TaxTMI 
TaxTMI 
1979 (3) TMI 176
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.... settle their differences, no sales tax should be levied or recovered from it since, it does not know to whom to pay the tax. This controversy arises on the following facts. Respondent 1 is a private limited company called K.G. Khosla & Co. (P.) Ltd., having its head office in the Union Territory of Delhi at 1, Deshbandhu Gupta Road, New Delhi. The company carries on business in air compressors and garage equipments which it manufactures in its factory at Faridabad, which was formerly in the State of Punjab and is now a part of the State of Haryana. For the purposes of sales tax, respondent 1 is registered as a dealer both in the Union Territory of Delhi and in the State of Haryana. It filed returns of sales tax with the sales tax authorities in Delhi since, according to it, the sale of goods manufactured in the factory at Faridabad was being effected from Delhi by its head office. The sales tax was being paid by the company under the Bengal Finance (Sales Tax) Act, 1941, as extended to Delhi, on the basis that the sales effected by the company were intra-State sales within the Territory of Delhi. On November 24, 1965, however, the Sales Tax Assessing Authority at Gurgaon, wh....
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.... State of Haryana, had taken place at Faridabad during the course of inter-State trade. The Union of India, on the other hand, contended that the goods were brought from Faridabad to Delhi and were thereafter sold by the company to the various purchasers outside Delhi. These sales, according to the Union of India, were governed by the Bengal Finance (Sales Tax) Act, 1941, as extended to Delhi, their situs being the Union Territory of Delhi. The Delhi High Court by its judgment dated August 2, 1971, allowed the writ petition and granted a declaration that the sales effected by respondent 1 which fell under section 3(a) of the Central Sales Tax Act, 1956, were liable to be assessed to inter-State sales tax by the sales tax authorities at Faridabad, since those sales caused the movement of goods from Faridabad to Delhi. The High Court added that the writ petition was confined to the goods manufactured at Faridabad in pursuance of preexisting contracts of sale and, therefore, its judgment would have no application to the local sales effected by respondent 1 at Delhi. In the result, the High Court passed an order directing that the amount of tax which respondent 1 had wrongly paid to....
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....other State, which, on the facts of the instant case, would mean, from the State of Haryana to the Union Territory of Delhi. It is only if a sale occasions the movement of goods from one State to another that it can be deemed to have taken place in the course of inter-State trade or commerce within the meaning of section 3(a) of the Act. Clause (b) of section 3 is not relevant for our purpose. The course and manner of its business have been set out by respondent 1 in paragraphs 3 and 27 of the writ petition in the following terms: "3. Orders for the supply of goods from various parties are received by the petitioner-company at its head office in Delhi. The head office draws out a production programme and advises the factory to manufacture the goods in accordance therewith. After the goods are so manufactured in the factory, the goods are collected by the. head office and brought to its head office in Delhi. From its head office the goods are despatched to various customers whether outside Delhi or in Delhi. The price of goods is also received at the head office. In short, the position is that excepting the manufacture of goods at the factory, all other activities including th....
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....t of goods or that the movement of goods must be occasioned specifically in accordance with the terms of the contract of sale. The true position in law is as stated in Tata Iron and Steel Co. Ltd., Bombay v. S.R. Sarkar [1960] 11 S.T.C. 655 at 667, 679 (S.C.); [1961] 1 S.C.R. 379 at 391, 407., wherein Shah, J., speaking for the majority, observed that clauses (a) and (b) of section 3 of the Act are mutually exclusive and that section 3(a) covers sales in which the movement of goods from one State to another "is the result of a covenant or incident of the contract of sale, and property in the goods passes in either State" (page 39 1) (page 667 of 11 S.T.C.). Sarkar, J., speaking for himself and on behalf of Das Gupta, J., agreed with the majority, that clauses (a) and (b) of section 3 are mutually exclusive but differed from it and held that "a sale can occasion the movement of the goods sold only when the terms of the sale provide that the goods would be moved; in other words, a sale occasions a movement of goods when the contract of sale so provides" (page 407) (page 679 of 11 S.T.C.). The view of the majority was approved by this Court in Cement Marketing Co. of India v. State of....
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.... from the factory to the various stock-yards was a continuous process and was not related to the requirement of any particular customer. It was the stock-yard in-charge who appropriated the required number of vehicles to the contract of sale out of the stocks available with him. Until such appropriation of vehicles was made, it was open to the company to allot any vehicle to any purchaser or to transfer the vehicles from the stock-yard in one State to a stock-yard in another State. At page 870 (page 380 of 26 S.T.C.) of the Report, a statement occurs in the judgment of Grover, J., that it was not possible to comprehend how in the above situation it could be held that "the movement of the vehicles from the works to the stock- yards was occasioned by any covenant or incident of the contract of sale ". This statement is relied upon by the Union of India in support of its contention that the contract of sale must itself provide for the movement of goods from one State to another. We are unable to read any such implication in the observation cited above. At page 866 (page 377 of 26 S.T.C.) of the Report, after referring to certain decisions, the court observed that the principle admi....