TMI Blog1992 (8) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... ented to the authorities by issuing form III-C-I that the purchases effected by him are intra-State purchases liable to be taxed under the State enactment and thereby prevented the authorities from taxing the transactions under the Central Sales Tax Act; he must, therefore, make good that tax amount. Assuming that what the authorities say is true, even so the respondent-dealer cannot be proceeded against under section 3-B for the reason that the said section applies to a situation where the tax "leviable under this Act", i.e., State Act, is evaded. It does not apply where the tax payable under the Central enactment is evaded. This appeal has to be dismissed on this short ground alone, and is accordingly dismissed. - C.A. Nos. 4560-4562 of 1990, - - - Dated:- 5-8-1992 - RANGANATHAN S., RAMASWAMI V. AND JEEVAN REDDY B.P. JJ. C.A. Nos. 4560-4562 of 1990, 2300, 2341, C.A. Nos. 2342 of 1980, C.A. Nos. 1807, C.A. Nos. 1808, C.A. Nos. 1809, C.A. Nos. 3103, C.A. Nos. 3104, C.A. Nos. 3105, C.A. Nos. 3106, C.A. Nos. 3108, C.A. Nos. 3109, C.A. Nos. 3110 of 1982, C.A. Nos. 183, C.A. Nos. 184, C.A. Nos. 265, C.A. Nos. 518, C.A. Nos. 520 of 1983, C.A. Nos. 1188, C.A. Nos. 2908 of 1986, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipals. These purchases were made by the respondent-dealer from three sources, namely: (1) from registered dealers, (2) from cartmen, and (3) from agriculturists. So far as purchases made from registered dealers are concerned, we are not concerned with them. The learned counsel for the State of U.P. stated before us that tax thereon is payable by the selling dealer. The controversy thus narrows down to purchases made by the respondent-dealer from cartmen and agriculturists. The finding of the High Court with respect to the nature of the transactions may be set out in their own words: "In the present case, the purchase orders placed by the ex-U.P. principals to the assessee are not on the record but, from the conduct of the parties and on the facts found, it is clear that the ex-U.P. principals contracted with the assessee that he should purchase goods on their behalf in U.P. and despatch them to ex-U.P. destinations on the payment of commission......the goods were sent to the ex-U.P. principals in fulfilment of the contract." Sales of agricultural produce by agriculturists are exempt from tax under the U.P. Sales Tax Act by virtue of the proviso to the definition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 3. According to clause (a) of section 3, an inter-State sale or purchase is one which occasions the movement of goods from one State to another. In other words, the movement of goods from one State to another must be the necessary incident-the necessary consequence-of sale or purchase. A case of cause and effect-the cause being the sale/purchase and the effect being the movement of the goods to another State. The purport of this clause has been succinctly stated by Shah, J., in Tata Iron Steel Co. Ltd. v. S.R. Sarkar [1960] 11 STC 655 (SC); [1961] 1 SCR 379, a decision of the Constitution Bench: "In our view, therefore, within clause (b) of section 3 are included sales in which property in the goods passes during the movement of the goods from one State to another by transfer of documents of title thereto: clause (a) of section 3 covers sales, other than those included in clause (b), 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." To the same effect is the decision in Union of India v. K.G. Khosla and Co. Ltd. [1979] 43 STC 457 (SC); [1979] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned such movement, and (3) it is also not necessary for a sale to be deemed to have taken place in the course of inter-State trade or commerce, that the covenant regarding inter- State movement must be specified in the contract itself. It would be enough if the movement was in pursuance of and incidental to the contract of sale (page 801) (page 449 of 35 STC). The learned judge added that it was held in a number of cases by the Supreme Court that if the movement of goods from one State to another is the result of a covenant or an incident of the contract of sale, then the sale is an inter-State sale." The decision in Khosla and Co. [1979] 43 STC 457 (SC); [1979] 3 SCR 453 explains that to be called an inter-State sale or purchase, it is not necessary that the contract of sale must expressly provide for and/or stipulate the movement of goods from one State to the other; it is enough if such movement of goods is implicit in the contract of sale. If, however, the movement of goods is neither expressly provided for in the contract nor implicit in it, the movement of goods from one State to another, even if one takes place-cannot be related to the sale/purchase. In such a case the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the goods are later despatched to another State or sold within the State. For the purpose of the U.P. Sales Tax Act, it is enough that a sale or purchase takes place within the State; the subsequent movement of the goods is irrelevant, says the counsel. We find it not possible to agree. As held by Mathew, J. in Oil India Ltd. v. Superintendent of Taxes [1975] 35 STC 445 (SC); [1975] 3 SCR 797, quoted approvingly in Khosla and Co. Ltd. [1979] 43 STC 457 (SC); [1979] 3 SCR 453, "a sale which occasions the movement of goods from one State to another is a sale in the course of the inter-State trade, no matter in which State the property in the goods passes". Even if the goods move in pursuance of an agreement of sale and the sale is completed in the State in which the goods are received, it will be an inter-State sale, as explained by this Court in Balabhagas Hulaschand v. State of Orissa [1976] 37 STC 207; [1976] 2 SCR 939. Sri Sehgal placed strong reliance upon certain observations in Balabhagas Hulaschand v. State of Orissa [1976] 37 STC 207 (SC); [1976] 2 SCR 939. The question that arose for consideration in that case was whether the definition of "sale" in section 2(g) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat can occur in the day-to- day commercial transactions. It is, therefore, manifest that there can hardly be a case where once a sale takes place the movement is subsequent to the sale." The learned Judge proceeded further and held thus: "(2) That the following conditions must be satisfied before a sale can be said to take place in the course of inter-State trade or commerce; (i) that there is an agreement to sell which contains a stipulation express or implied regarding the movement of the goods from one State to another; (ii) that in pursuance of the said contract the goods in fact moved from one State to another; and (iii) that ultimately a concluded sale takes place in the State where the goods are sent which must be different from the State from which the goods move. If these conditions are satisfied then by virtue of section 9 of the Central Sales Tax Act it is the State from which the goods move which will be competent to levy the tax under the provisions of the Central Sales Tax Act. This proposition is not, and cannot, be disputed by the learned counsel for the parties." Sri Sehgal relies particularly upon "Case No. III" contained in the first extract and cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on could have been different if the respondent-dealer had purchased the goods on behalf of the ex-U.P. principals in the first instance and thereafter in pursuance of subsequent instructions despatched the goods. In such an event the instructions to despatch the goods are independent of the instructions to purchase. There is a break between the purchase and despatch of goods. It would not be an inter-State purchase. An out-State principal may first instruct his commission agent within the State of U.P. to purchase the goods on his behalf and to await his further instructions. Depending upon the market conditions and other circumstances, the ex-State principal may instruct his agent in the State either to sell the goods within the State or to despatch the goods beyond the State. If such were the case, Sri Sehgal would have been right in saying that the State of U.P. was competent to tax the purchase by the respondent-dealer. But that is not the case here on the facts found by the appropriate authorities. For the above reasons, the civil appeals fail and are dismissed, but in the circumstances without costs. Civil Appeal No. 1534 of 1990: A further question arises in this a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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