Tata Engineering and Locomotive Co. Ltd. vs State of Bihar and Another

Mahapatra, J.—These two references are u/s 25(3) of the Bihar Sales-tax Act, 1947, at the instance of the assessee company in, regard to two periods, the 23rd October, 1954, to the 31st March, 1955 (M. J. C. 285 of 1962), and from the 1st April, 1955, to the 31st March, 1956 (M. J. C. 284 of 1962). The assessee company being aggrieved by the inclusion of certain transactions as sales in the turnover went in appeal and in revision without any success. They asked for a reference, but that was refused by the Board of Revenue. Thereupon they came with an application u/s 25 (2) of the Bihar Sales-tax Act, 1947 (to be referred hereafter as the Act) and obtained a rule on the 6th May, 1963, calling upon the Board of Revenue to state a case and refer the same to the High Court on the following questions.

In M. J. C. 285 of 1962 the question is as follows:

"With regard to the sales which took place between the period 23rd October, 1954 to 31st March, 1955, whether the assessee is entitled, upon the facts found by the Board of Revenus with regard to these categories of sales, to exemption from liability under the Bihar Sales-tax Act because of the provision of Article 286(1)(a) of the Constitution as it stood at the relevant date read with the explanation to that article In M. J. C. 284 of 1962 the following two questions were framed:

"(1) with regard to the sales which took place in the period from 1st of April, 1955, to the 6th September, 1955, whether the assesses is entitled, upon the facts found by the Board of Revenue with regard to these categories of sales, to exemption from liability under the Bihar Sales-tax Act because of the provision of Article 288(1)(a) of the Constitution as it stood at the relevant date read with the explanation to that article,

(2) with regard to the sales which took place in the period from 7th September, 1955, to 31st March, 1956, whether the assessee is entitled, upon the facts found by the Board of Revenue with regard to these categories of sales, to exemption from liability under the Bihar Sales-tax Act on the ground that the sales took place in the course of inter-state trade or commerce under Article 286(2) of the Constitution as it stood at the relevant period."

The division of the period 1st April, 1955, to 31st March, 1956, into two parts in the above two questions was necessary, because sales in the course of inter-state trade or commerce up to the 6th September, 1955, could be taxed by the State under the Sales-tax Laws Validation Act, and, therefore, the pertinent question in relation to the period before that date is whether the sales were outside the State of Bihar (Article 286(1)(a) of the Constitution). For the other period it has to be seen whether the sales were in the course of inter-State trade or commerce (Article 286(2) of the Constitution).

The assesses is a public limited company incorporated under the Indian Companies Act of 1913 and carries on the business of manufacturing and selling of truck and bus chassis and spare parts thereof to appointed dealers, state transport organisations and individual buyers throughout India. The registered office of the assessee company is in Bombay, but its factory where the truck chassis and the spare parts are manufactured is at Jamshedpur in Bihar. The company appointed several dealers all over India and entered into an agreement with them in regard to the manner of supply of track chassis and spare parts (to be referred hereafter for the sake of convenience as the vehicles) and the arrangement the dealers have to make for resale of those vehicles in their specified territories. No written agreement was there as far as the State transport corporations and organisations or the individual buyers were concerned.

During the relevant period, some vehicles were despatched either by rail or by road by the assessee to the purchasers'' destination and some vehicles were taken delivery of by the purchasers themselves from the factory and moved on road from Jamshedpur to their respective places. It is in regard to the latter transactions that the controversy arose between the assessee and the sales-tax authorities. About the other kind of transactions, the Board of Revenue was rightly of the opinion that they were sales outside the State, but with a view to eliciting further necessary information in that regard, it directed a remand of the case.

The assessee''s whole case is based upon the restriction provided under Article 286 of the Constitution as to the imposition of tax under any law of any State on certain sales or purchase of goods. That article has now undergone a change by the sixth amendment in 1956; but we are concerned with as it was before the amendment, for the period involved in these two references was prior to the amendment. The article read as follows :

"286. (1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place--

(a) outside the State; or

(b) in the course of the import of the goods into, or export of the goods out of, the territory of India.

Explanation :--For the purposes of Sub-clause (a), a sale or purchase shall be deemed to have taken place in the State in which the goods have actually been delivered as a direct result of such sale or purchase, for the purpose of consumption in that State notwithstanding the fact that under the general law relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State.

(2) Except in so far as Parliament may by law otherwise provide, no law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of any goods where such sale or purchase takes place in the course of inter-State trade or commerce :

Provided that President may by order direct that any tax on the sale or purchase of goods which was being lawfully levied by the Government of any State immediately before the commencement of this Constitution shall, notwithstanding that the imposition of such tax is contrary to the provisions of this clause, continue to be levied until the 31st day of March, 1951.

(3) No law made by the Legislature of a State imposing, or authorising the imposition of, a tax on the sale or purchase of any such goods as have been declared by Parliament by law to be essential for the life of the community shall have effect unless it has been reserved for the consideration of the President arid has received his assent."

The assessee conceded that where there were sales of vehicles to dealers, State transport organisations or private buyers belonging to the State of Bihar, they were assessable to sales-tax as they were inter-State sales; but they contended that the State sales-tax law will not apply to sales to others, because they were all safes outside the State of Bihar and also in the course of inter-State trade or commerce. Under Clause (2) of Article 286, the Parliament enacted the Sales-tax Laws Validation Act in January, 1956, by which the State laws imposing sales-tax on sale or purchase of any goods where such sale or purchase took place in the course of inter-State trade or commerce were validated till the 6th September, 1955.

It may be recalled that the Supreme Court decision in the case of the The Bengal Immunity Company Limited Vs. The State of Bihar and Others, was pronounced on the 8th September, 1955, where it was held that the explanation given to sub-Clause (a) of Art. 286 (1) was limited to that sub-clause and could not be extended to Sub-section (2) either as an exception or as proviso thereto or read as curtailing or limiting the ambit of Sub-section (2); in other words, it was held that even if a particular sale came with the legal fiction of inter-State sale within the meaning of the Explanation, yet, if it was in the course of inter-State trade or commerce, it would not be covered by any sales-tax laws made by any State. In that view, the assessee''s contention that their sales of the vehicles were in the course of inter-State trade or commerce will only be relevant for the sales that took place within the period from the 7th September, 1955 to the 31st March, 1956 (a part of the period covered by M. J. C. 284 of 1962). For the whole period involved in the two references the assessee claimed exemption on the ground that the sales were outside the State of Bihar.

We shall first take up the examination as to whether the sales can be said to be outside the State. "Sale" has been defined in the Act in Section 2 as follows:--

"''Sale'' means any transfer of property in goods for cash or deferred payment or other valuable consideration including such transfer of property in goods made by a society, club or association to its members but does not include a mortgage or hypothecation of or a charge or pledge on goods; and all grammatical variations and cognate expressions shall be construed accordingly;

This definition is on the same line as what is given in the Indian Sale of Goods Act. We thus see that when the property in goods is transferred to the buyer the sale is complete irrespective of when and how the delivery of the goods is made. That is why in the Explanation, hire-purchase sale where the seller retains the title in the goods as security for the payment of the price is fictionally brought into the category of sale for the purpose of levying sales-tax.

The place of delivery assumes importance on account of the Explanation given to Article 286(1). Though the property in goods may be transferred to the purchaser in the State of Bihar if the delivery of the vehicles is given to the purchaser in another State outside Bihar and consumption is also in that other State, the sale will be deemed to have taken place in that other State, in which case Bihar will not be competent to levy a tax on that sale and the law of the other State will bring the transaction into its fold. If the delivery and consumption are not in a particular State outside Bihar, then that particular transaction will necessarily come within the Bihar Act, if the property in the vehicle is transferred within the State. I am, for the time being, keeping out the consideration of the alleged character of inter-State trade or commerce which will be discussed separately later.

The learned Member of the Board of Revenue field that the property in the vehicles passed in each case at Jamshedpur within the State of Bihar; where delivery and consumption were in any one State outside Bihar, the Bihar Act will not levy a tax on those sales; where delivery of the vehicles was made in an outside State either by rail or by road by the assessee as an incident of the contract of sale, it was in the course of inter-State trade and not assessable under the Bihar Act, The assessee do not dispute these findings and accept the remand order for examination of further details in connection with the aforesaid two kinds of sales. They, however, very strenuously challenged the other finding, viz., that in case of other sales the delivery of the vehicles was at jamshedpur and their movement from Jamshedpur to the places of purchasers outside the State was not in the course of inter-State trade.

Learned counsel appearing for the assessee particularly pointed to three things, to contend that the vehicles were delivered to the purchasers outside the State; (1) when the vehicle was so delivered a receipt was taken from the purchaser at a place outside the State; (2) an escort fee of twenty five rupees was charged from the purchaser for escorting the vehicle or vehicles by an employee of the assessee from Jamshedpur to a place outside the State; and (3) the agreement between the seller and the buyer was for delivering the vehicle outside Bihar. No doubt, materials on record show that the purchaser gave a receipt showing delivery of the vehicle at Benares, Asansol or Champwa, all those places being outside the State; but before such receipts were taken, another previous receipt was taken in all cases from the purchaser or his agent at Jamshedpur before the vehicle was put on road at that place for movement outside the State.

In that receipt, delivery instructions were given to the factory (supply department) asking them to despatch the vehicle according to sales department''s release order to the named purchaser whose destination was also indicated. The details of the vehicle were given in that document. The purchaser signed it as a token of receipt of the vehicle. In face of such receipts, there is little room for doubt that the purchaser or his agent took delivery of the vehicle at Jamshedpur. The assessee had entered into some correspondence with the Sales-tax authorities of the State of Bihar and were given to understand by them that if the delivery of the vehicle was given outside the State they will not be liable to a tax in Bihar. To carry out that purpose, the second receipt used to be taken at a place outside the State from the purchaser to which place an escort of the assessee used to go with the vehicle or vehicles.

This was clearly for the purpose of evasion of the tax, as rightly or wrongly understood by the assessee from any of the sales-tax authorities of the State. If the second receipt was to be effective as for the place of delivery, the first receipt was unnecessary. It cannot be said that the first receipt was a superfluity, because in case of the purchasers belonging to the State of Bihar only the first receipt was taken from them & that was considered to be sufficient. If in their case it was sufficient there is no reason why in the case of other purchasers that first receipt would not be sufficient. Delivery of the goods to the purchaser cannot meaningfully be made at more than one place. Once it is clone at Jamshedpur, as evidenced by the first receipt, not only the property in the vehicle passed to the purchaser, but also he takes delivery of the goods.

It is conceded by the assessee that the responsibility and the risk, after the vehicle was made over to the purchaser at Jamshedpur, were no longer with the seller, although one of their employees escorted the vehicle to a place outside the State. Temporary registration under the Motor Vehicles Act to enable the movement of the vehicle from Jamshedpur onwards was obtained in the name of the purchaser. Transit insurance charges were also met by him. In such circumstances, if the purchaser assumed all the responsibility as the owner of the Vehicle from the moment he took it at Jamshedpur, mere accompaniment by an employee of the seller or payment of twentyfive rupees towards his remuneration will not undo what was done by and under the first receipt given at Jamshedpur.

Appearing for the State, learned Advocate-General drew our attention to a clause in the printed dealership agreement (dealer not in the sense as it is defined in the Act but dealers appointed by the assessee company for resale of the vehicles in different specified territories), where it is stated that all deliveries will be effected to the dealer at Tatanagar, Jamshedpur. It was, however, argued for the assessee that there was a variation in regard to that; and it was agreed between two parties, seller and buyer, that delivery would be given at a place outside the State of Bihar. In support of that, affidavits were filed by the dealers but the Board did not place much importance on them as they were from persons who were interested in the result of the decision. It was also urged for the department that there could be no variation other than, in writing, to the provisions in the printed dealership agreement as provided under Clause 35 of that agreement. Any part of the agreement can be varied by consent of the parties concerned. Any alleged variation can only be challenged by any of the two parties to the original agreement. Their conduct will be evidence of any variation if any.

Besides appointed dealers, there were other purchasers such as the State transport corporations or organisations and private Duyers. With them there was no written document. In their case, if actually it would be found, that the delivery of the vehicles was given to them outside the State, there was nothing to be contended against that being a part of the contract of sale. In that view, the mere mention in the original printed dealership agreement that the delivery was to be effected at Jamshedpur was not the final say in the matter. That could have been varied if the parties wished that. But, all the same, the real question is whether actually either according to the original written agreement or its variation, delivery of the vehicle was given in any transaction at a place outside the State. That will be a question of fact.

Learned counsel for the State urged that the finding of the Board of Revenue on that point was a finding of fact and should not be reagitated in this Court in a reference. That finding of the Board, though about a fact, was an inference drawn from other facts, such as receipts and dealership agreement. The construction of those documents is an evidentiary fact proved in the case; and the ultimate conclusion of the Board was based on a finding as drawn by way of inference from those primary evidentiary facts. In such a case, it is open to any of the two parties, the assessee or the Revenue, to contend that the impugned conclusion drawn from the relevant tacts was not rationally possible; and if such a plea can be established, this Court may consider whether the conclusion should not be set aside. Construction of a document, which was a part of the primary evidence leading to the concluding inference can be raised in a case of reference also (see G. Venkataswami Naidu and Co. Vs. The Commissioner of Income Tax, . The preliminary objection raised on behalf of the State cannot prevail. Yet, however, on examining the two receipts, and even assuming that there was a variation in the agreement about the place of delivery with the dealers, it is not possible to attach any importance whatsoever to the second receipt, which was only a step taken with a view to avoiding the levy of a tax under the Bihar Sales-tax Act Any understanding given to that effect by any of the sales-tax authorities of Bihar will not amount to an estoppel against them, to qualify the second receipt with any sanctity. The Board of Revenue was justified in its view that the delivery of the vehicles took place at Jamshedpur. The assessee cannot draw any support from the Explanation to Clause (1) of Article 286 of the Constitution, though the consumption of the vehicles in the sense that they were resold for use, was in States other than Bihar. Both delivery and consumption must co-exist in one outside State to avoid the levy in Bihar. Thus, the first contention of the assessee fails. All the sales (except those that have been remanded for further examination by the Board of Revenue) during the period from the 23rd October, 1954, to the 31st March, 1955 (M. J. C. 285 of 1962), and from the 1st April, 1955, to the 6th September, 1955 (partly covered by M. J. C. 284 of 1962), were liable to sales-tax under the Bihar Act.

Great stress was laid on the nature of the trade; and it was urged that the movement of the vehicles from Jamshedpur to the destinations of the different dealers, State transport organisations and private buyers, was in the course of inter-State trade. The sale, it was argued, if not held to be outside the State, yet will be exempted from the levy under Clause (2) of Article 286. The provision under that clause is independent of Clause (1). Whether a sale has an inter-State character has to be seen irrespective of the place of sale or purchase. It was laid down in The Bengal Immunity Company Limited Vs. The State of Bihar and Others, by S.R. Das, A.C.J. that the site of sale or purchase is wholly irrelevant as regards its inter-State character.

Reading from the dealership agreement, learned counsel for the assessee contended that the seller company was not only interested in the sale of the vehicles but also very much interested in an equitable supply of the vehicles to all parts of the country. They imposed restrictions on the dealers not to canvass or permit any sale outside the area assigned to them. They were to maintain show room and carry out demonstration of the vehicles and keep in stock the required number at their respective places. The sellers reserved to themselves the right of taking back the vehicles and imposing other penalties if the dealers failed in observance of the terms. As the transport assumes great importance in a developing country, the seller was anxious to meet the demand in an effective manner and by, as far as possible, equitable distribution over the whole country. That being so, that cannot be achieved except by movement of the vehicles from the factory to the different States in the course of inter-State trade. In my view, this contention is right.

If the movement of the vehicles from Bihar to outside is envisaged under the contract of sale and if such movement is necessitated by such contract, that will be a determining factor in support of the inter-State character. Inter-State movement of such goods is the result of the same. Such movement is (Missioned by the sale itself. It cannot be said that the activity in the movement of the vehicles is not integrated with the sale; but for such movement the sale will be ineffective and purposeless. When a buyer enters into a contract of sale of such vehicles, both parties have not only mere knowledge but the intention of inter-State movement of the vehicles. The assessee company''s interests do not cease with the sale and their active participation in the activities of the purchaser (particularly those whom dealership has been granted) subsequent to the sale continues. In such circumstances and in the peculiar nature of this particular trade, inter-State movement must be taken to be a normal feature and integral part of the transaction. We find that both the Duyer and the seller had intention from the beginning of inter-State movement. The buyer had the obligation to effect such movement; and, in fact, there was such actual movement from this State to other States, which was out of necessity of this trade itself. The buyers having their assigned areas of sale outside Bihar, could not have kept the vehicles purchased by them, in this State.

A decision of a Division Bench of this Court in Dulichand Hardwari Mull Vs. State of Bihar and Another, is very apt in support of the view taken above. The petitioner in that writ application was the assessee firm, which carried on business in the district of Saharsa in Bihar. They were registered under the Bihar Sales-tax Act. They claimed that the sale of goods by them to customers in Nepal to the extent of Rs. 50,01.5.55 nP. was not assessable, as that was in the course of export. Nepal, though a foreign State, adjoins Bihar. On the facts, it was found that the delivery of the goods to the purchaser or his representative was finalised in Bihar and that the seller did not continue to be the owner of the goods up to and beyond the time when the goods entered into the export or until after the goods crossed the customs barrier. Further, it was found that the transport of the goods to Nepal took place under the direction of the purchaser. The credit memos prepared in connection with that sale were in the name of the Nepal parties; and the goods were actually exported to Nepal. On these Facts, the learned Judges held that for the determination of the question whether the sale made by the assessee-firm to Nepal parties was a sale in the course of the export, delivery of the goods to the purchaser in India was not a conclusive test. Their Lordships thought that the decision of the Supreme Court in the case of the State of Travancore-Cochin v. Bombay Co. Ltd., Alleppey 1952 3 STC 434: AIR 1952 SC 366 was applicable and the sale was to be held to have been in the course of export out of India. Although that was a case of export because Nepal was a foreign State, that does not make much difference as far as the principle to be applied is concerned. If for a moment we would consider Nepal to be another State in India, then the sale in that case was to be held as in the course of inter-State trade or commerce. The material facts on which the learned Judges applied the test are similar to the present case also. In addition, as I have already stated, the seller retains interest and participates in the after-sale activities of the buyer. Learned counsel appearing for the Revenue suggested that the decision in the above referred case was not correct. We are unable to agree with him; nor do we think it necessary to make a reference to a larger Bench for reconsideration of that decision.

I should also refer to the case of the The Cement Marketing Co. of India Ltd. and Another Vs. The State of Mysore and Another, . The two appellants before the Supreme Court were respectively the sales manager and the manufacturer of cement, who had factories in different parts of India outside the State of Mysore. The sales manager had the head office in Bombay and a branch office in Bangalore and was registered as a dealer under the Mysore Sales-tax Act, 1948. The intending buyers of cement used to get an authorisation in a standard form on the sales manager to sell and supply cement in specified quantities and from named factories. The buyer then placed an order with the sales manager, whereupon the latter instructed his Bombay office to despatch the cement to the buyer according to the authorisation. A copy of that instruction was sent to the factory from where the goods were to be despatched. The sales manager then sent an advice to the buyer along with the railway receipt for the goods which were at buyer''s risk from the time the cement was put to the common carrier. As the actual delivery of the goods to the buyer was at a destination in the State of Mysore, the sales were taxed as intra-State sales.

Their Lordships of the Supreme Court, however, held that those sales were in the course of inter-State trade and exempted from sales-tax under the Mysore Sales-tax Act. The transactions themselves involved movement of goods from outside Mysore across the border. In that case, of course, the factories, from which the supply was to be made, were nominated by the Government by authorisation. Since all the factories were outside the State of Mysore, that did not make any difference on the nature of sale of cement. Referring to the decision in the The Bengal Immunity Company Limited Vs. The State of Bihar and Others, their Lordships quoted that a sale could be in the course of inter-State trade only if two conditions concur: (1) A sale of goods, and (2) a transport of these goods from one State to another under the contract of sale. I have shown how in the instant case both those conditions are present.

Referring to the case of Mohanlal Hargovind Das, Bidi Merchants, Jabalpur (M.P.) Vs. The State of Madhya Pradesh and Another, , their Lordships again observed that the tests to be applied are whether the transaction involves movement of goods across the border. That test is also satisfied in the case before us. Though the sale of cement and its delivery were inside the State of Mysore, yet on account of the necessary inter-State movement involved in the transaction, the sale in that case was held to be in the course of inter-State trade, and, therefore, not subjected to Mysore State laws imposing a tax on sales and purchases of goods.

Dealing with a case under the Central Sales-tax Act (74 of 1956) about sale of cement, the Supreme Court held in The Cement Marketing Co. of India Ltd. and Another Vs. The State of Mysore and Another, that although the contract of sale of cement did not itself contain any covenant that the supply had to be made from any particular factory, as the contract was subject to the terms and the permit which provided that the supply had to be made from one or the other factory situated outside Mysore State, the contract was to be deemed to have contained a covenant that cement would be supplied in Mysore from a place outside that State and a sale under such contract would clearly be an inter-State sale as defined in Section 3 of the Central Sales-tax Act. Movement of goods from one State to another is occasioned by a sale when such movement is the result of a covenant or incident of the contract of sale.

The taxing officer in that case found that the contract of sale did not provide for any supply of cement to be made from outside Mysore. The supply from factories situated outside was a matter of convenience to the supplier. In the present case it was argued for the State that the contract of sale of vehicles did not stipulate inter-State movement. Mere absence of such terms in the text of the contract itself is of no importance if that thing appears from other parts of the agreement between the two parties. Also from the nature of the trade it becomes a necessary incident or a covenant of the sale. In the The Cement Marketing Co. of India Ltd. and Another Vs. The State of Mysore and Another, the Supreme Court held such a circumstance to be an incident or covenant of the contract of sale, though it was absent from the contract itself, as the other circumstances connected with the sale including the permit issued by the Government, involved that. This case lends support to the assessee''s contention that the nature of goods and the peculiar features of a particular trade are to be taken into account to find its inter-State movement is an incident of the sale of that floods.

Another case decided by the Supreme Court in Mohanlal Hargovind Das, Bidi Merchants, Jabalpur (M.P.) Vs. The State of Madhya Pradesh and Another, is also helpful to the assessee. There, the assessee.s were a firm in Madhya Pradesh carrying on the business of making and selling bidis. In course of their business they bought and brought finished tobacco from dealers in Bombay State and rolled back into bidis and supplied them to various other States, where they are consumed. The Bombay suppliers of finished tobacco were also registered dealers under the Central Provinces and Berar Sales-tax Act, 1947. The assessees also made a declaration in the prescribed form at the time of purchase of finished tobacco from Bombay dealers that they purchased the goods for use as raw material in the manufacture of bidis for sale by actual delivery in Madhya Pradesh for the purpose of consumption in Madhya Pradesh.

A question arose if the purchase of finished tobacco by them from Bombay and delivery to them in Madhya Pradesh were liable to sales-tax. The Supreme Court held, on those facts that there was of necessity, movement of goods (finished tobacco) from the State of Bombay to the State of Madhya Pradesh and the transactions were, therefore, in the course of inter-State trade or commerce and were not liable to be taxed by virtue of Article 286(2) of the Constitution, It is to be noted that the declaration by the assessees at the time of their purchase of finished tobacco that that would be used for manufacture of bidis for sale and consumption in Madhya Pradesh and the fact that the Bombay suppliers were also registered dealers in Madhya Pradesh and the delivery of finished tobacco was in Madhya Pradesh did not affect the inter-State character of the transaction. Obviously enough, the inter-State movement was taken as a necessary result of the transaction of sale of finished tobacco by the nature of the goods and the purpose of their use.

Their Lordships of the Supreme Court, while repelling an argument on behalf of the Madhya Pradesh State observed:

"What one has got to look at is the real nature of the transactions and not the outside form..... Merely because he (the Bombay supplier of finished tobacco) got himself registered as such (as dealer) to avoid the penalty which would otherwise be visited upon him by the State (Madhya Pradesh) it cannot be stated that whatever transactions he entered into with other dealers in the State of Madhya Pradesh were all intra-State transactions or internal sales or purchases irrespective of the fact that the transactions involved movement of the goods across the border and were clearly transactions of sale of goods in the course of Inter-State trade or commerce."

In Tata Iron and Steel Co., Limited, Bombay Vs. S.R. Sarkar and Others, the Supreme Court, while explaining the provisions under the two clauses of Section 3 of the Central Sales-tax Act of 1956. observed:

"The question then arises, when does a sale occasion the movement of goods sold? It seems clear to us that a sale can occasion the movement of the goods sold only when the terms of the sale provide that the goods would be moved; in other words, a sale occasions a movement of goods when the contract of sale so provides.''''

In the instant case the printed dealership agreement rend as a whole cannot hut mean that the movement of the vehicles to the destination of the dealers in the different States was one of the terms of the sale; and, in that view, the inter-State movement was occasioned by sale. It was contended for the State that the dealership agreement consisted of the agreement of sale and other agreements in regard to after-sale affairs such as demonstration, show room and area of resale. Learned counsel wanted to compare those agreements with an agreement for renewal of lease in a deed of lease and argued that they were not part of the agreement of sale. I do not think the analogy is correct. The entire dealership agreement is about one transaction. No doubt, the vehicles bought by the dealers are to be resold by them; but the fact that both parties agreed that even in that respect the assessee company will retain some significant control, connects that with the transaction of original sale of the vehicles to the dealers. The only necessary link between the two is the inter-State movement of the vehicles.

It may be useful to refer to another recent decision of the Supreme Court in K.G. Khosla and Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes, Madras, decided on the 19th January, 1966, in Civil Appeals Nos. 143 and 144 of 1965 (SC) from Madras High Court, The assessee contracted with the Director General of Supplies and Disposals, New Delhi, for the supply of axle-box bodies, which were to be manufactured in Belgium according to specifications. It was arranged that at the workshop of the manufacturer the goods would be inspected and a certificate of inspection would be issued. The second inspection was provided for at Madras. Ninety per cent, of the price was to be paid to the assessee after inspection and delivery of the stores and the balance on final acceptance by the buyer. The axle-box bodies were supplied in pursuance of that contract by the assessee to the Southern Railway at Perambur and in Mysore.

The question in dispute was whether the sales were in the course of import and exempt from taxation u/s 5(2) of the Central Sales-tax Act, 1956, The sale and delivery admittedly took place after the import of the axle-box bodies from Belgium. The Madras High Court took the view that the sale was not in the course of import; but the Supreme Court held otherwise and said that before a sale could be said to have occasioned the import, it was not necessary that the sale should have preceded the import; the movement of axle-box bodies from Belgium into India was incidental to the contract that they would be manufactured in Belgium, inspected there and imported into India and was in pursuance of the conditions of the contract between the seller and the buyer. In that view, the sales to the Southern Railway took place in the course of import of goods. It is significant to note here that whether movement by way of import was prior or subsequent to the sale was immaterial. In the instant case before us, though the sale was complete at Jamshedpur and the movement out of the State of Bihar was subsequent to that, both the things can constitute integrated activities and the inter-State movement can be incidental to the contract of sale. It all depends upon the circumstances of a particular transaction and the nature of the goods and the trade involved therein.

Learned counsel for the State relied mainly on two decisions of the Madras High Court in support of his contention that the movement of the vehicles out of the State of Bihar was unconnected with the sale thereof. In the case of Ashok Leyland Ltd., Ennore, Madras Vs. The State of Madras, the assessee company assembled motor cars in Madras State and sold them to dealers outside that State. The outside State dealers sent their drivers to the assessee''s factory and took delivery of the cars and transported them outside Madras. The assessee''s contention that though the delivery of the cars was effected within the State of Madras, as such delivery was for immediate transport of the cars sold outside the State, the sales were in the course of inter-State trade within the meaning of article 286(2) of the Constitution, was repelled by the High Court of Madras and it was held that as the sales were completed and delivery was effected within the State of Madras, the salea were liable to sales fax under the Madras Act.

They observed that the stream of inter-State trade or commerce commenced only after the buyer took delivery of the goods, and the antecedent sale to him by the assessee was a distinct and closed transaction before that stream commenced. The facts, no doubt, are very much similar to those of the present case. The learned Judges in the Madras case followed that court''s decision in The Indian Coffee Board Vs. The State of Madras, . When a request was made to refer the case to a larger Bench for reconsideration of the previous decision, their Lordships did not concede to that. When Bose, J.s observations in the Supreme Court decision in The State of Bombay and Another Vs. The United Motors (India) Ltd. and Others, were placed before them they said that those observations were obiter and did not call for a reference of the case before them to a larger Bench.

In the previous decision (the The Indian Coffee Board Vs. The State of Madras, ) the question was whether the sale by the Coffee Board completed by delivery within the State of Madras to the purchaser or his agent who got the goods with intention of transporting them outside the State was in the course of inter-State trade. Coffee is a kind of goods which does not necessitate always its movement out of the place of its sale. The mere intention on the part of the purchaser to transport it outside the State where the sale took place, was not necessarily the integral part of the transaction as far as the seller was concerned. His mere knowledge that the goods sold was intended by the buyer to be carried out of the State was not enough; it had to be an integral intention on his part in that respect. Knowledge and intention are not always the same. In the case of motor vehicles its inter-State movement is certainly of a different incidence than in the case of coffee. Their Lordships of the Madras High Court, however, equated both of them and ruled the sale of motor cars in the same way as the sale of coffee. With great respect we are not able to take a similar view, particularly in face of the trend of and the principles laid down in several decisions of the Supreme Court in regard to the inter-State trade or sale -in the course of export or import.

The other decision of the Madras High Court in Addison and Co. Ltd. Vs. The State of Madras, was on the same line. There, the assessee was a dealer in automobiles and sold motor cars to their sub-dealers who resided outside the State of Madras and who had entered into an agreement with the assessee to resale those cars within their respective areas, all outside the State. The cars were delivered to the sub-dealers or their agents at Madras and were subsequently taken by them outside the State to their destination. There also the sales were held to be intra-State within the State of Madras and not in the course of Inter-State trade or commerce. The learned Judges followed the previous decisions. Our respectful comments on this decision are the same as already stated.

It has to be mentioned that the case of Ashok Leyland Ltd., Ennore, Madras Vs. The State of Madras, as decided in the Madras High Court was taken in appeal to the Supreme Court ( Ashok Leyland Ltd. Vs. The State of Madras, ). The present assessee of the instant case joined there as an intervener and pressed for a decision about the nature of the sale as involved in the Madras case; but as the Supreme Court found it sufficient to dispose of the case on a reference to the Sales-tax Laws Validation Act, the other question about the assessee''s claim about the inter-State trade was not gone into. It cannot, therefore, be said that the view taken by the Madras High Court on the nature of sale was upheld by the Supreme Court.

Learned counsel for the State also referred to two decisions of the Supreme Court in State of Mysore and Another Vs. Mysore Spinning and Manufacturing Co. Ltd. and Others, and East India Tobacco Co. Vs. State of Andhra Pradesh, . In the former case the appellant before the Supreme Court was the State of Mysore. The respondents were the spinning and textile mills, They had their registered offices in Bombay and factories in Bangalore in the State of Mysore. The bulk of their trade was with exporters at Bombay and other parts such as Calcutta and Madras. They used to sell to those exporters, who had export licences. In some cases the mills entered into direct contracts with foreign buyers and exported the goods directly. Those sales were not the subject-matter of the case. The exporters used to obtain firm offers from overseas buyers on production of which they used to get provisional export licences from the export controller in India.

After entering into a firm contract with the foreign buyers the exporters used to enter into contracts with the mills for the sale of the textile goods. There, it was mentioned that the goods were meant for export and the prices fixed were higher than the inland prices. After that the exporters used to get final export licences from the export controller in which the names of the seller and exporter and description of the commodities were mentioned. Then, the mills used to pack the goods marking "for export only" and despatch the goods. The exporters then took the delivery and shipped them overseas. The Supreme Court did not accept the High Court decision in favour of the asses-sees'' contention that their sales were in the course of export, as the view taken by the High Court was that the exporters-buyers should be deemed to be the agents of foreign buyers and the assessees'' sales to them this be presumed to be sales in favour of the overseas principals. Their Lordships of the Supreme Court did not accept the fiction of agency and held that there were actually two sales, one by the assessees to the exporters and the other by the exporters to the overseas buyers, the latter being one which occasioned the export and, therefore, in the course of export. Since, the assessees were not parties to that second sale, their transactions with the exporters were not in the course of export. For that their Lordships followed their previous decision in State of Travancore-cochin and Others Vs. Shanmugha Vilas Cashew Nut Factory and Others, where the difference between the last sale to the overseas buyer and the previous sale was made in connection with the actual export. Learned Counsel for the State very much pressed that although the assessees sellers knew that the goods they sold were for export and they had put such label on the packing of the goods yet that transaction was held not to be in the course of export. Applying that to the present case, he argued that though the assessee company knew that the vehicles were to be transported to other States, that would not constitute an inter-State trade.

In my view, the point of difference is elsewhere. In the former case of sale of textile goods to the exporter, the seller knew that the goods would be exported; but the goods were such that even after they sold them to the exporter, they may not have exported them and might have sold them in inland markets. Secondly, the seller had nothing to do with the export and had no semblance of any control over or participation in the after-sale activities of the exporter-buyer. In the instant case, there was not mere knowledge but the intention with the assessee company for inter-State movement of the vehicles. They wanted from the very beginning of their agreement that the vehicles must go to outside States and their association with the post-sale activities of the dealers, was well planned. The inter-State movement thus constituted an integral part of the contract of sale.

In that view, the case relied on by learned counsel cannot be applied here.

The other case ( East India Tobacco Co. Vs. State of Andhra Pradesh, is equally distinguishable. The assessees appellants were firms doing business in the export of tobacco and they used to purchase the requisite quantities of goods locally and then export them to foreign purchasers in performance of their contracts. Purchases of Virginia tobacco by the assessees appellants were sought to be taxed. One of the points raised on behalf of the assessees against that levy was that the discrimination between the purchases of two kinds of tobacco, country tobacco and Virginia tobacco, was ultra vires article 14 of the Constitution. That was not accepted. The other contention was that those purchases were in the course of export and came under Article 286(1)(b). Their Lordships followed their previous decision in State of Travancore-cochin and Others Vs. Shanmugha Vilas Cashew Nut Factory and Others, and held that the sale by the exporter to the overseas buyers, which really occasioned the export, was in the course of export and the sale before that by which the exporters purchased those goods was independent of export. With reference to the other case ( State of Mysore and Another Vs. Mysore Spinning and Manufacturing Co. Ltd. and Others, I have already shown how the facts of the instant case are different. The same is the position in this reported case.

Learned counsel further pointed that in the case of Ben Gorm Nilgiri Plantations Company, Coonoor and Others Vs. Sales Tax Officer, Special Circle, Ernakulam and Others, the Supreme Court referred to and followed its earlier decisions in State of Mysore and Another Vs. Mysore Spinning and Manufacturing Co. Ltd. and Others, and East India Tobacco Co. Vs. State of Andhra Pradesh, and held that sale of tea-chests along with export quota licence to persons who, later, on the strength of that export quota licence actually exported those goods overseas were not sales in the course of export. The sale of export quota licence, which was permissible under the law, did not alter the nature of the sale of the tea-chests to the exporters of tea who later sold them to overseas buyers and that occasioned the export. In the same way, as the earlier two decisions, this case has also to be distinguished from the present case. But, all the same, there are certain principles clearly laid down in this case which go to the support of the assessee''s contention. At page 759 of the report (STC): (at p. 1755 of AIR) their Lordships explained what should constitute a sale in the course of export of goods out of India and observed:

"To constitute a sale in the course of export of goods out of the territory of India, common intention of the parties to the transaction to export the goods followed by actual export of the goods to a foreign destination is necessary. But intention to export and actual exportation are not sufficient to constitute a sale in the course of export, for a sale by export ''involves a series of integrated activities commencing from the agreement of sale with a foreign buyer and ending with the delivery of the goods to a common carrier for transport out of the country by land or sea. Such a sale cannot be dissociated from the export without which it cannot be effectuated, and the sale and resultant export form parts of a single transaction'' 1952 3 STC 434: AIR 1952 SC 366. A sale in the course of export predicates a connection between the sale and export, the two activities being so integrated that the connection between the two cannot be voluntarily interrupted, without a breach of the contract or the compulsion arising from the nature of the transaction. In this sense to constitute a sale in the course of export it may be said that there must be intention on the part of both the buyer and the seller to export, there must be an obligation to export, and there must be an actual export. The obligation may arise by reason of statute, contract between the parties, or from mutual understanding or agreement between them, or even from the nature of the transaction which links the sale to export. A transaction of sale which is a preliminary to export of the commodity sold may be regarded as a sale for export, but is not, necessarily to be regarded as one in the course of export, unless the sale occasions export. And to occasion export there must exist such a bond between the contract of sale and the actual exportation, that each link is inextricably connected with the one immediately preceding it."

The ingredients spoken about to constitute a sale in the course of export are equally applicable to a sale in the course of inter-State trade or a commerce. All those three ingredients, viz., the intention about inter-State movement with the two parties, the obligation to make such a movement on the buyer and the actual such movement out of the State are present in the transaction under examination in this case. The dealership agreement also proves the first two ingredients and the third one, actual movement out of the State, is not in dispute.

I am clearly of the view that the sales of vehicles involved in these two references were in the course of inter-State trade but the sales that took place between the 23rd October, 1954, and the 6th September, 1955, were subject to sales-tax under the Bihar Sales-tax Act on account of the Sales-tax Laws Validation Act and, therefore, the assessee could not get any exemption. But in regard to the period From the 7th September, 1955, to the 31st March, 1956, the sales were not subject to levy under the Act and to this extent the assessee succeeds in M. J, C. 284 of 1962. The view taken by the Board of Revenue in respect of the other sales cannot be assailed.

In M. J. C. 284 of 1962 the answer to the first question is in the negative and against the assessee. The answer to the second question is in affirmative and in favour of the assessee. In M. J. C. 285 of 1962 the only question is to be answered in the negative and against the assessee. In view of partial success of both sides, there shall be no order for costs in either of the two references which are disposed of as stated above.

S.N.P. Singh, J.

I agree.