1. The petitioner was charged to tax for the assessment year 1960-61 on a net turnover of Rs. 2,17,727 representing, as was claimed by the revenue, inter-State sales of raw skins and a net turnover of Rs. 2,01,963 being the value of the last purchase in the State, according to the revenue, by it of raw skins. In respect of the two assessments penalties of Rs. 3,265 and Rs. 3,029 respectively were imposed. The petitioner claimed that there were no sales effected by it in the course of inter-State trade and commerce and that the last purchases of raw skins not being made by it, it was not liable to charge either under the Central Sales Tax Act or under the Madras General Sales Tax Act. But the claim was rejected by the revenue at all the stages and also by the Tribunal.
2. The point in both these cases turns on whether delivery of raw skins to out-of-State dealers in respect of the turnover of Rs. 2,17,727 was within the State of Madras ; if it was, the claim of the petitioner that it would not be liable to tax under either of the Acts in respect of its purchase of raw skins and sales thereof to out-of-State dealers will be well-founded. The Tribunal relied on two facts for its view that the petitioner effected inter-State sales: (1) it collected sales tax at one per cent on the sale transactions, and (2) it collected also charges for loading the goods on lorries. In addition, the revenue relied on the fact that the petitioner itself produced declarations in Form C from out-of-State buyers, but the Tribunal rightly considered that this fact by itself will not justify a finding that the sales covered by a turnover of Rs. 2,17,727 were inter-State in character. It seems to us that the Tribunal in coming to that conclusion failed to bear in mind the correct principles that bear on the question. It has not applied its mind to ascertain what the terms of the contracts of sale were with reference to which the conclusion as to the inter-State character of the transactions could legitimately be arrived at.
3. The scheme of Sections 3 to 5 of the Central Sales Tax Act, 1956, suggests that inter-State sales or purchases are carved out of and separated from inside sales with reference to certain indicia but integrated with them for the purpose of situs for taxation. A sale or purchase takes place inside a State if the specified or ascertained goods are within its limits at the time the contract of sale is made or in the case of unascertained or future goods they are within the limits of that State at the time of their appropriation to the contract of sale by the seller or the buyer. Once this test is satisfied and it is established that the sale or purchase is one inside the State, it is at once a sale or purchase outside all other States but this is subject to the provisions of Section 3. That defines when a sale or purchase of goods takes place in the course of inter-State trade. Two tests are applied, one of which is that a sale or purchase takes place in the course of inter-State trade, commerce or intercourse if it occasions movement of the goods from one State to another, and the other test is that a sale or purchase takes place by transfer of documents of title, during the movement of the goods from one State to another. In this case there is no question of sale or purchase during the movement of the goods from one State to another. The question, therefore, would be whether the sale to the out-of-State dealers here occasioned the movement of the goods from this State to another. That will depend upon the terms of the contract. If the contract provided for movement of the goods, that will be a case of a sale that occasions the movement. There may be other cases which may well fall within the phraseology of Section 3(a) but we need not for the purpose of this case enter into it. Once it is determined with reference to the terms of the contract that the transaction is of inter-State character, the question then will be which State is entitled to bring it to tax. That will take one back to Section 4(2) relating to an inside sale. It is the State where the goods were found at the time the contract in relation to the inter-State sale or purchase was entered into, if the goods are, of course, specified or ascertained, that will be entitled to tax. In the case of unascertained or future goods, the other test of appropriation will be applicable. It will follow, therefore, that in each case before a sale or purchase is taxed by a State as of an inter-State character, it must first be satisfied that the tests under Section 4(2) are fulfilled and then it must be examined whether the transaction answers the requirements of Section 3(a) or (b). The Tribunal has not approached the assessments before us keeping in view these principles.
4. The Tribunal failed to examine what the terms of the contract of sale were in respect of what were claimed to be inter-State sales. Neither the collection of sales tax by a dealer, be it on a mistaken impression or a genuine plea that it is chargeable, nor collection of charges for loading by themselves will be conclusive. The terms will have to be looked at comprehensively and together in order to see whether the contract occasioned the movement of the goods. It is also noteworthy that in each of the invoices the loading charge is practically negligible in comparison with the probable charges for transport by lorry. It is not known who bore the transport charges. The petitioner's case is that the out-of-State dealer through his agent took local delivery within the State of Madras and in token thereof the agent has initialled or signed the invoices. This aspect will have to be examined with reference to the evidence on record or to be adduced. What the Tribunal should constantly keep in view is to find out whether the contract occasioned the movement of the goods in the sense that there was a stipulation in the contract that the seller should despatch the goods from Madras State to another State.
5. The orders of the Tribunal are set aside and the appeals are remitted to the file of the Tribunal with a direction that it will dispose them of afresh. If it considers necessary, it will be at liberty to remit the assessments to the assessing authority for fresh consideration after recording further evidence, both oral and documentary and giving a proper and reasonable opportunity to the petitioner of being heard, which will include also the opportunity of producing evidence. The petitions are allowed with costs, one set. Counsel's fee Rs. 100.