1. Section 5(vii) of the General Sales Tax Act, 1125, provides that the sale of goods specified in column (2) of schedule 1 shall be liable to tax under Section 3 (i) only at such single point in the series of sales by successive dealers as may be specified by the Government by notification in the Gazette; and where the taxable point so specified is a point of sale, the seller shall be liable for the tax on the turnover for which the goods are sold by him at such point, and where the taxable point so specified is a point of purchase, the buyer shall be liable for the tax on the turnover for which the goods are bought by him at such point. Cotton yarn, the commodity with which we are concerned, was part of item No. 24 of schedule I.
2. By a notification under Section 5(vii) dated 1-4-1958 the Government of Kerala specified the point liable to tax under Section 3(1) in respect of item No. 24 of schedule I as the 'first sale in the State by a dealer who is not exempt from taxation under Section 3(3)'. The notification was published in the Kerala Gazette Extraordinary, No. 53, dated 1-4-1958 and came into force on that date.
3. The question for determination is whether the petitioner was the first seller in the State or not. According to him the first sales in the State were effected not by him but by the dealers in the Madras State who sold the goods to him, and his sales to his customers were the second in the series of sales.
4. The assessment year is 1958-59. That the petitioner was a dealer who was not exempt from taxation under Section 3(3) is not disputed. Counsel for the petitioner confined his submissions to the purchases of his client from seven dealers in the Madras State (Total turnover: Rs. 178567/37). That those seven dealers also were not exempt from taxation under Section 3(3) is now accepted by the Department.
5. It is common ground that the sales to the petitioner were inter-State sales. According to the Department such sales will not enter into the reckoning as they are not liable to taxation under the General Sales Tax Act, 1125, and the sales by the petitioner to his customers should be considered to be the first sales in the State. According to the petitioner the fact that the sales to him were inter-State sales unamenable to taxation under the Act is of no consequence at all as all that the notification says is 'first sale in the State' and not 'first taxable sale in the State'.
6. The situs of the inter-State sales, however, has not been determined by the Tribunal.It is necessary that it should do so. If the interstate sales did not take place in this State, thenthe question whether the notification contemplatesthe first sale in point of time or the first salethat attracts the tax will not arise for consideration.
7. The situs of an inter-State sale has to be determined in the light of Section 4 of the Central Sales Tax Act, 1956. Sub-section (2) of that sec-tion provides:
'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
(b) 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 sub-sequent to such appropriation.'
The ambit of this provision came up for consideration before the Supreme Court in Tata Iron and Steel Co., Ltd., Bombay v. S. R. Sarkar, (1960) 11 STC 655 : (AIR 1961 SC 65). The Court said:
'Sub-section (2) defines what sales or purchases shall be deemed to take place inside a State. The terms of Sub-section (2) are quite general, and the Parliament has thereby attempted to locate the place where a sale takes place. The clause does not deal with the conditions which 'effect' a sale; nor is there any warrant for the view that Sub-section (2) of Section 4 only seeks to locate the place of sales which are not in the course of inter-State trade or commerce.
'The Parliament by Sub-section (2) of Section 4, attempted to define when a sale shall be deemed to take place inside a state, and by Sub-section (1), of Section 4 provided that when a sale or purchase of goods was determined in accordance with Sub-section (2) to take place inside a State, such sale or purchase shall be deemed to haye taken place outside all other States.
'The argument that by the application of Section 4. Sub-section (2), in cases where the goods sold are unascertained or future goods there will be difficulty in ascertaining the place where the sale is effected, has also no force. In any event, Section 4(2) may not be denied its full operation, merely because difficulty may be encountered in some cases in ascertaining the place where it is effected by the application of the rules set out therein.'
8. In the light of what is stated above we must get aside the decision of the Tribunal and direct it to deal with the matter afresh. If the situs of the inter-State sales was outside the State there can be no doubt that the first sales in the State were by the petitioner to his customers and that the assessment should stand. If, on the other hand, the situs of the inter-State sales was within this State, then, and then alone, will the question whether the first sale in the State should be construed as the first sale in point of time or as the first taxable sale arise for consideration. It is unnecessary to deal with that question at this stage.
9. The T. R. C. is allowed as above. Nocosts.