# AMRITSAR SUGAK MILLS CO. LTD v. COMMISSIONER OF SALES TAX, U.P

- **Citation:** [1966] 3 S.C.R. 45
- **Court:** Supreme Court of India
- **Decided:** 1965-12-13
- **Case number:** Civil Appeal Nos. 86 to 89 A of 1965
- **Bench:** K. Subba Rao, J. C. Shah, S. M. Sikri
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/amritsar-sugak-mills-co-ltd-v-commissioner-of-sales-tax-u-p-3563
- **Pages:** 10

## Headnote

Ultar Pradesh Sales Tax Act, 1948_,,., 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.
The aaseHee-sugar mill oold sugar to parties who carried on bmineSI
iruide tho State of Uttar Pradesh, but the sugar wu despatched '.o stations
outside the State of Uttar Pradesh and delivered to another party in
oompliance with the instructions issued by the buyers.
Under the con·
tract entc~d between the assessee and the buyer, the assCS11te was
to
deliver the sugar at places to be communicated
by
the buyer. The
assessee-mill claimed rebate on these sal"' under •· 5 of the Uttar Pradesh
Sales Tax Act, 1948. The Sales Tax authorities rejected the claim. The
High Court held that the rebate was not adm;ssible
under s. 5 because
the contract did not contain any condition requiring the assC!iee 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 1et 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. S ia
to encourage export of goods manufactured in Uttar Pradesh and notified
under •· S.
The course of trade adopted by the buyers and the asaessee
shows that if the word 'delivery' is interpreted to mean 'con.•itructive delivery' very few 'export sales' would enjoy rebate under s. S.
As long as
the contract evinces an intention to export and actual
delivery is givea
to effectuate that intention the object of the legislature to emure that only
real 'export •ales' enjoy the rebate would be fulfilled. [53 B-DJ
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 distribuiing Co. Ltd. v. The Stale ul Madras,
10 S.T.C. 359, approved.
(ii)The aaleo by the assessee were far actual delivery ouuide Uttar
Pradesh. The despatch instructions contemplated by the controct entered
into by the aoseiiee, we.re part of the contract. The contract contemplated
a deotination in •pite of constructive delivery having been contracted to lie
made at the station where the asse,,see-mill was situated.
Further the
contract wu not to actually deliver at aome place to be choaen oc
assented to by the assessee-mill but at any place without reotrictiona. 1be
contract required nothing more for completlon than a mention of the
plaoc. When the despatch instructions were given, it was not a case of
performing the contract but specifying a term of contract. [53 E-GJ
46
St:PREME COt:R T REPORTS
(1966] 3 S.C.R.
CML APPELLATE JU11.1so1cT10N : Civil Appeal Nos. 86 to 89
A
of 1965.
Appeals by special leave from the judgment and order, dated
Ocotber 17, 1963 of the Allahabad High Court in S. T. Ref. No.
109 of 1956.
A. V. Viswanarha Sastri and B. N. Kripal, for the appellant.
N. D. Karkhanis and 0. P. Rana, for the respondent.
K. K. Jain, for intervener.

## Text

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AMRITSAR SUGAK MILLS CO. LTD.
v.
COMMISSIONER OF SALES TAX, U.P.
December 13, 1965
(K. SUBBA RAO, J. C. SHAH AND S. M. SIKRI, JJ.]
Ultar Pradesh Sales Tax Act, 1948_,,., 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.
The aaseHee-sugar mill oold sugar to parties who carried on bmineSI
iruide tho State of Uttar Pradesh, but the sugar wu despatched '.o stations
outside the State of Uttar Pradesh and delivered to another party in
oompliance with the instructions issued by the buyers.
Under the con·
tract entc~d between the assessee and the buyer, the assCS11te was
to
deliver the sugar at places to be communicated
by
the buyer. The
assessee-mill claimed rebate on these sal"' under •· 5 of the Uttar Pradesh
Sales Tax Act, 1948. The Sales Tax authorities rejected the claim. The
High Court held that the rebate was not adm;ssible
under s. 5 because
the contract did not contain any condition requiring the assC!iee 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 1et 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. S ia
to encourage export of goods manufactured in Uttar Pradesh and notified
under •· S.
The course of trade adopted by the buyers and the asaessee
shows that if the word 'delivery' is interpreted to mean 'con.•itructive delivery' very few 'export sales' would enjoy rebate under s. S.
As long as
the contract evinces an intention to export and actual
delivery is givea
to effectuate that intention the object of the legislature to emure that only
real 'export •ales' enjoy the rebate would be fulfilled. [53 B-DJ
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 distribuiing Co. Ltd. v. The Stale ul Madras,
10 S.T.C. 359, approved.
(ii)The aaleo by the assessee were far actual delivery ouuide Uttar
Pradesh. The despatch instructions contemplated by the controct entered
into by the aoseiiee, we.re part of the contract. The contract contemplated
a deotination in •pite of constructive delivery having been contracted to lie
made at the station where the asse,,see-mill was situated.
Further the
contract wu not to actually deliver at aome place to be choaen oc
assented to by the assessee-mill but at any place without reotrictiona. 1be
contract required nothing more for completlon than a mention of the
plaoc. When the despatch instructions were given, it was not a case of
performing the contract but specifying a term of contract. [53 E-GJ
46
St:PREME COt:R T REPORTS
(1966] 3 S.C.R.
CML APPELLATE JU11.1so1cT10N : Civil Appeal Nos. 86 to 89
A
of 1965.
Appeals by special leave from the judgment and order, dated
Ocotber 17, 1963 of the Allahabad High Court in S. T. Ref. No.
109 of 1956.
A. V. Viswanarha Sastri and B. N. Kripal, for the appellant.
N. D. Karkhanis and 0. 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 Ylas 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 panics 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 th11 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
busine.s outside Uttar Pradesh but rejected the claim for the sales
which were made to parties carrying on busines~ 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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AMRITSAR MILLS V. S. T. COMMR. (Sikri, J,)
47
A first quarter being April 1948 to July 1948.
Section 5 of the
Act reads as follows :
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"Sales of certain goods for delivery outside the
State--In respect of such manufactured 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
C 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 !his notification was modified on March 30, 1949, but we are not copcemed
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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 ~d
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under it could not apply.
The assessee mills then filed four revision a~plications before
the Judge (Revisions) Sales Tax. The Judge (Revisions) disp08ed
of the four applications by two orders, first dated February 1,
1950, and the second dated December 5, 1950. He held that "the
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words 'sales of such goods for delivery outside U.P.' clearly show
that the intention of the framers of tl!e 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
G 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 l;>cen 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
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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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SUPREME COURT REPORTS
(1966) 3 S.C.R.
on the facts he held that the selling agents, Tandon Bros., who
A
entered into a contract with the asscssee mills for sale of the gOO<b
were really the buyers and although the goods were d~patched
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 repel!ed
the argument that despatch instructions formed
part of the
contract.
The assessee mills then filed four applications under s. 11 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 ca<e Wfts
referred. The Judge (Revisions) drawing ur the statement of the
case was not Vie 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 were entitled to
send sugar under the orders of the Syndicate through
some selling agents of their own.
M/s. Tandon Bcos.,
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 tlie 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 thi! Sixteenth day of
October 1948 between the AMRITSAR SUGAR
MILLS CO. LTD., ROHANA KALAN (hereinafter
called "tho Seller'') and Tandon Brothers New Mandi
Muzaffarpur (hereinafter called "the Buyer'') for the
sale of the following goods by the Seller to the Buyer
upon the following terms and conditions :-
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Factory
(short)
Name
Rohana
Mills.
AMRITSAR MILLS V. S. T. COMMR. (Sikri, J.)
49
B
Description of
quality
Average colour
not lower than
!.S.S. No. 127
Averaa:e arain not
finer than l.S.S.
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PriceperMd.of
Quantity
-40 Sn. ~2 2/7 lb.
P.O.R. Factory
Station BK·
Factory.
Ra. Thirty Six Bags4.000
annu two .t
pies three only.
No. D. or I.
36/2/3
Each of packin12/30.
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Period{a)
of
deli•ery
Ready
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marks
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2. Delivery is to be made F.O.R. Rohana Kalan
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station, all terms and conditions of the Railway (torn)
to be binding on the Buyer.
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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 tney are put on rail. When
the goods are received"by Railway, all the terms and
conditions of the Railway ihall be deemed to be accepted
by the buyer. Tender to the Railway for carriage shllll
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,
(tom)
circumstances whatsoever, be responsible for nondespatch, 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 (tom) delivery of the goods
without any claim against the Seller on account of such
delay or the consequence thereof (tom) delay in despatch
is due to non-supply of wagons or due to booking
restrictions, the Seller, shall, if required by the (tom)
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
50
SUPREME COURT
RF.PORTS
[1966] 3 S.C.R.
three days time to despatch by the cheapest available
route at Seller's sole discretion to the dcstina1!ion
required by the original despatch instructions. Within
the period of three days above mentioned, Buyer may
change the destination provided the (tom) despatching
instructions arc 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 arc 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 caae
(tom) 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 (tom) clause provided shall apply to the despatching instructions for each
instalment. The sugar will be despatched at (tom) 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. transhipment difficulties and
other matters. The despatch (tom) 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 an·d in the
manner aforesaid he will be deemed not to have given
any despatching instructions at all.
11. 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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AMRITSAR MILLS V. S. T. COMMR. (Sikri, /.)
5 I
charges and unless the complaint is made in writing to
tho Seller within three days from the arrival of such con·
signment 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 Noteform A as required
by the Railway authorities at certain seasons of the year
shall not be construed as adverse remarks as to tho
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
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tion 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. Commlssionu Sales
Tax, V.P.(')
In that case Desai, C.J., held that the obligation
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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 :
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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 th•
c.ontracts 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."
(I) Sales Tax Reference No. 263of1954 iudgment delivered on March 19, 1963,
52
SUPREME COU.T llEPORTS
(19'6] 3 S.C.R.
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 nCJt so seuled and all that is settled is that they will be delivered
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in accordance with despatch instructions, the sale would neither
be a sale for delivery outside Uttar Pradesh nor a sale for delivery
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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 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
mus1 be delivered outside Uttar Pradesh. He observed that "there
is a distinction between settling and determining the terms of a
coniract and complying with the terms of that contract.
The
former relates to the formation of the contract, the latter to its
excc.ution."
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The first question which arises in these appeals is whether the
wore! "delivery" in the expression "sales of such goods for delivery outside Uttar Pradesh" occurring in s. 5 of the Act means
ac1ual delivery or constructive delivery. If it means constructive
delivery then there is no doubt that on the facts as stated by the
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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 Coun had occasion to consider a similar
question in India Coffee and Tea Distributing Co. Ltd .. v. The
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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.,
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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 etport of
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tea. The Legislature intended that where tea was
(I) 10 S.T,C. 359.
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AMRITSAR MILLS V. S. T. COM:lllll. (Sikri, J.)
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exported from the State for being delivered outside the
State, the sale 'IVhich resulted in such export should be
exempt from taxation. That 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 interC
preted to mean 'constructive delivery' very few 'export sales', if
we may use the expression, would enjoy rebate under s. 5.
As
Jong as the contract evinces an intention to export and actual
delivery is given to effectuate that intention the object of hte
Legislature to ensure that only real 'export sales' enjoy the rebate
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would be fuJfilled. 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 asscssee mills. It sccms to us that they were. The contract by the assessee mills wu to actually deliver at a place to
be communicated. This view is reinforced by what is contained
in clause 11 of the contract. This clause contemplated a destinaF
lion 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 assessec 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
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not a casc of performing the contract but specifying a tenn of
the contract. If the place of actual delivery had been ipecified
and it was a question merely of communicating the route by
which the goods were to be delivered this would perhaps relate
to the mode of performance of the contract. But communication
·H of the place where actual delivery is to be given doei not relate
to the mode of performance but formation of the contract. It
seem~ to us, with respect, that the High Court erred in relating
delpatch inltructiona to tho mode of performance of tile C09.tract.
54
SUPREME
COURT
REPORTS
[1966] 3 SC.R.
In the result we hold that the assessee mills is entitled to rebate
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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
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under s. 5 of the Act."
The appellant will have his costs incurred in the High Coun alld
here. One hearing fee.
Appeal a//oll'ed.
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