Case: Associated Cement Companies Limited, Kymore Vs. Commissioner Of Sales-Tax, Indore, Etc. Etc

the sales in question are interstate in nature or should be regarded as intrastate. It is seen that the Cement Marketing Company is an independent organisation and is carrying on business as an independent entity. It is also seen that what has actually been taxed are the sales effected by the appellant to the Cement Marketing Company of India and not the sales made to the parties which obtained an authorisation from the Cement Controller. This seems to be the crux of the matter." *On this basis reliance was placed on the decision of this Court in the case of Rohtas Industries Limited v. State of Bihar [ 1961 (12) STC 615, 620 : 1963 AIR(SC) 347] where, after analysing the terms of the contract between the manufacturer (appellant before the Supreme Court) and the Marketing Company, this Court held : (STC p. 620)"On a review of these terms of the agreement, it is manifest that the manufacturing companies had no control over the terms of the contract of sale by the Marketing Company and that the price at which cement was sold by the Marketing Company could not be controlled by the manufacturing companies; that the manufacturing companies were entitled, for ordinary cement, to be paid at the rate of Rs. 24 per ton at works, or at such other rate as might be decided upon by the directors of the Marketing Company, and in respect of special cements, at such additional rates as the directors of the Marketing Company might determine; that sale by the Marketing Company was not for and on behalf of the manufacturing companies but for itself and the manufacturing companies had no control over the sales nor had they any concern with the persons to whom cement was sold. In fine, the goods were supplied to the order of the Marketing Company which had the right, under the terms of the agreement, to sell on such terms as it thought fit, and that the manufacturing companies had the right to receive only the price fixed by the Marketing Company. The relationship in such cases can be regarded only as that of a seller and buyer and not of principal and agent." *4. This Court Rohtas Industries case [ 1961 (12) STC 615, 620 : 1963 AIR(SC) 347] on a detailed analysis of the terms of the contract came to hold that there was a sale between the manufacturer and the Marketing Company. It is not in dispute that the agreement between the appellant and the Marketing Company in this case has the same terms as this Court considered in Rohtas Industries case [ 1961 (12) STC 615, 620 : 1963 AIR(SC) 347]. It follows, therefore, that it must be held that there was a sale between the appellant and the Marketing Company5. The Marketing Company had its establishment at Nagpur within the State of Madhya Pradesh at that time. There was, therefore, a preceding local sale prior to the sales between the Marketing Company and the allottee of cement by the regulating authority. This Court in Rohtas Industries [ 1961 (12) STC 615, 620 : 1963 AIR(SC) 347] further found that the transaction between the manufacturer and the Marketing Company had nothing to do with the Marketing Companys sales to third parties. There was no privity between the manufacturer and the ultimate consumer who was said to have been located outside the State of Madhya Pradesh 6. The question for consideration is whether the sale that took place between the manufacturer and the Marketing Company can be taken to be covered by the Explanation. The Explanation which was repealed by the Sixth Amendment of the Constitution in 1956 read thus "For the purposes of sub-clause (a), a sale or purchase shall be deemed to have taken place in the State in which the goods have actually been delivered as a direct result of such sale or purchase for the purpose of consumption in that State notwithstanding the fact that under the general law relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State." * 7. Rohtas Industries case [ 1961 (12) STC 615, 620 : 1963 AIR(SC) 347] was dealing with a period prior to the Constitution; therefore, without the Explanation. The question for consideration thus is : Does the presence of the Explanation make any difference ? 8. What has been found as a fact in the statement of the case is that there was preceding local sales complete in every respect within Madhya Pradesh by which title to the cement had passed from the appellant to the Marketing Company. The concept of interstate sale as brought in by the Sixth Amendment or in the subsequent statute known as the Central Sales Tax Act was not in existence for the relevant period now under consideration. The finding recorded by the authorities is that the delivery of the cement was not the direct result of such sale or purchase of the cement outside the State. In the absence of such privity the Explanation is not attracted to the transactions9. An attempt was made by counsel to rely upon some of the later decisions of this Court where with reference to the provisions contained in the Central Sales Tax Act the law had been laid down. It is unnecessary to refer to them in view of the finding recorded by the authorities that the cement in this case actually had not been delivered as a direct result of such sale or purchase for the purpose of consumption outside the State. That is a finding clinching enough and once that is taken as binding on this Court, the only conclusion that can follow is that the Explanation does not apply and the assessments are justified. The ratio of Mohd. Serajuddin v. State of Orissa [ 1975 (2) SCC 47 : 1975 SCC(Tax) 269 : 1975 Supp SCR 169] is also against the appellants stand

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

Explanation:
0[ds]8. What has been found as a fact in the statement of the case is that there was preceding local sales complete in every respect within Madhya Pradesh by which title to the cement had passed from the appellant to the Marketing Company. The concept of interstate sale as brought in by the Sixth Amendment or in the subsequent statute known as the Central Sales Tax Act was not in existence for the relevant period now under consideration. The finding recorded by the authorities is that the delivery of the cement was not the direct result of such sale or purchase of the cement outside the State. In the absence of such privity the Explanation is not attracted to the transactions9. An attempt was made by counsel to rely upon some of the later decisions of this Court where with reference to the provisions contained in the Central Sales Tax Act the law had been laid down. It is unnecessary to refer to them in view of the finding recorded by the authorities that the cement in this case actually had not been delivered as a direct result of such sale or purchase for the purpose of consumption outside the State. That is a finding clinching enough and once that is taken as binding on this Court, the only conclusion that can follow is that the Explanation does not apply and the assessments are justified.