Case: The State Of Kerala And Others Vs. The Cochin Coal Company Ltd

In the case on hand, the part of the coal delivered could and would certainly have been used by the ship during the period of her stay in the harbour for loading and if such stay were prolonged owing to unforeseen causes even the entire coal might have been exhausted and of course it would have to be used till the ship left the limits of the port and the limits of State territory. The crucial fact therefore was that the coal was delivered to the actual consumer who was at liberty to consume it wherever he desired- the choice depending on his convenience and necessity. 7. In the circumstances, therefore, learned Counsel for the respondent was right in his submission that the sale of the "bunker coal" by the assessee-company fell within the Explanation to Art. 286(1)(a).If there were nothing more and the liability of the assessee had to be judged with reference to the charge imposed by the Sales-tax Act of the State, read in the light of the Constitution, the tax liability of the respondent-company would not have been open to doubt or dispute. But the submission of learned Counsel was that the State Government had power to exempt sales of any particular designated type from tax liability under S. 6 of the Sales-tax Act, and that the Government had by a notification dated February 5, 1954, and published in the official Gazette, exempted sales such as by the respondent-company in the present case from the levy of sales-tax during the assessment years now in question. The exemption under this notification was no doubt not referred to by the learned Judges of the High Court but had been one of the grounds on which the sales-tax appellate authority had set aside the tax imposition by the Sales-tax Officer and the point had been specifically urged in the petition filed in the High Court under Art. 226, and the respondent cannot, therefore, be denied the benefit of the notification if it applied. 8. Section 6 of the Travancore-Cochin Sales-tax Act enacts :"The Government may, by notification in the Gazette, make an exemption........ in respect of any tax payable under this Act: (i) on the sale of any specified class of goods at all points or at any specified point or points in the series of sales by successive dealers; or (ii) of any specified class of persons in regard to the whole or any part of their turnover." It is not necessary to set out the rest of the section. In the Travancore-Cochin Gazette dated February 16, 1954, the following notification dated February 5, 1954, appeared:"According to the interpretation given by the Supreme Court to Art. 286(1) of the Constitution in their judgment in the State of Bombay v. United Motors India Ltd. certain categories of inter-State transactions come within the taxing powers of the State Government. While the judgment enables the Government of Travancore-Cochin to levy sales-tax on certain categories of non-resident dealers selling goods for delivery and consumption in Travancore-Cochin State from the 1st April 1951, the Government have, after due consideration, decided to levy sales-tax on such transactions only from the 1st April 1953-the date immediately following that on which the Supreme Court delivered its judgment and to forgo the levy prior to that date." 9. Then followed provisions detailing the interim arrangements for submission of returns, of declarations to be filed and the manner in which the tax should be assessed and paid. Though the learned Counsel for the appellant-State urged that the notification could not have the statutory effect of granting exemption, we are clearly of the opinion that this was and must be deemed to be one issued in exercise of the power conferred on the State Government by S.6(1) whose relevant terms we have already extracted. Besides, this is rather a curious submission to make in view of what had transpired earlier. The Appellate Assistant Commissioner who set aside the assessment of the respondent-company stated in his order "Even if it is considered that the sale is for consumption in this State, the company need not pay tax on the turnover since Government have exempted from payment of tax on the sales which took place before April 1, 1953." When this appellate order was set aside by the Deputy Commissioner acting suo motu in revision, there is no reference made to the notification in the order and it was not stated that it had no statutory effect. In its petition to the High court under Art. 226, the respondent-company claimed the benefit of the exemption granted by notification dated February 5, 1954, and published in the Gazette of February 16, 1954, relating to the assessment for the period April 1, 1951, to April 1, 1953, and it added that the assessment in question came within the exemption contained in the Gazette notification. In answer to this a counter affidavit was filed by the sales-tax officer who said : "the notification referred to in the petitioners affidavit has no application to the case as the sales in question did not come within their orbit." In other words, the objection was not that the notification was not a statutory exercise of the power under S. 6(1) and effective to grant an exemption to the cases covered by it, but that the transactions of the respondent-company were not covered by the notification. The extract we have quoted from the notification shows that it is specially designed to afford relief to cases of non-resident dealers engaged in inter-State transactions which were held to be intra-State transactions by reason of the application of the Explanation to Art. 286(1)(a) to such sales by the decision of this Court in the United Motors case, (AIR 1953 SC 252 ). As the respondent-companys transactions in question clearly fall within the notification by reason of their nature as well as the assessment years concerned, the respondent-company would be entitled to the benefit of the tax exemption conferred by the notification.

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

Explanation:
0[ds]There is no doubt that the goods having originally been located in Candle Island in Madras State were moved out of that State by reason of the contract of sale into the territory of Travancore-Cochin. It had therefore an inter-State element which rendered the Explanation applicable. The delivery was admittedly effected in the State of Travancore-Cochin as a direct result of that sale and was trimmed into the steam-ships in the Cochin waters. If the purpose of the delivery was not export as we have held earlier, it must follow that in the circumstances of this case it was for the purpose of consumption in the State since the delivery was to the ultimate consumer who was to use the goods for his own purposes and not for the purpose of re-export or with a view to other transactions of a commercial character in the goods. It would be noticed that the ultimate buyer-the steam-ship company could, if it desired, consume the goods in the sense of exhaust the goods by consumption within the State or it could take it outside the State and consume it there, but that was a matter of its choice, dependent on its will and pleasure. This would not therefore detract from the delivery to it being for consumption within the State. Goods might be consumed either by destruction or by way of use depending on the nature of the goods. Thus edible articles are generally consumed in a literal sense while other articles like clothing or furniture etc. are consumed by being used, though they are not destroyed by such use. If edible articles are sold and delivered to an ultimate consumer within a State, it is delivered for the purpose of consumption within the State, notwithstanding, that the buyer may not choose to consume the whole of his purchase within the State but takes part of it outside the State and consumes it there. If, for instance, a vehicle is sold to the actual user and the sale is not in the course of export or with a view to further commercial transactions in it by the purchaser by way of resale etc., the delivery to the user is for the purpose of his consumption within the State. The fact that such a purchaser might in the exercise of the enjoyment of his property-by way of use or "consumption" -drive the vehicle to other States does not detract from the original delivery to him falling within the Explanation to Art. 286(1)(a). In the present case, the coal having been delivered into the ship for being consumed by it, it was open to the master of the vessel to use the coal while the ship was in the waters of Travancore-Cochin, or if he so chose take it outside those limits. The position might be different if the buyer were obliged by contract or by law not to use or consume the goods sold within the State of delivery, i. e., where he has no choice to consume it there. In the case on hand, the part of the coal delivered could and would certainly have been used by the ship during the period of her stay in the harbour for loading and if such stay were prolonged owing to unforeseen causes even the entire coal might have been exhausted and of course it would have to be used till the ship left the limits of the port and the limits of State territory. The crucial fact therefore was that the coal was delivered to the actual consumer who was at liberty to consume it wherever he desired- the choice depending on his convenience and necessity9. Then followed provisions detailing the interim arrangements for submission of returns, of declarations to be filed and the manner in which the tax should be assessed and paid. Though the learned Counsel for the appellant-State urged that the notification could not have the statutory effect of granting exemption, we are clearly of the opinion that this was and must be deemed to be one issued in exercise of the power conferred on the State Government by S.6(1) whose relevant terms we have already extracted. Besides, this is rather a curious submission to make in view of what had transpired earlier. The Appellate Assistant Commissioner who set aside the assessment of the respondent-company stated in his order "Even if it is considered that the sale is for consumption in this State, the company need not pay tax on the turnover since Government have exempted from payment of tax on the sales which took place before April 1, 1953." When this appellate order was set aside by the Deputy Commissioner acting suo motu in revision, there is no reference made to the notification in the order and it was not stated that it had no statutory effect. In its petition to the High court under Art. 226, the respondent-company claimed the benefit of the exemption granted by notification dated February 5, 1954, and published in the Gazette of February 16, 1954, relating to the assessment for the period April 1, 1951, to April 1, 1953, and it added that the assessment in question came within the exemption contained in the Gazette notification. In answer to this a counter affidavit was filed by the sales-tax officer who said : "the notification referred to in the petitioners affidavit has no application to the case as the sales in question did not come within their orbit." In other words, the objection was not that the notification was not a statutory exercise of the power under S. 6(1) and effective to grant an exemption to the cases covered by it, but that the transactions of the respondent-company were not covered by the notification. The extract we have quoted from the notification shows that it is specially designed to afford relief to cases of non-resident dealers engaged in inter-State transactions which were held to be intra-State transactions by reason of the application of the Explanation to Art. 286(1)(a) to such sales by the decision of this Court in the United Motors case, (AIR 1953 SC 252  ). As the respondent-companys transactions in question clearly fall within the notification by reason of their nature as well as the assessment years concerned, the respondent-company would be entitled to the benefit of the tax exemption conferred by the notification.