HINDUSTAN MOTORS LIMITED Vs. STATE OF TAMIL NADU

JUDGEMENT

(1.) THE provision of law in section 5 of the Central Sales Tax Act, 1956, which has fallen for interpretation in several cases, has once again to be subjected to interpretation. Article 286 of the Constitution of India reads : "(1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place - (a) outside the State; or (b) in the course of the import of, the goods into, or export of the goods out of, the territory of India. (2) Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1). (3) Any law of a State shall, in so far as it imposes, or authorises the imposition of, - (a) a tax on the sale or purchase of goods declared by Parliament by law to be of special importance in inter-State trade or commerce; or (b) a tax on the sale or purchase of goods, being a tax of the nature referred to in sub-clause (b), sub-clause (c) or sub-clause (d) of clause (29A) of article 366, be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify." This article which speaks of a tax on the sale or purchase of goods, where such sale or purchase takes place outside the State or in the course of the import of the goods into or export of the goods out of the territory of India, has made a reference to clause (29A) of article 366, which defines "tax on the sale or purchase of goods" to include, "(a) a tax on the transfer, otherwise than in pursuance of a contract of property in any goods for cash, deferred payment or other valuable consideration;(b) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; (c) a tax on the delivery of goods on hire-purchase or any system of payment by instalments; (d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration; (f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration; and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made."

(2.) WITH a view to formulate the principles for determining when a sale or purchase of goods takes place in the course of import into or export from India, to provide for the levy, collection and distribution of taxes on sales of goods in such trade or commerce and other purposes including inter-State trade, the Parliament has enacted the Central Sales Tax Act, 1956 (hereinafter referred to as "the Act").

(3.) A Bench of this Court in Gandhi Sons Ltd. v. State of Madras 1955 (6) STC 694, 1955 AIR(Mad) 722, 1955 (2) MLJ 545 considered the statement of law in the Travancore case 1953 AIR(SC) 333, 1953 (4) STC 205, 1953 SCJ 471, 1954 (1) SCR 53, 1953 (2) MLJ 123 decided by the Supreme Court as to sale in the course of export. The view expressed by the court in the said judgment is that an export sale will only be where the sale is to a foreign buyer with whom the local seller has privity and as a direct result of such sale the goods are transported across the customs frontier and further even if there is no export sale, if the sellers are able to establish that they continued to be the owners of the goods up to or beyond the time when the goods entered the export stream or until after the goods had crossed the customs barrier, the sale by them would be one "in the course of export" to which article 286(1)(b) of the Constitution would apply. This judgment emphasised on privity of contract as a direct result of which goods are transported across the customs frontier as well as the sale effected beyond the customs barrier in a case where the seller continued to be the owner of the goods up to or beyond the time when the goods entered the export stream or until after the goods had crossed the customs frontier. The Bench also took notice of the fact that the property in the goods did not pass to the buyers until the relevant bills of lading were presented to the buyer or in any event at least not until the good were put on board the vessels at the harbour. The earliest point of time when any contention could be raised that the property in the goods passed to the buyers would thus be the point when the goods were placed on the ship or bills of lading were taken in the name of buyers or consignees. There should therefore be no doubt as to the proposition that section 5(1) of the Act which deals with export sales has got two limbs. The first limb provides for a circumstance in which the sale itself occasions the export. The second limb contemplates a sale which arises as a result of transfer of documents of title after the goods crossed the customs frontier. It is not necessary to multiply and refer to a number of decisions taking this view. This Court in Seshasayee Paper and Boards Limited v. Deputy Commercial Tax Officer 1984 (56) STC 8 has said into in no uncertain words that this section provides for two types of fact situations in which and subject to the existence of which alone a sale may be regarded as taking place in the course of export. One is where the same occasions the movement of goods from India to a place abroad and the other is where there is a transfer of documents of title after the goods had crossed India customs frontiers.