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Report No. 61

3.52. Application of the principle to inter-State sales-a Kerala case.-

This test of integrated connection has been applied to inter-State sales also. "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." So observing, the Kerala High Court1 treated a sale in the following circumstances, as an inter-State sale. The facts were as follows:-

The assessee, a dealer in coir-yarn in the (erstwhile) Travancore-Cochin State, effected sales of coir-yarn to certain firms in port Cochin (then in the Madras State). The assessee used to go to the firm at port Cochin and enter into written agreements with them as to specified varieties of coiryarn, with reference to samples shown to and retained by the purchasing firms. The price per candy of coir would be fixed. The assessee then used to purchase coir from various manufacturers, transport the goods at his expense to the purchasing firm at port Cochin, and, when the goods arrived at port Cochin, the assessee, or his agent used to deliver the goods to the purchasers and receive an advance payment.

After a week or two, the coir would be tried, inspected and re-handled, and the rate would be fixed. After final weighment and bailing, the invoice would be drawn and the balance due would be received. On these facts, it was held that the inter-State movement of the goods from the (erstwhile) Travancore-Cochin State to the (erstwhile) Madras State was the direct result of a covenant or incident of the contract of sale. Thus, the principles which had been applied in relation to export sales2 and import sales3 was applied to inter-State sales also.

1. N.K. Subramaniam v. State of Kerala, (1971) 28 STC 733 (735) (Ker).

2. Ben Gorm case, AIR 1964 SC 1752.

3. Compare Khosla's case, AIR 1966 SC 1246: (1966) 3 SCR 352.

3.52A. Binani's case.-

Recently, an important judgment relating to import sales-Binani's case-has been pronounced by the Supreme Court. We shall refer to this later.1

1. Para. 3.55, infra.

Certain Problems connected with Powers of the States to Levy a Tax on the Sale of Goods and with the Central Sales Tax Act, 1956 Back

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