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SUPREME COURT OF INDIA
28th August, 1962.
S.K. DAS, J.L. KAPUR A.K. SARKAR, M. HIDAYATULLAH AND RAGHUBAR DAYAL, JJ.
Cement Marketing Co., of India (Pvt.) Ltd. and another, Appellants
Versus
State of Mysore and another, Respondents.
Advocates appeared
Mr. RJ. Kolab, Advocate and M/s. J. B. Dadachanji, O. C. Mathur and Ravinder Narain, Advocates of M/s. J. B. Dadachanji and Co., for Appellants; Mr. C. K. Daphtary, Solicitor General of India (M/s. B. R. L Iyengar and P. D. Menon, Advocates, with him), for Respondents.
CONSTITUTIONAL LAW - SALES TAX - INTER-STATE SALES - SALE OF CEMENT - AUTHORIZATION BY GOVERNMENT - MOVEMENT OF GOODS FROM ONE STATE TO ANOTHER - EXEMPTION FROM SALES TAX - MYSORE SALES TAX ACT, 1948.
Fact of the Case:
The appellant, a sales manager for the second appellant, a cement manufacturer, challenged the imposition of sales tax on the sale of cement by the first appellant to various purchasers in the State of Mysore. The cement was manufactured in factories located outside the State of Mysore and was supplied to the purchasers pursuant to authorizations issued by Government authorities.
Finding of the Court:
The Court held that the sales in question were inter-State sales and were exempt from Sales tax under Art. 286 (2) of the Constitution. The Court found that the movement of goods from one State to another was a direct result of the sales and that the transactions involved movement of goods across the border. The Court also held that the agreement between the appellants was different from that in Rohtas Industries Ltd. v. State of Bihar, (1961) 12 STC 615, and that the decision in that case did not apply to the facts of the present case.
Issues: Whether the sales in question were inter-State sales and were exempt from Sales tax under Art. 286 (2) of the Constitution.
Ratio Decidendi: The Court held that the sales in question were inter-State sales and were exempt from Sales tax under Art. 286 (2) of the Constitution. The Court found that the movement of goods from one State to another was a direct result of the sales and that the transactions involved movement of goods across the border. The Court also held that the agreement between the appellants was different from that in Rohtas Industries Ltd. v. State of Bihar, (1961) 12 STC 615, and that the decision in that case did not apply to the facts of the present case.
Final Decision: The appeal was allowed to the extent that the imposition of the Sales tax on the appellant for the year of assessment except for the period April 1,1955 to September 6, 1955 was illegal and was not leviable for that period.
Judgment
KAPUR, J. : This is an appeal against the judgment and order of the High Court of Mysore in Writ Petition No. 147 of 1958 dismissing the appellant s petition under Arts. 226 and 227 of the Constitution for quashing the order of assessment for the period of assessment 1955-56 i.e. from April 1, 1955 to March 31, 1956. In this appeal because of the Validating Act (VII of 1956) the appellants did not challenge their liability for the period April 1, 1955 to September 6, 1955.
2. The facts necessary for the decision of this appeal are these: Appellant No. 1- The Cement Marketing Co. Ltd. - are the Sales Managers of the second appellant - The Associated Cement Co. Ltd-appointed under an agreement dated April 21, 1954. The High Court has described the first appellant to be the Distributors of the second appellant. The second appellant is a manufacturer of cement and at the material time it had over a dozen factories in different parts of India, none of which was in the State of Mysore. The head office of the first appellant is at Bombay and it had then a branch office at Bangalore in the State of Mysore. The first appellant was registered as a dealer under the Mysore Sales Tax Act, 1948, hereinafter called the "Mysore Act." At all material times cement was and still is a controlled article. Whether the sale was to a Government Department i.e. to the Director General of Supplies and Disposal, Government of India, New Delhi or to a person authorised by the said officer or to the public it was effected on authorizations given to the buyers by appropriate Government authorities and produced by them in the office of the first appellant. Both in regard to purchases by the public and the Government the modus operandi was more or less identical. It was this: Every one wishing to buy cement had to get an authorization in a standard form which authorized the first appellant to sell cement in quantities mentioned therein and the cement had to be supplied from the factory therein mentioned. That document was in the following form which actually relates to a sale to a Government contractor.
"Government of India- Ministry of Commerce & Industry."
Office of the Regional Honorary Cement Adviser 4112 Race Course Road. Coimbatore.
Central Quota. Dated 8-1-1955.
Authorisation No. RA/CT/281CMV172 (CQ. CENTELEC)
Period IV/55 The Cement Marketing Co. of India
Name of Suppliers. P. Box No. 613; Sugar
Company Building, Bangalore-2
You are authorised to sell cement in quantity mentioned below under this authorization. The sale will be a direct deal between yourself and the purchaser. The Government undertakes no responsibility of any nature whatsoever :
Name and address of the person in whose favour authorisation is issued. Name of the cement factory or company required to supply cement. Quantity. Name of Rly. Station to which cement is tobe booked. Remarks.
1. 2. 3. 4. 5.
M/s G.S. Duggal & Co. Ltd. Engineers & Contractors, Jalhalli P.O. Bangalore. Madhukkarai Shahabad 300 tons Bangalore
Ref: No. J/117/115 date 29-9-55 from the above indentors-for manufacture of tiles for the Bharat Electronics Ltd. Supply recommended by the Commander Works Engineers (B.E.I.P), Jalahalli.
Full details of the purpose for which and the place at which cement will actually be consumed; Priority, Defence Work.
Sd. C.C. Ramanath.
Reg. Hon. Cement. Adviser (Coimbatore).
Copy to 1. The indentor.
2. The Dy. Development officer, Govt. of India, Ministry of Commerce & Industry Development Wing, (Chemicals 1, Mineral Industries) Shahjehan Road, New Delhi.
3. The Controller of Civil supplies in Mysore Bangalore for information"
3. This authorisation was subject to the following conditions: It was to be utilised within 15 days; the cement released could be used only for the purpose for which it was given; the authorisation was not transferable; the authority could, if necessary, revoke the authorisation at any time and even the orders booked under the authorisation could be cancelled. The purc
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