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TMI Blog1979 (1) TMI 215X X X X Extracts X X X X X X X X Extracts X X X X ..... ent from the forests in Madhya Pradesh to its mills at Raniganj in West Bengal. The respondent also paid a sum of Rs. 1,385.56 on account of sales tax in respect of bamboos and/or timber utilised by the respondent for constructing huts for the labourers employed in the said forests and for providing them with fuel. The respondent instituted the suit out of which this appeal arises on 3rd March, 1972, claiming that the aforesaid sums as sales tax were paid under a mistaken belief that the same were lawfully payable to the appellant-State as part of price under the contract. The respondent contended that on a true construction of the contract dated 8th May, 1968, there was no sale of bamboos by the appellant-State to the respondent. In the alternative, the respondent pleaded that the sales were in the course of inter-State trade and commerce and were not liable to tax under the Madhya Pradesh General Sales Tax Act. It was also pleaded that the State was not a dealer either under the Madhya Pradesh Act or under the Central Sales Tax Act, 1956. The respondent prayed for recovery of Rs. 1,72,172.01 paid as sales tax to the appellant-State. 2.. The District Judge, Bhopal, who tried the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld have amounted to a breach of the contract. It is not disputed before us that the bamboos in respect of which the sales tax was paid by the respondent were, in fact, taken to Raniganj in West Bengal for the use in the respondent's mills. In these circumstances, it is clear to us that the movement of bamboos from the State of Madhya Pradesh to the State of West Bengal was under a covenant of the contract of sale and that the said movement was a necessary incident of sale. There was a direct nexus between the movement of goods from one State to another and the sale. The sales of bam. boos under the contract, in our opinion, constituted inter-State sales under section 3(a) of the Central Sales Tax Act. As construed by the Supreme Court, a sale falls under section 3(a) "if the movement of goods from one State to another is under a covenant or incident of the contract of sale": see Tata Iron and Steel Company Limited v. Sarkar[1960] 11 S.T.C. 655 at 666 (S.C.); [1961] 1 S.C.R. 379 at 390., Tata Engineering and Locomotive Company Limited v. Assistant Commissioner[1970] 26 S.T.C. 354 at 376 (S.C.); [1970] 3 S.C.R. 862 at 866. and State of Bihar v. Tata Engineering and Locomotive Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract of sale, and property in the goods passes in either State." These observations were quoted with approval in Tata Engineering and Locomotive Company Limited v. Assistant Commissioner[1970] 26 S.T.C. 354 (S.C.); [1970] 3 S.C.R. 862. and State of Bihar v. Tata Engineering and Locomotive Company[1971] 27 S.T.C. 127 (S.C.); [1971] 2 S.C.R. 849., which are also cases decided by the five-Judge Benches. Further, the Supreme Court in the Balabhagas Hulaschand's case(1), analysing clause (a) of section 3, observed, at page 213, that if two conditions, viz., (i) that there is a sale or purchase of goods; and (ii) that the sale occasions the movement of goods from one State to another, are satisfied, the sale becomes an inter-State sale within section 3(a). The condition of passing of property in the State where the goods are transported is not stated to be a necessary condition at this place for making the sale an inter-State sale. As earlier stated by us, it is clear that, from the third proposition at page 215, it cannot be inferred that the Supreme Court intended to depart from the earlier decisions that passing of property in the destination State is not the true test for purposes o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in selling forest produce does not carry on a business. In Orient Paper Mills Ltd. v. State of M.P.[1971] 28 S.T.C. 532; 1971 M.P.L.J. 560., the High Court held in the context of the definition of "dealer" in the Madhya Pradesh General Sales Tax Act, as it then stood, that the Government in granting leases of bamboos did not carry on any business and was not a dealer. By the time this case came up before the Supreme Court in appeal, the definition of "dealer" was amended in the State Act by Act No. 13 of 1971. This amending Act added an explanation to include within the definition of "dealer" the Central or a State Government which buys, sells, supplies or distributes goods "whether or not in the course of business". Because of this amendment, which was retrospective, the State Government became a dealer under the State Act. However, under the Central Act, as it stood at the relevant period, the State Government was not a dealer within the definition of that term, as it did not carry on business by selling annually the forest produce. The decision of our Court in the Orient Paper Mills' case[1971] 28 S.T.C. 532; 1971 M.P.L.J. 560. was approved by the Supreme Court in Board of Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X
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