TaxTMI 
TaxTMI 
2007 (4) TMI 362
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....OJC No. 9724 of 2000. The case of the petitioners briefly stated is as follows: Petitioner No. 2 is one of the shareholders of petitioner No. 1 which is a private limited company having its registered head office at Calcutta. It carries on business in tobacco and kendu leaves. It prepares bidi with kendu leaves in the name and style of "Ashok Bidi" at its factory situated in the State of West Bengal. The Orissa Forest Devel\opment Corporation Limited, opposite party No. 3 (hereinafter referred to as "OFDC") is a Government of Orissa undertaking. Trade in kendu leaves in the State of Orissa being the State's monopoly, it is being transacted by the OFDC which sells processed and phal kendu/ tendu leaves by way of tender and auction every year. The petitioner No. 1 is a registered dealer both under the West Bengal Sales Tax Act, 1994 and Central Sales Tax Act, 1956. As usual, OFDC issued tender call notice for sale of processed and phal kendu (tendu) leaves for the year 2000-01 inviting sealed tenders from purchasers duly registered with it. The petitioner No. 1 being a registered purchaser with OFDC, submitted its tender which was duly accepted. As required, it has entered into....
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....aced reliance on the decisions of the Supreme Court in Commissioner of Sales Tax, U.P. v. Suresh Chand Jain [1988] 70 STC 45 and of this court in Similipahar Forest Development Corporation Limited v. State of Orissa [1995] 96 STC 627 and State of Orissa v. Vijayalaxmi Timber Depot [2002] 126 STC 169; [2000] II OLR 499. Before proceeding to consider the rival submissions, a short preface is necessary to be made here. Kendu tree is a wild growth. It's leaf is used mainly for manufacture of bidi. To regulate the trade in kendu leaves, the State of Orissa had been adopting different executive and legislative measures. The State Legislature enacted the Orissa Kendu Leaves (Control of Trade) Act, 1961 under which the State has assumed monopoly of trade in kendu leaves. As some of the provisions of the said Act and the Rules framed thereunder, i.e., the Orissa Kendu Leaves (Control of Trade) Rules, 1962 were referred to by the counsel for the parties in course of hearing, we may also indicate the same at this stage. Under sub-section (1) of section 3 of the said Act, no person other than- (a) the Government; (b) an officer of the Government authorised in that behalf; or (c) an....
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....to any such person shall grant to such person a certificate of sale in form "F". CENTRAL ISSUE: Section 3(a) of the Central Sales Tax Act, 1956 so far relevant, reads as follows: "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" It is now fairly settled by series of decisions of the Supreme Court that conditions essential for a sale in the course of inter-State trade or commerce within the meaning of section 3(a) are: (i) there must be a sale of goods; and (ii) such sale must occasion the movement of goods from one State to another. The word "occasions" in section 3(a) is used as a verb and means to cause or to be the immediate cause. In other words, the movement of goods from one State to another must be the necessary incidence- necessary consequences-of sale or purchase. The case of cause or effect, the cause being the sale/purchase and the effect being the movement of goods to another State. What is decisive is whether the sale is one which occasions the movement of goods from one State to another. The inter-....
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....eld to be sale in course of inter- State trade. (ii) Commissioner of Sales Tax, U.P. v. Bakhtawar Lal Kailash Chand Arhti [1992] 87 STC 196 (SC): The question that arose before the Supreme Court was whether the goods purchased by the principals after their movement to outside the State would constitute inter-State sale. The court found that the purchase of goods and their despatch were parts of the same transaction and the movement of goods from one State to another was occasioned by and was the result or incident of the purchases. (iii) Indian Explosives Limited v. State of Bihar [1993] 89 STC 417 (Patna). In this case, the dealer entered into contract for sale of explosives through its head office at Calcutta with customers in West Bengal. The explosives were supplied from the dealer's factory at Gomia in the State of Bihar. The question fell for consideration before the Patna High Court was whether the sales were inter-State sales. The cour held that it is wholly immaterial whether there was any contractual obligation on the part of the seller to move the goods from one State to another. The decisive factor was the movement of goods from the State of Bihar to the Sta....
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....of Orissa [1995] 96 STC 627 (Orissa). It was a case decided by this court. The Similipahar Forest Development Corporation (in brief "Corporation") was carrying on the business in timber, firewood and other minor forest produce. During the assessment year 1981-82, it sold timber in heaps and stacks by public auction. There was some purchasers who were not the residents of the State of Orissa and, therefore, the commodities moved out of Orissa either by rail or by truck. The Corporation treated those sales to be inter-State sales and accordingly paid tax under the CST Act. When the matter came to the Sales Tax Tribunal in second appeal, by majority it came to hold that the sale to the non-resident buyers was not inter- State sale. The minority however held to the contrary. This court found that from the terms and conditions of the contract it is difficult to hold that the movement of goods had occasioned from one State to other as a result of any covenant and the contract of sale and even as an incidence of the contract. In absence of any "conceivable link" between the sale and the movement of goods, this court concurred with the finding reached by the minority and held that the t....
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....hich was forwarded to the Divisional Forest Officer, Kendu Leaf, Padmapur Division, the Divisional Manager requested him to issue necessary transport permit in favour of the petitioner No. 1. The challan (annexure 1) indicates that the goods were to travel from Mithapali Chief Godown to Aurangabad (West Bengal). The transport permit in the prescribed form issued by the Divisional Forest Officer, Padmapur Kendu Leaf Division, at annexure 15, reads as follows: "M/s. Ashok Biri Factory, Calcutta, is permitted to transport 100 bags of kendu leaves with a total weight 60.00 quintals from Mithapali to Aurangabad (W. B.) by the following routes, means of transport and during the following period. Validity 15 days Permit No. 60/2000 The permit shall be presented for check and examination at the following: Mithapali C.G. to Aurangabad (W.B.) via-Jamsola and to be checked at Padampur and any other check gate coming on route by road." From the facts discussed above and the averments made in the writ petition which have not been controverted by the opposite parties, it is evident that kendu leaves can only be delivered after submission of necessary transport permit and the sale can on....
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.... (in short, "the State Act") was leviable. Accordingly, prayer was made for a declaration that levy and collection of tax under the State Act was unauthorised, without jurisdiction and the excess amount collected from them under the guise of State sales tax should be refunded. Background facts as presented by the appellants are as follows: The respondents have their registered office outside the State of Orissa. They carry on business in tobacco and kendu leaves. They prepare bidi at factories situated in the State of West Bengal. The Corporation is a Government of Orissa undertaking. Trade in kendu leaves in the State of Orissa is a State monopoly and, therefore, is being transacted by the Corporation which sells processed and phal kendu leaves by way of tender and auction every year. The writ petitioners had registered both under the West Bengal Sales Tax Act, 1994 (in short, "the West Bengal Act") and the Central Act. As usual, the Corporation issued tender notice for sale of processed and phal kendu leaves for the year 2000-01 and invited sealed tenders from purchasers duly registered with it. All the writ petitioners were registered purchasers with the Corporation ....
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....des that purchaser shall take delivery of kendu leaves from such depots or stores as indicated by the Divisional Forest Officer during the agreement. Rule 6 deals with grant of transport permit. The High Court relied upon the said rule for its conclusion that the transactions were in the nature of inter-State trade. Reference was made to sub-rule (1) of rule 6 which lays down that an application for issue of permit under section 3(2)(b) of the State Act in the prescribed form "C" has to be made to the Divisional Forest Officer. The High Court found that the writ petitioners were purchasers duly registered with the Corporation. They have submitted their tenders pursuant to the tender notice. Their bids were accepted pursuant to which in each case agreement was executed. As an instance regarding the nature of the transaction, reference was made to the factual position in OJC 9724 of 2000 filed by Ashok Bidi and another. In that case it was noted that the Divisional Manager of the Corporation, Balangir Division in his letter dated November 13, 2000 wrote to the Sub- Divisional Manager, Padampur Sub-Division, requesting him to give delivery of the stock to writ petitioner No. 1 on rece....
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....ther stated that though a casual reading of clause 3.13 gives an impression that there was no definite point of sale spelt out in the agreement, yet a complete reading of the agreement in its entirety goes to prove that sale was intended to be intra-State sale. So far as the permit is concerned it was submitted, as noted above, that it is only to facilitate the movement of goods. Nobody can move the articles without the permits, but that does not restrict loading. Knowledge about the State of destination is not determinative. There is no embargo on delivery and the embargo is only on transportation. One of the appeals filed related to certain interim orders passed after the disposal of the writ petitions. Learned counsel for the Corporation stated that such a practice is unknown in law. After the writ petition is disposed of, the court becomes functus officio and could not have passed any order of either interim or final nature. Learned counsel for the respondents on the other hand supported the judgment of the High Court. The nature of a transaction, i.e., whether it is an inter-State or intra- State would depend upon the factual scenario of the case under examination. Th....
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....te 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 in this case the movement of goods is neither in pursuance of the agreement to sell nor is the movement occasioned by the sale. The seller himself takes the goods to State Y and sells the goods there. This is, therefore, purely an internal sale which takes place in State Y and falls beyond the purview of section 3(a) of the Central Sales Tax Act not being an inter-State sale. Case No. III.-B, a purchaser in Stat....
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....ows upon and is the necessary consequence of the sale or purchase, as the case may be, and not the other way round." In the said judgment the view expressed by this court in Union of India v. K.G. Khosla and Co. Ltd. [1979] 2 SCC 242(2), was adopted. In paragraphs 15 and 17 of the judgment in K.G. Khosla's case [1979] 2 SCC 242 the position was stated as follows: "15. It is true that in the instant case the contracts of sales did not require or provide that goods should be moved from Faridabad to Delhi. But it is not true to say that for the purposes of section 3(a) of the Act it is necessary that the contract of sale must itself provide for and cause the movement 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 [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, a....
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....ip agreements. Each dealer was assigned an exclusive territory and under the agreement between the dealers and the company, they had to place their indents, pay the price of the goods to be purchased and obtain delivery orders from the Bombay office of the company. In pursuance of such delivery orders trucks used to be delivered in the State of Bihar to be taken over to the territories assigned to the dealers. Since under the terms of the contracts of sale the purchasers were required to remove the goods from the State of Bihar to other States, no question arose in the case whether it was or was not necessary for a sale to be regarded as an inter-State sale that the contract must itself provide for the movement of goods from one State to another. If a contract of sale contains a stipulation for such movement, the sale would, of course, be an inter-State sale. But it can also be an inter-State sale, even if the contract of sale does not itself provide for the movement of goods from one State to another but such movement is the result of a covenant in the contract of sale or is an incident of that contract." In Oil India Ltd. v. Superintendent of Taxes [1975] 1 SCC 733, the positi....
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....f the full sale value of the stock purchased in the prescribed form valid for a period of not less than one year and the said BG shall be released after finalisation of the export deal." Though, learned counsel for the Corporation submitted that this was only for the purpose of financial transactions, yet it is really not so. The clause clearly recognises the possibility of a tenderer making purchase for the purpose of export outside India. If sale was completed intra-State, as contended by the State and the Corporation, the question of effecting the purchase for the purpose of export does not arise. A specific query was made as to which is the specific provision in the agreement which relates to completion of sale, an evasive reply was given that a complete reading of the clause makes the position clear. It may be noted that in the appeal the State has made a statement to the effect that clause 3.6 of the tender notice refers to finalisation of sale and according to it the sale is completed in the State of Orissa. A bare reading of clause 3.6 amply proves that there is no substance in such a plea. Clause 3.6 reads as follows: "Sale once finalised in favour of a tenderer c....