JUDGMENT
B.K. Lala, Judicial Member
1. This is an application under Section 8 of the West Bengal Taxation Tribunal Act, 1987 praying for a declaration that the goods moved from West Bengal to other States in terms of agreement/contract in between the parties and the sales occasioned thereby inter-State sales within the meaning of Section 3(a) of the Central Sales Tax Act, 1956 and that the order of rejection of the revisional application by Board was illegal.
2. The petitioner is a Government of India undertaking– a company within the meaning of the Companies Act having its place of business in Calcutta, registered under the Bengal Finance (Sales Tax) Act, 1941 and also under the Central Sales Tax Act, 1956. Importing newsprints from overseas, the petitioner is distributing it to the different publishers of different States, according to allotment made by the Registrar of Newspapers for India, Ministry of Information and Broadcasting. In the year 1992-93 the petitioner imported newsprints and sold to different buyers/allottees of different States in terms of the allotment orders issued by the Registrar of Newspapers for India, Ministry of Information and Broadcasting for printing newspapers. The petitioner therefore, claimed deduction for Rs. 10,15,52,986 from gross turnover under Section 5(2)(a)(v) of the Bengal Finance (Sales Tax) Act, 1941 specifying those are as inter-State sale. The respondent No. 1 rejected the claim and levied tax under the Bengal Finance (Sales Tax) Act, 1941 simply on the ground that delivery of goods was made in West Bengal. The respondent No. 1 also levied turnover tax ignoring the provisions of Section 6B(2)(f) of the said Act, 1941.
3. An appeal thereafter was preferred against the order of the respondent No. 1 before the respondent No. 2 who held that the goods did not move from West Bengal to outside West Bengal and disallowed the claim.
4. Against the findings of the respondent No. 1 revision was preferred before the West Bengal Commercial Taxes Appellate and Revisional Board on the 31st January, 1995. On hearing the petitioner, the revisional application was dismissed on the ground that there was no movement as required under law, in pursuance of a contract/agreement in between the petitioner and actual users. The said order passed by the Board is not warranted in law. It is arbitrary and in contravention of the provisions of Section 3(a) of the Central Sales Tax Act, 1956 which is liable to be quashed.
5. The only point for consideration, therefore, is if the sale in question occasioned movement of the goods from one State to another within the meaning of Section 3 of the Central Sales Tax Act, 1956 and is an inter-State sale.
6. It is undisputed that the petitioner is a canalising agent of Government of India and importing newsprint from overseas and distributing to the publishers of different States as per the allocation orders of the Registrar of Newspapers for India. Thus, the actual users of different States are getting the newsprints from the petitioner according to their allotment made by the Registrar of Newspapers for India. Such transfer of goods can only be deemed to be inter-State sale under Section 3 of the Central Sales Tax Act, 1956 provided the conditions, which read as follows, for accepting a sale or purchase, are satisfied.
“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.”
7. “Sale” is defined in Section 2(g) of the Act meaning any transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable consideration, and includes a transfer of goods on the hire-purchase or other system of payment by instalments, but does not include a mortgage or hypothecation of or a charge or pledge on goods. Thus, according to the definition, a sale is transfer of property. It becomes taxable under Section 3(a), if movement of the goods from one State to another is under a covenant or incident of contract of sale. When the sale is effected by transfer of documents of title to the goods during their movement it attracts Section 3(b). The property, if passes before movement the sale will not come within the scope of the Section 3(b). In this case we are to deal only with the Section 3(a) of the Central Sales Tax Act, 1956.
8. The main object of a sale is the transfer of ownership from the seller to the buyer and it is often becomes important issue to decide the precise moment at which the change of ownership is effected. Express stipulations as to the time when the property is to pass are very rare. Delivery to the buyer is a strong evidence of intention to change the ownership but it is not conclusive. The intention of the parties has to be gathered from their conduct and other circumstances. A long train of judicial decisions has worked out more or less artificial series of rules for determining the presumed intention of the parties. Hence, in deciding the dispute arising in reference to the facts and circumstances of the instant case, a few judicial decisions on this point may be taken into consideration. In a case reported in [1963] 14 STC 175 [Cement Marketing Co. of India (Private) Ltd. v. State of Mysore], the fact of the case was that the petitioner had factories in different parts of India outside the State of Mysore. The head office was in Bombay and branch office in Bangalore and he was a registered dealer under the Mysore Sales Tax Act, 1948. The purchasers had to get authorisation in a standard form for supply of the cement from the factory, The order was accepted by the petitioner and instruction was given to Bombay office to supply cement, The delivery actually was made to the buyer within the State of Mysore. It was held that the sales were inter-State sales and exempt from sales tax because under the contract of sale there was transport of goods from outside the State of Mysore into the State of Mysore. Similarly, in a case reported in State Trading Corporation of India Ltd. v. State of Mysore [1963] 14 STC 188 it was held, “Although a contract of sale of cement did not itself contain any covenant that the supply had to be made from any particular factory, as the contract was subject to the terms of the permit which provided that the supply had to be made from one or other factory situated outside Mysore State, the contract must be deemed to have contained a covenant that the cement would be supplied in Mysore from a place situated outside its borders and a sale under such a contract would clearly be an inter-State sale as defined in Section 3(a) of the Central Sales Tax Act, 1956″, The decision was based on the fact that the cement at the relevant time could be purchased only under a permit issued by the Government and on the terms contained therein. All the sales were, therefore, made under the permits. The purchaser used to place order with the marketing company and later a firm contract with it was made. The written contract did not disclose any covenant that supply had to be made from any particular factory but such contract was subject to the terms of the permit and the sale, therefore, could only be under a permit on the terms contained therein. Since the permit provided the condition that the supply had to be made from the factory situate outside Mysore, the contract was therefore, deemed to have contained a covenant that the goods would be supplied in Mysore from a place situate outside its buyers.
9. In another case Union of India v. K.G. Khosla and Co. [1979] 43 STC 457 (SC), the respondent-company had its head office at Union territory and factory at Faridabad within Haryana State. Order is to be received at its office in Delhi. The goods used to be brought to the head office and despatched from the head office to various customers outside Delhi. Bills were sent from the head office and price is to be received there. The question therefore, arose as to whether the sales made at Faridabad were intra-State sales effected within territory of Delhi. The Supreme Court held that “if a contract of a sale contains a stipulation for the movement of the goods from one State to another, the sale would certainly be an inter-State sale. But for the purposes of Section 3(a) of the Act it is not necessary that the contract of sale must itself provide for and cause the movement of goods or that the movement of goods must be occasioned specifically in accordance with the terms of the contract of sale. A sale can 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 but such movement is the result of a covenant in the contract of sale or is an incident of that contract………….Although the contracts of sale did not require or provide that the goods should be moved from Faridabad to Delhi, the movement of the goods was occasioned from Faridabad to Delhi as a result or incident of the contracts of sale made in Delhi……….The question as regards the nature of the sale, i.e., whether it is an inter-State sale or an intra-State sale, does not depend upon the circumstance as to in which State the property in goods passes. It may pass in either State and yet the sale can be an inter-State sale”. (43 STC 457).
10. From the aforesaid decision, it is thus, clear that in order that a sale may be regarded as inter-State sale, it is immaterial whether the property in goods passes in one State or another. The question as regards the nature of the sale, i.e., whether it is an inter-State sale or an intra-State sale, does not depend upon the circumstance as to in which State the property in goods passes. It may pass in either State and yet the sale can be an inter-State sale.
11. In the present case, it is an undisputed fact that newsprints cannot be purchased from the open market. The policy of sale and distribution of newsprints is taken by the Registrar of Newspapers for India (RNI). On the basis of the requisitions placed by different or actual users, the Registrar of Newspapers for India issues order of allocation of newsprints with the direction to the State Trading Corporation for release of the newsprints to the actual buyers in terms of the allocation. The State Trading Corporation, i.e., the petitioner accordingly directs the actual users to take delivery of goods from the warehouse and transport those goods to their office situated outside Bengal. Thus the delivery of newsprint was made within West Bengal but transport was done outside West Bengal. A sale, as already pointed out, being by the definition, transfer of property, becomes taxable under Section 3(a) if the movement of goods from one State to another is under a covenant or incident of the contract of sale and the property in the goods passes to the purchaser otherwise than by transfer of documents of title when the goods are in movement from one State to another. In this case, it transpired from the facts that the allocation by the Registrar of Newspapers for India and the order of authorisation for delivery of newsprints formed the basis of the contract between buyer and the seller. The place of despatch of newsprints is also fixed by the Registrar of Newspapers for India leaving no option for the intending buyer to exercise its choice. In a case reported in [1960] 11 STC 655 (Tata Iron and Steel Co. Ltd. v. S.R. Sarkar), the apex Court also held explaining the nature of sales covered by the Clause (a) of Section 3 that the Section 3(a) covers sales “other than those included in Clause (b), in which the movement of goods from one place to another is the result of a covenant or incident of the contract of sale and property in the goods passes in either State”. It, thus, appears that the property of the goods even if passes in either State and the movement of goods from one State to another is the result of the covenant or incident of contract of sale, it will cover the Section 3(a) of the Central Sales Tax Act, 1956. In State Trading Corporation of India Limited v. State of Mysore [1963] 14 STC 188 (SC) already quoted above, same view was taken. The learned Members of the Board, therefore, were not justified to hold that the transaction in question since is not pursuant to any contract entered into between the petitioner and the purchaser and the petitioner also failed to produce any such agreement there was no reason to interfere with the judgments passed by the learned Assistant Commissioner, Commercial Taxes and Deputy Commissioner, Commercial Taxes. The judicial pronouncement made in this context by the apex Court has not properly considered by the learned Members of the Board. We, therefore, are of opinion that the transaction in question was inter-State sale since the sale occasioned movement of the goods from one State to another. The findings of the learned Members of the Board as well as Assistant Commissioner of Commercial Taxes and Deputy Commissioner, Commercial Taxes were based on misconception of law and are, therefore, liable to be set aside.
12. The instant application is thus, allowed. The impugned orders are thereby set aside. The respondents are directed not to take any steps for recovery of the assessed demand. The certificate proceeding under Certificate Case No. 21 ST(CD) of 1999-2000 is, accordingly set aside. No order as to costs.
A. Deb, Technical Member
13. I agree.