent if in pursuance of the contract the seller delivers the goods to the buyer or to the carrier for the purpose of transmission to the buyer and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the contract, and the title to the goods passes on such an appropriation. Section 24 then deals with the cases where the goods are sent on approval. Question No. (1) only says whether the provision of section 23(2) of the Indian Sale of Goods Act can be considered in applying section 2(12) of the Assam Sales Tax Act. Section 2(12) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as placed on the 2 cases of the Patna High Court-Birendra Nath Guha v. State of Bihar[1954] 5 S.T.C. 273; A.I.R. 1955 Pat. 245. This case undoubtedly is an authority for the proposition that under the terms of the present agreement the goods stood appropriated when they were passed within the State of Assam and also there was no condition in the agreement to the effect that the vendor had retained the right of disposal even though the goods were handed over to the carrier for transmission but, in our opinion, having regard to the provisions of section 3 (IA) of the Assam Sales Tax Act which in effect takes out these sales from the definition of "sale ", in section 2(12) which are of inter-State character, section 23(2) will not be material for the purpose of ascertaining the question of the applicability of section 2(12) of the Assam Act to the present transaction. If the definition of the word "sale" under section 2(12) is taken to cover within its scope sales of inter-State character on the ground that the title to the goods passes, by taking into consideration section 23 of the Indian Sale of Goods Act within the State of Assam, to the extent the provisions will be ultra vires ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tations outside the State of Assam and whether in such a state of affairs the sale can be said to have taken place within Assam. Even if such a sale is said to be covered. by the definition of the word "sale" under the Assam Act the question will still remain as to how far they will be hit by the provision of Articles 286(1) and 286(2) of the Constitution. Apart from Article 286 of the Constitution, section 3(1A) of the Assam Act also provides that nothing in sub-section (1) shall, except in cases covered by the first proviso to sub-section (12) of section 2 of this Act, be deemed to render any dealer liable to tax on the sale of goods where such sale takes place (i) outside the State of Assam; (ii) in the course of the import of the goods into, or export of the goods out of, the territory of India; or (iii) in the course of inter-State trade or commerce except in so far as Parliament may by law otherwise provide. This provision clearly takes out the sales which are in the nature of inter-State sales from the purview of the definition of sale and it will therefore have to be seen whether sales where the goods are handed over to the carrier in Assam for being sent to the consignee o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ser or his agent, and delivery to the common carrier is not actual delivery." It will be clear from these observations referred to above that in order to make a sale complete within the State the actual delivery is to take place within the State and any goods where the actual delivery takes place outside the State the sale is one of inter-State character and is taken out of the purview of the definition of the sale in the Assam Act. From clause 11(a) of the agreement also, it is clear that after the despatch order has been obtained with regard to the passed sleepers the goods are to be disposed of either by handing over to the consignee or by loading into the railway wagons and booking under Risk Note 'B' by rail to the consignee to whom the sleepers are allotted. This clause clearly draws a distinction between the loading after handing over the goods to the carrier and actual handing over to the consignee. If the delivery to the carrier in the eye of law would have amounted to actual delivery to the agent of the consignee, the first alternative would have been complied with as soon as the goods were handed over to the carrier and there was no further obligation on the vendor to ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d sale of goods within the State of Assam was thus concluded. The sale from its very nature consists of various elements, the contract, the existence of the goods, the passing of the title to the goods and the actual delivery of the goods. Prior to coming into force of the Constitution there was a lot of confusion as regards the power to levy sales tax. The following observation made by the Chief justice in the case of The State of Bombay v. United Motors (India) Ltd.[1953] 4 S.T.C. 133; A.I.R. 1953 S.C. 252., will make the position clear: " In exercise of the legislative power conferred upon them in substantially similar terms by the Government of India Act, 1935, the Provincial Legislatures enacted sales tax laws for their respective Provinces, acting on the principle of territorial nexus referred to above; that is to say they picked out one or more of the ingredients constituting a sale and made them the basis of their sales tax legislation. Assam and Bengal made among other things the actual existence of the goods in the Province at the time of the contract of sale the test of taxability. In Bihar the production or manufacture of the goods in the Province was made an additional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Ltd. v. State of Bihar[1955] 6 S.T.C. 446; A.I.R. 1955 S.C. 661., but the decision so far as it lays down that Article 286(1) prohibits the taxation of inter-State sales by all States except the State in which goods are actually delivered for consumption therein was not overruled but was in effect accepted. Prior to the coming into force of the Constitution under the Government of India Act the question whether the State had power to tax a sale or purchase having inter-State elements depended entirely on the question whether there was sufficient territorial connection between the taxing State and the sale or purchase sought to be taxed. There was no definite and conclusive test that could be applied to all cases as to what would constitute sufficient territorial connection to confer a taxing power on a State. This led to a position of great uncertainty as to which out of several States with which a sale or purchase could be said to have territorial connection had the power to tax it. This uncertainty has been removed by Article 286. The situs of such a sale has been fixed at the place where it is delivered for consumption and has been taken out of the territorial jurisdiction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contemplated in the explanation is not a constructive delivery to the carrier but actual delivery which undoubtedly in the present case took place at the station to which the goods were consigned. As to the second requirement of consumption in that State, it was argued that there was nothing in the agreement to indicate that the goods were actually consumed therein or that they were not brought again into the State of Assam for consumption. There are twofold answers to this: Firstly, reference to the question has been framed on the assumption that the goods were despatched and consumed outside the, State of Assam, and secondly, according to the terms of the agreement the goods after they have been passed are to be despatched to the outside stations according to the allotment made by the proper authorities. Allotments are made having regard to the requirement and necessity of each station. The goods thus must have been delivered to the allottee State for the purpose of consumption therein. Reference may also be made to an unreported decision of the Supreme Court in Sales Tax Officer, Cuttak v. B.C. Patel Co. Since reported in [1958] 9 S.T.C. 467. (Civil Appeal No. 230 of 1956). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate imposing or authorising the imposition of, a tax on the sale or purchase of any goods where such sale or purchase took place in the course of inter-State trade or commerce during the period between the 1st day of April, 1951, and the 6th day of September, 1955, shall be deemed to be invalid or ever to have been invalid merely by reason of the fact that such sale or purchase took place in the course of inter-State trade or commerce; and all such taxes levied or collected or purporting to have been levied or collected during the aforesaid period shall be deemed always to have been validly levied or collected in accordance with law." This validates the levy or collection of taxes levied or collected between a certain period irrespective of the fact that the sale has taken place in the course of inter-State trade or commerce. The purpose of this Ordinance and the subsequent Act was to validate the levy and collection of tax by the delivery State and not to validate the levy or collection of tax by the States which are not delivery States. Sales where the situs has been fixed by explanation to Article 286(1)(a) but were still made immune from taxation being in the course of inter- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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