Document Fragment View

Matching Fragments

3. The appellant, a public limited company having its registered office at Jodhpur with branches at different places in the State of Rajasthan, is engaged in the business of buying and selling chemicals, namely, methanol, chlorine, caustic soda lye, soda ash, hydrochloric acid, etc. It is averred that the appellant purchases the aforesaid chemicals in the course of inter-State trade from manufacturers/suppliers from Gujarat and effects subsequent inter-State sales to various buyers in the State of Rajasthan including SRF Ltd., Bhiwadi, by transfer of the documents of title to the goods, i.e., by endorsing goods receipts/bilties during their movement from Gujarat to Rajasthan. According to the appellant, these transit sales are duly supported by "C" forms from the purchasing dealers in Rajasthan and also forms E-I from the seller outside Rajasthan from whom the appellant has purchased the goods in the course of inter-State trade on "C" forms after paying 4 per cent CST. In the case of subsequent inter-State sales effected to SRF Ltd., Bhiwadi, the chemicals have been booked with the transporter by the appellant's Gujarat supplier for the destination Bhiwadi for being delivered to SRF Ltd., on the instructidns and on account of the appellant. It is asserted by the appellant that in respect of all transactions in question, it is not in dispute that the appellant did not take physical/actual delivery of the goods at any time during the course of inter-State movement and that the transporter had given delivery to the ultimate buyers in whose favour goods receipts/bilties were endorsed by the appellant. The said goods merely passed through the areas where the appellant's branches/head office are located and they were carried to the destination of the subsequent buyers in that very vehicle in which they were brought from Gujarat by the same transporter. The case of the respondents as set up in the impugned notice is that on account of the entries of the said sales made by the appellant in the daily sales report, preparation of invoices and delivery challans in respect of the said sales, it must be presumed that the appellant took symbolic/notional/constructive delivery of the goods which terminated their inter-State movement and the sales effected thereafter were "intra-State sales" of such goods to the buyers in Rajasthan oh which local tax is leviable. Thus, the question raised before the learned single Judge was with respect to the scope and interpretation of Section 3(b) and Section 6(2) of the CST Act and powers of the assessing authority in that regard. According to the appellant, Section 3(b) contemplates inter-State sales effected by transfer of documents of the title to the goods during their movement from one State to another and Explanation I appended thereunder provides that inter-State movement of goods commences from time the goods are handed over by the seller to the carrier or other bailee for transmission to the ex-State destination and such movement continues up to the time delivery of the goods is taken from such carrier or bailee by the purchaser. Subsequent inter-State sales satisfying the pre-conditions of requisite declaration are exempt from tax under Section 6(2). The learned single Judge following his own decision dated August 25, 2000 rendered in B.S.L. Ltd. v. State "S.B. Civil Writ Petition No. 651 of 2000", dismissed all the three petitions on the ground of availability of alternate remedy. The order dated September 18, 2000 followed in the other two writ petitions, dismissed by orders dated September 20, 2000 and September 25, 2000, reads as follows :

(a) occasions the movement of goods from one State to another ; or
(b) is effected by a transfer of documents of title to the goods during their movement from one State to another.

Explanation 1.-- Where goods are delivered to a carrier or other bailee for transmission, the movement of the goods shall, for the purposes of clause (b), be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee.

Explanation 2.--Where the movement of goods commences and terminates in the same State it shall not be deemed to be a movement of goods from one State to another by reason merely of the fact that in the course of such movement the goods pass through the territory of any other State."

28. A division Bench of the Allahabad High Court in Karam Chand Thappar and Brothers (C.S.) Ltd. v. Sales Tax Commissioner, reported in 1981 TLR 3101, did not agree with the view expressed by the Delhi High Court in Arjan Dass Gupta's case [1980] 45 STC 52. Dealing with Section 3(b) read with Explanation 1, the court held that a sale or purchase of goods takes place in the course of inter-State trade or commerce, if effected by the transfer of documents of title to the goods during their movement from one State to the other, shall be deemed to be an inter-State sale. The court found that the starting point of the movement is delivery of the goods to the carrier or bailee for transmission and the point of termination is when the goods are taken delivery of from the carrier or such bailee. The division Bench held that the Explanation contains a deeming clause and the fiction so created is to be taken to its logical conclusion. The court further held that if sale or purchase is effected by transfer of documents of title to the goods during such movement of the goods, it shall be treated as an inter-State sale. We are in respectful agreement with the view expressed by the division Bench of the Allahabad High Court.

30. Consequently, the inference of constructive delivery raised in the instant case by the assessing authority, which is the sole basis for refusing the exemption, is patently illegal.

31. It is also submitted by the learned counsel for the appellant that under Section 51(2) of the Sale of Goods Act, goods are deemed to be in transit from the time they are delivered to a carrier or other bailee for transmission to the buyer until the buyer takes delivery of them from such carrier or other bailee. In terms of Section 51(3) of the said Act, transit comes to an end when after arrival of the goods, the carrier or bailee acknowledges to the buyer that he holds goods on his behalf, i.e., there is an agreement between a carrier and the buyer by which carrier undertakes to hold goods for consignee not as a carrier but as his agent. There is a mutual agreement to the change of character distinct from the original contract of carriage. So long as the goods are in the hands of carrier/ transporter, they are not and they cannot be in the actual and/or constructive possession of the purchaser, despite their reaching at the destination and/or even the destination of the buyer/purchaser. After arrival of the goods at the destination, the delivery of goods takes place when the same are delivered to the buyer and/or his agent. This is actual or physical delivery. However, when carrier agrees to hold goods for the purchaser, which means that there comes into existence an agreement between the carrier and the buyer to that effect by agreeing to hold goods not as carrier but as an agent of the buyer, there may be constructive delivery and transit may come to an end. It is not the department's case. The only basis is making of entries, invoice, challan, etc., by the appellant for records and accounting purposes. The appellant without taking delivery of goods effected subsequent inter-State sales by endorsing bilties in favour of the subsequent buyers which resulted in transfer of property in goods during the course of inter-State movement. Further the fact that the subsequent buyers obtained delivery from the same transporter on or about the same day, clinches the point of termination of movement in terms of Section 3(b) of the CST Act. Thus, the appellant's act, viz., making of entries in the records, making of invoices, challans, etc., bearing factum of endorsement for accounting and record purposes cannot be construed as resulting in constructive delivery in any manner. Thus, we conclude that all the subsequent sales effected by the appellant during the course of inter-State movement of the subject goods are exempt in terms of Section 3(b) and Section 6(2) of the CST Act. The subject sales is governed by the CST Act and, therefore, beyond the scope of the RST Act. The proceedings initiated by the authorities under the RST Act are wholly without jurisdiction and without authority of law.