Case: M/s. Amritsar Sugar Mills Co. Ltd Vs. Commissioner of Sales Tax, Uttar Pradesh

a contract that despatch instructions would be furnished later necessarily means that the seller undertakes to comply with them. If under a contract itself something is to be settled later, what is settled later becomes as much binding under the contract itself as the terms already settled under the contract. Still, I do not think that the sales in those cases in which the contracts provided for despatch instructions to be given later became sales for delivery outside Uttar Pradesh merely because the despatch instructions were that they should be despatched outside Uttar Pradesh. All that can be said is that the sales were for "delivery in accordance with despatch instructions" and a sale for "delivery in accordance with despatch instructions" is not necessarily a sale for "delivery outside Uttar Pradesh."He seemed to be of the view that in order to come within the expression "delivery outside Uttar Pradesh" it must be one of the terms settled at the time of the formation of the contract itself that the goods will be delivered outside Uttar Pradesh, and if this is not so settled and all that is settled is that they will be delivered in accordance with despatch instructions the sale would neither be a sale for delivery outside Uttar Pradesh nor a sale for delivery inside Uttar Pradesh. He was clearly of the view that despatch instructions were not a part of the contract when it was formed and did not get incorporated into it or become a part of it when given. Pathak, J., in a concurring judgment, was of the view that it must be in the contemplation of the parties at the time of entering into the contract that the goods which were the subject of sale must be delivered outside Uttar Pradesh. He observed that "there is a distinction between settling and determining the terms of a contract and complying with the terms of that contract. The former relates to the formation of the contract, the latter to its execution."7. The first question which arises in these appeals is whether the word "delivery" in the expression "sales of such goods for delivery outside Uttar Pradesh" occurring in S. 5 of the Act means actual delivery or constructive delivery. If it means constructive delivery then there is no doubt that on the facts as stated by the Judge (Revisions) the contract provided for constructive delivery inside Uttar Pradesh and the assessee mills would not be entitled to rebate under S. 5.8. the Madras High Court had occasion to consider a similar question in India Coffee and Tea Distributing Co. Ltd. v. State of Madras, 1959-10 STC 359 (Mad). It held that the word "delivery" in S. 5 of the Madras General Sales Tax Act, 1939, which exempts from taxation sales of tea "if the sale is for delivery outside the State and delivery actually was made" did not include anything which the law deemed "delivery" but was restricted to physical delivery of the thing sold. In coming to this conclusion, Subrahmanyam, J., observed:"In deciding whether the word "delivery" in S. 5 (v) includes delivery in law, we have regard to the objects of the Legislature in enacting S. 5 (v). The object obviously was the promotion of the export of tea. The Legislature intended that where tea was exported from the State for being delivered outside the State, the sale which resulted in such export should be exempt from taxation. That object would not be wholly achieved if we hold that delivery of documents of title in the State of Madras would make the sale liable to taxation."9. We agree with the view expressed by the Madras High Court. It seems to us that the object underlying S. 5 is to encourage export of goods manufactured in Uttar Pradesh and notified under S. 5. The course of trade adopted by the Indian Sugar Syndicate Ltd. and the assessee mills shows that if the word "delivery" is interpreted to mean constructive delivery very few export sales, if we may use the expression, would enjoy rebate under S. 5. As long a s the contract evinces an intention to export and actual delivery is given to effectuate that intention the object of the Legislature to ensure that only real export sales enjoy the rebate would be fulfilled. It seems to us that in the context of S. 5 the word delivery occurring in S. 5 means actual delivery.10. The next question that arises is whether the sales by the assessee mills were for actual delivery outside Uttar Pradesh. The answer to this problem depends on the answer to the question whether despatch instructions contemplated by Cl. 2 and Cl. 3 of the contract were part of the contract entered into by the assessee mills. It seems to us that they were. The contract by the assessee mills was to actually deliver at a place to be communicated. This view is reinforced by what is contained in Cl. 11 of the contract. This clause contemplated a destination in spite of constructive delivery having been contracted be made at Rohana Kalan Station. Further, the contract was not to actually deliver at some place to be chosen or assented to by the assessee mills but at any place without restrictions. The contract required nothing more for completion than a mention of the place.When the despatch instructions were given, it was not a case of performing the contract but specifying a term of the contract. If the place of actual delivery had been specified and it was a question merely of communicating the route by which the goods were to be delivered this would perhaps relate to the mode of performance of the contract. But communication of the place where actual delivery is to be given does not relate to the mode of performance but formation of the contract. It seems to us, with respect, that the High Court erred in relating despatch instructions to the mode of performance of the contract.11

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

Explanation:
1[ds]9. We agree with the view expressed by the Madras High Court. It seems to us that the object underlying S. 5 is to encourage export of goods manufactured in Uttar Pradesh and notified under S. 5. The course of trade adopted by the Indian Sugar Syndicate Ltd. and the assessee mills shows that if the word "delivery" is interpreted to mean constructive delivery very few export sales, if we may use the expression, would enjoy rebate under S. 5. As long a s the contract evinces an intention to export and actual delivery is given to effectuate that intention the object of the Legislature to ensure that only real export sales enjoy the rebate would be fulfilled. It seems to us that in the context of S. 5 the word delivery occurring in S. 5 means actualanswer to this problem depends on the answer to the question whether despatch instructions contemplated by Cl. 2 and Cl. 3 of the contract were part of the contract entered into by the assessee mills. It seems to us that they were. The contract by the assessee mills was to actually deliver at a place to be communicated. This view is reinforced by what is contained in Cl. 11 of the contract. This clause contemplated a destination in spite of constructive delivery having been contracted be made at Rohana Kalan Station. Further, the contract was not to actually deliver at some place to be chosen or assented to by the assessee mills but at any place without restrictions. The contract required nothing more for completion than a mention of the place.When the despatch instructions were given, it was not a case of performing the contract but specifying a term of the contract. If the place of actual delivery had been specified and it was a question merely of communicating the route by which the goods were to be delivered this would perhaps relate to the mode of performance of the contract. But communication of the place where actual delivery is to be given does not relate to the mode of performance but formation of the contract. It seems to us, with respect, that the High Court erred in relating despatch instructions to the mode of performance of the contract.e next question that arises is whether the sales by the assessee mills were for actual delivery outside Uttar Pradesh.answer to this problem depends on the answer to the question whether despatch instructions contemplated by Cl. 2 and Cl. 3 of the contract were part of the contract entered into by the assessee mills. It seems to us that they were. The contract by the assessee mills was to actually deliver at a place to be communicated. This view is reinforced by what is contained in Cl. 11 of the contract. This clause contemplated a destination in spite of constructive delivery having been contracted be made at Rohana Kalan Station. Further, the contract was not to actually deliver at some place to be chosen or assented to by the assessee mills but at any place without restrictions. The contract required nothing more for completion than a mention of the place.When the despatch instructions were given, it was not a case of performing the contract but specifying a term of the contract. If the place of actual delivery had been specified and it was a question merely of communicating the route by which the goods were to be delivered this would perhaps relate to the mode of performance of the contract. But communication of the place where actual delivery is to be given does not relate to the mode of performance but formation of the contract. It seems to us, with respect, that the High Court erred in relating despatch instructions to the mode of performance of the contract.