Civil Appeal No 1191 of 1973
Appeal by special leave from the Judgment and Order dated 7 11 72 of the High Court of Madras in TC No 197 of 1968
C K Viswanatha Iyer Mrs section Gopalakrishnan for the Appellant
section T Desai A V Rangam and Miss A Subhashini for the respondent
The Judgment of the Court was delivered by RAY C J
This appeal by special leave is from the judgment dated 7 November 1972 of the High Court of Madras
The principal question in this appeal is whether the sales of cotton by the appellant to the mills at Tirunelveli and Karur were inter State sales under section 3a of the called the Central Act or are second sales under State Sales under section 3b of the Central Act
The appellant has its place of business at Coimbatore
The Mills are situated within the State of Madras
The Mills entered into an agreement with the appellant for purchase of cotton
The appellant in turn placed orders with its sellers at Bombay for purchase of cotton
The appellant directed its Bombay sellers to despatch the goods to the mills as consignees
The Bombay seller sent the consignment to the mills but the railway receipts were sent by the Bombay seller to the appellant
The appellant then endorsed the same in favour of the mills after collection of the substantial portion of the sale price
The appellant contended that the consignments were sent directly by the Bombay seller to the mills and therefore these were direct inter State sales by the Bombay seller to the mills and that the property in the goods passed to the mills when the goods were loaded at Bombay
The Sales Tax Authorities found that the Mills were the last purchaser and therefore these were inter State sales between the Appellant and the Mills
A most significant feature is that the railway receipts were sent by the Bombay seller to the appellant and the appellant thereafter endorsed the same to the mills
It is therefore apparent that there could not be an unconditional appropriation of the goods at Bombay towards the contract entered into between the appellant and the mills
The property in the goods passed only when the mills took delivery of the railway receipts from the appellant
The Bombay seller dealt with the railway receipts in such a way that it is proved that the intention of the appellant to part with the goods in any event is not until substantial payment is made by the mills
The Bombay seller had no privity of contract with the Mills
The 719 Bombay seller sold the goods to the appellant
The sale by the Bombay seller to the appellant was an inter State sale
The sale by the appellant to the mills cannot be said to have caused the interState movement of goods
The mere fact that the goods were consigned by the Bombay seller to the mills in accordance with the direction of the appellant will not make the transactions inter State sales
The sale by the Bombay seller to the appellant occasioned the movement of goods
The High Court was correct in holding that the sale by the Bombay seller to the appellant is an inter State sale and the sale by the appellant to the mills is not an inter State sale
Therefore the State Sales Tax Authorities had jurisdiction to assess the transaction for sale by the appellant to the mills under section 3b of the Central Act
The appellant raised a second contention that the appellant is entitled to the benefit of Government Order No 3602 which exempts from sales tax declared goods sold in the course of inter State trade or commerce where tax has been levied or collected in respect of sales or purchase of such declared goods under section 4 of the Madras General Sales Tax Act 1959 called the Madras Act
The Government Order No 3602 was issued in exercise of powers conferred by section 85 of the Central Act
The appellant contended that the mills paid the tax on their purchases of cotton and the same transaction could not be brought to charge in the hands of the appellant as inter State sale
If the transaction attracts levy of tax under the Central Act it is not taxable under the Madras Act
If the mills had paid tax under the impression that their purchases are taxable under the Madras Act that will not enable the appellant to claim the benefit of the exemption
The exemption applies only to cases where the claimant has paid tax himself under section 4 of the Madras Act in respect of local sales preceding the inter State transactions
The appellant in the present case did not pay tax under section 4 of the Madras Act
The High Court therefore correctly held that the appellant was not entitled to claim exemption under the Government Order
The third contention of the appellant was that the appellant was entitled to exemption in respect of turnover under section 62 of the Central Act
Section 62 of the Central Act lays down that where a sale in the course of inter State trade or commerce of goods of the description referred to in section 83 of the Central Act has occasioned the movement of goods from one State to another or has been effected by a transfer of documents of title to such goods during their movement from one State to another any subsequent 720 sale to a registered dealer during such movement effected by a transfer of documents of title to such goods shall not be subject to tax under the Act
A dealer claiming exemption for subsequent sale during the movement of goods from one State to another is required by section 62 of the Central Act to furnish to the prescribed authority in the prescribed manner a certificate duly filled and signed by the registered dealer by whom the goods were purchased containing the particulars
In the present case the appellant would be entitled to exemption in production of appropriate form by the Bombay seller and by showing that the buyer is a registered dealer
The appellant produced the form from Bombay seller but did not prove that his buyer was a registered dealer in cotton
Therefore the Tribunal rightly held that the appellant was not entitled to exemption under section 62 of the Act
The appeal is therefore dismissed with costs
SR Appeal dismissed


Summary:
As per the directions of the appellant and on receipt of the requisite licence under the cotton Transport Act 1923 for transport of cotton the Bombay seller despatched cotton to the ultimate buyer mills at Madurai and sent the Railway Receipts to the appellant who endorsed the same in favour of the Mills after collection of the substantial portion of the sale price
The sales Tax authorities treated the transaction as intra sales and assessed the Mills as the last purchaser under the Madras General Sales Tax and assessed the appellant us 3b of the 
The question is whether in the circumstances the transaction is one of inter state sales falling us 3a or second sales under state sales us 3b of the 
The contentions of the appellant in this court were 1 The sale of cotton by the appellant assessee to the buyer mill fell within the scope of section 3a of the Central Act as there was movement of goods from Bombay to Madras as a result of covenant in or incidental to the contract of sale and therefore us 91 of the Central Sales Tax the jurisdiction lay with Bombay state from where the goods moved from and ii Since the sale being in respect of declared goods is exempt by the terms of notification of Order No 3602 dated 28 12 63 issued us 85 of the CST and ii the turnover was exempt us 62 of CST Dismissing the appeal the court  HELD 1 The significant feature of the transaction viz sending of the Railway Receipts by the Bombay seller to the appellant who thereafter endorsed the same to the mills shows that a there could not be any unconditional appropriation of the goods at Bombay towards the contract entered into between the appellant b It was an inter state sales to the appellant and the sale by the appellant to the mills is an intra state sales in as much as the mere fact that the goods were consigned by the Bombay seller to the mills in accordance with the direction will not make the transaction inter state sales
718G H 719A B ii The State sales Tax authorities respondent had jurisdiction to assess the transaction for sale by the appellant to the mills us 3b of the Central Act
719C iii The exemption us 85 applies only to cases where the claimant had paid tax himself us 4 of the Madras Act in respect of local sales preceding the inter state transactions
In the instant case as the appellant did not pay tax us 4 of the Madras Act he was not entitled to claim exemption under the Government order
719 E F iv A dealer claiming exemption for subsequent sale during the movement of goods from one state to another is required by section 62 of the Central Act to furnish to the prescribed authority in the prescribed manner a certificate 718 duly filled and signed by the registered dealer by whom the goods were purchased containing the particulars
In the instant case the appellant produced the form from the Bombay seller but did not prove that his buyer was a registered dealer in cotton which disentitled him to exemption us 62 of the Act
720 B C