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TMI Blog1969 (12) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned above. The assessee contended that the transactions in question represented inter-State sales and were not liable to U.P. sales tax, but the contention was rejected. An appeal by the assessee was dismissed. The order was affirmed by the judge (Revisions) Sales Tax, who held that according to the terms set out in the contract forms the delivery of the goods was completed at the mill premises and the subsequent movement of the goods outside the State could not be said to have been occasioned by the contract of sale entered into by the assessee. At the instance of the assessee the Judge (Revisions) has referred the following question: "Whether under the circumstances of the case, these transactions of subsequent despatch are to be regarded as intra-State sales having been completed at Kanpur or as inter-State transactions?" It is appropriate at this stage to set out the relevant terms of the contract: "1. Unless otherwise expressly agreed in writing all goods sold shall be deemed to have been sold ex mill delivery. No complaint regarding quality or otherwise shall be entertained once the goods have left the mill premises. Even if the goods are despatched by the mills in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ragraph 1 of the contract of sale, property in the goods passed at the mill gate, and the subsequent despatch of the goods by rail by the assessee was merely in order to accommodate the buyer. It is contended that the circumstance that the railway receipt disclosed the assessee as consignee does not militate against this position. In that event, neither clause (a) nor clause (b) of section 3 of the Act is attracted. Section 3, Central Sales Tax Act, reads: "When is a sale or purchase of goods said to take place in the course of interState trade or commerce.-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 movem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent to third parties outside Uttar Pradesh. The case before us is one where the assessee sold the goods, to a dealer within the State and the dealer entered into a transaction with a party outside the State to whom ultimately delivery was effected by the assessee. There were two transactions, the first being an intra-State sale between the assessee and the Kanpur party, and the second being a sale between the Kanpur party and the outside party. Such cases are not unknown. In Gordhandas LaIji v. B. Banerjee and Others and S. Ghosh and Another[1958] 9 S.T.C. 581 (S.C.)., the Supreme Court held that in a case where goods were appropriated by the assessee to the contract with Bombay parties and thereafter he shipped the goods outside India according to their instructions, the act of shipping the goods outside India was a transaction apart from the contract between the parties under which the property passed. The assessee was held not entitled to the exemption under article 286(1)(b) of the Constitution as what were taxed were the sales by the assessee in favour of the Bombay parties and not the sales by the Bombay parties in favour of outsiders. In our opinion, clause (b) of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o a place outside the State of Uttar Pradesh. It is difficult for us, in the circumstances, to hold that any goods so despatched moved from the State of U.P. to a neighbouring State as the result of a covenant or an incident of the contract of sale. Plainly, the contract contains no such covenant or incident. The case is similar to Bharatkhand Textile Manufacturing Co., Ltd. v. State of Gujarat[1964] 15 S.T.C. 885, 891. In that case, it was not an essential term of the contract of sale that the goods should necessarily cross the border of the State of Bombay and go to another State. It was contended by the assessee that there was an implied term of the contract of sale that the assessee should give delivery of the goods to the buyers at their godowns, or should, if so instructed by the buyer, despatch the goods by rail to destinations intimated by the buyers and give constructive delivery of the goods by handing over the relative railway receipts duly endorsed in favour of the buyers. The Gujarat High Court held that this implied term did not establish that under the contract of sale the goods were necessarily to leave the State of Bombay. It was pointed out that the goods might, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even if the goods were despatched to a third party under a railway receipt endorsed in favour of that third party. The Judge (Revisions) has held that the assessee sold the goods to local parties at Kanpur and that is also evident from the specimen contract form set out in his judgment which shows the Bardana Trading Company, Kanpur, as buyer. We are unable to accept the contention of the assessee that although the contract of sale was between the assessee and the Kanpur party, the actual sale consequent thereto took place between the assessee and the third party. That is a contention for which we find no support on the facts of the present case. Another feature which distinguishes P. Mansinghka v. Commissioner of Income-tax[1967] 66 I.T.R. 159 (S.C.); A.I.R. 1967 S.C. 1626. is that on the facts before us the railway receipt was endorsed in favour of a third party and delivery made to it. We may reiterate that it is not a case where within the contemplation of the contract the assessee can be said to have reserved the right of disposal over the goods at the time of despatch. The assessee has also referred to the State of Madras v. Govind Lal and Another[1956] 7 S.T.C. 409. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very had been specified and it was a question merely of communicating the route by which the goods were to be delivered this would perhaps relate to the mode of performance of the contract. But communication of the place where actual delivery is to be given does not relate to the mode of performance but formation of the contract." Further, it is pertinent to point out that whereas the contract between the parties in those cases contemplated an obligation on the part of the dealer to despatch the goods to any place indicated by the buyer, there is no such obligation under the contract between the assessee and the Kanpur buyers. Paragraph 1 of the contract is couched in entirely different terms. We are of opinion that upon like considerations the cases of Commissioner of Income-tax v. P.M. Rathod[1959] 10 S.T.C. 493 (S.C.)., Governor-General in Council v. Joy Narain RitoliaA.I.R. 1948 Pat. 36., State of Madras v. V.P.V. Sons[1958] 9 S.T.C. 54; A.I.R. 1959 A.P. 23. and Lakshmi Ganesh Rice Mill v. Board of Revenue[1968] 22 S.T.C. 506. are distinguishable. In support of the submission that clause (a) of section 3 of the Central Sales Tax Act is attracted, the assessee has referred t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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