LAKSHMI MILLS COMPANY LIMITED Vs. STATE OF MADRAS

JUDGEMENT

(1.) THE petitioners are dealers in yarn. THEir course of business consists of purchasing cotton and producing and selling yarn. During the year 1957-58 they purchased cotton of the value of Rs. 3, 13, 177-74 nP. from a Bombay dealer and claimed that the said amount should not be included in their taxable turnover for assessment under the Madras General Sales Tax Act, 1939. This claim was made on the basis that the purchase was an inter-State purchase and that as such it was exempt from the levy of sales tax under the State law. THE department as well as the Tribunal held that the purchase covered by the turnover was intra-State and was within the scope of the Act. THE petitioners also claimed that the turnover relating to two items of sale of yarn during the year 1956-57 should not be taxed as the yarn was sold to dealers in places outside the Madras State and that the sales were inter-State sales not covered by the Act. Both the department and the Tribunal negatived relief to the petitioners in regard to these sales as, in their opinion, they were not inter-State in character. In these revision petitions the petitioners contend that both these sets of transactions should not properly be included within their taxable turnover under the Madras General Sales Tax Act.

(2.) THE petitioners purchased cotton from various dealers, some of whom were Jeevaraj Motiram and Company (Bombay dealer), Volkart Brothers (Coimbatore dealer), and Kilachand Devchand (Bombay dealer). THE goods moved from outside the State, and were delivered inside the State, either by rail or by lorry. One set of transactions in which the goods were consigned through railway by the outside dealer, was held to be inter-State in character and the Tribunal gave relief to the petitioners on that basis. In respect of other items of goods which were despatced from places outside the State to the petitioners by lorries the Tribunal held that the purchases were inter-State in character. But, as regards the disputed turnover, in respect of which the Tribunal refused relief to the petitioners and which forms the subject-matter of this revision petition, the goods were actually shipped by the Bombay dealers (sellers) to Tuticorin Port and were cleared at that port by the sellers' agents and were loaded in lorries and delivered at the petitioners' place of business at Koilpatti.

(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 on State to another. Explanation 1. - Where goods are delivered to a carrier or other bail for transmission, the movement of the goods shall, for the purposes of clause (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 .................." This statutory provision practically codifies the pre-existing judge-made law on the subject. An inter-State sale consists of two essential elements : (1) a sale of goods and (2) a transport of those goods from one State to another under the contract of sale. Where a dealer in 'A' State agreed to sell goods to another in 'B' State and undertakes as part of that contract to deliver the goods to the purchaser in the 'B' State and the goods are transported from 'A' State to 'B' State, whatever be the means of transport, air, road or rail, the transaction viewed as a whole is an inter-State sale or purchase. The movement of the goods from one State to another in a contract of inter-State sale is the necessary result of the contract as otherwise the contract cannot be fulfilled or performed. The manner of transport or the stages involved in such transport would not have any material bearing upon the nature of the sale. Taking the present case, we do not understand why the landing of the goods at the Tuticorin Port and their subsequent carriage by lorry to Koilpatti should operate to destroy the inter-State character of the transaction, if at the inception the parties entered into a contract and did intend that they should be delivered only at Koilpatti.