1. This order will also govern the disposal of Misc. Petition No. 120 of 1969.

2. By these petitions under Article 226 of the Constitution the petitioner calls into question the assessment orders passed by the Assistant Commissioner of Sales Tax on 30th September, 1968, and 1st January, 1969, for the account years 1954-55 and 1955-56 respectively. The period covered in each year is from 1st August to 31st July.

3. The petitioner is a public limited company and is engaged in the manufacture and sale of cement. It has its factories in various States in India. One such factory is at Kymore in Madhya Pradesh. In these petitions we are concerned only with the sales made by the Kymore factory.

The petitioner-company is a registered dealer under the C.P. and Berar Sales Tax Act, 1947. According to the assessment orders, the petitioner, for the year 1954-55, claimed that its turnover to the extent of Rs. 13,03,041.44 was in respect of sales which took place outside the State and this turnover was not taxable by the State of Madhya Pradesh in view of Article 286(1)(a) of the Constitution as it stood prior to the Constitution (Sixth Amendment) Act, 1956. Similar exemption was claimed for the year 1955-56 in respect of a turnover amounting to Rs. 20,04,025.47. Another exemption that was claimed for both these years was in respect of sales made to the Madhya Pradesh Electricity Board. It was claimed by the petitioner that sale of cement to the extent of Rs. 10,206.25 for the year 1954-55 and to the extent of Rs. 3,11,973.62 for the year 1955-56 was made to the Board under certificates which showed that the cement was used for generation and distribution of electrical energy and was exempt from tax under Section 2(j)(a)(iii) of the Central Provinces and Berar Sales Tax Act, 1947. Both these contentions were not accepted by the Assistant Sales Tax Commissioner.

4. The manner in which the alleged outside sales took place is pleaded in paragraphs (2) to (6) of the petitions which are admitted in the return filed on behalf of the respondents. The mode or the manner of these sales is thus now not disputed. During the entire period falling within the two assessment orders cement was a controlled commodity. Any person wishing to purchase cement had to secure an authorisation in a standard form from the Cement Advisor, Ministry of Commerce and Industry, Government of India. The authorisation directed the selling agents of the petitioner-company, namely, M/s, Cement Marketing Company of India, to sell to the named purchaser the quantity of cement mentioned in the authorisation from the factory specified therein. One of the conditions attached to the authorisation was that the full quantity of the cement released was to be used only for the purpose and at the place stated in the authorisation and no part of it was to be used for any other place or given or sold to any other party. Having received the authorisation, the purchaser placed an order with the selling agents (C.M.I.) stating the requirement, the place where the commodity was to be sent, the manner of transport, etc. A specimen of such an order is annexure 'B'. The instructions which the purchaser gave in this order, apart from other matters, referred to the place of delivery being "F.O.R. works siding" and place of destination as the railway station to which the goods were to be despatched by the petitioner from its works siding.

On receipt of the order the selling agents entered into a contract with the purchaser in a standard form. The terms and conditions of this contract are contained in annexure 'C' which are as follows :

1. Despatches against the order will be made subject to cement and wagons being available and we do not hold ourselves responsible either for any delay in despatch due to any reason or for non-receipt of consignment or for any loss, damage or shortage in transit. Our responsibilty ceases once the goods are delivered to the carriers.

2. The cement will be consigned "freight to pay".

3. The supply will be billed at the standard rate ruling on the date of despatch and will be subject to credit being given for freight from the nearest works, the actual freight being payable by you.

4. Any increase in railway freight after the date of receipt of the order by us will be on your account.

5. The quantity loaded and despatched may be more or less than the quantity specified in the order according to the carrying capacity of the wagon available.

6. You should take delivery of the consignment on indemnity bond if railway receipt is not received by you in time. We will not be responsible for any demurrage incurred on account of non-receipt or delay in receipt of railway receipt.

7. Sales tax, octroi, town duty, etc., are payable by the buyers. Supplies from the works will be subject to the sales tax/taxes wherever chargeable.

8. In case it is not possible to supply the whole or part of the quantity of your order, the amount of your advance or the balance thereof (if any) as the case may be, will be refunded without interest on application.

9. The cement supplied shall not be resold by you but will be used for your own consumption nor shall the cement be transported to any other place from the station mentioned.

10. The sale will also be subject to the terms and conditions of our standard form of contract for sale of cement.

11. In case of orders for bagged, cement only:--Please note that supply against the above order is not guaranteed in any particular type of packing but will be made either in jute bags or paper bags whichever packing is available or practicable at the works at the time of despatch, for which our works will be the sole judge. The price payable for the same will be as indicated below :

The selling agents, after entering into a contract with the purchaser, directed the petitioner to supply the requisite quantity of cement to the purchaser. Thereafter, the petitioner despatched the cement by rail and sent an advice to the purchaser enclosing therewith the railway receipt for the goods. The advice indicated that the goods were delivered to the carrier as directed by the purchaser and that the liability for loss or delay during the transit was on him. The selling agents then sent a bill to the purchaser and recovered the price. It is not disputed that in all sales for which the exemption was claimed by the petitioner under Article 286(1)(a) the goods were despatched by rail by the petitioner from Kymore in Madhya Pradesh to places outside the State of Madhya Pradesh.

5. In the impugned orders the Assistant Sales Tax Commissioner held that the sales were not outside sales and did not qualify for exemption under Article 286(1)(a), as it stood before the Constitution (Sixth Amendment) Act, 1956. In support of his conclusion the Assistant Commissioner deduced and laid emphasis on the following conditions :

(1) All quotations include free delivery in good condition at work siding;

(2) the assessee do not accept any responsibility whatever for shortage, loss, damage or delay in the transit and any claim with the railway is preferred by the buyers, i.e. the transit risk is to be covered by the buyers ;

(3) the railway receipt in all the cases is taken out in the name of the consignee and sent to them direct by post; and (4) freight is paid by the buyer.

He then said that the sales in all respects were complete once the goods were delivered at the works siding and appropriated to the contract as the entire responsibility from that moment shifted to the buyer.

6. In our opinion, the conclusion reached by the Assistant Commissioner cannot be upheld. The apparent error in his order is that he has given attention only to the place of notional delivery, the passing of property in goods and the shifting of responsibility in respect of payment of freight, loss etc. and has not directed his attention to the main question as to where the actual delivery of the goods took place. Under the explanation to Article 286(1)(a) of the Constitution a sale or purchase is 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 consumption in that State, notwithstanding the fact that under the general law relating to sale of goods, the property in goods has by reason of such sale or purchase passed in another State. It has been settled by a series of decisions of the Supreme Court that the expression "actually delivered" in the context in which it is used in the explanation "can only mean physical delivery of the goods or such other action as puts the goods in the possession of the purchaser ; it does not contemplate mere symbolical or notional delivery e.g. by entrusting the goods to a common carrier, or even delivery of documents of title like railway receipts" : Bajrang Jute Mills v. State of A.P. A.I.R. 1966 S.C. 376, 379; Singareni Collieries Co. v. Commissioner of Commercial Taxes A.I.R. 1966, S.C. 563, 568, 569; B.T. Trading Co. v. Commissioner of Sales Tax M.P. A.I.R. 1967 S.C. 1348, 1349 In Bajfang Jute Mills v. State of A.P. A.I.R. 1966 S.C. 376, 379, the goods were sold F.O.R. Guntur in Andhra Pradesh and the railway receipts which were taken in the name of purchaser were delivered to the agents of the purchaser in Andhra Pradesh who paid the price. The goods were, however, despatched by the seller to the various factories of the purchaser in different States and although the property in the goods passed in Andhra Pradesh and the purchaser bore all the risk, it was held by the Supreme Court that the sales were explanation sales and could not be taxed by the State of Andhra Pradesh. In Singareni Collieries Co. v. Commissioner of Commercial Taxes A.I.R. 1966, S.C. 563, 568, 569 sales were made by a colliery in Andhra Pradesh to allottees of coal outside the State pursuant to directions of the Coal Commissioner under the Colliery Control Order. The sales were made under the terms of a sale-note according to which the property in coal passed to the purchaser when the goods were loaded into railway wagons for conveyance and thereafter all losses and any new tax imposed were to be borne by the purchaser who also paid the freight. It was held that the goods were actually delivered outside the State of Andhra Pradesh and, therefore, could not be taxed by that State. Similarly, in B. T. Trading Co. v. Commissioner of Sales Tax M.P. A.I.R. 1967 S.C. 1348, 1349, where there was a contract for supply of sleepers, although the place of delivery was indicated as Dhamtari (Eastern Railway) in Madhya Pradesh, and the price was also charged as F.O.R., it was held that the goods were actually delivered outside the State of Madhya Pradesh at the respective places of destination.

In the light of these authorities, the question in the present petitions is whether on the terms and conditions on which the cement was sold by the petitioner-company to outside purchasers can it not be said that the sales qualified for exemption under the explanation ? It is quite plain that the goods were never put in the possession of the purchasers in the State of Madhya Pradesh; the purchasers got possession of the goods at the destination in different States where they were despatched under the contract of sale by the seller. It is true that under the general law the property in goods passed to the purchaser when the goods were loaded in the railway wagons at Kymore and the risk also passed to the purchasers who were also liable to pay the freight; but these incidents do not lead to the conclusion that the place of actual delivery was Kymore. As already noticed, by "actual delivery" is meant physical delivery of the goods or such other action as puts the goods in the possession of the purchaser. The delivery in that sense was effected only when the goods reached the destination and were taken delivery of by the consignees. Under the terms of the authorisation of the Government as also under the contract the goods were meant for utilisation or consumption at the place of destination. In our opinion, therefore, the sales to the outside purchasers in respect of which the exemption was claimed by the petitioner before the Assistant Commissioner fell within the explanation to Article 286(1)(a) of the Constitution and could not be taxed by the State of Madhya Pradesh under the Central Provinces and Berar Sales Tax Act, 1947.

7. Learned Counsel for the respondents argued that the railway was the agent of the purchasers and, therefore, actual delivery took place at Kymore. Agency cannot be created except by contract and as there was no contract between the consignees and the railway, it cannot be held that the railway accepted the goods for despatch as agent of the purchasers. Then it was said that the petitioner-company in loading the goods in the railway wagons at Kymore and in obtaining the railway receipts acted as agent of the purchasers. In loading the goods in the railway wagons and in obtaining railway receipts the petitioner was acting in pursuance of the contract of sale qua seller. The contract entered into by the petitioner and the purchasers was not divisible into contract of sale and contract of agency. All steps taken by the petitioner including loading of the goods in the wagons and obtaining the railway receipts and sending the same to the purchasers were done in pursuance of the contract of sale. In our opinion, therefore, it is difficult to accept the argument that the railway or the petitioner himself took actual delivery of the goods at Kymore on behalf of the purchasers.

Reliance was then placed upon the case of C. P. Timber Works v. Commissioner of Sales Tax [1967] 20 S.T.C. 335 (S.C.). But in that case the sales were held to be outside the explanation on the ground that there was no evidence to show that actual delivery of the goods took place at the destination. The decision arrived in that case was in special circumstances as the petitioner there had failed to place the full facts to displace the prima facie inference that the delivery was made at the place where the goods were put on rail. C. P. Timber Works' case, [1967] 20 S.T.C. 335 (S.C.) is, therefore, distinguishable and cannot help the respondents.

8. As regards the sales made to the Madhya Pradesh Electricity Board, the finding reached by the Assistant Commissioner is that the cement was used in the construction of buildings needed by the Board to house its staff and office. This is a finding of fact and must be accepted in these proceedings. On this finding it was argued for the petitioner that the cement was used by the Board in the generation or distribution of electrical energy, for the buildings constructed by use of the cement purchased had assisted the Board in these activities.

The sales that qualify for exemption under Section 2(j)(a)(iii) of the Act must be one that are made to any undertaking supplying electrical energy "for use by it in generation or distribution of such energy". Everything sold to the Electricity Board for its use does not fall within the exemption. It is only when sale is made for use in the generation or distribution that the exemption is attracted. Cement used for construction of office buildings and staff quarters cannot be said to be used in the generation or distribution of electrical energy. The connection between these activities of the Board and its office building and staff quarters is too remote and it cannot even be said that these buildings are used in the generation or distribution of the energy. It is only when there is a direct use of the goods in generation or distribution that the goods sold to the Board can fall within the exemption. On somewhat similar logic it was held by the High Court of Punjab and Haryana that sale of timber for the construction of a power-house did not fall within a similar exemption clause under the Punjab Sales Tax Act, 1948 : S. D. Singh & Co. v. Punjab State [1968] 22 S.T.C. 319. In our opinion, the Assistant Commissioner was clearly right in rejecting the contention raised by the petitioner in respect of sales made to the Electricity Board.

9. It was also contended by the learned Counsel for the respondents that as the petitioner did not avail of the remedy of appeal, no interference should be made under Article 226. An appeal under the relevant provisions of the Sales Tax Act can be filed only on payment of tax. The existence of alternative remedy is not a bar for interference; it is only a factor to be taken into account in exercising discretion under Article 226. In our opinion, when the facts are admitted and the tax amount is heavy, it would not be a sound exercise of discretion to refuse interference on the ground that the petitioner could have gone up in appeal.

10. In the result, the petitions are partly allowed. The assessment orders against the petitioner in so far as they relate to disallowance of exemption claimed under Article 286(1)(a) of the Constitution are quashed and the respondents are directed not to recover any tax in respect of turnover of outside sales. There shall be no order as to costs of these petitions. The amount of security deposits shall be refunded to the petitioner.