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TMI Blog1964 (12) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... is ... Govt./Central/Military/Commercial. 10. Place of delivery ... Free delivery at A.I., I.G.S., Hastings, Calcutta (Loose) for (a) Terms of delivery onward despatch to consignee. 11. Consignee ... To Commandant, C.O.D., Kanpur (Siding). 14. Inspection (a) Inspection Authority ... A.I., I.G.S., Hastings, Calcutta. 15. Payment (a) By the ... P. & A.O., W.H. & S., Calcutta. (b) During the year ... 1956-57." The general conditions contained in W.S.B. 133 contain inter alia the following conditions: "11 Delivery (v)(a) Place of delivery.-The contractor shall as may be required by the Secretary, Department of Supply, deliver the stores either free at, or F.O.R. the place or places detailed in the schedule hereto and not later than on the dates specified in the Acceptance of Tender. 15.. System of payment. (i) Unless otherwise agreed between the parties payment for the delivery of the stores will be made on submission of bills in the prescribed form. (ii) Payment for the stores or for each delivery will be made to the contractor on submission of bills in accordance with the procedure laid down by the Secretary, Department of Supply (now Ministry of Works, Housing and Supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, it was held that the sale was completed within the State of West Bengal and was liable to payment of sales tax. The petitioner thereupon filed a reference before the Additional Member, Board of Revenue, West Bengal, under subsection (1) of section 21 of the said Act for referring certain questions of law to the High Court. The said application was rejected as being out of time. The petitioner then filed a reference application in this High Court under sub-section (2) of section 21 of the said Act. The application was not entertained on the ground that it was out of time. Thereupon, the petitioner made this application and a rule was issued on the 17th May, 1961, calling upon the respondents to show cause why a writ in the nature of mandamus should not be issued directing the respondents to forbear from giving effect to the illegal order of assessment dated 27th June, 1956, and why a writ in the nature of certiorari should not be issued setting aside the several orders mentioned hereinbefore, and for other reliefs. I have mentioned above that the petitioner seeks to bring its case under the provisions of section 5(2)(a)(v) of the said Act. That provision states that in the turnov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t contemplated local delivery to the party entitled to inspect. The goods were actually delivered in Calcutta and the condition in the contract which mentioned, "for onward despatch to consignee", had nothing to do with the petitioner, nor is there any evidence to show that the goods were in fact despatched to Kanpur. He pointed out that one must take into account the manner in which these contracts are entered into by the Central Government for military purposes. Requisitions would be made from all over India, and the Central Government would enter into a contract with various dealers for the supply of the materials indented for. If the dealer was required by the contract to deliver the goods outside the State for consumption therein, it may amount to an inter-State sale and come within the scope of Article 286(2) of the Constitution. The conditions, however, also contemplated local delivery to the inspecting authority. In the case of delivery to the consignee outside the State, the bill would be made for 90 per cent. on delivery and 10 per cent. after the certificate had been obtained. In this case, however, the goods were delivered in Calcutta and on the same date the dealer bil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 286(2). I held that the sale was an inter-State sale on the peculiar facts of the case. The sale was in respect of railway wagons which were admittedly required for purposes elsewhere. The facts in that case are distinguishable from the facts of the present case. Upon an interpretation of the contract itself, taken with the conduct of the parties in implementing it, I have no doubt that the words "for onward despatch to consignee" had nothing to do with the petitioner. In my opinion, contracts covered by W.S.B. 133 can be of various kinds. In one case, the goods may be inspected and together with the certificate of inspection the dealer may be called upon to despatch the same by rail to the consignee. In such a case, the duty of despatching falls on the dealer and other considerations may arise. In other cases, the delivery may be made, locally for example, to the inspecting authority. In such a case, the dealer had no duty to despatch the goods outside the State to the consignee. The delivery was complete when the goods were delivered to the inspecting authority. In such a case, they could at once bill the Government provided, however, that the goods were found to be in conform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by transfer of shipping documents, while the goods are beyond the customs barrier, that is within the exemption, and that a sale which precedes such export or import or follows it is not exempted, vide State of Travancore-Cochin v. Shanmugha Vilas Cashew Nut Factory[1953] 4 S.T.C. 205. On the same principles, a purchase made inside a State, for sale outside the State cannot itself be held to be in the course of inter-State trade, and the imposition of a tax thereon is not repugnant to Article 286(2) of the Constitution". The same principles were upheld in the Cement Marketing Co. of India (Private) Ltd. v. The State of Mysore and Another[1963] 14 S.T.C. 175. Kapur, J., said as follows: "Thus the tests which have been laid down to bring a sale within inter-State sales are that the transaction must involve movement of goods across the border: Mohanlal Hargovind's case[1955] 6 S.T.C. 687.; transactions are inter-State in which as a direct result of such sales the goods are actually delivered for consumption in another State: M/s. Ram Narain Sons Ltd. v. Assistant Commissioner of Sales Tax and Others[1955] 6 S.T.C. 627.; a contract of sale must involve transport of goods from one Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract of sale are satisfied, there cannot be an inter-State sale. Since the petitioner has referred to the condition relating to despatch F.O.R. in Calcutta for Kanpur, reference may be made to a Bench decision of the Madhya Pradesh High Court, C.P. Timber Works v. Commissioner of Sales Tax, M.P., Indore and Another[1964] 15 S.T.C. 602. In that case, the assessee entered into a contract of sale of timber with the Director-General of Stores, Supplies and Disposals, Government of India. The contract in that case was similar to the one we have to consider in the instant case. Under the contract, the place of delivery was F.O.R. a railway station within the State of Madhya Pradesh. The assessee kept the timber logs ready for inspection at that place. The inspecting authority inspected the timber, issued an inspection certificate and put a mark on the approved timber. The assessee despatched the timber by goods train to places outside the State, obtained the railway receipt in the name of the consignee, sent the receipt by registered post and received ninety per cent. of the price. The balance of ten per cent. was received by the assessee on receipt of the consignment in good condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al. As the goods were appropriated to the contract in West Bengal, their subsequent despatch outside West Bengal was not by the appellant but was by and on behalf of the Bombay party. Consequently, the appellant was not entitled to exemption under the said Act, nor was he entitled to exemption under Article 286(1)(b) of the Constitution. The legal position may be summarised as follows: A contract for the sale of goods may be exempted from the payment of local tax in cases governed by the Constitution prior to the Sixth Amendment if it is an Explanation sale. In order to be such a sale, it is to be found as a fact that the goods under the contract were to be delivered in another State for consumption in that State. That is not the position in the present case. It would also be exempted if under the contract of sale the goods have to be delivered by the seller to the buyer at a place outside the State of West Bengal. It is the contract itself that must provide for this liability on the part of the seller. Even if the intention is clear that the purchaser would buy and then transport it outside the State, that would not be sufficient. The question is, where was the delivery made in fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract were to be despatched by A from railway stations in the Central Provinces to Ambernath in the Province of Bombay. It was there that the factory manager of the purchaser would inspect, measure and accept the same, if in his opinion they were in accordance with the contract at the time that the goods were in existence at all as logs, although they might have been in the form of standing timber. On the facts it was held that the appropriation to the contract was made at Ambernath and that is where the title to the goods passed and the Central Provinces could not make the seller liable to sales tax. In my opinion, this decision cannot help the petitioner because the facts are not analogous. The seller may have stacked his logs in the Central Provinces but the delivery was made at Ambernath, where they were inspected and accepted by the purchaser. In the instant case, the seller appropriated the goods to the contract and delivered them to the purchaser at Calcutta. They were inspected there and as soon as the certificate was granted the goods were found to be in terms of the contract. After that, the seller could have no further title to the goods. If at all, the Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... patching the goods by railway. It delivered the goods to the inspecting authority locally and as soon as the inspecting authority found that the goods were in accordance with the contract, the matter ended so far as the seller was concerned. Mr. Banerjee argues that the decision of the Madhya Pradesh High Court is erroneous. I am unable to agree with him. But even if it is erroneous, it does not advance the matter further, because the facts in the present case are different. In Gordhandas Lalji v. B. Banerjee[1958] 9 S.T.C. 581., Gajendragadkar, J. (as he then was), said as follows: "Shri Veda Vyas then attempted to challenge the correctness of this finding. It is clear that this is a finding of fact and it would normally not be open to the appellant to question the correctness of the findings of fact in appeals under Article 136 of the Constitution. But even on the merits we think the finding in question is perfectly correct. There can be no doubt that, with the unconditional appropriation of the goods to the contract by one of the parties with the consent of the other, property passes from the seller to the buyer. Shri Veda Vyas, however, relies on his conduct and suggests that u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e buyer. On the other hand, the goods were delivered in Calcutta and immediately billed for. There was no conditional appropriation. Mr. Banerjee next cites "Benjamin on Sale", 8th Edn., at page 351. The learned author refers to the case of Sir James Laing & Sons v. Barclay[1908] A.C. 35. In that case, the respondents contracted to build for an Italian company two steamers according to certain specifications. There was a special clause which stated-"The vessels will not be considered as delivered to and finally accepted by the purchasers until the said ships have passed the official trial trip in Genoa, have been approved in Genoa by the Italian emigration authorities, and all conditions of the contract have been fulfilled." There were other conditions about payment and the appointment of an expert to superintend the construction of the vessel and the machinery. After several instalments have been paid the appellants arrested the ships for a debt due to them from the Italian company. The Court of Session discharged the arrestments on the ground that there was no evidence that the property in the ships had passed. On appeal to the House of Lords, with regard to one of the ships, it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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