Case: Singareni Collieries Co. Ltd Vs. State Of Andhra Pradesh And Others

The Company which has its registered office at Hyderabad in the former Part B State of Hyderabad, and now in the State of Andhra Pradesh, carried on the business of mining coal from its collieries and supplying it to consumers in the outside the State of Hyderabad2. These appeals relate to three financial years 1954-55,1955-56 and 1956-57, during which coal was a controlled commodity and its disposal and use could be made only under orders issued by the appropriate authority under the Colliery Control Order, 1945. The Company claimed that Rs. 175,67,286-1-2 in the year 1954-55 Rs. 1. 17,39,636-11-8 in the year 1955-56, and Rs. 1,55,18,937-6-5 in the year 1956-57were not liable to be included in the taxable turnover for levying sales tax under the Hyderabad General Sales Tax Act, 1950 because the State Legislature which enacted that Act was, by Art, 286 of the Constitution, prohibited from imposing tax on transactions of supply of coal outside the limits of the State under orders of the Coal Commissioner3. The Commercial Tax Officer, Hyderabad, admitted the claim of the Company for the years 1954-55 and 1955-56 for exemption from liability. The claim of the Company for the year 1956-57 was, however, rejected, The Company appealed to the Deputy Commissioner of Commercial Taxes and to the Sales Tax Appellate Tribunal, Hyderabad, against the order of assessment for the year 1956-57, but without success. The Company then applied to the High Court of Andhra Pradesh in its revisional jurisdiction, and submitted in support of its claim that a part of its turnover was exempt from liability to sales tax under the Hyderabad Central Sales Tax Act because the turnover was in respect of sales, (a) which had taken place outside the State within the meaning of Art. 286 (1) (a) read with the explanation thereto, and (b) which were effected in the course of inter-State trade or commerce, and the Parliament had not by law removed the ban against imposition of tax on such sales by the State legislature. The High Court rejected these contentions. In the meanwhile the Commissioner of Commercial Taxes issued notices to the Company to show cause why the orders of assessment for the years 1954-55 and 1955-56 should not be reopened and why the sales which were exempted by the order of the Commercial Tax Officer should not be charged to tax, and by his orders respectively dated February 8, 1961 and November 16, 1960 for the two years 1954-55 and 1955-56 brought to tax the turnover which was previously treated as exempt. The Orders were carried to the High Court in appeal and the same grounds which were set up in the revision application relating to the assessment year 1956-57 were set up, beside the ground that the action for reopening the assessments by the Commissioner of Commercial Taxes was barred by limitation and was, therefore, incompetent. The High Court rejected these contentions. With certificate granted by the High Court, these appeals are preferred by the Company.

Reasoning: 9. Broadly speaking the scheme of the Colliery Control Order was that no person could acquire or purchase or agree to acquire or purchase any coal from a colliery and no colliery owner could sell or agree to sell or despatch coal from the colliery, except under the authority and in accordance with the conditions prescribed by the Coal Commissioner, and that the person to whom coal was supplied also could not utilise it for a purpose other than the purpose for which it was supplied, nor could he dispose of coal supplied to him. Supply, use and disposal of coal were, therefore, regulated from the stage of production till consumptionThe Coal Commissioner addressed a letter to a colliery authorising it to despatch on the request of the specified consumers coal not exceeding the quantities mentioned during certain months and according to the schedule appended. In the Schedule appended to the letter were set out the names of the concerns to whom coal was to be supplied. Intimation of the despatch instructions was given to the consumers individually Acting upon this intimation, the consumer addressed a letter to the colliery requesting that the quantity of coal allotted may be despatched to him by train and gave instructions regarding booking, the name of the person to whom coal may be consigned, and also about the collection of price of coal suppliedThe colliery then loaded coal in railway wagons making out a sale note mentioning the cost per ton F. O. R. Colliery with "freight to pay" and despatched the same by rail to the consumer at the destination requested. In the "sale note" were set out the name of the buyer, grade and quantity of coal allotted, the terms of sale, cost per ton F. O. R. Colliery, other charges, and particulars of despatch, such as the name of the Railway Station to which the coal should be booked and the name of the consignee. The sale note was subject to conditions of sale, that the colliery shall not be responsible for non-delivery or late delivery of coal or for any loss occasioned in consequence of fire, snow, heat, flood, strikes, lockouts, shortage of wagons, restrictions on booking, accidental losses, etc, that any taxes, export duty, cess or other charges not in force imposed by the Government after the date of the sale note shall be borne by the purchaser: that the colliery reserved the right to demand payment in advance and to have a right of lien on all coal despatched until it was paid for: that the sale note was subject to the quantity allotted by the Deputy Coal Commissioner for buyers outside the State and in the event of the Deputy Coal Commissioner cancelling the whole or any part of the said allotment such cancellation shall be deemed to apply equally to the sale note11. Under the terms of the "sale note" the property in the coal consigned passed, so far as the colliery was concerned, to the allottee-original or substituted-when the goods were loaded into the railway wagons for conveyance, and thereafter all losses and any new taxes imposed were to be borne by the purchaser, the colliery having only a right of lien on coal not paid for. Coal supplied was meant for consumption by the allottee: therefore, when the allottee was outside the State, it was supplied for the purpose of consumption in the State in which the allottee resided or carried on business12. In view of the legislative developments which we will presently notice the period of the three assessment years may be divided into four sub-periods. They are: April 1. 1954 to September 6, 1955; September 7, 1955 to September 10, 1956, September 11, 1956 to January 4, 1957 and January 5, 1957 to March 31. 1957. In making this sub-division we have not taken into account the application of the States Reorganisation Act as a result of which on November 1,1956, the Part B State of Hyderabad ceased to exitence by merger of certain areas including parts of the State of Hyderabad. The effect of the Reorganisation Act had a bearing only on the territorial operation of the constitutional prohibitions under Art. 286Article 286 thus imposed qua sales four bans upon legislative power of the StatesThat State alone in which the sale is deemed to take place has the power to tax the sale, and for this purpose it is immaterial that property in the goods has under the general law relating to sale of goods passed in another State in which the allottee resided or carried on business. Delivery of coal to the Railway Administration may amount to delivery to the allottee for the purpose of the general law relating to sale of goods, but thereby coal cannot be said to be "actually delivered" within the meaning of the Explanation to Art. 286 (1) (a). It is also true that under the terms of the sale- note under which coal was despatched on terms F. O. R. Singareni the Company was not responsible for loss or damage to the consignment after it was loaded in the wagons, that may indicate that the Company had no property in the goods after it was in transit. But determination of the State in which sale shall be deemed to have taken place is artificially determined not by terms of the contract of sale, nor by the legal concept of passing of passing in the goods sold by the delivery for the purpose of consumptionSales-tax under the Hyderabad General Sales Tax Act on transactions of coal delivered to the Railway or other carrier for carriage to places outside the taxing State and for delivery for consumption therein is therefore not leviable to be by virtue of the Explanation to Art. 286 (1)Coal in the appeals under review was transported from the colliery of the Company to the consumers outside the taxing State, as a result of the covenant or incident of the contract of sale and therefore the sale must be regarded as an inter-State sale and not liable to be taxed under the Hyderabad General Sales Tax Act. 1950.The High Court was, in our view, in error in holding that the turnover of the Company in which coal was loaded in railway wagons for conveyance to places outside the taxing State was taxable under the Hyderabad General Sales Tax Act. In that view we do not think it necessary to decide whether the Commissioner of Commercial Taxes was right in re-opening the assessments for the years 1954-55 and 1955-56 in the manner he has purported to do