R.S. Pathak, J.
1. The assessee manufactures and sells jute goods. Its selling agents, M/s. Bagla Bros., secured orders from local parties at Kanpur. The orders were placed in a printed form. The order forms were then sent to the assessee for necessary compliance. Subsequently the Kanpur parties sent instructions to the assessee to despatch goods pertaining to their orders to third parties outside Uttar Pradesh. Accordingly the assessee booked the goods by rail. The railway receipts showed the assessee both as consignor and consignee. In some cases the receipts were sent to the Kanpur parties and in other cases to third parties outside Uttar Pradesh. C forms were also issued by the ex U.P. parties.
2. For the assessment year 1957-58 the assessee was assessed under the U.P. Sales Tax Act on a gross turnover of Rs. 43,93,303.00. This included the turnover of goods despatched outside the State in accordance with the procedure mentioned above. The assessee contended that the transactions in question represented inter-State sales and were not liable to U.P. sales tax, but the contention was rejected. An appeal by the assessee was dismissed. The order was affirmed by the Judge (Revisions) Sales Tax, who held that according to the terms set out in the contract forms the delivery of the goods was completed at the mill premises and the subsequent movement of the goods outside the State could not be said to have been occasioned by the contract of sale entered into by the assessee. At the instance of the assessee the Judge (Revisions) has referred the following question:--
Whether under the circumstances of the case, these transactions of subsequent despatch are to be regarded as intra-State sales having been completed at Kanpur or as inter-State transactions?
3. It is appropriate at this stage to set out the relevant terms of the contract:
1. Unless otherwise expressly agreed in writing all goods sold shall be deemed to have been sold ex mill delivery. No complaint regarding quality or otherwise shall be entertained once the goods have left the mill premises. Even if the goods are despatched by the mills in response to the desire of the buyer, the liability of the buyer shall not cease under this condition.
2. If the buyer refuses or neglects to take delivery of the goods sold under the contract on any account whatsoever, the goods may be disposed of on the buyer's account, risk and responsibility without any notice being given for the resale by the mills and the buyer shall be liable for the resulting loss. Even if the mills do not actually resell the goods, they can claim from the buyer damages based on the difference between the contract price and the market price.
3. The date of delivery stated in the order or contract shall not be the essence of the contract. The mill shall not be responsible for delay in performance of this contract partly or wholly due to strike, fire, damage or accident to the mill or their machinery or booking restrictions or any other event or circumstances whatsoever beyond the control of the mill.
4. If under the unforeseen circumstances, the mill does not work for three months in continuation, the mill has full right to cancel part or whole of the contract.
5. Once the goods have left mill premises, no liability whatsoever will be attached to the mill thereafter for any damage caused or done to the goods.
4. The case of the assessee is that the sale was effected by the assessee to an ex U.P. party and that the contract of sale evidenced by the contract form was a mere agreement of sale and did not mature into a completed sale between the assessee and the Kanpur party. The basis of that submission is the circumstance that the railway receipts in respect of the goods were drawn in favour of the assessee as consignee, and the argument is that thereby the assessee retained the property in the goods until the property passed upon endorsement of the railway receipt in favour of the ex U.P. party on payment of price of the goods. The assessee says that the case falls under Section 3(b) of the Central Sales Tax Act. Alternatively, it is urged that the instructions given by the Kanpur party to despatch the goods outside U.P. must be considered as part of the contract of sale and, therefore, the movement of the goods from Kanpur to a place outside U.P. was occasioned by the contract of sale, and the case would then fall under Section 3(a) of the Act. The case of the Commissioner of Sales Tax, on the other hand, is that under paragraph 1 of the contract of sale, property in the goods passed at the mill gate, and the subsequent despatch of the goods by rail by the assessee was merely in order to accommodate the buyer. It is contended that the circumstance that the railway receipt disclosed the assessee as consignee does not militate against this position. In that event, neither Clause (a) nor Clause (b) of Section 3 of the Act is attracted.
5. Section 3, Central Sales Tax Act, reads:
When is a sale or purchase of goods said to take place in the course of interstate trade or commerce.--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.
Explanation 1.--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 2.--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.
6. It is well settled that if a sale is an inter-State sale it is so because it falls either under Clause (a) or Clause (b) of Section 3. The two clauses are mutually exclusive. If a case falls under Clause (b) it cannot fall under Clause (a), and as was pointed out by the Supreme Court in Tata Iron and Steel Co. Ltd. v. S.R. Sarkar  11. S.T.C. 655 at 667 (S.C.):
In our view, therefore, within Clause (b) of Section 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 documents of title thereto: Clause (a) of Section 3 covers sales, other than those included in Clause (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.
7. We shall now examine whether Clause (b) of Section 3 applies. Clause (b) of Section 3 is attracted if the sale is effected by a transfer of documents of title to the goods during the movement of goods from one State to another.
8. Regard being had to the terms and conditions of the contract between the assessee and the Kanpur parties, it is clear that property in the goods was intended to pass ex mill. That is expressly stipulated under paragraph 1 of the contract. Even if the goods were despatched by the assessee to places outside the mills in response to the desire of the Kanpur party, the liability of the Kanpur party would be on the basis that the goods were sold ex mill. There is nothing in the terms and conditions of the contract stipulating that property in the goods would pass by a transfer of documents of title. Indication to the contrary is also afforded by the statement of the purchaser:
We beg to confirm having bought from you the goods as detailed below subject to the terms and conditions overleaf....
9. Upon the plain terms and conditions of the contract it makes no difference that the goods were booked by rail under railway receipts, that the railway receipts showed the assessee as consignee, and that in the transactions under consideration the railway receipts were sent to third parties outside Uttar Pradesh. The case before us is one where the assessee sold the goods to a dealer within the State and the dealer entered into a transaction with a party outside the State to whom, ultimately delivery was effected by the assessee. There were two transactions, the first being an intra-State sale between the assessee and the Kanpur party, and the second (1)  11 S.T.C. 655 at 667 (S.C.). being a sale between the Kanpur party and the outside party. Such cases are not unknown. In Gordhandas Lalji v. B. Banerjee and Ors. and S. Ghosh and Anr.  9 S.T.C. 581 (S.C.), the Supreme Court held that in a case where goods were appropriated by the assessee to the contract with Bombay parties and thereafter he shipped the goods outside India according to their instructions, the act of shipping the goods outside India was a transaction apart from the contract between the parties under which the property passed. The assessee was held not entitled to the exemption under Article 286(1)(b) of the Constitution as what were taxed were the sales by the assessee in favour of the Bombay parties and not the sales by the Bombay parties in favour of outsiders.
10. In our opinion, Clause (b) of Section 3 is not attracted to the case before us.
11. The question then arises whether Clause (a) of Section 3 comes into play. In order that in terms of Clause (a) of Section 3, a sale can be said to occasion the movement of goods from one State to another, the movement of goods must be the result of a covenant or an incident of the contract of sale, and it is immaterial that the property passes in one State or the other. So it was laid down in Tata Iron and Steel Co. Ltd.  11 S.T.C. 655 (S.C.). Reference may also be made to the observations in Bengal Immunity Co. Ltd. v. State of Bihar  6 S.T.C. 446 (S.C.), where it was pointed out:
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.
12. In the present case, when paragraph 1 of the contract expressly contemplates that the goods would be sold ex mill delivery, it cannot be said that if the goods subsequently crossed the border of the State of Uttar Pradesh to a neighbouring State it was as a result of a covenant or an incident of the contract of sale. It is true that paragraph 1 also recites:--
Even if the goods are despatched by the mills in response to the desire of the buyer, the liability of the buyer shall not cease under this condition.
13. From this recital the assessee attempts to spell out the case that the parties expressly contemplated that goods could be despatched by the mills upon instructions of the buyer to places outside Uttar Pradesh. Now, in the first place, the language employed in the recital does not make it obligatory on the assessee to despatch the goods as directed by the buyer. The language appears to indicate that it is within the discretion of the assessee whether or not to despatch the goods as desired by the buyer, and the fact of the discretion is emphasised by the stipulation that even if the goods are so despatched the liability of the buyer shall not cease under Clause (1). In other words, the liability of the buyer continues on the basis that the goods have been sold ex mill delivery. In the second place, there is nothing in the recital to indicate that the parties expressly contemplated that the goods should be despatched to a place outside the State of Uttar Pradesh. It is difficult for us, in the circumstances, to hold that any goods so despatched moved from the State of U. P. to a neighbouring State as the result of a covenant or an incident of the contract of sale. Plainly, the contract contains no such covenant or incident.
14. The case is similar to Bharatkhand Textile . v. State of Gujarat  15 S.T.C. 885, 891. In that case, it was not an essential term of the contract of sale that the goods should necessarily cross the border of the State of Bombay and go to another State. It was contended by the assessee that there was an implied term of the contract of sale that the assessee should give delivery of the goods to the buyers at their godowns, or should, if so instructed by the buyer, despatch the goods by rail to destinations intimated by the buyers and give constructive delivery of the goods by handing over the relative railway receipts duly endorsed in favour of the buyers. The Gujarat High Court held that this implied term did not establish that under the contract of sale the goods were necessarily to leave the State of Bombay. It was pointed out that the goods might, under the contract of sale, be taken delivery of by the buyers at their godowns within the State of Bombay or, if the buyers so instructed the assessee, the goods might be despatched to other destinations which again might be either within the State of Bombay or outside the State of Bombay, depending upon the instructions of the buyers. The buyers had thus an option under the contract of sale either to take actual delivery of the goods at their godowns within the State of Bombay or to direct the assessee to despatch the goods by rail to destinations within the State of Bombay or outside the State of Bombay according as they required in each case. The court held that the sales could not be said to have occasioned the movement of the goods from one State to another and that, therefore, they were not inter-State sales.
15. We shall now turn to the cases on which the assessee. has placed reliance. Reference was made to P. Mansinghka v. Commissioner of Income-tax : 3SCR961 in support of the proposition that in a case where goods are despatched by rail under a railway receipt showing the seller as consignee, and thereafter the railway receipt is endorsed in favour of the buyer and sent to a bank for delivery to the buyer upon payment of price the seller must be considered to have reserved the right of disposal over the goods at the time of despatch and, therefore, within the terms of Section 25 of the Sale of Goods Act property in the goods does not pass until delivery is effected by the bank to the buyer. The distinguishing feature in this case is that it was an essential condition of the contract that the consignments would be sent to Kodarma or Giridih and the railway receipts would be sent 'through bank'. In the present case the contract proceeds on the basis that goods would be sold ex mill delivery and even if the goods were despatched to some other place on the desire of the buyer the liability of the buyer would continue on the basis that the goods had been sold ex mill delivery. One of the consequences would be that the Kanpur buyer would be liable for the price and it would not be necessary for the assessee to proceed against the third party in case it did not accept the railway receipt and take delivery of the goods. Paragraph 1 clearly intended that the sale would remain one between the assessee and the Kanpur buyer even if the goods were despatched to a third party under a railway receipt endorsed in favour of that third party. The Judge (Revisions) has held that the assessee sold the goods to local parties at Kanpur and that is also evident from the specimen contract form set out in his judgment which shows the Bardana Trading Company, Kanpur, as buyer. We are unable to accept the contention of the assessee that although the contract of sale was between the assessee and the Kanpur party, the actual sale consequent thereto took place between the assessee and the third party. That is a contention for which we find no support on the facts of the present case. Another feature which distinguishes P. Mansinghka v. Commissioner of Income-tax : 3SCR961 . is that on the facts before us the railway receipt was endorsed in favour of a third party and delivery made to it. We may reiterate that it is not a case where within the contemplation of the contract the assessee can be said to have reserved the right of disposal over the goods at the time of despatch.
16. The assessee has also referred to the State of Madras v. Govind Lal and Anr.  7 S.T.C. 409. This case is distinguishable because of the considerations mentioned above.
17. For the same reason, the decisions of the Supreme Court in Amritsar Sugar Mills Co. Ltd. v. Commissioner of Sales Tax  17 S.T.C. 405 (S.C) and Lord Krishna Sugar Mills Ltd. v. Commissioner of Sales Tax  18 S.T.C. 498 (S.C) are distinguishable. The railway receipts in those cases were endorsed by the assessee in the name of the buyers. Moreover, the Supreme Court was called upon to consider whether the sales in question were sales for delivery outside Uttar Pradesh for the purposes of Section 5 of the U.P. Sales Tax Act, and it was in that context that the Supreme Court observed that what was contemplated was actual delivery and not constructive delivery and that as the actual delivery of the goods took place outside Uttar Pradesh under the terms of the contract the benefit of Section 5 was available to the dealer. It was laid down that although the destination to which goods were to be despatched on the instructions of the buyer was not expressly specified in the contract between the parties, when the destination was actually specified by the buyer it must be taken that it formed a part of the contract itself and that, therefore, the contract intended that the goods would be delivered at that destination outside Uttar Pradesh. The court said:
The next question that arises is whether the sales by the assessee-mills were for actual delivery outside Uttar Pradesh. The answer to this problem depends on the answer to the question whether despatch instructions contemplated by Clause 2 and Clause 3 of the contract were part of the contract entered into by the assessee-mills. It seems to us that they were. The contract by the assessee-mills was to actually deliver at a place to be communicated. This view is reinforced by what is contained in Clause 11 of the contract. This clause contemplated a destination in spite of constructive delivery having been contracted to be made at Rohana Kalan Station. Further, the contract was not to actually deliver at some place to be chosen or assented to by the assessee-mills but at any place without restrictions. The contract required nothing more for completion than a mention of the place. When the despatch instructions were given, it was not a case of performing the contract but specifying a term of the contract. If the place of actual delivery had been specified and it was a question merely of communicating the route by which the goods were to be delivered this would perhaps relate to the mode of performance of the contract. But communication of the place where actual delivery is to be given does not relate to the mode of performance but formation of the contract.
18. Further, it is pertinent to point out that whereas the contract between the parties in those cases contemplated an obligation on the part of the dealer to despatch the goods to any place indicated by the buyer, there is no such obligation under the contract between the assessee and the Kanpur buyers. Paragraph 1 of the contract is couched in entirely different terms.
19. We are of opinion that upon like considerations the cases of Commissioner of Income-tax v. P.M. Rathod  10 S.T.C. 493 (S.C.), Governor-General in Council v. Joy Narain Ritolia A.I.R. 1948 Pat. 36, State of Madras v. V.P.V. & Sons : AIR1959AP23 and Lakshmi Ganesh Rice Mill v. Board of Revenue  22 S.T.C. 506 are distinguishable.
20. In support of the submission that Clause (a) of Section 3 of the Central Sales Tax Act is attracted, the assessee has referred to Tata Iron and Steel Co.  11 S.T.C. 655 (S.C.) and to State Trading Corporation of India Ltd. v. State of Mysore : 3SCR792 . Both these cases, however, were decided on the basis that the contract between the parties expressly contemplated a movement of the goods from one State to another.
21. We are of opinion that the sales in question cannot be described as inter-State sales as defined in Section 3 of the Central Sales Tax Act. The property in the goods must be taken to have passed at Kanpur, and that is clear from the terms of the contract between the parties. The sales are intra-State sales. We answer the question referred accordingly.
22. The Commissioner of Sales Tax is entitled to his costs which we assess at Rs. 100. Counsel's fee is assessed at the same figure.