Judgment

VENKATARAMIAH, J.:- The appellant in these three appeals by special leave is a company engaged in the business of manufacture and sale of art silk yarn. It has its factory at Sirumughai in the District of Coimbatore in the State of Tamil Nadu. The appellant is registered as a dealer carrying on business at Coimbatore. In the course of its business, it sold during the relevant period large quantities of art silk yarn to various purchasers some of whom were weavers residing in the States of Maharashtra and Gujarat who had been issued cards under a scheme called Export Promotion Scheme entitling them to buy specified quantities of art silk yarn from specified manufacturers. The question involved in these appeals relates to the eligibility of the sales effected in favour of Export Promotion Scheme card holders belonging to the States of Maharashtra and Gujarat to tax under the Central Sales Tax Act, 1956 (hereinafter referred to as the Act).

2. The assessment years are 1962-63, 1963-64 and 1964-65.

3. The details of the Export Promotion Scheme for distribution of art silk yarn referred to above were these: There were certain weavers in India who were entitled to an incentive in the form of import licences to import art silk yarn from abroad. The said import entitlement was cut to a certain extent and indigenous art silk yarn at concessional price was allotted to them. To regulate the scheme of allotment, a committee called the Art Silk Yarn Distribution Committee was constituted by the Government of India. The Committee made allotments to different weavers by issuing allotment cards. These allotment cards contained details of the quantity of allotment and the rayon yarn manufacturer from whom the allotted quantity of yarn could be drawn. As per the terms of the card, the yarn manufacturer should offer to the allottee rayon yarn within seven days of the date of allocation of the card without waiting for the allottee to approach him. A firm contract for the supply of yarn should be completed within a period of twenty-one days from the date of allocation of the card. If a firm commitment was not entered into by the allottee with the yarn manufacturer within twenty-one days from the date of allocation of the card, the yarn manufacturer should return the allocation card to the Distribution Committee with suitable remarks on the card and a covering letter explaining the reasons for the return of the card. Even in the case of actual fulfilment of the quota covered by the allocation card, the said card should be returned to the Distribution Committee after the delivery of the yarn was completed. This in brief was the Scheme.

4. In the instant case, the appellant had supplied art silk yarn to certain card holders who were residing, as stated earlier, outside the State of Tamil Nadu. It is stated that the appellant had a selling agent and distributor by the name M/s. Rayonyarns Import Company Ltd., at Bombay and the case of the appellant as that it had supplied art silk yarn to the card holders in the States of Maharashtra and Gujarat through the said agent and the delivery of the goods was effected at Bombay. In the assessment proceedings before the Joint Commercial Tax Officer, Coimbatore for the year 1964-65, the appellant claimed that the sales of art silk yarn through its agent at Bombay were not inter-State sales as defined by Section 3 (a) of the Act as the movement of the goods in question from the State of Tamil Nadu to the State of Maharashtra or the State of Gujarat was not occasioned by the sales in question and that they were in fact sales which had taken place outside the State of Tamil Nadu. The Joint Commercial Tax Officer rejected the contention of the appellant and treated the sales effected in favour of the Export Promotion Scheme card holders through the appellants agent at Bombay as inter-State sales and levied tax under the Act accordingly. He also revised the orders of assessment for the years 1962-63 and 1963-64