http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 15  

PETITIONER: BALABHAGAS HULASCHAND

       Vs.

RESPONDENT: STATE OF ORISSA

DATE OF JUDGMENT09/12/1975

BENCH: FAZALALI, SYED MURTAZA BENCH: FAZALALI, SYED MURTAZA MATHEW, KUTTYIL KURIEN

CITATION:  1976 AIR 1016            1976 SCR  (2) 939  1976 SCC  (2)  44  CITATOR INFO :  D          1980 SC1468  (18)  RF         1981 SC 446  (6)  E&D        1985 SC1754  (10)  E&D        1992 SC1952  (12,13,15)

ACT:      Central Sales  Tax Act,  1956-Ss. 2(g), 3, 4(2)(a) (b)- "Sale"-Ambit of the definition "Sale".      Central Sales  tax Act, 1956-Section 3 (a) read with s. 4 of  the Sale  of Goods  Act, 1930-Agreement  to sell is an essential ingredient of sale.-      Central Sales  Tax Act, 1956, s. 3(a)-Scope of s. 3(a)- Occasions the "movement of goods from one State to another"- Whether the  agreement of  sale  occasions  movement-Whether agreement to  sell was  a forward  contract or a contract in respect of unascertainable or future goods does not make any difference for the purposes of application of s. 3(a) of the Act.      Interpretation  of  statutes-Whether  s.  3(a)  of  the Central Sales  Tax Act  is  redundant  and  would  apply  to contingencies which may not happen at all.      Central Sales Tax Act, 1956-Section 3(a) read with Art. 286(3) of  the Constitution  of India-Sale "in the course of interstate trade  or commerce"-Conditions  to  be  satisfied before a  sale can  be said  to take  place in the course of interstate trade or commerce.

HEADNOTE:      The appellant,  a firm  dealing in  buying and  selling jute with  headquarters at  Calcutta, used  to purchase  raw jute grown  in Orissa and despatch them in bags from Cuttack and Dhanmandal  Railway Station  to the Railway Mills Siding Station in  Calcutta. The  goods were  booked in the name of the buyer  "KB &  Co" through  its licensed broker "EIJ & HE Ltd." and  on the  arrival of  the goods the buyer inspected the goods  and if  they were  found in  accordance with  the specifications mentioned  in the agreement of sale, accepted them and  paid their  price. On the basis of these concluded transactions of  sale the respondent State, levied sales tax under s. 3(a) of the Central Sales Tax Act on the basis that the  sales   were  interstate  sales.  Since  the  assessing authorities negatived  the contention  of the appellant that

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 15  

the sale was merely an internal sale which took place in the State of  West Bengal and since the Tribunal refused to make a reference,  the appellant  moved the  High Court  under s. 24(3) of  the Orissa Sales Tax Act to direct the Tribunal to make a statement of the case to the High Court. The Tribunal referred two  points, viz.,  (i) Did  the title to the goods pass in  Orissa or in West Bengal and (ii) Even if the title in the goods passed in West Bengal, whether in the facts and circumstances of  this  case,  the  transaction  constituted "sale in  the course  of inter-state trade" ? The High Court held that  although the  title in  the goods  passed in West Bengal and  the  sale  took  place  there,  since  the  sale occasioned the  movement of goods from Orissa to West Bengal it was  an inter-State  sale, and, therefore, it was clearly governed by s. 3(a) of the Central Sales Tax Act.      Affirming the judgment of the High Court and dismissing the appeals by special leave, the Court, ^      HELD: (1)  The definition  of "sale"  in s. 2(g) of the Central Sales  Tax Act  postulates the following conditions. (i) There  must be  a transfer  of property  in goods by one person to another; (ii) The transfer must be for cash or for deferred payment  or for  any other  valuable consideration; and (iii)  That such a transfer includes a transfer of goods on  the   hire  purchase  or  other  system  of  payment  by instalment etc.  The word  "sale" defined in cl. (g) of s. 2 and used  in s.  3(a), 4(2)  (a) and  (b) is  wide enough to include not  only a  concluded contract  of sale  but also a contract or agreement of sale provided the agreement of sale stipulates that there was a transfer of property or movement 940 of goods. An agreement to sell by which the property did not actually pass  was also  an element of sale. [944H, 945A, C, G]      Bengal Immunity  Co. Ltd.  v. The  State of  Bihar  and others, [1955] 2 SCR 603, relied on.      Sales  Tax   Officer,  Pilibhit  v.  Budh  Prakash  Jai Prakash, 5 S.T.C. 193, 196, followed.      (2) When  the statute  uses the words "sale or purchase of goods", it automatically attracts the definition of "sale of goods"  as given  in s. 4 of the Sale of Goods Act, 1930, and is  to some  extent pari  materia to s. 3 of the Central Sales Tax  Act  so  far  as  the  transactions  of  sale  is concerned. The  inevitable conclusion  that fellows from the combined effect of the interpretation of s. 3 of the Central Sales Tax  Act and  s. 4 of the Sale of Goods Act is that an agreement to  sell is  also an  essential ingredient of sale provided it contains a stipulation of transfer of goods from the seller to the buyer. [946E-F, 947A]      (3) Since  the word "sale" appearing in s. 2(g) as also in s. 3(a) of the Act includes an agreement to sell provided the said  agreement contains a stipulation regarding passing of the  property, if  there is  a movement of goods from one State to  another, not  in pursuance of the sale itself, but in pursuance  of an  agreement to  sell, which  later merges into a  sale, the  movement of goods would be deemed to have been occasioned  by the sale itself wherever it takes place. When the movement of goods start, they shed the character of either unascertained  goods or future goods. For the purpose of application  of s. 3(a) of the Central Sales Tax Act, the question whether  the contract  is a forward contract or not makes no material difference. [947B, C-D, 948F]      (4) A  statutory provision  cannot be  interpreted in a way which  defeats the very object of the Act. It is equally well settled  that the  Legislature does  not waste words or

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 15  

introduce useless  or redundant  provisions. The  contention that s.  3(a) of  the Central Sales Tax Act was redundant or would apply to contingencies which may not happen at all, is not correct. [948D]      Indian Chamber  of Commerce  v. C.I.T.,  West Bengal II Calcutta, 1976(1) SCR 830, applied.      (5) The following conditions must be satisfied before a sale can  be said  to take place in the course of interstate trade or commerce:      (i) that there is an agreement to sell which contains a stipulation express or implied regarding the movement of the goods from one State to another.      (ii) that  in pursuance of the said contract the goods, in fact, move from one State to another; and      (iii) that  ultimately a  concluded sale takes place in the State  where the  goods are sent which must be different from the State from which the goods move, because the tax is on sale  and not  on an  agreement  to  sell  or  a  forward contract.      If these  conditions are satisfied then by virtue of s. 9 of  the Central  Sales Tax  Act it is the State from which the goods move which will be competent to levy the tax under the provisions  of the  Central Sales  Tax Act. The question whether the  agreement to  sell is in respect of ascertained or unascertained  goods, existing  or future  goods, make no difference whatsoever  so far  as the  interpretation of  s. 3(a) of the Central Sales Tax is concerned. [949A-C, E]      Cement Distributors  (P) Ltd.  v. Deputy Commercial Tax Officer,   Lalgudi   and   others,   23   S.T.C.   86,   94, distinguished.      Larsen and  Toubro Ltd.,  Madras-2 &  others. v.  Joint Commercial Tax  Officer, 20 S.T.C. 150, 186 & 187; The State of Madras  v. N. K. Nataraja Mudaliar [1961] 1 SCR 379, 391; Tata Iron  and Steel  Co. Ltd.  v. S.  R. Sarkar  and others [1961] 1  SCR 379,  391; State  Trading Corporation of India Ltd. v.  State of  Mysore, [1963]  3 SCR  792, 797-798; Tata Engineering & Locomotive Co. Ltd. 941 v. The  Assistant Commissioner  of Commercial  Taxes & Anr., [1970] 3  SCR 862, 866; M/s. Kelvinator of India Ltd. v. The State of  Haryana [1973]  3 SCC 561, 560; The State of Tamil Nadu v. The Cement Distributors (P) Ltd. and others [1975] 4 SCC 30 and Oil India Ltd. v. The Superintendent of Taxes and others, referred to.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: CAs Nos. 449-454 of 1971 & 888-890 of 1974.      Appeals by  special leave  from the  judgment and order dated the  27-4-1970 and  11-4-1973 of the Orissa High Court at Cuttack  in special  jurisdiction Cases  Nos. 74 to 77 of 1968 and 70-72 of 1971 respectively.      Hardayal Hardy, and Sukumar Ghose, for the appellant in CAs 449-454 of 1971.      Gobind Das, G. S. Chatterjee for the respondent.      Sukumar Ghose,  for the  appellant in  CAs  888-890  of 1974.      M. C.  Bhandare, B.  Parthasarthi for the respondent in CAs 888 and 889 of 1974.      Ex parte for respondent in appeal No. 890 of 1974.      The Judgment of the Court was delivered by      FAZAL ALI,  J.-These  are  two  groups  of  appeals-one consisting of  six appeals by the firm Balabhagas Hulaschand

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 15  

dealing in  jute. Civil  Appeal No.  449/71 arises  from the Judgment of  the High Court in S.J.C. No. 41 of 1968 decreed on April  22, 1970  in respect  of the  assessment  for  the quarter ending  June 1960. The other five appeals are by the same firm in respect of the sales tax levied by the State of Orissa for  the quarters  ending December,  March  1960  and December 1960  to June  1961, decided by the judgment of the High Court  in S.J.C.  Nos. 73-77  of 1968  dated April  27, 1970. As  all the  appeals involve  a common point they were consolidated and have been heard together.      Appeals Nos. 888-890/74 have been filed by the firm M/s Kaluram Ramkaran in respect of the assessment of tax made by the State  of Orissa  for the  quarters ending September 30, 1961, June  30, 1962  and September  30, 1962. These appeals arise out  of the judgment of the High Court given in S.J.C. Nos. 70-72/1971  dated April  11, 1973.  The High  Court  in these cases  followed its  previous judgment,  which is  the subject-matter of  the six appeals mentioned above, and held that the  levy was valid. The points of law arising in these appeals also  are identical  to the  points arising  in  the other six  appeals referred  to above,  and in  view of  the common points  of law  involved  in  all  these  appeals  we propose to dispose them of by one common judgment.      The appellant  Balabhagas Hulaschand  is a firm dealing in buying  and selling  jute and  has  its  Head  Office  in Calcutta. The firm used to purchase raw jute grown in Orissa and send the same to its buyers in the State of West Bengal. The modus operandi was that after the 942 goods  were   received  by  the  appellant  firm  they  were despatched in  bags  from  Cuttack  and  Dhanmandal  railway stations to  the Railway  Mills Siding in Calcutta. The bags were booked  in the  name of  the buyer  mills through their broker. The  goods on arrival in the Mills Railway siding at Calcutta were  inspected by  the buyer firm and if they were found to  be in accordance with the specifications mentioned in the  agreement of sale they were accepted. The appellants in appeals  Nos. 888-890/74  are a  firm dealing  in similar business with this difference that it has got its purchasing centre at  Kendupatna in the District of Cuttack, and it was from Cuttack that the goods were despatched to the buyers in West Bengal.      The transaction  of sale  was entered  into  through  a licensed broker  "East India Jute and Hessian Exchange Ltd." and  the  buyers  were  the  Managing  Agents  of  the  firm Kettlewell-Bullen &  Co., Ltd.,  Calcutta. A letter has been produced by  the parties which appears at p. 24 of the Paper Book which  forms the  contract or agreement of sale entered into between  the parties  in pursuance  of which  the goods were despatched  to the  buyer firm  at Calcutta.  Under the contract the  responsibility  in  respect  of  the  quality, moisture, shortage  in weight and risk in transit lay on the seller. It  is also not disputed that in all these appeals a concluded sale  takes place when the goods despatched in the name of  the Calcutta  firm were  ultimately accepted by the said firm  and the  price of  the said goods was paid to the appellants. On  the basis of these concluded transactions of sale the Government of Orissa levied sales tax under s. 3(a) of the  Central Sales  Tax Act,  1956, on the basis that the sales were inter-State sales and, therefore, fell within the ambit of  that section.  The assessing  authorities upto the stage of  the  Tribunal  negatived  the  contention  of  the appellants that  the sale  was merely an internal sale which took place  in the  State of  West Bengal  and not an inter- State sale. Thereafter the appellants moved the Tribunal for

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 15  

making a reference to the High Court of Orissa but failed to persuade the  Tribunal to  make a  reference. The appellants then moved  the High  Court of  Orissa under s. 24(3) of the Orissa Sales  Tax Act  to direct  the  Tribunal  to  make  a statement of  the case  to the  High Court.  Accordingly the Tribunal referred the following points for consideration:           "(1) Did title  to the  goods pass in Orissa or in                West Bengal?           (2)  Even if  title in  the goods  passed in  West                Bengal whether in the facts and circumstances                of this  case,  the  transaction  constituted                "sale in the course of inter-State trade ?"      After  considering   the  entire   evidence   and   the circumstances and  the law  on the subject the High Court by its judgment  dated April  22, 1970 negatived the plea taken by the  appellants and  held that  although the title in the goods passed  in West  Bengal and the sale took place there, since the  sale occasioned  the movement  of the  goods from Orissa to  West Bengal  it was  an  inter-State  sale,  and, therefore, it was clearly governed by s. 3(a) of the Central Sales Tax Act. Thereafter 943 the appellants  moved the  High Court, for granting leave to appeal to  this  Court,  which  having  been  rejected,  the appellants filed  an application  to this Court for grant of special leave  to appeal  and the  same having been granted, these appeals have been set down for hearing before us.      Mr. Hardy learned counsel for the appellants in Appeals Nos.  449-454/71  has  submitted  only  one  point  for  our consideration. He  has contended  that on the facts found it would appear  that the movement of goods from Orissa to West Bengal took  place in  pursuance of an agreement of sale and not in  pursuance of  the sale  itself which  actually  took place in  West Bengal,  and,  therefore,  the  sale  is  not covered by s. 3(a) of the Central Sales Tax Act and the levy made by  the State  of Orissa  was illegal.  Mr.  Ghose  who followed Mr.  Hardy and  was appearing  in appeals Nos. 888- 890/74 further  added that  the agreements  in  the  instant cases  were   merely  forward   contracts  in   respect   of unascertained and  future goods, and, therefore, fell beyond the ambit of the provisions of the Central Sales Tax Act.      Mr. Gobind  Das  appearing  for  the  State  of  Orissa repelled the  contentions of  the appellants  and  submitted that the  circumstances clearly  point out to the conclusion that  although  the  sale  took  place  in  West  Bengal  it undoubtedly occasioned  the movement of goods from one State to  another,  namely,  from  Orissa  to  West  Bengal,  and, therefore, were  clearly covered  by s.  3(a) of the Central Sales Tax Act, and the High Court was right in rejecting the contention of the appellants.      Learned counsel  for both  the  parties  have  cited  a number of  authorities of  this Court  and other High Courts before us. But before going to the authorities we would like to deal  with the  scope and  ambit of the Central Sales Tax Act and try to determine the incidents of a sale which would attract the  provisions of  s. 3(a) of the Central Sales Tax Act. Before,  however,  taking  up  this  point  it  may  be necessary to  mention the admitted circumstances in the case on which both the parties are agreed. They are-           (1)  that there  was an  agreement or  contract of                sale between  the  appellant  firms  and  the                Calcutta firms by which the appellants agreed                to sell raw jute of certain specifications of                weight and quality to the Calcutta firms;           (2)  that at  the time  when the  contract of sale

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 15  

              was entered  into, the  raw jute  was not  in                existence as it was being grown;           (3)  that after the goods were ready the same were                booked in bags by the appellants not in their                names but  in the names of the buyer firms in                Calcutta;           (4)  that the  goods were  booked from Cuttack and                Dhanmandal railway  stations in Orissa to the                Railway  Sidings   of  the   buyer  Mills  at                Calcutta; and 944           (5)  that all  the goods  which are  the  subject-                matter of  the sales  tax levy  in all  these                appeals  were   ultimately  accepted  by  the                buyers at  Calcutta and a concluded sale took                place at Calcutta in West Bengal. In  view   of  these  admitted  circumstances,  we  have  to determine the  legal position. To begin with it would appear that the  Central Sales  Tax Act was passed in the year 1956 and  before  that  there  was  some  amount  of  controversy regarding the  authority which  was to  levy tax  in case of inter-State trade.  In The  Bengal Immunity  Company Ltd. v. The State  of Bihar  and Others(1),  Venkatarama Ayyar,  J., speaking for the Court quoted Rottschaefer on Constitutional Law (1939  Edition) where  sale in the course of inter-State commerce was defined thus: (p. 785):           "The activities  of buying  and selling constitute      inter-State  commerce   if   the   contracts   therefor      contemplate or  necessarily  involve  the  movement  of      goods in inter-State commerce."      The learned Judge also observed in that case:           "A sale  could be  said to  be in  the  course  of      inter-State trade  only if two conditions concur: (1) A      sale of  goods, and (2) a transport of those goods from      one State to another under the contract of sale. Unless      both these  conditions are  satisfied, there  can be no      sale in the course of inter-State trade." This Court, therefore, accepted the ingredients of an inter- State sale.      It appears  that soon  after the decision in the Bengal Immunity Company  Ltd’s case(1)  was handed down it received statutory recognition in the shape of s. 3(a) of the Central Sales Tax Act, which was enacted by the Parliament to remove any doubts or misgivings regarding the competence of a State Legislature to  levy tax  on inter-State sales. Section 2(g) of the Central Sales Tax Act defines "sale" thus:           "’sale’,  with   its  grammatical  variations  and      cognate expressions,  means any transfer of property in      goods by one person to another for cash or for deferred      payment or  for any  other valuable  consideration, and      includes a  transfer of  goods on  the hire-purchase or      other system  of payment  by instalments,  but does not      include a  mortgage or  hypothecation of or a charge or      pledge on goods;" Analysing this definition it would appear that it postulates the following conditions:           (i)  there must be a transfer of property in goods                by one person to another; 945           (ii) the transfer must be for cash or for deferred                payment   or    for   any    other   valuable                consideration; and           (iii)that such  a transfer  includes a transfer of                goods on the hire-purchase or other system or                payment by instalments, etc.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 15  

It would  thus be seen that the word ’sale’ has been given a very wide  connotation by  the Parliament  so as  to include within its  fold not  only sales  of goods which are usually known in common parlance but also transactions which legally cannot be called sales, for instance, a transfer of goods on the hire-purchase system. It seems to us that the Parliament wanted to  give the  widest amplitude to the word ’sale’ and that is  why, while  in s.  3 the words ’sale of goods’ have been used  in s.  4(2) clauses (a) & (b) which deal with the situs of  the sale  the words  ’contract of  sale’ have been used in  the same  sense. In  other words,  the word  ’sale’ defined in  clause (g)  of s.  2 and  used in s. 3 and other sections is  wide enough  to include  not only  a  concluded contract of  sale but  also a  contract or agreement of sale provided the  agreement of  sale stipulates that there was a transfer of  property or movement of goods. In The Sales Tax Officer, Pilibhit  v. Budh  Prakash Jai  Prakash(1)  quoting Benjamin on  Sale, (8th  Edn.) Venkatarama  Ayyara, J.,  who spoke for the Court observed as follows:           " "The distinction between a sale and an agreement      to sell  under Section  1 of  the English  Act is  thus      stated by Benjamin on ’Sale’, Eighth Edition, 1950:-           "In order to constitute a sale there must be-           (1)  An agreement  to sell,  by  which  alone  the                property does not pass; and           (2)  an actual sale, by which the property passes.           It will  be observed  that  the  definition  of  a      contract of  sale above cited includes a mere agreement      to sell as well as an actual sale."           This distinction  between sales  and agreements to      sell based  upon the  passing of  the property  in  the      goods is  of great importance in determining the rights      of parties under a contract." It would  thus appear  that this  Court clearly held that an agreement to  sell by  which the  property did  not actually pass was also an element of sale. Of course in that case the Court had  to decide  a different  point, namely, whether it was within  the competence of a State Legislature to tax not a sale  but even  an agreement  to sell where an actual sale had  not  taken  place.  This  Court  held  that  the  State Legislature was  not competent to make such a levy under any statute passed by it 946      Section 3 of the Central Sales Tax Act, 1956 runs thus:           "3. A sale or purchase of goods shall be deemed to      take place  in  the  course  of  inter-State  trade  or      commerce if the sale or purchase-           (a)  occasions the  movement  of  goods  from  one                State to another; or           (b)  is effected  by a  transfer of  documents  of                title to the goods during their movement from                one State to another." Section 3  consists of  two clauses. But in the instant case we are  not concerned  with clause  (b) but only with clause (a). Analysing  clause (a)  of s. 3 of the Central Sales Tax Act it  would  appear  that  before  s.  3  can  apply,  the following facts must be established:           (i)  that there  is a  sale or  purchase of goods;                and           (ii) that the sale occasions the movement of goods                from one State to another. If these  two conditions  are satisfied  the sale becomes an inter-State sale  on which  tax could  be levied  under  the Central Sales Tax Act.      The serious  question that  arises for consideration in

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 15  

this case is whether or not the term ’sale of goods’ as used in s.  3 includes  an agreement to sell. It has already been pointed out  that an  agreement to  sell is  undoubtedly  an element of  sale. In  fact a  sale consists of three logical steps-(i) that  there is  an offer;  (ii) that  there is  an agreement to sell when the offer is accepted; and (iii) that in pursuance  of the  said agreement  a concluded sale takes place. When  the statute uses the words "sale or purchase of goods" it  automatically attracts  the definition of sale of goods as  given in s. 4 of the Sale of Goods Act. 1930 which is a  statute passed  by the  same Parliament and is to some extent in  pari materia  to the Central Sales Tax Act so far as transaction  of sale  is concerned. Section 4 of the Sale of Goods Act runs thus:           "4. (1)  A contract of sale of goods is a contract      where by the seller transfers or agrees to transfer the      property in  goods to  the buyer for a price. There may      be a  contract  of  sale  between  one  part-owner  and      another.           (2)  A  contract   of  sale  may  be  absolute  or                conditional.           (3)  Where under  a contract  of sale the property      in the  goods is  transferred from  the seller  to  the      buyer, the  contract is  called a  sale, but  where the      transfer of  the property in the goods is to take place      at  a   future  time   or  subject  to  some  condition      thereafter to  be fulfilled,  the contract is called an      agreement to sell.           (4)  An agreement  to sell becomes a sale when the      time elapses or the conditions are fulfilled subject to      which the property in the goods is to be transferred." 947 Section 4(1), therefore, clearly provides that a contract of sale  of  goods  includes  also  an  agreement  to  transfer property in  goods to  the buyer for a price. The inevitable conclusion that  follows from  the combined  effect  of  the interpretation of s. 3 of the Central Sales Tax Act and s. 4 of the  Sale of  Goods Act  is that  an agreement to sell is also an  essential ingredient of sale provided it contains a stipulation for  transfer of  goods from  the seller  to the buyer. This  being the  position if  there is  a movement of goods from  one State  to another,  not in  pursuance of the sale itself, but in pursuance of an agreement to sell, which later merges  into a  sale, the  movement of  goods would be deemed to  have been  occasioned by the sale itself wherever it takes  place. In  this view of the matter the question as to whether  agreement to  sell was  a forward  contract or a contract in respect of unascertainable or future goods would make no  difference for  the simple  reason that when once a sale takes  place, or  for that  matter when the goods start moving from  one  State  to  another  in  pursuance  of  the agreement to sell they cease to be future goods because they are in  existence and  they become  also ascertainable.  The argument of  the learned  counsel for the appellant is based on a  clear fallacy  because it  seeks to draw an artificial distinction between  a contract  of  sale  of  ascertainable goods and  a contract  of sale  of unascertainable or future goods. This  argument fails  to take  note of  the fact that when the movement of the goods start they shed the character of either unascertained goods or future goods. Hence for the purpose of  application of  s. 3(a) of the Central Sales Tax Act the  question whether the contract is a forward contract or not makes no material difference.      Further more,  we can hardly conceive of any case where a sale  would take  place  before  the  movement  of  goods.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 15  

Normally what  happens is  that there  is a contract between the two  parties in  pursuance of  which the  goods move and when they  are accepted and the price is paid the sale takes place. There  would, therefore,  hardly, be any case where a sale would take place even before the movement of the goods. We would  illustrate  our  point  of  view  by  giving  some concrete instances:      Case No. I-A is a dealer in goods in State X and enters into an  agreement to  sell his  goods to  in  State  X.  In pursuance of the agreement A sends the goods from State X to State Y  by booking  the goods  in the  name of B. In such a case it is obvious that the sale is preceded by the movement of the goods and the movement of goods being in pursuance of a contract  which eventually merges into a sale the movement must be  deemed to  be occasioned  by the  sale. The present case clearly falls within this category.      Case No.  II.-A who  is a  dealer in  State X agrees to sell goods to B but he books the goods from State X to State Y in  his own  name and  his agent  in State  Y receives the goods on  behalf of A. Thereafter the goods are delivered to B in  State Y  and if  B accepts them a sale takes place. It will be  seen that  in this  case the  movement of  goods is neither in  pursuance of  the agreement  to sell  nor in the movement occasioned  by the  sale. The  seller himself takes the goods to 948 State Y and sells the goods there. This is therefore, purely an internal  sale which  takes place  in State  Y and  falls beyond the  purview of  s. 3(a) of the Central Sales Tax Act not being an inter-State sale.      Case No.  III-B a purchaser in State Y comes to State X and purchases  the goods  and pays  the price thereof. After having purchased  the goods  he then  books the  goods  from State X  to State  Y in  his own  name. This  is also a case where the sale is purely an internal sale having taken place in State  X and  the movement  of goods is not occasioned by the sale  but takes place after the property is purchased by B and becomes his property.      Generally these  are the  only type  of cases  that can occur in  the day  to day  commercial transactions.  It  is, therefore, manifest  that there  can hardly  be a case where once a  sale takes  place the  movement is subsequent to the sale. Mr.  Hardy was  unable to cite a single instance where such a  contingency could arise and he accordingly submitted with his  usual fairness  that if no such contingency arose, then s.  3(a) of  the Central  Sales Tax  Act will  have  no application and  the levy  cannot be  made. We are unable to accept this  contention because  it is  well settled  that a statutory provision  cannot be  interpreted in  a way  which defeats the  very object  of the  Act. It  is  equally  well settled  that  the  Legislature  does  not  waste  words  or introduce useless or redundant provisions. In Indian Chamber of Commerce v. C.I.T. West Bengal II, Calcutta(1) a Division Bench of  this Court to which I was also a party observed as follows:           "Section 2(xv)  must  be  interpreted  in  such  a      manner that  every word  is given  a meaning and not to      treat any expression as redundant or missing the accent      of the amendatory phrase." In view  of these  circumstances we cannot hold that s. 3(a) of the Central Sales Tax Act was redundant or would apply to contingencies  which   may  not  happen  at  all.  In  these circumstances, therefore, the conclusions at which we arrive may be summarised as follows:      (1) That  the word  ’sale’ appearing in s. 2(g) as also

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 15  

in s.  3(a)  of  the  Central  Sales  Tax  Act  includes  an agreement to  sell also provided the said agreement contains a stipulation regarding passing of the property. Even in the Bengal  Immunity  Company  Ltd’s  case  (supra)  this  Court observed thus:           ".... the  expression "contract  of sale"  in this      context has  the same meaning as the words "contract of      buying and  selling" in  the definition  of inter-State      commerce given  by Rottschaefer  in the passage already      quoted, and they both refer to the bargain resulting in      the sale  irrespective of whether it is in the stage of      an agreement  to sell, or whether it is a sale in which      title to the goods has passed to the purchaser. That is      also the  definition of  "contract of  sale" in section      5(1) of the Indian Sale of Goods Act." 949      (2) That  the following  conditions must  be  satisfied before a  sale can  be   said to take place in the course of inter-State trade or commerce:           (i)   that there  is an  agreement to  sell  which                contains a  stipulation   express or  implied                regrading the  movement of the goods from one                State to another;           (ii) that  in pursuance  of the  said contract the                goods in fact move form one State to another;                and If these  conditions are satisfied then by virtue of s. 9 of the Central  Sales Tax  Act it  is the  State from which the goods move which will be competent to levy the tax under the provision of  the Central Sales Tax Act. This proposition is not, and  cannot, be disputed by the learned counsel for the parties.      Lastly another aspect of the matter is that in order to determine whether  a sale  has taken  place in the course of inter-State  trade   or  commerce   the  matter  has  to  be approached only  after a  concluded sales  has  taken  place because unless  the sale  takes place  or in other words the agreement to  sell merges into a concluded sale the question regarding the application of the   provisions of the Central sales Tax  Act does  not arise at all because the  tax is on sale and not on an agreement to sell or a forward contract.      Finally if  all  these  conditions  are  satisfied  the question whether  the agreement  to sell  is in  respect  of ascertained  or  unascertained  goods,  existing  or  future goods,  makes   no  difference  whatsoever  so  far  as  the interpretation of  s. 3(a)  of the  Central Sales Tax Act is concerned.      Applying these  principles  let  us  see  what  is  the position in  the present appeals? The letter at p. 24 of the Paper Book  in Civil  Appeals Nos.  449-454/71 which  may be quoted in extenso runs thus:      "THE EAST INDIA JUTE & HESSIAN EXCHANGE LTD., CALCUTTA      Transferable Specific Delivery Contract for Raw Jute.                                      Calcutts 1st April 1960 No. S.G.M./16/21 To      Messrs Balabhagas Hulaschand      161/1, Mahatma Gandhi Road, Calcutta. Dear Sirs,      We  have,   subject  to   the  terms   and   conditions hereinafter referred  to, this d ay sold to M/s Fort Gloster Industries Ltd., New Mill 950 M/Agents M/s  Kettlewell Bullen  & Co.  Ltd., Cal.,  by your order and  on your  account, the  following goods  which are

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 15  

Jute:- Crop 1959-1960  .      .    .   .    1400 (one thousand four Cuttuck; Dhanmandal .   .   .    hundred only) maunds of the      White Jute.                 mark, assortment and                                   quality  as per margin and                                  in sound dry storing 748 mds. Bot @ Rs.34/- per md. . condition at the rate of:- 748 mds. Bot @ Rs.34/- per md. . Rupees Thirty four only for 652 mds. Bot @ Rs.32/- per md. . white B. Br. jute.- __________ 1400 mds.                         Rupees thirty two only for      Marks: B.H..   .   .   .    white Jute Bot. free to Jute Bales of:- .   .   .   .    buyer’s mill, siding and/or 1 1/2  to 5  mds. .   .   .   .    ghat. Weight guarantee at                                  buyers’ mill. Delivery to     .   .   .   .    Fort Gloster, New Mill. Shipment or despatch during .    April: May 1960. Payment:-        .   .   .   .    90% Cash against documents                                  and rest on approval. Arbitration     .   .   .   .    M/s Bengal Chamber of                                  Commerce Industry L. M. D. Re-weighment     .   .   .   .    As per rules of M/s Bengal                                  Chamber. Insurance       .   .   .   .    M/s. Marine & General                                  insurance Co. Ltd. Cal.           "The foregoing  terms and  conditions as  well  as      other terms  and conditions applicable to this contract      are as per the terms and conditions of the transferable      Specific Delivery  Contract for  Raw jute  of the  East      India Jute  & Hessian  Exchange Ltd., Calcutta, and are      subject to the Bye-Laws of that Exchange for trading in      Transferable Specific  Delivery Contracts  for Raw Jute      in force for the time being.      Brokerage at one per cent.                                            Yours faithfully,                                  Shree Gopalji Sahay Meghraj                                              Sd./- Illegible                                              Licensed Broker                 The East India Jute & Hessian Exchange Ltd." It is  conceded by  counsel for  the  appellants  that  this letter or other letters in identical terms form the basis of the contracts  of sale.  The  first  part  of  the  contract clearly mentions that the goods have been sold by the seller to the  buyer. But of course that does not make the letter a concluded sale because the letter read as a whole would show that it is in respect of some future goods which have yet to be grown.  We are, however, unable to agree with the learned counsel for  the appellant  that this contract is in respect of unascertained goods because the quality and the colour of the jute,  the weight,  the price, the markings etc. are all mentioned in  the contract. Therefore the goods are no doubt ascertainable and  must be  according to  the specifications mentioned in  the agreement.  This contract was entered into on April  1, 1960  and in  some appeals  a little  later.  A perusal of this contract 951 also shows  that the  appellant undertook  to send the goods from Cuttack  to the buyers’ Mills siding in Calcutta and it is not  disputed that  after the jute was ready it was to be booked in  bags from railway stations in Orissa to the Mills Siding of  the buyer  in Calcutta.  It is,  therefore, clear that the  goods moved  in pursuance  of  the  terms  of  the agreement  from  the  seller  in  Orissa  to  the  buyer  in Calcutta. It  is also  clear that  the movement of the goods from Orissa  to West  Bengal forms  a clear  stipulation  or

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 15  

incident of  the  agreement  to  sell.  The  agreement  also provides that there has been a transfer of property from the seller to  the buyer  which is  the effect of the first para referred to  above. It  is also  not disputed that after the goods reached  Calcutta they  were finally  accepted by  the buyers and  a concluded  sale took  place in Calcutta in the State of  West Bengal.  In view of these circumstances there can be  no manner  of doubt  that the  sale  falls  squarely within s.  3 (a)  of the Central Sales Tax Act and since the goods moved  from the  State of  Orissa it  is the  State of Orissa alone  which is  competent to levy the tax under s. 9 of the Central Sales Tax Act.      We shall  now discuss  the various authorities cited by counsel for the parties to show that the view taken by us in this case  is amply  supported by a long catena of decisions of this  Court handed  down during the last two decades. The learned counsel  for the  appellant heavily  relied  on  the observations  made  by  the  Madras  High  Court  in  Cement Distributors (P)  Ltd. v.  Deputy  Commercial  Tax  Officer, Lalgudi & Ors.(1):           "Thus if  the goods  are unascertained, then until      it is  appropriated to the contract by a known process,      sale is not complete. Central sales tax is not leviable      by the despatching State in such cases, notwithstanding      inter-State  movement   of  the   goods,  as  they  are      considered in section 4 as "out-of-State." To begin  with, this case has no application to the facts of the  present  case,  because  the  decision  in  the  Cement Distributors (P)  Ltd.’s case  (supra) was  governed by  the provisions of s. 4 of the Central Sales Tax Act and the High Court of  Madras came  to a finding that the sale was not at all complete,  in view  of the  fact  that  the  goods  were unascertained. Further  more, the  decision was given on the peculiar facts  in that case by which the branch at Calcutta had merely  been authorised by the State Trading Corporation of India  Ltd to  receive the  goods despatched  and  it  is doubtful whether there was a complete transaction of sale in that case. If however, that case is taken to be an authority for the  proposition that  where the goods are unascertained and even  if there  is an  inter-State movement of goods the sale is not an inter-State sale, we find ourselves difficult to agree  with that view which is not in consonance with our interpretation of  the provisions  of the  Central Sales Tax Act.      The appellant  then relied  on another  decision of the Madras High  Court in  Larsen and  Toubro  Ltd.  Madras-2  & others v.  Joint Commercial  Tax Officer(2).  To begin with, this case appears to have been 952 overruled by  this Court  in The  State of  Madras v.  N. K. Nataraja Mudaliar(1)  on another  point.  Even  so,  we  are unable to  see how  this case  is of  any assistance  to the appellant. Veeraswami,  J., as he then was, speaking for the Court, observed as follows:           "The essential  tests of a sale or purchase in the      course of  inter-State trade, commerce and inter-course      or import  into or export out of the territory of India      are, (1)  whether there  is movement  of goods from one      State to  another or  into or  out of  the territory of      India, (2)  whether such  movement is occasioned by the      contract of  sale or  purchase  and  (3)  alternatively      whether, during  such movement, the sale or purchase is      effected by  transfer of  documents  of  title  to  the      goods." The learned Judge also observed:

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 15  

         "A sale  could be  said to  be in  the  course  of      inter-State trade  only if two conditions concur: (1) A      sale of  goods, and (2) a transport of those goods from      one State to another under the contract of sale. Unless      both these  conditions are  satisfied, there  can be no      sale in the course of inter State trade." Thus the  ratio laid  down  by  the  Court  is  entirely  in consonance  with   the  view   taken  by  us  regarding  the conditions of an inter-State sale.      Reliance was  also placed  on Tata  Iron and  Steel Co. Ltd. v.  S.R. Sarkar  and Others(2)  where Shah,  J.,  while delivering the  majority judgment  of the Court, observed as follows:           "In our  view, therefore,  within cl.  (b) of s. 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 document  of title thereto:      cl. (a) of s. 3 covers sales, other than those included      in cl.  (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." Sarkar, J.,  who gave  a  dissenting  judgment  observed  as follows: (pp. 407 & 408)           "The  question  then  arises,  when  does  a  sale      occasion the movement of goods sold ? It seems clear to      us that  a sale  can occasion the movement of the goods      sold only  when the  terms of the sale provide that the      goods would  be moved; in other words, a sale occasions      a movement  of goods  when  the  contract  of  sale  so      provides."           "We have  then come  to this  that cl. (a) of s. 3      contemplates  a   sale  where   the  contract  of  sale      occasions the movement of the goods sold and cl. (b), a      sale where transfer of 953      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 document  of title      must be transferred during such movement."      In State  Trading Corporation of India Ltd. v. State of Mysore(1) this Court observed as follows:           "Since the  permits with  which we  are  concerned      provided that  the supply  had to  be made  from one or      other factory  situate outside  Mysore,  the  contracts      must be  deemed to  have contained  a covenant that the      goods would  be supplied in Mysore from a place situate      outside its borders. A sale under such a contract would      clearly be  an inter-State  sale as defined in s. 3 (a)      of the Central Sales Tax Act."      Similarly in  Tata Engineering & Locomotive Co. Ltd. v. The Assistant  Commissioner of  Commercial Taxes  &  Anr.(2) while describing  the incidents of an inter-State sale, this Court observed as follows:           "A sale being transfer of property becomes taxable      under s.  3(a) ’if the movement of goods from one State      to another  is under  a covenant  or  incident  of  the      contract of sale’."      The same  view was  taken in  a later  decision of this Court in  M/s Kelvinator  of India  Ltd.  v.  The  State  of Haryana(3) where Khanna, J., speaking for the Court observed as follows:           "It is  also plain  from the  language of  Section      3(a) of  the Act  that the  movement of  goods from one

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 15  

    State to  another must be under the contract of sale. A      movement of  goods which takes place independently of a      contract of sale would not fall within the ambit of the      above clause. Perusal of Section 3 (a) further makes it      manifest  that   there  must  be  a  contract  of  sale      preceding the  movement of  the goods from one State to      another, and  the movement  of goods  should have  been      caused by  and be  the result of that contract of sale.      If there was no contract of sale preceding the movement      of goods, the movement can obviously be not ascribed to      a contract of sale nor can it be said that the sale has      occasioned the  movement of goods from one State to the      other." In that  case, however, on the facts found by the High Court this Court  held that  the sale  was not an inter-State sale but an internal sale which took place in Delhi. In that case there was no movement of the goods from one State to another in pursuance  of the  contract of  sale. In other words, the facts of  this case  clearly fell  within Case No. II, which has been described by us, above.      To the same effect is the recent decision of this Court in The  State of  Tamil Nadu  v. The Cement Distributors (P) Ltd. and  Others(4) in  which reliance  was  placed  on  the earlier decision  of this  Court in  Tata Iron and Steel Co. Ltd. v. S. R. Sarkar & Ors. (supra). 954      In oil  India Ltd.  v. The  Superintendent of Taxes and Others (1),  while lucidly  describing the  incidents of  an inter-State sale, Mathew, J., observed as follows:           "This Court  has held in a number of cases that if      the movement  of goods from one State to another is the      result of  a covenant or an incident of the contract of      sale, then the sale is an inter-State sale. x x x x x x           Even though Clause 7 of the supplemental agreement      does not  expressly provide  for movement of the goods,      it is  clear that the parties envisaged the movement of      crude oil  in pursuance  to the contract from the State      of Assam  to the  State of  Bihar. In  other words, the      movement of  crude oil  from the  State of Assam to the      State of Bihar was an incident of the contract of sale.      No matter  in which  State the  property in  the  goods      passes, a sale which occasions "movement of goods" from      one State  to another is a sale in the course of inter-      State trade.  The  inter-State  movement  must  be  the      result of a covenant express or implied in the contract      of sale  or an  incident of  the contract.  It  is  not      necessary that  the sale  must precede  the inter-State      movement in  order that  the sale may be deemed to have      occasioned such  movement. It is also not necessary for      a sale  to be  deemed to have taken place in the course      of inter-State  trade or  commerce, that  the  covenant      regarding inter-State movement must be specified in the      contract itself. It would be enough if the movement was      in pursuance  of and  incidental  to  the  contract  of      sale."      We might mention here that the case cited above appears to be  on all  fours with  the facts of the present case. In that case  also the  goods were supplied from Assam to Bihar through the  pipelines in  Assam to  Barauni in  Bihar. This Court observed that no matter in which State the property in goods passes the sale undoubtedly occasioned movement of the goods which  was sufficient  to bring  the case  within  the ambit of s. 3(a) of the Central Sales Tax Act.      Thus  the  authorities  discussed  above  by  us  fully support the  principles and  the ratio  laid down  by us. We

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 15 of 15  

have already  pointed out  that even  though the  sale  took place at Calcutta, as rightly found by the High Court, since the movement  of goods preceded the sale in pursuance of the contract of  sale which  contained a  clear stipulation that the goods  were to  move from  Orissa to  Calcutta  in  West Bengal, the  movement of  goods was  occasioned by  the sale itself which took place in Calcutta. In these circumstances, therefore, the  High Court  was legally justified in holding that in  all these appeals the cases were clearly covered by the provisions of s. 3(a) of the Central Sales Tax Act.      We, therefore, find no merit in these appeals which are accordingly dismissed,  but in the circumstances without any order as to costs. S.R.                                      Appeals dismissed. 955