TMI Blog2005 (2) TMI 796X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 locations/places indicated in the NIT as also the purchase orders. There is also no dispute regardin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese 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 sales will be charged on the entire sales under this tender, clause 9.2 of general terms and conditions is not applicable. General terms and conditions of tender: 4.. Quality and quantity 4.1. The goods will be sold on 'as is where is&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 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 lying/the lot quoted for employing their own labour and transport their own cost from the area within time stipulated in the special terms and conditions of tender or within such time as may be prescribed in the delivery order. The buyer(s) shall lift the material on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der 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 out of this sale shall be final in regard to all matters relating to contract. 14.9. All kinds of legal proceedings in any matter arising out of the contract shall be triable only by appropriate civil courts at New Delhi. Declaration by the tenderer 1.. I/We have fully understood the above general terms and conditions of tender as well as the spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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/site/space as may be earmarked by the stock holder from time to time which should be final and binding on them and they shall observe the rule and regulations and working hours as may be fixed by the stock holder. The successful tenderer shall remove the lot only after fulfilling the terms and conditions of tender including payments and on issue of delivery order by the competent authority. Amended special terms and conditions: Earnest money deposit (EMD) The tender should be accompanied by EMD at 20 per cent of the total net sale value or each lot quoted by way of demand draft/pay order on any nationalised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 part arises, shall have the jurisdiction to entertain a petition under article 226 of the Constitution of India. The question arises whether any cause of action has accrued within the territorial jurisdiction of Jammu and Kashmir State in respect to transaction as to sale of stocks admittedly lying within the territory of Jammu and Kashmir State. It may be useful to notice certain provisions of the Sale of Goods Act, 1930, which reads as under: Section 4. Sale and agreement to sell. (1) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 or tender of delivery may be treated as ineffectual unless made at a reasonable hour. What is a reasonable hour is a question of fact. (5) Unless otherwise agreed, the expenses of and incidental to putting the goods into a deliverable state shall be borne by the seller. 10.. The transaction in respect to sale, i.e., inviting offers, acceptance of offer and issuance of sale order including payment of consideration, all these components of contract were settled at Delhi and there is no dispute on this count amongst the parties. There is also no dispute that the stocks lying in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner 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 the court. Therefore, in determining the objection of lack of territorial jurisdiction the court must take all the facts pleaded in support of the cause of action into consideration albeit without embarking upon an enquiry as to the correctness or otherwise of the said facts. In other words, the question whether a High Court has territorial jurisdiction to entertain a writ petition must be answered on the basis of the averments made in the petition, the truth or otherwise whereof being immaterial. To put it differently, the question of territorial jurisdiction mus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 pay tax in the manner demanded under the contract. The apex Court in Verigamto Naveen v. Government of A.P. reported in (2001) 8 SCC 344, held as under: On the question that the relief as sought for and granted by the High Court arises purely in the contractual field and, therefore, the High Court ought not to have exercised its power under article 226 of the Constitution placed very heavy reliance on the decision of the Andhra Pradesh High Court in Y.S. Raja Reddy v. A.P. Mining Corporation Limited (1988) 2 ALT 722, and the decisions of this High Court in Har Shankar v. Deputy Excise and Taxation Commissioner (1975) 1 SCC 737, Radhakrishna Agarwal v. State of Bihar (1977) 3 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 regulations when the connected additional load was reduced the minimum guarantee charges could not have been levied as if the appellant was a new consumer and alternatively, it was submitted that if regulation 17(ii) is pressed into service for sustaining the recovery, the said regulation was ultra vires article 14 of the Constitution. The High Court in the impugned judgment without addressing itself to these vital questions has observed that the appellant may seek the remedy by way of arbitration before a person nominated by the Chairman of the Electricity Board. In our view, the main contentions canvassed by the learned counsel for the appellant before the High Court were required to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent 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.. The court does not sit as a court of appeal but merely reviews the manner in which the decision was made. 3.. The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted, it will be substituting its own decision, without the necessary expertise which itself may be fallible. 4.. The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made quali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce 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 such circumstances, cannot deny a party of its right to have the issue decided by a writ court. The writ petitions are thus maintainable under the present set of circumstances. 19.. Now coming to the principal question for which the parties have addressed lengthy and detailed arguments: whether the sale in question is inter-State sale attracting the provision of the Central Sales Tax Act for the purpose of determining the tax liability or the sale is pure and simple a local sale and the provisions of Local Sales Tax Act, i.e., General Sales Tax Act, 1962 as applicable to the State of Jammu and Kashmir will apply to determine the tax liability? 20.. I have noticed certain c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the goods are within the State, it shall be deemed to be a sale within the State of Jammu and Kashmir irrespective of the contract of sales being made in any other State. It has been urged on behalf of the respondents that the definition of sale under the local Act and the clear stipulation in the contract making it local sale, tax to be paid is under the local Sales Tax Act. It is stated that the petitioners are not entitled to the benefit of concessional rate of tax as provided under section 3 of the Central Sales Tax Act, which is applicable only on inter-State sales. Mr. Shali learned counsel for the respondents has further stated that there is no stipulation in the contract of sale allowing the petitioners to transport the good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia 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 v. K.G. Khosla and Co. Ltd. [1979] 43 STC 457 (SC); (1979) 2 SCC 242, it was observed that a sale would be an inter-State sale even if the contract of sale does not itself provide for the movement of goods from one State to another provided, however, that such movement was the result of a covenant in the contract of sale or was an incident of the contract. Similar view was expressed in Sahney Steel and Press Works Limited v. Commercial Tax Officer [1985] 60 STC 301 (SC); (1984) 4 SCC 173. In manganese Ore (India) Ltd. v. Regional Assistant Commissioner of Sales Tax [1976] 37 STC 489 (SC); (1976) 4 SCC 124, after referring to Balabhagas Hulaschand v. State of Orissa [1976] 37 STC 207 (SC); (1976) 2 SCC 44, it was observed that so far as section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 have noticed that the situs of the sale or purchase is wholly material as regards the inter-State trade or commerce, as held in Bengal Immunity Co. Ltd.'s case [1955] 6 STC 446 (SC); [1955] 2 SCR 603. Further, the State Legislature cannot by law treat sales outside the State and sales in the course of import as 'sales within the State' by fixing the situs of sales within its State in the definition of sale , as it is within the exclusive domain of the appropriate Legislature, i.e., Parliament, to fix the location of sale by creating legal fiction or otherwise. It may be noted that the transactions contemplated under subclauses (a) to (f) of clause (29A) of article 366 are not actual sales within the meaning of 'sale' but are deemed sales by legal f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 available in case of goods which have suffered sales tax under the other sales tax laws. We therefore, of the view that since the explanation has not been amended in conformity with section 8-A of the Act, the Explanation to section 2(10) of the Maharashtra Act transgresses the limits of legislative power conferred on the State Legislature under entry 54 of List II and we, thus, instead of striking it down, direct that the Explanation to section 2(10) 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 deemed sale is (i) an outside sale, (ii) sale in the course of the import of the goods into or export of the goods out of the territory of India and (iii) an inter-State sale. ... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 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 one person to another whether or not for a specified period for cash, deferred payment or other valuable consideration without the transfer of ownership, and includes a sub-lease but does not include any transfer on hire-purchase or any system of payment by instalments. 25.. While referring to the provision of section 3 of the Central Sales Tax Act and the powers of the State Legislature, it is stated that the Jammu and Kashmir State Legislature has similar powers to impose the tax on sales as are available to the Legislatures of other States in India. He has relied upon judgment in case titled Khazan Chand v. State of Jammu and Kashmir reported in [1984] 56 STC 214 (SC); AIR 1984 SC 762, wherein it has been held as under: Thus, under the constitutional provisions applicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement 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 the movement of the goods must be parts of the same transaction. 28.. In Union of India v. K.G. Khosla and Co. Ltd. reported in [1979] 43 STC 457 (SC); AIR 1979 SC 1160; (1979) 2 SCC 242, the apex Court held as under: ...........In order that the sale may be regarded as an inter-State sale, it is immaterial whether the property in the goods passes in one State or another. The question as regards the nature of the sale, that is, whether it is an inter-State sale or an intra-State sale, does not depend upon the circumstances as to in which State the property in the goods passes. It may pass in either State and yet the sale can be an inter-State sale. 29.. In 20th Century Finance Corpn. Ltd. v. State of Maharashtra reported in [2000] 119 STC 182 (SC); AIR 2000 SC 2436, the Constitution Bench while deali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 would be enough if the movement was in pursuance of an incidental to the contract of sale. 31.. Reference is also made to case Onkarlal Nandlal v. State of Rajasthan reported in [1985] 60 STC 314, wherein the apex Court held as under: Even an inter-State sale must have a situs and the situs may be in one State or another. It does not involve any contradiction in saying that an inter-State sale or purchase is inside a State or outside it. The situs of the sale may fall for consideration from more than one point of view. It may require to be considered for the purpose of deter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 is no answer to say that the purchasing dealers has agreed to the incorporation of an illegal term of a contract... 33.. There seems to be no dispute as regard the proposition of law laid down in the aforesaid judgment is concerned. However, to apply the ratio of the aforesaid judgment, it must be established that any condition contained in the contract, is in contravention to any statutory provision and thus falls within the mischief of section 23 of the Contract Act. The petitioners have to show that the stipulation asking the buyers to pay the local tax contravenes the statutory provision. It will depend upon the finding, whether the sale in question is governed by the Central Sales Tax Act or the General Sales Tax Act. The validity of the clause in the contract will depend upon such findings and will be dealt with accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsfer 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 is evident from the averments contained in the writ petitions and the deposit of the tax by the petitioners under the interim orders of the court while seeking permission to remove the goods outside the State. Third condition as laid down by the apex Court that there must be movement of the goods from one State to another State where the sale concludes, is also not satisfied. In the present cases, contract of sale was executed at Delhi and transaction of the sale is concluded at the time of delivery of goods in the State of Jammu and Kashmir. The tenders were accepted, money was deposited and as per the clear stipulation of the NIT, the goods were to be delivered in the State of Jammu and Kashmir. The sale letters placed on record also show that the transaction was completed except the delivery of goods in the State of Jammu and Kashmir. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Districts of Leh (Ladakh) and Kargil by or on behalf of any dealer and intended to be imported into the said districts shall be accompanied by the documents prescribed under section 15-A of the said Act till it is delivered at its destination and the person-incharge of the consignment including the driver of the vehicle in which it is under transport shall produce it for inspection and verification to the assessing authority or any other person authorised by the Commissioner of Sales Tax in this behalf. (c) to (g) . (h) A dealer who has his head office locate outside the region of Ladakh and operates a branch in the region of Ladakh, shall conspicuously display the branch registration certificate in the business premises. (i) Where any dealer located outside the region of Ladakh claim that he is not liable to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X
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