JUDGMENT
(Delivered by Rajagopala Ayyangar, J.)
This is a revision petition filed by an assesses against the decision of the Sales Tax Appellate Tribunal raising for consideration the correct construction of the Explanation to Art. 286(1)(a) of the Constitution.
The assessee is a registered manufacturer of and a licensed dealer in groundnut oil carrying on business in Pollachi and the assessment relates to the year 1950-1951. During the accounting year he sold oil to Messrs. Tata Oil Mills Co. Ltd., under the terms of a contract on conditions embodied in an order in the form below:
To
Messrs. Tata Oil Mills Co. Ltd., Coimbatore.
Dear Sirs,
Ref: Sales contract—Groundnut oil.
This is to confirm that I have this day sold groundnut oil to you as per terms and conditions given below:
Quantity: tons of 2240 lbs. each.
Price: Rs. 2026 (Rs. Two thousand and twenty five only per ton of 2240 lbs. nett loose f.o.r Pollachi Jn. including sales-tax.
Quality: Pure expeller groundnut oil with six per cent F.F.A or below.
Delivery: F.O.R Pollachi Jn. oil to be supplied during the month of February (within the 15th) 1951.
Containers: are to be supplied by you F.O.R Pollachi Jn. R.R as usual.
The course of business between the assessee and the purchasers was as follows: As the sale of the oil was “loose” the containers were supplied by the purchasers who sent their own drums to the assessee for the carriage of the oil. These containers were checked up by the sellers and they were filled in at the assessee's mills. The drums were transported to Pollachi Junction and and then loaded on railway waggons by the sellers who obtained railway receipts in the name of the buyers as consignors, the consignees of course being the same. There is also no dispute that on the instructions of the buyers all the oil sold under these contracts were routed to Ernakulam where they were cleared by the boyers and the commodity was consumed in the letter's mills. The railway receipts were with the relative invoices handed over at Coimbatore to the buyers where they had an office and the sellers received a good portion of the price. The balance was paid after weights were checked and fatty acid tests were carried out by the buyers at Ernakulam.
The total turnover of the goods involved in these contracts for the assessment year was Rs. 1,80,738-13-4.
Before the Deputy Commercial Tax Officer the assessee raised a contention that he was entitled to a rebate of one half of the sales tax due in respect of the turnover under S. 7 of the Madras General Sales Tax Act. That section runs in these terms:
“In respect of such finished articles of industrial manufacture as may be notified by the State Government and subject to such restrictions and conditions as may be prescribed, a rebate shall be allowed, of one-half of the tax levied on sales of such articles for delivery outside the State if such articles are actually so delivered.”
The assessing officer rejected this claim and held that the asses see was not entitled to the exemption claimed. The assenee filed an appeal to the Commercial Tax Officer and at that Stage raised the contention that he was entitled to exemption in respect of the whole of the tax paid by reason of the Explanation to Art. 286(1)(a) of the Constitution. The appellate authority decided against the assessee and a further appeal to the Sales Tax Appellate Tribunal was also rejected. Hence this revision.
Before us two points were argued. The first was that the petitioner was entitled to exemption under the Explanation to Art. 286(1)(a). The Article and the Explanation are in these terms:
“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)…………
Explanation: For the purposes of Sub-Cl. (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 is the goods has by reason of such sale or purchase passed in another State.”
There is no doubt that the purchase by the Tatas was “for the purpose of consumption” in Ernakulam, but that is not sufficient to attract the constitutional exemption which would be satisfied only when goods have “actutally been delivered outside this State. The submission of learned Counsel for the petitioner in support of the argument that the requirements of the Explanation were complied with, was as follows: As the sale was f.o.r Pollachi and as it was part of the duty of the seller to obtain the railway receipt and book the goods to Ernakulam outside the State of Madras, “the delivery” most be treated as having taken place outside the State bringing the transaction within the Explanation. It was contended that “f.o.r Pollachi” was mentioned in the contract merely in order to ascertain the price and that though for the purpose of the Sale of Goods Act, the property might have passed to the buyer either when the containers of the buyer were filled up in the god owns of the seller or at any rate when the goods were put on rail at Pollachi, this was irrelevant for the purpose of considering whether the petitioner was entitled to the exemption under the Article above set out since the Explanation in express terms renders the passing of property irrelevant for the purpose. It was also contended that delivery “as a direct result of the sale” was distinct from delivery in pursuance of a sale because “a result” can be reached only after the terms of the contract are fulfilled. On this basis it was urged that as it was admitted by the department that eventually the goods did reach Ernakulam at the end of their journey from Pollachi, the goods were delivered at Ernakulam as a direct result of the sale sufficient to bring the transaction within the exemption embodied in the Explanation.
We are clearly of the opinion that the argument of learned Counsel for the petitioner is without substance. It is true that under the Explanation to Art. 286(1)(a) the passing of property is immaterial for the purpose of judging whether a sale has taken place within the State or not. But the crucial fact which has to be established before the exemption could be claimed is that there should be an “actual delivery” of the goods outside the State. If under the contract there is a delivery of these goods at Pollachi, there could not possibly be a delivery of the fame goods again in Ernakulam. It is therefore necessary to consider whether by reason of the contract between the parties there was or was not a delivery of these goods at Pollachi junction when the petitioner loaded the goods in the train and got the railway receipt in the name of the buyer. When have already set out the terms of the contract under which the delivery was to be at Pollachi junction. In the face of this express stipulation in the contract which was fulfilled it is, in our opinion, impossible to contend that there was no delivery within the State. If delivery had taken place within the State, there could not obviously be a delivery of the same goods outside the State merely because they were subsequently transported to and reached Ernakulam. In this connection we might refer to the terms of S. 39(1) of the Sale of Goods Act which runs in these terms:
“39(1): Where id pursuance of a contract of sale, the seller is authorised or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer, or delivery of the goods to a wharfinger for safe custody, is prima facie deemed to be a delivery of the goods to the buyer.”
In the terms of this provision which merely relates to the common law rule, the seller was on the terms of the contract we have in this case required to send the goods by a carrier named by the buyer.
As explained in Benjamin on Sale of Goods (8th Edn.) at page 211 and at page 737:
“It is well settled that the delivery of the goods to a common carrier a fortiori to one specially designated by the buyer, for conveyance to him or to a place designated by him, constitutes an actual receipt by the buyer. In such cases the carrier is, in contemplation of law, the bailee, of the person to whom not of the person by whom, the goods are sent, the seller employing the carrier, being considered as an agent of the buyer for the purpose.”
The carrier was thus constituted an agent of the buyer for accepting delivery of the goods on his behalf with the result that the goods have “actually been delivered to the buyer within the Madras State.”
It will be noticed that this section which occurs in Chapter IV of the Sale of Goods Act has nothing to do with the passing of property dealt with in Chapter III of the Act which is the matter which is rendered irrelevant by the Explanation to Art. 286(1)(a) of the Constitution.
In the circumstances, on the terms of this contract we are clearly of the opinion that the delivery of these goods at Pollachi junction was a delivery to the purchaser and if the goods were transported from Pollachi to Ernakulam, it was really by or on behalf of a buyer, who had taken delivery of the goods, that the punter was performed. If the delivery has taken place within the State of Madras, the tax liability has accrued and this is not altered or affected by reason of the subsequent despatch of the goods at the instance of the buyer from the State of Madras to Ernakulam outside the State.
Counsel for the petitioner also relied on the circumstance that the weight of the oil as well as the fatty acid content were checked at Ernakulam and it was only thereafter that the balance of the price was paid to the assessee. In our judgment these do not bear upon the point how under consideration. We are unable to gather from the contract any stipulation that the goods continue to be the property of the seller until they are tested and weighed which is what this argument virtually amounts to and therefore these circumstances do not militate against the buyer having taken delivery of the goods at Pollachi when they were handed over to the buyer's agent, viz., the carrier.
Learned Counsel for the petitioner relied in this connection on certain observations in the judgment in State of Bombay v. United Motors Ltd.(1), a passage at page 749, where referring to the explanation the learned Chief Justice of the Supreme Court stated:—
“It provides by means of a legal fiction that the State in which the goods sold or purchased are actually delivered for consumption therein is the State in which the sale or purchase is to be considered to have taken place, notwithstanding the property in such goods passed in another State……The test of sufficient territorial nexus was thus replaced by a simpler and more easily workable test. Are the goods actually delivered in the taxing State, as a direct result of a sale or purchase for the purpose of consumption therein? Then, such sale or purchase shall be deemed to have taken place in that State and outside all other States.”
“The words in which the goods have actually been delivered ensure that goods have come into the State and the expression for the purpose of consumption in the State shows that though the tax is formally laid on sales, its income is aimed at the consumers in the State” (at page 752);
and passages of a like type occurring elsewhere in the judgment. From these the argument urged was that it was sufficient if as “a result of the sale” the goods “reached” some place outside the State. That is not however how we consider the judgment has to be understood, if under the terms of the contract between the parties, and as one of the stipulations therein, a delivery has taken place within the State, the Constitution does not envisage a fictitious or notional second delivery of the same goods outside the State affording a like exemption by reason merely of the goods being transported outside the State by the purchaser even though it be by a transaction which forms part of the very delivery to him. In our opinion the actual delivery referred to in the Explanation is a delivery by the seller to the buyer and not the delivery involved in a buyer's agent to whom goods have been delivered in this State transporting them across the border and handing them over to his principal. We are therefore clearly of the opinion that the petitioner is not entitled to exemption under the Explanation to Art. 286(1)(a) of the Constitution.
The next question that falls for consideration is whether the petitioner is entitled to a refund of half the tax paid on these sales under S. 7 of the General Sales Tax Act. From the section which we have extracted above, it will be seen that two conditions are necessary before the exemption can be invoked. One is that the terms of the contract should provide for delivery outside the State and secondly that in pursuance of such a contract the goods must have been (actually) delivered outside. It will thus be noticed that the requirements of S. 7 of the General Sales Tax Act are even stricter and the exemption narrower than that embodied in the Explanation to Art. 286(1)(a). Therefore in a case to which the latter provision is not attracted, the provisions of S. 7 cannot possibly apply. In the present case, the contract stipulates for delivery inside the State and so the terms of S. 7 of the General Sales Tax Act are not brought into play.
The result is that the petition fails and is dismissed with costs. Counsel's fee Rs. 100.
V.C.S