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TMI Blog2005 (2) TMI 796X X X X Extracts X X X X X X X X Extracts X X X X ..... iced. The goods put to auction/tenders belong to Ministry of Defence, Government of India, which shall hereinafter referred to be as "stock holders". The Union of India appointed M/s. Metal Scrap Trading Corporation for carrying out the auction of the stocks on behalf of the Union of India in short to be referred as "M.S.T.C. Limited", which is Government of India Enterprises. Tenders are floated by M.S.T.C. Limited (respondent 2) from its Delhi office at Parkash Deep, 7th Floor, 7 Tolstoy Marg, New Delhi. The tenderers were required to submit the tenders in the prescribed form only in the sealed covers addressed to M.S.T.C. Limited, Domestic Trade Division, and put in the tenders box at its office in New Delhi. Notice inviting tenders contained various conditions for submission of the tenders and since there is no dispute regarding the eligibility of any of the tenderers in these petitions, the same are not being referred to. It is also admitted case of the parties that all the writ petitioners before the court in these petitions were the successful tenderers, who have successfully secured the tenders in their favour and purchased the goods/stocks lying at loca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... involved. According to him, the courts in the State of Jammu and Kashmir have no jurisdiction to entertain these petitions. Before this question is taken up for consideration, it is deemed necessary to briefly notice the terms and conditions governing the contract. The tender document contains general terms and conditions of tender as also the special terms and conditions. Relevant extract of these terms and conditions is being reproduced hereunder: "Date, time & venue of Tender: 17-2-2003 at 2.30 PM Important terms and conditions: 1 …………… 2 ………….. 3.. Local sales tax will be charged on the entire sale. Important guidelines to purchaser: 1 ………………. 2 ………………. 3.. The tenderer must collect his delivery order personally from M.S.T.C. officer during working hours after duly endorsing the delivery order. In case of his inability to collect the same any other representative may come with clear authority letter authorises him to collect delivery order from M.S.T.C. and lift material from the delivery office. Note: Since local sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... half by the appropriate authority. 9.6. ……………………….. 9.7. Tenderers wishing to avail of local sales tax concession against form may note the following points for compliance: (a) Every declaration form should contain registration number of the dealer. (b) Sales tax declaration form should be properly and fully filled up by dealer legibly without any cutting/over writings. (c) The declaration form should contain P.O. number duly filled in by sales tax authority. (d) The signature in the declaration form should match that on the sales tax registration certificate of the dealer. (e) Original sales tax registration certificates should be produced as and when demanded by M.S.T.C./owners. (f) Items for which sales tax declaration form is issued should be covered by the registration certificate. Items should be clearly mentioned on the form. (g) Sales tax form complete in all respects as above should be submitted along with the payment towards material value. Any delay in submission of the same will not be accepted and full tax is to be deposited in such cases. Delivery: 11.1 The buyer(s) shall lift the material lyin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ney/security deposit (as the case may be) without prejudice to M.S.T.C. rights to take further action under the contract as well as recover such losses, damages or claim from the other money due/becoming due under any other transaction with M.S.T.C./stock holder or from the buyer(s) directly. 14.. General ……………………. …………………… 14.6. The tenderer shall note the above general terms and conditions in addition to the special terms and conditions of tender which forms an integral part of the general terms and conditions of the tender in so far as the general terms and conditions of tender may be altered by the special terms and conditions of tender. 14.7. Intending tenderer(s) may obtain any clarification before tendering. Submission of tender implies that the tenderer(s) has obtained all the clarifications required and that he has agreed to all the general terms and conditions herein specified as well as special terms and conditions of tender, if any. 14.8. The decision of the Chairman-cum-Managing Director of M.S.T.C. Ltd. or his authorised nominee in any matter arising ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of contract as mentioned above whichever is earlier. 13.. Payment towards material value The schedule of payment will be as follows: (a) The 80 per cent value of each lot and all taxes/duties as applicable have to be paid at a time along with the required security deposit (if any) within ten days from the date of issue of letter of acceptance (including the date of issue) by M.S.T.C.; (b) Security deposit, if any, as envisaged in the general terms and conditions of tender is payable along with the full value of material including taxes/duties, as the case may be; (c) A formal delivery order shall be issued by M.S.T.C. only after receipt of the full (100 per cent) payment including all taxes/duties, etc., against each lot. 14.. Delivery period The materials offered for sale on 'as is where is basis'. The successful tenderer shall remove each lot allotted to them by employing their labour and transport at their own cost from the area allotted to them within 30 (thirty) days from the date of issue of sale-cumdelivery order by M.S.T.C. or within such time as may be prescribed in the delivery order. The successful tenderer shall lift the material only from the lot/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tution of India. Article 226. Power of High Courts to issue certain writs.--(1) Notwithstanding anything in article 32, every High Court shall have the powers, throughout the territories in relation to which it exercises jurisdiction, to issue to any person or authority, including in appropriate cases, any Government, within those territories directions, orders or writs, including writs in the nature of habeas corpus, mandamus, prohibition, qua warranto and certiorari, or any of them, for the enforcement of any of the rights conferred by Part III and for any other purpose. (2) The power conferred by clause (1) to issue directions, orders or writs to any Government, authority or person may also be exercised by any High Court exercising jurisdiction in relation to the territories within which the cause of action, wholly or in part, arises for the exercise of such power, notwithstanding that the seat of such Government or authority or the residence of such person is not within those territories. (3)........................ (4)........................." 9.. Under the aforesaid constitutional provision, a court within whose territorial jurisdiction cause of action wholly or in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the goods in the possession of the buyer or of any person authorised to hold them on his behalf. Section 36: Rules as to delivery.--(1) Whether it is for the buyer to take possession of the goods or for the seller to send them to the buyer is a question depending in each case on the contract, express or implied, between the parties. Apart from any such contract, goods sold are 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 agreement to sell, or, if not then in existence, at the place at which they are manufactured or produced. (2) Where under the contract of sale the seller is bound to send the goods to the buyer, but no time for sending them is fixed, the seller, is bound to send them within a reasonable time. (3) Where the goods at the time of sale are in possession of a third person, there is no delivery by seller to buyer unless and until such third person acknowledges to the buyer that he holds the goods on his behalf: Provided that nothing in this section shall affect the operation of the issue or transfer of any document of title to goods. (4) Demand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lifting of goods from the State of Jammu and Kashmir is only an incident of the concluded transaction of sale. As a matter of fact, it does constitute an integral part of contract of sale and consequently an essential component of cause of action. Respondents have placed reliance upon case of Oil and natural Gas Commission v. Utpal Kumar Basu reported in (1994) 4 SCC 711. In this case, tenders were invited at Delhi. The same were required to be received at Delhi and final decision on the bids was to be scrutinised and decided at Delhi. The rejection of the bid of the writ petitioner was however communicated to him at Calcutta. Bid was in respect to some work to be executed in some other State. Considering the fact that the entire transaction came to be settled at Delhi and even the rejection took place at Delhi, it was held by the apex Court that its communication to the writ petitioner at Calcutta, does not constitute an integral part of the cause of action, the apex Court held as under: "It is well-settled that the expression 'cause of action' means that bundle of facts which the petitioner must prove, if traversed, to entitle him to a judgment in his favour by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contract, which, inter alia, provide reference of all questions arising out of contract to the arbitrator and it is accordingly stated that the issue involved being referable to arbitration in view of the wide amplitude of the arbitration clause, writ petition is not maintainable, that too after the contract stands concluded. It is vehemently argued on behalf of the respondents that since there is efficacious alternative remedy, discretionary jurisdiction to be exercised by the writ court, should not be exercised in such a case. No doubt, the contract between the parties do contain an arbitration clause and the issue arbitral thereunder. However, the question raised in the writ petitions relates to the liability to pay tax, which is statutory liability. In view of the specific constitutional provision contained under article 265 of the Constitution of India and section 114 of the Constitution of Jammu and Kashmir, there is constitutional prohibition from levying and recovering the tax without the authority of law. Therefore, what needs to be examined, is nor enforceability and interpretation of mere contractual obligations, but also statutory liability of the petitioners to pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est. After entering into contract, in cancelling the contract which is subject of terms of the statutory provisions, as in the present case, it cannot be said that the matter falls purely in a contractual field. Therefore, we do not think it would be appropriate to suggest that the case on hand is a matter arising purely out of a contract and, therefore, interference under article 226 of the Constitution is not called for. This contention also stands rejected." 14.. The apex Court in another case titled Modern Steel Industries v. State of U.P. reported in (2001) 10 SCC 491, while considering the question of exercise of writ jurisdiction under article 226 of the Constitution, held as under: "We have heard the learned counsel for the parties finally with their consent. The short question is whether the revenue recovery certificate issued by the first respondent on behalf of the State of U.P. for recovering the minimum guarantee charges as sought to be recovered by the respondent-electricity board from the appellantindustry could be legally sustained or not. The said recovery was challenged by the appellant in the writ petition on two grounds: (i) that under the relevant r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions. The petitioners are thus estopped from filing writ petitions to challenge any condition of the contract or plead non-applicability of any of its terms. Reliance is placed upon Directorate of Education v. Educomp Datamatics Ltd. reported in (2004) 4 SCC 19. In this case, the apex Court while noticing the principle of law for interference in contractual matters in the case of Tata Cellular v. Union of India reported in (1994) 6 SCC 651, held as under: "It is well-settled now that the courts can scrutinise the award of the contracts by the Government or its agencies in exercise of its powers of judicial review to prevent arbitrariness of favouritism. However, there are inherent limitations in the exercise of the powers of judicial review in such matters. The point as to the extent of judicial review permissible in contractual matters while inviting bids by issuing tenders has been examined in depth by this Court in Tata Cellular v. Union of India (1994) 6 SCC 651. After examining the entire case law the following principles have been deduced. 94.. The principles deducible from the above are: 1.. The modern trend points to judicial restraint in administrative action. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant to raise sand. As the High Court, as noticed hereinbefore, has merely proceeded on the basis that the appellant had entered into the contract with his eyes wide open, but, the same would not, in our opinion, mean that they were bound to pay the contract amount, get its security amount forfeited, as also pay interest at the rate of 24 per cent, although it could not, by reason of acts of omission and commission on the part of the respondents, carry out the mining operation as per the terms of the agreement." 18.. The ratio of the aforesaid judgments is clearly applicable to the facts of these cases. The question is not merely of performance and non-performance of contractual obligations effecting the civil/ contractual rights of the parties. The issue being liability to pay tax, which is statutory exaction and not the breach of the contract alone, therefore, the writ court cannot shut its eyes and refuse to interfere only on the ground that the question raised is one of enforcement of contractual obligation particularly when the enforcement of contractual obligation involve rights and liabilities of the parties under statutory provisions. The writ court under suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be against Government of any account whatsoever, if delivery is effected to wrong person reporting to give his authority." 21.. Based upon the aforesaid contractual provision, it is stated that the sale being only a local sale, the petitioners are liable to pay local sales tax as applicable in the State of Jammu and Kashmir. Learned counsel appearing for the respondents also referred to the definition of "sale" as provided under the Jammu and Kashmir General Sales Tax Act, 1962. Explanation 2(a) of the General Sales Tax Act is reproduced as under: "Explanation 2(a). The sale of goods shall be deemed, for the purposes of this Act, to have taken place in the State, wherever the contract of sale might have been made, if the goods are within the State: (i) in case of specific or ascertained goods, at the time the contract of sale is made; and (ii) in the case of unascertained or future goods, at the time of their appropriation to the contract of sale by the seller, whether the assent of other party is prior or subsequent to such appropriation." 22.. In view of the explanation to the definition of "sale" as contained in the aforesaid Act, if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e concludes. It follows as a necessary corollary of these principles that a movement of goods which takes place independently of a contract of sale would not fall within the meaning of inter-State sale. In other words, if there is no contract of sale preceding the movement of goods, obviously the movement cannot be attributed to the contract of sale. Similarly, if the transaction of sale stands completed within the State and the movement of goods takes place thereafter, it would obviously be independently of the contract of sale and necessarily by or on behalf of the purchaser alone and, therefore, the transaction would not be having an interState element. Precedents are legion; we may briefly refer to some of them. In English Electric Co. of India Limited v. Deputy Commercial Tax Officer [1976] 38 STC 475 (SC); (1976) 4 SCC 460, this Court held that when the movement of the goods from one State to another is an incident of the contract it is a sale in the course of inter-State sale and it does not matter which is the State in which the property passes. What is decisive is whether the sale is one which occasions the movement of the goods from one State to another. In Union of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... down the definition of inter-State sale, which is within the exclusive jurisdiction of the Parliament of India under entry No. 92-A which falls in the List I, i.e., of Union List and the State Legislature cannot enact a law to make provision for interState sale or change its definition. He has further submitted that even if there is conflict between a law enacted by the Parliament and the one by the State Legislature, it is the law which is made by the Parliament, that will operate. Reference is made to case Chaman Lal v. State of Jammu and Kashmir reported in 1987 KLJ 609. He has further submitted that by legal fiction, neither the definition of interState sale can be changed nor situs of the sale changed. According to Mr. Dutt, learned counsel for the petitioners, if any provision of law contravenes the law made by the parliament which has otherwise supremacy over the field, such a provision is to be "read down". He has referred to 20th Century Finance Co-operative Ltd. v. State of Maharashtra [2000] 119 STC 182 (SC), wherein it has been held that: "While examining the power of the State Legislature under entry 54 of List II in earlier part of this judgment, we hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ace where agreement of such transfer of the right is made and therefore it widens the scope of the definition of 'sale' so as to include deemed sales (i) which are in the course of inter-State trade and commerce and (ii) sales outside the State of Maharashtra and (iii) sales which occasioned import of goods into India. Section 3 of the Maharashtra Act provides incidence of tax. It lays down that subject to the provisions contained in the Act and Rules, tax shall be leviable on the turnover of sales and therefore turnover necessarily has to include outside sale and sale in the course of inter-State trade and commerce and sales which occasioned import of goods. Although section 8-A of the Act (as referred to in written notes), provides that nothing in this Act would be deemed to impose or authorise imposition of any tax on a sale outside the State or in the course of the import or export or inter-State trade or commerce but the Explanation has not been amended accordingly. There is a provision for exemption of turnover related to goods in respect of which tax has already been paid under the Bombay Sales Tax Act, 1959 but there is no provision that such exemption would be ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he State, and the State is empowered to levy tax on such transaction of deemed sale, if the goods are located within the State. Further, in section 3A, the rates of tax has not been specially prescribed. Following what we have stated earlier, we hold that the Explanation 3(a) to section 2(n) of the Act is in excess of power under entry 54 of List II of the Seventh Schedule so far as it relates to the transactions of transfer of right to use any goods are concerned. Since the said Explanation is in the general provisions of the Act, we direct that Explanation 3(a) to section 2(n) of the Act shall be read down to this effect that it would not be applicable to the transactions of transfer of right to use any goods if such transaction of deemed sale is (i) an outside sale; (ii) the sale which occasioned the import of goods into India; and (iii) an inter-State sale. ................................ Rajasthan: The Rajasthan Sales Tax Act, 1994, levies tax on transfer of a right to use any goods. Section 2(23) defines 'lease' which is being reproduced below: 'lease' means any agreement or arrangement whereby the right to use any goods for any purpose is transferred by o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... movement in order that the sale may be deemed to have occasioned such movement. 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 will be enough if the movement is in pursuance of and incidental to the contract of sale." 27.. In Commissioner of Sales Tax, U.P. v. Bakhtawar Lal Kailash Chand Arhti [1992] 87 STC 196; AIR 1992 SC 1952, the apex Court held as under: "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 is it 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 movement of goods would be unconnected with and independent of the sale/purchase. It would not fall under section 3(a). To fall thereunder, the sale and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ament, the State Legislature would be required to exercise its legislative power in conformity with such law. Thus, what we have stated above, are the limitations on the powers of the State Legislatures on levy of sales tax on deemed sales envisaged under sub-clause (d) of clause (29-A) of article 366 of the Constitution." 30.. Mr. Dutt has further submitted that as far the transaction of sale is concerned, it has nothing to do with the situs of the sale. What is relevant, is the sale which occasioned movement of goods from one State to another notwithstanding the property in the goods passes in one State or the other. Reference is made to case Oil India Limited v. Superintendent of Taxes reported in [1975] 35 STC 445, wherein the apex Court held as under: "No matter in which State the property in the goods passes, a sale which occasions 'movement of goods from one State to another is a sale in the course of inter-State trade'. The inter-State movement must be the result of a covenant, express or implied, in the contract of sale or an incident of the contract. It is not necessary that the sale must precede the inter-State movement in order that the sale may be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of India to contend that it is the Parliament alone which is competent to enact law relating to inter-State sale and provide for tax on such sale and it is the law made by the Parliament which operates and not the law made by the State Legislature. Reference is made to Modern Automobiles v. Union of India reported in [1984] 56 STC 85 (Delhi), wherein the Delhi High Court held as under: "..........right to claim exemption is created by the Act and Rules. The special or general conditions of contract must act in furtherance of and not contrary to the statutory provisions. Amendment to clause (10) in the special conditions to the effect that sales tax declaration forms will not be accepted is directly in breach of rule 7(1) also. Direction to pay sales tax in the said amendment is contrary to sections 4 and 5 of the Act. The validity of this amendment has been separately challenged by the petitioners and they are entitled to do so. Once it is held that the said amendment to clause (10) is contrary to sections 4 and 5 of the Act and rule 7(1) of the Rules, and therefore, void, it is obvious that no such term can be incorporated in a contract with the purchasing dealers. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termine the exigibility of the tax. However, in order to determine whether sale is an interState sale, test laid down by the apex Court in the case of State of Andhra Pradesh v. National Thermal Power Corporation Ltd. reported in [2002] 127 STC 280 (SC); (2002) 5 SCC 203, must be satisfied. If these tests are applied, the condition No. 1 that there must be contract of sale incorporating the stipulation express or implied regarding the inter-State movement of the goods, is not satisfied from the facts of the present cases. There is no express stipulation regarding the interState movement of the goods rather such a stipulation contained in condition No. 9.2 of the general terms and conditions of contract has been excluded from the contract in express terms by incorporating a note in special terms and conditions. The document to evidence the transfer of the goods, if any also does not indicate that the seller is a party to the transfer of title in goods meant for movement outside the State. Therefore, there is also no implied condition to this effect. It is, however, a fact that there has been movement of the goods from the State of Jammu and Kashmir to outside the State, which fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply depending upon the type of goods sold. Therefore, rates of tax to be charged under General Sales Tax Act, will be as provided under different notifications issued by the Government prescribing a particular rate of tax for the a particular kind of goods. As far the question of exemption from payment of tax is concerned, Notification S.R.O. 40 dated March 8, 1995 grants exemption from payment of general sales tax under section 5 of the said Act in respect to goods sold by the dealer in the Districts of Leh and Kargil, subject to conditions stipulated therein. Relevant extract from the said S.R.O. is reproduced as under: "S.R.O. 40.--In exercise of the powers conferred by section 5 of the Jammu and Kashmir General Sales Tax Act, 1962 (XX of 1962), the Government hereby exempts from payment of tax all the goods sold, by the dealers in the Districts of Leh and Kargil subject to the following conditions: (a) The dealer shall obtain exemption licence in the prescribed form on payment of Rs. 30 from the assessing authority within a period of six months from the date of issue of this notification. (b) A consignment of goods imported from any place in the State outside the Distri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he dealers in the Districts of Leh and Kargil which is exempted, subject to conditions which, inter alia, include: procuring exemption licence in the prescribed form and the import of goods in the Districts of Leh and Kargil for resale, etc. None of these conditions is applicable in the present cases. At the first place, the sale has not been made in the Districts of Leh and Kargil. The sale was made at Delhi, though the goods were lying in the State of Jammu and Kashmir and the sale is not by the dealer in the State of Jammu and Kashmir or by the branch offices of the dealers located outside the region of Ladakh. It is nobody's case that the petitioners had obtained exemption licence from the competent assessing authority as prescribed under the aforesaid S.R.O./notification. Therefore, the conditions and justifications provided under the aforesaid S.R.O. being not satisfied and attracted, this S.R.O. has no application to the present cases and such of the petitioners who have lifted the goods from the Ladakh region are not entitled to the benefit of exemption either under the General Sales Tax Act or under section 8(2-A) of the Central Sales Tax Act. 39.. In view of the deta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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