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Judgment
Ramanujam, J.—In this tax case filed by the assessee, the taxability of the following three items of turnover under the Tamil Nadu General
Sales Tax Act, 1959, is challenged :
(1) The turnover of Rs. 1,34,027 which has been claimed by the assessee as exempted u/s 6(2) of the Central Sales Tax Act, (2) a sum of Rs.
27,722 in respect of which the assessee claimed exemption from tax on the ground that the goods have been imported through post parcel from
England to the assessee, and (3) a sum of Rs. 87,096 which represented sale in the course of import of the goods by ship.
As regards the first item, it is seen that the assessee purchased batteries from Lucas Indian Service Ltd., Calcutta, which it later sold the same in
entirety to Lucas Indian Service Limited, Madras, before the goods were delivered by the carrier after transporting the goods from Calcutta to
Madras. In respect of this turnover, the assessee claimed exemption from tax u/s 6(2) of the Central Sales Tax Act. As regards this claim the
assessing authority held that the assessee and Lucas Indian Service Limited, Calcutta, are sister concerns situate in adjacent premises, and
therefore, there in no reason as to why the assessee went through the formality of purchasing the goods from Calcutta and selling the same to
Lucas Indian Service Limited, Madras. He also took the view that since the carrier had agreed to effect door delivery, there was no practical
significance in endorsing the lorry way bill, and therefore, it should not be treated as an inter-State sale but an intra-State sale liable to be taxed
under the Tamil Nadu General Sales Tax Act. On appeal, the Appellate Assistant Commissioner agreed with the view of the assessing authority.
When the matter reached the Tribunal, it was contended on behalf of the assessee that as the goods had been despatched from Calcutta to the
assessee through public carrier and the assessee had effected sale by transferring the documents of title to the goods during their movement from
Calcutta to Madras, and therefore it is a sale coming u/s 3(b) of the Central Sales Tax Act. It was also contended by the assessee that the
assessee and Lucas Indian Service Limited, Madras, were two legal entities and the fact that the two concerns were sister concerns located in the
same premises will not have any significance in the matter of levy of sales tax and that so long as there is a transfer of documents of title while the
goods were in the inter-State movement from Calcutta to Madras, the transaction clearly comes within the exemption provided in section 6(2).
After considering the rival contentions the Tribunal found that no contract or purchase order in respect of either purchase or sale by the assessee is
available, that the purchase bill indicates that the Calcutta supplier sold the goods under invoice dated 31st December, 1974, and despatched them
by lorries on 4th January, 1975, that the assessee''s sale bill to Lucas Indian Service Ltd., Madras, the buyer, and the covering letter are shown as
having been issued on 7th January, 1975, that no purchase order was available, that the delivery chalan issued by the carriers on 8th January,
1975, is only in favour of the assessee and that the invoice for freight charges issued by the carriers on 9th January, 1975, is also addressed to the
assessee and that the invoice for freight charges also contains a note that the goods were delivered to the buyer Lucas Indian Service Limited,
Madras. From the facts so found, the Tribunal has proceeded to state that there was no valid document of title in favour of the buyer when the
goods were in inter-State movement, and therefore, it is to be treated as a delivery to the buyer subsequent to the inter-State movement, and
therefore, it should be treated as a local sale. We are at a loss to see how the above facts as found by the Tribunal will indicate that there was no
valid transfer of documents of title to the buyer while the goods were in the inter-State movement. In fact, the facts as found by the Tribunal clearly
lead to the inference that there was a transfer of documents of title to the buyer while the goods were in the inter-State movement. As a matter of
fact, the goods were actually delivered to the buyer on 9th January, 1975, as seen from the invoice issued by the carrier for freight charges, which
contains an endorsement of the delivery of the goods to the buyer. This delivery was in pursuance of the sale bill admittedly issued by the assessee
on 7th January, 1975, with a covering letter to the carrier that the goods are to be delivered to the buyer. In this case the revenue has not
challenged the genuineness of the assessee''s sale bill issued to the purchaser on 7th January, 1975. It is also not disputed that on the basis of the
said bill dated 7th January, 1975, the buyer has taken delivery of the goods from the public carrier on 9th January, 1975. Inter-State, movement
from Calcutta to Madras stood terminated only on the delivery of the goods and long before the termination of the inter-State movement, the
goods had been sold by the assessee to the buyer on 7th January, 1975. Section 3 of the Central Sales Tax Act says that a sale or purchase of
goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase occasions the movement of goods from
one State to another or is effected by a transfer of documents of title to the goods during their movement from one State to another. Explanation 1,
of the said section says that 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. Thus it is clear that in this case the sale by the assessee to his buyer has been effected by transfer of documents of title to the goods during
their inter-State movement. Section 6(2) of the Central Sales Tax Act provides that where a sale of any goods in the course of inter-State trade or
commerce has either occasioned the movement of such goods from one State to another or has been effected by a transfer of documents of title to
such goods during their movement from one State to another, any subsequent sale during such movement effected by a transfer of documents of
title to such goods to a registered dealer other than the Government, if the goods are of the description referred to in sub-section (3) of section 8
shall be exempt from tax under this Act. It is not the case of the revenue that the batteries purchased in Calcutta and sold by the assessee in
Madras are not of the description referred to in sub-section (3) of section 8. Therefore, if the sale is found to be an inter-State sale, the assessee
will be entitled to exemption under the local Act in view of section 6(2) of the Central Sales Tax Act. We have already expressed the view that on
the facts found by the Tribunal there is no other conclusion possible except the conclusion which we have reached that there was a sale by the
assessee to the buyer by transfer of documents of title while the goods were in the inter-State movement. On practically similar facts the Supreme
Court in Tata Iron and Steel Co., Limited, Bombay Vs. S.R. Sarkar and Others, has held that the transaction will amount to an inter-State sale.
Dealing with the scope of section 3(b) of the Central Sales Tax Act the Supreme Court has observed :
The sale contemplated by clause (b) is one which is effected by transfer of documents of title to the goods during their movement from one State
to another. Where the property in the goods has passed before the movement has commenced, the sale will evidently not fall within clause (b); nor
will the sale in which the property in the goods passes after the movement from one State to another has ceased to be covered by the clause.
Accordingly a sale effected by transfer of documents of title after the commencement of movement and before its conclusion as defined by the two
termini set out in explanation (1) and no other sale will be regarded as an inter-State sale u/s 3(b).
We cannot, therefore, agree with the view taken by the Tribunal in this case. We are of the view that the turnover of Rs. 1,34,029.98 is liable to be
exempted u/s 6(2) of the Central Sales Tax Act, as claimed by the assessee.
Coming to the second item of turnover which represents the import transactions of goods by post parcel from England, the facts as found by the
Tribunal are these : The assessee purchased certain goods from Lucas Service Overseas Ltd., England, in several consignments and all these
consignments were received by post parcel. After the case arrived in Madras General Post Office, the Assistant Collector of Customs, Postal
Appraising Department, has sent an intimation for production of the foreign seller''s invoice, import licence, etc. Simultaneously an intimation has
been sent by the post office also, about the receipt of the consignment. The assessee claims that the said intimation has been endorsed by the
assessee in favour of Lucas Indian Service Ltd., who took delivery of the goods on the basis of the said endorsement made by the assessee.
Though the assessee claimed that the import licence itself was transferred to the buyer, no evidence was produced. On these facts the assessing
officer held that even if there was an endorsement on the postal intimation such an endorsement took place after the goods have physically arrived
at Madras General Post Office, and therefore, the transfer of title to the goods, even if any, should have taken place after the import is completed.
On appeal, the Appellate Assistant Commissioner agreed with the view of the assessing authority. When the matter came before the Tribunal, it
took the view that the intimation from the postal department is not a document of title and that any endorsement made on the intimation will not
amount to a transfer of documents of title amounting to transfer of goods. According to the Tribunal the assessee remained to be the owner of the
goods till they cleared the goods by paying the requisite customs duty, and therefore, the appropriation of the goods to the sales in favour of the
buyer should have been made only after the goods are cleared from the customs authorities. In this view the Tribunal held that the sale by the
assessee in favour of Lucas Indian Service, Madras, is an intra-State sale. Before us the learned counsel for the assessee contends that the
endorsement of the assessee in the intimation received from the post office on the basis of which the buyer took delivery of the goods from the post
office should be taken to be an endorsement on the documents of title and that the Tribunal is in error in proceeding on the basis that the intimation
received from the post office about the arrival of the post parcel will not amount to document of title. ""Document of title to goods"" has been defined
in section 2(4) of the Sale of Goods Act as meaning a bill of lading, dock-warrant, warehouse-keeper''s certificate, wharfinger''s certificate, railway
receipt, warrant or order for the delivery of goods, and any other document used in the ordinary course of business as proof of the possession or
control of goods, or authorising or purporting to authorise, either by endorsement or by delivery, the possessor of the document to transfer or
receive goods thereby represented. Though the said definition is an inclusive one and cannot, therefore, be said to be exhaustive, we are not in a
position to agree with the learned counsel for the assessee that an intimation of receipt of post parcel by the post office will come within the
definition of ""document of title to goods"". Such an intimation received from the post office by itself cannot enable the assessee to transfer or receive
the goods referred to therein. The intimation will not amount to a document of title. It is no doubt true, in this case the buyer took delivery of the
goods on the basis of the endorsement made in the intimation sent by the post office. But that is only as an agent of the assessee and not as owner
of the goods. Even assuming that there was an agreement of sale of the goods received in the post parcel to the buyer, Lucas Indian Service Ltd.,
that will not by itself pass title to the goods, nor can it enable the buyer to take delivery of the goods from the post office on their arrival. Though
the assessee contended that the import licence itself was transferred to the buyer, no evidence has been produced, and therefore, we have to
proceed on the basis that there was no transfer of the import licence to the buyer as contended by the assessee. Further, even if the endorsement in
the postal intimation is taken to amount to a transfer of document of title to the goods, such an endorsement in the nature of things, is subsequent to
the arrival of the goods in Madras. Therefore the transfer of documents of title should be taken to be after the import is ended. In this view of the
matter we are inclined to agree with the view taken by the Tribunal that the sale by the assessee in favour of the buyer cannot be taken to be a sale
in the course of import.
So far as the third item of turnover is concerned, it is seen that it represents one consignment of goods received from Lucas Service Overseas
Limited, England, by ship. The goods were shipped on 22nd August, 1974, and the ship arrived in the Madras port on 2nd November, 1974, and
berthed on 9th November, 1974. The bill of lading is found to have been transferred to the buyer on 18th October, 1974. The assessee''s claim
was that as there was a sale by transfer of title when the goods were in the high seas, it should be treated as a sale in the course of import. The
Tribunal, after perusing the import licence, the bill of lading and the clearing agent''s bill on the buyer, has factually found that the import licence
expired by efflux of time on 31st August, 1974, and that though the assessee had applied for extension of time fixed in the import licence, but
extension was ordered until 31st December, 1974, by an order made subsequent to 2nd November, 1974, when the goods can be taken to have
crossed the customs frontiers. It must be noted that at the relevant time the customs barrier was taken to be the limits of the territorial waters (that
is 12 nautical miles from the shore). Though later on the customs barrier was equated to the place of clearance, having regard to the fact that the
ship has crossed the customs frontier on 2nd November, 1974, the import movement should be taken to have been terminated on that day. It is no
doubt true that the assessee has transferred the bill of lading to the buyer on 18th October, 1974. But the said transfer was at a time when he had
no valid licence to import, the period of validity of the import licence held by the assessee having expired by then. Though the assessee has in fact
transferred the bill of lading in favour of the buyer, that transfer is of no avail and it will not confer any title to the goods on the buyer as the
assessee who transferred the bill of lading had no subsisting authority to import and to pass title to the buyer by transferring the bill of lading.
Though the assessee got extension of the period of licence subsequently, admittedly he had no valid licence to import on 18th October, 1974,
when the bill of lading is said to have been transferred by the assessee to the buyer. The learned counsel for the assessee submits that the
subsequent extension of the period of the import licence should relate back to the date of expiry of the period of licence, and therefore, the
assessee should be presumed to have the power to transfer the bill of lading on 18th October, 1974. We are not impressed by this argument.
Though the subsequent extension of the period of the licence will enable the assessee to clear the goods on the basis of the subsequent order
extending the period of licence, the subsequent order extending the period of the licence cannot be taken to confer title to the goods on the buyer
retrospectively. The question is whether on the date when the bill of lading was transferred by the assessee to the buyer he had the requisite power
to transfer. If he had no valid licence, he has no power to transfer the bill of lading so as to confer title to the goods on the buyer. Such power he
had during the currency of the licence and that power came to an end on the expiry of the period mentioned in the licence. He again acquired such
a power after the import authorities extended the time mentioned in the import licence. Though the transfer of documents had taken place from the
assessee to the buyer on 18th October, 1974, there was a legal transfer of title to the goods only after the period mentioned in the licence has been
extended. Admittedly such an extension took place only after 2nd November, 1974, when the goods had crossed the customs frontier and
reached the Madras harbour. In this view, we are inclined to agree with the view taken by the Tribunal that the said item of turnover should be
taken to represent intra-State sales effected by the assessee.
The tax case is, therefore, partly allowed as regards item No. (1) set out above and is dismissed as regards items Nos. (2) and (3). There will,
however, be no order as to costs.