Full Judgment Text
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PETITIONER:
AMRITSAR SUGAR MILLS CO. LTD.
Vs.
RESPONDENT:
COMMISSIONER OF SALES TAX, U.P.
DATE OF JUDGMENT:
13/12/1965
BENCH:
SIKRI, S.M.
BENCH:
SIKRI, S.M.
SUBBARAO, K.
SHAH, J.C.
CITATION:
1966 AIR 1242 1966 SCR (3) 45
ACT:
Uttar Pradesh Sales Tax Act, 1948-- S. 5--Contract to
communicate later, by buyer, place of delivery-Delivery to
another Person outside State-if rebate, admissible-Uttar
Pradesh Sales Tax (Temporary) Rules, 1948.
HEADNOTE:
The assessee-sugar mill sold sugar to parties who carried on
business inside the State of Uttar Pradesh, but the sugar
was despatched to stations outside the State of Uttar
Pradesh and delivered to another party in compliance with
the instructions issued by the buyers. Under the contract
entered between the assessee and the buyer, the assessee was
to deliver the sugar at places to be communicated by the
buyer. The assessee-mill claimed rebate on these sales
under s. 5 of the Uttar Pradesh Sales Tax Act, 1948. The
Sales Tax authorities rejected the claim. ’Me High Court
held that the rebate was not admissible under s. 5 because
the contract did not contain any condition requiring the
assessee to deliver goods outside Uttar Pradesh and because
the despatch instructions.were not a part of the contract
when it was formed and did not get incorporated into it or
become a part of it when given. In appeal to this Court.
HELD : (i) In. the context of s. 5 of the Act the word
’delivery’ occurring therein means ’actual delivery’. The
object underlying s. 5 is to encourage export of goods
manufactured in Uttar Pradesh and notified under s. 5. The
course of trade adopted by the buyers and the assessee shows
that if the word ’delivery’ is interpreted to mean
’constructive delivery’ very few ’export sales’ would enjoy
rebate under s. 5. As long as the contract evinces an
intention to export and actual delivery is given to
effectuate that intention the object of the legislature to
ensure that only real ’export sales’ enjoy the rebate would
be fulfilled. [53 B-D]
Lord Krishna Sugar Mills v. Commissioner of Sales Tax, U.P.
S.T. reference No. 263/54 dated March 19, 1963, disapproved.
India Coffee and Tea distributing Co. Ltd. v. The State of
Madras 10 S.T.C. 359, approved.
(ii)The sales by the assessee were for actual delivery
outside Uttar Pradesh. The despatch instructions
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contemplated by the contract entered into by the assessee,
were part of the contract. The contract contemplated a
destination in spite of constructive delivery having been
contracted to be made at the station where the assessee-mill
was-situated. Further the contract was not to actually
deliver at some place to be chosen or assented to by the
assessee-mill but at any place without restrictions. The
contract required nothing more for completion than a mention
of the place. when the despatch instructions were given, it
was not a case of performing the contract but specifying a
term of contract. [53 EG]
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JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 86 to 89 of
1965.
Appeals by special leave from the judgment and order, dated
October 17, 1963 of the Allahabad High Court in S. T. Ref.
No. 109 of 1956.
A. V. Viswanatha Sastri and B. N. Kripal, for the
appellant.
N. D. Karkhanis and O. P. Rana, for the respondent,
K. K. Jain, for intervener.
The Judgment of the Court was delivered by
Sikri, J.These four appeals by special leave are directed
against the judgment of the Allahabad High Court in a Sales
Tax Reference made by the Judge (Revisions), Sales Tax,
Uttar Pradesh, Lucknow, on being directed to do so by the
High Court under s. 11 of the Uttar Pradesh Sales Tax Act,
1948, hereinafter referred to as the Act. The question
referred was as follows :
"Whether in law the revising authority was
right in holding that the sales in dispute
were not for delivery outside Uttar Pradesh
and that the applicant Was not entitled to a
rebate under sec. 5 of the Act."
The question was referred in the following circumstances.
The appellant, hereinafter referred to as the assessee
mills, carries on the business of manufacturing and selling
sugar and is registered as a dealer under the provisions of
the Act. During the previous year relevant to the
Assessment Year 1948-49, the assessee company had sold sugar
to parties who carried on business outside Uttar Pradesh and
also delivered the same outside Uttar Pradesh. It also sold
sugar to parties who carried on business inside Uttar
Pradesh but the sugar was despatched to stations outside
Uttar Pradesh in compliance with the instructions issued by
the buyers. The assessee mills submitted an
application.under s. 5 of the Act in form VII, prescribed
by, the Uttar Pradesh Sales Tax (Temporary) Rules, 1948,
claiming 50% rebate on the sales of sugar delivered outside
Uttar Pradesh. The Sales Tax Officer allowed rebate in
respect of the sales of sugar to parties who carried on
business outside Uttar Pradesh but rejected the claim for
the sales which were made to parties carrying on business
inside Uttar Pradesh. In respect of the assessment year
1948-49 there were four assessment orders covering each
quarter of the year,, the,
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first quarter being April 1948 to July 1948. Section 5 of
the Act reads as follows
"Sales of certain goods for delivery outside
the State-In respect of such manufactured
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goods as may be notified by the State
Government and subject to such restrictions
and conditions as may be prescribed, a rebate
of one-half of the tax levied on sales of such
goods for delivery outside the Uttar Pradesh
shall be allowed if such goods are actually so
delivered."
In exercise of the powers conferred by S. 5 of the Act, the
Governor was pleased to order that rebate of one half of the
tax levied on sales of certain goods including sugar
manufactured in Uttar Pradesh for delivery outside Uttar
Pradesh shall be allowed if such goods were actually so
delivered. It appears that this notification was modified
on March 30, 1949, but we are not concerned with this
modification.
The Sales Tax Officer dealt with the question at issue in
his order in respect of the quarter ending March 31, 1949,
in detail and he was of the view that if property passed
from the seller to the purchaser in Uttar Pradesh, s. 5 and
the notification issued under it could not apply.The
assessee mills then filed four revision applications before
the Judge (Revisions) Sales Tax. The Judge (Revisions)
disposed of the four applications by two orders, first dated
February 1, 1950, and the second dated December 5, 1950. He
held that "the words ’sales of such goods for delivery
outside U.P. clearly show that the intention of the framers
of the act was to allow a rebate only in cases in which the
goods are sold subject to the condition that they would be
delivered outside U.P. It is also clear that section 5
contemplates only one buyer who purchase the goods and also
take their delivery outside U.P. In other words the party
who buys the goods and the party who takes the delivery must
be one and the same. It is not disputed that the sales of
sugar in respect of which the claim has been disallowed were
in favour of one party and delivery was taken by another
party outside U.P. The party after buying the sugar under a
contract of sale had the goods despatched outside U.P. by
the Mills to another party outside U.P." He added later that
"on a true construction of section 5 rebate will be
permissible only if delivery is taken outside U.P. by the
same party which purchased the sugar from the mills." Then
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on the facts he held that the selling agents, Tandon Bros.,
who entered into a contract with the assessee mills for sale
of the goods were really the buyers and although the goods
were despatched outside Uttar Pradesh in accordance with the
despatch instructions of some contract arrived at between
Tandon Bros., and the party to which the goods were
ultimately delivered, the assessee mill had not entered into
the contract with the parties to which the goods were
despatched outside Uttar Pradesh. He further repelled the
argument that despatch instructions formed part of the
contract.
The assesses mills then filed four applications under s. 1
of the Act, but the Judge (Revisions) Sales Tax rejected the
applications on the ground that no question of law arose.
The High Court, however, directed the Judge (Revisions) to
state a case under s. 11 of the Act. A consolidated
statement of the case was referred. The Judge (Revisions)
drawing up the statement of the case was not the Judge
(Revisions) who had disposed of the revision applications.
In the statement of the case certain further facts were
given and those are as under
"The applicants (assessee mills) were members
of the Indian Sugar Syndicate Ltd., and they
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were entitled to send sugar under the orders
of the Syndicate through some selling agents
of their own. M/s. Tandon Bros., were the
selling agents of the Mills. It was through
them that the sales had been made to buyers
outside U.P. The goods were despatched outside
U.P. under the instructions received from the
buyers through the selling agents. The
delivery of the goods was made outside U.P. It
is on the basis of these facts that the
applicants (assessee mills) claimed that the
sales had been made for delivery outside U.P."
The standard contract form prescribed by the
Indian Sugar Syndicate has been annexed to the
case and the following terms are relevant :
"AN AGREEMENT made this Sixteenth day of
October 1948 between the AMRITSAR SUGAR MILLS
CO. LTD. ROHANA KALAN (hereinafter called
"the Seller") and Tandon Brothers New Mandi
Muzaffarpur (hereinafter called "the Buyee")
for the sale of the following goods by the
Seller to the Buyer upon the following terms
and conditions
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A B C D E F
Factory Description Price per Md. ofQuantity Period(s) Re-
(short) of quality 40 Srs. 82 2/7 lb. of marks
Name F.O.R. Factory delivery
Station Ex-
Factory.
Rohana Average colour Rs. Thirty Six Bags 4,000 Ready
Mills. not lower than annas two &
I.S.S. No. 127 pies three only.
Average grain not Each of pack-
finer than I.S.S. ing 2/30.
No. D. or I. 36/2/3
2. Delivery is to be made F.O.R. Rohana
Kalan station, all terms and conditions of the
Railway (torn) to be binding on the Buyer.
The goods shall be deemed to have been
delivered (a) when tendered Ex-Factory godown,
(b) when put on F.O.R. at Factory Station or
(c) when tendered for carriage by rail at the
said station, and in case of delay in accept
(torn) by the Railway after such tender the
said goods shall be deemed to be held by the
Seller on account of the Buyer until they are
put on rail. When the goods are received by
Railway, all the terms and conditions of the
Railway shall be deemed to be accepted by the
buyer.. Tender to the Railway for carriage
shall be deemed to have been made when a
(torn) carriage or a Forwarding Note has been
given to the Station Master of the Station.
The seller shall not, (torn) circumstances
whatsoever, be responsible for non-despatch,
or refusal to despatch or delay in despatch or
any (torn) mistake in despatch by the Railway.
Where (after tender as aforesaid) any delay in
despatch occurs, the Buyer shall (torn)
delivery of the goods without any claim
against the Seller on account of such delay or
the consequence thereof (torn) delay in
despatch is due to non-supply of wagons or due
to booking restrictions, the Seller, shall, if
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required by the (torn) obtain from the factory
a letter stating the cause of the delay.
Where owing to restriction of whatsoever
nature imposed by Carriers on despatches,
Seller is unable to despatch according to the
route requested by the Buyer, then Seller
shall have the right, after giving to the
Buyer
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three days time to despatch by the cheapest
available route at Seller’s sole discretion to
the destination required by the original
despatch instructions. Within the period of
three days above mentioned, Buyer may change
the destination provided the (torn)
despatching instructions are capable of
immediate execution. In the case of despatch
by road, river or other transport any
combination thereof, all the terms and
conditions of the Carriers are be a binding on
the Buyer, and tender to Carrier shall be a
good delivery within the meaning of the
clause.
3. The buyer is to give the Seller
despatching instructions in accordance with
the above schedule, in the case (torn) ready
sales within ten days from the date hereof
when the quantity is less than 1500 bags, and
within fifteen days when quantity is 1500 bags
or more; and in the case of forward sales, not
less than fourteen days prior to the expiry of
the (torn) for delivery of the goods as
provided in the above Schedule. When goods
are for delivery in instalments the times
(torn) clause provided shall apply to the
despatching instructions for each instalment.
The sugar will be despatched at (torn) Risk
unless the buyer shall give to the Seller
instructions to the contrary in the
Despatching Instructions.
The despatching instructions to be given as
aforesaid shall be such as the Seller will
then be in a position to carry (torn) having
regard to restrictions on booking,
availability of wagons, transshipment
difficulties and other matters. The despatch
(torn) instructions once given shall not
ordinarily be amended or altered and they can
be altered or amended only with the consent of
the seller and before the goods have left the
factory, the Seller is not in any way
responsible for any delays that may arise
through error or mistake in the despatching
instructions sent by the buyer. If the Buyer
fails to give despatching instructions within
the time and in the manner aforesaid he will
be deemed not to have given any despatching
instructions at all.
No complaint as regards description, quality
or condition of any consignment will be
admitted unless the Buyer has complied with
Clause 3 thereof and has paid to the Seller
the full price and all overdue or other
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charges and unless the complaint is made in
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writing to the Seller within three days from
the arrival of such consignment at
destination, the date of such arrival being
deemed to be the date of arrival entered in
the Books of the Railway Co., Steamer Co.,
Carrier or Port Authorities. The completion
of Risk Note form A as required by the Railway
authorities at certain seasons of the year
shall not be construed as adverse remarks as
to the condition of the goods or its packing.
If any complaint, as to quality condition
quantity or weight is referred to arbitration
and an allowance is awarded in thereof, the
Buyer shall retain the goods and such
allowance shall be deducted from the price and
be refunded by the Seller."
The High Court, in view of its finding that the delivery
was contracted to be made ex-factory, the factory being
within the State of Uttar Pradesh and the contract not
containing any condition requiring the assessee to deliver
the goods outside Uttar Pradesh, held that rebate was not
admissible under s. 5. The High Court said that its detailed
reasons were contained in its, judgment in Lord Krishna
Sugar Mills v. Commissioner Sales Tax, II.P.(1) In that case
Desai, C.J., held that the obligation to deliver goods
outside Uttar Pradesh must arise only from a term in the
contract, and in the absence of such a term it could, not be
said that the goods were to be delivered outside Uttar
Pradesh. The learned Chief Justice further observed as
follows
A term in a contract that despatch
instructions would be furnished later
necessarily means that the seller undertakes
to comply with them. If under a contract
itself something is to be settled later, what
is settled later becomes as much binding under
the contract itself as the terms already
settled under the contract. Still, I do not
think that the sales in those cases in which
the contracts provided for despatch
instructions to be given later became sales
for delivery outside Uttar Pradesh merely
because the despatch instructions were that
they should be despatched outside Uttar
Pradesh. All that can be said is that the
sales were for "delivery in accordance with
despatch instructions" and a sale for
"delivery in accordance with despatch
instructions" is not necessarily a sale for
"delivery outside Uttar Pradesh."
(1) Sales Tax Reference No. 263 of 1954 judgment delivered
on, March 19, 1963..
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He seemed to be of the view that in order to come within
the expression "delivery outside Uttar Pradesh’ it must be
one of the terms settled at the time of the formation of the
contract itself that the goods will be delivered outside
Uttar Pradesh, and if this is not so settled and all that is
settled is that they will be delivered in accordance with
despatch instructions, the sale would neither be a sale for
delivery outside Uttar Pradesh nor a sale for delivery
inside Uttar Pradesh. He was clearly of the view that
despatch instructions were not a part of the contract when
it was formed and did not get incorporated into it or become
a part of it when given. Pathak, J., in a concurring
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judgment, was of the view that it must be in the
contemplation of the parties at the time of entering into
the contract that the goods which were the subject of sale
must be delivered outside Uttar Pradesh. He observed that
"there is a distinction between settling and determining the
terms of a contract and complying with the terms ’of that
contract. The former relates to the formation of the
contract, the latter to its execution."
The first question which arises in these appeals is whether
the word "delivery" in the expression "sales of such goods
for delivery outside Uttar Pradesh" occurring in s. 5 of the
Act means actual delivery or constructive delivery. If it
means constructive delivery then there is no doubt that on
the facts as stated by the Judge (Revisions) the contract
provided for constructive delivery inside Uttar Pradesh and
the assessee mills would not be entitled to rebate under S.
5.
The Madras High Court had occasion to consider a similar
question in India Coffee and Tea Distributing Co. Ltd., v.
The State of Madras.(1) It held that the word "delivery" in
s. 5 of the Madras General Sales Tax Act, 1939, which
exempts from taxation sales of tea "if the sale is for
delivery outside the State and delivery actually was made"
did not include anything which the law deemed "delivery" but
was restricted to physical delivery of the thing sold. In
coming to this conclusion, Subrahmanyam, J., observed :
"In deciding whether the word "delivery" in
section 5 (v) includes delivery in law, we
have to have regard to the objects of the
Legislature in enacting section 5 (v). The
object obviously was the promotion of the
export of tea. The Legislature intended that
where tea was
(1) 10 S.T.C. 359.
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exported from the State for being delivered
outside the State, the sale which resulted in
such export should be exempt from taxation.
’Mat object would not be wholly achieved if we
hold that delivery of documents of title in
the State of Madras would make the sale liable
to taxation."
We agree with the view expressed by the Madras High Court.
It seems to us that the object underlying S. 5 is to
encourage export of goods manufactured in Uttar Pradesh and
notified under s. 5. The course of trade adopted by the
Indian Sugar Syndicate Ltd.. and the assessee mills shows
that if the word "delivery" is interpreted to mean
’constructive delivery’ very few ’export sales’, if we may
use the expression, would enjoy rebate under s. 5. As long
as the contract evinces an intention to export and actual
delivery is given to effectuate that intention the object of
the Legislature to ensure that only real ’export sales’
enjoy the rebate would be fulfilled. It seems to us that in
the context of S. 5 the word ’delivery’ occurring in s. 5
means ’actual delivery’.
The next question that arises is whether the sales by the
assessee mills were for actual delivery outside Uttar
Pradesh. The answer to this problem depends on the answer
to the question whether despatch instructions contemplated
by clause 2 and clause 3 of the contract were part of the
contract entered into by the assessee mills. It seems to us
that they were. The contract by the assessee mills was to
actually deliver at a place to be communicated. This view
is reinforced by what is contained in clause 11 of the
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contract. This clause contemplated a destination in spite
of constructive delivery having been contracted to be made
at Rohana Kalan Station. Further, the contract was not to
actually deliver at some place to be chosen or assented to
by the assessee mills but at any place without restrictions.
The contract required nothing more for completion than a
mention of the place. When the despatch instructions were
given, it was not a case of performing the contract but
specifying a term of the contract. If the place of actual
delivery had been specified and it was a question merely of
communicating the route by which the goods were to be
delivered this would perhaps related the mode of performance
of the contract. But communication of the place where
actual delivery is to be given does not relate to the mode
of performance but formation-of the contract. It seems to
us, with respect, that the High Court reared in relating
despatch instructions to the mode of performance of the
contract.
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In the result we hold that the assessee mills is entitled to
rebate under s. 5. We set aside the judgment of the High
Court and answer the question as follows :
"The revising authority was not right in
holding that the sales in dispute were not for
delivery outside Uttar Pradesh. Further, the
applicant was entitled to rebate under S. 5 of
the Act."
The appellant will have his costs incurred in
the High Court and here. One hearing fee.
Appeal allowed.
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