Sri Ganapathy Mills Co. Ltd. vs The State of Tamil Nadu

V. Ramaswami, J.

The assessee returned a total taxable turnover of Rs. 58,46,514.48 in respect of the assessment year 1965-66. He had claimed in the return

exemption in respect of a turnover of Rs. 8,00,789.23 on the ground that they are inter-State sales. The assessing officer considered that the

contract entered into by him with respect to this turnover with Messrs. C. A. Galiakotwala and Co. (P.) Limited did not either occasion or

contemplate movement of goods from one State to another and, accordingly, proposed to include this disputed turnover in the assessment and

issued a preassessment notice. While submitting the objections, the assessee claimed exemption u/s 3(b) of the Central Sales Tax Act, 1956, on

the ground that the sale was effected by transfer of documents of title during the movement of the goods from one State to another. The assessing

officer rejected this contention and held that they are all local sales and, accordingly, included the disputed turnover in the assessment. Before the

Appellate Assistant Commissioner, it appears that the petitioner claimed exemption as an intei v State sale u/s 3(a) of the Central Sales Tax Act on

the ground that in fact the goods moved from one State to another in pursuance of the contract and that the contract itself occasioned or

contemplated movement of goods from one State to another. The Appellate Assistant Commissioner, on a perusal of the contract, held that there

was no term in the contract relating to the place of dispatch or the source from which the cotton is to be supplied and that, therefore, it will not fall

u/s 3(a). Again, when he preferred an appeal before the Tribunal, the petitioner seems to have contended that the transactions are inter-State sales

falling u/s 3(b), but the Tribunal rejected the contention, holding that the contract for purchase was prior to the contract under which the seller of

the petitioner had purchased the goods and that, therefore, it will not be a transaction falling u/s 3(b). In this revision petition, the learned counsel

for the petitioner relies both on Section 3(a) and Section 3(b). The contract was entered into within the State of Tamil Nadu between Gaiiakotwala

and Company, who is stated to have got a branch office at Coimbatore and the petitioner. The contract was for the supply of a certain quantity of

fully pressed bales of cotton at f. o. r. Tirunelveli price. 85 per cent of the price was payable against the railway receipt and the balance

immediately on weighment. Against the delivery clause it is mentioned as ""Despatch in December, 1964, January-February, 1965, subject to

availability of wagons and railway booking"". The contract is subject to the rules and regulations of the East India Cotton Association Limited,

Bombay. The terms and conditions also provided that the contract was subject to Bombay jurisdiction and the dispute regarding quality is to be

determined in arbitration and appeal as per the rules and regulations of the East India Cotton Association Limited. The terms and conditions

appear to be a printed form which is applicable either for despatch through railway wagon or steamer. It is seen from the order of the Appellate

Assistant Commissioner that, actually, the goods covered by the disputed turnover were despatched from places outside the State of Tamil Nadu.

On these facts, the learned counsel for the petitioner argues that the movement of the goods was occasioned by the contract itself and that, in any

case, the contract contemplated movement and that, therefore, they are inter-State sales falling u/s (a) of the Central Sales Tax Act. We are unable

to agree with this contention of the learned counsel. The terms of the contract did not specify the place from which the goods will have to be

despatched to the buyer. The source from which the seller is to procure the goods is left entirely to his discretion and there is no evidence to show

that the cotton agreed to be sold was not available or could not have been procured by the seller inside the State. In fact, we find from the records

that the total purchase of the cotton from Galiakot-wala and Company by the petitioner during the assessment year under the various contracts

amounted to Rs. 9,12,000.54, whereas the claim of the petitioner for exemption on the ground of inter-State sales was only Rs. 8,00,789.23. The

remaining turnover, therefore, related to supply of the cotton purchased locally by the vendor. The fact that the contract was subject to the rules

and regulations of the East India Cotton Association Limited, Bombay, or, for purposes of jurisdiction the courts in Bombay alone are given the

power, does not, in any way, show that even at the time of the contract the parties intended that the goods would have to move from out of State

places into this State. In the absence of any evidence to show that the parties, at the time of the contract, contemplated that the goods had to move

from out of State places, it cannot be held that the transaction falls u/s 3(a) of the Central Sales Tax Act. The decision in Jayajothi and Company v.

State of Madras [1969] 23 S.T.C. 324, relied on by the learned counsel, was based on the finding that the terms of the contract showed that the

supply of the goods was to be made by movement of the goods from out of State into this State. The alternative argument of the learned counsel

that, in any case, it might fall u/s 3(b) of the Central Sales Tax Act is also not acceptable. The assessee had not produced the railway receipt or

any other evidence to show that the sale was by transfer of documents of title when the goods were in movement. There is also no evidence to

show the exact location of the goods when the actual transfer of documents was effected. Unless there is evidence to show that the consignor was

different from the seller of the petitioner and, during the time the goods were in movement, by transfer of documents the sale was effected in favour

of the petitioner, it is not possible to bring the transaction u/s 3(b) of the Central Sales Tax Act. There is absolutely no evidence on this point. We

are, therefore, unable to accept the argument that the transactions in dispute fall u/s 3(b).

In the result, the tax revision: petition fails and it is dismissed. But there will be no order as to costs.