PETITIONER:
BALABHAGAS HULASCHAND
Vs.
RESPONDENT:
STATE OF ORISSA
DATE OF JUDGMENT09/12/1975
BENCH:
FAZALALI, SYED MURTAZA
BENCH:
FAZALALI, SYED MURTAZA
MATHEW, KUTTYIL KURIEN
CITATION:
1976 AIR 1016 1976 SCR (2) 939
1976 SCC (2) 44
CITATOR INFO :
D 1980 SC1468 (18)
RF 1981 SC 446 (6)
E&D 1985 SC1754 (10)
E&D 1992 SC1952 (12,13,15)
ACT:
Central Sales Tax Act, 1956-Ss. 2(g), 3, 4(2)(a) (b)-
"Sale"-Ambit of the definition "Sale".
Central Sales tax Act, 1956-Section 3 (a) read with s.
4 of the Sale of Goods Act, 1930-Agreement to sell is an
essential ingredient of sale.-
Central Sales Tax Act, 1956, s. 3(a)-Scope of s. 3(a)-
Occasions the "movement of goods from one State to another"-
Whether the agreement of sale occasions movement-Whether
agreement to sell was a forward contract or a contract in
respect of unascertainable or future goods does not make any
difference for the purposes of application of s. 3(a) of the
Act.
Interpretation of statutes-Whether s. 3(a) of the
Central Sales Tax Act is redundant and would apply to
contingencies which may not happen at all.
Central Sales Tax Act, 1956-Section 3(a) read with Art.
286(3) of the Constitution of India-Sale "in the course of
interstate trade or commerce"-Conditions to be satisfied
before a sale can be said to take place in the course of
interstate trade or commerce.
HEADNOTE:
The appellant, a firm dealing in buying and selling
jute with headquarters at Calcutta, used to purchase raw
jute grown in Orissa and despatch them in bags from Cuttack
and Dhanmandal Railway Station to the Railway Mills Siding
Station in Calcutta. The goods were booked in the name of
the buyer "KB & Co" through its licensed broker "EIJ & HE
Ltd." and on the arrival of the goods the buyer inspected
the goods and if they were found in accordance with the
specifications mentioned in the agreement of sale, accepted
them and paid their price. On the basis of these concluded
transactions of sale the respondent State, levied sales tax
under s. 3(a) of the Central Sales Tax Act on the basis that
the sales were interstate sales. Since the assessing
authorities negatived the contention of the appellant that
the sale was merely an internal sale which took place in the
State of West Bengal and since the Tribunal refused to make
a reference, the appellant moved the High Court under s.
24(3) of the Orissa Sales Tax Act to direct the Tribunal to
make a statement of the case to the High Court. The Tribunal
referred two points, viz., (i) Did the title to the goods
pass in Orissa or in West Bengal and (ii) Even if the title
in the goods passed in West Bengal, whether in the facts and
circumstances of this case, the transaction constituted
"sale in the course of inter-state trade" ? The High Court
held that although the title in the goods passed in West
Bengal and the sale took place there, since the sale
occasioned the movement of goods from Orissa to West Bengal
it was an inter-State sale, and, therefore, it was clearly
governed by s. 3(a) of the Central Sales Tax Act.
Affirming the judgment of the High Court and dismissing
the appeals by special leave, the Court,
^
HELD: (1) The definition of "sale" in s. 2(g) of the
Central Sales Tax Act postulates the following conditions.
(i) There must be a transfer of property in goods by one
person to another; (ii) The transfer must be for cash or for
deferred payment or for any other valuable consideration;
and (iii) That such a transfer includes a transfer of goods
on the hire purchase or other system of payment by
instalment etc. The word "sale" defined in cl. (g) of s. 2
and used in s. 3(a), 4(2) (a) and (b) is wide enough to
include not only a concluded contract of sale but also a
contract or agreement of sale provided the agreement of sale
stipulates that there was a transfer of property or movement
940
of goods. An agreement to sell by which the property did not
actually pass was also an element of sale. [944H, 945A, C,
G]
Bengal Immunity Co. Ltd. v. The State of Bihar and
others, [1955] 2 SCR 603, relied on.
Sales Tax Officer, Pilibhit v. Budh Prakash Jai
Prakash, 5 S.T.C. 193, 196, followed.
(2) When the statute uses the words "sale or purchase
of goods", it automatically attracts the definition of "sale
of goods" as given in s. 4 of the Sale of Goods Act, 1930,
and is to some extent pari materia to s. 3 of the Central
Sales Tax Act so far as the transactions of sale is
concerned. The inevitable conclusion that fellows from the
combined effect of the interpretation of s. 3 of the Central
Sales Tax Act and s. 4 of the Sale of Goods Act is that an
agreement to sell is also an essential ingredient of sale
provided it contains a stipulation of transfer of goods from
the seller to the buyer. [946E-F, 947A]
(3) Since the word "sale" appearing in s. 2(g) as also
in s. 3(a) of the Act includes an agreement to sell provided
the said agreement contains a stipulation regarding passing
of the property, if there is a movement of goods from one
State to another, not in pursuance of the sale itself, but
in pursuance of an agreement to sell, which later merges
into a sale, the movement of goods would be deemed to have
been occasioned by the sale itself wherever it takes place.
When the movement of goods start, they shed the character of
either unascertained goods or future goods. For the purpose
of application of s. 3(a) of the Central Sales Tax Act, the
question whether the contract is a forward contract or not
makes no material difference. [947B, C-D, 948F]
(4) A statutory provision cannot be interpreted in a
way which defeats the very object of the Act. It is equally
well settled that the Legislature does not waste words or
introduce useless or redundant provisions. The contention
that s. 3(a) of the Central Sales Tax Act was redundant or
would apply to contingencies which may not happen at all, is
not correct. [948D]
Indian Chamber of Commerce v. C.I.T., West Bengal II
Calcutta, 1976(1) SCR 830, applied.
(5) The following conditions must be satisfied before a
sale can be said to take place in the course of interstate
trade or commerce:
(i) that there is an agreement to sell which contains a
stipulation express or implied regarding the movement of the
goods from one State to another.
(ii) that in pursuance of the said contract the goods,
in fact, move from one State to another; and
(iii) that ultimately a concluded sale takes place in
the State where the goods are sent which must be different
from the State from which the goods move, because the tax is
on sale and not on an agreement to sell or a forward
contract.
If these conditions are satisfied then by virtue of s.
9 of the Central Sales Tax Act it is the State from which
the goods move which will be competent to levy the tax under
the provisions of the Central Sales Tax Act. The question
whether the agreement to sell is in respect of ascertained
or unascertained goods, existing or future goods, make no
difference whatsoever so far as the interpretation of s.
3(a) of the Central Sales Tax is concerned. [949A-C, E]
Cement Distributors (P) Ltd. v. Deputy Commercial Tax
Officer, Lalgudi and others, 23 S.T.C. 86, 94,
distinguished.
Larsen and Toubro Ltd., Madras-2 & others. v. Joint
Commercial Tax Officer, 20 S.T.C. 150, 186 & 187; The State
of Madras v. N. K. Nataraja Mudaliar [1961] 1 SCR 379, 391;
Tata Iron and Steel Co. Ltd. v. S. R. Sarkar and others
[1961] 1 SCR 379, 391; State Trading Corporation of India
Ltd. v. State of Mysore, [1963] 3 SCR 792, 797-798; Tata
Engineering & Locomotive Co. Ltd.
941
v. The Assistant Commissioner of Commercial Taxes & Anr.,
[1970] 3 SCR 862, 866; M/s. Kelvinator of India Ltd. v. The
State of Haryana [1973] 3 SCC 561, 560; The State of Tamil
Nadu v. The Cement Distributors (P) Ltd. and others [1975] 4
SCC 30 and Oil India Ltd. v. The Superintendent of Taxes and
others, referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: CAs Nos. 449-454 of 1971
& 888-890 of 1974.
Appeals by special leave from the judgment and order
dated the 27-4-1970 and 11-4-1973 of the Orissa High Court
at Cuttack in special jurisdiction Cases Nos. 74 to 77 of
1968 and 70-72 of 1971 respectively.
Hardayal Hardy, and Sukumar Ghose, for the appellant in
CAs 449-454 of 1971.
Gobind Das, G. S. Chatterjee for the respondent.
Sukumar Ghose, for the appellant in CAs 888-890 of
1974.
M. C. Bhandare, B. Parthasarthi for the respondent in
CAs 888 and 889 of 1974.
Ex parte for respondent in appeal No. 890 of 1974.
The Judgment of the Court was delivered by
FAZAL ALI, J.-These are two groups of appeals-one
consisting of six appeals by the firm Balabhagas Hulaschand
dealing in jute. Civil Appeal No. 449/71 arises from the
Judgment of the High Court in S.J.C. No. 41 of 1968 decreed
on April 22, 1970 in respect of the assessment for the
quarter ending June 1960. The other five appeals are by the
same firm in respect of the sales tax levied by the State of
Orissa for the quarters ending December, March 1960 and
December 1960 to June 1961, decided by the judgment of the
High Court in S.J.C. Nos. 73-77 of 1968 dated April 27,
1970. As all the appeals involve a common point they were
consolidated and have been heard together.
Appeals Nos. 888-890/74 have been filed by the firm M/s
Kaluram Ramkaran in respect of the assessment of tax made by
the State of Orissa for the quarters ending September 30,
1961, June 30, 1962 and September 30, 1962. These appeals
arise out of the judgment of the High Court given in S.J.C.
Nos. 70-72/1971 dated April 11, 1973. The High Court in
these cases followed its previous judgment, which is the
subject-matter of the six appeals mentioned above, and held
that the levy was valid. The points of law arising in these
appeals also are identical to the points arising in the
other six appeals referred to above, and in view of the
common points of law involved in all these appeals we
propose to dispose them of by one common judgment.
The appellant Balabhagas Hulaschand is a firm dealing
in buying and selling jute and has its Head Office in
Calcutta. The firm used to purchase raw jute grown in Orissa
and send the same to its buyers in the State of West Bengal.
The modus operandi was that after the
942
goods were received by the appellant firm they were
despatched in bags from Cuttack and Dhanmandal railway
stations to the Railway Mills Siding in Calcutta. The bags
were booked in the name of the buyer mills through their
broker. The goods on arrival in the Mills Railway siding at
Calcutta were inspected by the buyer firm and if they were
found to be in accordance with the specifications mentioned
in the agreement of sale they were accepted. The appellants
in appeals Nos. 888-890/74 are a firm dealing in similar
business with this difference that it has got its purchasing
centre at Kendupatna in the District of Cuttack, and it was
from Cuttack that the goods were despatched to the buyers in
West Bengal.
The transaction of sale was entered into through a
licensed broker “East India Jute and Hessian Exchange Ltd.”
and the buyers were the Managing Agents of the firm
Kettlewell-Bullen & Co., Ltd., Calcutta. A letter has been
produced by the parties which appears at p. 24 of the Paper
Book which forms the contract or agreement of sale entered
into between the parties in pursuance of which the goods
were despatched to the buyer firm at Calcutta. Under the
contract the responsibility in respect of the quality,
moisture, shortage in weight and risk in transit lay on the
seller. It is also not disputed that in all these appeals a
concluded sale takes place when the goods despatched in the
name of the Calcutta firm were ultimately accepted by the
said firm and the price of the said goods was paid to the
appellants. On the basis of these concluded transactions of
sale the Government of Orissa levied sales tax under s. 3(a)
of the Central Sales Tax Act, 1956, on the basis that the
sales were inter-State sales and, therefore, fell within the
ambit of that section. The assessing authorities upto the
stage of the Tribunal negatived the contention of the
appellants that the sale was merely an internal sale which
took place in the State of West Bengal and not an inter-
State sale. Thereafter the appellants moved the Tribunal for
making a reference to the High Court of Orissa but failed to
persuade the Tribunal to make a reference. The appellants
then moved the High Court of Orissa under s. 24(3) of the
Orissa Sales Tax Act to direct the Tribunal to make a
statement of the case to the High Court. Accordingly the
Tribunal referred the following points for consideration:
“(1) Did title to the goods pass in Orissa or in
West Bengal?(2) Even if title in the goods passed in West
Bengal whether in the facts and circumstances
of this case, the transaction constituted
“sale in the course of inter-State trade ?”After considering the entire evidence and the
circumstances and the law on the subject the High Court by
its judgment dated April 22, 1970 negatived the plea taken
by the appellants and held that although the title in the
goods passed in West Bengal and the sale took place there,
since the sale occasioned the movement of the goods from
Orissa to West Bengal it was an inter-State sale, and,
therefore, it was clearly governed by s. 3(a) of the Central
Sales Tax Act. Thereafter
943
the appellants moved the High Court, for granting leave to
appeal to this Court, which having been rejected, the
appellants filed an application to this Court for grant of
special leave to appeal and the same having been granted,
these appeals have been set down for hearing before us.Mr. Hardy learned counsel for the appellants in Appeals
Nos. 449-454/71 has submitted only one point for our
consideration. He has contended that on the facts found it
would appear that the movement of goods from Orissa to West
Bengal took place in pursuance of an agreement of sale and
not in pursuance of the sale itself which actually took
place in West Bengal, and, therefore, the sale is not
covered by s. 3(a) of the Central Sales Tax Act and the levy
made by the State of Orissa was illegal. Mr. Ghose who
followed Mr. Hardy and was appearing in appeals Nos. 888-
890/74 further added that the agreements in the instant
cases were merely forward contracts in respect of
unascertained and future goods, and, therefore, fell beyond
the ambit of the provisions of the Central Sales Tax Act.Mr. Gobind Das appearing for the State of Orissa
repelled the contentions of the appellants and submitted
that the circumstances clearly point out to the conclusion
that although the sale took place in West Bengal it
undoubtedly occasioned the movement of goods from one State
to another, namely, from Orissa to West Bengal, and,
therefore, were clearly covered by s. 3(a) of the Central
Sales Tax Act, and the High Court was right in rejecting the
contention of the appellants.Learned counsel for both the parties have cited a
number of authorities of this Court and other High Courts
before us. But before going to the authorities we would like
to deal with the scope and ambit of the Central Sales Tax
Act and try to determine the incidents of a sale which would
attract the provisions of s. 3(a) of the Central Sales Tax
Act. Before, however, taking up this point it may be
necessary to mention the admitted circumstances in the case
on which both the parties are agreed. They are-(1) that there was an agreement or contract of
sale between the appellant firms and the
Calcutta firms by which the appellants agreed
to sell raw jute of certain specifications of
weight and quality to the Calcutta firms;
(2) that at the time when the contract of sale
was entered into, the raw jute was not in
existence as it was being grown;(3) that after the goods were ready the same were
booked in bags by the appellants not in their
names but in the names of the buyer firms in
Calcutta;(4) that the goods were booked from Cuttack and
Dhanmandal railway stations in Orissa to the
Railway Sidings of the buyer Mills at
Calcutta; and
944
(5) that all the goods which are the subject-matter of the sales tax levy in all these
appeals were ultimately accepted by the
buyers at Calcutta and a concluded sale took
place at Calcutta in West Bengal.
In view of these admitted circumstances, we have to
determine the legal position. To begin with it would appear
that the Central Sales Tax Act was passed in the year 1956
and before that there was some amount of controversy
regarding the authority which was to levy tax in case of
inter-State trade. In The Bengal Immunity Company Ltd. v.
The State of Bihar and Others(1), Venkatarama Ayyar, J.,
speaking for the Court quoted Rottschaefer on Constitutional
Law (1939 Edition) where sale in the course of inter-State
commerce was defined thus: (p. 785):
“The activities of buying and selling constitute
inter-State commerce if the contracts therefor
contemplate or necessarily involve the movement of
goods in inter-State commerce.”
The learned Judge also observed in that case:
“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 inter-State trade.”
This Court, therefore, accepted the ingredients of an inter-
State sale.
It appears that soon after the decision in the Bengal
Immunity Company Ltd’s case(1) was handed down it received
statutory recognition in the shape of s. 3(a) of the Central
Sales Tax Act, which was enacted by the Parliament to remove
any doubts or misgivings regarding the competence of a State
Legislature to levy tax on inter-State sales. Section 2(g)
of the Central Sales Tax Act defines “sale” thus:
“‘sale’, with its grammatical variations and
cognate expressions, means 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;”
Analysing this definition it would appear that it postulates
the following conditions:
(i) there must be a transfer of property in goods
by one person to another;
945
(ii) the transfer must be for cash or for deferred
payment or for any other valuable
consideration; and
(iii)that such a transfer includes a transfer of
goods on the hire-purchase or other system or
payment by instalments, etc.
It would thus be seen that the word ‘sale’ has been given a
very wide connotation by the Parliament so as to include
within its fold not only sales of goods which are usually
known in common parlance but also transactions which legally
cannot be called sales, for instance, a transfer of goods on
the hire-purchase system. It seems to us that the Parliament
wanted to give the widest amplitude to the word ‘sale’ and
that is why, while in s. 3 the words ‘sale of goods’ have
been used in s. 4(2) clauses (a) & (b) which deal with the
situs of the sale the words ‘contract of sale’ have been
used in the same sense. In other words, the word ‘sale’
defined in clause (g) of s. 2 and used in s. 3 and other
sections is wide enough to include not only a concluded
contract of sale but also a contract or agreement of sale
provided the agreement of sale stipulates that there was a
transfer of property or movement of goods. In The Sales Tax
Officer, Pilibhit v. Budh Prakash Jai Prakash(1) quoting
Benjamin on Sale, (8th Edn.) Venkatarama Ayyara, J., who
spoke for the Court observed as follows:
” “The distinction between a sale and an agreement
to sell under Section 1 of the English Act is thus
stated by Benjamin on ‘Sale’, Eighth Edition, 1950:-
“In order to constitute a sale there must be-
(1) An agreement to sell, by which alone the
property does not pass; and
(2) an actual sale, by which the property passes.
It will be observed that the definition of a
contract of sale above cited includes a mere agreement
to sell as well as an actual sale.”
This distinction between sales and agreements to
sell based upon the passing of the property in the
goods is of great importance in determining the rights
of parties under a contract.”
It would thus appear that this Court clearly held that an
agreement to sell by which the property did not actually
pass was also an element of sale. Of course in that case the
Court had to decide a different point, namely, whether it
was within the competence of a State Legislature to tax not
a sale but even an agreement to sell where an actual sale
had not taken place. This Court held that the State
Legislature was not competent to make such a levy under any
statute passed by it
946
Section 3 of the Central Sales Tax Act, 1956 runs thus:
“3. 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.”
Section 3 consists of two clauses. But in the instant case
we are not concerned with clause (b) but only with clause
(a). Analysing clause (a) of s. 3 of the Central Sales Tax
Act it would appear that before s. 3 can apply, the
following facts must be established:
(i) that there is a sale or purchase of goods;
and
(ii) that the sale occasions the movement of goods
from one State to another.
If these two conditions are satisfied the sale becomes an
inter-State sale on which tax could be levied under the
Central Sales Tax Act.
The serious question that arises for consideration in
this case is whether or not the term ‘sale of goods’ as used
in s. 3 includes an agreement to sell. It has already been
pointed out that an agreement to sell is undoubtedly an
element of sale. In fact a sale consists of three logical
steps-(i) that there is an offer; (ii) that there is an
agreement to sell when the offer is accepted; and (iii) that
in pursuance of the said agreement a concluded sale takes
place. When the statute uses the words “sale or purchase of
goods” it automatically attracts the definition of sale of
goods as given in s. 4 of the Sale of Goods Act. 1930 which
is a statute passed by the same Parliament and is to some
extent in pari materia to the Central Sales Tax Act so far
as transaction of sale is concerned. Section 4 of the Sale
of Goods Act runs thus:
“4. (1) A contract of sale of goods is a contract
where by the seller transfers or agrees to transfer the
property in goods to the buyer for a price. There may
be a contract of sale between one part-owner and
another.
(2) A contract of sale may be absolute or
conditional.
(3) Where under a contract of sale the property
in the goods is transferred from the seller to the
buyer, the contract is called a sale, but where the
transfer of the property in the goods is to take place
at a future time or subject to some condition
thereafter to be fulfilled, the contract is called an
agreement to sell.
(4) An agreement to sell becomes a sale when the
time elapses or the conditions are fulfilled subject to
which the property in the goods is to be transferred.”
947
Section 4(1), therefore, clearly provides that a contract of
sale of goods includes also an agreement to transfer
property in goods to the buyer for a price. The inevitable
conclusion that follows from the combined effect of the
interpretation of s. 3 of the Central Sales Tax Act and s. 4
of the Sale of Goods Act is that an agreement to sell is
also an essential ingredient of sale provided it contains a
stipulation for transfer of goods from the seller to the
buyer. This being the position if there is a movement of
goods from one State to another, not in pursuance of the
sale itself, but in pursuance of an agreement to sell, which
later merges into a sale, the movement of goods would be
deemed to have been occasioned by the sale itself wherever
it takes place. In this view of the matter the question as
to whether agreement to sell was a forward contract or a
contract in respect of unascertainable or future goods would
make no difference for the simple reason that when once a
sale takes place, or for that matter when the goods start
moving from one State to another in pursuance of the
agreement to sell they cease to be future goods because they
are in existence and they become also ascertainable. The
argument of the learned counsel for the appellant is based
on a clear fallacy because it seeks to draw an artificial
distinction between a contract of sale of ascertainable
goods and a contract of sale of unascertainable or future
goods. This argument fails to take note of the fact that
when the movement of the goods start they shed the character
of either unascertained goods or future goods. Hence for the
purpose of application of s. 3(a) of the Central Sales Tax
Act the question whether the contract is a forward contract
or not makes no material difference.
Further more, we can hardly conceive of any case where
a sale would take place before the movement of goods.
Normally what happens is that there is a contract between
the two parties in pursuance of which the goods move and
when they are accepted and the price is paid the sale takes
place. There would, therefore, hardly, be any case where a
sale would take place even before the movement of the goods.
We would illustrate our point of view by giving some
concrete instances:
Case No. I-A is a dealer in goods in State X and enters
into an agreement to sell his goods to in State X. In
pursuance of the agreement A sends the goods from State X to
State Y by booking the goods in the name of B. In such a
case it is obvious that the sale is preceded by the movement
of the goods and the movement of goods being in pursuance of
a contract which eventually merges into a sale the movement
must be deemed to be occasioned by the sale. The present
case clearly falls within this category.
Case No. II.-A who is a dealer in State X agrees to
sell goods to B but he books the goods from State X to State
Y in his own name and his agent in State Y receives the
goods on behalf of A. Thereafter the goods are delivered to
B in State Y and if B accepts them a sale takes place. It
will be seen that in this case the movement of goods is
neither in pursuance of the agreement to sell nor in the
movement occasioned by the sale. The seller himself takes
the goods to
948
State Y and sells the goods there. This is therefore, purely
an internal sale which takes place in State Y and falls
beyond the purview of s. 3(a) of the Central Sales Tax Act
not being an inter-State sale.
Case No. III-B a purchaser in State Y comes to State X
and purchases the goods and pays the price thereof. 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.
Generally these are the only type of cases that can
occur in the day to day commercial transactions. It is,
therefore, manifest that there can hardly be a case where
once a sale takes place the movement is subsequent to the
sale. Mr. Hardy was unable to cite a single instance where
such a contingency could arise and he accordingly submitted
with his usual fairness that if no such contingency arose,
then s. 3(a) of the Central Sales Tax Act will have no
application and the levy cannot be made. We are unable to
accept this contention because it is well settled that a
statutory provision cannot be interpreted in a way which
defeats the very object of the Act. It is equally well
settled that the Legislature does not waste words or
introduce useless or redundant provisions. In Indian Chamber
of Commerce v. C.I.T. West Bengal II, Calcutta(1) a Division
Bench of this Court to which I was also a party observed as
follows:
“Section 2(xv) must be interpreted in such a
manner that every word is given a meaning and not to
treat any expression as redundant or missing the accent
of the amendatory phrase.”
In view of these circumstances we cannot hold that s. 3(a)
of the Central Sales Tax Act was redundant or would apply to
contingencies which may not happen at all. In these
circumstances, therefore, the conclusions at which we arrive
may be summarised as follows:
(1) That the word ‘sale’ appearing in s. 2(g) as also
in s. 3(a) of the Central Sales Tax Act includes an
agreement to sell also provided the said agreement contains
a stipulation regarding passing of the property. Even in the
Bengal Immunity Company Ltd’s case (supra) this Court
observed thus:
“…. the expression “contract of sale” in this
context has the same meaning as the words “contract of
buying and selling” in the definition of inter-State
commerce given by Rottschaefer in the passage already
quoted, and they both refer to the bargain resulting in
the sale irrespective of whether it is in the stage of
an agreement to sell, or whether it is a sale in which
title to the goods has passed to the purchaser. That is
also the definition of “contract of sale” in section
5(1) of the Indian Sale of Goods Act.”
949
(2) That the following conditions must be satisfied
before a sale can be said to take place in the course of
inter-State trade or commerce:
(i) that there is an agreement to sell which
contains a stipulation express or implied
regrading the movement of the goods from one
State to another;
(ii) that in pursuance of the said contract the
goods in fact move form one State to another;
and
If these conditions are satisfied then by virtue of s. 9 of
the Central Sales Tax Act it is the State from which the
goods move which will be competent to levy the tax under the
provision of the Central Sales Tax Act. This proposition is
not, and cannot, be disputed by the learned counsel for the
parties.
Lastly another aspect of the matter is that in order to
determine whether a sale has taken place in the course of
inter-State trade or commerce the matter has to be
approached only after a concluded sales has taken place
because unless the sale takes place or in other words the
agreement to sell merges into a concluded sale the question
regarding the application of the provisions of the Central
sales Tax Act does not arise at all because the tax is on
sale and not on an agreement to sell or a forward contract.
Finally if all these conditions are satisfied the
question whether the agreement to sell is in respect of
ascertained or unascertained goods, existing or future
goods, makes no difference whatsoever so far as the
interpretation of s. 3(a) of the Central Sales Tax Act is
concerned.
Applying these principles let us see what is the
position in the present appeals? The letter at p. 24 of the
Paper Book in Civil Appeals Nos. 449-454/71 which may be
quoted in extenso runs thus:
“THE EAST INDIA JUTE & HESSIAN EXCHANGE LTD., CALCUTTA
Transferable Specific Delivery Contract for Raw Jute.
Calcutts 1st April 1960
No. S.G.M./16/21
To
Messrs Balabhagas Hulaschand
161/1, Mahatma Gandhi Road, Calcutta.
Dear Sirs,
We have, subject to the terms and conditions
hereinafter referred to, this d ay sold to M/s Fort Gloster
Industries Ltd., New Mill
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M/Agents M/s Kettlewell Bullen & Co. Ltd., Cal., by your
order and on your account, the following goods which are
Jute:-
Crop 1959-1960 . . . . 1400 (one thousand four
Cuttuck; Dhanmandal . . . hundred only) maunds of the
White Jute. mark, assortment and
quality as per margin and
in sound dry storing
748 mds. Bot @ Rs.34/- per md. . condition at the rate of:-
748 mds. Bot @ Rs.34/- per md. . Rupees Thirty four only for
652 mds. Bot @ Rs.32/- per md. . white B. Br. jute.-
__________ 1400 mds. Rupees thirty two only for
Marks: B.H.. . . . white Jute Bot. free to
Jute Bales of:- . . . . buyer’s mill, siding and/or
1 1/2 to 5 mds. . . . . ghat. Weight guarantee at
buyers’ mill.
Delivery to . . . . Fort Gloster, New Mill.
Shipment or despatch during . April: May 1960.
Payment:- . . . . 90% Cash against documents
and rest on approval.
Arbitration . . . . M/s Bengal Chamber of
Commerce Industry L. M. D.
Re-weighment . . . . As per rules of M/s Bengal
Chamber.
Insurance . . . . M/s. Marine & General
insurance Co. Ltd. Cal.
“The foregoing terms and conditions as well as
other terms and conditions applicable to this contract
are as per the terms and conditions of the transferable
Specific Delivery Contract for Raw jute of the East
India Jute & Hessian Exchange Ltd., Calcutta, and are
subject to the Bye-Laws of that Exchange for trading in
Transferable Specific Delivery Contracts for Raw Jute
in force for the time being.
Brokerage at one per cent.
Yours faithfully,
Shree Gopalji Sahay Meghraj
Sd./- Illegible
Licensed Broker
The East India Jute & Hessian Exchange Ltd.”
It is conceded by counsel for the appellants that this
letter or other letters in identical terms form the basis of
the contracts of sale. The first part of the contract
clearly mentions that the goods have been sold by the seller
to the buyer. But of course that does not make the letter a
concluded sale because the letter read as a whole would show
that it is in respect of some future goods which have yet to
be grown. We are, however, unable to agree with the learned
counsel for the appellant that this contract is in respect
of unascertained goods because the quality and the colour of
the jute, the weight, the price, the markings etc. are all
mentioned in the contract. Therefore the goods are no doubt
ascertainable and must be according to the specifications
mentioned in the agreement. This contract was entered into
on April 1, 1960 and in some appeals a little later. A
perusal of this contract
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also shows that the appellant undertook to send the goods
from Cuttack to the buyers’ Mills siding in Calcutta and it
is not disputed that after the jute was ready it was to be
booked in bags from railway stations in Orissa to the Mills
Siding of the buyer in Calcutta. It is, therefore, clear
that the goods moved in pursuance of the terms of the
agreement from the seller in Orissa to the buyer in
Calcutta. It is also clear that the movement of the goods
from Orissa to West Bengal forms a clear stipulation or
incident of the agreement to sell. The agreement also
provides that there has been a transfer of property from the
seller to the buyer which is the effect of the first para
referred to above. It is also not disputed that after the
goods reached Calcutta they were finally accepted by the
buyers and a concluded sale took place in Calcutta in the
State of West Bengal. In view of these circumstances there
can be no manner of doubt that the sale falls squarely
within s. 3 (a) of the Central Sales Tax Act and since the
goods moved from the State of Orissa it is the State of
Orissa alone which is competent to levy the tax under s. 9
of the Central Sales Tax Act.
We shall now discuss the various authorities cited by
counsel for the parties to show that the view taken by us in
this case is amply supported by a long catena of decisions
of this Court handed down during the last two decades. The
learned counsel for the appellant heavily relied on the
observations made by the Madras High Court in Cement
Distributors (P) Ltd. v. Deputy Commercial Tax Officer,
Lalgudi & Ors.(1):
“Thus if the goods are unascertained, then until
it is appropriated to the contract by a known process,
sale is not complete. Central sales tax is not leviable
by the despatching State in such cases, notwithstanding
inter-State movement of the goods, as they are
considered in section 4 as “out-of-State.”
To begin with, this case has no application to the facts of
the present case, because the decision in the Cement
Distributors (P) Ltd.’s case (supra) was governed by the
provisions of s. 4 of the Central Sales Tax Act and the High
Court of Madras came to a finding that the sale was not at
all complete, in view of the fact that the goods were
unascertained. Further more, the decision was given on the
peculiar facts in that case by which the branch at Calcutta
had merely been authorised by the State Trading Corporation
of India Ltd to receive the goods despatched and it is
doubtful whether there was a complete transaction of sale in
that case. If however, that case is taken to be an authority
for the proposition that where the goods are unascertained
and even if there is an inter-State movement of goods the
sale is not an inter-State sale, we find ourselves difficult
to agree with that view which is not in consonance with our
interpretation of the provisions of the Central Sales Tax
Act.
The appellant then relied on another decision of the
Madras High Court in Larsen and Toubro Ltd. Madras-2 &
others v. Joint Commercial Tax Officer(2). To begin with,
this case appears to have been
952
overruled by this Court in The State of Madras v. N. K.
Nataraja Mudaliar(1) on another point. Even so, we are
unable to see how this case is of any assistance to the
appellant. Veeraswami, J., as he then was, speaking for the
Court, observed as follows:
“The essential tests of a sale or purchase in the
course of inter-State trade, commerce and inter-course
or import into or export out of the territory of India
are, (1) whether there is movement of goods from one
State to another or into or out of the territory of
India, (2) whether such movement is occasioned by the
contract of sale or purchase and (3) alternatively
whether, during such movement, the sale or purchase is
effected by transfer of documents of title to the
goods.”
The learned Judge also observed:
“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 inter State trade.”
Thus the ratio laid down by the Court is entirely in
consonance with the view taken by us regarding the
conditions of an inter-State sale.
Reliance was also placed on Tata Iron and Steel Co.
Ltd. v. S.R. Sarkar and Others(2) where Shah, J., while
delivering the majority judgment of the Court, observed as
follows:
“In our view, therefore, within cl. (b) of s. 3
are included sales in which property in the goods
passes during the movement of the goods from one State
to another by transfer of document of title thereto:
cl. (a) of s. 3 covers sales, other than those included
in cl. (b), in which the movement of goods from one
State to another is the result of a covenant or
incident of the contract of sale, and property in the
goods passes in either State.”
Sarkar, J., who gave a dissenting judgment observed as
follows: (pp. 407 & 408)
“The question then arises, when does a sale
occasion the movement of goods sold ? It seems clear to
us that a sale can occasion the movement of the goods
sold only when the terms of the sale provide that the
goods would be moved; in other words, a sale occasions
a movement of goods when the contract of sale so
provides.”
“We have then come to this that cl. (a) of s. 3
contemplates a sale where the contract of sale
occasions the movement of the goods sold and cl. (b), a
sale where transfer of
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property in the goods sold is effected by a transfer of
documents of title to them. Of course, in the first
case, the movement of the goods must be from one State
to another and in the second, the document of title
must be transferred during such movement.”
In State Trading Corporation of India Ltd. v. State of
Mysore(1) this Court observed as follows:
“Since the permits with which we are concerned
provided that the supply had to be made from one or
other factory situate outside Mysore, the contracts
must be deemed to have contained a covenant that the
goods would be supplied in Mysore from a place situate
outside its borders. A sale under such a contract would
clearly be an inter-State sale as defined in s. 3 (a)
of the Central Sales Tax Act.”
Similarly in Tata Engineering & Locomotive Co. Ltd. v.
The Assistant Commissioner of Commercial Taxes & Anr.(2)
while describing the incidents of an inter-State sale, this
Court observed as follows:
“A sale being transfer of property becomes taxable
under s. 3(a) ‘if the movement of goods from one State
to another is under a covenant or incident of the
contract of sale’.”
The same view was taken in a later decision of this
Court in M/s Kelvinator of India Ltd. v. The State of
Haryana(3) where Khanna, J., speaking for the Court observed
as follows:
“It is also plain from the language of Section
3(a) of the Act that the movement of goods from one
State to another must be under the contract of sale. A
movement of goods which takes place independently of a
contract of sale would not fall within the ambit of the
above clause. Perusal of Section 3 (a) further makes it
manifest that there must be a contract of sale
preceding the movement of the goods from one State to
another, and the movement of goods should have been
caused by and be the result of that contract of sale.
If there was no contract of sale preceding the movement
of goods, the movement can obviously be not ascribed to
a contract of sale nor can it be said that the sale has
occasioned the movement of goods from one State to the
other.”
In that case, however, on the facts found by the High Court
this Court held that the sale was not an inter-State sale
but an internal sale which took place in Delhi. In that case
there was no movement of the goods from one State to another
in pursuance of the contract of sale. In other words, the
facts of this case clearly fell within Case No. II, which
has been described by us, above.
To the same effect is the recent decision of this Court
in The State of Tamil Nadu v. The Cement Distributors (P)
Ltd. and Others(4) in which reliance was placed on the
earlier decision of this Court in Tata Iron and Steel Co.
Ltd. v. S. R. Sarkar & Ors. (supra).
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In oil India Ltd. v. The Superintendent of Taxes and
Others (1), while lucidly describing the incidents of an
inter-State sale, Mathew, J., observed as follows:
“This Court has held in a number of cases that if
the movement of goods from one State to another is the
result of a covenant or an incident of the contract of
sale, then the sale is an inter-State sale. x x x x x x
Even though Clause 7 of the supplemental agreement
does not expressly provide for movement of the goods,
it is clear that the parties envisaged the movement of
crude oil in pursuance to the contract from the State
of Assam to the State of Bihar. In other words, the
movement of crude oil from the State of Assam to the
State of Bihar was an incident of the contract of sale.
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 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 and incidental to the contract of
sale.”
We might mention here that the case cited above appears
to be on all fours with the facts of the present case. In
that case also the goods were supplied from Assam to Bihar
through the pipelines in Assam to Barauni in Bihar. This
Court observed that no matter in which State the property in
goods passes the sale undoubtedly occasioned movement of the
goods which was sufficient to bring the case within the
ambit of s. 3(a) of the Central Sales Tax Act.
Thus the authorities discussed above by us fully
support the principles and the ratio laid down by us. We
have already pointed out that even though the sale took
place at Calcutta, as rightly found by the High Court, since
the movement of goods preceded the sale in pursuance of the
contract of sale which contained a clear stipulation that
the goods were to move from Orissa to Calcutta in West
Bengal, the movement of goods was occasioned by the sale
itself which took place in Calcutta. In these circumstances,
therefore, the High Court was legally justified in holding
that in all these appeals the cases were clearly covered by
the provisions of s. 3(a) of the Central Sales Tax Act.
We, therefore, find no merit in these appeals which are
accordingly dismissed, but in the circumstances without any
order as to costs.
S.R. Appeals dismissed.
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