COMMISSIONER OF SALES TAX Vs. MCKENZIES LTD

JUDGEMENT

(1.) This is a reference under section 34(1) of the Bombay Sales Tax Act, 1953 (hereinafter referred to as "the said Act").

(2.) The facts which have given rise to this reference are as follows : The respondents are dealers registered under the said Act. On 30th January, 1954, the respondents entered into a contract with the Government of India for the supply of certain goods or stores consisting mainly of venetian shutters and shutter parts to the Western Railway. The terms and conditions of this contract are contained in a schedule to the acceptance of tender, a copy of which forms part of the record. From these terms and conditions, it appears that against the heading "place of delivery", it is stated "free delivery in Bombay". Under the heading "terms of delivery", there is another heading "despatch instructions" and against it, the following appears : "To be delivered to the Inspection Officer (Stores), Western Rly., Mahalaxmi, Bombay, for onward despatch to the District Controller of Stores (CAN), Western Rly., Ajmer."

(3.) The officer designated as Inspecting Officer was the Works Manager (Carriage). Workshop, Lower Parel, Bombay. The relevant conditions contained under the heading "special instructions" are to the effect that 100 per cent of the payment would be made on receipt of goods by the consignee in good condition. It was further provided that the contractors (respondents) were to be entirely responsible for the execution of the contract in all respects in accordance with the terms and conditions and any approval which the Inspector might have given in respect of the stores, materials or other particulars and the work or the workmanship involved in the contract (whether with or without test carried out by the contractors or the Inspector) would not bind the purchaser and notwithstanding any approval or acceptance given by the Inspector, it would be lawful for the consignee of the stores on behalf of the purchaser to reject the stores on arrival at destination if it was found that the stores supplied by the contractor were not in conformity with the terms and conditions of the contract in all respects. It was further provided that the provision and arrangement of transport and wagons was not the liability of the purchaser and any deterioration of stores after inspection and acceptance by the Inspector and before their receipt by the consignee would be to the account of the contractor. There are certain other terms and conditions of the contract but the same are not material for the purposes of this reference. Under this contract it appears that during the assessment period from 1st April, 1954, to 31st March, 1955, the respondents supplied goods of the value of Rs. 64,849-7-0 to the Western Railway. It was common ground that the goods went out of the then State of Bombay and there is no dispute that they were delivered to the consignee at Ajmer. The Sales Tax Officer assessing the respondents for the said assessment period rejected the claim of the respondents that this amount was not liable to be included in the taxable turnover of the respondents. The respondents went in appeal to the Assistant Commissioner of Sales Tax against the order passed by the Sales Tax Officer. This appeal was allowed in part. But the contention of the respondents that the said sum of Rs. 64,849-7-0 was not liable to be included in the taxable turnover of the respondents was rejected, and it is only that portion of the order, which is relevant for the purpose of the reference before us. Against this decision of the Assistant Commissioner of Sales Tax, the respondents went in revision, but their revision application was dismissed by the Deputy Commissioner of Sales Tax. The respondents then filed a revisional application before Sales Tax Tribunal against the decision of the Deputy Commissioner of Sales Tax. The majority of the Tribunal took the view that the sale of the aforesaid goods was not a sale within the then State of Bombay under the explanation to clause (1) of article 286 of the Constitution of India before its amendment in 1956 and, hence, was not exigible to tax. It is out of this decision of the Tribunal that the present reference has been made to us at the instance of the Commissioner of Sales Tax.