TMI Blog1962 (8) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... .K., HIDAYATULLAH M. AND RAGHUBAR DAYAL R.J. Kolah, Advocate, and J.B. Dadachanji, O.C. Mathur and Ravinder Narain, Advocates of J.B. Dadachanji and Co., for the appellants. C.K. Daphtary, Solicitor-General of India (B.R.L. Iyengar and P.D. Menon, Advocates, with him), for the respondents. -------------------------------------------------- KAPUR, J. -This is an appeal against the judgment and order of the High Court of Mysore in Writ Petition No. 147 of 1958 dismissing the appellant's petition under Articles 226 and 227 of the Constitution for quashing the order of assessment for the period of assessment 1955- 56, i.e., from April 1, 1955 to March 31, 1956. In this appeal because of the Validating Act (VII of 1956) the appellants did not challenge their liability for the period April 1, 1955 to September 6, 1955. The facts necessary for the decision of this appeal are these: Appellant No. 1-The Cement Marketing Co., Ltd.-are the sales managers of the second appellant-The Associated Cement Co., Ltd.- appointed under an agreement dated April 21, 1954. The High Court has described the first appellant to be the distributors of the secondappellant. The second app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ref: No. J/117/115 dated 29-9-55 from the above indentors-For manufacture of tiles for the Bharat Electronics Ltd. Supply recommended by the Commander Works Engineers (B.E.I.P.), Jalahalli. Full details of the purpose for which and the place at which cement will actually be consumed; Priority, Defence Work. Sd. C.C. Ramanath, Reg. Hon. Cement Adviser (Coimbatore). Copy to 1. The indentor. 2. The Dy. Development Officer, Govt. of India, Ministry of Commerce Industry Development Wing, (Chemicals I, Mineral Industries), Shahjehan Road, New Delhi. 3. The Controller of Civil Supplies in Mysore, Bangalore for information." This authorisation was subject to the following conditions: It was to be utilised within 15 days; the cement released could be used only for the purpose for which it was given; the authorisation was not transferable; the authority could, if necessary, revoke the authorisation at any time and even the orders booked under the authorisation could be cancelled. The purchaser or the indentor had then to place an order with the first appellant as sales managers of the second appellant stating the requirement, where the goods were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e dealers M/s. Cement Marketing Company of India Ltd., Bangalore to dealers and customers in Mysore State amounts to intra-State sales and therefore liable to Mysore Sales Tax Act, 1948." In its judgment the High Court took into consideration the fact that the first appellant had a branch office at Bangalore within the State of Mysore and that the public placed their orders with the first appellant for supplies of cement against permits granted to them; that the first appellant, who after accepting the offer for the supplies of cement, collected the price from the intending purchasers and then directed one of the factories of the second appellant to supply cement to the purchasers and actual delivery to the purchasers was within the State of Mysore and therefore the contention that cement was loaded outside the State of Mysore and despatched to the purchaser did not convert sales into inter-State sales but were intra-State sales. It appears that the true nature of the transaction was not correctly considered by the High Court. The modus operandi above-mentioned shows that before an intending purchaser could obtain cement he had to get what is called an authorisation from a Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the nature of the transaction and preliminaries which are necessary for the sale or purchase of cement it cannot be said that the sale itself did not occasion the movement of goods from one State to another. The essential features of the contracts proved in the present case are analogous to those in Mohanlal Hargovind v. State of Madhya Pradesh [1955] 2 S.C.R. 509; 6 S.T.C. 687. In that case the assessees were a firm carrying on business of making and selling biris in Madhya Pradesh. In the course of their business they imported finished tobacco from dealers in Bombay State, rolled it into biris and exported the biris to various other States. Both the exporters of tobacco from Bombay State who supplied the assessees and the assessees were registered dealers under the C. P. and Berar Sales Tax Act, 1947. It was held that the assessees imported the finished tobacco into Madhya Pradesh from persons who were carrying on in the State of Bombay business of processing tobacco and selling the goods and there was, as a result of these transactions movement of goods from the State of Bombay to the State of Madhya Pradesh and therefore the trans- actions involved movement of goods across ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to prohibition against imposition of tax on inter-State sales the test, it was said, was that in order that a sale or purchase might be inter-State it is essential that there must be transport of goods from one State to another under the contract of sale or purchase. The following observations from the Bengal Immunity Co. Ltd. v. State of Bihar and Others(1) were quoted with approval in support of the proposition: "A sale could be said to be in the course of inter-State trade only if two conditions concur: (1) A sale of goods, and (2) a transport of those goods from one State to another under the contract of sale. Unless both these conditions are satisfied, there can be no sale in the course of inter-State trade." Thus the tests which have been laid down to bring a sale within inter-State sales are that the transaction must involve movement of goods across the border: Mohanlal Hargovind's case [1955] 2 S.C.R. 509; 6 S.T.C. 687.; trans- actions are inter-State in which as a direct result of such sales the goods are actually delivered for consumption in another State: M/s. Ram Narain Sons Ltd. v. Assistant Commissioner of Sales Tax and Others [1955] 2 S.C.R. 483, 504; 6 S.T.C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purchaser the goods from any of the factories of the second appellant. The factories were nominated by the Government by authorisations which formed the basis of the contract between the buyer and the seller. Applying these tests to the facts of the present case we are of the opinion that the sales were in the nature of inter-State sales and were exempt from sales tax. In these circumstances the contracts of sale in the present case have been erroneously considered to be intra-State sales. The decision in Rohtas Industries Ltd. v. The State of Bihar [1961] 12 S.T.C. 615., to which reference was made by the respondent does not apply to the facts of the present case because the agreement between the first appellant and the second appellant is different from that which existed between Rohtas Industries Ltd. and the Cement Marketing Co. of India in the case above-cited. On an examination of the agreement between those two companies this Court held that the relationship which existed between the two was of seller and buyer and not of principal and agent. In the present case the agreement is quite different. In the first clause of the agreement between the two appellants and the Pat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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