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Orissa High Court
G.K.MISRA,S.ACHARYA
Balabhagas Hyulaschand - Appellant
Versus
State of Orissa represented by The Commissioner of Sales Tax - Respondent
S.J.C. No. 41 of 1968
Decided On : 04/22/1970
INTER-STATE SALE - SALE IN COURSE OF INTER-STATE TRADE - MOVEMENT OF GOODS - PASSING OF TITLE - CENTRAL SALES TAX ACT, 1956 - SECTION 3(A), 4(1), 4(2)(B).
Fact of the Case:
The petitioner, a firm dealing in jute, purchased jute in Orissa and sent it to various jute mills in West Bengal. The jute was inspected by the mills at the mill sidings for quality, moisture, etc., and if found acceptable, the purchase was finalized. If not up to the grade, it was rejected. The petitioner contended that title to the goods passed in West Bengal and that the transaction constituted an internal sale in West Bengal, not a sale in the course of inter-State trade.
Finding of the Court:
The court held that title to the goods passed in West Bengal, but the sale was in the course of inter-State trade or commerce because the movement of the jute from Orissa to West Bengal was the result of a covenant entered into between the petitioner and the jute mills that the goods should be moved to the sidings of the mills for final approval and appropriation towards the contract.
Issues: 1. Whether title to the goods passed in Orissa or in West Bengal? 2. Even if title in the goods passed in West Bengal whether in the facts and circumstances of this case, the transaction constituted "sale in the course of inter-State trade"?
Ratio Decidendi: The court interpreted Section 3(a) and Section 4(1) of the Central Sales Tax Act, 1956, and held that even though title to the property passed in West Bengal and the sale was completed there, the transaction would be taxable as a "sale in the course of inter-State trade or commerce" because the movement of the jute from Orissa to West Bengal was the result of a covenant entered into between the petitioner and the jute mills. The court reasoned that the movement of the goods was a direct and necessary consequence of the important covenant regarding weighment, approval of specification, and final acceptance, and thus, the movement was in performance of the terms of the contract.
Final Decision: The court answered the questions referred to it by holding that (i) title to the jute passed in West Bengal and not in Orissa, and (ii) even though title to the jute passed in West Bengal, the sales were in the course of inter-State trade or commerce, as the completed sales occasioned the movement of the jute from Orissa to West Bengal. The reference was discharged, but there was no order as to costs.
Judgement
G. K. MISRA, C. J. :- The Tribunal was called upon to make a statement of the case and refer the following question
"Whether title to the goods passed after approval at the site of the mills or in Orissa".
In the course of hearing we were of opinion that the appropriate question would be :
"Whether, in the facts and circumstances of the case, there was a sale in the course of inter-State trade or whether there was only an internal sale in West Bengal."
Counsel addressed us on the basis of the aforesaid modified question, which of course was not set out in the order sheet
2. The relevant facts as given in the statement of the case, may be narrated in brief.
The petitioner is a firm which carries on business in jute. It purchases jute in Orissa and sends it outside the State to various jute mills in West Bengal. The headquarters of the firm is at 161/1, Mahatma Gandhi Road, Calcutta-7. For the quarter ending 30-6-69, jute worth Rs. 2,43,992.71 P. and Rs. 96,759.40 P. was despatched from Cuttack and Dhenkanal railway stations respectively to West Bengal. The transaction was through a licensed broker "East India Jute and Hessian Exchange, Ltd.". The procedure followed was that jute was being despatched to the sidings of the jute mills. It would appear from a letter dated 14th September, 1963, written by the Managing Agents Kettlewellbullen and Co., Ltd., addressed to the petitioner - in which the terms and conditions of the contract were set out - that the jute mills had no agents or branch offices in Orissa to make purchases of jute. After arrival of the jute at the mill sidings it is carefully inspected by the mills in respect of quality, moisture, etc. If it is found acceptable purchase is finally settled. If it is not up to the grade it is rejected. The jute is purchased on the basis of delivery at the mill sidings in Calcutta and accordingly the mills do not pay any railway freight or other charges for bringing it there. The sellers generally book the jute in the name of the milks as the railways do not accept any booking to the mills' sidings unless the goods are booked in the name of the mills. Payment for the value of jute is made in Calcutta. Purchase is made on the basis of weight ascertained at the mills. Every responsibility in respect of quality, moisture, shortage in weight and risk in transit lies upon the seller. This letter was produced before the Tribunal and is a part of the paper book. It is the common case of the parties that the terms and conditions enumerated in this letter governed the terms and conditions under which the transactions were effected during the quarter ending 30-6-1960. The statement of facts has been made on the basis of the terms mentioned in letter dated 1-4-60, addressed to the petitioner by the licensed broker, which are more or less to the same effect. It is mentioned therein that 90 per cent of the payment was to be made in cash against documents and the rest on approval.
3. The assessing authorities upto the stage of the Tribunal were of opinion that there was sale of jute in the course of inter-State. Being aggrieved the petitioner asked for a reference. It was rejected. Thereafter the petitioner moved this Court which in exercise of its jurisdiction under Section 24(3) of the Orissa Sales Tax Act called upon the Tribunal to make a statement of the case. That is how this reference has been made.
4. The points which arise for consideration in this reference are :
(1) Did title to the goods pass in Orissa or in West Bengal?
(2) Even if title in the goods passed in West Bengal whether in the facts and circumstances of this case, the transaction constituted "sale in the course of inter-State trade"?
5. So far as the first question is concerned, there can hardly be any doubt that title to the goods passed in West Bengal and not in Orissa. The jute, at the time of its despatch, was an unascertained goods. As per the terms and conditions of the agreement the mills retained full liberty to
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