Case: C. P. Timber Works Vs. Commissioner of Sales Tax, Madhya Pradesh and Others

rm had its head office at Kanpur and a branch office in the State of Madhya Pradesh at Mandla. During the course of its business, it entered into a contract with thel of Store, Supplies and Disposals, Government of India, New Delhi. For the period January 1, 1952 to December 31, 1952, the petitioner was assessed to sales tax in respect of timber booked by rail from Mandla Fort railway station to places outside the State. The Sales Tax Authorities had found that the title to the goods passed within the State of Madhya Pradesh and the sales were also completed there and the delivery of the goods also took place within that State, the subsequent movement of goods to places outside the State being for the better enjoyment of what had been acquired earlier.      3. Before the High Court, the petitioner contended that the goods were sent to purchasers for consumption outside the State and were actually delivered beyond the boundaries of the State as a direct result of the sales for the purpose of consumption there.      4. In the return filed on behalf of the respondents opposing the petition, it was stated with detailed reference to the terms of the contract between the parties that the property in goods passed to the buyer within the State of Madhya Pradesh and that the goods were delivered in that State and in despatching goods outside that State according to the instructions given by the buyers from time to time, the sellers acted as agents of the purchasers; consequently, the sales did not fall within section) of the Act or Article 286(1)(a) of the Constitution and the Explanation thereto.The facts of the case as found by the High Court were as follows : The petitioners tender for the contract for supply of timber was accepted on 15th December, 1951. The form of acceptance was exhibited as annexure "A" to the petition, which was subject to the conditions mentioned in "Acceptance of Tender Form". It was also, as stated in clause 7 of the Acceptance of Tender Form, subject to the conditions of the contract as contained in Form No. W.S.B. 133. The petitioner had not exhibited the tender form, although it had produced a form before the Sales Tax Authorities. The tender form was however not to be found on the record. The High Court noted that under the undisputed course of business between the assessee and the Director, the petitioner was required to keep the timber logs ready and available for inspection at Mandla Fort and other stations by A.I.G.S., G.S.I.D., Kanpur, or an officer acting for him. The inspecting authority after inspecting the timber, issued an inspection certificate and also put a hammer mark on the timber approved. The approved timber also bore the private mark of the petitioner. The petitioner was then required to despatch the timber by goods train in full wagon load on military credit notes to the Commandant, C.O.D. Chowki or the consignee intimated by the C.O.D. Chowki. The place of delivery was Mandla Fort and other stations that were to be intimated. The petitioner had to obtain military credit notes from the inspector and was required to send the railway receipt to the consignee by registered post. As soon as the goods were booked by rail, the petitioner was required to inform the consignee about the despatch of the timber giving the number of the wagon and the railway receipt number. The assessee was also required to place in each wagon an invoice or packing note showing the number of planks by sizes and their cubic capacity. When the timber reached the place of destination, the consignee was entitled tot the goods, check the shortage if any, and reject the timber not conforming to the specifications. The assessee was paid 90 per cent. of the price of each consignment on proof of despatch of timber to the consignee from Mandla Fort railway station. Such proof had to be furnished by sending copies of inspection notes and the railway receipts to the authorities responsible for payment. The balance of 10 per cent. was to be paid to the assessee on receipt of the consignment in good condition.On a reference to annexure "A" to the petition, we find a schedule to the acceptance of the tender dated December 15, 1951. The seventh clause thereunder read "conditions of contract as contained in Form No. W.S.B. 133". The date of delivery was given as the date on which acceptable stores were to be tendered. Clause 11 provided for the place of delivery. This was divided into three, Clause (a) read "terms of delivery". Against this was the remark "F.O.R. Mandla Fort and other stations to be intimated immediately". Clause (b) showed that military credit notes were to be obtained from the inspector and clause (c) which read "disposal of railway receipt" had against it the remark "to be sent to the consignee by registered post, acknowledgment due". The 12th clause providing for despatch instructions bore the remark "to be despatched by goods train in full wagon load on M.C. notes". Clause 13 showed the consignee as Commandant, C.O.D. Chowki, or as intimated by him. Clause 17 which provided for inspection showed that the inspecting authority was C.S.D.S., Kanpur, and the place at which the goods were to be tendered for inspection was Mandla Fort and other stations. Special instructions were given in clause 19.e (a) thereof provided that 90 per cent. of the payment was to be made on proof of inspection and despatch from the railway station mentioned and the balance of 10 per cent. on receipt of stores in goods condition by the consignee.e (c) provided that in the event of delay in despatch of the passed stores after inspection, contractors were advised in their own interest to stack them suitably, if necessary, in consultation with the indentor or inspector in order to avoid deterioration from natural causes. This was however without prejudice to the general conditions of the contract.According to the High Court it was abundantly plain that the sale was "F.O.R. Mandla Fort" and timber was delivered to the Director at that place, it never being the petitioners case that any place other than Mandla Fort was intimated as the place of delivery. Soon after the despatch of timber, the assessee lost the right and power of disposal over them by completely parting with the document of title in its possession. It also received 90 per cent. of the price on proof of inspection and despatch from Mandla Fort. The cumulative effect of all the terms was that the goods were actually delivered to the Director at Mandla Fort.      5. Before the High Court it was contended that actual delivery of timber was not at Mandla Fort station but at places outside the State of Madhya Pradesh where the timber was despatched to. It was further contended that F.O.R. Mandla Fort was mentioned in the contract merely to ascertain the price. The High Court turned down this contention and noted that the expression "F.O.R." in the contract before it was not used in connection with the charges of putting the goods on rail but in connection with the place of delivery and that delivery F.O.R. Mandla Fort meant that the goods were to be delivered at that station and the delivery receipt was taken out in the name of the consignee who might be outside the State.

Court's reasoning:
7. We have in our judgment in Bengal Timber Trading Co., Ltd. v. Commissioner of Sales Tax, Madhya Pradesh ([1967] 19 S.T.C. 366.), delivered today, dealt with the question at length as to when Explanation to Article 286(1) would be attracted so as to make the sale liable to tax in a State outside the State where the goods were put on rail. In this case, the conditions of contract in Form No. W.S.B. 133 were not exhibited nor was the tender form exhibited before the High Court. The assessee did not want the case to be stated to the High Court under section 44 of the Madhya Pradesh Sales Tax Act and consequently, the High Court was bound to decide the case in terms of the documents placed before it in the writ petition.From the petition itself and the annexure thereto, it appears that the place of delivery was Mandla Fort where the goods were to be put on rail, the contractor having the further obligation to send the railway receipt to the consignee. The place of inspection of the goods synchronised with the place of delivery, viz., Mandla Fort, and there was nothing before the High Court to show that the actual delivery of the goods took place outside the State of Madhya Pradesh although the goods might have eventually found their way outside that State. There is no evidence in this case to show that actual delivery of the goods took place at the destination, i.e., to the consignee who happened to be outside the State. The mere fact that the consignee had the right of a further inspection of the goods and to reject those which were not in terms of the contract does not of itself purport to alter the place of delivery from Mandla Fort to the place where the consignee was. There is nothing here to displace the prima facie inference as to delivery at Mandla Fort under section 39(1) of the Sale of Goods Act.