1960 (3) TMI 31 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Jurisdiction to levy sales tax on inter-State transactions.
2. Legality of sales tax on transactions with the Director-General of Supplies and Disposals, Government of India.

Detailed Analysis:

1. Jurisdiction to Levy Sales Tax on Inter-State Transactions:
The petitioners contended that the transactions of sale and supply of cement to the public in the State of Mysore during the relevant period were inter-State sales and thus beyond the jurisdiction of the State of Mysore to levy sales tax. They argued that the actual supply or delivery of cement to buyers was made from factories situated outside the State of Mysore, making these transactions inter-State in nature under Article 286(1)(a) of the Constitution and Section 27 of the Mysore Sales Tax Act, 1948.

The court examined the explanation to Article 286(1)(a) of the Constitution and Section 27 of the Mysore Sales Tax Act, which state that if actual delivery of goods takes place as a direct result of sale or purchase within the State for consumption in that State, the State has the authority to levy sales tax. The court noted that the first petitioners accepted orders and collected payment within Mysore and directed factories outside the State to supply cement to purchasers within Mysore. Despite the cement being dispatched from outside the State, the court held that actual delivery to the buyer occurred within Mysore, making these transactions taxable by the State of Mysore. The court relied on the precedent set by the Supreme Court in Bengal Immunity Co. Ltd. v. State of Bihar and Others, which clarified that delivery to a common carrier does not constitute actual delivery to the purchaser for the purposes of Article 286(1)(a).

2. Legality of Sales Tax on Transactions with the Director-General of Supplies and Disposals, Government of India:
The petitioners further contended that supplies to the Director-General of Supplies and Disposals, Government of India, were governed by an annual rate contract and were inter-State transactions. They argued that once the goods were loaded onto railway wagons at the factories situated outside Mysore, the sale was completed, making these transactions exempt from Mysore's sales tax under Article 286(2) of the Constitution and Section 27 of the Mysore Sales Tax Act.

The court rejected this contention, noting that the orders were placed with the first petitioners in Bangalore, Mysore, and the goods were delivered within Mysore. The court emphasized that the terms of the contract, including F.O.R. ex-works, did not alter the fact that the sales were concluded within Mysore and the goods were delivered for consumption within the State. Therefore, these transactions did not fall under the prohibition of Article 286(2) or Section 27, and the State of Mysore had the jurisdiction to levy sales tax on them.

Conclusion:
The court dismissed the writ petition, holding that the State of Mysore had the jurisdiction to levy sales tax on the transactions in question. The transactions relating to the sale of cement to the public and the Director-General of Supplies and Disposals, Government of India, were deemed to be within the State of Mysore and thus subject to its sales tax laws. The petitioners were ordered to pay costs, including advocate's fees of Rs. 100.