Skip to content


Hy-lay Poultry Farms Vs. the State of Haryana - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtPunjab and Haryana High Court
Decided On
Case Number General Sales Tax Reference Nos. 20 to 23 of 1976
Judge
Reported in[1985]58STC208(P& H)
AppellantHy-lay Poultry Farms
RespondentThe State of Haryana
Appellant Advocate Kapil Sibal and; R.C. Setia, Advs.
Respondent Advocate B.S. Pawar, Additional Adv.-General and; Harbhagwan Singh, Adv.-General
DispositionPetition dismissed
Cases ReferredC) and Union of India v. K.G. Khosla and Co. Ltd.
Excerpt:
.....the assessee and the buyers and from this it was concluded that the appropriation of goods actually took place at kulwehri and not at delhi. 6. a reading of the aforesaid two statements along with the circumstances of the case, clearly go to show that the chicks are sent from kulwehri farm directly to customers in delhi or to delhi railway station for being sent to outside customers for which orders are already received in delhi by taking 10 per cent advance at the time of booking. 9. after hearing the learned counsel for the parties, we are of the view that the two decisions relied upon on behalf of the assessee are clearly distinguishable;.....1969. the assessing authority, karnal, started proceeding for the levy of intra-state and inter-state sales tax. the assessing authority came to the conclusion on the basis of the statements of darshan singh, accountant of the assessee, and mrs. tani gurdip singh, a partner of the assessee, that the chicks transported to delhi, were in the course of inter-state sales. for the chicks sold within the state of haryana, sales tax was levied under section 4a of the punjab general sales tax act, 1948 and for the inter-state sales, the sales tax was levied under section 7(1) of the central sales tax act, 1956. the assessee took the matter in appeals and the deputy excise and taxation commissioner found no merit in the same and rejected them. the assessee took the matter in further appeals.....
Judgment:

G.C. Mital, J.

1. M/s. Hy-Lay Poultry Farms, Karnal (hereinafter called the assessee), is a partnership concern which maintains a poultry farm in Village Kulwehri, District Karnal, Haryana State. Chickens of parent stock are reared by it and the eggs laid by them are handed over to Hi-Bred (India) Private Limited, Karnal, for the purpose of hatching. Hatching is done twice a week. Immediatly after the hatching of the eggs, the chicks are sexed and graded by the Hi-Bred (India) Private Limited and are delivered back to the assessee at its poultry farm. The assessee then transports the chicks in cardboard boxes to Delhi in the vans where the assessee had its head office. The head office delivers the goods to the customers from whom advance orders are received along with 10 per cent of the purchase price and the balance 90 per cent price is received at the time of delivery. From Delhi certain sales are made to local customers and some to customers of the neighbouring States. The assessee had started the business in the year 1969. The Assessing Authority, Karnal, started proceeding for the levy of intra-State and inter-State sales tax. The Assessing Authority came to the conclusion on the basis of the statements of Darshan Singh, accountant of the assessee, and Mrs. Tani Gurdip Singh, a partner of the assessee, that the chicks transported to Delhi, were in the course of inter-State sales. For the chicks sold within the State of Haryana, sales tax was levied under Section 4A of the Punjab General Sales Tax Act, 1948 and for the inter-State sales, the sales tax was levied under Section 7(1) of the Central Sales Tax Act, 1956. The assessee took the matter in appeals and the Deputy Excise and Taxation Commissioner found no merit in the same and rejected them. The assessee took the matter in further appeals before the Sales Tax Tribunal, Haryana (hereinafter called the Tribunal), and the Tribunal also rejected the appeals by order dated 17th July, 1975. The assessee sought references and the Tribunal has referred the following two questions of law for the opinion of this Court.

(1) Whether or not on the facts and circumstances of this case, it could be said that there was a contract of sale in pursuance of which the applicant-firm moved chicks from Haryana to Delhi ?

(2) Whether on the facts and circumstances of this case, it could be said that the goods were appropriated to the contract of sale in Delhi, and what should be the liability of the applicant to pay tax to the State taxation authorities ?

2. The aforesaid two questions have to be answered on the basis of the following statement of facts as found by the Tribunal.

(1) That the assessee dealt with a commodity which was perishable as the chicks could not survive beyond 48/72 hours unless they were fed and cared properly during this interval. There was no regular godown for storing the chicks at Delhi. Hence, it was necessary to regulate their production on the basis of the orders placed to it by the prospective buyers.

(2) That the assessee received 10 per cent advance of the total price at the time of placing an order by the purchasers and the remaining 90 per cent price was to be taken at the time of delivery of the chicks which clearly showed that the chicks were transported from Kulwehri to Delhi in pursuance of a pre-existing contract between the assessee and the buyers and from this it was concluded that the appropriation of goods actually took place at Kulwehri and not at Delhi.

(3) That the statement of facts mentioned in the statements of Darshan Singh and Mrs. Tani Gurdip Singh was correct and the subsequent affidavits filed by them, which were at variance in material particulars with the statements, could not be believed.

3. Proceedings for the following year, namely, 1970-71, were again started by the Assessing Authority and the same points were raised for consideration. Again the Assessing Authority on the basis of the material available before it came to the conclusion that the transportation of chicks to Delhi was in pursuance of a pre-existing contract of sale and consequently imposed tax under Section 7(1) of the Central Sales Tax Act, 1956, considering them to be inter-State sales and for the sales made within the State of Haryana, tax was levied under the Punjab General Sales Tax Act, 1948. Against the orders of the Assessing Authority, the assessee filed Civil Writ Petition No. 1157 of 1976 in this Court which was initially dismissed in limine, but on appeal to the Supreme Court, the matter was sent back with a direction to admit the writ petition and to hear it at a regular hearing. Since the points arising in the references and the writ petition were common, the writ petition was ordered to be heard along with the references. That is how this writ petition has also been placed before us for hearing. Since counsel for the parties concede that common question arise in the references and the writ petition, therefore, they are being disposed of by this common judgment.

4. In the references, we have to proceed to decide the two questions on the basis the statement of the cases forwarded by the Tribunal to this Court which is based on the findings recorded by the Tribunal. However, since the writ petition is also to be disposed of with the references the facts contained therein also deserve to be noticed. While doing so, we find that the admitted position is that the assessee has its poultry farm at Kulwehri, District Karnal, in the State of Haryana, with its head office at Delhi. The Delhi office receives orders and at the time of booking of orders, takes 10 per cent advance and the balance price is received when the delivery is made at Delhi or the goods are despatched at Delhi railway station. In this behalf, the statement of Mrs. Tani Gurdip Singh, partner of the assessee-firm, attached as annexure R-l to the written statement of the Assessing Authority, deserves to be read and in particular, the following portion :

That the farm was started in the year 1969 during the month of October, 1969. Since then all the produce is transferred to Delhi office by our own van and from there the same is despatched to various customers on the same day. That in these transfers the movement of goods have been almost continuous from Karnal to the customer.

5. Then she made particular reference to two chalans dated 14th October, 1969 and 17th October, 1969 regarding two different purchasers. The first purchaser was from Delhi to whom the goods were despatched directly and the other was of Bhatinda to whom the goods were despatched from Delhi railway station. She further stated that the nature of transfers was practically the same as stated above. She stated that the assessee has account in the Central Bank of India at Karnal and at Delhi. The chalans and the bill books of Karnal and Delhi, respectively, shall be produced as and when required and asked by the department. The statement of Darshan Singh is attached as annexure P-l with the writ petition. The following lines from his statement deserve to be kept in view.

That we have no storage arrangement at Delhi and despatches made by us from Karnal to Delhi were further rebooked to different places for which orders are always with the office at Delhi.

6. A reading of the aforesaid two statements along with the circumstances of the case, clearly go to show that the chicks are sent from Kulwehri Farm directly to customers in Delhi or to Delhi railway station for being sent to outside customers for which orders are already received in Delhi by taking 10 per cent advance at the time of booking. Since there is no provision for keeping the chicks in Delhi, they are sent directly from Karnal either to the places of destination or to Delhi railway station for onward despatch by rail to the places of destination outside Delhi. The findings of the Tribunal are in consonance with these facts. It is not a case where the goods are moved to Delhi without any pre-existing orders or where after the chicks are received in Delhi head office, then the orders are taken and supplies made. This would entail the keeping of the chicks in such conditions in which they can stay, otherwise they are likely to perish because the chicks can survive between 48 to 72 hours without being fed. Therefore, even on the facts on the record of the writ petition, the conclusions arrived at by the Tribunal are found to be correct and we proceed to answer the questions on those facts.

7. On behalf of the assessee, Shri Kapil Sibal placed reliance on two Supreme Court decisions in Balabhagas Hulaschand v. State of Orissa [1976] 37 STC 207 (SC) and Kelvinator of India, Ltd. v. State of Haryana AIR 1973 SC 2526. His argument was that the sale in fact took place in Delhi and the movement of goods from the State of Haryana to Delhi was not under contract of sale and was independent of it and therefore, inter-State sales tax could not be imposed. In highlighting the argument, it was mainly stressed that the property in the goods passed in Delhi when delivery was made to local customers of Delhi or when the goods were despatched at Delhi railway station and not in the State of Haryana. Hence, no inter-State sales tax could be levied.

8. On the other hand, the counsel appearing for the State of Haryana has placed reliance on two other decisions of the Supreme Court in English Electric Company of India Ltd. v. Deputy Commercial Tax Officer [1976] 38 STC 475 (SC) and Union of India v. K.G. Khosla and Co. Ltd. [1979] 43 STC 457 (SC). On the basis of these two decisions, it is argued that on identical facts it was held by the highest Court of the land that even if orders for supply of goods are received in the head office or the registered office, the supplies made by the factory on receipt of the orders amount to movement as a result of covenant in the contract of sale and it does not matter that the property in goods passes at the head office or the registered office, as the case may be, and not at the place where the factory premises are situate.

9. After hearing the learned counsel for the parties, we are of the view that the two decisions relied upon on behalf of the assessee are clearly distinguishable; whereas the two decisions relied upon on behalf of the State of Haryana are fully applicable to the facts of the present cases. In K.G. Khosla's case [1979] 43 STC 457 (SC), Chandrachud, C. J., gave the following verdict:

That if a contract of a sale contains a stipulation for the movement of the goods from one State to another, the sale would certainly be an inter-State sale. But for the purposes of Section 3(a) of the Act it is not necessary that the contract of sale must itself provide for and cause the movement of goods or that the movement of goods must be occasioned specifically in accordance with the terms of the contract of sale. A sale can be an inter-State sale, even if the contract of sale does not itself provide for the movement of goods from one State to another but such movement is the result of a covenant in the contract of sale or is an incident of that contract..

The question as regards the nature of the sale, that is, whether it is an inter-State sale or an intra-State sale, does not depend upon the circumstance as to in which State the property in the goods passes. It may pass in either State and yet the sale can be an inter-State sale.

10. The aforesaid dictum gives clear answer to the two points raised on behalf of the assessee.

11. In English Electric Company's case [1976] 38 STC 475 (SC), A. N. Ray, C. J., gave the following verdict:

When the movement of goods from one State to another is an incident of the contract of sale it is a sale in the course of inter-State trade falling under Section 3(a) of the Central Sales Tax Act, 1956. It does not matter in which State the property in the goods passes. What is decisive is whether the sale is one which occasions the movement of goods from one State to -another. The inter-State movement must be the result of a covenant, express or implied, in the contract of sale or an incident of the contract. It is not necessary that the sale must precede the inter-State movement in order that the sale may be deemed to have occasioned such movement. It is also not necessary for a sale to be deemed to have taken place in the course of inter-State trade or commerce, that the covenant regarding inter-State movement must be specified in the contract itself. It will be enough if the movement is in pursuance of and incidental to the contract of sale.

12. The aforesaid quote also negatives the argument raised on behalf of the assessee. Besides, the two decisions relied upon on behalf of the assessee are distinguishable and even if they were to be read to mean that they were applicable to the facts of the present case, still we are inclined to follow the two decisions relied upon on behalf of the State of Haryana instead of the two decisions relied upon by the assessee. Firstly, we are in agreement with the reasons given by the two Chief Justices, and secondly, both those decisions are by larger benches.

13. For the aforesaid reasons, we answer both the questions in favour of the State of Haryana and against the assessee and hold that the movement of chicks from the State of Haryana to Delhi was in pursuance of and incidental to the orders received by the head office in Delhi and it did not matter in which State the property in goods passed. The references are, therefore, answered in the aforesaid terms.

14. In view of the answer given in the references, the writ petition is devoid of merit and is hereby dismissed. However, the parties are left to bear their own costs.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //