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PETITIONER: IYANAHALLI BAKKAPPA & SONS.

       Vs.

RESPONDENT: STATE OF MYSORE

DATE OF JUDGMENT29/10/1971

BENCH: REDDY, P. JAGANMOHAN BENCH: REDDY, P. JAGANMOHAN VAIDYIALINGAM, C.A. MATHEW, KUTTYIL KURIEN

CITATION:  1971 AIR 2598            1972 SCR  (2) 213

ACT: Mysore  Sales Tax Act, 1957--Sale of safety matches  taxable under s. 5(3) (a) on first or earliest of successive dealers in  State of Mysore--On facts of case whether  assessee  was first of successive dealers in State of Mysore.

HEADNOTE: The  appellant declared for the assessment years  1959-60  a total turn-over of Rs. 13,04,097 in respect of the  purchase of  safety  matches  and claimed  exemption  on  the  entire turnover  on the ground that it was a subsequent  sale  from the  dealers  in the State of Mysore.  During  the  relevant assessment year sale of matches was taxable under s. 5(3)(a) of  the Mysore Sales Tax Act, 1957 on the first or  earliest of the successive dealers in the State of Mysore.  The modus operandi  of the appellant in purchasing these  matches  was that  it  placed  orders  with  the  sales  depots  of   the manufacturers  inside  Mysore.  The Managers of  the  depots forwarded  the orders to the principles who has  their  head office at Sivakasi outside the State of Mysore.  The matches were thereafter despatched by the principal to the appellant in accordance with the instructions received from the  Sales Depots.   The Sales Depots sent the appellant  detailed  in- voices  of the matches despatched by their  factories.   The appellant  gave  credit to the value of  the  matches  after deducting  therefrom  the amount covered by debit  notes  in respect  of  Octroi,  lorry  freight  and  other  incidental charges  incurred  by  it and at the request  of  the  sales office  the  appellant  remitted the value  of  the  matches direct  to  the factory by means of  draft  and  telegraphic transfer.  The appellant’s contention was that it  purchased the  matches from the sales depots inside Mysore  State  who were the first sellers of the matches in the State of Mysore liable  to tax and the appellant being the second dealer  in the  State  was not liable to tax in respect of  its  sales. The  assessing  authority came to the  conclusion  that  the transactions were inter-State sales within the meaning of s. 3(a)  of the Central Sales Tax Act and since  the  appellant was  the  first  dealer in matches in Mysore  State  it  was liable  to  pay sales tax.  The appellant’s appeals  to  the Deputy Commissioner of Commercial Taxes, and to the Tribunal were  unsuccessful.   The High Court rejected  the  revision

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petition filed by the appellant.  In appeal to this Court, HELD : From the facts the sales were made by the  respective factories direct to the appellant.  The sales price was also sent  directly to the. factories at Sivakasi.  No doubt  the orders  were  routed  through the sales depot  but  on  that account it could not be said that the factory sold the goods ordered  by  the  appellant  to its  sales  depot.   It  was inconceivable  that  there  could  be  a  sale  between  the manufacturer and its Sales Depot. [215 E-G] The  transactions in question under explanation 3(a)  to  s. 2(t) of the Mysore Act were the first sales in favour of the appellant  and they took place in the State of Mysore.   The decision in the case of Ram Narain & Sons, if applied to the facts  of  the present case, would indicate that  the  first sale by the Sivakasi firms was in Mysore.  In that view, the question  of inter State sale not being urged  as  necessary for  consideration,  it was rightly held by the  High  Court that   the  sales  in  question  fell  within  cl.  (a)   of Explanation  3  of s. 2(t) of the Act.  As Such  the  appeal must be dismissed. [216 E, 217 D-E] 214 Ram  Narain  & Sons v. Asstt.  Commissioner of Sales  tax  & Ors., [1955] 2 S.C.R. 483, discussed.

JUDGMENT: CIVIL  APPELLATE  JURISDICTION : Civil Appeal  No.  1175  of 1967. Appeal from the judgment and order dated September 30,  1966 of the Mysore High Court in S.T.R.P. No. 58 of 1965. R. Gopalakrishnan, for the appellant. A. R. Somanatha Iyer, M. S. Narasimhan and R. B. Datar, for -..the respondent. The Judgment of the Court was, delivered by P.  Jaganmohan  Reddy,  J. This  Appeal  is  by  certificate against the judgment of the Mysore High Court dismissing the Revision Petition against the order of the Mysore Sales  Tax Appellate Tribunal, by and under which the assessment  order of the Commercial Tax Officer and the Appellate order of the Deputy  Commissioner of Commercial Tax was  confirmed.   The question of law which arose out of the decision of the Sales Tax  authorities  for consideration of the High  Court  was" whether  on  the  facts and circumstances of  the  case  the assessee’s-  turn-over in respect of safety matches  is  not liable to tax on the ground ,that the sales effected by  the assessee  are  not  the  first  sales  in  the  State."  The appellants declared for the assessment year 1959-60 a  total turn-over  of Rs. 13,04,097/- in respect of the purchase  of safety matches and claimed exemption on the entire  turnover on  the  ground  that  it was a  subsequent  sale  from  the ,dealers  in  the  State of  Mysore.   During  the  relevant assessment year sale of matches was taxable under sec. 5  (3 ) (a) of the Mysore Sales Tax Act, 1957 (hereinafter  called the  Act)on the first or earliest of the successive  dealers in  the State of Mysore. The appellants contention was  that it  purchases  the  matches from the  Sales  Depots  of  the National  Match  Works, Lakshmi Match Works  and  Palaniappa Match Industries at Devangere who were the first sellers  of matches  in the State of Mysore liable to tax and  that  the appellant  was the second dealer in the State not liable  to tax in respect of its sales. The  Modus  operandi of the appellant  in  purchasing  these matches  was that it placed orders with the aforesaid  Sales Depots  of M/s.  National Match Works, Lakshmi  Match  Works

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and  Palaniappa Match Industries at Devangers, which  Depots are  registered dealers under the Act.  On receipt of  these orders  from  the Appellant the respective Managers  of  the three Sales Depots forward the orders to their Head  Offices at  Sivakasi  and  instruct them  to  despatch  the  matches ordered  direct to the appellant at Devangere.  The  matches are thereafter despatched by  215 lorry  to the Appellant in accordance with the  instructions received  from the Sales Depots.  The Sales Depots  send  to the appellant detailed invoices of the matches despatched by their  factories The Appellant gives credit to the value  of the matches after deducting therefrom the amount covered  by debit  notes in respect of Octroi, lorry freight  and  other incidental charges incurred by it and at the request of  the sales  office the assessee remits the value of  the  matches direct  to  the factory by means of  draft  and  telegraphic transfer.   On these findings the correctness of  which  was not disputed the assessing authority came to the  conclusion that  the  transactions were inter-State  sales  within  the meaning  of  ’Sec. 3 (a) of the Central Sales  Tax  Act  and since  the  appellant  was the first dealer  in  matches  in Mysore State it was liable to pay Sales Tax and accordingly, it  was so assessed.  Against the said assessment order  the appellant  filed  an appeal to the  Deputy  Commissioner  of Commercial  Taxes  who dismissed the  appeal.   The  further appeal to the Tribunal was equally unsuccessful. Before  us it is contended by the learned Advocate  for  the appellant  relying upon the despatch advice, delivery  notes and invoices issued in the name of the assessee in which the Sales Tax @ 2% was charged that the sale by the manufacturer at Sivakasi was effected in favour of their respective sales Depots  in  Mysore  and  it  is  only  thereafter  that  the appellants purchased from these Sales Depots the matches and cannot  therefore be treated as the first purchaser  in  the Mysore  State.   It appears to us on the facts  as  set  out above which were not in dispute, the sales were made by  the respective  factories  direct to the  appellant,  the  sales price  was also sent directly to the factories at  Sivakasi. No doubt the orders were routed through the Sales Depot  but on that account it cannot be said that the factory sold  the goods ordered by the appellant to its Sales Depot.  It  does not  appear  that  the content-ion  based  on  the  invoices showing  that the Sales Tax was charged by the  Sales  Depot was  urged before any of the authorities or before the  High Court nor was there any finding on this aspect as is evident from the facts found by the Sales Tax authorities which were not in dispute.  It is also inconceivable that there can  be a sale between the manufacturer and its Sales Depot. It  is not disputed that under the provisions of the Act  it is  the  first sale in the State that is  exigible  to  tax. Sale is defined in sec. 2(t) of the Act as follows: -               "Sale’ with all its grammatical variations and               cognate  expressions means every  transfer  of               the property in goods by one person to another               in the course of trade 216 or  business  for  cash or for deferred  payments  or  other valuable  consideration,  but does not  include  a  mortgage hypothecation, charge or pledge". Explanation  (3)  to this definition which  is  relevant  is given below:-               (a)  The  sale or purchase of goods  shall  be               deemed  for the purpose of this Act,  to  have               taken place in the State wherever the contract

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             of  sale or purchase might have been made,  if               the goods are within the State               (I)  In  the case of specific  or  ascertained               goods,  at  the time the contract or  sale  or               purchase is made; and               (II)  in the case of unascertained  or  future               goods,  at the time of their appropriation  to               the contract of sale or purchase by the seller               or by the purchaser, whether the assent of the               other  party  is prior or subsequent  to  such               appropriation". It   is  apparent  from  the  above  provisions   that   the transactions  in  question under explanation  3(a)  are  the first  sales in favour of the appellant and they took  place within the State of Mysore.  The learned advocate relies  on the  decision  in  Ram  Narain  &  Sons  v.  The   Assistant Commissioner  of Sales-Tax & Others(1), for  the  contention that in similar circumstances the sale was said to have been affected  to  the depots and consequently the  sale  to  the assessee  was  the  second  sale  and  is,  therefore,   not assessable  to  tax.   The High  Court,  before  which  this decision  was  cited, did not rely upon it because  it  felt that  it  was not possible to ascertain  whether  under  the statute   this  Court  was  called  upon  to  consider   the definition  of sale similar to that contained in  section  2 (t)  of  the Act.  It is true that in that case  while  this Court  was considering the question whether the  sales  were inter-State sales or inside sales, the definition of  ’sale’ under the Madhya Pradesh Sales Tax Act was not  specifically referred  to  or  examined.  A  perusal  of  that  decision, however, would show that what this Court was considering was whether the transactions fell within the definition of  sale contained  in explanation 11 to section 2(g) of  the  Madhya Pradesh  Sales  Tax Act and that so far  as  the  post-Cons- titution period was concerned, whether they were saved  from the  ban of Article 286(1) (a) and the explanation  thereto, by  the President’s order made under the proviso to  Article 286(2).   The Advocate General of Madhya Pradesh, no  doubt, urged that the (1) [1955] (2) S.C.R. 483.  217 transactions  were  pure inside sales entered  into  by  the assessees in Madhya Pradesh on orders received by them  from outside  the State, and accepted by the petitioners in  that State.    It  was  also  contended  that  the   goods   were appropriated to the contracts, and the property in the goods passed within the State of Madhya Pradesh, as such the sales were inter-State sales or inside sales which, it was  within the  competence of the State of Madhya Pradesh to tax.   The facts  disclosed that the assessees manufactured  beedis  in Madhya  Pradesh.  They had various sales depots in U.P.  and other  State and also had selling agents through  whom  they sold  their goods.  Apart from affecting sales  through  the said agencies. they also sold direct to customers who placed orders  with them.  The question was whether some or all  of those  sales took place in Madhya Pradesh or in U.P. and  it was  held that having regard to the transactions in  respect of all the aforesaid categories of sales, they were affected in  U.P.  We are unable to appreciate how this  case  really assists the appellants.  On the other hand, it would  appear that the sale by the assessee was affected in U.P., which if applied  to the facts in this case, would indicate that  the first  sale  by the Sivakasi firms was in Mysore.   In  that view,  the question of inter-State sale not being  urged  as necessary for consideration, it was rightly held by the High

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Court  that the sales in question fell within clause (a)  of explanation  (3)  of section 2(t) of the Act; as  such  this appeal is dismissed but in the circumstances, without costs. G. C.                            Appeal Dismissed. 5--L256SupCI/72 218