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TMI Blog1972 (2) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... ed particulars and for modifying the assessment after taking into consideration the said certificates, is valid in law? (The abbreviations "S.T.C." stands for State Trading Corporation of India Ltd. and "H.S.L." stands for Hindustan Steel Ltd.). Both these shall hereinafter be referred to in the same abbreviated form. 2.. The S.T.C. is a registered dealer under the Central Sales Tax Act, 1956 (hereinafter referred to as the Act), bearing registration No. SG-575-(c) under the Chaibasa sub-circle of the commercial taxes department and deals in iron and manganese ore. The assessment year for which the assessment is in question is the year 1959-60, the period of assessment being 1st April, 1959, to 31st March, 1960. The dealer S.T.C. obtained a gross turnover of Rs. 38,24,724.44 during the relevant year from supply of iron ore to the H.S.L., which also has been held to be a registered dealer. The claim of the S.T.C. before the assessing officer was that it had purchased iron ore from certain mine owners in Bihar on f.o.r. (free on rail) loading-station-basis for selling it to the H.S.L. for their units in Durgapur in West Bengal, Bhilai in Madhya Pradesh and Rourkela in Orissa. The s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s E-1 and E-2 of the said Rules. 5.. The Commissioner of Commercial Taxes, Bihar, sought a reference to this court on the two questions stated above, but the same having been refused, he moved this court which called upon the Tribunal to submit a statement of the case on the aforementioned questions. 6.. Mr. Sushil Kumar Jha, appearing for the Commissioner of Commercial Taxes, submitted that the crux of the matter lay in the question as to whether the sales by the mine owners to the S.T.C. were inter-State sales. If that was not an inter-State sale, the subsequent sale by the S.T.C. to the H.S.L. would be a distinct and separate transaction of interState, which would be taxable as such. According to Mr. Singh, since the Tribunal had found it as a fact that the sales by the mine owners to the S.T.C. had been completed within the State of Bihar, whatever further action was taken by the S.T.C. in respect of the goods so purchased would not constitute a connected transaction in the course of inter-State trade. In support of his contention, he made reference to two decisions, namely, a decision of the Calcutta High Court in the case of Jeewanlal (1929) Ltd. v. Commercial Tax Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be upheld while deciding the reference and not the one which went against the interest of the subject. Even otherwise, according to Mr. Chatterji, the contract documents had been correctly understood by the Tribunal and, therefore, the reference must be answered in favour of the dealer. 8.. As has been rightly argued by Mr. Jha, the learned counsel for the Commissioner of Commercial Taxes, the crux of the matter lies in the answer to the question as to whether the sales by the mine owners to the S.T.C. was a sale in the course of inter-State trade. If that was so, the subsequent sale by the S.T.C. to the H.S.L. would automatically attract the provisions of section 6(2) of the Act in which case the transactions would be exempt from tax. If the transactions would be so exempt, the direction given by the Tribunal for allowing the S.T.C. to file the certificates in forms E-1 and E-2 would be more or less a direction following as a matter of course in pursuance of the answer to the primary question. 9.. Section 3 of the Act defines as to when a sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce. According to this provision, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d an inter-State sale. A specimen copy of the contract between the mine owners as the sellers and the S.T.C. as the buyers has been filed before this court. The relevant materials in the said contract are that the mine owners were told under article No. 3 of the said contract about the movement sector and loading stations where they had to load the iron ore and further under article No. 4 the destination of the said iron ore was also mentioned which destinations were at places outside the State of Bihar. Then there was an appendix to the said contract laying down certain terms agreed to between the parties. The prices were fixed on the basis of f.o.r. loading station situated in the State of Bihar. For the final settlement of accounts the railway receipt weight was to be the final document, but the mine owners were made responsible that the analysis of the iron ore must conform to the specification. 80 per cent. of the price was to be paid to the mine owners within 30 days of the submission of the bills and the balance of 20 per cent. was to be paid within 60 days of the booking of the consignment. In terms of clause 5 of the said appendix, iron ore was to be loaded in the wagons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obligation to send the goods to places outside the State of Bihar, so as to reach the H.S.L., I think, it would be a case of sale in the course of inter-State trade or commerce. The question as to whether the sale was in the course of inter-State trade or commerce, has always to be decided on the particular facts and circumstances of each case. But all the same after the decision of the Supreme Court in the case of The State of Bihar and Another v. Tata Engineering Locomotive Co. Ltd.[1971] 27 S.T.C. 127 at p. 145 (S.C.)., the guidelines have been distinctly laid out. This was a case which arose from a judgment of this court, the decision of the Patna High Court being reported in Tata Engineering and Locomotive Co. Ltd. v. State of Bihar and Another[1971] 27 S.T.C. 127 at p. 129; A.I.R. 1967 Pat 53. This court had taken the view that in order to constitute a sale in the course of inter-State trade or commerce, three essential ingredients should be present: (1) There must be an intention on the part of the seller and the buyer about the inter-State movement of the goods sold; (2) there must be an obligation on the buyer to make such a movement, and (3) there must be actual move ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods commenced their journey from the State, the sales must be regarded as having taken place in the course of the export and, therefore, exempt under article 286(1)(b). The same exposition of the law is true of clause (2) of article 286 as it stood prior to its amendment on September 11, 1956." Their Lordships struck a note of caution by reference to the case of Endupuri Narasimham and Son v. State of Orissa[1961] 12 S.T.C. 282 (S.C.)., that a purchase made inside the State, for sale outside the State, cannot itself be held to be in the course of inter-State trade, but where, quoting from the decision in the case of Ben Gorm Nilgiri Plantations Co. v. Sales Tax Officer, Special Circle, Ernakulam[1964] 15 S.T.C. 753 (S.C.)., "a sale in the course of export predicates a connection between the sale and export, the two activities being so integrated that the connection between the two cannot be voluntarily interrupted, without a breach of the contract or the compulsion arising from the nature of the transaction......." or as observed by the Supreme Court in the case of Tata Engineering and Locomotive Co., Ltd. v. Assistant Commissioner of Commercial Taxes[1970] 26 S.T.C. 354 (S.C.). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the S.T.C. to the H.S.L. was exempt from tax under sub-section (2) of section 6 of the said Act. The Tribunal, therefore, rightly held that the sales were not exigible to tax under the Act. The question as to whether the Tribunal was justified in remanding the case allowing the opposite party opportunity to furnish the certificates in forms E-1 and E-2 is in the nature of a direction which, under the circumstances, the Tribunal was justified in giving. 12.. As stated earlier, the learned counsel for the petitioner had made reference to two decisions, one of the Madhya Pradesh High Court in the case of Commissioner of Sales Tax v. Nathani Brothers[1968] 21 S.T.C. 465., and the other of the Calcutta High Court in the case of Jeewanlal (1929) Ltd. v. Commercial Tax Officer[1967] 20 S.T.C. 345., for the proposition that unless the movement of the goods outside the State was occasioned by reason of a contract for such sale, such a movement could not be called a movement in the course of interState trade or commerce. Having gone through both these decisions, even if the ratio decidendi of these decisions be understood in the manner as understood by the learned counsel for the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to move the goods outside the State was necessary in order to constitute an inter-State sale, the same was discussed by the Supreme Court in the case of Cement Marketing Co. v. State of Mysore(1). In that case, the taxing officer had found that the contract of sale did not provide that the supply be made from a factory situated outside Mysore, but it was a matter of convenience for the supplier to make supplies from places outside Mysore State. The Supreme Court held that though such a covenant was absent from the contract itself the other circumstances connected with the sale including the permit issued by the Government involved such an interState sale. As observed by me earlier, each case has to be decided on its own facts and notwithstanding the absence of specific contract to send the goods outside the State, if the facts and circumstances denote that perforce the goods purchased have to be sent by the seller outside State, such a sale would be in the course of inter-State trade. 13.. I accordingly answer both the questions in the affirmative, i.e., in favour of the assessee and against the Commissioner of Commercial Taxes. The opposite party shall be entitled to costs. He ..... X X X X Extracts X X X X X X X X Extracts X X X X
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