Report No. 30

79. Cement Marketing Co.'s case.-

In the Cement Marketing Co. of India Ltd. v. State of Mysore, (1963) 3 SCR 777: AIR 1963 SC 980: 14 STC 175. there were two appellants: The Cement Marketing Co. Ltd. and the Associated Cement Co. Ltd. The former were Sales Managers of the latter, a manufacturing concern, which had a dozen factories in different parts of India, none of which was in the State of Mysore.

The former, i.e., the Cement Marketing Co., had its Head Office at Bombay, and a branch office at Bangalore in Mysore State, and was a registered dealer under the Mysore Sales Tax Act. Cement was at all material times, a controlled article and its sale could be effected only on the authorisation given to the buyers by a proper Government officer.

This authorisation, mentioning, inter alia, the factory from where the supply was to be made, had to be produced before the Cement Marketing Co., which, in its turn, instructed its Bombay office to despatch the cement in accordance with the authorisation to the buyer. None of these factories was in the State of Mysore. The goods were received in the State of Mysore by the purchaser. The Sales Tax Officer held the sales to be intra-State sales and, therefore, liable to sales tax, a view which was upheld of the High Court.

The Supreme Court, on appeal, held, that, under the sales, the movement of goods was from one State to another as a result of a covenant or incident of the contract of sale, and the sales were in the course of inter-State trade or commerce, and consequently exempt from sales tax. In coming to this conclusion, the Supreme Court referred, inter alia, to section 3 of the Central Sales Tax Act, and to the observations of Shah J. in Tata Iron and Steel Co. Ltd. v. State of Bihar, (1961) 1 SCR 379 (391) .which were also quoted in K.G. Khosla's case .

"As stated above under the contracts of sale in the present case there was transport of goods from outside the State of Mysore into the State of Mysore and the transactions themselves involved movement of goods across the border. Thus, if the goods moved under the contract of sale, it cannot be said that they were intra-State sales. It was not the volition of the first appellant, to supply to the purchaser the goods from any of the factories of the second appellant.

The factories were nominated by the Government by authorisations which formed the basis of the contract between the buyer and the seller. Applying these tests to the facts of the present case we are of the opinion that the sales were in the nature of inter-State sales and were exempt from sales tax. In these circumstances the contracts of sale in the present case have been erroneously considered to be intra­State sales."

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