Delhi High Court
Commissioner Of Sales Tax, Delhi vs Motorades on 11 February, 1992
Author: B.N. Kirpal
Bench: B.N. Kirpal
JUDGMENT B.N. Kirpal, J.
1. The Sales Tax Appellate Tribunal, Delhi, has referred to this Court the following question of law :
"Whether, on the facts and circumstances of the case, the learned Tribunal was justified in holding that the sales effected by the respondent-dealer of automobile parts to other State Governments were sales in the course of inter-State trade and commerce and D forms issued could be accepted ?"
2. The facts as found by the Tribunal are that in respect to the year 1972-73 the dealer was carrying on the business of operating an automobile workshop and service station at Delhi. It also sold auto parts.
3. The claim of the dealer was that it sold auto parts to different departments of Himachal Pradesh and Haryana Governments in the course of inter-State trade and it produced "D" form. The manner in which the transactions used to take place was that these departments used to send their vehicles to Delhi and the requisite parts would be fitted therein and then the vehicles would go back to Himachal Pradesh or Haryana.
4. The assessing authority as well as the Assistant Commissioner of Sales Tax did not consider these sales as being in the course of inter-State trade and commerce. A further appeal was then filed to the Appellate Tribunal. Vide its order dated November 25, 1978, the Tribunal referred to two decisions of the Supreme Court in the case of Telco [1971] 27 STC 127 and Oil India Ltd. [1975] 35 STC 445 in which it was held that if the sale occasions the movement of goods from one State to another then such a sale would be regarded as an inter-State sale and it would not matter in which State the property in the goods passed. The Tribunal came to the conclusion that the auto parts after getting fitted in the vehicles were taken out of Delhi and the sales in question were inter-State sales.
5. On an application moved by the Commissioner of Sales Tax the aforesaid question has been referred to this Court.
6. Now it is well-settled that in order to see whether the sale is in the course of inter-State trade and commerce or not what has to be determined is whether the sale has occasioned the movement of goods from one State to another. The property in the goods can pass either before or after the movement of goods. In other words the property in the goods can pass from the seller to the purchaser in either of the two States. What is, however, material is that the sale itself must occasion the movement of the goods.
7. If there was a written agreement between the parties which envisaged the movement of goods there would have been no difficulty. In the present case, however, it is not denied that there is no written agreement. What happens is that vehicles are sent by the State departments from outside Delhi to the dealer's workshop and auto parts are fitted therein and then the vehicles leave Delhi. In the absence of any written agreement what has to be determined is whether the movement of goods, viz., the auto parts from Delhi to outside Delhi was occasioned by the sale of those parts.
8. Learned counsel for the department has vehemently contended that the sale was complete in Delhi when the auto parts were fixed in the vehicles. While relying upon the decision of a Division Bench of this Court in the case of Delhi Cloth and General Mills Co. Ltd. v. Commissioner of Sales Tax [1981] 48 STC 351 it has been submitted that there was no term of the contract which occasioned the movement of goods from one State to another. He has further submitted that once the parts were fixed to the vehicles it was not necessary for the vehicles to go out of Delhi and there was no control in the movement of goods from Delhi to outside Delhi. It is contended that in DCM's case [1981] 48 STC 351 (Delhi) vanaspati ghee was supplied to the State of Jammu and Kashmir at Delhi against cash payment and even though it was known that the goods would be transported to Jammu and Kashmir the sales in question were not treated as inter-State sales.
9. The case of DCM [1981] 48 STC 351 (Delhi) can be of no assistance to the department. In that case there was no written agreement and the order for the supply of vanaspati ghee was placed on the dealer by the Trade Commissioner, Jammu and Kashmir Government, New Delhi. It is that Trade Commissioner who took delivery of the goods at Delhi and the payment was made in cash at Delhi. What is important to note is that the sale notes used to be made in the name of the Trade Commissioner, Jammu and Kashmir, Delhi. It was found by this Court that nowhere in the correspondence was there any stipulation regarding the movement of goods from Delhi to Jammu and Kashmir.
10. It will be seen that all the essential elements of sale were completed, in DCM's case [1981] 48 STC 351 (Delhi) in Delhi. It is the agent at Delhi who placed the order, took delivery of the goods and paid the price thereof. If the Trade Commissioner at Delhi, after having taken the custody of the goods did not dispatch the goods to Jammu and Kashmir the dealer, namely, the DCM, would in no way have been affected by it. After the delivery of vanaspati ghee was made at Delhi and the price received, and the DCM had no further interest in the matter.
11. In the present case, however, the transaction is not complete with the fixation of auto parts in the vehicles of the State Governments. What is of vital importance to note is that as observed by the Assistant Commissioner of Sales Tax in his order that according to the dealer "sale price were received after the goods were approved by the Government department authority situated in the other States". This contention has not been refuted and has obviously been accepted. It is clear, therefore, that the price was not to be received by the dealer till the goods which were supplied and been approved by the Government departments. The bills in the present case were made in the names of Government departments outside Delhi. The goods in fact went out of Delhi. The very fact that the goods had to be approved by the departments outside Delhi clearly indicates that incidental to the sale, if not directly related thereto, was the movement of goods from Delhi to States outside Delhi. When the goods were being sold the dealer knew that they were meant to be exported outside Delhi because he was to get the sale price only after the goods were approved by the authorities outside Delhi. If there had been a written agreement in which it was stipulated that after the delivery of the goods is taken in Delhi the same would be transported by the purchaser to outside Delhi and the goods will have to be approved before any part is fitted, then it would have been possible to argue that such a term would not be regarded as a term which does not envisage movement of goods from one State to the other. Merely because there is no written agreement would make no difficulty, in our opinion.
12. A contract may be in writing or verbal, terms may be express or implied. There are a large number of contracts which are placed on telephone, i.e., see Commissioner of Commercial Taxes v. Bhag Singh Milkha Singh [1972] 29 STC 463 (Pat) or may be by other electronic modes of communication. Contract may be in writing and sent by the party or it may be entered into with the help of telex facility. The finding of fact in the present case is that the goods moved from one State to the other. There is a verbal contract which has been entered into between the dealer and the departments outside Delhi. It is as a result thereof that auto parts were fixed in the vehicles and those vehicles went back to their respective States and the price was received only after the auto parts which were supplied have been approved by the purchasers. The inescapable conclusion, therefore, is that there was a movement of goods from Delhi to outside the State and that this movement had been occasioned by the sale which was effected by the dealer. The movement of goods was incidental to the sale and was also an implied term of the sale. In our opinion, therefore, the Tribunal was right in coming to the conclusion that the sales in question were inter-State sales.
13. For the aforesaid reasons the question of law is answered in favor of the dealer and against the Revenue. There will, however, be no order as to costs.
14. Reference answered in the affirmative.