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TMI Blog1979 (8) TMI 192X X X X Extracts X X X X X X X X Extracts X X X X ..... 72-73 and gave a small relief in relation to the assessment for 1973-74. The assessee thereafter appealed to the Sales Tax Appellate Tribunal. Before the Tribunal, the contention of the assessee was that these transactions were local transactions in Andhra Pradesh and that, therefore they could not be brought to tax under the Central Sales Tax Act. The Tribunal rejected this contention and, therefore, the matter is in revision before us. Before proceeding further to consider the contentions, we shall describe the nature of the transactions. A party who requires an automobile has, under the prevalent regulations, to deposit a sum of Rs. 2,000 called "security deposit " and keep it in a post office savings bank account. The security deposit account is then pledged in favour of an automobile dealer subject to withdrawal only with the written authority of the dealer. Taking one transaction as typical, there was a deposit on 29th July, 1971, at Nellore, by a party named G. Venkatanarayana Reddy. On 16th June, 1972, the assessee, after receiving the requisite number of vechicles from Hindustan Motors Limited, Calcutta, made what is called "stock transfer" and this transfer was to its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther assent of the other party is prior or subsequent to such appropriation. On the basis of the determination of the place of sale, the State, within which the sale is deemed to take place, is liable to tax the transaction in accordance with the procedure set out in the State law. This provision has been interpreted in several decisions of the Supreme Court. We were referred to Balabhagas Hulaschand v. State of Orissa [1976] 37 S.T.C. 207 (S.C.)., which has considered the earlier ones and which has brought out the principles to be applied in a case like this. That was a case where a firm dealt in jute with its head office in Calcutta. It entered into a contract of sale with certain Calcutta firms by which it was agreed to sell raw jute of certain specifications. When the contract of sale was entered into, the raw jute was not in existence as it was being grown. After the goods were ready, the assessee, who was in Orissa, booked the goods in bags in the names of the buyers from certain railway stations in Orissa to the railway sidings of the buyers at Calcutta. The goods, on arrival in the buyers' railway siding at Calcutta, were inspected by the buyers and as they were found t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en occasioned by the contracts of sale, by taking into account the earmarking of each individual car with chassis numbers and the engine numbers in the stock transfer notes as relating to a particular purchaser. Where there has been earmarking in Madras and the subsequent transfer of the vehicle to Nellore, the question is whether there is an inter-State sale or a sale outside the State. In South India Viscose Ltd. v. State of Tamil NaduPag 7 infra; 1977 C.T.R. (Mad.) 189., the scope of case No. II transaction has been examined. In that case also, a similar argument was advanced and in dealing with that contention, it was pointed out: "We are of the opinion that this argument is misconceived. This argument assumes that in case No. II, extracted above, the contract or agreement to sell has preceded the movement of the goods, while actually in that illustration, though the order in which the facts of the illustration are stated may make one to think that the agreement was first entered into and the movement of the goods took place later, there is nothing to indicate positively that that was the case contemplated by that illustration. As a matter of fact that could not have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State and a branch office in Madras. The Madras office received orders from the customers and transmitted them to the head office for compliance. The head office despatched the consignments of packing cases to the branch office, which delivered the cases to the customers in execution of the orders placed by them. The Tribunal held that the sale had occasioned the movement of the goods from Kerala State to Madras and that, therefore, it was an inter-State sale assessable to sales tax under the Central Sales Tax Act. On revision, the High Court held that the Madras branch was really the agent of the buyer and that when the branch transmitted the orders to the head office and the head office despatched the goods to it in Madras, the receipt and the delivery of the goods were really as agents of the buyer, and no more. It was, therefore, held that the conclusion of the Tribunal was correct. Though this case in a way supports the stand taken by the State in the present case, still we are unable to agree with it as we do not accept the reasoning that the branch, when it booked the order, was acting as the agent of the purchaser as correct. The branch would act only as the agent of the he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r or by the buyer, whether assent of the other party is prior or subsequent to such appropriation, the goods were inside the State. Therefore, the assent of the buyer is not a sine qua non to fix up the location for the sale. After the appropriation had been made by the assessee, it would not have been possible for the assessee to divert the goods on the facts here. This is not a case where such goods were actually diverted. In these circumstances, the transactions were rightly treated as inter-State sales and the tax levied accordingly. The revision petitions fail and are dismissed with costs. Counsel's fee Rs. 250. Petitions dismissed. Appendix [The judgment of the Division Bench of the Madras High Court consisting of ISMAIL and SETHURAMAN, JJ., in South India Viscose Ltd. v. State of Tamil Nadu (Tax Cases Nos. 205 to 207 of 1971 [Revisions Nos. 120 to 122 of 1971]) delivered on 20th October, 1976, is printed below: ] SOUTH INDIA VISCOSE LTD. v. STATE OF TAMIL NADU The judgment of the Court was delivered by ISMAIL, J.-These tax revision cases are filed against the orders of the Sales Tax Appellate Tribunal (Additional Bench), Coimbatore, dated 6th April, 1970, dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s art silk yarn to be obtained from the petitioner herein. According to the petitioner, after assessing the demands from the allottees at Bombay, its sole selling agent, namely, Messrs. Rayon Yarns Import Co. Private Ltd., Bombay-1, used to place orders with the petitioner's office at Sirumughai for consignment of yarn to Bombay and after the yarn was consigned to the Bombay agent, the Bombay agent took delivery of the consignments and thereafter sold the yarn to the various allottees as per the allotment orders. It is the case of the petitioner that these sales having taken place at Bombay, they were local sales in Bombay, that the petitioner had actually paid sales tax to the Maharashtra Government under the sales tax law in that State and that therefore no sales tax can be levied by the State of Tamil Nadu under the provisions of section 3 of the Central Sales Tax Act, 1956, hereinafter referred to as the Act. The contention of the petitioner was that the sales were exclusively and wholly intra-State sales and they were not inter-State sales and that, therefore, the question of the Tamil Nadu Government collecting any sales tax under the Act did not arise. This contention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wever, contended before us that the conclusion drawn by the authorities below are erroneous and are not supported by the materials available on record. The learned counsel drew our attention to an order dated 23rd May, 1964, by the petitioner's selling agent in Bombay placed with the petitioner at its factory at Sirumughai for consignment of 69 cases of art silk yarn and subsequent documents. The said order dated 23rd May, 1964, is as follows: "We enclose herewith list for a total number of 69 cases of art silk yarn, which we request you to send to us in Bombay on consignment basis as was done on previous occasions. We will send you copies of the invoices and delivery orders as and when the cases are sold by us. However, we must request you to kindly ensure that only the cases mentioned in the enclosed lists may be sent to us. M/s. South India Clearing Forwarding Agent will collect the cases and despatch the goods from your godowns and bring the same to us in Bombay through Messrs. Vasundhara Lorry Service. You may, therefore, kindly take this letter as authority for clearance and despatch of the 69 cases. After the goods have been handed over, please confirm to us the details ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry to its godown at Bombay for subsequent sale to various allottees concerned and that, therefore, under section 3(a) of the Act, it could not be contended that the movement of the goods from Tamil Nadu to Bombay was the result of any contract of sale or incident of sale that took place between the Bombay agent and the allottee. The learned counsel also contended that the fact that three cases out of 69 cases covered by the consignment order dated 23rd May, 1964, were delivered to Messrs. Ramesh Silk Fabrics, Surat, as referred to already, would not establish that there was a contract between Messrs. Ramesh Silk Fabrics, Surat, and the petitioner's selling agent at Bombay prior to the movement of the goods in the present case so as to attract the applicability of section 3(a) of the Act. According to the learned counsel, the goods were sent from Tamil Nadu to Bombay only in the name of the petitioner's selling agent; it was the petitioner's selling agent which took delivery of the goods from the carriers and kept them in its own godown and it was the petitioner's selling agent that issued the subsequent order for delivery of the three cases to Messrs. Ramesh Silk Fabrics, Surat. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ics was concerned, the supply was actually made only on 3rd June, 1964, that is, more than six months after the date of the allotment. Under these circumstances, is it conceivable at all that the petitioner's Bombay agent suddenly placed the indent on 23rd May, 1964, for the purpose of supply of goods to various allottees without the allottees themselves having previously approached the petitioner's Bombay agent and having agreed to purchase the silk yarn allotted to them? Otherwise, it is inexplicable as to how the allotment order dated 7th November, 1963, came to be executed towards the end of May or the beginning of June, 1964. It is pertinent to point out that the indent placed on 23rd May, 1964, contained a list showing the number of cases to be sent and also a request that only those cases should be sent and that no other case or further case should be sent to the Bombay agent. That again merely confirms our conclusion that particular cases were required to be despatched only because the Bombay agent had already entered into commitments with various allottees concerned for the sale of the quantities of yarn covered by those cases only. Therefore, as a fact we draw the infer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... export. It was held that a sale in the course of export predicated 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. The export, it was further observed, should be inextricably linked up with the sale so that the bond cannot be dissociated. The observations in the case of Tata Iron and Steel Co.[1960] 11 S.T.C. 655 (S.C.). as well as Ben Gorm Nilgiri Plantations Co.(1) were relied upon by a Constitution Bench of this 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.)., and 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. It can, therefore, be said that a sale of goods is in the course of inter-State trade if the sale and movement of goods from one State to another are integral parts of the same transaction. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of these contentions, the learned counsel for the petitioner argued that the sales in question are not exigible to tax under section 3 of the Act. In support of the above contention, the learned counsel relied on certain decisions to which we shall immediately draw attention. The first decision is that of the Supreme Court in Tata Engineering and Locomotive Co. Ltd. v. Assistant Commissioner of Commercial Taxes, Jamshedpur[1970] 26 S.T.C. 354 at 380 (S.C.). In that case the manufacturer was periodically despatching its goods to various stock-yards to be delivered to its dealers and the Supreme Court on the facts observed: "It would appear from the materials placed before us that generally the completion of the sales to the dealers did not take place at Jamshedpur and the final steps in the matter of such. completion were taken at the stock-yards. Even if the appellant took into account the requirements of the dealers which it naturally was expected to do when the vehicles were moved from the works to the stock-yards it was not necessary that the number of vehicles allocated to the dealer should necessarily be delivered to him. The appropriation of the vehicles was do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r point of view by giving some concrete instances: Case No. I.-A is a dealer in goods in State X and enters into an agreement to sell his goods to B in State Y. In pursuance of the agreement A sends the goods from State X to State Y by booking the goods in the name of B. In such a case, it is obvious that the sale is preceded by the movement of the goods and the movement of goods being in pursuance of a contract which eventually merges into a sale the movement must be deemed to be occasioned by the sale. The present case clearly falls within this category. Case No. II.-A, who is a dealer in State X, agrees to sell goods to B but he books the goods from State X to State Y in his own name and his agent in State Y receives the goods on behalf of A. Thereafter, the goods are delivered to B in State Y and if B accepts them a sale takes place. It will be seen that in this case the movement of goods is neither in pursuance of the agreement to sell nor is the movement occasioned by the sale. The seller himself takes the goods to State Y and sells the, goods there. This is, therefore, purely an internal sale which takes place in State Y and falls beyond the purview of section 3(a) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods preceded the contract of sale. Therefore, if we understand case No. II in this light, it will follow that the case will only cover a situation where the movement of the goods had preceded the sale. In other words, in case No. III, A books his goods from State X to State Y in his own name and his agent in State Y receives the goods and thereafter by entering into agreement with the dealer in State Y sells the goods. In this view, case No. II mentioned in the decision referred to above and relied on by the learned counsel for the petitioner, is not of any assistance to the present case of the petitioner. With regard to the contention of the learned counsel for the petitioner that there should not be interruption by way of taking delivery of the goods by the seller's agent at Bombay and that the goods should be directly booked to the buyer concerned, we are unable to see any warrant for this proposition on the basis of any principle or authority. As a matter of fact, this Court in English Electric Company of India Limited v. Deputy Commercial Tax Officer, Alandur Division, Madras-16[1969] 23 S.T.C. 32., observed thus: "In an inter-State sale the goods have to be despatc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied in the contract itself. It will be enough if the movement is in pursuance of and incidental to the contract of sale. When a branch of a company forwards a buyer's order to the principal factory of the company and instructs them to despatch the goods direct to the buyer and the goods are sent to the buyer under those instructions it would not be a sale between the factory and its branch. If there is a conceivable link between the movement of the goods and the buyer's contract, and if in the course of inter-State movement the goods move only to reach the buyer in satisfaction of his contract of purchase and such a nexus is otherwise inexplicable, then the sale or purchase of the specific or ascertained goods ought to be deemed to have taken place in the course of inter-State trade or commerce as such a sale or purchase occasioned the movement of the goods from one State to another. The presence of an intermediary such as the seller's own representative or branch office, who initiated the contract may not make the matter different. Such an interception by a known person on behalf of the seller in the delivery State and such person's activities prior to or after the implementatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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