An appeal was preferred by the State in the case of the Trading Co., namely, the case pertaining to the assessment of the sales from Chemical Co. to the Trading Co. The only submission advanced by Mr. Mohan, learned, companynsel for the appellant, was that there were two sets of sales, namely, by the Chemical Co. to the Trading Co. and by the Trading Co. to the out of State buyers.
Consequently, Central Sales tax was levied on the first sale, but number on the second sale.
Clause 2 of the agreement provided, the Chemical Co. would make the sales directly to the Trading Co. on a principal to principal basis against offers or indents.
The facts giving rise to the appeal are as follows The Dharangadhara Chemical Works Ltd. is a manufacturer of Caustic Soda and certain other chemicals.
The nature of sales by the Chemical Co. to the Trading Co. and the question whether they were inter state sales had to be decided after further taking into account the further instructions given by the buyers.
The mode in which sales were made was that the Trading Co. obtained orders from out of State buyers and entered into agreement of purchase with the Chemical Co. for these specified quanities.
From the Judgment and Order dated 11.7.1973 of the High Court of Madras in Tax Case No.
619 NT of 1975.
The Trading Co. used to given directions to the Chemical Co. for despatching specified quantities of goods to the stations named by the Trading Co. and as per these directions, the Chemical Co. booked the goods at the booking station which was invariably Arunuganeri Railway Station in the State of Tamil Nadu, showing themselves as the companysignors and the Trading Co. as the companysignees of the goods specified in that companytract of sale.
The Judgment of the Court was delivered by KANIA, J. This is an appeal against the companymon judgment of a Division Bench of the High Court of Judicature at Madras in Tax Cases Nos.
The appeal has been preferred pursuant to special leave granted by this Court under Article 136 of the Constitution of India.
2 3 of 1970.
These companytentions were rejected by the Appellate Assistant Commissioner, who dismissed the appeals.
In the original assessment order for the assessment year 1961 62 made by the Sales Tax Officer, both the sales by the Chemical Co. to the Trading Co. and the sales by the Trading Co. to the out State buyers were treated as inter State sales.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
Dharangadhara Chemicals Works Ltd. referred to hereinafter as the Chemical Company entered into an agreement dated 9th August, 1957 under which it agreed to sell all its products to Dharangadhara Trading Co. Pvt.
After booking the goods, the invoices were handed over to the Trading Co. by the Chemical Co. It may be mentioned that the actual quantities sold, the sale price, the booking station and the destination stations were number determined under the aforesaid agreement of 9th August, 1957, but in the actual companytracts of sale in respect of definite or specified quantities.
All the goods sold under these companytracts of sale were booked at the aforesaid railway station in Tamil Nadu to the various places outside the State of Tamil Nadu where buyers from the Trading Co. required the goods and after the goods were booked as aforesaid on the railway, the railway receipts and the invoices companycerned were endorsed and handed over to the Trading Co. Admittedly, as pointed out by the Tribunal, there were two sets of sales, one by the Chemical Co. to the Trading Co. and the second by the Trading Co. to the various out of State buyers.
It was submitted by him that the first set of sales, namely, by the Chemical Co. to the Trading Co. were local or intrastate sales because under the agreement dated 9th August, 1957 the delivery was to be effected at the booking station.
Rajendra Choudhary for the Respondent.
Considering the manner in which the sales were effected and despatches made by the Chemical Co., and after examining some specimen orders placed by the Trading Co. with the Chemical Co., the Tribunal came to companyclusion that the delivery was effected by the Chemical Co. to the Trading Co. by delivery of documents of title, namely, the respective invoices and the railway receipts.
Alternatively, if a view were taken that the sales did number fall under Sub section a of Section 3, the deliveries of goods sold were effected by the transfer of documents after the movement of the goods from Tamil Nadu to the other States had companymenced and the sales companyld be regarded as companyered under Sub section b of Section 3 of the Central Sales Tax Act.
The actual terms of the sales have to be determined number merely under the agreement dated 9th August, 1957 as that agreement was a general agreement which did number specify the quantities to be sold, the sale price, booking stations, the destination stations, and so on, but these actual terms companyld be determined only by taking into account the terms on which and the manner in which the actual sales were made by the Chemical Co. to the Trading Co. For ascertaining these terms, the Tribunal examined some of the subsequent orders placed by that Trading Co. on the Chemical Co. Taking into account all these, the Tribunal found that as the orders were placed for booking, specified goods to out of station buyers, and the Chemical Co. never give physical delivery of the goods to the Trading Co., but booked the goods to the destinations as required by the out of state buyers and merely handed over documents of title to the Trading Co. It was clear that the movement of the goods from the State of Tamil Nadu to the outside States was occasioned by the terms of the companytract themselves and the sales were inter state sales falling within Section 3, Sub section a of the Central Sales Tax Act, 1956.
Under clause 1 of the said agreement, the Chemical Company agreed to companyfine the sale of all the products manufactured by it at all its works to the Trading Co. for a period of 5 years from the 1st day of March, 1958.
The Trading Co. would make payments to the Chemical Co. within one month from the date of supply or sale of goods by the Chemical Co. Pursuant to this agreement, sales were effected by the Chemical Co. to the Trading Co. Although the aforesaid agreement companytained the general terms as set out earlier, neither the booking stations, number the destination stations number the sale price were given in the said agree ment.
Mohan for the Appellant.
This assessment order was revised and under the revised assessment order the assessing authority treated the sales effected by the Chemical Co. to the Trading Co. as intra State sales and the sales effected by the Trading Co. to the out of State buyers as inter state sales falling under Section 3 of the Central Sales Tax Act, 1956.
The delivery of the goods would, however, be given F.O.R. at booking stations.
Both the assessees filed appeals against the decisions of the Appellate Assistant Commissioner to the Tribunal.
Ltd. referred hereinafter as the Trading Company .
It was companytended by the assessee that the sales by the Trading Co. to the out of State purchasers were admittedly inter state sales and as far as sales by the Chemical Co. to the Trading Co. were companycerned, these were also inter state sales as the sales were companypleted by the delivery of railway receipts and invoices only after the inter state journey of the goods had companymenced.
Clause 3 provided that the selling price would be determined by the Board of Directors of the Chemical Co. on the basis of ex factory or F.O.R. at booking or F.O.R. destination stations as decided upon by the Directors.
From this decision of the Tribunal, Revision Petitions under Section 38 of the Tamil Nadu General Sales Tax Act were preferred by the State of Tamil Nadu to the Madras High Court.
The assessees, namely, the Chemical Co. as well as the Trading Co. filed appeals before the Appellate Assistant Commissioner companytending that both the said sales were inter state sales.
