TMI Blog1968 (8) TMI 182X X X X Extracts X X X X X X X X Extracts X X X X ..... which the contracts to sell goods were made by and with the branches of the company as above at Bombay, Delhi, Calcutta and Lucknow. We shall refer in detail to the manner and method adopted by the branch at Madras and the other branches of the company outside Madras presently in concluding the impugned transactions. The contention of the petitioner is that orders were booked by customers with the out-of-State branches and the goods were sent by the Madras branch or works so as to implement the said contracts. On this it is stated that the sales are not inter-State sales within the meaning of section 3(a) of the Central Sales Tax Act, 1956 (Act 74 of 1956). The petitioner reserves certain other matters for appropriate action by it at the required stage, but it is, in this writ petition, canvassing the propriety of the notice dated 21st February, 1967, issued by the first respondent proposing to treat the turnover of Rs. 29,68,749.97 as assessable turnover for the assessment year 1965-66. The petitioner has referred to certain documents by way of illustration to sustain its case that the turnover in question is not assessable as if it were so in the course of inter-State sales. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same caption and refers to Asha Metal Works, Bombay, and quotes its price for the goods for which quotations were asked for. Invariably the price is F.O.R. Madras. For one item the petitioner would state that the offer is "ex Stock subject to prior sale". On receipt of such particulars from the Madras office, the Bombay office in turn writes to the buyers reproducing the offer of the petitioner and in particular the conditions of sale and mode of despatch and calls upon the buyers to accept the order in terms thereof. It is very significant to note that this offer which was transmitted to the buyers in the name of the Bombay branch is vetted to the petitioner as well. One of the conditions of sale, which appears to be a general condition, adopted by the petitioner-company, wherever situate, runs as follows: Since reported as Sitalakshmi Mills Ltd., Tirunagar, and Others v. The Deputy Commercial Tax Officer, No. lX, Teppakularn New Colony, Madurai, and Others [1968] 22 S.T.C. 436. "Unless specially arranged to the contrary, all goods will be despatched at the risk of the contractee......If desired, insurance can be effected on account of the buyer to cover risks in transit. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tating that the normal procedure may be adopted and the goods may be insured against damage or loss in transit. After such correspondence regarding the despatch and delivery of the goods, the Bombay office writes to the Madras office as follows: "Our Indent BOM/906-CFS Distribution Boards for Asha Metal Works. With reference to your memo. of 26th August, 1964, please despatch the equipment covered by our above indent by goods train to Bhandup Rly. Station, freight to pay, duly insured, consigned to us. The R/R and other documents to be sent to us for disposal." Herein also a reference is made to the indent and the reference to Asha Metal Works in the caption of this letter is indicative of the fact that the goods are to move from Madras for the benefit of Asha Metal Works. The Bombay office repeat that the goods are to be consigned to them, but the real substance of the above letter is that the railway receipt and the above documents are to be sent to them for disposal. One other significant feature of the above letter is that the petitioner is directed to send the goods to Bhandup Railway Station which is the place of business of the buyers. The petitioner immediately after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the seller and in the absence of such an indicia, the main sine qua non, which would dub a transaction involving inter-State movement of goods as an inter-State sale is absent. The State argues to the contrary. For a sale or purchase to take place, there should be a buyer and a seller. No doubt, if the seller sends the contracted goods direct to the buyer, the concept of a sale as is popularly and even grammatically understood, is complete. Any contract visualises co-operative action by which "the wills of two or more persons are economically disposed towards certain harmonious courses of action". In a contract of sale, as grammatically defined in the statutes under consideration, two parties are necessarily involved, one the seller and the other the buyer. Such a contract is not indicative of any subjective state of the mind, but it is an act and in such an act certain inferences from the conduct of parties follow. Such inferences from conduct have to be judged not by what was passing in the minds of parties to a contract, but on what they said or wrote. The intention that is manifest from such conduct, from such consensus and other surrounding circumstances, has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me to such a buyer. As was pointed out by the Supreme Court in Bengal Immunity Co. Ltd. v. State of Bihar[1955] 6 S.T.C. 446.: "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 interState trade." That does not however mean that sales cannot take place without the volition of a party to a contract. The illustration in the dissenting judgment of Hidayatullah, J., as he then was, in New India Sugar Mills Ltd. v. Commissioner of Sales Tax, Bihar[1963] 14 S.T.C. 316 at 354., brings out this concept: "A sick man is given medicines under the orders of his doctor and pays for them to the chemist with tax on the price. He does not even know the names of the medicines. Did he make an offer to the chemist from his sick-bed?" Is there not a sale in this case? Certainly, there is. Equally there may be a case where the attendant circumstances clearly point out that the transmission of the goods by the seller may not necessarily be to the buyer. The fascicle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intra-State, but the sole deciding factor is as to whether the movement of goods from one State to another was as a result of a covenant or the incident of a contract of sale..........." In another form the main requirement of section 3(a) has been very succinctly stated by a Division Bench of this Court, to which the Honourable the Officiating Chief justice was a party, in Larsen and Toubro Ltd. v. Joint Commercial Tax Officer[1967] 20 S.T.C. 150. The excerpt can be quoted as it is apposite: "What is of the essence of the inter-State character of a sale or purchase under section 3(a) is that the inter-State movement of goods springs from the terms of the contract of sale or purchase or is incidental thereto. The movement of goods need not necessarily be preceded by an agreement of sale or purchase but may be part of or incidental to it, or arises out of it. The dividing line between sales or purchases under section 3(a) and those under section 3(b) is that in the former the movement of goods is under the contract of sale or purchase but in the latter the contract comes into existence after commencement and before termination of the interState movement of the goods. In both th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected from the buyer. The freight charges from Madras to Bombay were also duly accounted for in the invoice. The Bombay office merely played the role of an intermediary or a canvasser. But it took more responsibility because it was a branch office and was answerable to the main office and equally responsible to the Madras office. A mere misdescriptional nomenclature adopted by a party cannot be pressed into service to by-pass the real purpose and purport of a document; we mean the indent order. By the order being characterised as an indent order or a consignment sale, can the Bombay office achieve the purpose, which they wished to do in this case, to sustain that the contract in question should be deemed to be an intra-State sale in Bombay? The answer to the query has to be necessarily in the negative. The goods are sent to the place of business of the buyer. The despatch instructions are equally clear that the goods have to be sent to the place where the buyer carries on business. And even as regards the mode of despatch, there is tripartite correspondence between the Bombay office, Madras office and the buyer. The letter wherein final despatch instructions were given by the Bomba ..... X X X X Extracts X X X X X X X X Extracts X X X X
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