Report No. 61
3.32. Some pre-Khosla cases.-
At this stage, we may refer to several cases decided by the Supreme Court before Khosla's case. One of them which deals the Sale of Goods and with the Central Sales Tax Act, 1956 with inter-State sales, in Tata Iron & Steel Co. v. S.R. Sarkar, (1961) 1 SCR 379: AIR 1961 SC 65 (71, 72): 11 STC 655., on which the decision of the Supreme Court in K.G. Khosla's case is primarily founded. In that case, the company had its registered office in Bombay, its Head Sales office in Calcutta in the State of West Bengal and its factories in Jamshedpur in the State of Bihar. The company was registered as a "dealer" under the Bihar Sales Tax Act, and was also registered as a "dealer" in the State of West Bengal under the Central Sales Tax Act, 1956.
For period of assessment July 1, 1957 to March 31, 1958 the company submitted its return of taxable sales to the Commercial Tax Officer, Lyons Range, Calcutta, disclosing a gross taxable turnover of Rs. 9,571.71 np. in respect of sales liable to Central Sales Tax in the State of West Bengal. By his memorandum dated August 12, 1959, the Commercial Tax Officer directed the company to submit a statement of sales from Jamshedpur for the period under assessment, "documents relating to which were transferred in West Bengal or of any other sales that may have taken place in West Bengal under section 3(b) of the Central Sales Tax Act, 1956." The company, by its letter dated September 30, 1969, informed the Tax Officer that the requisition for production of statement of sales made from Jamshedpur in the course of inter-State trade or commerce was without jurisdiction.
The company contended that "all the sales from Jamshedpur were of the type mentioned in section 3(a) of the Central Sales Tax Act and at the same time, some of them also fell within the category mentioned in section 3(b) of the Act," that even if the sales were of the type mentioned in section 3(b) of the Act, the appropriate State of the place where the sales take place or are effected alone had jurisdiction to assess such sales to Central Sales Tax, and that in respect of inter-State sales from Jamshedpur, the suits of the sale was always the State of Bihar as the goods were in Bihar either at the time of the contract of sale or at the time of appropriation to the contract." By his order dated October 21, 1959, the Commercial Tax Officer made a "best judgment assessment" on a gross turnover of Rs. 90,00,09,561.71 np. of inter-State sales and called upon the company to pay Rs. 41,14,718.12 np, as tax under the Central Sales Tax Act.
3.33. The company had, on December 15, 1958, filed with the Sales Tax Officer, Jamshedpur a return of inter-State Sales Made from Jamshedpur for the period July 1, 1957 to March 31, 1958 and a return for the same period for the sales made from Dhanbad with the Sales Tax Officer, Dhanbad. In these returns, the company included all sales in which movement of the goods had taken place from the State of Bihar to destinations outside that state. The total turnover in respect of inter-State sales as shown in the return exceeded Rs. 26 crores and the company paid as required by the Bihar Sales Tax Act Rs. 71 lakhs odd as advance tax under the Central Sales Tax Act, 1956. By this petition, the company impugned the validity of the order of the Commercial Tax Officer and claimed a writ of certiorari quashing and setting aside the assessment order dated October 21, 1959, and a writ of mandamus directing the Commercial Tax Officer to refrain from taking steps in enforcement or implementation of the order.
3.34. Mr. Justice Shah delivered the majority judgment. He first discussed the effect of the various amendments made by the Constitution (Sixth Amendment) Act of 1956 (investing Parliament with exclusive authority to enact laws imposing tax on sales or purchases taking place in the course of inter-State trade).
The actual discussion related to inter-State sales and inter alia to the question how far section 3(a) or section 3(b) of the Central Sales Tax Act applied to the sales in question. According to the majority, the decision in the two cases had no bearing on the interpretation of section 3, clauses (a) and (b). In those cases, the expression "in the course of import and export" and "in the course of inter-State trade or commerce" used in Article 286 fell to be determined. The Constitution did not define those expressions, and Parliament had, in the Central Sales Tax Act, sought to define (by section 3) when a sale or purchase is said to take place in the course of inter-State trade or commerce and to define (by section 5) when a sale or purchase is said to take place in the course of import or export, and further to define (by section 4) when a sale or purchase of goods is said to take place outside a State. In delivering the majority judgment, Mr. Justice Shah observed1:-
"In interpreting these definition clauses, it would be inappropriate to requisition in aid the observations made in ascertaining the true nature and incidents without the assistance of any definition clause of "sale outside the State" and "sale the course of import or export" and "sale in the course of inter-State trade or commerce" used in Article 286.
"In our view, therefore, within clause (b) of section 3 are included sales in which property in the goods passes during the movement of the goods from one State to another by transfer of documents of title thereto; clause (a) of section 3 covers sales, other than those included in clause (b), in which the movement of goods from one State to another is the result of a covenant or incident of the contract of sale, and property in the goods passes in either State."."
1. Tata Iron etc. v. S.R. Sarkar, (1961) 1 SCR 379 (391): AIR 1961 SC 65 (71, 72): 11 STC 655.
3.35. In his minority judgment, Mr. Justice Sarkar (as he then was) expressed the view, that a sale cannot fall under both clause (a) and clause (b) of section 3. For, then, it would be liable to be taxed twice. Clauses (a) and (b) were mutually exclusive. Interpreting these two clauses, he said that clause (a) contemplates a sale where the contract of sale occasions the movement of the goods sold, and clause (b), a sale where transfer of property in .the goods sold is effected by a transfer of documents of title to them. Of course, in the first case, the movement of the goods must be from one State to another, and in the second, the documents of title must be transferred during such movement.