TMI Blog1960 (11) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... cer disallowed the claim for deduction holding that the transactions in question constituted intra State transactions. The assessee carried the matter in appeal to the Deputy Commissioner who found that out of the turnover of Rs. 1,78,65,464-12-10 which was sought to be brought under Article 286 of the Constitution, sales amounting to Rs. 23,46,527-6-5 related to consumers in the Andhra area of the State during the period from Ist November, 1956, to 31st March, 1957, and as such they could not be regarded as inter-State sales, since for the purpose of Article 286 the entire State of Andhra, Pradesh was one unit. This was also conceded by the assessee before the Deputy Commissioner. As regards the rest of the turnover, i. e., Rs. 1,55,18,937-6-5, relating to sales made to parties outside the State, he held that they were local sales and were not governed by Article 286. In the result, he dismissed the appeal. The further appeal taken by the assessee to the Sales Tax Appellate Tribunal was unsuccessful. It is to revise this order of the Tribunal that this petition is presented. The question that calls for determination is whether the turnover in dispute is protected by the ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, which is in transit, shall, subject to such terms and conditions, if any, as the said Coal Controller deems fit, be diverted at and delivered to another person specified in the order. Explanation: For the purpose of this clause, coal shall be deemed to be in transit from the time when it is delivered to a carrier or other bailee for transmission to the consignee thereof and until the consignee or his agent has taken actual delivery of the entire quantity of coal from such carrier or other bailee. (2) As soon as an order is made under-sub-clause (1), all the rights of the consignee, the owner of the colliery, or other person in the said coal shall, subject to the terms of the order, devolve upon and vest in the person to whom the coal is to be delivered under the said order. (3) The Coal Controller with the Government of India may, if he thinks fit, modify or cancel any order made under sub-clause (1) and direct the coal to be diverted or delivered to a person other than the person originally named therein and the provisions of this clause shall thereupon apply as if such person was the consignee of the coal. (4) The person to whom coal is delivered under any order made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of Madhya Pradesh, was rolled into bidis which were exported to other States, mainly to the State of Uttar Pradesh. The dealer in Uttar Pradesh and other States bought these bidis from the assessee, and sold the same to other dealers and consumers in those States. The Sales Tax Authorities in Madhya Pradesh called upon the assessee to file a statement of returns of total purchases of this tobacco delivered to them in that State, and to deposit the purchase tax thereon. It was to challenge this order that a petition under Article 32 of the Constitution was filed before the Supreme Court. It was held by the Supreme Court that these transactions were in the course of inter-State trade or commerce since as a result of the transactions entered into between the petitioners and the Bombay suppliers, the finished tobacco, which was supplied to the petitioners, was transported from the State of Bombay to the State of Madhya Pradesh. We do not think that this case affords any parallel to the present case. The ratio decidendi of that case was that the movement of goods from one State to another was as a result of the sale, i.e., that the movement of goods was an integral part of the sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dges expressed the opinion that Article 286 enacted two distinct and independent bans, though in some cases they might overlap and that the Explanation to Article 286(1)(a) could not be "legitimately extended to clause (2) either as an exception or as a proviso thereto or read as curtailing or limiting the ambit of clause (2)". The principle adumbrated in that case does not help the petitioners. It is true that the transactions involved in that case were regarded as being in the course of inter-State trade or commerce. But it was not disputed that the sales took place in the course of inter-State trade or commerce. (1) [1955] 6 S.T.C. 446; A.I.R. 1955 S.C. 661. (2) [1953] 4 S.T.C. 133; 1953 S.C.J. 373. The only ground urged by the State in support of its authority to tax the transactions was that they fell within the sweep of the Explanation to Article 286(1)(a). That this is so, appears from the following passage of Das, C.J., occurring at page 680: "It is not necessary, for purposes of this appeal, to enter upon a discussion as to what is exactly meant by inter-State trade or commerce or by the phrase 'in the course of', for it is common ground that the sales or purchases made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a way substantiates our conclusion. Nor does Sriram Venkata Subbarao v. State of Andhra Pradesh(1) carry the petitioners much further. There, a commission agent in Andhra Pradesh entered into contracts with sellers in Andhra Pradesh as agents for the dealers in Bombay, paid the price, supervised all the processing operations, etc., took delivery of the cotton bales and transported them to Bombay as instructed by his principals whenever wagons were avilable. He collected from the Bombay dealers pressing and other charges, sales tax, his commission, etc. It was held inter alia that the sale was completed inside the State and nothing remained to be done by the seller, and consequently it was an intra-State sale. We are unable to see how that judgment would be of any help to the petitioners. The passage relied on by the learned counsel is: "The case would be different if some of the ingredients of the transaction were completed outside the State or, though all the essential ingredients took place within the State, transport of the goods took place across the borders of the State as part and parcel of the transaction of sale itself." This statement of law would have been applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Provinces where the logs were put in wagons or in Ambernath, in another State, where the logs were inspected and measured by the vendee's factory manager and where the prices, which were F.O.R. Ambernath, were paid by the company to the assessee's agent at Bombay. The Supreme Court ruled that the sale did not take place in the Central Provinces and it was not liable to sales tax in that Province, since the property in the goods did not pass to the company until the logs arrived at Ambernath and there were inspected, measured and accepted by the company. In the discussion of this topic, this is what their Lordships observed at page 308 of the report: "It is quite clear from the language of section 23 itself that the appropriation may be by the seller with the assent of the buyer or by the buyer with the assent of the seller, that assent to appropriation may be express or implied and that it may be given after the appropriation or in advance before such appropriation. Learned counsel for the department lays strong emphasis on the provision of clause 4 in the contract that the sawar logs should be despatched by rail from certain stations within the Central Provinces and conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . United Motors (India) Limited(3), occurring at page 166. They are as follows: "A, a Bombay dealer, sells goods to B, a dealer in Madras, for consumption in Madras. I will assume that delivery is made to B himself in Bombay and that he carries the goods across in person. If that is the normal way in which trade and commerce in that particular line of goods flows across the boundary, then that would, in my opinion, be a sale in the course of inter-State trade and commerce, despite the facts, including delivery, mentioned above. Ordinarily, goods of this nature are delivered to a carrier but that makes my point all the (1) [1898] A.C. 200, 207, 209. (2) [1960] 11 S.T.C. 655 at 679. (3) [1953] 4 S.T.C. 133; (1953) 1 M.L.J. 743. stronger. So long as the ban imposed by clause (2) remains, the situs of the sale and the place of delivery are not material provided the sale is caught up in the vortex of inter-State trade and commerce. Similar considerations apply in the case of exports and imports. This obiter dicta is contained in the dissenting judgment of the learned judge. The test postulated by the learned Judge is, "the normal way in which the trade and commerce in the particular l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sales were inter-State sales was that the contract contemplated movement over the border and the fact that delivery was to be at the manufacturer's siding was not enough in the case of manufacture and supply of railway rolling stock to constitute an intra-State sale. We are unable to share this view of the learned Judge and we have to express our respectful disagreement with it. The mere fact that the rolling stock would be manufactured and moved to various parts of India beyond the boundaries of the State would not render the sale an inter-State sale. Further, this reasoning is inconsistent with the statement of law contained in State of Mysore v. Mysore Spg. and Mfg. Co Ltd. Delivering the opinion of the Court, Bose, J., remarked: "The is nothing to show that these gods were manufactured with 'the main intention for export'' beyond the fact that they were sold to exporters and marked 'for export; at the time of despatch. But even if the facts were as stated, that would not help because, as we have already pointed out, this Court has decided that only the sale that occasions the export is exempt and that the sale to the exporter that preceded it is not, even if it was made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en sale and the movement of goods. In other words, it should be stipulated between the parties that deliveries should be outside the State. The other cases cited by Sri Rajah Ayyar do not make any further contribution to the solution of the problem presented by this petition. We will now examine the features of the instant case in the light of the legal position indicated above, At the outset, it should be borne in mind that there is no stipulation as to the destination of the goods. As already mentioned, no contracts are entered into between the collieries and buyers of the coal. Persons or institutions in need of coal should apply to the Coal Controller for allotment of particular quantities of coal and the latter allots specific quantity and gives intimation of such allotment to the allottee as also the collieries. In spite of this, at one stage the learned counsel attempted to spell out an agreement as to the place of delivery from the letter of allotment sent by the Deputy Coal Controller, though during a good part of the hearing of the revision, the arguments proceeded on the footing of an implied term of contract in that behalf. But he did not succeed in his attempt since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to be delivered at the place at which they are at the time of the sale, and goods agreed to be sold are to be delivered at the place at which they are at the time of the agreement to sell, or, if not then in existence, at the place at which they are manufactured or produced. Thus, in the absence of a contract, in view of this section, coal is to be delivered by the petitioners to the buyers at the collieries. Now, is there any contract which could be implied that coal was to be delivered at a place other than the colliery or, at any rate, outside the State of Andhra Pradesh? Far from there being any such implied term, the indications are to the contrary. If really there was a stipulation as to the place of delivery between the parties, there was no need for the petitioners to ask the buyer for despatch instructions or for the latter to issue such instructions. That such delivery, as a term of the contract, was not in contemplation of the parties would appear from a letter written by one Govindjee Madhowjee Co., Private Limited to the petitioners. It is complained in that letter that one wagon containing tons 22-10-0 crushed round coal was despatched to Associated Cement Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the railway company for despatch to destination at the minimum rate of freight, and in the terms of the railway company's usual owner's risk note relating to minimum freight on account and risk of the buyers, and the buyers agree to accept and pay for rail receipt weights. Any increase in rail freight after receipt of order in these cases will be debited to buyer's account and paid by them. The buyer shall, required to do so by the company, pay for all coal ordered before it is despatched subject to adjustment on rail receipt weights. The sellers have a lien on all coal despatched until such coal be paid for. These terms would be unmeaning if there was an agreement between the parties that the goods were to be delivered at a place other than the collieries. If such a stipulation existed, the collieries have to carry the coal to that place and deliver it there in a deliverable state. They cannot disown responsibility for non-delivery of the goods. It is incumbent on them to deliver the goods contracted to be sold at the destination. These conditions, in our opinion, are pointers to the conclusion that there was no contract between the parties that the petitioners had to deli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce and in cases where Government was the purchaser cash was realised later. So far as the coal sold to Government is concerned, the sales seem to have been on credit basis and as such there is no question of the petitioners having the vendor's lien or the right of stoppage in transit even in that regard. What follows from this premises is that the sale in all cases was complete in this State itself before the goods were moved to various places outside the State. Some reliance was placed by Sri Rajah Ayyar, counsel for the petitioners, on the clause in the conditions of sale: "The buyer shall, required to do so by the company, pay for all coal ordered before it is despatched subject to adjustment on rail receipt weights". It is argued on the basis of this clause that the price could not be said to have been fully paid. We have already stated that the sale was for cash and that it was paid in advance. This clause only enables the buyer to get back any excess amount paid by him to the company. It cannot be overlooked in this context that the proprietors of the collieries could not sell coal more than what is allotted by the Coal Controller. Full price is paid to the petitioners on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 10th September, 1956, as the Explanation was deleted from the Constitution by the Constitution (Sixth Amendment) Act, 1956. We do not think that the petitioners can invoke that Explanation in view of our finding that coal was not delivered as a direct result of the sale. We have already said that it was not as a part of the bargain between the parties that the goods were despatched to places outside the State. In order that delivery for consumption in another State should come within the ambit of that Explanation, it should be an integral part of the sale. That is the import of the expression "delivery as a direct result of such sale." Since the petitioners had not succeeded in proving that it was a term of the contract that the goods should be transported to places outside the State, they could not have resort to the Explanation. Therefore, the sales effected between Ist April, 1956, and 10th September, 1956, are not covered by the ban created by the Explanation and are liable to sales tax. It was lastly urged by Sri Rajah Ayyar that, at any rate, the sales subsequent to 5th January, 1957, when the Central Sales Tax Act (74 of 1956) was passed, should not be subject to tax, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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