1. The Sales Tax Tribunal (Board of Revenue, M. P.) has made this reference under Section 44 of the Madhya Pradesh General Sales Tax Act, 1958, at the instance of the Commissioner of Sales Tax, M. P. The question referred to us is:
'Whether in the facts and the circumstances of the case the sales amounting to Rs. 34,468.38 np. were sales made in the course of inter-State trade and commerce or intra-State sales?'
2. The facts of the case are that the assessee firm deals .in manganese ore extracted from a mine in Balaghat District. The assessee was assessed on the sale of manganese worth Rs. 1,04,070/- on the basis that the sales were intra-State sales. The assessee had claimed deductions for the sales worth Rs. 34.568.35 nP. on the ground that said sales were inter-State sales exempt from the State tax. This claim was negatived by the Sales Tax Authorities; but the Tribunal upheld it.
3. The sales in question were effected in favour of Messrs. Rambahadur Thakur & Co., Nagpur, and Bal Krishna Trading Co; Nagpur, under the contracts dated 17th October 1957 and 8th April 1958 respectively. Under both the contracts the agreement was to sell certain quantity of manganese ore lying at the Katangi Railway Station siding at the stated price F. O. R. Katangi. Under both the contracts the assessee was responsible for loading the wagons indented by the purchasers. It is also not disputed by the assessee that the consignees and the consignors of the goods from Katangi were the purchasers in both the cases. Other important conditions relevant to the controversy raised before us are as under:
' I. Contract with Messrs. Ram Bahadur Thakur & Co., Nagpur.
DELIVERY: The entire contracted quantity is ready at Katangi Railway Station siding and is tendered herewith for sampling.
WEIGHT: First net weight at Gondia weighbridge shall be final and binding on sellers and buyers for the purpose of payment.
PAYMENT: The buyers agree to pay 80 per cent value of the stacks, tendered and accepted by the buyers on receipt of satisfactory analysis report, and the balance shall be paid by the buyers to the sellers after loading the entire stack andon receipt of first net weight from Gondiaweighbridge.
* * * II. Contract with Balkrishna Trading Co., Nagpur.
DELIVERY: Ready stack at Katangi Rly. siding in two lots.
PAYMENTS :-- 80 per cent on analysis report and balance on final weight of Gondia weigh-bridge.'
These conditions clearly show that the delivery was to be taken by the purchasers at Katangi Railway Station and major portion of the price was to be paid on loading. The balance was, however, to be paid after the exact weight of the ore determined at the weigh-bridge at Gondia a place: outside the State of Madhya Pradesh. As the consignors and consignees of the goods in both the cases were the purchasers, there cannot be any doubt that the movement of the goods from Katangi to Gondia and onwards was at the instance of the purchasers. The Sales Tax Tribunal, however, held that inasmuch as under the terms of the contract the weight of the ore was to be ascertained at the weigh-bridge at Gondia, the movenment of the goods from Katangi to Gondia was occasioned by the terms of the respective contracts and hence the transactions were in the course of inter-State trade and commerce,
4. The reasoning of the Tribunal is that after the amendment of Articles 286 and 289 of the Constitution and the amendment of the entries in the Seventh Schedule (Entry No. 92-A of the First List and Entry No. 54 of the Second List) the question of the character of a sale can be determined on the tests laid down bv the Parliament in Section 3 of the Central Sales Tax Act. 1956. Section 3 of the Central Act reads;
'3. When is a sale or purchase of goods said to take place in the course of inter-State trade or commerce. A sale of 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 purpose 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 Rnd 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.'
The Tribunal further referred to the decision of the Supreme Court in Tata Iron and Steel Co., Ltd. Bombay v. S. R. Sarkar, 1960-11 STC 655: (AIR 1961 SC 65) in support of its conclusion. The Tribunal specially relied on the following observation:
'.....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.' (p. 667 of STC : (at p. 72 of AIR)).
and held that as the movement of the goods from Katangi to Gondia for the purposes of determining the weight was in terms ofthe contract of sale, the matter was covered by Clause (a) of Section 3 and that the sales in question were inter-State sales.
5. Undoubtedly, the case is not covered by Clause (b) of Section 3. It will have, therefore, to be seen whether the case falls within Clause (a) of Section 3, As observed by their Lordships in the case of the Tata Iron and Steel Co., Ltd. 1960-11 STC 655: (AIR 1961 SC 65) (supra) the passing of the title in one State or the other is not relevant in deciding whether the sale is inter-State or intra-State, but the sole deciding factor is as to whether the movement of goods from one State to another was as a result of a covenant or the incident of the contract of sale. In the case of Tata Iron and Steel Co. Ltd. 1960-11 STC 655=(AIR 1961 SC 65) (supra) it was not disputed that the sales were inter-State sales, and the only controversy was as to what State was entitled to the Central Sales Tax. But the test laid down by their Lordships in that case was adopted by the Supreme Court in subsequent cases also: [See Cement Marketing Co. v State of Mysore, 1963-14 STC 175= (AIR 1963 SC 980) and Khosla & Co. (P) Ltd.. Delhi v. Deputy Commissioner of Commercial Taxes. Madras Division, 1966-17 STC 473=(AIR 1966 Section C. 1216) and we must proceed to decide the present controversy on the basis of the test laid down by the Supreme Court in 1960-11 STC 655= (AIR 1961 SC 65) (Supra).
6. Shri Sen, learned Advocate-General urged on behalf of the Revenue that a sale is complete in the case of ascertained goods if the goods are delivered to the purchaser for an agreed consideration. The payment of consideration at the time of delivery is not essential for completion of a sale He pointed out that in this particular case the agreement was to sell ascertained goods for a stated price. When the goods were delivered at Katangi, the sale was completed in all respects. The further movement of the goods was not in furtherance of the sale transaction. He urged that the movement of the goods across the border of the State in pursuance of the contract must be for the purposes of delivery of the goods to the buyer and for noother purpose. In that case alone the test laid down by the Supreme Court would apply: but when the delivery of the goods is taken by the purchaser inside a State and the sale transaction is completed, there can be no question of invoking the aid of Section 3 for determining the nature of the transaction. Shri Sen referred to the following observations from the judgment of Tata Iron and Steel Co; Ltd; 1980-11 STC 655= (AIR 1961 SC 65) (supra):
''By the first part of the definition, in case of sale of goods falling within Clause (a), the place from which the goods have been moved is the place of business and by Clause (2), in the case of sales falling within Clause (b) of Section 3, the place where the sale is effected is the place of business This evidently is a highlv artificial definition. By a fiction, the place from which goods have been moved by reason of the sale falling within Clause (a) of Section 3, that is, that place from which the goods have been moved under the contract of sale for the purpose of delivery to the purchaser in another State was declared the place of business.' [p. 668 (of STC)=(at p. 72 of AIR)] and urged that the movement of the goods in terms of the contract must be for purposes of delivery to the purchaser and not otherwise. We find that there is great force in the submissions made by Shri Sen.
6A. In Commissioner of Sales Tax v. Husenali Adamji and Co., 1959-10 STC 297 at p. 308=(AIR 1959 SC 887 at p. 893) their Lordships of the Supreme Court observed thus:
'It is quite clear from the language ot Section 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 provision 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 Section 23 as well as of constituting delivery of them at the railway stations under Sections 33 and 39(1). The argument is prima facie sound unless there be some other provision in the contract to negative this conclusion, e. g. that the logs must be carried to Ambernath and delivered there.'
The above-quoted passage illustrates the principle that it is only when a contract contemplates delivery of goods in another State that the sale could be said to be inter-State. In our opinion, in order to impressthe sale with the character of inter-State trade or commerce, the terms of sale should provide for the delivery being effected in another state, i. e., the delivery outside the State should be pursuant to contractual obligations and not otherwise.
7. Shri Dharmadhikari, learned counsel for the assessee, referred to the decision of this Court in Commissioner of Sales Tax, M. P. v. Shri Allwyn Cooper, Katangjhiri, Misc. Civil Case No. 318 of 1964 D/- 26-11-1965 (MP) and urged that in similar circumstances it was held in that case that the sales were inter-State sales and that in this case also no other conclusion can be reached. In that case, this Court, after considering the contracts in question, came to the following conclusion:
'These stipulations about the despatch of ore to Gondia in two cases, and to Vishakhapatnam Port in the other two cases, leave no doubt that the transport of manganese ore from the State of Madhya Pradesh to Gondia and Vishakhapatnam outside the State was under the contracts of sale concluded between the assessee and the buyers These sales were, therefore, clearly in the course of inter-State trade.'
This observation clearly indicates that the movement of the goods was by reason of the sale and for the purpose of giving delivery of the goods to the purchasers at the places outside the State. This decision, therefore, does not support the assessee.
8. Now, in the present case the movement of the goods was not by reason of the sale but it was after the sale was completed and delivery was taken in the State by the buyer. Again, the movement was not for giving delivery of the goods to the buyer. We are, therefore, of the view that the sales in question were not in the course of inter-State trade.
9. The Tribunal based its conclusion only on the basis that the final payment of the price was to be made after the buyer got the weight of the ore determined at Gondia weigh-bridge. The condition about payment of price on determination of the weight at Gondia weigh-bridge is for the purposes of ascertaining the exact weight. It is not a condition of sale. The Tribunal has found as a fact that the delivery of the goods was made at Katangi and from Kat-angi the goods were despatched by the buyer; but it reached the conclusion that the movement was in pursuance of the contract of sale because the weight of the goods was to be determined at Gondia weigh-bridge. In our view, the Tribunal was in error in applying the test laid down by the Supreme Court and its conclusion is wrong
10. For the abovesaid reasons, our answer to the question is that the sales in question were not sales made in the course of inter-State trade and commerce but wereintra-State sales. The reference is answeredaccordingly. The assessee shall pay costs ofthe Commissioner of Sales Tax, M. P. Hearing fee Rs. 150.