1. This is a revision against the order passed by the Tribunal holding that the assessee is liable to pay tax under the Central Sales Tax Act in respect of his inter-State sales for the year 1957-58.
2. The assessee is a paddy and rice merchant carrying on business at Mannargudi. He registered himself as a dealer under the Central Sales Tax Act. He submitted his return in Form 1 for the year 1957-58 and the Commercial Tax Officer accepted the same and determined the tax turnover at Rs. 5,24,457-36 and directed him to pay tax on that amount. He paid the tax. Subsequently after the close of the year in September, 1958, he filed an appeal before the Appellate Assistant Commissioner stating that he was not liable to pay any tax and that he was entitled to a refund of the tax as it was paid under a mistake of law. The Appellate Assistant Commissioner found that in pursuance of the contracts the assessee despatched goods to Kerala and that therefore it was an inter-State sale as defined in the Central Sales Tax Act, that the invoice and the demand draft clearly proved that the goods were appropriated to the contract at the assessee's place of business and that the assessee also adopted various safeguards to guarantee the payment of money to him under the bills. On this view, the Appellate Assistant Commissioner dismissed the appeal.
3. Against this order the assessee filed an appeal before the Tribunal. The Tribunal after considering the nature of the transactions came to the conclusion that the sales in question were inter-State sales under Section 3, Clause (b), and the appropriate State was Madras and that therefore the imposition of the tax was justified. The Tribunal accordingly dismissed the appeal.
4. It is against this order of the Tribunal the assessee prefers this revision. It is necessary to give a few facts to understand the nature of the transactions of the assessee. The assessee is a paddy and rice merchant at Mannargudi. When despatching goods to a destination in Kerala State he takes a railway receipt to 'self' and makes an endorsement 'please deliver to the State Bank of India or order' and sends the document to his bank in Kerala advising the bank to deliver it to the buyer against payment. The assessee has also an agent in Kerala. In case the buyer to whom the goods are intended refuses to honour the hundi, the agent arranges to sell the goods to another purchaser in Kerala State and advises his principal to send the demand draft in the name of the prospective purchaser. The purchaser has to honour the draft by payment of money to the bank, receive the railway receipt and take delivery of the goods. This in brief is the mode of transaction of the assessee. The first question that arises is whether the sales so made were sales in the course of inter-State trade. For deciding this question it is necessary to refer to the relevant provisions of the Central Sales Tax Act. Section 3 is as follows:
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-
(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.
5. This section lays down the principles for determining when a sale or purchase shall be deemed to take place in the course of inter-State trade or commerce, because under the Act tax is imposed only on inter-State transactions, Clause (a) of Section 3 provides that the sale or purchase should occasion movement of goods from one State to another. In other words, the goods must move in pursuance of a contract of sale or purchase. But where the goods move from one State to another without any privity of contract the sale or purchase shall not be deemed to be a sale or purchase in the course of inter-State trade or commerce. Clause (b) provides for another type of sale which shall be deemed to be in the course of inter-State trade or commerce. Even where the goods are sent from one State to another without any privity of contract and the sale is effected by a transfer of documents of title when the goods are in transit, such a sale shall be deemed to be a sale in the course of inter-State trade or commerce. In other words, the sale contemplated by Clause (b) is one which is effected by transfer of title to the goods during their movement from one State to another.
6. In Tata Iron and Steel Co. Ltd. v. S.R. Sarkar  11 S.T.C. 655 their Lordships of the Supreme Court while discussing the scope of Section 3(a) and (b) observed at page 667 :
In our view, therefore, within Clause (b) of Section 3 are included sales in which property in the goods passes during the movement of the goods from one State to another by transfer of documents of title thereto ; 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.
7. Their Lordships also observed at page 679 that Section 3 has to be so construed that the two clauses in it are made mutually exclusive.
8. It is clear from the facts of this case that the sales effected by the assessee come under Section 3, Clause (b), of the Central Sales Tax Act. The Tribunal has rightly held that the sales in question were inter-State sales under Section 3, Clause (b).
9. The next question for consideration is which of the States is entitled to collect the sales tax in respect of the inter-State sales. Section 9(1) provides that the tax payable by any dealer under the Act shall be levied and collected in the appropriate State by the Government of India. This power would however be subject to any rule made under the Central Sales Tax Act. We may now refer to the definition of 'appropriate State' in Section 2(a) as it stood before the amendment on 1st October, 1958.
Appropriate State' means-
(i) in relation to a dealer who has one or more places of business situate in the same State, that State ;
(ii) in relation to a dealer who has one or more places of business situate in different States, every such State with respect to the place or places of business situate within its territory.
Explanation.-'Place of business' means-
(i) in the case of a sale of goods in the course of inter-State trade or commerce falling within Clause (a) of Section 3, the place from which the goods have been moved by reason of such sale ;
(ii) in the case of any such sale falling within Clause (b) of Section 3, the place where the sale is effected.
10. These are the provisions of the Act which we have to consider in deciding the question which is the appropriate State entitled to levy and collect tax on the inter-State sales effected under Section 3(b) in the present case. The facts in this case reveal that the assessee transfers the documents of title to the goods, such as the railway receipt, demand draft and other relevant documents to the bank in the first instance, advising the bank to hand over the documents to the intended purchaser and the intended purchaser gets these documents on payment of money against the bill or the demand draft and subsequently takes delivery of the goods. Thus the property in the goods passes and can only pass when the buyer pays the moneys and receives documents of title duly endorsed in his favour. That is the point of time when the sale can be said to be effected. It is beyond dispute that these incidents took place only in the Kerala State. We may refer to the following observations of the Supreme Court in Tata Iron and Steel Co. Ltd. v. Sarkar  11 S.T.C. 655:.a sale contemplated by Section 3(b) is effected within the State in which the documents of title to the goods sold are transferred resulting in a transfer of the property in them ; that State is the 'appropriate State' in respect of such sale.
11. When once it is found that the Kerala State is the appropriate State, it is only that State which is entitled to levy and collect any tax due by a dealer under the Act.
12. But the Tribunal in deciding the question which is the appropriate State sought the aid of Section 4(2) and held that Section 4(2) must be applied to the facts in this case for fixing the place where the sales were effected under Section 3(b). Section 3 contemplates two kinds of inter-State sales: (1) where under the contract of sale the goods sold are moved from one State to another, and (2) where a sale is effected by transfer of documents of title to the goods during their movement from one State to another.
13. Section 4(1) sets out the principles for determining when a sale or purchase of goods takes place outside the State and Clause (2) when a sale shall be deemed to take place inside a State. Section 5 defines when a sale is said to take place in the course of import and export. It should be noted that Section 4 begins by saying 'subject to the provisions of Section 3'. (1) 15. The appropriate State in respect of such a sale has to be decided from Clause (2) of the Explanation in Section 2(a). Their Lordships of the Supreme Court in Tata Iron and Steel Co. Ltd. v. S.R. Sarkar  11 S.T.C. 655 while considering the scope of sections 3 and 4 observed at page 684 :
Section 4 is expressly made subject to Section 3. This can only mean that in case any conflict between the two sections appears, Section 3 would prevail. Now these two sections define two kinds of sale, namely, a sale in the course of inter-State trade and a sale taking place outside a State. If a sale happens to come under both definitions, it would have to be taken as a sale in the course of inter-State trade for Section 4 has been made subject to Section 3. That being so, it would be impossible to hold that Section 4(2) indicates where a sale falling under Section 3(b) is to be held to have been effected.
14. Again at page 685 their Lordships observe :
It would be legitimate to hold that similarly Section 4 was enacted only for the purpose of formulating principles for determining when a sale is said to take place outside a State and not for any other purpose...we hold that Sub-section (2) of Section 4 was not enacted for determining which is an 'appropriate State' to collect the tax in the case of a sale falling under Clause (b) of Section 3.
15. In the light of the above, it is clear that the Tribunal having held that the sales in question were inter-State under Section 3(b) erred in bringing to aid Section 4(2)(a) or 4(2)(b) in determining the appropriate State. The Tribunal also failed to note that if appropriation to the contract is to have the effect of transferring the property and resulting in a completed sale, such appropriation should be unconditional, which is not the case here. It follows that the order of the Tribunal in so far as it determined that the Madras State is the appropriate State has to be set aside. This revision petition is allowed with costs. Counsel's fee Rs. 100 (Rupees one hundred only).