Judgment

P. JAGANMOHAN REDDY, J.:- These three appeals by certificate under Article 133 (1) (c) of the Constitution are against the judgment of the Madras High Court which allowed the three Writ Petitions filed by the Respondent under Article 226 of the Constitution of India by which it challenged the proceedings proposed to be taken by the Sales Tax Officer under the Madras General Sales Tax Act 1959 (hereinafter called the Act) and the rules thereunder in respect of sale transactions in the assessments 1960-61 to 1964-65 and 1966-67 (upto October, 1966).

2. The first petition was for quashing the summons issued under the Act and requiring the respondent to furnish certain vouchers of cotton yarn, branch transfer accounts and particulars relating to the years 1960-61 to 1964-65 and 1966-67 (upto October, 1966). The second petition was for directing the appellant to forbear from taking any steps for verification and in disallowing the exemption for the second and subsequent sales of yarn purchased by the respondent company from the Madurai Mills Limited in respect of the aforesaid period. The third petition prayed for the issue of Mandamus to the appellant to forbear from disallowing the exemption for the second and subsequent sales of yarn estimated at Rs.5,08,247/- for the assessment year 1965-66. The High Court of Madras allowed all the three petitions and quashed the proceedings as prayed for.

3. The respondent is a registered dealer with its head office at Madras and branches in Madurai, Rajapalayam and Salem inside the State of Tamil Nadu and also in certain places in the State of Kerala and Andhra Pradesh including Hyderabad. During the years 1960-61 to 1964-65 and 1966-67 upto October, 1966, it was dealing in various goods including cloth, yarn, etc. and was being assessed to tax under the Act on the turnover of the business. The gross turnover of the respondent included sales of yarn by the Madurai Mills Limited to the respondent to its head office in Madras and also to its branches. The method which was followed by the head office of the respondent was that it would place orders from Madras on Madurai Mills Limited pursuant to which the supplies would be made by the Madurai Mills Limited either to the responent s head office or to its branches in accordance with the instructions given by the head office. Where deliveries were made to the respondent inside the State the seller collected the tax due under the Act with reference to item 3 of the second Schedule to the Act. But in respect of deliveries made to the respondent s branches outside the State, the Madurai Mills collected tax under section 3 of the Central Sales Tax Act (hereinafter called the Central Act). During the year 1965-66 the respondent transferred to Madras State certain quantities of yarn from the stock so purchased at its branches in the State of Andhra Pradesh and Kerala and sold the same to local dealers. The appellant thereupon called upon the respondent to produce account and certain other documents, on the assumption that the sales so effected were chargeable to tax as first sales in the State. The respondent objected to these proceedings on the ground that the sales were second sales not liable to tax and field three writ petitions which are subject to these appeals.

4. It was not disputed that the sales by the Madurai Mills to the respondent in which deliveries were made to branches in the States of Andhra Pradesh and Kerala have been charged to tax under the provisions of the Central Act. The only question in controversy is whether the sales made locally of yarn transferred to the Madras State from the stocks of yarn in the State of Andhra Pradesh and Kerala in respectof Sales tax which had already been charged as inter-State sales are again liable to tax as first sales in the State of Madras.

5. In order to resolve this contorversy, it would be useful to notice the relevant provisions of the Act and Central Act. Section 3 (1) of the Act imposes