1. Supply of coal to consumers outside the taxing state under the Colliery Control Order, 1945 — Liability for sales tax under the Hyderabad General Sales Tax Act, 1950. (Para 1 , 2 , 8 , 9 , 10 )
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1965 Supreme(SC) 248
SUPREME COURT OF INDIA
P.B. GAJENDRAGADKAR, C.J.I., K.N. WANCHOO, M. HIDAYATULLAH, J.C. SHAH AND S.M. SIKRI, JJ.
Singareni Collieries Co. Ltd., Appellant
Versus
Commissioner of Commercial Taxes, Hyderabad and another, Respondents.
1. State of Madhya Pradesh, 2. Amalgamated Coal Fields Ltd., 3. Panch Valley Coal Co. Ltd., 4, Perfect Pottery Co. Ltd., 5. Attorney General for India, Interveners.
Civil Appeals Nos. 950 to 952 of 1963.
Advocates appeared
Mr. N. A. Palkhivala, Senior Advocate, (M/s. S. N. Andley, Rameshwar Nath, P. L. Vohra and Mohinder Narain. Advocates of M/s. Rajinder Narain and Co., with him), for Appellant; Mr. D. Muni Kanniah, Senior Advocate, (Mr. T. V. R. Tatachari, Advocate with him), for Respondents; Mr. M. Adhikari Advocate General, for the State of Madhya Pradesh, (Mr. I. N. Shroff, Advocate, with him), for Intervener No. 1; M/s. M. C. Setalvad and N. A. Palkhivala, Senior Advocates (M/ s. A. P. Sen and R. K. P. Shankardas Advocates, and M/s. J. B. Dadachanji, O. C. Mathur, and Ravinder Narain, Advocates, of M/s. J. B. Dadachanji and Co., with them), for Intervener No. 2; Mr. N. A. Palkhivala, Senior Advocates, and M/s. J. B. Dadachanji, O. C. Mathur and Ravinder Narain, Advocates of M/s. J. B. Dadachanji and co., with him), for Intervener No. 3; Mr. J. B. Dadachanji, Advocate of M/s. J. B. Dadachanji and Co., for Intervener No.4; Mr. S. V. Gupte, Solicitor - General of India, (Mr. R. N. Sachthey, Advocate, with him), for Intervener No. 5.
Advocates:
A.P.SEN, D.MUNIKANIAH, I.M.SHROFF, J.B.DADACHAN, M.ADHIKARI, M.C.SETALVAD, MOHINDER NARAIN, N.A.PALKHIWALA, O.C.MATHUR, P.L.VOHRA, R.K.P.SHANKAR DAS, R.N.SACH, RAJINDAR NARAIN, RAMESHWAR NATH ROY, RAVINDER NARAYAN, Ravindra Narayan, S.N.ANDLEY, S.V.Gupta, T.V.R.TATACHARI
A.P.SEN, D.MUNIKANIAH, I.M.SHROFF, J.B.DADACHAN, M.ADHIKARI, M.C.SETALVAD, MOHINDER NARAIN, N.A.PALKHIWALA, O.C.MATHUR, P.L.VOHRA, R.K.P.SHANKAR DAS, R.N.SACH, RAJINDAR NARAIN, RAMESHWAR NATH ROY, RAVINDER NARAYAN, Ravindra Narayan, S.N.ANDLEY, S.V.Gupta, T.V.R.TATACHARI
State sales tax is not leviable on goods delivered to a carrier for consumption in another state, as "actual delivery" requires physical possession by the purchaser. Such transactions, occasioning movement across state borders, constitute inter-state sales exempt from state taxation.
Headnote:(A) Constitution of India - Article 286(1)(a) and (2) - State General Sales Tax Act - Section 2(k) - Central Sales Tax Act, 1956 - Section 3 - Sales Tax Laws Validation Act, 1956 - Taxability of sales outside the state - "Actually delivered" for the purpose of consumption - Inter-state trade or commerce - The expression "actually delivered" in the context of Article 286(1)(a) means physical delivery of the goods or such action as puts the goods in the possession of the purchaser; it does not include symbolic or notional delivery, such as entrusting goods to a common carrier or delivery of documents of title (Paras 18, 19).
(B) Inter-state trade - A sale is deemed to take place in the course of inter-state trade or commerce if the sale occasions the movement of goods from one state to another as a result of a covenant or incident of the contract of sale, regardless of where the property in the goods passes (Paras 20, 21, 22).
Facts of the case:
A company engaged in mining coal supplied the commodity to consumers outside the taxing state pursuant to directions issued under a control order. The coal was loaded into railway wagons on an F.O.R. basis, and the property in the goods passed to the allottee upon loading. The taxing authorities sought to include the turnover from these supplies in the taxable turnover for three financial years, rejecting the company's claim that the transactions were exempt as sales taking place outside the state or in the course of inter-state trade.
Findings of Court:
The court found that the delivery of coal to the railway administration did not constitute "actual delivery" within the taxing state under the constitutional explanation, as the coal was destined for consumption in another state. It further held that because the sales occasioned the movement of goods from one state to another, they were inter-state sales and thus not taxable under the state legislation during the relevant periods.
Issues: Whether the supply of coal to allottees outside the taxing state, pursuant to directions of a control authority, is liable to sales tax under the state act, and whether such transactions constitute "outside sales" or "inter-state sales" under the Constitution and the Central Sales Tax Act.
Ratio Decidendi: The court ruled that the fictional situs of a sale is fixed by the state where the goods are actually delivered for consumption. Since physical delivery occurred outside the taxing state, the state lacked the power to tax. Additionally, the movement of goods across state borders as a result of the contract of sale qualifies the transaction as an inter-state sale, which is exempt from state tax under Article 286(2) and the Central Sales Tax Act.
Result: Appeals allowed.
Legal Category Hierarchy
Table of Contents
2. Whether transactions constitute sales outside the state under Article 286(1)(a) or inter-state trade under Article 286(2) of the Constitution, thereby exempting them from state sales tax. (Para 3 , 16 )
3. Delivery to railway wagons for carriage to another state for consumption does not constitute actual delivery within the taxing state under the constitutional fiction of Article 286. (Para 18 , 19 )
4. Sales occasioning movement of goods from one state to another for consumption therein are inter-state sales and exempt from state tax under Article 286 and Central Sales Tax Act. (Para 19 , 20 , 21 , 22 )
5. Appeals allowed — Turnover for the disputed financial years declared exempt from liability to sales tax under the Hyderabad General Sales Tax Act, 1950. (Para 23 )
6. What constitutes actual delivery of goods for the purpose of determining the taxing state under the Explanation to Article 286(1)(a) of the Constitution?
Actual delivery means physical delivery or action putting goods in the purchaser's possession for consumption in that state. It excludes symbolic or notional delivery, such as entrusting goods to a common carrier or delivering railway receipts. (Para 18 , 19 )
7. When is a sale considered to be in the course of inter-state trade or commerce?
A sale is in the course of inter-state trade if it involves a sale of goods and the transport of those goods from one state to another under the contract of sale. (Para 20 , 21 , 22 )
8. Does delivery of goods to a carrier within a state make the sale taxable by that state if the goods are for consumption elsewhere?
No. The constitutional fiction shifts the situs of the sale to the state where goods are actually delivered for consumption, regardless of where property passed under general sale of goods law. (Para 19 )
Judgment
SHAH, J. : The question which falls to be determined in these appeals is
"whether the appellant Company is liable to pay sales-tax assessed under the Hyderabad General Sales Tax Act, 1950 on the price of coal supplied to allottees outside the taxing State pursuant to directions of the Coal Commissioner issued under the Colliery Control Order, 1945".
The Company which has its registered office at Hyderabad in the former Part B State of Hyderabad, and now in the State of Andhra Pradesh, carried on the business of mining coal from its collieries and supplying it to consumers in the outside the State of Hyderabad.
2. These appeals relate to three financial years 1954-55,1955-56 and 1956-57, during which coal was a controlled commodity and its disposal and use could be made only under orders issued by the appropriate anthority under the Colliery Control Order, 1945. The Company claimed that Rs. 175,67,286-1-2 in the year 1954-55 Rs. 1. 17,39,636-11-8 in the year 1955-56, and Rs. 1,55,18,937-6-5 in the year 1956-57were not liable to be included in the taxable turnover for levying sales tax under the Hyderabad General Sales Tax Act, 1950 because the State Legislature which enacted that Act was, by Art, 286 of the Constitution, prohibited from imposing tax on transactions of supply of coal outside the limits of the State under orders of the Coal Commissioner.
3. The Commercial Tax Officer, Hyderabad, admitted the claim of the Company for the years 1954-55 and 1955-56 for exemption from liability. The claim of the Company for the year 1956-57 was, however, rejected, The Company appealed to the Deputy Commissioner of Commercial Taxes and to the Sales Tax Appellate Tribunal, Hyderabad, against the order of assessment for the year 1956-57, but without success. The Company then applied to the High Court of Andhra Pradesh in its revisional jurisdication, and submitted in support of its claim that a part of its turnover was exempt from liability to sales tax under the Hyderabad Ceneral Sales Tax Act because the turnover was in respect of sales, (a) which had taken place outside the State within the meaning of Art. 286 (1) (a) read with the explanation thereto, and (b) which were effected in the course of inter-State trade or commerce, and the Parliament had not by law removed the ban against imposition of tax on such sales by the State legislature. The High Court rejected these contentions. In the meanwhile the Commissioner of Commercial Taxes issued notices to the Company to show cause why the orders of assessment for the years 1954-55 and 1955-56 should not be reopened and why the sales which were exempted by the order of the Commercial Tax Officer should not be charged to tax, and by his orders respectively dated February 8, 1961 and November 16, 1960 for the two years 1954-55 and 1955-56 brought to tax the turnover which was previously treated as exempt. The Orders were carried to the High Court in appeal and the same grounds which were set up in the revision application relating to the assessment year 1956-57 were set up, beside the ground that the action for reopening the assessments by the Commissioner of Commercial Taxes was barred by limitation and was, therefore, incompetent. The High Court rejected these contentions. With certificate granted by the High Court, these appeals are preferred by the Company.
4. at the material time, by S. 2 (k) of the Hyderabad General Sales Tax Act, 1950, the expression "sale" was defined as under.
"Sale with all its grammatical variations and cognate expressions means every transfer of property in goods by one person to another in the course of trade of business for cash or for deferred payment or other valuable consideration and includes also a transfer of property in goods involved in the execution of a works contract, but does not include a mortgage, hypothecation, charge or pledge.
Explanation 2.- Notwithstanding anything to the contrary in any other law for the time being in force, a transfe
