TMI Blog1996 (4) TMI 523X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose of our opinion on these two questions we note that the principal arguments were addressed by the parties in Taxation Case No. 245 of 1981. 3. The assessees in all these cases, however, deal in hard coke and their business premises are within the State of Bihar. They are registered dealers. Sales of hard coke have been made to various purchasers who hail from outside the State of Bihar and these sales have been effected at the business premises of the assessees. The purchases had been made by the representatives/employees of the purchasers who had come to the business premises of the assessees. They purchased the goods and made payment of the price in cash for which they were granted cash memos. The purchasers brought their trucks and registered number of those trucks were duly noted in the cash memos. After the purchasers had loaded the goods on their respective trucks, they were given permits in Form XXVIII-B prescribed under rule 31 of the Bihar Sales Tax Rules, 1959 framed under the Act. The goods were thus transported accompanied by those road permits and cash memos. The trucks crossed various check posts including the last check posts on the border of State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vernment under sub-section (2) may, for the purpose of satisfying himself that the provisions of sub-section (2) are not being contravened, and subject to such restriction as may be prescribed, intercept, detain and search any road vehicle or river craft which may be suspected of being used for contravening such provisions. 42. Restrictions on movement.- (1) No person shall transport from any railway station, steamer station, airport, post office or any other place whether of similar nature or otherwise notified in this behalf by the State Government, any consignment of such goods, exceeding such quantity, as may be specified in the notification, except in accordance with such conditions as may be prescribed and such conditions shall be made with a view to ensuring that there is no evasion of tax payable under this Act. (2) Any authority or officer who may be authorised by the State Government in this behalf, may, for the purpose of verifying whether any goods are being transported in contravention of the provisions of sub-section (1) and subject to such restrictions as may be prescribed, intercept, detain and search any road vehicle or river craft or any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clare that the above statements are correct and complete to the best of my/our knowledge and belief. Signature of dealer/declared Manager. Date 10. Section 3 and Section 8(2-A), in relevant part, of the C.S.T Act run thus:- 3. When is a sale or purchase of goods said to take place in the course of inter-State trade or commerce.-A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase- (a) occasions the movement of goods from one State to another; or (b) is effected by a transfer of documents of title to the goods during their movement from one State to another. Explanation 1.-Where goods are delivered to a carrier or other bailee for transmission, the movement of the goods shall, for the purpose of cl. (b), be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee. Explanation 2.-Where the movement of goods commences and terminates in the same State it shall not be deemed to be a movement of goods from one State to another by reason merely of the fact that, in the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one the dealer could sell. The dealers had to place indents, pay the price of goods to be purchased and obtain delivery orders from the Bombay office of the assessee. In pursuance of the delivery orders the trucks etc. were delivered in Bihar to be taken to the territories assigned to them for sale there. If the dealers failed to abide by the term requiring them to move the goods outside the State of Bihar they would have committed breach of their contracts. The question was whether the turnover relating to the sales made by the assessee to its dealers for sale by them in their respective territories outside the State of Bihar was exempt from liability to pay sales tax under the Bihar Sales Tax Act, on the ground that the sales took place in the course of inter-State trade or commerce. It was held that where under the terms of a contract of sale, the buyer is required, as a necessary incident of the contract, to remove the goods from the State in which he purchased the goods to another State and when the goods are so removed, the sale must be considered as a sale in the course of inter-State trade or commerce, in the Tata Engineering Locomotive Co. case the ratio was that under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the sale/purchase it amounted to an inter-State sale/purchase. The Court also held that it was not also necessary that the contract of sale must expressly provide for movement of goods and that it was sufficient if the movement of goods was implicit in the sale. 14. It will be seen that in the Tata Engineering and Locomotive Co.'s and in Co-operative Sugar (Chittur)'s cases the contract or the statutory order provided for movement of goods from one State to another. In Co-operative Sugar (Chittur) Ltd.'s case, the Supreme Court referred to the following observations from its earlier case in Commissioner of Sales Tax, U.P v. Bakhawar Lal Kailash Chand (87 STC 196) as under:- According to clause (a) of S. 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 errect-the cause being the sale/purchase and the effect being the movement of the goods to another State It is immaterial whether a completed sale precedes the movement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erce if there was movement of goods in pursuance to covenant and that movement of goods as such could not be integral part of the sale to say that sale had taken place in the course of inter-State trade or commerce. Mr. Salve said that in the present case the assessee had nothing to do with the movement of goods. A sale for all intent and purposes had been concluded and goods delivered to the buyer at the premises of the seller in the State. It was for the buyer to take out the goods outside the State by making his own arrangements for transportation of goods, but the seller was in no way concerned with it and had in fact washed off his hands after taking the price and delivery of the goods to the buyer at the premises of the seller. His further submission was that issue of Form XXVIII-B did not in any way change the position in law on the facts of the case inasmuch as Form XXVIII-B was no part of the C.S.T Act or any rules framed thereunder. This form was issued under sections 41 and 42 of the local Sales Tax Act and it was purely on account of anti-evasion measure under that law. Issue of Form XXVIII-B did not change the nature of the sale which was intra-State. Mr. Salve said th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . After having purchased the goods he then books the goods from State X to State Y in his own name. This is also a case where the sale is purely an internal sale having taken place in State X and the movement of goods is not occasioned by the sale but takes place after the property is purchased by B and becomes his property. 16. Another decision of the Supreme Court may also be noticed, it is Union of India v. K.G Khosla and Co. Ltd. (A.I.R 1979 S.C 1160). In this case the company was having its head office in Delhi and its factory at Faridabad in the State of Haryana. The company contended that except for manufacturing of goods at Faridabad factory, all its activities including those of booking of orders, sales, despatching of goods, billing and receiving of sale price were being done by and through the head office in Delhi and that no sales were effected by or from its factory. The Court found that the goods were manufactured by the company in its factory at Faridabad in pursuance of specific orders received by its head office at Delhi, contracts of sale were made at Delhi and in pursuance of those contracts, goods were manufactured at Faridabad according to specificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the production schedule and requirements of customers in different States. The stocks available in the stockyards were distributed from time to time to dealers. The transfer of the vehicles from the factory to the various stockyards was a continuous process and was not related to the requirement of any particular customer. It was the stockyard in charge who appropriated the required number of vehicles to the contract of sale out of the vehicles to any purchaser or to transfer the vehicles from the stockyard in one State to a stockyard in another State. The Court held in the case that it was not possible to comprehend how in that situation it could be held that the movement of vehicles from the works to the stockyards was occasioned by any covenant or incident of the contract of sale . In that case the Court after referring to certain decisions observed that the principle admits of no doubt, according to the decisions of this court, that the movement of goods must be the result of a covenant or incident of the contract of sale . The court contrasted this decision with another decision of the same company (A.I.R 1971 S.C 477) which we have referred to above. Thus, the question whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale in the present case, whether it is the Bihar Sales Tax Act, 1959 or the Central Sales Act. This could not be decided merely on the basis of Form XXVIII-B on a plea that the assessee would be estopped from contending that it was inter-State sale when, in fact, it was intra-State one on his own showing by issuing the form. In support of this submission of his Mr. Salve referred to two decisions of the Supreme Court in Dunlop India Ltd. v. Union of India (A.I.R 1977 S.C 597) and Basheshwar Nath v. Income Tax Commissioner (A.I.R 1959 S.C 149). Mr. Salve also said that by issuing Form XXVIII-B no particular advantage could be said to have been gained by the assessee. 19. On the second question about the applicability of section 8(2-A) of the C.S.T Act we may quote the following passages from the statement of case as formulated by the Tribunal:- 9. After holding the sales in question to be inter-State sales, the Tribunal considered the question regarding non-liability of the assessees for payment of sales tax. These assessees are duly registered as Small Scale Industrial Units in the Industries Department of the Government of Bihar as also under the appropriate se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7, 71/77 are disposed by its order dated 12.5.78 (Annexure G) and revision case nos. 104-105/78 by its order dated 30.6.78 (Annexure H) in terms of the decision dated 5.5.78 (Annexure F.) 20. In Commissioner of Sales Tax, Jammu Kashmir v. Pine Chemical Ltd. (96 STC 365-SC), the Supreme Court held that exemption from Central Sales Tax under section 8(2-A) of the C.S.T Act of the sale or purchase of goods was available only where the sale or purchase of such goods was exempt generally under the State sales tax law. The Court must give due regard and attach due meaning to the expression generally in section 8(2-A) which expression has been defined in the Explanation thereto. The Court said that section 8(2-A) required specifically that such exemption must be a general exemption and not an exemption operative in specified circumstances or under specified conditions and general exemption meant that the goods were totally exempt from tax and that where exemption from taxation was conferred by conditions or in certain circumstances there was no exemption from tax generally. This decision of the Supreme Court was followed in a subsequent decision of the Court in Hindustan P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee which pointed to the sale being in course of inter-State trade. He said that movement of goods were implicit in the contract of sale which was signified by Form XXVIII-B. He said that it was unnecessary to contend that Form XXVIII-B was not necessary. It may or may not be relevant, but in any case, it evidenced a link in the buyer and the seller for the movement of goods from the State of Bihar to another State. He, however, admitted that Form XXVIII-B was necessary for passing the goods inside the State of Bihar. Learned Advocate General said that it was enough if it was shown that there was mutual understanding between the parties that goods had to move outside the State in pursuance of the agreement between them. In support of his submission, reference was also made to the decisions of the Supreme Court in the Co-operative Sugar (Chittur) Ltd., K.G Khosla and Company Ltd. and Tata Engineering and Locomotive Company cases, which we have discussed above, and Sahney Steel Press Works Ltd. v. Commercial Tax Officer (A.I.R 1985 S.C 1754). In this case the appellant company was having its registered office and (factory at Hyderabad with branches in various States. The r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture of the goods at Hyderabad factory and the movement thereafter from Hyderabad to the branch office outside the State was an incident of the contract entered into with the buyer, for it was intended that the same goods shall be delivered by the branch office to the buyer. The Court said that the commercial tax officer was right in holding that the sale transactions were inter-State sales inasmuch as they satisfied the terms of clause (a) of section 3 of the C.S.T Act. 24. We may now refer to certain decisions of this Court which have been relied upon by the learned Advocate General. In Shankerjee Raut Gopalji Raut v. State Of Bihar Opposite Party. (22 STC 241 : 1968 PLJR 241-Patna), a Full Bench of this Court, the question was whether on the facts and in the circumstances of the case sales made to Nepal territory could be treated as sales in the course of export of goods out of the territory of India and as such exempt from levy of any sales tax. The answer was that there was no obligation to export either under the contract or in pursuance of a mutual understanding or agreement between the parties and sales could not, therefore, be exempt from sales tax. In Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... videnced from Form XXVIII-B that the movement of the goods had to be from the State of Bihar to outside the State. He said that it was immaterial if the sale was complete within the State of Bihar, but then the parties knew that the goods were meant for a place outside the State of Bihar and in pursuance thereto there was movement of goods and Form XXVIII-B evidenced that to facilitate the movement. 26. Under sub-section (2) of section 4 of the C.S.T Act, a sale or purchase of goods shall be deemed to take place inside the State if the goods are within the State- (a) in the case of specific or ascertained goods, at the time of the contract of sale is made; and (b) in the case of unascertained or future goods, at the time of their appropriation to the contract of sale by the seller or by the buyer, whether assent of the other party is prior or subsequent to such appropriation. Explanation.-Where there is a single contract of sale or purchase of goods situated at more places than one, the provisions of this sub-section shall apply as if there were separate contract in respect of the goods at each of such places. 27. Learned Advocate Genera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed before us is if the movement of goods is an incident of sale or contract of sale. No doubt, there has been sale and the goods sold have reached outside the State, but then the basic element to make it inter-State sale is missing and this movement of goods is not an incident of sale or contract of sale. Form XXVIII-B prescribed under a rule under the State Act is meant for a different purpose altogether, it is issued under the local State Act for transporting the goods beyond the check posts in the State and not for transporting them across the border of State. Issue of Form XXVIII-B, to our mind, cannot be a determining factor. It is not relevant and to take this into account would be an extraneous circumstance. It is undisputed that the buyers outside the State purchased the goods, paid the price, took delivery at the business premises of the assessee and transported the goods themselves in the trucks engaged by them. It is quite apparent that sale was complete within the State of Bihar. To take out the goods outside the State it was not necessary for the assessee to issue Form XXVIII-B. Perhaps, best that could be said would be that it facilitated the movement of the goods in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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