Source: http://www.rishabhdara.com/sc/view.php?case=2012
Timestamp: 2019-11-13 15:20:22
Document Index: 591616339

Matched Legal Cases: ['Art. 286', 'Art. 286', 'Art.\n286', 'Art. 286', 'Art. 286', 'Art. 286', 'Art.\t286', 'Art. 286', 'Art. 286', 'Art:\t286', 'Art. 286', 'Art. 286']

A. versus THOMAS & CO. LTD. versus DEPUTY COMMISSIONER OF AGRICULTURAL INCOME TAX
1964 AIR 569	1963 SCR Supl. (2) 608
A. V. THOMAS & CO. LTD. V. DEPUTY COMMISSIONER OF AGRICULTURAL INCOME TAX [1962] RD-SC 343 (30 November 1962)
30/11/1962 KAPUR, J.L.
CITATION: 1964 AIR 569	1963 SCR Supl. (2) 608
Sales Tax-Goods stored in Travancore-Sale by	auction in Madras by samples-Delivery in Travancore-Consumption neither in Madras nor	in Travancore-Whether	sales	taxable	in Travancore-Constitution of India, Art. 286 (1).
The sales of teas were by auction which was conducted in Fort Cochin in Madras State.	The price was paid in	Fort Cochin	and delivery orders were also given there for goods which were at Willingdon Island in Travancore Cochin State.
From Willingdon Islands the goods were sent for	consumption to other States and to foreign countries. The State of Travancore Cochin sought to tax these transactions for sales tax.
Under Art. 286(1) it was the "passing of the property within the State" that was intended to be fastened	on for	the purpose of determining whether the sale was	"inside" or "outside" the	State.	Subject to the operation of	the "explanation" that State in which property passed would be the only State which would have the power levy the tax on the sale. But the explanation did not apply in the present case as there was no delivery as a direct result of the sale for consumption in any particular State.
Indian	Copper Corporation Ltd. v. State of Bihar, [1961] 2 S.C.R. 276, followed.
609 V. P.	Gopalan Nambiar, Advocate General, State of Kerala and Sardar Bahadur, for the respondent.
A. V. Viswanatha Sastri, S. N. Andley, Rameshwar Nath andP.
L. Vohra, for the interveners.
1962. November30. The	Judgement of	the,	Court	was delivered by KAPUR, J.-Thisappeal by certificate of the High Court	of Keralaraises the question of the taxability of sales of tea under the	Travancore-Cochin General Sales Tax	Act, hereinafter termed the Act, and the Rules made	thereunder.
The assessment period is 1952-53 and the turnover was of a sum of	Rs.3,77,644/- on which a tax of Rs. 5900/11/-	was levied. The appellant before us is the assessee company and the respondent is the Deputy Commissioner of'	Agricultural Income-tax and Sales tax.
Mr. A. V. Viswanatha Sastri on behalf of Outcherloney Valley Estates	(1938)	Ltd. has applied for intervention on	the ground that in case of that company also the State or Kerala has, on similar fact;, levied sales tax	on certain transaction that the High Court of Kerala has	upheld	the taxability of the transactions relying on the judgment which is under appeal in the present case, and that the intervener has obtained Special leave to appeal against that judgment and the records are	under print.	In view of these circumstances we have allowed that company to intervene in the present appeal.
The assessment was made on March 30, 1955, under r. 33(1) of the Act on the ground that the sales of tea	had escaped assessment. The appeal against 610 that order was unsuccessful and thereafter a further appeal was taken to the Sales tax Appellate Tribunal which by	its order dated August 12, 1957, held that the ban	under	Art.
286(1)(a) of the Constitution on sales which are outside the State applied,	in regard to the sales of 'full lots'	and therefore remanded the case to the	Sales tax Officer.
Against	that order a revision was taken to the	High Court which held that the decision of the Appellate	Tribunal in regard to the applicability of Art. 286(1)(a) was erroneous and therefore the sales were subject to sales tax under	the Act. It is against that judgment and order that	the assessee company has come to this court on a certificate of the High Court.
Put shortly, the nature and procedure of sales of teas	was this; that the teas were stored in the godowns at Willingdon Island which was in the State of Travancore Cochin., samples of those teas etc., were taken to Fort Cochin which at	the relevant time was in the State of Madras. There by	the samples	the teas were sold by public auction in lots,	some were purchased	in their entirety and others in parts	and after the consideration money was paid at	Fort Cochin delivery orders. were given to the buyers addressed to	the godown	keepers at Willingdon Island and actual delivery of tea was taken there.	These teas were then sent out	from Willingdon Island in	Travancore Cochin for	consumption either	in other parts of India or were exported out of India.
The taxability	of the sales of teas in the manner above- mentioned will depend upon whether the sales can be held to have taken place at Willingdon Island i.e.	within	the territory of Travancore Cochin State and were liable to	the imposition of sales tax under the Act or they were what	for convenience are called Ire outside sales" and therefore	not subject to sales tax in the State of Travancore-Cochin.	The argument raised on behalf of the assessee company was that 611 these sales were effected at Fort Cochin which was outside the territory of Travancore Cochin and therefore were	not liable	to tax because of the ban imposed by Art. 286(1)(a) of the Constitution. That Aricle with the Explanation at the relevant time was as follows "Art. 286(1) No law of a State shall impose, or authorise the imposition of, a tax on	the sale or purchase of goods where such sale or purchase takes place (a) outside the State; or (b)..........................................
Explanation :-For the purpose of sub-clause (a) a sale or purchase shall be deemed to have taken place in the State in which the goods have actually been delivered as a direct result of' such	sale or purchase for	the purpose of consumption in that State, notwith- standing	the fact that under the general	law relating to sale of goods the property in	the goods has, by reason of such sale or purchase, passed in another State".
(2) the sale is complete when the auctioneer announces	its completion by the fall of	the hammer or in the customery manner; and until such announcement is made any	bidder	may retract his bid." Specific goods in s. 2 (14) of the Sale of Goods Act means goodsidentified and agreed upon at the time contract is made. Therefore on the fall of the hammer theoffer is accepted and if the goods are specified goods the title passes to the buyer.
In the present case as soon as the hammer fell the title in the goods passed to the buyer as the goods were specific goods i.e. goods which were auctioned in full lots and	this event took place at Fort Cochin which was in the State of Madras.	But in the case of unascertained goods the title in the goods does not pass to the buyer unless and until	the goods are ascertained. It was for this reason that a distinction was drawn by the Sales tax	Appellate Tribunal between	goods which were sold in full lots and those which were sold in portions.	In regard to the former it was	held that the title passed as soon as the hammer fell but not so in regard to the latter and therefore the sale of "full lots' was held to have taken place outside the State of Travancore Cochin and of portions of lots inside that State.
The High Court in revision held that the words in Art.	286 (1) (a) "'outside the State" do not mean	transfer of ownership, according to the Sale of Goods 613 Act but it was lex situs which determines the taxability of the transaction and the correct position is that	the ownership in the goods is transferred according to the	law of the	place where the goods are situate. Therefore	the sale in the present case was in the State of Travancore Cochin	and there is nothing in the Explanation to Art. 286 (1) (a) which provides to the contrary.
It has	been found and it has not been	disputed that	the title to the	goods in the present case passed at	Fort Cochin.	The purchase money was paid there and the purchaser obtained from the auctioneer delivery notes directing	the godown keepers at Willingdon Island to deliver the goods and only the actual physical delivery of the goods took place at Willingdon Island. In these circumstances the question is whether	the sale was "outside" or "inside sale" as	the expressions have been compendiously used	in various judgments to indicate sales taking place within a State or without	it. The Explanation to Art. 286 (1) (a) which	has been set out above explains what a sale outside the State is. According to that Explanation a fiction is created as between	two States, one where the goods are delivered	for consumption in that State and the other where the title in the goods passes and the former is treated as the situs of the taxable event to the exclusion of the latter. Therefore where the Explanation applies the difficulty about the situs is resolved but in a case	like the present one	the difficulty still remains because the explanation does	not operate	in the sense that the rival States claiming to	tax the same taxable event are not the States of delivery	for consumption in that State and those where the title in	the goods passes. In somewhat similar circumstances this court in Indian Copper Corporation Ltd. v. State of Bihar (1) held by a majority decision that the opening words of Art:	286 (1) which speak of a sale or purchase taking place and	the non-obstante clause in (1) [1961] 2 S.C.R. 276,286, 614 the Explanation which refers to the general law relating to the sale of goods, indicated that it was the	"passing of property within the State" that was intended to be fastened on, for the purpose of determining, whether the sale in question was "inside" or "outside" the State and therefore subject	to the operation of the "'Explanation", that State in which property passed would be the only State which would have the power to levy a tax on the sale. At page 286 it was observed:
"The conclusion	reached	therefore is	that where the property in the goods passed within a	State as a direct result of the sale,	the sale transaction is not outside the State	for the purpose of Art. 286 (1) (a)	unless the Explanation operates".
The majority decision in Indian Copper Corporation Ltd. v.
State of Bihar (1) concludes the point in favour of	the appellant. On the facts of this case it was found by	the Sales Tax Appellate Tribunal that in regard to the sales of tea in 'full lots' the property passed at Fort	Cochin	and this view has not been challenged in this court. Therefore, on the majority decision in Indian Copper Corporation	Ltd.
v. State of Bihar (1) the only State which would have	the power to levy a tax on such sales would be the State of Madras and so far as Travancore Cochin was concerned,	the sale would be an outside sale.
In the present case therefore the sale was an "outside sale" and cannot be said to be an "inside sale" qua Travancore Cochin because the title passed at Fort Cochin which is in the State of Madras. Apart. from that the money was	paid there and the delivery order was also received	there	even though	the actual physical delivery of goods was made at a Willingdon Island in the State of Tranvancore Cochin.	The fiction	created by the Explanation to, Art. 286 (1)(a) is inapplicable (1)[1961] 2 S.C.R. 276, 615 because there was no delivery as a direct result of sale for the purpose of consumption in any particular State.
There then remains the question of goods which were exported out of India from Willingdon Island. In the case of those goods 'also it cannot be said that there was a sale inside the 'State of Travancore Cochin	because	the	same considerations	will apply to those sales as to the sales already	discussed i.e. goods the title to which passed at Fort Cochin were delivered at Willingdon Island and	were delivered for	'consumption in parts of India	other	than Travancore Cochin.
In our view therefore the High Court was in error and	the appeal	should	therefore be allowed and the judgment	and order of the High Court of Kerala set aside. The appellant will have its costs in this court and in the High Court.