Case: Balabhagas Hulaschand Vs. State Of Orissa

1. These two groups of appeals one consisting of six appeals by the firm Balabhagas Hulaschand dealing in jute. Civil Appeal No. 449 of 1971 arises from the judgment of the High Court in S.J.C. No. 41 of 1968 decided on April 22, 1970 in respect of the assessment for the quarter ending June, 1960. The other five appeals are by the same firm in respect of the sales tax levied by the State of Orissa for the quarters ending December, 1959, March, 1960 and December, 1960 to June, 1961, decided by the judgment of the High Court in S.J.C. Nos.of 1968 dated April 27, 1970. As all the appeals involve a common point they were consolidated and have been heard together.2. Appeals Nos.of 1974 have been filed by the firm M/s. Keluram Ramkaran in respect of the assessment of tax made by the State of Orissa for the quarters ending September 30, 1961, June 30, 1962 and September 30, 1962. These appeals arise out of the judgment of the High Court given in S.J.C. Nos.of 1971 dated April 11, 1973. The High Court in these cases followed its previous judgment, which is theof the six appeals mentioned above and held that the levy was valid. The points of law arising in these appeals also are identical to the points arising in the other six appeals referred to above, and in view of the common points of law involved in all these appeals we propose to dispose them of by one common judgment.3. The appellant Balabhagas Hulaschand is a firm dealing in buying and selling jute and has its Head Office in Calcutta. The firm used to purchase raw jute grown in Orissa and send the same to its buyers in the State of West Bengal. The modus operandi was that after the goods were received by the appellant firm, they were despatched in bags from Cuttack and Dhanmandal railway stations to the Railway Mills Siding in Calcutta. The bags were booked in the name of the buyer mills through their broker. The goods on arrival in the Mills Railway Siding at Calcutta were inspected by theand if they were found to be in accordance with the specifications mentioned in the agreement of the sale they were accepted. The appellants in appeals Nos.of 1974 are a firm dealing in similar business with the difference that it has got its purchasing centre at Kendupatana in the District of Cuttack, and it was from Cuttack that the goods were despatched to the buyers in West Bengal.4. The transaction of sale was entered into through a licensed broker "East India Jute and Hessian Exchange Ltd., and the buyers were the Managing Agents of the firm& Co. Ltd. Calcutta. A letter has been produced by the parties which appears at p. 24 of the Paper Book which forms the contract or agreement of sale entered into between the parties in pursuance of which the goods were despatched to the buyer firm at Calcutta. Under the contract the responsibility in respect of the quality, moisture, shortage in weight and risk in transit lay on the seller. It is also not disputed that in all these appeals a concluded sale takes place when the goods despatched in the name of the Calcutta firm were ultimately accepted by the said firm and the price of the said goods was paid to the appellants. On the basis of these concluded transactions of sale the Government of Orissa leviedunder section 3(a) ofthe Central Sales Tax Act, 1956, on the basis that the sales weresales and, therefore, fell within the ambit of that section. The assessing authorities upto the stage of the Tribunal negatived the contention of the appellants that the sale was merely an internal sale which took place in the State of West Bengal and not ansale. Thereafter the appellants moved the Tribunal for making a reference to the High Court of Orissa but failed to persuade the Tribunal to make a reference. The appellants then moved the High Court of Orissa under section 24(3) of the Orissa Sales Tax Act to direct the tribunal to make a statement of the case to the High Court. Accordingly the Tribunal referred the following points for considerationDid title to the goods pass in Orissa or in West Bengal ?(2) Even if title in the goods passed in West Bengal whether in the facts and circumstances of this case, the transaction constituted sale in the course oftrade ?"5. After considering the entire evidence and the circumstances and the law on the subject the High Court by its judgment dated April 22, 1970 negatived the plea taken by the appellants and held that all though the title in the goods passed in West Bengal and the sale took place there, since the sale occasioned the movement of the goods from Orissa to West Bengal it was ansale, and, therefore, it was clearly governed by the Section 3(a) of the Central Sales Tax Act. Thereafter the appellants moved the High Court for granting leave to appeal to this Court, which having been rejected, the appellants filed an application to this Court for grant of special leave to appeal and the same having been granted, these appeals have been set down for hearing before us.

Reasoning: 30. The same view was taken in a later decision of this Court in M/s. Kelvinator of India Ltd. vs. The State of Haryana (1973) 3 S.C.C. 551 at 560 where Khanna, J., speaking for the Court observed as followsis also plain from the language of section 3(a) of the Act that the movement of goods from one State to another must be under the contract of sale. A movement of goods which takes place independently of a contract of sale would not fall within the ambit of the above clause. Perusal of section 3(a) further makes it manifest that there must be a contract of sale preceding the movement of the goods from one State to another, and the movement of goods should have been caused by and be the result of that contract of sale. If there was no contract of sale preceding the movement of goods, the movement can obviously be not ascribed to a contract of sale nor can it be said that the sale has occasioned the movement of goods from one State to the other".In that case, however, on the facts found by the High Court, this Court held that the sale was not ansale but an internal sale which took place in Delhi. In that case there was no movement of the goods from one State to another in pursuance of the contract of sale. In other words, the facts of this case clearly fell within Case No. 11 which has been described by us, above.31. To the same effect is the recent decision of this Court in The State of Tamil Nadu vs. The Cement Distributors (P) Ltd. and others, (1975) 4 S.C.C. 30 in which reliance was placed on the earlier decision of this Court in Tata Iron and Steel Co. Ltd. vs. S. R. Sarkar & others (supra).32. In Oil India Ltd. vs. The Superintendent of Taxes and others, (1975) 1 S.C.C. 733 atwhile lucidly describing the incidents of ansale, Mathew, J., observed as follows :"This Court has held in a number of cases that if the movement of goods from one State to another is the result of a covenant or an incident of the contract of sale, then the sale is ansale ......."Even though Clause 7 of the supplemental agreement does not expressly provide for movement of the goods, it is clear that the parties envisaged the movement of crude oil in pursuance to the contract from the State of Assam to the State of Bihar. In other words, the movement of crude oil from the State of Assam to the State of Bihar was an incident of the contract of sale. No matter in which State the property in the goods passes, a sale which occasions movement of goods from one State to another is a sale in the course ofate movement must be the result of a covenant express or implied in the contract of sale or an incident of the contract. It is not necessary that the sale must precede the interState movement in order that the sale may be deemed to have occasioned such movement. It is also not necessary for a sale to be deemed to have taken place in the course oftrade or commerce, that the covenant regardingmovement must be specified in the contract itself. It would be enough if the movement was in pursuance of and incidental to the contract of sale."33. We might mention here that the case cited above appears to be on all fours with the facts of the present case. In that case also the goods were supplied from Assam to Bihar through the pipelines in Assam to Barauni in Bihar. This Court observed that no matter in which State the property in goods passes the sale undoubtedly occasioned movement of the goods which was sufficient to bring the case within the ambit of Section 3(a) of the Central Sales Tax Act.34. Thus the authorities discussed above by us fully support the principles and the ratio laid down by us. We have already pointed out that even though the sale took place at Calcutta, as rightly founded by the High Court, since the movement of goods preceded the sale in pursuance of the contract of sale which contained a clear stipulation that the goods were to move from Orissa to Calcutta in West Bengal, the movement of goods was occasioned by the sale itself which took place in Calcutta. In these circumstances, therefore, the High Court was legally justified in holding that in all these appeals the cases were clearly covered by the provisions of section 3(a) of the Central Sales Tax Act.