Place of actual delivery under the contract determines whether sales move outside the State for constitutional tax purposes.

For applying Article 286(1)(a) of the Constitution, the decisive question was whether the contractual sale was completed outside Bombay or within the State. The contract required only preliminary inspection in Bombay, but the despatch instructions, the contractor's continuing responsibility until receipt and acceptance at Ajmer, and the consignee's right of final rejection showed that movement to Ajmer was part of the bargain. On that basis, the actual delivery under the contract was at Ajmer, not at the Bombay inspection point, so the sales were outside Bombay and not liable to Bombay sales tax.

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Issues: Whether the sales under the contract took place outside the State of Bombay within the meaning of Article 286(1)(a) of the Constitution of India and whether the goods moved from Bombay to Ajmer under the contract so as to fall within the constitutional explanation and escape State sales tax.

Analysis: The contract required delivery at Bombay only for preliminary inspection, but the despatch instructions showed that the goods were to be sent onward to Ajmer. The contract also made the contractor responsible until receipt and acceptance by the consignee at Ajmer, and the consignee retained the right of final rejection at destination. On the whole contract, the movement from Bombay to Ajmer was pursuant to a contractual covenant, and the place of actual delivery for the purpose of the constitutional explanation was the destination outside Bombay, not the inspection point within Bombay. The evidence also showed that the goods were in fact moved to and delivered at Ajmer under the contract.

Conclusion: The sales were outside the State of Bombay within the constitutional explanation and were not taxable by the State of Bombay.

Final Conclusion: The reference was answered in favour of the dealer, and the sales were held not exigible to Bombay sales tax.

Ratio Decidendi: For applying the explanation to Article 286(1)(a) of the Constitution of India, the decisive test is the place of actual delivery under the contract as a whole, and where goods are sent onward to an outside-State consignee with final acceptance reserved at destination, the sale is deemed to take place at that destination rather than at the preliminary inspection point.

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