1. These four appeals by special leave are directed against the judgment ofthe Allahabad High Court in a Sales Tax Reference made by the Judge(Revisions), Sales Tax, Uttar Pradesh, Lucknow, on being directed to do so bythe High Court under s. 11 of the Uttar Pradesh Sales Tax Act, 1948,hereinafter referred to as the Act. The question referred was as follows :
Whether in law the revising authority was right inholding that the sales in dispute were not for delivery outside Uttar Pradeshand that the applicant was not entitled to rebate under sec. 5 of theAct.'
2. The question was referred in the following circumstances. The appellant,hereinafter to as the assessee mills, carries on the business of manufacturingand selling sugar and is registered as a dealer under the provisions of theAct. During the previous year relevant to the Assessment Year 1948-49, theassessee Company had sold sugar to parties who carried on business outsideUttar Pradesh and also delivered the same outside Uttar Pradesh. It also soldsugar to parties who carried on business inside Uttar Pradesh but the sugar wasdespatched to stations outside Uttar Pradesh in compliance with theinstructions issued by the buyers. The assessee mills submitted an applicationunder S. 5 of the Act in form VII, prescribed by the Uttar Pradesh Sales Tax(Temporary) Rules, 1948, claiming 50% rebate on the sales of sugar deliveredoutside Uttar Pradesh. The Sales Tax Officer allowed rebate in respect of thesales of sugar to parties who carried on business outside Uttar Pradesh butrejected the claim for the sales which were made to parties carrying onbusiness inside Uttar Pradesh. In respect of the assessment year 1948-49 therewere four assessment orders covering each quarter of the year, the firstquarter being April 1948 to July 1948. Section 5 of the Act reads as follows :
'Sales of certain goods for delivery outside theState-In respect of such manufactured goods as may be notified by the StateGovernment and subject to such restrictions and conditions as may beprescribed, a rebate of one-half of the tax levied on sales of such goods fordelivery outside the Uttar Pradesh shall be allowed if such goods are actuallyso delivered.'
3. In exercise of the powers conferred by S. 5 of the Act, the Governor waspleased to order that rebate of one half of the tax levied on sales of certaingoods including sugar manufactured in Uttar Pradesh for delivery outside UttarPradesh shall be allowed if such goods were actually so delivered. It appears thatthis notification was modified on March 30, 1949, but we are not concerned withthis modification.
4. The Sales Tax Officer dealt with the question at issue in his order inrespect of the quarter ending March 31, 1949, in detail and he was of the viewthat if property passed from the seller to the purchaser in Uttar Pradesh, S. 5and the notification issued under it could not apply.
5. The assessee mills then filed four revision applications before the Judge(Revisions) Sales Tax. The Judge (Revisions) disposed of the four applicationsby two orders, first dated February 1, 1950, and the second dated December 5,1950. He held that 'the words 'sales of such goods for delivery outsideU.P.' clearly show that the intention of the framers of the act was to allow arebate only in cases in which the goods are sold subject to the condition thatthey would be delivered outside U.P. It is also clear that section 5contemplates only one buyer who purchase the goods and also take their deliveryoutside U.P. In other words the party who buys the goods and the party whotakes the delivery must be one and the same. It is not disputed that the salesof sugar in respect of which the claim has been disallowed were in favour ofone party and delivery was taken by another party outside U.P. The party afterbuying the sugar under a contract of sale had the goods despatched outside U.P.by the Mills to another party outside U.P.' He added later that 'on atrue construction of section 5 rebate will be permissible only if delivery istaken outside U.P. by the same party which purchased the sugar from themills.' Then on the facts he held that the selling agents, Tandon Bros.,who entered into a contract with the assessee mills for sale of the goods werereally the buyers and although the goods were despatched outside Uttar Pradeshin accordance with the despatch instructions of some contract arrived atbetween Tandon Bros., and the party to which the goods were ultimatelydelivered, the assessee mill had not entered into the contract with the partiesto which the goods were dispatched outside Uttar Pradesh. He further repelledthe argument that despatch instructions formed part of the contract.
6. The assessee mills then filed four applications under S. 11 of the Act,but the Judge (Revisions) Sales Tax rejected the applications on the groundthat no question of law arose. The High Court, however, directed the Judge(Revisions) to state a case under S. 11 of the Act. A consolidated statement ofthe case was referred. The Judge (Revisions) drawing up the statement of thecase was not the Judge (Revisions) who had disposed of the revisionapplications. In the statement of the case certain further facts were given andthose are as under :
'The applicants (assessee mills) were members ofthe Indian Sugar Syndicate Ltd., and they were entitled to send sugar under theorders of the Syndicate through some selling agents of their own. M/s. TandonBros., were selling agents of the Mills. It was through them that the sales hadbeen made to buyers outside U.P. The goods were despatched outside U.P. underthe instructions received from the buyers through the selling agents. Thedelivery of the goods was made outside U.P. It is on the basis of these factsthat the applicants (assessee mills) claimed that the sales had been made fordelivery outside U.P.'
7. The standard contract form prescribed by the Indian Sugar Syndicate hasbeen annexed to the case and the following terms are relevant :
'AN AGREEMENT made thisSixteenth day of October 1948 between the AMRITSAR SUGAR MILLS CO. LTD., ROHANAKALAN (hereinafter called 'the Seller') and Tandon Brothers New MandiMuzaffarpur (hereinafter called 'the Buyer') for the sale of thefollowing goods by the Seller to the Buyer upon the following terms and conditions:-
A B C D E F
Factory Description Price per Quantity Period(s) Remarks
(Short) of Md. of 40 of
Name Quality Srs. 82 2/7 Delivery
Rohana Average colour Rs. Thirty Six Bags Ready
Mills. not lower than annas two & 4,000
I.S.S. No. 127 pies three
-------------- only. -------
Average grain Each of
not finer than Packing
I.S.S. No.D or 2/30.
2. Delivery is to be made F.O.R.Rohana Kalan station, all terms and conditions of the Railway (torn) to bebinding on the Buyer.
The goods shall be deemed to havebeen delivered (a) when tendered Ex-Factory godown, (b) when put on F.O.R. atFactory Station or (c) when tendered for carriage by rail at the said station,and in case of delay in accept (torn) by the Railway after such tender the saidgoods shall be deemed to be held by the Seller on account of the Buyer untilthey are put on rail. When the goods are received by Railway, all the terms andconditions of the Railway shall be deemed to be accepted by the buyer. Tenderto the Railway for carriage shall be deemed to have been made when a (torn)carriage or a Forwarding Note has been given to the Station Master of theStation. The seller shall not, (torn) circumstances whatsoever, be responsiblefor non-despatch, or refusal to dispatch or delay in dispatch or any (torn)mistake in dispatch by the Railway. Where (after tender as aforesaid) any delayin despatch occurs, the Buyer shall (torn) delivery of the goods without anyclaim against the Seller on account of such delay or consequence thereof (torn)delay in despatch is due to non-supply of wagons or due to bookingrestrictions, the Seller, shall, if required by the (torn) obtain from thefactory a letter stating the cause of the delay.
Where owing to restriction ofwhatsoever nature imposed by Carriers on dispatches, Seller is unable todespatch according to the route requested by the Buyer, then Seller shall havethe right, after giving to the Buyer three days time to despatch by theavailable route at Seller's sole desecration to the destination required by theoriginal despatch instructions. Within the period of three days abovementioned, Buyer may change the destination provided the (torn) despatchinginstructions are capable of immediate execution. In the case of despatch byroad, river or other transport any combination thereof, all the terms andconditions of the Carriers are be a binding on the Buyer, and tender to Carriershall be a good delivery within the meaning of the clause.
3. The buyer is to give theSeller despatching instructions in accordance with the above schedule, in thecase (torn) ready sales within ten days from the date hereof when quantity isless than 1500 bags, and within fifteen days when quantity is 1500 bags ormore; and in the case of forward sales, not less than fourteen days prior tothe expiry of the (torn) for delivery of the goods as provided in the aboveSchedule. When goods are for delivery in installments the times (torn) clauseprovided shall apply to the despatching instructions for each instalment. Thesugar will be despatched at (torn) Risk unless the buyer shall give to theSeller instructions to the contrary in the Dispatching Instructions.
The despatching instructions tobe given as aforesaid shall be such as the Seller will then be in a position tocarry (torn) having regard to restrictions on booking, availability of wagons,transhipment difficulties and other matters. The despatch (torn) instructionsonce given shall not ordinarily be amended or altered and they can be alteredor amended only with the consent of the seller and before the goods have leftthe factory, the Seller is not in any way responsible for any delays that mayarise through error or mistake in the despatching instructions sent by thebuyer. If the Buyer fails to give despatching instructions within the time andin the manner aforesaid he will be deemed not to have given any despatchinginstructions at all.
11. No complaint as regardsdescription, quality or condition of any consignment will be admitted unlessthe Buyer has complied with Clause 3 thereof and has paid to the Seller thefull price and all overdue or other charges and unless the complaint is made inwriting to the Seller within three days from the arrival of such consignment atdestination, the date of such arrival being deemed to be the date of arrivalentered in the Books of the Railway Co., Steamer Co., Carrier of PortAuthorities. The completion of Risk Note form A as required by the Railwayauthorities at certain seasons of the year shall not be construed as adverseremarks as to the condition of the goods or its packing. If any complaint, asto quality condition quantity or weight is referred to arbitration and anallowance is awarded in respect thereof, the Buyer shall retain the goods andsuch allowance shall be deducted from the price and be refunded by theSeller.'
8. The High Court, in view of its finding that the delivery was contractedto be made ex-factory, the factory being within the State of Uttar Pradesh andthe contract not containing any condition requiring the assessee to deliver thegoods outside Uttar Pradesh, held that rebate was not admissible under Section5. The High Court said that its detailed reasons were contained in its judgmentin Lord Krishna Sugar Mills v. Commissioner Sales Tax U.P. In that case DesaiC.J., held that the obligation to deliver goods outside Uttar Pradesh mustarise only' from a term in the contract, and in the absence of such a termit could not be said that the goods were to be delivered outside Uttar Pradesh.The learned Chief Justice further observed as follows :
A term in a contract that despatch instructions would befurnished later necessarily means that the seller undertakes to comply withthem. If under a contract itself something is to be settled later, what issettled later becomes as much binding under the contract itself as the termsalready settled under the contract. Still, I do not think that the sales inthose cases in which the contracts provided for despatch instructions to begiven later became sales for delivery outside Uttar Pradesh merely because thedespatch instructions were that they should be despatch outside Uttar Pradesh.All that can be said is that the sales were for 'delivery in accordancewith despatch instructions' and a sale for 'delivery in accordancewith despatch instructions' is not necessarily a sale for 'deliveryoutside Uttar Pradesh.'
9. He seemed to be of the view that in order to come within the expression'delivery outside Uttar Pradesh' it must be one of the terms settledat the time of the formation of the contract itself that the goods will bedelivered outside Uttar Pradesh, and if this is not so settled and all that issettled is that they will be delivered in accordance with despatchinstructions, the sale would neither be a sale for delivery outside UttarPradesh nor a sale for delivery inside Uttar Pradesh. He was clearly of theview that despatch instructions were not a part of the contract when it wasformed and did not get incorporated into it or become a part of it when given.Pathak, J., in a concurring judgment, was of the view that it must be in thecontemplation of the parties at the time of entering into the contract that thegoods which were the subject of sale must be delivered outside Uttar Pradesh.He observed that 'there is a distinction between settling and determiningthe terms of a contract and complying with the terms of that contract. Theformer relates to the formation of the contract, the latter to itsexecution.'
10. The first question which arises in these appeals is whether the word'delivery' in the expression 'sales of such goods for deliveryoutside Uttar Pradesh' occurring in S. 5 of the Act means actual deliveryor constructive delivery. If it means constructive delivery then there is nodoubt that on the facts as stated by the Judge (Revisions) the contractprovided for constructive delivery inside Uttar Pradesh and the assessee millswould not be entitled to rebate under S. 5.
11. The Madras High Court had occasion to consider a similar question inIndia Coffee and Tea Distributing Co. Ltd., v. The State of Madras 10 S.T.C.359 It held that the word 'delivery' in s. 5 of the Madras GeneralSales Tax Act, 1939, which exempts from taxation sales of tea 'if the saleis for delivery outside the state and delivery actually was made' did notinclude anything which the law deemed 'delivery' but was restrictedto physical delivery of the thing sold. In coming to this conclusion,Subrahmanyam, J., observed :
'In deciding whether the word 'delivery'in section 5(v) includes delivery in law, we have to have regard to the objectsof the Legislature in enacting section 5(v). The object obviously was thepromotion of the export of tea. The Legislature intended that where tea wasexported from the State for being delivered outside the State, the sale whichresulted in such export should be exempt from taxation. That object would notbe wholly achieved if we hold that delivery of documents of title in the Stateof Madras would make the sale liable to taxation.'
12. We agree with the view expressed by the Madras High Court. It seems tous that the object underlying s. 5 is to encourage export of goods manufacturedin Uttar Pradesh and notified under s. 5. The course of trade adopted by theIndian Sugar Syndicate Ltd. and the assessee mills shows that if the word'delivery' is interpreted to mean 'constructive delivery' very few'export sales', if we may use the expression, would enjoy rebate under s. 5. Aslong as the contract evinces an intention to export and actual delivery isgiven to effectuate that intention the object of the Legislature to ensure thatonly real 'export sales' enjoy the rebate would be fulfilled. It seems to usthat in the context of s. 5 the word 'delivery' occurring in s. 5 means 'actualdelivery'.
13. The next question that arises is whether the sales by the assessee millswere for actual delivery outside Uttar Pradesh. The answer to this problemdepends on the answer to the question whether despatch instructionscontemplated by clause 2 and clause 3 of the contract were part of the contractentered into by the assessee mills. It seems to us that they were. The contractby 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. Thisclause contemplated a destination in spite of constructive delivery having beencontracted to be made at Rohana Kalan Station. Further, the contract was not toactually deliver at some place to be chosen or assented to by the assesseemills but at any place without restrictions. The contract required nothing morefor completion than a mention of the place. When the despatch instructions weregiven, it was not a case of performing the contract but specifying a term ofthe contract. If the place of actual delivery had been specified and it was aquestion merely of communicating the route by which the goods were to bedelivered 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 notrelate to the mode of performance but formation of the contract. It seems tous, with respect, that the High Court erred in relating despatch instructionsto the mode of performance of the contract.
14. In the result we hold that the assessee mills is entitled to rebateunder s. 5. We set aside the judgment of the High Court and answer the questionas follows :
'The revising authority was not right in holdingthat the sales in dispute were not for delivery outside Uttar Pradesh. Further,the applicant was entitled to rebate under S. 5 of the Act.'
15. The appellant will have his costs incurred in the High Court and here.One hearing fee.
16. Appeal allowed.