Case: State Of Tamil Nadu Vs. Dharangadhara Trading Co. Ltd

Company as well as the Trading Company filed appeals before the Appellate Assistant Commissioner contending that both the said sales were inter-State sales. It was contended by the assessee that the sales by the Trading Company to the out of State purchasers were admittedly inter-State sales and as far as sales by the Chemical Company to the Trading Company were concerned, these were also inter-State sales as the sales were completed by the delivery of railway receipts and invoices only after the inter-State journey of the goods had commenced. These contentions were rejected by the Appellant Commissioner, who dismissed the appeals. Both the assesses filed appeals against the decisions of the Appellate Assistant Commissioner to the Tribunal. The Tribunal allowed both the appeals. 4. The Tribunal pointed out that there were two sets of sales, the second set of sales by the Trading Company to out of State buyers was admittedly inter-State in character. The Trading Company had filed necessary E-1 forms and C forms in these cases and the transactions, therefore, fell within the scope of Section 6(2)(b) of the Central Sales Tax Act and were exempt from tax under local Sales Tax Act as well as the Central Sales Tax Act. As far as first set of sales, namely, by the Chemical Company to Trading Company were concerned, it was pointed out that although under the agreement dated August 9, 1957 the sales agreed to be FOR Booking Stations and the booking station was in Tamil Nadu, the delivery of goods could be either by physical delivery or by handing over documents of title. The delivery contemplated in the agreement was not actual physical delivery, as the place of delivery was neither sellers place of business, nor the buyers place of business. Considering the manner in which the sales were effected and dispatches made by the Chemical Company, and after examining some specimen orders placed by the Trading Company with the Chemical Company, the Tribunal came to conclusion that the delivery was effected by the Chemical Company to the Trading Company by delivery of documents of title, namely, the respective invoices and the railway receipts. The nature of sales by the Chemical Company to the Trading Company and the question whether they were inter-State sales had to be decided after further taking into account the further instructions given by the buyers. The actual terms of the sales have to be determined not merely under the agreement dated August 9, 1957 as that agreement was a general agreement which did not specify the quantities to be sold, the sale price, booking stations, the destination stations, and so on, but these actual terms could be determined only by taking into account the terms on which and the manner in which the actual sales were made by the Chemical Company to the Trading Company. For ascertaining these terms, the Tribunal examined some of the subsequent orders placed by that Trading Company on the Chemical Company. Taking into account all these, the Tribunal found that as the orders were placed for booking specified goods to out of station buyers, and the Chemical Company never gave physical delivery of the goods to the Trading Company, but booked the goods to the destinations as required by the out of State buyers and merely handed over documents of title to the Trading Company, it was clear that the movement of the goods from the State of Tamil Nadu to the outside States was occasioned by the terms of the contract themselves and the sales were inter-State sales falling within Section 3, sub-section (a) of the Central Sales Tax Act, 1956. Alternatively, if a view were taken that the sales did not fall under sub-section (a) of Section 3, the deliveries of goods sold were effected by the transfer of documents after the movement of the goods from Tamil Nadu to the other States had commenced and the sales could be regarded as covered under sub-section (b) of Section 3 of the Central Sales Tax Act. From this decision of the Tribunal, revision petitions under Section 38 of the Tamil Nadu General Sales Tax Act were preferred by the State of Tamil Nadu to the Madras High Court. The High Court upheld the views of the Tribunal and dismissed both the revision petitions which were numbered as Tax Cases Nos. 2 and 3 respectively. An appeal was preferred by the State in the case of the Trading Company, namely, the case pertaining to the assessment of the sales from Chemical Company to the Trading Company. 5. The only submission advanced by Mr Mahajan, learned counsel for the appellant, was that there were two sets of sales, namely, by the Chemical Company to the Trading Company and by the Trading Company to the out of State buyers. It was submitted by him that the first set of sales, namely, by the Chemical Company to the Trading Company were local or intra-State sales because under the agreement dated August 9, 1957 the delivery was to be effected at the booking station. In our view, as the Tribunal has rightly pointed out, the agreement dated August 9, 1957, is merely a general agreement and the actual terms of the contracts of sales as well as the instructions of the out of State buyers have to be taken into account in determining the nature of the sales in question. In view of this, the conclusions arrived at by the Tribunal as well as the High Court that the sales by the Chemical Company to the Trading Company were inter-State sales cannot be faulted and the learned counsel for the appellant has not advanced a single reason showing how that conclusion is incorrect. In fact, this conclusion finds some support from the observations of this Court in Union of India v. K. G. Khosla & Co. (P) Ltd. [(1979) 2 SCC 242, 248 : (1979) 3 SCR 453 , 460 : 1979 SCC (Tax) 101 : (1979) 43 STC 457 ].

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

Explanation:
0[ds]5. The only submission advanced by Mr Mahajan, learned counsel for the appellant, was that there were two sets of sales, namely, by the Chemical Company to the Trading Company and by the Trading Company to the out of State buyers. It was submitted by him that the first set of sales, namely, by the Chemical Company to the Trading Company were local or intra-State sales because under the agreement dated August 9, 1957 the delivery was to be effected at the booking station. In our view, as the Tribunal has rightly pointed out, the agreement dated August 9, 1957, is merely a general agreement and the actual terms of the contracts of sales as well as the instructions of the out of State buyers have to be taken into account in determining the nature of the sales in question. In view of this, the conclusions arrived at by the Tribunal as well as the High Court that the sales by the Chemical Company to the Trading Company were inter-State sales cannot be faulted and the learned counsel for the appellant has not advanced a single reason showing how that conclusion is incorrect. In fact, this conclusion finds some support from the observations of this Court in Union of India v. K. G. Khosla & Co. (P) Ltd. [(1979) 2 SCC 242, 248 : (1979) 3 SCR 453 , 460 : 1979 SCC (Tax) 101 : (1979) 43 STC 457 ]