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TMI Blog2005 (2) TMI 786X X X X Extracts X X X X X X X X Extracts X X X X ..... was under obligation to itself to transport the goods from Tamil Nadu to Karnataka. A can be under obligation to B , but surely A cannot be under an obligation to A himself. After having purchased the sandalwood in Tamil Nadu, the petitioner could do whatever he linked with it, and he was under no obligation to transport it to Karnataka, and that he did so was of his own choice and volition and not under any obligation. No doubt, the petitioner obtained necessary permits under the Karnataka and Tamil Nadu Acts and obtained the necessary incometax certificate, but that was all voluntary and of its own choice. If the petitioner had not chosen to transport the goods to Karnataka it may have suffered from the business point of view as it would not get the necessary raw materials for its factory in Bangalore, but that does not amount to saying that it was under any legal obligation, either express or implied, to transport the goods to Karnataka. Hence, the auction sales cannot be called inter-State sales. Writ appeals and petitions dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... Chennai and for a direction that the respondents shall only charge Central sales tax from the petitioner, and not general sales tax under the Tamil Nadu General Sales Tax Act. 4.. The facts of the case are that the petitioner-company has its factory at Bangalore and is engaged in the manufacture of soaps and detergents in the State of Karnataka. Sandalwood is required for the use in the manufacture of soaps. Periodically, the first respondentDistrict Forest Officer, Sathyamangalam used to issue sale notice for auction sale of sandalwood in Tamil Nadu which is published in the District Gazette. The sale is subject to sales tax being paid whereupon delivery is effected. Petitioner participated in such auctions. For this purpose a power of attorney is given to a senior officer of the petitioner-company to participate in the auction sale and to seek delivery, apply for transport permits, and for movement of the goods to the petitioner's factory. Accordingly, the petitioner bid in the auction sales in respect of the specific lots of sandalwood. The petitioner thereupon after securing the confirmation of the sale from the first respondent-District Forest Officer, Sathyamangalam obtained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se the petitioner is a registered dealer under the Central Sales Tax Act, 1956. In view of the above development the petitioner was compelled to pay tax at 12 per cent with surcharge in respect of the sale held on September 11, 2003. The petitioner remitted the amount under protest by letter dated September 14, 2003 because delivery was refused unless tax under the Tamil Nadu General Sales Tax Act, 1959 was remitted. The petitioner further alleged that being a manufacturer of soap and detergents in the State of Karnataka, it purchases the sandalwood solely for the purpose of transport and consumption in its factory at Bangalore. Hence, the purchase is in the course of inter-State trade and commerce. It is alleged that the petitioner participated in the auction through its senior officer for the purpose of bidding for sandalwood, taking delivery in Tamil Nadu and transporting it into Karnataka, and the sale and movement are integral without possibility of diversion. It is further alleged that the petitioner bid only for the purpose of consumption in the State of Karnataka and the very delivery and transportation is covered by the transport pass in form 41 issued under rule 155 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsit and transportation from the depot in Tamil Nadu to the factory in Karnataka are immediate and interlinked by the route of transit indicated in the permit. 6.. Mr. C. Natarajan, learned Senior Counsel for the petitioner/ appellant has strongly relied on the decision of the Supreme Court in Commissioner of Sales Tax, U.P. v. Bakhtawar Lal Kailash Chand Arhti [1992] 87 STC 196. In that case, the facts were that the Ex. U.P. Principals contracted with the assessee (a commission agent) that he should purchase goods on their behalf in U.P. and transport them to a destination outside U.P. on payment of a commission. The goods were sent to the Ex. U.P. Principals under fulfilment of the contract. In our opinion this decision is clearly distinguishable because in the present case it is the petitioner/appellant who himself has purchased the goods in the State of Tamil Nadu through its officers. Having purchased the goods in the auction sale in Tamil Nadu, the petitioner was under no legal obligation to send the goods to the State of Karnataka. Surely, a person cannot be said to be under any legal obligation to himself. On the other hand, in the decision of the Supreme Court in Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Tamil Nadu only with a view to and exclusively for the purpose of transporting it to its factory in Kerala. This was because of the G.O. issued by the Tamil Nadu Government in pursuance of its agreement with the Kerala Government. Thus, the aforesaid decision of the Supreme Court was on its own peculiar facts, and hence it is clearly distinguishable. 8.. In our opinion, the sales in question in the present bunch of cases cannot be regarded as inter-State sales. No doubt, it is not necessary that the contract of sale must expressly provide for the movement of the goods to another State, as held in Co-operative Sugars (Chittur) Ltd. v. State of Tamil Nadu [1993] 90 STC 1 (SC). However, as held in the Constitution Bench decision of the Supreme Court in State of A.P. v. National Thermal Power Corporation Ltd. [2002] 127 STC 280 (SC) (vide para 25); (2002) 5 SCC 203 (vide para 24) the contract of sale must at least impliedly provide for the movement of the goods from one State to another. In the aforesaid Constitutional Bench decision the Supreme Court has observed: "It is well-settled by a catena of decisions of this Court that a sale in the course of inter-State trade has three e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction between unascertained or future goods and goods which are already in existence, if at the time when the sale takes place these goods have come into actual existence." 9.. Thus, as held in the above decision, the very first requirement for regarding a sale as an inter-State sale is that the contract of sale must incorporate a stipulation, express or implied, regarding inter-State movement of goods. In the present case, we do not find any such stipulation, express or implied, providing for inter-State movement of goods. Hence the sales in question do not fulfil the very first requirement, as laid down in the Constitution Bench decision of the Supreme Court in State of A.P. v. National Thermal Power Corporation Ltd. [2002] 127 STC 280 (SC); (2002) 5 SCC 203. 10.. No doubt in Union of India v. K.G. Khosla and Co. Ltd. [1979] 43 STC 457 (SC); (1979) 2 SCC 242 the Supreme Court observed that a sale would be an inter-State sale even if the contract of sale does not itself provide for the movement of the goods from one State to another, provided, however, such movement was a result of a covenant in the contract of sale or was an incident of the contract. In the present case, it can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract of sale as per terms of the allocation card. The fact that actual sale pursuant to the said contract of sale had taken place subsequently does not militate against the transaction being treated as an inter-State sale under section 3(a) of the Act, since the movement of the goods delivered to the buyer was occasioned by the contract of sale brought into existence under the terms of the allocation card." The Supreme Court in the above decision observed that the goods having been dispatched from one State to another pursuant to the contract of sale, which came into existence directly between the appellant and the buyer a few days after the date of allocation of the card, the sale was an inter-State sale. The Supreme Court observed that there has to be a conceivable link between the contract of sale and the movement of goods from one State to another in order to discharge the obligation under the contract of sale to make it an inter-State sale. 13.. In the present case, there is no conceivable legal link between the auction sale in Tamil Nadu and the movement of goods to Karnataka. The said movement was purely voluntary at the option of the petitioner and not under any lega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Commercial Taxes [1970] 26 STC 354; AIR 1970 SC 1281 is more apposite to the facts of the present case. In the above decision the facts of the case were that vehicles was moved from the factory of the appellant to various stock yards in different States, but the movement of vehicles from the site of works to the stock yards was not occasioned by any covenant or incident of the contract of sale. In fact, the completion of the sales to the dealers did not take place at the Jamshedpur factory, but was completed at the stack yard. There was nothing to show that the movement of goods from the Jamshedpur factory of the appellant to the stock yard was in pursuance of some firm order on behalf of a customer. 18.. In Commissioner of Commercial Taxes, Bihar v. Bhag Singh Milkha Singh [1974] 34 STC 535 a Division Bench of the Patna High Court observed: "It must he held that what is of importance to make the sale as one in the course inter-State trade and commerce is that there must be an obligation to transport the goods outside the State-the obligation may be of the seller or the buyer-and it may arise by reason of statute, contract between the parties, or from mutual understanding or a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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