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Arjan Dass Gupta and Bros. Vs. Commissioner of Sales Tax, Delhi Administration - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtDelhi High Court
Decided On
Case NumberSales Tax Reference No. 18 of 1974
Judge
Reported in[1980]45STC52(Delhi)
AppellantArjan Dass Gupta and Bros.
RespondentCommissioner of Sales Tax, Delhi Administration
Appellant Advocate Mukal P. Bhargava, Adv
Respondent Advocate R.C. Chawla, Adv.
Excerpt:
.....of the bengal finance (sales tax) act, 1941, as in force in the union territory of delhi? the railway receipts so endorsed by the civil supplies authorities (for purposes of importation) would be endorsed by the dealer in favor of the purchasing retailers in delhi. he contends that the railway receipts are endorsed during the movement of the coal from bengal/bihar to the union territory of delhi. if, after the landing of the goods in delhi, the railway receipts are endorsed one after another to ten persons and the delivery is taken by the tenth person, say after three months, the movement of goods would on the dealer's interpretation artificially continue for three months after the landing of the goods in delhi. ..after import in the said territory' occurring in the notification dated..........receipts in their favor while the goods were in movement constitute single transaction of inter-state sales falling within the purview of section 3(b) read with explanationn 1 of the central sales tax act, 1956, or there are two sales (i) one between the colliery owners and the dealer falling under clause (a) of section 3 of the central act and the other between the dealer and retailers in delhi?(ii) whether, on the facts and in the circumstances of the case, the second sale of coal by the dealer by endorsement of the railway receipts to the retailers in delhi is subsequent inter-state sale falling under clause (b) of section 3 of the central act or intra-state sale falling under clause (g) of section 2 of the act?(iii) whether, on the facts and in the circumstances of the case, the.....
Judgment:

S.B. Wad, J.

1. In this reference under Section 21(1) of the Bengal Finance (Sales Tax) Act, 1941, the following questions are referred by the Lt. Governor, Delhi, for our opinion:

(i) Whether, on the facts and in the circumstances of the case, the sales of coal and coke made to various coal retailers of the Union Territory of Delhi by the dealer by endorsing the railway receipts in their favor while the goods were in movement constitute single transaction of inter-State sales falling within the purview of Section 3(b) read with Explanationn 1 of the Central Sales Tax Act, 1956, or there are two sales (i) one between the colliery owners and the dealer falling under Clause (a) of Section 3 of the Central Act and the other between the dealer and retailers in Delhi?

(ii) Whether, on the facts and in the circumstances of the case, the second sale of coal by the dealer by endorsement of the railway receipts to the retailers in Delhi is subsequent inter-State sale falling under Clause (b) of Section 3 of the Central Act or intra-State sale falling under Clause (g) of Section 2 of the Act?

(iii) Whether, on the facts and in the circumstances of the case, the subsequent inter-State sale of coal is exempt from the levy of sales tax under Sub-section (2) of Section 6 of the Central Act or exigible to tax under the Central Act?

(iv) Whether, on the facts and in the circumstances of the case, the sales tax authorities of Delhi have jurisdiction and competence to levy tax under the Central Act on the subsequent inter-State sale of coal made by the dealer by endorsement of the railway receipts to the retailers?

(v) Whether, on the facts and in the circumstances of the case, the tax levied under the Act treating the subsequent sales of coal by the dealer, as transactions of inter-State can be deemed to have been levied under the Central Act if the second sales by the dealer are held to be subsequent sales covered by Clause (b) of Section 3 and held to be taxable under Section 6 of the Central Act?

(vi) Whether, in the circumstances of the case, the freight charges paid to the railway authorities by the coal retailers in whose favor the railway receipts were endorsed are liable to be included in the sale price and turnover of the appellant-firm in terms of the definitions as provided under Sections 2(h) and 2(i) of the Bengal Finance (Sales Tax) Act, 1941, as in force in the Union Territory of Delhi?

2. The dealer, M/s. Arjan Dass Gupta and Bros., was at the relevant time carrying on the business of selling coal, imported from Bihar/Bengal, to retailers in the Union Territory of Delhi. During the assessment year 1964-65, procurement of coal from the collieries outside Delhi and its sale in Delhi was regulated by the Delhi Coal Control Order, 1963, issued under Section 3 of the Essential Commodities Act, 1955. A notification was issued on 18th January, 1963, by the Delhi Administration under Section 5-A of the Bengal Finance (Sales Tax) Act, 1941, whereby with effect from 1st January, 1963, the point at which the sale was taxable under the said Act, was detailed as the point of sale by the importer if the importer was a seller and if the importer was not a seller himself, the point at which the seller makes the first sale, after importation. The said notification runs as follows:

In exercise of the powers conferred by Section 5-A of the Bengal Finance (Sales Tax) Act, 1941, as in force in the Union Territory of Delhi, the Chief Commissioner, Delhi, is pleased to specify that with effect from January 1, 1963, the turnover in respect of coal including coke in all its forms shall be liable to tax only at the point of sale by importer or if the importer is not a seller himself by the first seller after import in the said territory. Provided that the turnover in respect of sales within the said territory by any registered dealer of any quantity of coal including coke in all its forms which has not suffered any tax in terms of this notification shall be liable to tax as if the dealer were the first seller in terms of this notification.

3. The pattern of importation of coal and its sale within the Union Territory of Delhi followed by the dealer was on these lines: The dealer would place orders on the colliery owners in Bengal/Bihar for the purchase of coal. The railway receipts of the consignments of the coal would be in the name of the dealer as consignee 'freight to pay' and the consignments of coal would be dispatched to Delhi. The invoices covering the cost of coal dispatched and the sales tax under the Central Act charged by the colliery owners on the consignments of coal dispatched to Delhi would also be in the name of the dealer. On arrival of the consignments the dealer would present the railway receipts before the civil supplies authorities for endorsement on the railway receipts which permitted the import of coal within the Union Territory of Delhi under the provisions of the notification mentioned above. The railway receipts so endorsed by the civil supplies authorities (for purposes of importation) would be endorsed by the dealer in favor of the purchasing retailers in Delhi. The actual delivery of the coal wagons in Delhi would be taken by the purchasing retailers on payment of railway freight to the railway authorities. The landed cost of coal would be paid to the dealer by the purchasing retailers which included the cost of coal, the Central sales tax and the dealer's profit.

4. All the sales tax authorities held that the sales in question were intra-State sales liable to sales tax under the Bengal Finance (Sales Tax) Act, 1941, and were not sales exempt under Section 3(b) of the Central Sales Tax Act as contended by the dealer. The authorities further held that the sale price liable to tax was inclusive of the freight charges. The dealer had contended that the freight was directly paid by the purchasing retailers and was not, thereforee, a component of sale price.

5. The relevant provisions of the Central Sales Tax Act, 1956, and the Bengal Finance (Sales Tax) Act, 1941, relied upon by the dealer and the revenue read as follows:

Central Sales Tax Act:

Section 3. 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....

(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...

Section 4. When is a sale or purchase of goods said to take place outside a State. -- (1) Subject to the provisions contained in Section 3, when a sale or purchase of goods is determined in accordance with Sub-section (2) to take place inside a State, such sale or purchase shall be deemed to have taken place outside all other States.

(2) A sale or purchase of goods shall be deemed to take place inside a State if the goods are within the State --

(a) in the case of specific or ascertained goods, at the time the contract of sale is made; and....

6. The Bengal Finance (Sales Tax) Act, Section 2(g), is in the following terms:

'Sale' with its grammatical variations and cognate expressions means any transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable consideration and includes a transfer of goods on hire-purchase or other system of payment by Installments, but does not include a mortgage or hypothecation of or a charge or pledge on goods.

Explanation. -- A sale or purchase of goods shall be deemed to take place inside the Union Territory of Delhi if the goods are within that territory --

(i) in the case of specific or ascertained goods, at the time the contract of sale is made; and

(ii) in the case of unascertained or future goods, at the time of their appropriation to the contract of sale by the seller or by the buyer, whether assent of the other party is prior or subsequent to such appropriation.

7. Section 2(h) is the definition of sale price. ' 'Sale price' means the amount payable to a dealer as consideration for the sale of any goods, less any sum allowed as cash discount according to the practice normally prevailing in the trade, but inclusive of any sum charged for anything done by the dealer in respect of the goods at the time of or before the delivery thereof other than the cost of freight or delivery or the cost of installation in cases where such cost is separately charged.

8. The counsel for the dealer contends that the sales in question are effected by transfer of documents of title to the goods, during their movement from one State to another. He contends that the railway receipts are endorsed during the movement of the coal from Bengal/Bihar to the Union Territory of Delhi. Relying on Explanationn 1 to Section 3(b) of the Central Sales Tax Act, the counsel further contends that as coal is carried by the railways (as a common carrier), the movement of goods would terminate only on the taking of the delivery of goods by the purchaser-retailer in the Union Territory of Delhi and not before that. The learned counsel for the dealer further contends that the sales in question took place prior to the importation of the goods within the territory of Delhi and, as such, they are not sales liable to tax under the notification of the Delhi Administration dated 18th January, 1963.

9. Although the Lt. Governor has referred six questions for our opinion, the real central question for determination is 'whether the sale of the coal by the retailers in Delhi is an inter-State sale falling under Clause (b) of Section 3 of the Central Sales Tax Act or is an intra-State sale falling under Clause (g) of Section 2 of the Bengal Finance (Sales Tax) Act'.

10. Now it is the admitted position that the sales in question are first sales by an importer after the goods are imported in Delhi (although at one stage before the authorities the dealers had contended otherwise). Section 3(b) of the Central Sales Tax Act is primarily introduced to cover such transactions of sale which do not fall under Section 3(a). Inter-State sale is a sale where the goods are exported from one State and are imported in the other State. One of the modes of transfer of property in goods is by way of transfer of documents of title to the goods. Section 3(b) says that if the sale is made by transfer of documents, when the goods have left one State and are yet to reach the other State, such sales are inter-State sales. The reference to the two States in Clause 3(b), in our opinion, makes it clear that the termination of the journey of the goods as contemplated by the said Sub-section takes place when the goods are landed in the importing State. Normally, when the goods are carried by a carrier from one State to another, the delivery is taken by the importer immediately after the goods land in the importing State. Thus, normally, the landing of the goods in the importing State and the delivery of the goods are almost simultaneous acts, although technically there will be some hiatus between the two. Considering these commercial facts, it is difficult to accede to the retailer's contention that the movement of goods continues even if the goods have landed in Delhi only because the importer has transferred the documents of title to the purchasing retailers and such retailers take delivery from the railways at a subsequent time. If taking delivery is the test of termination of movement and not the landing of the goods in an importing State, Explanationn 1 to Section 3(b) of the Central Sales Tax Act would lead to anomalous results. If, after the landing of the goods in Delhi, the railway receipts are endorsed one after another to ten persons and the delivery is taken by the tenth person, say after three months, the movement of goods would on the dealer's interpretation artificially continue for three months after the landing of the goods in Delhi.

11. The words 'at the point of sale by importer...after import in the said territory' occurring in the notification dated 18th January, 1963, clearly suggest that the physical presence of the goods in the Union Territory of Delhi at the time of the sale is the decisive consideration in the matter of the tax liability. The expanded concept of the movement of goods added by Explanationn 1 to Section 3(b) of the Central Sales Tax Act, on our interpretation, does not pose any difficulty, as we have already held that Explanationn 1 to Section 3(b) does not permit a purchaser from the dealer to 'expand the movement' of goods beyond the time of the physical landing of the goods in the Union Territory of Delhi.

12. The provisions of Section 4(2) of the Central Sales Tax Act also support the same construction. That Section provides that a sale or purchase of goods shall be deemed to take place inside a State if the goods are within the State, i.e., physically within the State.

13. Considering the provisions of the Central Act, the local Act and, particularly, the special provisions of the Delhi Coal Control Order and the notification (which alone made the sale of coal legally possible at the relevant time), the only reasonable conclusion on a harmonious construction is that where the documents of title are transferred after coal has landed in Delhi, all sales thereafter are intra-State sales within Delhi. On the said interpretation, the first sale by the importer-seller is an intra-State sale within Delhi, liable to sales tax under Section 2(g) of the Bengal Finance (Sales Tax) Act, 1941.

14. The first five questions referred to by the Lt. Governor are answered as follows:

Answer to question No. (i). -- The sales in question do not fall under Section 3(b) read with Explanationn 1 of the Central Sales Tax Act, 1956. The second part of the question, as admitted by the counsel for the dealer [regarding application of Section 3(a) of the Central Act], has been wrongly framed as the dealer had never claimed the protection of Section 3(a) before any of the authorities. We agree with the counsel for the dealer that the second part of the question need not be answered.

Answer to question No. (ii). -- The sales in question are governed by Section 2(g) of the Bengal Finance (Sales Tax) Act of 1941 and not by Section 3(b) of the Central Sales Tax Act. The sales in question are intra-State sales.

Answer to question No. (iii). -- In the light of the analysis of the relevant provisions, answer to question No. (iii) is in the negative.

Answer to question No. (iv). -- In view of our interpretation, answer to question No. (iv) is in the negative.

Answer to question No. (v). -- In view of our interpretation, the answer is in the negative.

15. In answer to question No. (vi), we hold that freight charges paid by the coal retailers are liable to be included in the sale price and turnover of the dealer. The words cost of freight 'separately charged' occurring in Section 2(h) connote that the intention of the parties (as disclosed in the contract of sale) must unequivocally be that freight charges will not form part of the sale price. In the absence of any such evidence produced by the dealer, our view is that freight charges should be included in the sale price, since, as a commercial transaction, it is inconceivable that a dealer will bear the freight charges himself. However, in this case, the department may examine whether the dealer is entitled to the benefit of the circular referred to in para 7 of the order of the Deputy Commissioner (M.D. Singh) dated 25th October, 1972.


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