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Singareni Collieries Co. Ltd. Vs. the State of Andhra Pradesh - Court Judgment

LegalCrystal Citation
SubjectConstitution
CourtAndhra Pradesh High Court
Decided On
Case NumberTax Revn. Case No. 17 of 1960
Judge
Reported inAIR1962AP75; [1961]12STC765(AP)
ActsConstitution of India - Article 286 and 286(1); Colliery Control Order, 1945; Central Sales Tax Act, 1956 - Sections 3
AppellantSingareni Collieries Co. Ltd.
RespondentThe State of Andhra Pradesh
Appellant AdvocateK. Rajah Iyer and ;I.V. Rangachari, Advs.
Respondent AdvocateAdv. General and ;G.P.
Excerpt:
constitution - interstate trade - articles 286 and 286 (1) of constitution of india, colliery control order, 1945 and section 3 of central sales tax act, 1956 - assessee claimed exemption from assessment on ground of interstate trade - coal supplied as per direction of coal controller - neither supplier directed to supply at place of buyer nor any contract to that effect with buyer - contract between supplier and purchaser that of free on rail - risk and property passed to purchaser on delivery of goods to railway - held, sale intrastate as sale complete on delivery of goods to railway which was made within state. - - (5) the further appeal taken by the assessee to the sales tax apellate tribunal was unsuccessful. for the relevant period, it is the hyderabad general sales tax act.....chandra reddy, c.j.(1) this petition raises a question as to the interpretation of art. 286 of the constitution and arises out of proceedings taken under the hyderabad general sales tax act for assessing the tax payable by the petitioners in respect of their dealings for the year 1956-57.(2) the facts of the case are susceptible of a concise statement. the petitioners are messrs. singareni collieries carrying on business in coal at singareni yellandu etc. now situate in the state of andhra pradesh, having their head office at khairatabad, hyderabad. for the assessment year 1956-57, they submitted a return showing a gross turnover of rs. 3,87,03,998-2-2 and a net turnover of rs. 2,08,38,533-5-4 claiming exemption of a turnover of rs. 1,78,65,464-12-10 on the ground that the same represents.....
Judgment:

Chandra Reddy, C.J.

(1) This Petition raises a question as to the interpretation of Art. 286 of the Constitution and arises out of proceedings taken under the Hyderabad General Sales Tax Act for assessing the tax payable by the petitioners in respect of their dealings for the year 1956-57.

(2) The facts of the case are susceptible of a concise statement. The Petitioners are Messrs. Singareni Collieries carrying on business in coal at Singareni Yellandu etc. now situate in the State of Andhra Pradesh, having their head office at Khairatabad, Hyderabad. For the assessment year 1956-57, they submitted a return showing a gross turnover of Rs. 3,87,03,998-2-2 and a net turnover of Rs. 2,08,38,533-5-4 claiming exemption of a turnover of Rs. 1,78,65,464-12-10 on the ground that the same represents inter-state sales falling within the words of Article 286 of the Constitution.

(3) The proper Commercial Tax Officer disallowed the claim for deduction holding that the transaction in question constituted inter-state transaction.

(4) The assessee carried the matter in appeal to the Deputy Commissioner, who found that out of the turnover of Rs. 1,78,65,464-12-10 which was sought to be brought under Art. 286 of the Constitution, sales amounting to Rs. 23,46,527-6-5 related to consumers in the Andhra area of the State during the period from 1-11-1956 to 31-3-1957 and as such they could not be regarded as inter-state sales, since for the purpose of Art. 286 the entire State of Andhra Pradesh was one unit. This was also conceded by the assessee before the Deputy Commissioner. As regards the rest of the turnover, i.e., Rs. 1,55,18,937-6-5, relating to sale made to parties outside the State, he held that they were local sales and were not governed by Article 286. In the result he dismissed the appeal.

(5) The further appeal taken by the assessee to the Sales Tax Apellate Tribunal was unsuccessful. It is to revise this order of the Tribunal that this petition is presented.

(6) The question that calls for determination is whether the turnover in dispute is protected by the ban imposed by Article 286 of the Constitution. For the relevant period, it is the Hyderabad General Sales Tax Act that is applicable to this case, as it was then in force and the Andhra Pradesh General Sales Tax Act came into operation only in 1957.

(7) In tackling this problem, it is to be borne in mind that coal being a controlled commodity, the, owners of collieries are not at liberty to enter into contracts of sale with any party they liked or to fix their own price. The price for the or to fix their own price. The prices for the various catagories of coal to be sold are fixed by the notification issued by the Ministry of Works New Delhi. The collieries distributed coal as per the allotments made by the Controlled to various persons. Pursuant to these allotments, orders are placed with the petitioners for the coal. The collieries then call upon the allottee to remit the price in advance to give the despatch instructions.

After the receipt of the price and the instructions, the Head Office at Hyderabad issues the sale note containing the conditions of the contract of sale between the parties and then instruct the Collieries to despatch the goods to places indicated by the allottees by post. The consignee in every case is the allottee, the owners of the Collieries being the consignor. The price quoted is F. O. R. Collieries and the goods are to be booked 'Freight to Pay' as per railway receipts weighment. The goods were to be booked from the Collieries at 'Owners' risk', unless expressly asked for by the consumer to be booked at 'Railway Risk'. According to the conditions of sale, the sellers were not resposible for non-delivery or late-delivery etc., and that all duties, charges, cesses etc. are to be paid by the buyers. Out of the total turnover of Rs. 1,55,18,937-6-5, sales for Rs. 97,00,757-6-11 related to supplies to Governmental Agencies llikeRailways and other institutions.

(8) Before we proceed to consider the nature of the transactions, it is useful to extract clause10(A) of the Colliery Control Order, 1945, on which an argument is founded that the sales in question fall within the prohibition enacted in Article 286 of the Constitution.

(9) Clause10(A) says:-

'(1) The Coal Controller with the Government of India may, by order in writing direct, that any coal despatched by any colliery owner, or a person acting on behalf of a colliery owner, to any person, which is in transit, shall, subject to such terms and conditions, if any, as the said Coal Controllers deems fit, be diverted at and delivered to another person specified in the order.

Explanation: For the purpose of this clause, coal shall be deemed to be in transit from the time when it is delivered to a carrier or other bailee for transmission to the consignee thereof and unless the consignee or his agent has taken actual delivery of the entire quality of coal from such carrier or other bailee.

(2) As soon as an order is made under sub-clause(1) all the rights of the consignee, the owners of the Colliery, or other person in the said coal shall be subject to the terms of the order develop upon and vest in the person to whom the coal is to be delivered under the said order.

(3) The Coal Controller with the Government of India, may if he thinks fit, modify or cancel any order made sub-clause(1) and direct the coal to be diverted or delivered to a person other than the person originally named therein and the provisions of this clause shall thereupon apply as if such person was the consignee of the coal.

(4) The person to whom coal is delivered under any order made under clause (1) or clause(3) shall pay price including frieght, loading insurance and other charges and to such person as the Coal Controller with the Government of india may direct.

(5) Where no order is made under sub-clause(1) there shall be paid to consignee of the coal such compensation as the said Coal Controller considers reasonable. Such compensation may at the option of the said

Coal Controller be either:-

(a) by delivery to such consignee by the Central Government of the same quantity of coal of same or similar quality, size and grade and at the same place, as soon as coal for such purpose is available, or (b) by payment to such consignee by the Central Government of monetary compensation consisting of the price of coal paid by him and such frieght, insurance, loading and other lawful charges incurred by him as are allowed by the said Coal Controller:

Provided that where the consignee fails to produce before the said Coal Controller satisfaction evidence regarding the price of coal paid and other charges incurred by him, the said Coal Controller may fix the amount of compensation according to the best of his Judgement. *

(10) On these facts, we are invited to hold by the learned counsel for the petitioners that the sales making up the disputed turnover which resulted in the deliveries being effected outside the State, fall within the connotation of inter-state trade or commerce and as such they are not amenable to tax under the Hyderabad General Sales Tax Act. it is urged that the essential elements that constitute inter-state trade or commerce are present in this case in that they were sales to parties outside the State and there they were sales to parties outside the State and there was transport of these goods from this State to other States. It is maintained that since deliveries were effected outside the State, the sales should be considered to be in the course of inter-state trade or commerce. In support of this proposition, Sri Rajah Iyer, learned counsel for the petitioners, called our attention to some of the rulings of the Supreme Court and some of the High Courts.

(11) In Mohanlal Hargovind v. State of Madhya Pradesh, (S) : [1955]2SCR509 the assessee, who was a registered dealer under the C. P. and Berar Sales Tax Act (21 of 1947), imported tobacco from Bomabay in large quantities after its import into the State by the vendees with other types of indeginuous tobacco. The finished tobacco, after its import into the State of Madhya Pradesh, was rolled into bidies which were exported to other States, mainly to the State of Uttar Pradesh. The dealer in Uttar Pradesh and other States bought these bidies from the assessee, sold the sameto other dealers and consumers in those States. The Sales Tax authorities in Madhya Pradesh called upon the assessee to file a statement of returns of total purchases of this tobacco, delivered to them in that State and to deposit the purchase tax thereon. It was to challenge this order that a petition under Art 32 of the Constitution was filed before the Supreme Court. It was held by the Supreme Court that these transactions werein the course of inter-state trade or commerce since as a result of the transactions entered into between the petitioners and the Bombay suppliers, the finished tobacco, which was supplied to the petitioners, was transported from the State of Bombay to the State of Madhya Pradesh.

(12) We do not think that this case affords any parallel to the present case. The ratio decidenti of that case was that the movements of goods from one State to another was as a result of the sale, i.e., that the movement of goods was an integral part of the sale. There tobacco was supplied by the Bomabay dealers to the petitioners in the State of Madhya Pradesh. That principle applies only if it is established that delivery of the goods outside the State was trace able to a bargain between the parties.

(13) The next case citied to us is Bengal immunity Co. Ltd. v. State of Bihar, (S) 1955 SC 661. The relevant facts in that case were these: The assessee, an incorporated company, was carrying on business of manufacturing and selling various sera, vaccines, biological products and medicines with its registered head office at Calcutta and its laboratory and factory were situated in one of the districts of West Bengal. Its products had extensive sales throughout the Union of india and the commodities manufactured by thecompany were despatched from Calcutta by rail, steamer company in Calcutta. It had no agent or laboratory in that State. It was called upon by the Commercial Tax Officer to get itself registered under the Bihar Sales Tax Act, 1947 and to deposit the Bihar sales tax due in any one of the treasuries. The company denied the right of the State of Bihar to tax the sales effected in West Bengal on the ground that it had no place of business within that State and that the provisions of the Act which enabled the Government to imposetax on such sales were repugnant to Article 286 of the Constitution.

(14) The stand taken by the State Government was that the sales fell within the scope fell of the Explanation to Article 286(1) (a).

(15) The Supreme Court upheld theplea of the company by its majority Judgement in the view that the sales falling within the Explantaions being inter-State in character, could not be taxed by reasons of Article 286(2) unless the Parliament lifted the ban and that the Explanation to Article 283(1)(a) did not control Art. 286 (2). They overruled the decision in State of Bomabay v. United Motors (India) Ltd., : [1953]4SCR1069 , which laid down that Art. 286 (1) enacted a prohibition against taxation of transaction with inter-State elements by all States excepting which was left free to tax them, and that power was not derived from Art. 286 (1)(a) but under Art. 246 (3) read with Entry 54, in ScheduleIII. The majority of the learned Judges expressed the opinion that Art. 286 enacted two distinct and independent bans, though the Explanation to Art. 286(1) (a) could not be'legimately extended to clause(2) either as an exception or as a proviso thereto or read as curtailing or limiting the ambit of cl.(2).'

The principle adumbrated in that case does not help the petitioners. it is true that the transactions involved in that case were regarded as being in the course of inter-state trade or commerce. But it was not disputed that the sales took place in the course of inter-state trade or commerce. The only ground urged by the statein support of its authority to tax the transactions was that they fell within the sweep of the Explanation to Art.286 (1) (a). That this is so appears from the following passageof Das, C. J. occurring at page 680.

'It is not necessary, for purpose of this appeal to enter a discussion as to what is exactly meant by inter-State trade or commerce or by the phrase'in the courseof', for, it is common ground that the sales or purchases madeby the appellant company which are sought to be taxed by the State of Bihar actually took place in the course of inter-State trade or commerce.'

This case will not, therefore, afford any relief to the petitioners.

(16) Relaince was next placed by the learned counsel for the petitioners on State of Travancore-Cochin v. Shanmuga Vilas Cashewnut Factory, : [1954]1SCR53 . In that case, the purchases of cashew nuts fell into three groups, namely (i) purchases madein the local market; (ii) purchases from the neighbouring districts of the State of Madras; and (iii) imports from Africa. The learned counsel thinking that the discussion in the Judgement bearing on the second category of purchase helped him. In dealing with the second category their Lordships observed:

'The respondent's contention was that the purchase were effected and the deliveries taken by their own paid-servants outside the State of Travancore-Cochin and it was thus a caseof a person buying goods and taking delivery thereof outside the state and bringing them across the border after the transaction was completed in all respects outside the State. On the other hand, the contention on behalf of the State was that though the purchases were made outside the State in the neighbouring districts of Madras, deliveries were effected through ordinary commercial agents who made the purchases and arranged for the deliveries at the respective depots at Trichur or Quilon. All that can be said here is that, if the transactions took place in the manner alleged by the respondents in these two appeals, they would be exempted by the learned Advocate General of the appellant State. On the other hand, if, as claimed by the Advocate General, the purchases were effected by the employment of firms doing business as commission agents outside the State and the deliveries were made through normal commercial channels, the transaction would partake of an inter-State character and fall under Clause(2)'.

(17) We do not see how this passage lends any support to the case of the petitioners. All that it conveys is that is deliveries were to be madein the State of Travancore-Cochin, the sales would be exempt under clause (1)(a), whereas if deliveries were taken in the other State then they would be regarded as outside sales. We think that this in a way substantiates our conclusion.

(18) Nor does Sriram Venkata Subbarao and Son v. State of Andhra Pradesh, 1960-11 STC 646 (AP) carry the petitioners much further. There, a commission agent in Andhra Pradesh entered into contracts with sellers in Andhra Pradesh as agents for thedealers in Bombay, paid the price, supervised all the processing operations etc., took delivery of the cotton bales and transported them to Bomaby as instructed by his principals whenever wagons were available. He collected from the Bombay dealers pressing and other charges, sales-tax, his commission etc. It was held inter alia that the sale was completed inside the State and nothing remained to be done by the seller, and consequently it was an inter-Statesale. We are unable to see how that Judgement would be any helpto thepetitioners. The passage relied on by the learned Counsel is:

'The case would be different if someof the ingredients of the transactions were completed outside the State. Although all the essential ingredients took place within the State, transport of the goods took place across the border of the State as part and parcel of the transaction itself.' This statement of law would have been applicable to this case if someof the essential elements of the sales here had occured outside the State. But it would appear from the discussion to follow that none of the essential ingredients had taken place outside the State.

(19) In Capco Ltd. v. Sales Tax Officer, Kanpur, 1960-11 STC 34:

: AIR1960All62 to which our attention was next drawn, the assessee was a company and was subject to tax on sales effected to persons in Uttar Pradesh by itd head-office in Calcutta and branches at Bombay and Madras. The contract of sale provided for delilvery ex-godown Calcutta/ Madras/ Bombay or F.O.R. Calcutta/Madras/Bombay. The sales were for specific and ascertained goods in a deliverable State and the goods were despatched by the petitioners to the destinations in Uttar Pradesh to which the buyers desired them to besent for consumption in Uttar Pradesh. Payments were made by the buyers against sale bills and railway receipts received either directly or though banks or through V.P.P. As respects sales F.O.R. Calcutta/Madras/Bombay, the assessee charged with the railways freight and the cost of the carriage of the goods from the godown to the Railway station.

It was laid down by a Bench of the Allahabad High Court consisting of Mootham C. J. and Dayal, J. that since the delivery of the goods took placein Uttar Pradesh as a result of the sale under the contract within the purview of the Explanation to Art. 286(1)(a), they were not liable to sales tax in Uttar Pradesh. It is necessary for us to consider whether the principle enunciated there in is sound or not, as they are features which distinguish it from the present case, namely,that the railway receipts and sale bills could be obtained only against payments in Uttar Pradesh by presenting which alone delivery could be obtained. If,however, that distinction is not to betrated as material, we will have to express our respectful disagreement with it as it would be opposed to the principles laid down by the Supreme Court and other High Courts in various decisions.

(20) We may here call in aid the pronouncement of the SupremeCourt in Commissioner of Sales Tax Eastern Division, Nagpur v. Husenali Adamji and Co., : AIR1959SC887 . One of the question that posed itself there was whether the property in 'sawar' logs passed in Central Provinces where the logs were put in wagons or in Ambernath, in another State, where the logs were inspected and measured by the vendee's factory manager and where the prices which were F.O.R. Ambernath we repaid by the company to the assessee's agent at Bombay. The Supreme Court ruled that the sale did not take placein the Central Provinces and it was not liable to sales tax in that provinces and it was not liable to sales tax in that province, since the property in the goods did not pass to the company until the logs arrived at Ambernath and they were inspected, measured and accepted by the company.

(21) In the discussion of this topic, this is what their Lordships observed at page307 of thereport (S. T. C.) :(at p. 893 of AIR):-

'It is quite clear from the langauge of S. 23 itself that the appropriation may be by the seller with the assent of the buyer or by the buyer with the assent of the seller, that assent to appropriation may be express or implied and that it may be given after the appropriation or in advance before such appropriation. Learned Counsel for the department lays strong emphasis on the provisions of clause 4 in the contract that the sawar logs should be despatched by rail from certain stations, within the Central Provinces and contends that delivery by the seller of sawar logs of the contract quality and description to the railways in terms of the contract without the reservation of any right of disposal has the effect of passing the property therein to Wimco at the railway stations in the Central Provinces under Sec. 23 as well as of constituting delivery of them at the railway stations under Section 33 and 39(1). The argument is prima facie sound unless there be someother provision in the contract to negative this conclusion e.g., that thelogs must be carried to Ambernath and delivered there(SeeBadischeAnilin Und Soda Fabrick v. Basle Chemical Works, Bindschelder, (1898) A. C. 200, at pp. 207,209).

(22) The above quoted passage illustrates the principle that it only when a contracts comtemplates delivery of goods, in another State that the sale could be said to be an inter-state.

(23) Thelaw is stated in similar terms by the Supreme Court in Tata Iron and Steel Co. Ltd., Bombay v. S. R. Sarkar, : [1961]1SCR379 . interpreting Sec. 3 clause (a) of the Central Sales-Tax Act, 1956 Sarkar J. said that:-

'the words 'sale occasions the movement' should create no difficulty. It is apparent from the Explanation in Sec. 2(a) which will be set out later, that they mean 'moved by reason of the sale'. The question then arises, when does a sale' occasion the movement of goods sold? It seems clear to us that the sale can occasion the movement of thegoods sold only when the terms of the sale provide that the goods would be moved; in other words, a sale occasions a movement of the goods when the contract of sale so provides.'

It is abundantly clear from the two pronouncements referred to above that is a sale is to be treated as occuring in the course of inter-State trade, it should be a term of the sale that the goods should be transported from one state to another i.e., that the delivery be in another State.

(24) It was then argued by Sri Rajah Ayyar for the petitioners that even if the sale was completed within the state of Andhra Pradesh, still the transactions should be deemed to have taken place in the course of inter-state trade or commerce; as the goods were transported across the State frontiers, the situs of the sale being immaterial for the determination of the real character of sale for purpose of Article 286(2) of the Constitution.

(25) This is founded on the observations of Bose J. in : [1953]4SCR1069 occuring at page 166 (of STC) : (at p.268 of AIR). They are as follows:

'A, a Bombay dealer, sells goods to B, a dealer in Madras, for consumption in Madras. I will assume that delivery is made to B himself in Bombay and that he carries the goods across in person. If that is the normal way in which trade and commerce in that particular line of goods flows across the boundary, then that would in my opinion, be a sale in the course of inter-state trade or commerce, despite the facts, including delivery, mentioned therein. Ordinarily goods of this nature are delivered to a carrier but that makes my point all the stronger. So long as the ban imposed by clause(2) remains, the situs of the sale and the place of delivery are not material provided the sale and the place of delilvery are not material provided the sale is caught up in the vortex of inter-state trade and commerce. Similar considerations apply in the case of exports and imports.' This obiter dicta is contained in the dissenting Judgement of the learned Judge. The test postulated by the learned Judge is, 'the normal way in which the trade and commerce in the particular line of goods flows across the boundary.' It may be that with regard to the goods involved in that case that was the normal way in which the goods flowed over the borders of that State. The learned Judge would not have intended to lay down that as a universal test applicable to all cases notwithstanding that delivery was given to the buyer before the stream of inter-state trade or commerce commences. Such an interpretation of that passage would trench upon the doctrine established by the Supreme Court in its several rulings. It would also be opposed to the rule stated by the learned Judge in State of Mysore Spinning and ., : AIR1958SC1002 , which will be referred to presently. The learned Judge there observed that it is only a sale that occasion export that is exempted under Article 286(1) of the Constitution.

(26) Sri Rajah Ayyar next called our attention to a Judgement of the Calcutta High Court in Indian Standard Wagon Co., Ltd. v. Commercial Tax-Officer, : AIR1960Cal25 . The facts of that case as appear from the head-note are these: The petitoner, a limited company with its regard office in Calcutta, was engaged in the manufacture of railway wagons. The Railway Board in New Delhi placed an order with the managing agents of the petitioner for the manufacture of certain railway wagons and this orcer was accepted by a letter posted in Calcutta. Under the contract, delivery of the wagons was to be made at the petitioner's siding situated inside the State of West Bengal and payments were to be made in Calcutta. The wagons however, meant for consumption by the railways situated wholly outside the State of Bengal. On these facts the question arose whether the transaction effected by the assessee during the years 1952-53 and 1953-54 were liableto sales tax under the Bengal Finance(Sales Tax) Act 1941.

It was held by Singh J. that as the wagons were delivered within West Bengal, the transaction were not 'Explanation Sales' and were not hit at by Art. 286(1) (a), but as the transactions were invested with the character of inter-state sales, they fell within the exemption covered by Art. 286(2). However, as they were between 1-4-1951 and 6-9-1955, the levy of tax was validated by the Sales-Tax Laws Validation Act, 1956. The reason adduced by the learned Judge for holding that the sales were inter-state sales was that the contract contemplated movement over the border and the fact that delivery was to be at the manufacturer's siding was not enough in the case of manufacture and supply of railway rolling stock to constitute an inter-state sale. We are unable to share this view of the learned Judge and we have to express our respectful disagreement with it. The mere fact that the rolling stock would be manufactured and moved to various parts of India beyond the boundaries of the State would not render the sale an inter-state sale. Further, this reasoning is inconsistent with the statement of law contained in : AIR1958SC1002 . Delivering the opinion of the Court, Bose, J. observed:-

'There is nothing to show that these good were manufactured with the main intention 'for export' beyond the fact that they were sold to exporters and marked 'for export' at the time of despatch. But even if the facts were as stated, that would not help because, as we have already pointed out, this Court has decided that until the sale that occasions export is exempt and that 'the sale to the exporter that preceded it is not, even if it was made'with a view to' or 'for the purposeof, exports.'

(27) In order to impress the sale with the character of inter-state trade or commerce, the terms of sale should providied for the delivery outside the State should be pursuant to contractual obligations. Two essential conditions of inter-state trade or commerce are that there should be sale of goods and movement of those goods across the boroders of the State under a contract of sale i.e., the delivery outside the state should be a term of the contract.

(28) In this connection, we might usefully extract a passage from the Judgement of Venkatarama Ayyar J., in the Bengal immunity case (S) : [1955]2SCR603 .

'A sale could be said to be in the course of inter-state trade only if two conditions concur(a) A sale of goods, and (2) a transport of those goods from one State to another under the contracts of sale. Unless both these conditions are satisfied, there can be no sale in the course of inter-state trade. Thus, if X a merchant in State A goes to State B, purchases goods there and transports them into A, there is undoubtedly a movement of goods in inter-state commerce. But that is not under any contract of sale. X might be entitled under Article 301 to certain rights in the matter of transportation.

But Article 286(2) has no application, as there is no sale in the course of inter-state trade or commerce. In the same illustration, if X after transporting the goods into State A sells them, then also there is no sale in the course of inter-State trade. It is true that there is a sale, and there is also a movement of goods from one State to another. But that movement has not been under the sale, there having been no sale at the time of transportation. In-'Rottschaefer on Constitutional Law' (1930 Edn.) the sale in the course of inter-state commerce is thus defined:-

'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.' (See also Kerala Arecanut Co. v. State of Travancore-Cochin, : AIR1958Ker280 .

(29) It is manifest that in order to constitute inter-State trade or commerce, it is not sufficient if there is a sale and transportation of goods across the State's frontiers. There should a related connection between sale and the movement of goods. In other words, it should be stipulated between the parties that deliveries should be outside the State. The other cases citied by Sri RaJah Ayyar do not make any further contribution to the solution of the problem presented by this petition.

(30) We will next examine the features of the instant case in the light of the legal position indicated above. At the outset, it should be borne in mind that there is no stipulation as to the destination of the goods. As already mentioned, no contracts areentered into between the Collieries and buyers of the coal. Persons or institutions in need of coal should apply to the Coal Controller for allotment of particular quantities of coal and the latter allots specific quantity and gives intimation of such allotment to the allottee as also the Collieries. in spite of this, at one stage the learned counsel attempted to spell out an agreement as to the place of delivery from the letter of allotment sent by the Deputy Coal Controller, though during a good part of the hearing of the revision, the arguments proceeded on the footing of an implied term of contract in that behalf. But he did not suceed in his attempt since that letter does not throw any light on the place of delivery to the allottee. It has only three columns, namely, (1) name of the concern (2) class of coal and (3) quantity. Under the first column, the name of the allottees and their addresses are given.

It is the mention of the address of the allottee that was responsible for the argument that place of dellivery was indicated therein. We have already stated that letter does not contain a column in regard to the destination of goods. If really the place of delivery was in the contemplation of the Controller, several of the things which will be referred to immediately would have been unnecessary. We, therefore, have to take it that there was no express term of the contract as to the place of delivery.

(31) This leads us to the question whether we can infer from the circumstances of the case such a term.

(32) In the consideration of this question, we will have to refer to the notification issued by the Government of india in July, 1956, to which our attention was drawn by the learned counsel for the petitioners. The note fixes different prices for different varieties of coal and for different collieries. That note recites:

(i) The prices given under tables i,iii,iV and Vii are for delivery free on rail at or at the loading point nearest to the colliery, or free on tramway or road vehicle at the colliery.

(ii) The prices given under table II are for delivery free on rail at or at the loading point nearest to the colliery or free on road vehicle at the colliery and are inclusive of all charges.

(iii) The prices given under table V are for delivery on rail at the colliery;.except that;** ** * * **

(33) It is plain that the collieries are required to deliver the goods at or near the collieries and it is with reference to the place of delivery that prices are fixed by the Coal Controller, Ministry of Production, Government of India. There is no obligation on the part of the owners of the Collieries to deliver coal at any other place, be it inside or outside the State. This is in consonance with Sec. 36 of the Indain Sale of Goods Act. It provides:

(1) 'Whether it is for the buyer to take possession of the goods or for the seller to send them to the buyer is a question depending in each case on the contract, express or implied between the parties. Apart from such contract, goods sold are to be delivered at the place at which they are at time of the sale, and goods sold are to be delivered at the place at which they are at the time of the agreement to sell, or if not then in existence, at the place at which they are manufactured or produced.* * **

(34) Thus, in the absence of a contract, in view of this section, coal is to be delivered by the petitioners to the buyers at the Collieries. Now, is there any contract which could be implied that coal was to be delivered at a place other than the Colliery or, at any rate, outside the State of Andhra Pradesh Far from there being any such impliled term, the indications are to the contrary. If really there was a stipulation as to the place of delivery between the parties, there was no need for the petitioners to ask the buyer for despatch instructions or for the latter to issue such instructions. That such delivery as a term of the contract was not in contemplation of the parties would appear from a letter written by one Govindjee MadhowJee and Co., Private Ltd., to the petitioners. It is complained in that letter that one Wagon containing Tons 22-10-0 crushed Round coal was despatched to Associated Cement Company, Kishna Works, not to send any more wagons to Kishna works, without any instructions and the Collieries was asked not to send any more wagons to Kishna works. This would not have been the position, if there was any contract between the parties in this behalf.

It is seen from the correspondence filed by the petitioners that invariably, the buyers furnished the collieries with a rail-head programme for the despatch of coal within the allotments made to the various buyers. They requested the collieries to sent coal in instalments to different places at different times. We may refer to a letter written by one of the allottees on 5th september, 1956 as an illustration. it indicates that there could not have been any stipulation regarding delivery out side the state. This is What is stated in that letter.

'....As the Director of Controller Commodities has given orders to issue coal to the permit card holders from the last month onwards, the permit holders are coming to take the coal. But very little quantity has been received so far. So I request you to despatch immediately August and September allotments.

I am herewith furnishing Rail-Head programme for the month of September, 1956, for your information and necessary arrangements to despatch coal wagons.'

(35) There is another circumstance which clinches the matter against the petitioners and that is the'condition of sale' contained in the sale note issued by the petitioners. They are:

1. The sellers shall not be responsible for non-delivery or late delivery of all or any if the coal contracted for, should such arise from or to bein consequences of fire, snow, beat, flood strikes, lockouts or any disorganisation of labour wherever happening shortage or empties, restrictions on bookings,accidents or loss during sea or land transport, war invasion, or blockade, over carriage of goods by land or sea, riot, or other Force majeure, and the buyer agrees to accept late delivery as good in all cases.

2. In the event of any taxes, export duty, cess or other charge not now in force being imposed by Government, the Buyer shall pay the same in addition to the Sale price. Stowing Excise Duty, Labour Welfare Cess, shall be collected by the Railway at destination. The company will only collect these cesses for supplies of coal other than by Rail.

3. Where coal is despatched freight 'paid' in extraordinary cases, the consignment will be handed over by us to the Railway Company for despatch to destination at the minimum freight, and in the terms of the Railway Company's usual Owner's Risk Note relating to minimum freight on account and risk of the Buyers, and the Buyers, agree to accept and pay for Rail Receipt weights. Any increase in Rail Frieght after receipt of order in these cases will be debited to Buyer's account and paid by them.

The Buyer shall, if required to do so by the company, pay for all coal ordered before it is despatched subject to adjustment on Rail Receipt weight. The Sellers havea lien on all coal despatch until such coal be paid for.

XX XX XX

(36) These terms would be unmeaning if there was an agreement between the parties that the goods were to be delivered at a place other than the Collieries. If such a stipulation existed, the collieries have to carry the coal to that place and deliver it therein a deliverable state. They cannot disown responsiblity for non-delivery of the goods. It is incumbent on them to deliver the goods contracted to be sold at the destination. These conditions, on our opinion, are pointer to the conclusion that there was no contract between the parties that the petitioners had to deliver goods at a place other than the colliereis and if they despatched goods to various places it is not pursuant to any contractual obligation but is in complaince with the request of the buyers. They put the goods on rail as per the Rail head programme furnished by the buyers. Therefore, delivery of the goods to the buyers, furnished the rail-head programme. In the circumstances of the case, the common carrier should be taken to have been designated by them. The common carrier, therefore, is a bailee of the buyer and not of the seller.

(37) The law on the subject is stated by Benjamin on sale as follows:

'It is well that the delivery of good to a common carrier, a fortiori to one special designated by the buyer for conveyance to him or to a place designated by him constitutes an actual receipt by the buyer. In such cases, the carrier is, in contemplation of law, the bailee of the person to whom, not of the person by whom, the goods are sent, the seller in employing the carrier being considered as an agent of the buyer for that purpose.'

(38) So, when the property was put on rail at the Collieries itself, there was receipt of these goods by the buyer and as much the sale in all these cases was complete within the State. The petitioners transported the goods to various places outside the State, as instructed by the parties, and not as a condition attached to the contract of sale. The movement of the goods was subsequent to the completion of the sale in this State. After the goods were put in the wagons, there was nothing further to be done by the vendees. In cases where the Government was not the purchaser, cash was paid in advance and in cases where the Government was the purchaser, cash was realised later. As such there was no question of the petitioners having any vendor's lien in regard to these goods or the right of stoppage in transit. It is true that one of the conditions of sale was:

'......The seller have a lien on all coal despatched until such coall bepaid for.'

But it is seen from the letters written by the consumers that the whole price was paid in advance. Moreover, it is stated in the order of the Tribunal that it was not denied that the transfer of the goods was for cash and it was admitted that except in cases where the Government was the purchaser cash was paid in advance and in cases where Government was the purchaser was realised later. So far as the coal sold to Government is concerned, the sales seem to havebeen on credit basis and as such there is no question of the petitioners having the vendor's lien or the right of stoppage in transit even in that regard. What follows from this premises is that the sale in all cases was complete in this State itself before the goods we removed to various places outside the State.

(39) Some reliance was placed by sri Rajah Ayyar, counsel for the petitioners, on the clause in the consitions of sale. 'The buyer shall, if required to do so by the company, pay for all coal ordered before it is despatched subject to adjustment of Rail Receipt Weights.' It is argued on the basis of this clause that the price could not be said to have been fully paid. We have already stated that the sale was for cash and that it was paid in advance. This clause only enables the buyers to get back any excess amount paid by him to the company. It cannot be overlooked in this context that the proprietors of the Collieries could not sell coal morethan what is alloted by the Coal Controller. Full priceis paid to the petitioners on the basis of the allotment and if the quantity despatched falls short of that allotted and for which the price was paid, the buyers should be paid back the amount. This, is the only purport of that clause.

(40) We will now deal with clause10-A of the Colliery Control Order, 1945, which is pressed into service by the petitioners in support of the theory that delivery could be deemed to have been effected only when the goods are physically put in possession of the buyer. It is argued that the allottee is not certain of receiving the goods despatched until he actually receives them, as under clause 10-A(1) of the Colliery Control Order, 1945 the Coal Commissioner could direct the coal to any other person even while the goods are in transit and, therefore is no unconditional appropriation of the goods to the particular contract.

We do not think that circumstance in any way alters the situation. So far as the seller is concerned, as soon as the goods are put on rail, he fades out of the picture and he is not in any way responsible for the diversion. This is an extraneous factor that cannot have any bearing on the present enquiry. The Coal Commission is invested with this power because coal is a controlled commodity. In fact, that order itself contemplates that the property in the goods in transit had already passed to the buyer and he is entitled to such compensation as the Coal Controller considers reasonable and it could be either in the shape of the same quantity of coal of same or similar quality, size and grade and at the same place as soon as coal , for such purpose is availble. Thus, the right of the Controller to divert the coal to some person other than the one who bought the coal from the petitioners does not detract from the nature of the transaction.

(41) It follows that the transactions, in question do not constitute an inter-state trade or commerce so as to claim the exemption granted by Article 286 of the Constitution and are, therefore amenable to sales tax:

(42) It was next contended by Sri Rajah Ayyar that the transactions for the period between 1-4-56 and 10-1-1956 are hit at by the Explanation to Article 286(1)(a) of the Constitution and hence it was not within the competance of the State Government to impose tax in respect thereof. The petitioners limit it to the period up to 10-9-1956, as the Explanation was deleted from the Constitution by the Constitution Sixth Amendement Act, 1956.

(43) We do not think that the petitioners can invoke that Explanation in view of our finding that coal was not delivered as a direct result of the sale. We have already said that it was not as a part of the bargain between the parties that the goods were despatched to places outside the State. In order that delivery for consumption in another State should come within the ambit of that Explanation, it should be an integral part of the sale. That is the import of the expression of the expression 'delivery as a direct result of such sale'. Since the petitioners had not succeeded in proving that it was a term of the contract that the goods should betransported to places outside the State, they could not have resort to the Explanation. Therefore, the sales effected between 1-4-1956 and 10-9-1956 are not covered by the ban created by the Explanation and are liable to sale-tax.

(44) It was lastly urged by Sri Rajah Ayyar that, at any rate, the sales subsequent to 5-1-1957, when the Central Sales Tax Act 1956 (74 of 1956) was passed, should not be subject to tax, since these transactions are governed by Sec. 3 of that Act. This submission is unsubstantial. That section only defines what inter-state trade or commerce means. It runs as follows:

'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) Occassion the movement of goods from one State to another or

(b) is effected by a transfer of documents of the title to the goods during their movements from one State to another. Explantion I: Where goods are delivered to a carrier or other bailee 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 II: Where the movement of goods commences and terminates in the same State it shall not be deemed to be a movement of goods from one State to another by reason merely of the fact that in the course of such movement the goods pass through the territory of any other State.'

(45) It is seen that clause(b) has no bearing on the present enquiry as it related to transfer of documents of the title to the goods, while in transmit from one State to another. We are here concerned only with clause (a). The Central Act was enacted by Parliament in exercise of the power conferred by Article 286(2) of the Constitution. Sec. 3(a) only contains a rule to determine as to what constiutes inter-state trade or commerce. According to that rule, the transactions could be said to have inter-state elements only if the sale itself occasion transportation of goods. The exact import of the expression 'sale occasioning the movement of the goods' is, as already stated, that the delivery outside the State should be under a covenant or as an incident of contract of sale. This clause contain the same priniciple as that laid down in the various decision referred to above and the concept underlying this clause does not contain a different one. Therefore, if the petitioner had failed to prove that the sales in question are invested with inter-state character, they cannot succeed in getting them within the scope of this clause. SO, section 3 of the Central Sales Tax Act, 1956 does not render any assistance to the petitioners. We, therefore, feel that the order of the Sales Tax Appellate Tribunal confirming that of the Deputy Commissioner of Commercial Taxes cannot be successfully impeached.

(46) It follows that the revision petition has to be dismissed with costs. In the special circumstances of the case, Advocate's fee is fixed at Rs. 500/ (Rupees fivehundred only).

(47) Revision petition dismissed.


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