Case: Bengal Timber Trading Co. Ltd Vs. Commissioner Of Sales Tax, Madhyapradesh

accepted by the consignee. Cl. 11 (g) makes it clear that notwithstanding the fact that the goods had been passed by the Sleeper Passing Officer at Dhamtari and that they had been put on rail within the period of the contract at the said station and the Sleeper Passing Officer had given the contractor a passing certificate in terms of C1. 10 and the station master at Dhamtari had issued a tally receipt for the number of sleepers loaded, the consignee still had the right to inspect the goods at the destination and reject any which were not in terms of the contract and such rejected goods were to be treated as non-delivered. All this, in our opinion, puts the matter beyond doubt that the actual physical delivery was not taken as complete before the goods were accepted by the consignee at the destination. In all such cases, the consumption took place in the State to which the goods were despatched with the result that the sales came within the purview of the Explanation to Art. 286 (1) (a) as it stood before the Sixth Amendment of the Constitution.12. Our attention was drawn to a judgment of the Patna High Court in Birendranath Guha and Co. v. State of Bihar, 1954-5 STC 273: (AIR 1955 Pat 245 ) where the assessee had taken lease of a timber forest in Nepal and had built godowns in Nepal territory close to Jogbani railway station in the State of Bihar. The assessee supplied to the railways and despatched to different destinations various quantities of sleepers from Jogbani railway station after obtaining instructions from the Sleeper Control officer. The assessee contended that no sale took place in Bihar since the sleepers had been manufactured in Nepal and despatched from Jogbani railway station to places outside Bihar. The full terms of the contract in that case are not to be found in the report but it appears that it was worded very similarly to the contract before us. The Patna High Court held that on a consideration of all the provisions of the contract, it was manifest that the goods in question had been unconditionally appropriated to the contract at Jogbani railway station. Alternatively, the High Court held that there was appropriation of the goods within the meaning of S. 23(2) of the Sale of Goods Act at Jogbani railway station and accordingly it was held that there was delivery to the carrier at Jogbani railway station coupled with an unconditional appropriation of the goods within the meaning of Section 23 (2) of the Sale of Goods Act. With regard to Clauses 11 (g), 11(j) and 13 (a) the High Court said that these were merely additional stipulations superimposed on the contractor who agreed to act as insurer of the goods till the stage of final destination and also agreed to the other conditions, but these additional conditions had no bearing on the question as to where and when the title to the sleepers passed to the buyer.13. We find ourselves unable to agree with the above expression of opinion as we have already pointed out that the question is not when the title to the goods passed under the contract, but to ascertain whether actual delivery of the goods took place outside the State of Madhya Pradesh for the purpose of consumption there so as to be within the deeming provision of the Explanation to Art. 286 (1). The contract has to be considered in the setting of the facts and circumstances of the case as a whole and Cl. 11(g), 11 (i), 12, 13 and 14 cannot be read as conditions superimposed after the actual delivery of the goods. The place of actual delivery in the light of all the circumstances of the case can only be the destination of the goods and the goods can only be said to be fully delivered and finally accepted after they are acknowledged at the destination by the Sleeper Control Officer.14. A similar contract came up for consideration before the Assam High Court in Birendra Nath Guha v. Commissioner of Taxes, Assam, 1959-10 STC 327: (AIR 1958 Assam 119) and the High Court took a view different from that of the Patna High Court mentioned above.15. In D. N. Dutta v. Commissioner of Sales Tax, Orissa, ILR (1961) Cut 622 two questions were referred to the High Court, one of them being, whether there was a completed sale in Orissa so as to confer jurisdiction on the State of Orissa to tax the impugned transactions and secondly, whether even if there was a completed sale in Orissa, the State Government was prohibited from taxing those transactions in view of the ban imposed by Cl. (1) and Cl. (2) of Art. 286 of the Constitution. The contract, according to the judgment of the High Court, was identical with the one which came for consideration in the Patna case in 1959-10 STC 327: (AIR 1958 Assam 119) (supra). The Orissa High Court held that in respect of the impugned transaction, none of the sleepers had been subject to reinspection by the Sleeper Control Officer "or rejected by him at the destination; all the sleepers were fully delivered when the passing mark was given by the Sleeper Passing Officer at the place of despatch and the seller had loaded them in the wagon at the despatching station and obtained the tally receipt from the station master concerned. It is not necessary to examine the case in detail but it is sufficient to say that even if there was no rejection at the place of destination, actual delivery would not be completed until they were finally accepted at destination and to that extent we find ourselves unable to agree with the decision of the Orissa High Court.16. In the result, it must be held that the sales in these cases were covered by the Explanation to Art. 286 (1) and as such not taxable by the State of Madhya Pradesh.

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

Explanation:
1[ds]11. In our opinion, we have got to take the whole of the contract into account and then find out the intention of the parties as to where actual delivery was to take place thereunder. While there can be no doubt that the major part of the operations of the contractor with regard to delivery were to be performed at Dhamtari he was not relieved of all liability as to delivery until the goods were finally accepted at the destination by the consignee. In this respect, we cannot overlook Cls. 3 (a), 11(g), 12 and 14 of the conditions of contract when the consignee was outside Madhya Pradesh. Cl. 3 (a) speaks of delivery and final acceptance under the terms of the contract. Delivery here is linked with final acceptance which according to Cl. 11 (g) can only be after the goods had reached the destination and were acknowledged as accepted by the consignee. Cl. 11 (g) makes it clear that notwithstanding the fact that the goods had been passed by the Sleeper Passing Officer at Dhamtari and that they had been put on rail within the period of the contract at the said station and the Sleeper Passing Officer had given the contractor a passing certificate in terms of C1. 10 and the station master at Dhamtari had issued a tally receipt for the number of sleepers loaded, the consignee still had the right to inspect the goods at the destination and reject any which were not in terms of the contract and such rejected goods were to be treated as non-delivered. All this, in our opinion, puts the matter beyond doubt that the actual physical delivery was not taken as complete before the goods were accepted by the consignee at the destination. In all such cases, the consumption took place in the State to which the goods were despatched with the result that the sales came within the purview of the Explanation to Art. 286 (1) (a) as it stood before the Sixth Amendment of the Constitution.We find ourselves unable to agree with the above expression of opinion as we have already pointed out that the question is not when the title to the goods passed under the contract, but to ascertain whether actual delivery of the goods took place outside the State of Madhya Pradesh for the purpose of consumption there so as to be within the deeming provision of the Explanation to Art. 286 (1). The contract has to be considered in the setting of the facts and circumstances of the case as a whole and Cl. 11(g), 11 (i), 12, 13 and 14 cannot be read as conditions superimposed after the actual delivery of the goods. The place of actual delivery in the light of all the circumstances of the case can only be the destination of the goods and the goods can only be said to be fully delivered and finally accepted after they are acknowledged at the destination by the Sleeper Controlis not necessary to examine the case in detail but it is sufficient to say that even if there was no rejection at the place of destination, actual delivery would not be completed until they were finally accepted at destination and to that extent we find ourselves unable to agree with the decision of the Orissa High Court.16. In the result, it must be held that the sales in these cases were covered by the Explanation to Art. 286 (1) and as such not taxable by the State of Madhya Pradesh.