1979 Supreme(SC) 187

SUPREME COURT OF INDIA
Y.V. CHANDRACHUD, CJI., D.A. DESAI AND R.S. PATHAK, JJ.
Union of India and another, Appelants
Versus
M/s. K. G. Khosla and Co. Ltd. and others. Respondents.
Civil Appeal No. 2077 of 1972, D/-6-3-1979.
Advocates appeared
Mr. E. C. Agarwala, Advocate for R. N. Sachthey, Advocate, for Appellants; Mr. Lal Narian Sinha, Sr. Advocate (M/s. K. K. Jain, S. K. Gupta, Pramod Dayal and Bishamber Lal, Adocates, with him), (for No. 1) and M/s. Rameshwar Dial, Adarsh Fial and A.D. Mathur, Advocates (for Nos. 2-3), for Respondents.

Headnote:

Central Sales Tax Act, 1956 – Sections 3, 9 – Constitution of India, 1950 – Article 133 – Bengal Finance (Sales Tax) Act, 1941 – Sales Tax – Appeal by certificate raises an interesting controversy between the sales tax authorities in the Union Territory of Delhi and those in Haryana, the question being as to which of the two authorities can asses respondent 1 to sales tax – One of the reliefs sought by respondent 1 is that until the sales tax authorities of the two territories settle their differences, no sale tax should be levied or recovered from it since, it does not know to whom to pay the tax – Respondent 1 is a private limited company called K.G. Khosla & Co. (P.) Ltd, having its head office in the Union Territory of Delhi, at 1, Deshbandhu Gupta Road, New Delhi – Company carries on business in Air Compressors and garage equipment which it manufactures in its factory at Faridabad, which was formerly in the State of pubjab and is now a part of the State of Haryana. – For the purposes of sales tax, respondent 1 is registered as a dealer both in the Union territory of Delhi and in the State of Haryana – If filed returns of sales tax with the Sales Tax Authorities in Delhi, since, according to it, the sale of goods manufactured in the factory at Faridabad was being effected from Delhi by its head office – Sales tax was being paid by the company under the Bengal Finance (Sales Tax) Act, 1941 as extended to Delhi, on the basis that the sales effected by the company were intra-States sales within the territory of Delhi – Sales Tax Assessing Authority at Gurgaon, which was then in the State of Punjab but which subsequently became a part of the State of Haryana, sent a notice to the company under sections 11 and 14 of the East Punjab General Sales Tax Act, 1948 and Rule 33 made thereunder that, in respect of the period commencing and ending with the year 1964-65, the sales made by the company were liable to assessment in Haryana – Assessment was made by the Assessing Authority at Faridabad on the basis that the sales effected by the company were inter-State sales liable to be assessed to sales tax under the Central Sales Tax Act, 74 of 1956 – Held, 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 obtained 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 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 – Decisions to which court have referred above show that in order that a sale may be regarded as an inter-State sale, it is immaterial whether the property in the goods passes in one State or another – Question as regards the nature of the sale, that is, whether it is an inter-State sale or an intra-State sale, does not depend upon the circumstances as to in which state the property in the goods passes – It may pass in either State and yet the sale can be an inter-State sale – High Court was, therefore, right in holding that the sales in question are inter-State sales and that the turnover of sales is assessable to sales tax under the Central Sales Tax Act, 1956 at the instance of the Sales Tax authorities at Faridabad – Amount of tax which respondent has wrongly paid to the Sales Tax authorities at Delhi on such inter-State sales from 1-4-1961 to 30-9-1965 shall have to be transferred by the Sales Tax authorities at Delhi to the Sales Tax authorities at Faridabad, as directed by the High Court – Appeal Dismissed