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TMI Blog1975 (3) TMI 120X X X X Extracts X X X X X X X X Extracts X X X X ..... unting to Rs. 52,84,985.61, as transfer of cotton yarn from the factory at Rohtak to its sales office at Delhi. The Assessing Authority examined the transactions relating to the deductions claimed from the account books, stock registers and other documents produced by the assessee and disallowed deductions to the tune of Rs. 22,72,399.63 by order dated 6th September, 1966, a copy of which is annexure A to the statement of the case. Similarly, for the assessment year 1965-66, the assessee-company filed a return showing gross turnover of Rs. 1,08,37,571.67, and claimed deductions to the tune of Rs. 93,50,775.60, on account of transfers from the factory to the sales office at Delhi. The Assessing Authority perused the account books, stock registers and other documents produced by the assessee and after examining each transaction, disallowed the deductions to the extent of Rs. 30,73,778.58. A copy of that order is annexure B to the statement of the case. Against those orders, the assessee preferred appeals which were dismissed by the Deputy Excise and Taxation Commissioner: vide orders dated 21st September, 1967, and 23rd September, 1967, copies of which are annexures C and D to the st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equence of that order, the Sales Tax Tribunal has drawn up the statement of the case and referred the above-mentioned two questions for decision to this court. It may be mentioned that for the assessment year 1965-66, the gross turnover was shown as Rs. 1,08,37,571.67 out of which Rs. 93,50,775.60 were claimed as deductions on account of value of the goods transferred to Delhi office. Out of this amount, the sum of Rs. 2,99,973.00 was disallowed on the ground that the sales were made to dealers in the State of Punjab and were intra-State sales. G.S.T.R. No. 32 of 1971 concerns this amount and, in that case, the questions for decision should read as under: (1) Whether, on the facts and in the circumstances of the case, the transactions in dispute are not intra-State sales? (2) Whether there is any evidence on the record to hold that the transactions in dispute are not intra-State sales? I shall first deal with G.S.T.R. Nos. 30 and 31 of 1971. The facts found in these cases by the Sales Tax Tribunal are that the assessee-company has its registered office at Delhi and carries on the business of manufacture of cotton yarn at Rohtak under the name and style of "Mohan Spinning Mill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receding clause, any portion of the contract goods is not ready by the specified time, it shall be open to the buyer, at his option, either to cancel the contract, in so far as the cancellation relates to the balance of the goods which are not in the process of manufacture but which still remain to be manufactured or to agree to extend the time of delivery for such period as the company may reasonably require. 5.. Condition No. 10.-In the event of the buyer requiring the company to despatch the goods either by rail, road or sea, the goods shall be at the risk, in all respects, of the buyer from the time the goods are ready with the company and available for delivery to the carrier, after notice to that effect is issued by the company to the buyer. The goods shall be despatched by goods train at railway or owner's risk as is acceptable to the railway authorities, but property and risk in the goods shall pass to the buyer on delivery of the goods to the carriers. 6.. Condition No. 14.-The prices are net mill godown delivery and the buyer shall be responsible for all charges after the goods leave the godowns of the company, as the case may be. Where the prices are f.o.r. destinati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eon. The learned Tribunal has misinterpreted the contract inasmuch as he has considered that "Mohan Spinning Mills" or "the company" means the mills of the company at Rohtak and that the contracts were on the basis of ex-godown delivery of the goods at Rohtak because the freight charges were recoverable from the purchasers although octroi charges were not so recoverable. It is to be remembered that the contract referred to above was admittedly executed at Delhi by the sales office of the assessee-company with the purchaser of cotton yarn, carrying on business at Delhi. The terms of the contract, which provided for ex-mill godown delivery, meant delivery at the godown of the company at Delhi and not Rohtak. The tenor of the conditions of the contract, set out above, read as a whole, leaves no doubt that the sale was to take place at Delhi at the time of actual delivery of the goods to the buyer or to a carrier for onward journey to him and the sales tax, whether intra-State or inter-State, was to be exigible then (condition No. 16). Condition No. 19 unambiguously shows that the contract of sale was to be performed at Delhi and it was the responsibility of the company to bring the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dabad to the assessee's registered office in Delhi. The purchase orders were placed by the distributors after the goods reached the head office in Delhi and the property in the goods passed at Delhi after delivery. Clause 6 of the distribution agreement with S contained the following provision: "All goods leaving the company's factory will pass through rigorous inspection procedures laid down by the company. No responsibility for shortage or damage occurring in transit will be accepted by the company." Clause 8 of the distribution agreement with B and G was as follows: "All the goods leaving the company's factory will pass through rigorous inspection procedures laid down by the company, and will be packed in crates and will be delivered to the distributors packed as such. The company in no case shall be responsible for any shortage or damage that may occur in further transit, once the goods have been delivered and inspected by the distributors in Delhi." The following facts were asserted by the assessee but nothing was said on them by the departmental authorities: After the goods were manufactured in the factory, an excise clearance pass was obtained after payment of excise d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering Locomotive Co. Ltd. v. Assistant Commissioner of Commercial Taxes, Jamshedpur[1970] 26 S.T.C. 354 (S.C.)., in which it was held that the sales to be exigible to tax under the Act must be shown to have occasioned the movement of goods or articles from one State to another and that the movement must be the result of a covenant or incident of the contract of sale. The conclusion was then stated as under: "It can, therefore, be said that a sale of goods is in the course of interState trade if the sale and movement of goods from one State to another are integral parts of the same transaction. There must exist a direct nexus between the sale and the movement of goods from one State to the other. In other words, the movement should be incident of, and be necessitated by, the contract of sale and thus be interlinked with the sale of goods." It was held by a Division Bench of the Madras High Court in Cement Distributors (P.) Ltd., Dalmiapuram v. Deputy Commercial Tax Officer, Lalgudi[1969] 23 S.T.C. 80., that if the goods are sent in bulk to an agent in another State with instructions to distribute them amongst the allottees, the movement of the goods cannot be said to have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the discretion of the agent to a few of the several buyers whose contracts were pending on the date of despatch. The assessing authority treated those transactions as inter-State sales within the meaning of section 3(a) of the Central Sales Tax Act, 1956, and not out-of-State sales which would be exempted from being included in the assessable turnover under the Central Sales Tax Act and, accordingly, revised the original assessments whereunder exemption had been granted. The petitioner thereupon filed a writ petition in the High Court to quash the reassessment order. It was held that it was the depot agent who appropriated the goods towards particular contracts without reference to his principal and, therefore, the transactions were intra-State sales in the State of West Bengal and out-ofState sales so far as the State of Tamil Nadu was concerned. The order of reassessment was quashed. On the parity of reasoning, it can be said in the cases before us that the sales took place at Delhi when the bales of cotton yarn were separately appropriated to the contracts of the buyers who had already placed their orders and not when the goods were transported from the mills at Rohtak to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contract that the axlebox bodies would be manufactured in Belgium, inspected there and imported into India for the consignee. Movement of 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 being diverted by the assessee for any other purpose. Consequently we hold that the sales took place in the course of import of goods within section 5(2) of the Act, and are, therefore, exempt from taxation." (Emphasis supplied.) A Division Bench of the Madras High Court held in Larsen and Toubro Ltd., Madras-2 v. Joint Commercial Tax Officer, Mount Road II Division, Madras-2[1967] 20 S.T.C. 150., that the character of the transaction does not change because of the terms of delivery, like f.o.r., or f.o.b. or c.i.f. The mere mention of delivery f.o.r. place of destination in condition No. 14 of the contract of sale does not necessarily lead to the conclusion that the movement of goods commenced from Rohtak in fulfilment of that contract unless it is further proved that the goods despatched from Rohtak directly reached the buyer at the place mentioned in the contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s passed to the buyers at the moment they were despatched from Madhya Pradesh. The learned counsel has also relied on another decision of the Supreme Court in State of Bihar and Another v. Tata Engineering Locomotive Co. Ltd. [1971] 27 S.T.C. 127 (S.C.). In that case the respondent-company carried on the business of manufacturing and selling trucks and bus chassis and spare parts thereof. It had its head office in Bombay and its factory in Jamshedpur in Bihar. It had appointed several dealers all over India. Under the agreements between the company and the dealers, each dealer was assigned a territory in which alone he could sell the trucks, bus chassis and other spare parts purchased from the company and the dealer was forbidden from selling them outside his territory. The dealers placed their indents, paid the price of the goods and obtained delivery orders from the Bombay office of the company. In pursuance of those delivery orders, the trucks, bus chassis and spare parts were delivered in Bihar to the dealers to be taken over to the territories assigned to them. Under the contracts the dealers were required to remove the trucks, bus chassis and spare parts delivered to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also received at Delhi. The Assessing Authority at Faridabad made an assessment order against the petitioner-company on the basis that the sales effected by it were inter-State sales. On a writ petition being filed by the petitioner-company, it was held that: (1) for the sales to be inter-State sales within the meaning of section 3(a) of the Central Sales Tax Act, 1956, it was not necessary that the contracts of sale should themselves have provided that the goods should be supplied from Faridabad. Since the contracts of sale referred to goods of particular specifications, those goods were manufactured in Faridabad, and those contracts of sale could be performed by the petitioner only in one way, viz., by the movement of the goods from Faridabad, the movement was occasioned by the contracts of sale and their movement from Faridabad to Delhi was a necessary incident of the contracts of sale. Therefore, the sales were made in the course of inter-State trade within the meaning of section 3(a); (2) the fact that in many of the contracts it was provided that delivery would be f.o.r. Delhi did not affect the legal position; (3) in view of sections 2(a), 2(dd), 4(2)(b) and 8(2)(a) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... situate in the Punjab State, during the year 1965-66. Since Rohtak was also in that State, the Assessing Authority treated the sales as intra-State sales. It was pleaded by the petitioner-company that the goods were not supplied from Rohtak, but were supplied from Delhi where the orders had been received and the goods manufactured at Rohtak were transported to Delhi sales office in routine, and not in fulfilment of the contracts of sale with the parties at those places. The petitioner-company submitted proof in support of its plea, but it was disbelieved without there being any evidence in the possession of the department to the contrary. It is significant to note that the rate of tax was only 1 per cent and the petitionercompany had sold goods worth about Rs. 15 lacs from Rohtak to the dealers within the State of Punjab and there is no reason why goods of the value of about Rs. 3 lacs should have been taken to Delhi and despatched from there to the buyers at Faridabad, Bhiwani and Ludhiana. The expenses of transporting those goods to Delhi including the payment on account of octroi or terminal tax, were probably more than the sales tax of 1 per cent, which had to be paid by the b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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