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TMI Blog1967 (2) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... mercial. 10. Place of delivery ... Free delivery at A.I.I.G.S., Hastings. (a) Terms of delivery ... Calcutta, (loose) for 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 are, inter alia, as follows: II. 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. 16. 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 Supply) as detailed below: (a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Taxes which was also rejected; the appellant, thereupon, filed a revision application before the Additional Member, Board of Revenue, Government of West Bengal, and this application was also refused. The authorities mentioned above were of the view that the sale was completed within the State of West Bengal and was liable to payment of sales tax under the West Bengal Act. Then the appellant invited the said Additional Member to refer certain questions of law to the High Court. The appellant's application for reference was held to be barred. The appellant then came to the High Court with an application for reference which was also not entertained on the ground of limitation. Thereupon, on the 17th May, 1961, the appellant made an application under Article 226 of the Constitution and a rule was issued 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 the 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. Sinha, J., by his Lordship's o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f unascertained or future goods, at the time of their appropriation to the contract of sale by the seller or by the buyer, whether assent of the other party is prior or subsequent to such appropriation. Explanalion.-Where there is a single contract of sale or purchase of goods situated at more places than one the provisions of this subsection shall apply as if there were separate contracts in respect of the goods at each of such places." Section 3 of the Central Sales Tax Act is as follows: "A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase(a) occasions 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. Explanation 1.-Where goods are delivered to a carrier or other bailee for transmission, the movement of the goods shall, for the purposes of clause (b), be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee. Explanation 2.-Where the movement of goods commences and terminates in the same State it shall not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner of Commercial Taxes, Madras Division, Madras[1966] 17 S.T.C. 473. But before we come to the Supreme Court case it is worthwhile referring to a decision of the Madras High Court In Bengal Corporation Private Ltd. v. The State of Madras[1965] 16 S.T.C. 62. In this case under a contract between the petitioner and the Iron and Steel Controller, Calcutta, the petitioner agreed to import and supply steel to the Integral Coach Factory at Madras. The contract provided that the petitioner would get the goods manufactured in U.K.; the goods would be shipped to the Madras Port; but before shipment a nominee of the buyer should inspect the goods to satisfy himself whether they were In accordance with the specification. The petitioner had to submit to the Controller advance information of all expected shipments and should deliver the materials to the Deputy Controller of Stores, Integral Coach Factory, Madras. On completion of delivery the petitioner would submit its 100 per cent. bill for payment. The Madras High Court held that the sale was a sale in the course of import within the meaning of section 5(2) of the Central Sales Tax Act, 1956, because the movement of the goods from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that the goods would be manufactured in Belgium, inspected there and imported into India for the consignee, and it was in pursuance of the conditions of the contract between the assessee and the Director-General of Supplies. The Supreme Court thought, on the facts of the case, that there was no possibility of the goods being diverted by the assessee for any other purpose and, therefore, the sales took place in the course of import of goods within section 5(2) of the Act, and were exempt from taxation. At pages 488 to 489 Sikri, J., has explained what is "incidental to the contract" In these words: "The next question that arises is whether the movement of axle-box bodies from Belgium into Madras was the result of a covenant in the contract of sale or an incident of such contract. It seems to us that it is quite clear from the contract that it was incidental to the contract that the axle-box bodies would be manufactured in Belgium, inspected there and imported into India for the consignee. Movement of the goods from Belgium to India was in pursuance of the conditions of the contract between the assessee and the Director-General of Supplies. There was no possibility of these goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. Ltd. claimed that the aforesaid sales were inter-State sales chargeable under the Central Sales Tax Act, 1956, alone and the Hyderabad General Sales Tax Act, 1950, had no application to these sales. The Supreme Court upheld this contention and stated that during the said periods coal was transported from the colliery of the company to consumers outside the taxing State, as a result of the covenant or incident of the contract of sale. The facts of the case are clear enough for us to conclude that by using the words "incident of the contract of sale" the Supreme Court was not widening the scope of inter-State sales. There is no doubt that the movements of goods, outside the State concerned, were in accordance with the terms of the contracts of sales and, as such, they were inter-State sales. There is another case to which Mr. Banerjee drew our attention. This is a Bench decision of our Court recently given. In S.K. Roy v. Additional Member, Board of Revenue, West Bengal[1966] 18 S.T.C. 379., the assessee, a coal company, was registered under the Bengal Finance (Sales Tax) Act, 1941. Under the provisions of the Colliery Control Order, 1945, coal could not be exported out of Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Madras[1956] 7 S.T C. 135. have quoted certain observations in this connection of Gavit, Willoughby and Rottschaeffer. Gavit says in his "Commerce Clause" (1932 Edition): "The dividing line between an inter-State sale and intraState sale is rather fine, although clear. If the goods are shipped into a State without a previous sale, any sale within the State is intra-State commerce......Thus if the sale succeeds the transportation in point of time, however close, the State may license it." Willoughby in his "Constitution of the United States" at page 753 states: "........ the test whether agreements to purchase or to sell are to be deemed constituent parts of inter-State commercial transactions is as to whether inter-State transportation of goods is necessarily involved in their execution." The statements in Rottschaeffer's "Constitutional Law" (1939 Edition) at pages 229 and 235 are more categorical. Here it is stated: "The activities of buying and selling constitute inter-State commerce if the contracts therefor contemplate or necessarily involves the movement of goods in inter-State commerce." Again Rottschaeffer at page 235 observes: "The decisive factor that renders making a co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ills Ltd., Guntur v. The State of Andhra Pradesh[1964] 15 S.T.C. 430., Ben Gorm Nilgiri Plantations Co. v. The Sales Tax Officer, Ernakulam[1964] 15 S.T.C. 753. and The State of Mysore v. Guduthur Thimmappa and Son and Another[1967] 19 S.T.C. 35., the decision of the Madras High Court in Indian Coffee Board v. The State of Madras[1956] 7 S.T.C. 135., the decision of the Calcutta High Court in Associated Electrical Industries (India) (P.) Ltd. v. Commercial Tax Officer and Others(1964) 68 C.W.N. 776., the decision of the High Court of Madhya Pradesh in C.P. Timber Works v. Commissioner of Sales Tax, M.P. and Others[1964] 15 S.T.C. 602. and the decision of the Punjab High Court in Prem Payari Aggarwal v. Punjab State[1966] 18 S.T.C. 150. We have seen, when Mr. Banerjee was arguing, that expressions like "there was of necessity as a result of these transactions the movement of the goods across the border"; "the sale and export form parts of a single transaction"; "the sale and the export were integrally connected"; "the export is the result of the sale"; "the export is inextricably linked up with the sale"; and "movement of goods in connection with the sale". We have also discussed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause (a), a sale or purchase shall be deemed to have taken place in the State In which the goods have actually been delivered as a direct result of such sale or purchase for the purpose of consumption in that State, notwithstanding the fact that under the general law relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State. (2) Except in so far as Parliament may by law otherwise provide, no law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of any goods where such sale or purchase takes place in the course of inter-State trade or commerce: Provided that the President may by order direct that any tax on the sale or purchase of goods which was being lawfully levied by the Government of any State immediately before the commencement of this Constitution shall, notwithstanding that the imposition of such tax is contrary to the provisions of this clause, continue to be levied until the thirty-first day of March, 1951. (3) No law made by the Legislature of a State imposing, or authorising the imposition of, a tax on the sale or purchase of any such goods as have been declared by Parliam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase(a) occasions 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. Explanation 1.-Where goods are delivered to a carrier or other bailee for transmission, the movement of the goods shall, for the purposes of clause (b), be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee. Explanation 2.-Where the movement of goods commences and terminates in the same State it shall not be deemed to be a movement of goods from one State to another by reason merely of the fact that in the course of such movement the goods pass through the territory of any other State. " For purposes of deciding this appeal we have to construe the expression "occasions the movement of goods from one State to another". If a sale or purchase occasions such movement it would be a sale or purchase in the course of inter-State trade or commerce. In our view, a sale or purchase -occasions the movement of goods" either when the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat contract in the material accounting year, Calendar 1955, were received by the petitioner and were subjected to the charge and assessment of West Bengal sales tax." Mr. Banerjee also referred to paragraphs 4 and 5 of this supplementary affidavit (at page 90 of the paper book), which run thus: "4. That the utensils required to be sold by the contract were at the time of the contract, unascertained and/or future goods. 5.. That the process of ascertainment of the goods into the contractual goods required the tender of the utensils before the said Inspectorate at Hastings and the further receipt of the consignments of the utensils to the satisfaction of and by the consignee, the C.O.D. at Kanpur, (sic) to tender the goods completely ascertained and thereafter in a deliverable state." The appellant's counsel states that in paragraphs 6 and 7 (at page 113) of the affidavit of Nirode Baran Mitra, the Commercial Tax Officer, affirmed on 22nd January, 1963, in reply to the said supplementary affidavit, the said averments in paragraphs 4 and 5 of the said supplementary affidavit have been disputed; but there is no specific denial of the statements made in the said sub-paragraphs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant documents clearly establish the fact that the goods were actually despatched to Kanpur In the course of interState trade." (vide page 53.) The Additional Member, Board of Revenue, has not accepted this contention. He has also held that the sales were complete before the goods were despatched from Calcutta: vide page 55. From the terms of the contract placed before us we also cannot come to any other conclusion. And as regards the appellant's contention based on splitting up of the payment, that is to say, that 90 per cent. would be paid initially and 10 per cent. on the rendering of a bill accompanied by a certificate of inspection, it does not appear from the bill in the paper book at page 36 that this system was being followed. True, the State of West Bengal has not denied these allegations; but we do not think they could be said to have any knowledge of these matters. In any event, this system of payment does not make any difference. We have already noted the facts in K.G. Khosla Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes, Madras Division, Madras[1966] 17 S.T.C. 473. There also the payment of the total sum due was split up; but the Supreme Court's main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the necessary transport permit under the Cotton Control Order, 1950, and insured the cotton bales as owners for purposes of transmission on the railway. The Supreme Court has held that the property in the goods did not pass during the movement of the goods from one State into another by transfer of documents of title, and the movement of the goods from the Madras State to places outside the State was not the result of any covenant or incident of the contract of sale. The Supreme Court was of the view that the contract of sale was completely carried through within the Madras area itself, where the respondents had received the price and the cotton bales were delivered to the buyers; the movement outside the Madras State was by the buyers themselves after the property in them had passed to them; and the sales were not sales in the course of inter-State trade. In our case too the goods were delivered in West Bengal; the property in the goods had passed to the buyers In West Bengal; the price and the transportation of the goods, if any, from Calcutta to Kanpur was made by or on behalf of the buyer with which the seller had nothing to do. In the premises, we hold that these transact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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