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TMI Blog1991 (7) TMI 315X X X X Extracts X X X X X X X X Extracts X X X X ..... orth Rs. 27,80,122.34 in that year to Government. The assessee claimed that all that was meant for Defence forces and the sales were completed in Delhi itself. No sales tax was pleaded to be leviable on these sales as they were covered by rule 29(iii) of the Delhi Sales Tax Rules. The sales tax authorities, however, did not accept that the sales were exempted under this rule or that they were local sales at Delhi only. Instead it was found that those supplies were meant for Defence forces in different places in India and the contract of sale involved despatch of those supplies to places outside Delhi. They were, therefore, held assessable as inter-State sales and eligible to sales tax at the rate of 10 per cent. The procedure for placement of orders for the said supplies was that the Ministry of Agriculture, Government of India, floated tender enquiries for obtaining canned meat. In the present case the "invitation of tenders and instructions to tenders" dated 24th July, 1970, was issued by the Government of India, Ministry of Food, Department of Food (Army Purchase Organisation), New Delhi. In response to this invitation for tenders, the present assessee submitted its tender ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed by the Tribunal and it was held that after considering the entire circumstances of the case and the law cited, the sale in the present case did not occasion the movement of goods from Delhi to another State nor could it be said that the movement was in pursuance or incidental to the contract of sale. If the goods after having been purchased and supplied at Delhi or New Delhi station were despatched to another State, it was observed, it could not be said that this movement of goods was the result of the contract itself. The Tribunal referred to two certificates dated 24th May, 1970 and 22nd January, 1976, issued by the Officer Commanding, Composite Food Laboratory, ASC, to the effect that the goods supplied by the dealer to Defence Ministry were free on rail at Delhi and New Delhi and the consignor in all these cases was the army unit. The Tribunal further came to the conclusion that the provisions of rule 29(iii) were attracted to the present sales as the goods were purchased for official use of Ministry of Defence. The Tribunal made reference to certificate dated 15th February, 1971, issued by the Defence authorities to the effect that the goods were purchased for official ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... livery of the goods would take place at the railway station/siding at Delhi. If there was not to be any movement of goods from Delhi, there would have been no need, it was contended, for the agreement to require the delivery to take place at the railway station or the siding. In our opinion there is no merit in this submission. The Tribunal has found as a fact that the delivery of the goods took place at Delhi. Furthermore, reliance was placed on a certificate issued by the Composite Food Laboratory, Delhi, which is to the following effect: "It is certified that all the foods, viz., canned mutton, ham, bacon supplied to Defence against various contracts by M/s. Essex Farms Pvt. Ltd., 4, Mehrauli Road, Delhi-16 are free of Delhi/New Delhi railway stations. Consignor in all the cases is Composite Food Laboratory, ASC, Delhi (Defence) and consignee are the various army units." The aforesaid certificate shows that even though goods were being sent out of Delhi, the consignor in all the cases was the Composite Food Laboratory, ASC, Delhi, which is a wing of the Ministry of Defence. Had the contract envisaged movement of the goods, then the consignor would ordinarily have been the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has bought goods in Delhi and then, de hors the contract, has either utilised them in Delhi or despatched them from Delhi. The sale was complete when the goods were delivered and that was a local sale. Another case which is similar to the present case is that of Delhi Cloth and General Mills Co. Ltd. v. Commissioner of Sales Tax [1981] 48 STC 351 (Delhi). That was a case where the dealer had offered to supply certain quantities of vanaspati ghee to the J K Government at Delhi against cash payment. The sale note was made in the name of the Trade Commissioner of Jammu Kashmir at Delhi though the destination was mentioned as Jammu. In the correspondence between the parties, there was no stipulation regarding the movement of the goods though the delivery of the goods was taken in Delhi and was then despatched by the Trade Commissioner to Jammu Kashmir. A Division Bench of this Court following the aforesaid Supreme Court decision in Balabhagas case [1976] 37 STC 207 came to the conclusion that the sale was a local sale and not an inter-State sale. It is clear, therefore, that in order that a sale may be regarded as an inter-State sale, the contract or the agreement to sell m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Defence Accounts (Western Command). From the aforesaid, it is clear that the said purchase was made for and on behalf of the military, viz., the Ministry of Defence. Shri Salve is right in contending that this is a case of an agent of a disclosed principal who has made the purchases from the dealer. In law, it was sought to be contended that the purchaser was the Ministry of Defence and not the Ministry of Food and Agriculture. To put it differently, the sale by the dealer was, in law, to the Ministry of Defence which was the disclosed principal of the agent, viz., Ministry of Food and Agriculture. In Lester v. Balfour Williamson Merchant Shippers Ltd. [1953] 1 All ER 1146, there was a sale by agents "for account of " foreign principals. The question arose with regard to the liability of the agents for act or default. It was held in that case that the agents were not the sellers. The principle which was invoked was that an agreement by an agent on behalf of a disclosed principal binds the principal qua the other contracting party and not the agent. In Radhakrishna Sivadutta Rai v. Tayeballi Dawoodbhai AIR 1962 SC 538, a contract was entered into through brokers. The question ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... half of the Ministry of Defence. The Ministry of Defence was the disclosed principal. It is, therefore, the Ministry of Defence which was bound by the contract of sale. When rule 29(iii) provides that the sale shall be to the Ministry of Defence, it means, in fact that the purchases are made by the Ministry of Defence. The principal contracting parties were the dealer and the Ministry of Defence and the Ministry of Food and Agriculture was merely an agent of the disclosed principal. The two parties, to put it differently, which were bound by the terms of the contract as a result of the issuance and acceptance of the tender, were the dealer and the Ministry of Defence. The intention of the said rule is very clear and that is, on the purchases made by the Ministry of Defence, sales tax under the provisions of the Delhi Sales Tax Rules should not be paid. It was submitted by the learned counsel for the department that rule 29(iii) should be literally construed. This submission cannot be accepted in view of the following observations of the Supreme Court in the case of Collector of Central Excise v. Parle Exports (P) Ltd. [1989] 75 STC 105 (SC); AIR 1989 SC 644: "The question of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in K.P. Varghese v. Income-tax Officer [1981] 131 ITR 597, wherein the Court emphasised that a statutory provision must be so construed, if possible, that absurdity and mischief may be avoided. It is well-known that purchases on behalf of the Ministry of Defence are also made, to a large extent, by the purchase departments of the Government of India like the Directorate General of Supplies and Disposal and the Ministry of Food and Agriculture in the present case. These departments make purchases for the benefit and on behalf of the Ministry of Defence. The intention of rule 29(iii) clearly is that any purchases made by the Ministry of Defence should be free of sales tax. Even if it was to be assumed though there is no warrant for doing so, that the sale was in favour of the Ministry of Food and Agriculture, nevertheless as ultimately the purchaser was the Ministry of Defence, rule 29(iii) has to be so construed to give a full effect and that is to consider the sale to be to the Ministry of Defence itself. In other words, applying the principle of a purchase being made for a disclosed principal, by an agent, in the instant case, the sale has been effected by the dealer in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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