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TMI Blog1965 (10) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... J.B. Dadachanji of J.B. Dadachanji and Co., for intervener No. 4. -------------------------------------------------- The judgment of the Court was delivered by SHAH, J.-The question which falls to be determined in these appeals is "whether the appellant-company is liable to pay sales tax assessed under the Hyderabad General Sales Tax Act, 1950, on the price of coal supplied to allottees outside the taxing State pursuant to directions of the Coal Commissioner issued under the Colliery Control Order, 1945". The Company which has its registered office at Hyderabad, in the former Part "B" State of Hyderabad and now in the State of Andhra Pradesh, carried on the business of mining coal from its collieries and supplying it to consumers in and outside the State of Hyderabad. These appeals relate to three financial years 1954-55, 1955-56 and 1956-57, during which coal was a controlled commodity and its disposal and use could be made only under orders issued by the appropriate authority under the Colliery Control Order, 1945. The Company claimed that Rs. 1,75,67,286-1-2 in the year 1954-55, Rs. 1,17,39,636-11-8 in the year 1955-56, and Rs. 1,55,18,937-6-5 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hyderabad General Sales Tax Act, 1950, the expression "sale" was defined as under: "'Sale' with all its grammatical variations and cognate expressions means every transfer of property in goods by one person to another in the course of trade or business for cash or for deferred payment or other valuable consideration and includes also a transfer of property in goods involved in the execution of a works contract, but does not include a mortgage, hypothecation, charge or pledge. Explanation 2.-Notwithstanding anything to the contrary in any other law for the time being in force, a transfer of goods, in respect of which no tax can be imposed by reason of the provisions contained in Article 286 of the Constitution, shall not be deemed to be 'sale' within the meaning of this clause." The Explanation was evidently introduced into the definition with a view to avoid its operation on transactions which are outside the taxing power of the States by virtue of Article 286 of the Constitution. In these appeals, the Company submitted in the first instance that within the meaning of the Hyderabad General Sales Tax Act, there was no sale of coal which was supplied to the consumers pursuant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f coal in the colliery during any period (clause 8); and notwithstanding any contract to the contrary, every colliery owner to whom a direction was given under clause 8 had to dispose of coal in accordance therewith and could not dispose of coal in contravention thereof (clause 9). The Coal Commissioner could order that coal despatched by any colliery owner to any person which was in transit (terminii whereof were defined by the explanation) shall subject to the terms and conditions if any imposed by the Coal Commissioner be diverted and delivered to another person specified in the order [clause 10-A(1)]. As soon as an order was made under sub-clause (1), all the rights of the consignee, the owner of the colliery or other person in the consignment of coal were, subject to the terms of the order, to devolve upon and vest in the person to whom the coal was to be delivered under the order [clause 10-A(2)]. An allottee of coal could not use it otherwise than in accordance with the conditions of the order of allotment, nor divert or transfer any such coal to any other person except under a written authority from the Central Government (clause 12-B): and no person could acquire or purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss occasioned in consequence of fire, snow, heat, flood, strikes, lockouts, shortage of wagons, restrictions on booking, accidental losses, etc.: that any taxes, export duty, cess or other charges not in force imposed by the Government after the date of the sale note shall be borne by the purchaser: that the colliery reserved the right to demand payment in advance and to have a right of lien on all coal despatched until it was paid for: that the sale note was subject to the quantity allotted by the Deputy Coal Commissioner for buyers outside the State and in the event of the Deputy Coal Commissioner cancelling the whole or any part of the said allotment, such cancellation shall be deemed to apply equally to the sale note. Under the terms of the "sale note" the property in the coal consigned passed, so far as the colliery was concerned, to the allottee -original or substituted-when the goods were loaded into the railway wagons for conveyance, and thereafter all losses and any new taxes imposed were to be borne by the purchaser, the colliery having only a right of lien on coal not paid for. Coal supplied was meant for consumption by the allottee: therefore when the allottee was outs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) Except in so far as Parliament may by law otherwise provide, no law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of any goods where such sale or purchase takes place in the course of inter-State trade or commerce: Provided that the President may by order direct that any tax on the sale or purchase of goods which was being lawfully levied by the Government of any State immediately before the commencement of this Constitution shall, notwithstanding that the imposition of such tax is contrary to the provisions of this clause, continue to be levied until the thirty-first day of March, 1951. (3) No law made by the Legislature of a State imposing, or authorising the imposition of, a tax on the sale or purchase of any such goods as have been declared by Parliament by law to be essential for the life of the community shall have effect unless it has been reserved for the consideration of the President and has received his assent." Article 286 thus imposed qua sales four bans upon legislative power of the States. Clause (1) prohibited every State from imposing or authorising the imposition of, a tax on outside sales and on sales in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nter-State trade or commerce; and all such taxes levied or collected or purported to have been levied or collected during the aforesaid period shall be deemed always to have been validly levied or collected in accordance with law. The Parliament thereby removed the ban contained in Article 286(2) of the Constitution retrospectively but limited only to the period between April 1, 1951, and September 6, 1955. All transactions of sale, even though they were inter-State could for that period be lawfully charged to tax. But Article 286(2) remained operative after September 6, 1955, till the Constitution was amended by the Constitution (Sixth Amendment) Act, i.e., September 11, 1956. By the amendment, the Explanation to clause (1) of Article 286 was deleted and for clauses (2) and (3) the following clauses were substituted: "(2) Parliament may be law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1). (3) Any law of a State shall, in so far as it imposes, or authorises the imposition of, a tax on the sale or purchase of goods declared by Parliament by law to be of special importance in inter-State trade or commer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akes place in the course of inter-State trade or commerce, the Parliament enacted the Central Sales Tax Act, 1956, which was brought into force on January 5, 1957, and after that date inter-State sales could be taxed under the provisions of the Central Sales Tax Act. The Company claims that the transactions which are sought to be charged for the period between April 1, 1954, to September 6, 1955, are not taxable, because they were covered by Explanation to clause (1)(a) of Article 286 of the Constitution, before it was amended. For the period between September 7, 1955, and September 10, 1956, it is claimed the transactions are not taxable, because they are covered by the Explanation to Article 286(1) and also because they are inter- State sales. For the period September 11, 1956, to January 4, 1957, the transactions are not taxable, because they are inter-State sales not chargeable under any statute-State or Parliamentary-and for the period January 5, 1957, to March 31, 1957, the transactions are not chargeable by the State because they are inter-State and are chargeable under the Central Sales Tax Act alone. The true effect of Explanation to Article 286(1) and Article 286(2) gav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in which the allottee resided or carried on business. Delivery of coal to the Railway Administration may amount to delivery to the allottee for the purpose of the general law relating to sale of goods, but thereby coal cannot be said to be "actually delivered" within the meaning of the Explanation to Article 286(1)(a). It is also true that under the terms of the sale note under which coal was despatched on terms F.O.R. Singareni the Company was not responsible for loss or damage to the consignment after it was loaded in the wagons; that may indicate that the Company had no property in the goods after it was in transit. But determination of the State in which sale shall be deemed to have taken place is artificially determined not by the terms of the contract of sale, nor by the legal concept of passing of property in the goods sold but by the delivery for the purpose of consumption. As observed by Das, Ag. C.J., in the Bengal Immunity Company's case: "The shifting of situs of a sale or purchase from its actual 'situs' under the general law to a fictional 'situs' under the Explanation takes the sale or purchase out of the taxing power of all States other than the State where the ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate trade or commerce within the meaning of section 3, they could not be taxed under the Hyderabad General Sales Tax Act, 1950. Section 3 of the Central Sales Tax Act, 1956, provides that "a sale......of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale.........occasions the movement of goods from one State to another or is effected by a transfer of documents of title to the goods during their movement from one State to another". In Tata Iron and Steel Company Ltd. v. S.R. Sarkar [1961] 1 S.C.R. 379; 11 S.T.C. 655., this Court held that clause (a) of section 3 covers sales in which the movement of goods from one State to another is the result of a covenant or incident of the contract of sale, and property in the goods passes in either State. That view was reaffirmed in The State Trading Corporation of India Ltd. and Another v. The State of Mysore and Another [1963] 14 S.T.C. 188. and Cement Marketing Company of India v. State of Mysore [1963] 14 S.T.C. 175. Coal in the appeals under review was transported from the colliery of the Company to the consumers outside the taxing State, as a result of the covenant or incident of the contract o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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