Madras High Court
Madras Rubber Factory Ltd. vs The Joint Commercial Tax Officer, Mount ... on 3 February, 1972
Equivalent citations: [1973]30STC96(MAD)
Author: V. Ramaswami
Bench: V. Ramaswami
JUDGMENT Ramanujam, J.
1. These are three connected writ petitions arising out of certain revised assessments made on the assessee-company under the Central Sales Tax Act, 1956, for the assessment year's 1963-64, 1964-65 and 1965-66. For all the above three years the assessments were completed, and the assessee was finally assessed to Central sales tax by the assessing officer on various dates. Subsequently, the assessing officer revised the assessments for all the three years and reflxed the taxable turnovers. Aggrieved against the said revision of assessments for the three years in question, the assessee has filed the above writ petitions before this court and had also filed, appeals before the appellate authority. This court by its order dated 12th July, 1971, directed the appellate authority to dispose of the appeals filed by the assessee so that this court can have the benefit of its findings in disposing of the writ petitions. The appellate authority has since disposed of the appeals and affirmed the revised assessment orders passed against the assessee, which are impugned in these petitions. The details of disputed turnovers in all the three years are as follows :
1963-64 Rs. 9,05,786.55 Branch transfer treated
as inter-State sales.
1964-65 Rs. 17,65,846.93 do.
1965-66 Rs. 6,17,290.61 Local sales made to
Tyresoles Concessiona-
ries Private Ltd. treated
as inter-State sales.
Rs. 70,74,433.75 Branch transfer treat-
ed as inter-State sales.
2. Therefore, the question for consideration in these writ petitions is as to whether the revision of assessments made by the assessing officer 'for the three years is justified on the facts and circumstances of these cases.
3. The taxable turnover as originally assessed, the turnover as revised arid the disputed turnover in respect of each of the years are given below :
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W.P. Year of Original Revised Disputed
No. assessment turnover turnover turnover
assessed assessed
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Rs. Rs. Rs. 1316/69 1963-64 7,81,744 16,87,531 9,05,787 1167/70 1964-65 14,19,540 31,85,385 17,65,847 1240/71 1965-66 43,36,301 1,20,28,025 76,91,724
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4. In the assessment years 1963-64 and 1964-65, the disputed turnover has been shown in the assessee's accounts as stock transfers from the head office at Madras to its depots situate outside the State. The assessing officer at the time of the original assessment accepted the assessee's plea that the turnovers involved represented stock transfers and excluded it from the taxable turnover. Similarly, in the assessment year 1965-66 the assessing officer accepted a turnover of Rs. 70,74,434 as stock transfers from the head office to the depots outside the State and excluded it from the levy of tax. Subsequently, the above turnovers in question have been brought to tax under the revised assessments on the ground that though the concerned transactions have been shown as stock transfers from the head office to its depots outside the State, they are in fact sales by the assessee to the out-of-State buyers as a result of which the goods have moved from this State to places outside the State. Therefore, the substantial question for decision is as to whether the transactions which are shown as stock transfers by the assessee in its books are really inter-State sales as has been held by the assessing officer.
5. In respect of the year 1965-66, there arises a further point to be considered. In that year, the assessing officer originally treated a turnover of Rs. 6,17,290.61, representing the sales made to one Tyresoles Concessionaries (P.) Ltd., as intra-State sales and subjected the same to tax under the Tamil Nadu General Sales Tax Act. Subsequently, the assessing officer had changed his view on the basis of information got by the. Intelligence Wing and on the materials available on the further check of accounts, and held that the sales to the said company are not in fact .intra-State but inter-State sales which have occasioned the movement of the goods from this State to places outside this State. He, therefore, brought them within the net of taxation under the Central Sales Tax Act. Thus, the further question to be considered is as to whether the sales by the assessee made during the year 1965-66 to the said Tyresoles Concessionaries (P.) Ltd. are inter-State sales as has been held by the assessing officer.
6. The assessee-company has got its factory in Thiruvottiyur in the State of Tamil Nadu and it is a manufacturer and dealer in tyres, tubes, tread rubber, etc. It has also a head office at No. 175/1, Mount Road, Madras-2. The head office makes out annually a production programme and sales forecast and sends its production schedule each month to its factory to be effected for the following months. This schedule indicates as to how much of the manufactured articles was meant for export, for general market and for supply to original equipment manufacturers. According to the assessee, it manufactures tyres not only to cater to the needs of the general market but also to cater the requirements of the original equipment manufacturers, i.e., manufacturers of automobile vehicles such as cars, trucks, jeeps, etc., who use tyres and tubes as parts of the ultimate products manufactured by them. It is stated that reduced prices are charged in respect of the supplies made to them as they happen to take bulk supplies. At the time when the tyres and tubes are sent by the factory at Madras to its depots, the same are marked with letters "O.E." if they are intended to meet the needs of the original equipment manufacturers. Sometimes the goods sent to depots for supply to certain bulk consumers contain the initials of the bulk consumers. The assessing officer had treated the despatches of tyres and tubes made by the factory at Madras to its depots in other States as inter-State sales mainly on the following grounds :
(1) Though the goods were shown as consignments to branches, the names of certain buyers had been earmarked in the pro forma invoices raised by the head office.
(2) In some other cases, even though no name of any buyers was mentioned, the code words "O.E." had been noted. This means sales to original equipment company.
(3) Goods have been moved from the State on prior orders of buyers.
7. The above reasons which prompted the assessing officer to hold the transactions to be inter-State have been accepted by the appellate authority as justifying the conclusion that the despatches made by the assessee to its depots are inter-State sales.
8. As already stated, the entire disputed turnover except the turnover of Rs. 6,17,290.61, which represented the sales to Tyresoles Concessionaries (P.) Ltd., represented the despatches made by the assessee to its depots outside the State. The assessing authority as well as the appellate authority treated those despatches of various consignments as inter-State sales, as the consignments had been marked for a particular buyer of the original equipment manufacturer outside the State, and the movement of the goods from the factory to outside destination has been occasioned as a result of the prior orders placed by the buyers with the head office at Madras or with its depots outside the State. We have to see whether the above conclusion arrived at by the assessing and the appellate authorities is correct.
9. Though the assessing as well as the appellate authority proceeded on the basis that there have been prior, orders placed by the out-of-State buyers either with the factory at Madras or with its depots outside the State for the supply of tyres and tubes, etc., they have not referred to any particular order as having been placed by the buyer or original equipment manufacturer outside the State before the despatches were made. The authorities had assumed that the letters and figures on the left hand top of the pro forma invoices sent by the head office to its depots in various places refer to the details of the earlier orders placed by the buyers. But it has been explained by the assessee that it refers to the serial number of the despatch to a particular destination. For instance, the details P.I. No. BY/238/65 given in the left hand top of the pro forma invoice dated 11th September, 1965, are said to indicate that it is a pro forma invoice iii relation to 238th consignment sent to Bombay in the year 1965. We accept the explanation that the said details indicate only the details of the consignments sent to a particular depot and that they do not refer to any pre-existing order said to have been placed by the buyer. The finding of the assessing authority that in all the cases there has been prior orders in pursuance of which the consignments were sent by the head office to its depots appears to be without any basis and it cannot be accepted without any material to support it. The assessing officer has not given the details of any prior orders though he has proceeded on the basis that there have been prior orders placed by the customers either with the depots or with the factory. According to the assessee, in most of the cases, the consignments had been sent to its depots to replenish their stocks without reference to" any earlier orders from the buyers, and those consignments have been taken to the stock at the various depots and then supplied to the various buyers having regard to their requirements. It is stated that it is only in very few cases identical goods consigned have been delivered to the buyers whose initials are marked in the consignment, and the turnover in relation to the same in each of the years is said to be Rs. 1,79,924.05 for the year 1963-64, Rs. 2,17,395.02 for the year 1964-65 and Rs. 1,28,193 for the year 1965-66. It is conceded by the learned counsel for the assessee that in respect of those cases where there is numerical similarity between the consignments to the depots and the ultimate delivery to the buyers, it could be taken that there has been appropriation of the goods and that the movement of the goods had been occasioned by the orders placed by the buyers. In other cases, the depots took the consignments to their stocks and subsequently sold the same to the buyers out of their stocks. The assessee contends that in the latter types of cases there have been only stock transfers and the sales have taken place only subsequent to the-receipt of the consignments from the head office at the depots.
10. Both the assessing authority as well as the appellate authority have taken the view that as the goods have been marked with the buyer's initials or with the letters "O.E." to represent that they are intended for the original equipment manufacturers in the pro forma invoices issued by the head office, it is possible to infer that the consignments had been despatched for delivery to the particular buyers only in pursuance of orders placed by the named buyers or by the original equipment manufacturers prior to the despatch of the goods, and that the movement of the goods had been occasioned by the prior orders placed by the named buyers or by the original equipment manufacturers, though the consignments have been sent to the assessee's depots at various places. According to them the fact that the consignments had been sent to the assessee's depots and not directly to the buyers cannot make any difference as the goods had been consigned to the depots only for effecting delivery to the named buyers and the despatches though called stock transfers were really inter-State sales, having regard to the fact that the movement of the goods has been occasioned by the orders that might have been placed by these named buyers. As already stated, it has not been shown that there has been any prior order placed by the named buyers or by the original equipment manufacturers before the consignments were despatched by the head office to its depots. Even if some of the consignments have been sent as a result, of certain orders placed by the buyers with the depots, unless the despatches are specifically intended for the supply to that particular purchaser, it cannot be taken that the consignment was in pursuance of the orders placed. As a matter of fact, in most of the cases the consignments have been taken to their stocks by the depots and have been sold to various persons including those whose initials have been put there in the consignments. Though the assessee has produced before the assessing and the appellate authorities all the pro forma invoices which would make up the disputed turnover, they have not referred to them in detail. With reference to the said pro forma invoices filed by the assessee, it is contended that except in a few limited number of cases in each of the years whose aggregate turnover has been referred to already, in all other cases the goods consigned have been taken to their stocks and supplied by the depots to the various buyers according to their discretion, and that the buyers had not been supplied with the identical consignments received by them from the head office. Therefore, unless it is shown that the consignments with the initials of particular buyers have been taken delivery by the buyers concerned through the depots, which is the case in the limited number of cases set out above, it is not possible to construe the despatches made by the head office to its depots under the pro forma invoices as inter-State sales by the assessee to out-of-State buyers. The learned counsel contends that in all the transactions there has been no earlier firm contracts by the buyers outside the State with the head office, that the goods moved only from the head office to its depots on the basis of the trade enquiries made by the out-of-State buyers, that appropriation of the goods towards the contract of sale by the buyers was only at the depots outside the State when goods were separated from their stock and actual delivery was effected by them to the buyers, and that the price noted in the pro forma invoices issued by the assessee as against their depots outside the State could not be treated as the sale price payable by the buyers, as the goods consigned have been taken to the stock of the depots and then appropriated towards the buyer's contracts with the respective depots. As a matter of fact, the learned counsel pointed out with reference to the records produced before the authorities and which form part of the record in these cases that, in some instances despatches made to a depot in one State and retransferred by that depot to a depot in another State has been treated as a sale to an out-of-State buyer which is obviously untenable.
11. On these facts, the learned counsel contends that as there are no earlier firm contracts either with the head office or with its depots, the movement of the goods from the factory to the various depots outside the Slate cannot be said to have been occasioned by any prior contract of sale, and that the authorities have construed wrongly the number of the consignment shown in the left hand top of the pro forma invoices as the number of the order placed by the out-of-State buyer. After a perusal of the records available in the case, we are of the view that the pro forma invoices do not refer to any prior contract of sale as has been assumed by the assessing authority. Therefore, it has to be taken that the despatches made by the head office to its depots, except the said limited number of cases, were not in pursuance of a prior contract of sale entered into by the out-of-State buyer either with the head office or with the depots. The learned counsel also contends that, even if the consignment sent to depots are taken to be inter-State sales, unless there is appropriation of the goods within the State towards the prior contract of sale, they cannot be taxed as inter-State sales by this State, that in these cases the appropriation had taken place only when the. assessee's depots situate outside the State apportioned the goods consigned to them to the various buyers and that the despatches made by the head office to its depots cannot, in any sense, be treated as amounting to appropriation towards the contract of sale entered into by the buyers either with the head office or with its depots. .According to the learned counsel, the goods in this case being unascertained and future goods, unless there is appropriation of goods to the contract of sale between the assessee and the out-of-State buyer, this State cannot tax the transactions, even if the transactions are treated to be inter-State sales.
12. To substantiate the above contentions, reliance is placed on Hakim Syed Abid Hussain and Sons v. Government of Madras [1968] 21 S.T.C. 350. In that case, Veeraswami, J., (as he then was) speaking for the Bench had laid down that the scheme of Sections 3 to 5 of the Central Sales Tax Act is that the inter-State sales or purchases are carved out of and separated from inside sales with reference to certain indicia but integrated with them for the purpose of situs for taxation, that a sale or purchase takes place inside a State if the specified or ascertained goods are within its limits at the time the contract of sale is made or in the case of unascertained or future goods they are within the limits of that State at the time of their appropriation to the contract of sale by the seller or the buyer, and that it is the State where the goods were found at the time of the contract in relation to the inter-State sale or purchase was entered into, if the goods are specified or ascertained, and if the goods are unascertained or future goods where the appropriation takes place, that will be entitled to tax.
13. According to the learned Judges, before a sale or purchase is taxed by the State as being inter-State, it must first be statisfied that the tests under Section 4(2) are fulfilled and then it must be examined whether the transaction answers the requirements of Section 3(a) or 3(b), and for finding out whether the requirements of Section 3(a) are satisfied, the terms of the contract of sale with reference to which the conclusion as to the inter-State character of the transaction is to be arrived at, have to be looked into, to ascertain whether the contract occasioned the movement of the goods in the sense that there was a stipulation in the contract that the seller should despatch the goods from the Madras State to another State.
14. In Larsen and Toubro Ltd. v. Joint Commercial Tax Officer [1967] 20 S.T.C. 150, a Division Bench of this court has, while dealing with the scope of Section 4(2) of the Central Sales Tax Act, expressed the view thus :
" Once the character of the transaction is determined by the proper tests we mentioned, to be inter-State, the next question will be where is its situs or which is the appropriate State to bring it to tax. That will take us to Section 4(2). Where a sale or purchase occasions inter-State movement of goods, it may be comparatively easy to fix its situs. The situs of goods at the time when the contract of sale, which occasions the inter-State movement thereof, is made or at the time of appropriation of the goods, if they are unascertained or future goods, is made to the contract of sale by the seller or buyer, will be the situs of the sale or purchase and, therefore, the State in which such situs is situate will be the appropriate State entitled to bring the transaction to tax. The assent to appropriation may be prior or subsequent to it. That means the appropriation for purposes of Section 4(2) need not necessarily be accompanied by the assent of the party concerned. Appropriation of unascertained or future goods may be in a variety of ways. It may be by earmarking the goods with reference to a particular contract of sale or purchase by putting them into separate packages or by some other tangible means by which the intention of such appropriation may appear. The appropriation may also be by delivery to a carrier without a possibility of diversion of the goods for application to some other sale or purchase of goods. The appropriation must be a final one in that sense, so far as the seller or the buyer, as the' case may be, who makes the appropriation is concerned. Any 'other test like right of inspection or rejection, the terms like f.o.r. or f.o.b. or c.i.f., passing of property in the goods will be irrelevant for purposes of Section 4(2)(b). So too considerations based on Sections 39 and 51 of the Sale of Goods Act may have no bearing in the application of Section 4(2)(b)."
15. A similar view has been taken in Indian Wood Products Company Limited v. Sales Tax Officer [1968] 21 S.T.C. 437, wherein it has been expressed that where the goods are unascertained, the place where the sale is effected will have to be determined under Section 4(2)(b), that under that section the place of sale depends upon the location of the goods at the time of their appropriation to the contract of sale, that Section 4(2)(b) does not require an unconditional appropriation as required by Section 23 of the Sale of Goods Act and that the appropriation referred to in that section connotes the setting apart of goods as specific goods to be delivered under the contract of sale and not an appropriation linked with passing of property, as the scheme of the Sales Tax Act goes to show that the Parliament left out of account the element of passing of property as of any relevance in determining the situs of sale and the question of appropriation of goods has to be decided, irrespective of the passing of property.
16. In Cement Distributors (Private) Limited v. Deputy Commercial Tax Officer [1969] 23 S.T.C. 86, Ramaprasada Rao, J., speaking for the Bench considered a question such as the one arising in this case, and held that unless the appropriation has taken place inside the State of Madras, that State cannot tax the inter-State sale as the sale becomes an out-of-State sale so far as it is concerned under Section 4(1). In that case, the assessee with its registered office in Madras and branches at Calcutta and Dalmiapuram, was constituted as the agent of the State Trading Corporation of India to take charge of the cement manufactured in a factory at Dalmiapuram and to dispose of it in accordance with the directions of the Corporation. During the year 1961-62 large quantities of cement had to be sent to Calcutta by the assessee under the directions of the Corporation and authorisations to purchase and sell cement were accordingly issued by the Corporation to the assessee. Pursuant to these authorisations which enabled the assessee to sell the quantity of cement mentioned therein to the persons in whose favour the authorisations were issued, several tons of cement were shipped by the assessee from the port of Cuddalore to its Calcutta branch. The Calcutta branch authorised its clearing agents to clear the goods, and to deliver to the respective allottees at the jetty or dock such quantities of cement fixed by the Corporation under the letters of allotment and to collect the price from the purchasers. The question was whether these sales could be charged to tax by the Madras State under the Central Sales Tax Act, 1956. It was held that as the purchasers or allottees could not identify their goods until they were separated from the bulk and delivered to them by the assessee's agents under express authority from the assessee's branch office at Calcutta, the appropriation to the contracts of sale took place only in Calcutta and that, therefore, the sales could not be taxed by the Madras State as the situs to the sale has been shifted outside Madras State by virtue of Section 4(2) of the Central Sales Tax Act. The facts in that case are similar to the facts of this case and that decision will have to govern this case as well. As already stated, most of the consignments sent by the head office to the depots were in bulk and they were separated and appropriated for supply to a purchaser only at the depots outside the State and it is not possible to say that the mere despatch of the goods amounted N to an appropriation in this State.
17. The Supreme Court has also dealt with a similar situation in Tata E. & L. Co. Ltd. v. Assistant Commissioner of Commercial Taxes [1970] 26 S.T.C. 354 (S.C.). In that case, certain vehicles were sent from the assessee's factory at Jamshedpur to its stock-yards in various places for effecting supplies to the dealers. But at the time of the despatches of the vehicles to its stock-yards there were no completed sales to the dealers and finally steps in the matter of such completion were taken at the stock-yards after receipt of the vehicles. It was found that the assessee took into account the requirements of the dealers when the vehicles were moved from the factory to the stock-yards. It was held that as it was not necessary that the number of vehicles allotted to the dealer should necessarily be delivered to him, the appropriation of the vehicles should be deemed to have taken place at the stock-yards at various places by the specification of the engine and the chassis number and that it was open to the assessee till then to allot any vehicle to any purchaser and to transfer the vehicles from one stock-yard to another. In that case also, as in this case, on some occasions vehicles had been moved from the stock-yard in one State to a stock-yard in another State. On the question whether the sale of vehicles in that case were inter-State sales under Section 3(a), the Supreme Court held that it could not be said that the movement of the vehicles from the factory to the stock-yards was occasioned by any covenant in the contract of sale, and that even on the assumption that there were firm orders by the dealers before the vehicles were despatched from the factory to the stock-yards outside the State, those orders could be regarded only as mere offers to purchase in view of the fact that it was always open to the assessee to supply or not to supply the vehicles. As per this decision, the relevant test of taxability of the transaction by this State is to find out whether the sale is completed inside the State by appropriation of the goods to the contract and if the appropriation has taken place outside the State, then the sale cannot be taxed as an inter-State sale by this State from which the goods have moved in view of the specific provision in Section 4(2) of the Central Sales Tax Act.
18. The assessing authority, however, has relied on the decision in English Electric Co. of India Ltd. v. Deputy Commercial Tax Officer [1969] 23 S.T.C. 32, in support of the revised assessments. In that case, the assessee's main factory was at Madras and its head office at Calcutta and branches at Bombay, Delhi, Madras and Lucknow. The State of Madras sought to levy sales tax on the assessee under the Central Sales Tax Act in respect of sales of which the contracts to sell goods were made by the branches of the assessee. In respect of those sale transactions, the buyer had asked for quotations of certain named articles from the branch office which in turn obtained the particulars from the factory. After the buyer was apprised of the correct position an order was placed by the buyer with the branch office. The branch office prepared an indent order which was addressed to the Madras office. After manufacturing the goods in accordance with the specifications given by the buyer, the Madras office despatched the goods as per the directions of the branch office, to the place of business of the buyer by goods train, freight to pay and duly insured, and sent the railway receipts and other documents to the branch office for disposal. The despatch advice sent by the Madras office to the branch office specified the price as agreed upon and the amount that had to be collected by way of freight. The branch office subsequently prepared an invoice for the supply of the goods and collected the price from the buyers and endorsed the railway receipts in their favour. It was contended by the assessee in that case that in the absence of a direct forging of a contract between the assessee and the buyer, the mere movement of the goods from one State to another by itself was not decisive, that as the goods had been consigned to the branches as a result of the instructions received from them, the transactions could be treated only as stock transfers from the head office to its branches, and that, therefore, the State of Madras had no jurisdiction to tax the transaction as an inter-State sale merely because of the inter-State movement. The court, while rejecting that contention held that judged from the steps taken from the beginning to the end by the branch office in co-ordination with the Madras office, it could not be said that it was the branch office that should be considered as the seller and all that the Madras office did was merely to despatch the goods as an automaton, that it must be said that the branch office was merely acting as an in-between between the Madras branch and the ultimate buyer, that it was the Madras branch which pursuant to the covenant in the contract of sale, though forged by the branch office, caused the inter-State movement of the goods from Madras, and that the transaction was, therefore, an inter-State sale falling within Section 3(a) of the Central Sales Tax Act, 1956. We are at a loss to know as to how the above decision will apply to the facts of this case which are entirely different. It is not shown that there existed any prior contract of sale before the despatches were made by the Madras office to its depots outside the State. The goods consigned to its depots by the assessee had been taken to their stocks and thereafter supplied to the various buyers with reference to their requirements as well as the availability of the stocks in the depot. The mere fact that the consignments bore the initials of some of the buyers or the code word "O.E." will not mean that there is a completed transaction of sale in Madras by appropriation of the goods towards any contract. In English Electric Co. of India Ltd. v. Deputy Commercial Tax Officer [1969] 23 S.T.C. 32, the goods have been consigned directly to the buyer's place though the consignment was in the name of the assessee's branch office which was required to hand over the railway receipts duly endorsed after collecting the price. The fact that the railway receipts were taken showing the branch office as the consignee will only show that the right of disposal was retained by the Madras office, the appropriation of the goods having taken place earlier. That cannot be said of the case on hand. Here the appropriation cannot be said to have taken place in this State when the goods were consigned by the Madras office to its depots without there being any prior contract of sale in respect of the consigned goods.
19. We are, therefore, of the view that the facts in this case attract the principle laid down in Cement Distributors (P.) Ltd. v. Deputy Commercial Tax Officer [1969] 23 S.T.C. 86 and Tata E. &. L. Co. Ltd. v. Assistant Commissioner of Commercial Taxes [1969] 23 S.T.C. 32, and that the decision in English Electric Co. of India Ltd. v. Deputy Commercial Tax Officer [1970] 26 S.T.C. 354 (S.C.), has no application. We, therefore, hold that all the transactions except those in respect of which there is numerical similarity between the stock transfer and the ultimate delivery to the buyer by the depots, are to be held as mere stock transfers, there being no completed sale within the State of Tamil Nadu, and the movement of the goods from this State not being in pursuance of any firm contracts of sale between the assessee and the out-of-State buyer, and that the assessment of the said turnover under the Central Sales Tax Act cannot be upheld.
20. The additional question that has to be considered in W.P. No. 1241 of 1971 is whether the sales amounting to Rs. 6,17,290.61 made to Tyresoles Concessionaries (P.) Ltd. are local sales without involving the movement of the goods outside the State in pursuance of the said sales as alleged by the assessee. According to the assessee, in respect of the transactions involved, all the elements of sale, namely, placing of the order, taking delivery of the goods and payment of the price, were all completed in Madras itself and the Madras office of the purchaser-company arranged for the transport of the goods from Madras to places outside the State subsequent to their taking delivery at Madras. The assessing authority has however proceeded on the basis that the records of the assessee showed that they had arranged for the movement of the goods to the various factories of the purchaser-company situate outside the State as a direct result of a contract of sale, and that such transactions are, therefore, exigible to tax under Section 3(a) of the Central Sales Tax Act. The assessing authority has not referred to any contract of sale which required the seller to move the goods from this State to various places outside the State as a direct result of the contract of sale.
21. It appears that in some of the transactions the branch office of the Tyresoles Concessionaries (P.) Ltd., Bombay, took delivery of the goods and despatched the goods to various other places, and that in some others the assessee itself had despatched the goods to the out-of-State destinations, though such despatches are said to have been made on behalf of or at the instructions of the buyer's branch office at Madras. But, in both the types of cases the transport charges have been borne by the seller. From this fact it is possible to infer that the seller has undertaken the obligation of transporting the goods from Madras to the outside destination as part of the contract to supply the goods to the buyer. But it is contended on behalf of the assessee that it agreed to bear the transport charges by way of a concession so that the buyer could get the goods at Bombay and other places at competitive prices. Whatever may be the reason for the seller agreeing to bear the transport charges, the fact is that the buyer has asked the seller to arrange for the transport of the goods and produce the way bills, etc., to the buyer's office at Madras in some cases. On the materials on record, we are not able to say that there was a separate agreement between the seller and the buyer as regards the transport of the goods and that the seller has been constituted as an agent of the buyer to arrange for the transport of the goods. For example, a letter written by the Tyresoles Concessionaries (P.) Ltd. on 20th October, 1965, to the assessee is as follows :
We confirm having sent to you a telegram this afternoon, reading as under : ORDER 182 MICK GOODS SOON.
The above message when decoded should read as 'Our Order No. 182- despatch at once by motor lorry goods-Confirm as order is urgent.' We hope you would have by now arranged for the despatch of above materials. Kindly confirm.
22. This letter indicates that the seller is obliged to despatch the goods as per the terms of the original order. Another letter dated 28th April, 1965, written by the assessee to the office of the buyer-company at Jullundur is as follows :
We are pleased to advise you that we have already despatched your order No. 28 in full through M/s. New Howrah Transport Co. vide their way bill 1393 of 24th April, 1965. In this connection we confirm having wired you on 24th April as per copy enclosed.
Assuring you of our best services always.
23. Yet another letter written by the assessee dated 11th May, 1965, to M/s. Tyresoles Concessionaries (P.) Ltd., Bombay, runs as follows :
We thank you for your letter No. M-32 : 178 dated 6th May, 1965, enclosing, your subject order for different sizes of retread/repair materials.
Arrangements are being made with our factory to manufacture your requirements and shall make them available to your Madras office according to your delivery schedule.
We note that you require 40-46-10 and 42-50-12 size very urgently. Accordingly, the same will be despatched in a week's time.
Assuring you of our best services always.
24. These letters show that the assessee as seller has agreed to despatch the goods. Though there was some correspondence regarding freight charges, the assessee ultimately agreed to bear the freight charges incurred in despatching the goods to their destinations outside the State. Those transactions though put through the Madras office, will come under the category of inter-State sales falling under Section 3(a) of the Central Sales Tax Act.
25. However, in some transactions the Madras office of the buyer-company seems to have taken delivery of the goods. Some of the letters by the assessee addressed to the buyer-company show this. The assessee's letters dated 11th May, 1965, and 15th May, 1965, addressed to the buyer's office at New Delhi and Jullundur respectively are as follows:
We thank you for your order No. 196 of 7th May, 1965, calling for the supply of 200 kgs. 64-66-18-slab.
We are making necessary arrangements to have your requirements manufactured and shall make them available to your Madras office with the least possible delay.
We thank you for your letter No. JF. MRF: TPO: Order No. 31/410 dated-12th May, 1965, calling for the supply of 350 kgs. 64-64-16-20 and 100 kgs. 64-16 slabs.
Necessary arrangements are being made with our factory to have your requirements manufactured and we hope to make them available to your Madras office with the least possible delay.
26. It is possible in these "cases to say that the buyer's office at Madras has taken delivery of the goods and that the bargain between the parties was to effect delivery at Madras.
27. Therefore, in our view, the transactions of sale in respect of which the goods had been delivered to the buyer's office at Madras could not be treated as inter-State sales, but the transactions in respect of which the assessee itself had moved the goods from this State to the destinations outside the State on the orders placed by the buyer-company, should be treated as inter-State sales coming under Section 3(a) of the Central Sales Tax Act. But the assessing authority has not made any distinction between the two types of transactions. It proceeded to treat all the transactions alike. We have to, therefore, quash the assessments on this turnover with a direction that the assessing authority may determine the turnover of such transactions in respect of which the goods have been despatched by the assessee to destinations outside the State in pursuance of the orders placed by the buyer and charge them to tax under Section 3(a) of the Central Sales Tax Act.
28. The result is, the orders impugned herein are quashed, with a direction to the respondent to determine in respect of each of the years, the transactions wherein there is numerical similarity between the stock transfer and the ultimate delivery to the buyer outside the State, as also the transactions wherein the assessee has despatched the goods to places outside the State under the orders of Tyresoles Concessionaries (P.) Ltd., and assess them as inter-State sales under the Central Sales Tax Act. There will, however, be no orders as to costs.