TaxTMI 
TaxTMI 
1992 (8) TMI 241
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.....B. Misra and Vishwajit Singh, Advocates, with him), for the appellants. Raja Ram Agrawal, Senior Advocate (R.D. Upadhyay, P.K. Chakraborty, Vijay Hansaria, Suresh Gupta, Puneet Tyagi, Ms. Santosh Singh, P.S. Jha, Dr. Maya Rao, Ms. Abho Jain, Mrs. Rani Chhabra, M.P. Shorawala, R.C. Verma and Sarva Mitter, Advocates, with him), for the respondents. -------------------------------------------------- The judgment of the Court was delivered by B.P. JEEVAN REDDY, J.-A common question arises in this batch of appeals and special leave petitions. Leave granted in S.L.Ps. In Commissioner of Sales Tax v. Hanuman Trading Co. [1979] 43 STC 408 a learned single Judge of the Allahabad High Court held that the purchases made by commission agents in U.P. on behalf of the principals outside the State, where the goods so purchased were despatched to such principals, were inter-State purchases not exigible to tax under the U.P. Sales Tax Act, 1948. This decision was rendered on October 6, 1978. Civil Appeal No. 1809 of 1982 is preferred against the same. Following the said decision a large number of cases were disposed of by the Allahabad High Court wh....
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....of such goods be treated as a dealer". In such a case, it is stated, purchase tax is leviable on the purchaser. If, however, the purchase is an inter-State purchase as defined by section 3 of the Central Sales Tax Act, 1956, then the State Legislature becomes disabled from taxing it by virtue of article 286(1) of the Constitution of India. It is this aspect which lies at the root of the grievance of the State, and it is precisely for this reason that it seeks to treat the purchases in question as intra-State purchases, exigible to purchase tax under section 3-D of the State Act. Section 3 of the Central Sales Tax Act, 1956, defines the inter-State sale/purchase. Omitting the explanations which are not necessary for our purpose, the section reads as follows: "3. When is a sale or purchase of goods said to take place in the course of inter-State trade or commerce.-A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase- (a) occasions the movement of goods from one State to another; or (b) is effected by a transfer of documents of title to the goods during their movement from one State to another." Se....
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....rdance 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 STC 655 (SC); [1961] 1 SCR 379 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 391) (page 667 of 11 STC). 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 STC). The view of the majority was approved by this Court in Cement Marketing Co. of India v. State of Mysore [1963] 14 STC 175 (SC); [1963] 3 SCR 777, State Trading Corporation of India v. State of Mysore [1963] 14 STC 188 ....
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.... statement occurs: "The mere fact that the article sold in the State had been brought from outside the State does not make the sale of that article a sale in the course of inter-State trade or commerce. It is only when A, in State X, purchased through a commission agent in a State Y and receives the articles purchased through the commercial agency that the sale comes within the expression 'in the course of inter-State trade': See State of Travancore-Cochin v. Shanmugha Vilas Cashew-nut Factory [1953] 4 STC 205 (SC); [1954] SCR 53." This statement is in accord with the ratio of the decisions aforementioned. If we examine the facts of this case in the light of the above principles, it would be clear that the purchases effected by the respondent-dealer were inter-State purchases. The purchases were made by the respondent as a commission agent on behalf of the ex-U.P. principals and the goods purchased under each of the purchases were duly despatched to such principals. It is found that such despatch took place not later than three days from the date of purchase, as soon as the railway wagon was available. The purchase of goods and their despatch to ex-State principal were parts ....
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....nt of goods. Normally what happens is that there is a contract between the two parties in pursuance of which the goods move and when they are accepted and the price is paid the sale takes place. There would, therefore, hardly be any case where a sale would take place even before the movement of the goods. We would illustrate our point of view by giving some concrete instances: Case No. I-A is a dealer in goods in State X and enters into an agreement to sell his goods to B in State Y. In pursuance of the agreement A sends the goods from State X to State Y by booking the goods in the name of B. In such a case it is obvious that the sale is preceded by the movement of the goods and the movement of goods being in pursuance of a contract which eventually merges into a sale the movement must be deemed to be occasioned by the sale. The present case clearly falls within this category. Case No. II.-A, who is a dealer in State X, agrees to sell goods to B but he books the goods from State X to State Y in his own name and his agent in State Y receives the goods on behalf of A. Thereafter the goods are delivered to B in State Y and if B accepts them a sale takes place. It will be seen that ....
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..... If a purchase or sale is complete in the State from which the goods emanate, he says, it can never be an inter-State purchase or sale. We cannot accede to this understanding of the learned counsel. The said observations, no doubt rather widely worded, must be understood in the context of the question that arose for consideration in that case, viz., whether an agreement of sale is included within the definition of "sale" as defined in the Central Sales Tax Act. Be that as it may, the true position has since been explained in the later decision in Khosla and Co. [1979] 43 STC 457 (SC); [1979] 3 SCR 453. It is immaterial whether a completed sale precedes the movement of goods or follows the movement of goods, or for that matter, takes place while the goods are in transit. What is important is that the movement of goods and the sale must be inseparably connected. The ratio of Balabhagas [1976] 37 STC 207 (SC); [1976] 2 SCR 939 is this: if the goods move from one State to another in pursuance of an agreement of sale and the sale is completed in the other State, it is an inter-State sale. The observations relied upon by Sri Sehgal do not constitute the ratio of the decision and cannot ....