Case: G. A. Galiakotwala &amp; Co. (P) Ltd., Madras Vs. The State Of Madras

The appellant has its place of business at Coimbatore. The Mills are situated within the State of Madras. The Mills entered into an agreement with the appellant for purchase of cotton. The appellant in turn pl aced orders with its sellers at Bombay for purchase of cotton. The appellant directed its Bombay sellers to despatch the goods to the mills as consignees. The Bombay seller sent the consignment to the mills but the railway receipts were sent by the Bombay seller to the appellant. The appellant then endorsed the same in favour of the mills after collection of the substantial portion of the sale price.

Court's reasoning:
The High Court was correct in holding that the sale by the Bombay seller to the appellant is an inter-State sale and the sale by the appellant to the mill s is not an inter- State sale. Therefore, the State Sales Tax Authorities had jurisdiction to assess the transaction for sale by the appellant to the mills under section 3(b) of the CentralHigh Court, therefore, correctly held that the appellant was not entitled to claim exemption under the Governmentthird contention of the appellant was that the appellant was entitled to exemption in respect of turnover under section 6(2) of the Central Act. Section 6(2) of the Central Act lays down that where a sale in the course of inter-State trade or commerce of goods of the description referred to in section 8(3) of the Central Act has occasioned the movement of goods from one State to another or has been effected by a transfer of documents of title to such goods during their movement from one State to another, any subsequent sale to a registered dealer during such movement effected by a transfer of documents of title to such goods shall not be subject t o tax under the Act. A dealer claiming exemption for subsequent sale during the movement of goods from one State to another is required by section 6(2) of the Central Act to furnish to the prescribed authority in the prescribed manner a certificate duly filled and signed by the registered dealer by whom the goods were purchased containing thethe present case, the appellant would be entitled to exemption in production of appropriate form by the Bombay seller and by showing that the buyer is a registered dealer. The appellant produced the form from Bombay seller but did not prove that his buyer was a registered dealer in cotton. Therefore, the Tribunal rightly held that the appellant was no t entitled to exemption under section 6(2) of the Act