K.L. Poddar and Sons Pvt. Ltd. vs State of Karnataka

T. Balachandran, M.-The only point for consideration in this appeal before us is:

Whether the Commercial Tax Officer, XV Circle, Bangalore is justified in levying tax at the rate of 4 percent under the Central Sales Tax Act, 1956 on the sales of iron ore worth Rs. 5,40,374-13 against C forms effected to M/s. MMTC of India by the appellant during the period 1-10-1975 to 31-3-1976 treating the same as inter-state sales ?

The assessing authority has levied tax at the rate of 4 percent treating the sales of iron worth Rs. 5,40,374-13 effected during the period 1-10-75 to 31-3-76 as inter-State sales covered by C forms in his assessment order dated 14-11-1979 passed under the Central Sales Tax Act, 1956 (hereinafter called the Act). The first appeal in ADCAP 35/79-80 against this order was unsuccessful. Hence the present appeal.

When the case was taken up for hearing the appellant remained absent and unrepresented. The appellant has contended in the appeal petition that the purchaser of iron ore, namely, M.M.T.C. has absolutely no interest or control of whatsoever nature until the iron ore is delivered at plots belonging to M.M.T.C. The actual sale takes place after the ore is delivered at the plots belonging to the purchasers. The weighment is made at the plots after the delivery of the iron ore followed by analysis and then the bill is preferred. This obviously goes to show that this is a case of actual sale in Goa and not an inter-State sale. The transport of iron ore was by the seller and the consignee was the seller himself. Neither the iron ore was weighed nor the iron content analysed before the same was loaded in the trucks belonging to the sellers. Therefore the appellant contended that it is not a case of sale at all involving inter-State movement. Further the contract in question creates no obligation with a corresponding right in the purchasers since the element of actual sale is not involved in the movement of goods from Karnataka to Goa and the same does not attract levy of tax under the Central Act.

The learned State Representative argued that the entire sales are made to M.M.T.C. of India as per the contract entered into with the appellant. Just because the delivery is made ex-plot Goa, the appellant cannot claim that it is not an inter-State sale as the iron ore has moved from Karnataka to Goa to meet the contractual obligation by the appellant. The learned State Representative has relied upon the decision of the Supreme Court of India in English Electric Company of India v. Deputy Commercial Tax Officer, 38 STC 475, SC and prayed for dismissal of the appeal.

We have considered the appeal petition of the appellant and the arguments of the learned State Representative and perused the records. We have to hold that the orders passed by the lower authorities are unexceptionable.

According to the iron ore purchase contract (Ex-plot) No. 9/70 dated 28-7-70 entered into between the M.M.T.C. of India Ltd., New Delhi (called the buyer) and the appellant (called the sellers), iron ore is to be delivered at certain places in Goa. The weight of the iron ore supplied by the seller shall he determined at the unloading point at the buyer''s handling agent''s weigh-bridge. All charges for weighment shall be to seller''s account. The analysis of samples drawn by analysts designated by the buyer and appointed by the sellers at the time of unloading of trucks in the buyer''s/handling Agent''s plot shall be final. The payment would be made for the iron ore supplied on the basis of weight and analysis as determined above for the delivery effected. In view of the various conditions stipulated in the contract, though the deliveries are effected to the M.M.T.C. in certain places in Goa, the sales are to be held as effected in the course of inter-State trade in view of the decision of the Supreme Court of India in Union of India v. R.G. Khosla and Co. Ltd, (1979) 43 STC 457 SC. It was held therein:

"that if a contract of sale contains a stipulation for the movement of the goods from one State to another, the sale would certainly be an inter-State sale. But for the purposes of section 3(a) of the Act it is not necessary that the contract of sale must itself provide for and cause the movement of goods or that the movement of goods must be occasioned specifically in accordance with the terms of the contract of sale. A sale can be an inter-state sale, even if the contract of sale does not itself provide for the movement of goods from one State to another but such movement is the result of a covenant in the contract of sale or is an incident of that contract. The question as regards the nature of the sale, that is, whether it is an inter-State sale, or an intra-state sale does not depend upon the circumstance as to in which State the property in the goods passes. It may pass in either State and yet the sale can be an inter-State sale."

In view of the law laid down by the Supreme Court of India, we have no hesitation to hold that the sales of iron ore worth Rs. 5,40,3/4-13 effected by the appellant during the period 1-10-1975 to 31-3-1976 are in the course of inter-State trade liable to tax under the central Act.

Thus we pass the following order:

The appeal is hereby dismissed.