Case: Shree Bajrang Jute Mills Ltd Vs. State Of Andhra Pradesh

such delivery took place and being outside all other States exempt from sales-tax by those other States: Tobacco Manufacturers (India) Ltd. v. Commissioner of Sales-tax, Bihar, Patna, 1961-2 SCR 106 : (AIR 1961 SC 402 ): Indian Copper Corporation Ltd. v. State of Bihar, 1961-2 SCR 276 : (AIR 1961 SC 347 ): and State of Kerala v. Cochin Coal Co. Ltd., 1961-2 SCR 219 : (AIR 1961 SC 408 ). But the Explanation is not exhaustive of what may be called "inside sales". Clause (1) (a) excludes from the reach of the power of the States sales outside the State but it does not follow from the Explanation that it localises the situs of all sales. The power of the State under Entry 54 List II of the Seventh Schedule to tax sales (not falling within cls. (1) (b), (2) and (3)) which are outside the Explanation, and which may for the sake of brevity be called non-Explanation sales, remains unimpaired. It is not necessary for the purpose of this case to express an opinion, whether the theory of territorial nexus of the taxing State, with one or more elements which go to make a completed sale authorises since the promulgation of the Constitution the exercise of legislative power under Entry 54, List II the Seventh Schedule to tax sales, where property in goods has not passed within the taxing State.7. The question which then falls to be determined is whether the sales to the A. C. C. by the appellant may be regarded as "non-Explanation sales". There can be no doubt that if the goods were delivered pursuant to the contracts of sale outside the State of Andhra for the purpose of consumption in the State into which the goods were delivered, the State of Andhra could have no right to tax those sales by virtue of the restriction imposed by Art. 286(1) (a) read with the Explanation.8. The facts found by the taxing authorities clearly establish that property in the goods despatched by the appellant passed to the A. C. C. within the State of Andhra when the railway receipts were handed over to the agent of the A. C. C. against payment of price. The question still remains: were the transactions non-Explanation sales i. e. falling outside the Explanation to Art. 286(1) ? To attract the Explanation, the goods had to be actually delivered as a direct result of the sale, for the purpose of consumption in the State in which they were delivered. It is not disputed that the goods were supplied for the purpose of consumption outside the State of Andhra, and in the States in which they were supplied. It is submitted that the goods were actually delivered within the State, when the railway receipts were handed over to the agent of the buyer. But the expression "actually delivered" in the context in which it occurs, can only mean physical delivery of the goods, or such action as puts the goods in the possession of the purchaser: it does not contemplate mere symbolical or national delivery e. g., by entrusting the goods to a common carrier, or even delivery of documents of title like railway receipts. In C. Govindarajulu Naidu and Co. v. State of Madras, AIR 1953 Mad 116 , Venkatarama Ayyar, J., dealing with the concept of actual delivery of goods, so as to attract the application of the Explanation to Art. 286(1) (a) rightly observed:"In the context it can mean only physical delivery and not constructive delivery such as by transfer of documents of title to the goods. The whole object of the Explanation is to give a power of taxation in respect of the goods actually entering the State for the purpose of use therein and it will defeat such a purpose if notional delivery of the goods as by transfer of documents of title to the goods within the State is held to give the State a power to tax, when the goods are actually delivered in another State." A similar view has been expressed in two other cases: Capoo Ltd. v. Sales Tax Officer, AIR 1960 All 62 , and Khaitan Minerals v. Sales Tax Appellate Tribunal for Mysore, AIR 1963 Mys. 141.9. Counsel for the respondent-State relied upon S. 39 of the Indian Sale of Goods Act, 1930, which provides in so far as it is material, by the first sub-section that where, in pursuance of a contract of sale, the seller is authorised to send the goods to the buyer, delivery of the goods to a carrier for the purpose of transmission to the buyer, is prima facie deemed to be delivery of the goods to the buyer. But that provision will not make mere delivery of the railway receipts representing title to the goods actual delivery of goods for the purpose of Art. 286. The rule contained in S. 39(1) of the Indian Sale of Goods Act raises a prima facie inference that the goods have been delivered if the conditions prescribed thereby are satisfied: it has no application in dealing with a constitutional provision which while imposing a restriction upon the legislative power of the States entrusts exclusive power to levy sales tax to the State in which the goods have been actually delivered for the purpose of consumption.10. The High Court was therefore in error in inferring from the fact that the property had passed within the State of Andhra against delivery of the railway receipts that the goods were actually delivered within the State. If the inference raised by the High Court that the goods were actually delivered within the State of Andhra cannot be accepted, on the facts found there is no escape from the conclusion that the State of Andhra had no authority to levy tax in respect of those sale transactions in which the goods were sent under railway receipts to places outside the State of Andhra and actually delivered for the purpose of consumption in those States.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]It is now well-settled that by Art. 286(1) (as it stood before it was amended by the Constitution Sixth Amendment Act, 1956) sales as a direct result of which goods were delivered in a State for consumption in such State i. e., the sales falling within the Explanation to Art. 286(1) were fictionally to be regarded as inside that State for the purpose of (1) (a) and so within the taxing power of the State in which such delivery took place and being outside all other States exempt from sales-tax by those other States: Tobacco Manufacturers (India) Ltd. v. Commissioner of Sales-tax, Bihar, Patna, 1961-2 SCR 106  : (AIR 1961 SC 402  ): Indian Copper Corporation Ltd. v. State of Bihar, 1961-2 SCR 276  : (AIR 1961 SC 347  ): and State of Kerala v. Cochin Coal Co. Ltd., 1961-2 SCR 219  : (AIR 1961 SC 408  ). But the Explanation is not exhaustive of what may be called "inside sales". Clause (1) (a) excludes from the reach of the power of the States sales outside the State but it does not follow from the Explanation that it localises the situs of all sales. The power of the State under Entry 54 List II of the Seventh Schedule to tax sales (not falling within cls. (1) (b), (2) and (3)) which are outside the Explanation, and which may for the sake of brevity be called non-Explanation sales, remains unimpaired. It is not necessary for the purpose of this case to express an opinion, whether the theory of territorial nexus of the taxing State, with one or more elements which go to make a completed sale authorises since the promulgation of the Constitution the exercise of legislative power under Entry 54, List II the Seventh Schedule to tax sales, where property in goods has not passed within the taxingcan be no doubt that if the goods were delivered pursuant to the contracts of sale outside the State of Andhra for the purpose of consumption in the State into which the goods were delivered, the State of Andhra could have no right to tax those sales by virtue of the restriction imposed by Art. 286(1) (a) read with the Explanation.8. The facts found by the taxing authorities clearly establish that property in the goods despatched by the appellant passed to the A. C. C. within the State of Andhra when the railway receipts were handed over to the agent of the A. C. C. against payment of price. The question still remains: were the transactions non-Explanation sales i. e. falling outside the Explanation to Art. 286(1) ? To attract the Explanation, the goods had to be actually delivered as a direct result of the sale, for the purpose of consumption in the State in which they were delivered. It is not disputed that the goods were supplied for the purpose of consumption outside the State of Andhra, and in the States in which they were supplied. It is submitted that the goods were actually delivered within the State, when the railway receipts were handed over to the agent of the buyer. But the expression "actually delivered" in the context in which it occurs, can only mean physical delivery of the goods, or such action as puts the goods in the possession of the purchaser: it does not contemplate mere symbolical or national delivery e. g., by entrusting the goods to a common carrier, or even delivery of documents of title like railwaythat provision will not make mere delivery of the railway receipts representing title to the goods actual delivery of goods for the purpose of Art. 286. The rule contained in S. 39(1) of the Indian Sale of Goods Act raises a prima facie inference that the goods have been delivered if the conditions prescribed thereby are satisfied: it has no application in dealing with a constitutional provision which while imposing a restriction upon the legislative power of the States entrusts exclusive power to levy sales tax to the State in which the goods have been actually delivered for the purpose of consumption.10. The High Court was therefore in error in inferring from the fact that the property had passed within the State of Andhra against delivery of the railway receipts that the goods were actually delivered within the State. If the inference raised by the High Court that the goods were actually delivered within the State of Andhra cannot be accepted, on the facts found there is no escape from the conclusion that the State of Andhra had no authority to levy tax in respect of those sale transactions in which the goods were sent under railway receipts to places outside the State of Andhra and actually delivered for the purpose of consumption in those States.