# • • ' G. A. GALIAKOTWALA & CO. (P) LTD., MADRAS v. THE STATE OF MADRAS

- **Citation:** [1976] 3 S.C.R. 717
- **Court:** Supreme Court of India
- **Decided:** 1976-03-22
- **Case number:** Civil Appeal No. 1191 of 1973
- **Bench:** A. N. Ray, M. H. Beg, Jaswant Singh
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/g-a-galiakotwala-co-p-ltd-madras-v-the-state-of-madras-6812
- **Pages:** 4

## Headnote

717
A
B
Central Sales Tax Act Ss. 3, 6(2), 8(3)
and
8(5)-Scope of-Goods
despatched by "S' in Bombay to "B'' in Madras who has an agreement
to purchase with "A" to whom Railway Receipts were sent by "S" as per directions and separate agreement-Transaction is an 'Inter state' sales within S.
3(b) of the C.S.T. between "S" and "A"-Exemption uls 8(5) applies only
to cases where the claimant paid tax himself under ,the State Act-Exemption
u/s 6(2) is applicable on proof that the buyer is a aregistered dealer".
C
As per the directions of the appellant and on receipt of tlie requisite licence
Under the cotton Transport Act 1923, for transport of cotton, the Bombay
seller despatched cotton to the ultimate buyer mills at Madurai and sent the
Railway Receipts to the appellant who endorsed the same in favour of the Mills
after collection of the substantial portion of the sale priCe. The sales Tax
authorities treated the transaction as intra sales and assessed the Mills as the
J.ast purchaser under the Madras General Sales Tax and assessea the appellant
D
u/s 3(b) of the Central Sales Tax Act 1956. The question is wnether in the
circumstances the transaction is. one of inter state sales falling U/s 3(a) or
second sales under state sales u/s 3 (b) of the Central Sales Tax Act.
The contentions of the appellant in this court were ; (1) The sale of cotton
by the appellant assessee to the buyer mill fell within tlie scope of S. 3(a) of
the Central Act as there was movement of goods from "Bombay to Madras
as a result of covenant in or incidental to the contract of sale and therefore
u/s 9(1) of the Central Sales Tax the jurisdiction lay with Bombay state from
E
where the goods moved from and (ii) Since the sale being in respect of dee~
lared goods, is exempt by the terms of notification of Otder No. 3602 dated
28-12-63 issued u/s 8(5) of the C.S.T. and (ii) the turnover was exempt u/s
6(2) of C.S.T.
Dismissing the appeal the court,
HELD : (1) The significant feature of the transaction viz. sending of tbe
Railway Receipts by the Bombay seller to the appellant who thereafter endorsed the same to the mills, shows that (a.) there could not be any uncondi~
tional appropriation of the goods at Bombay towards the contract entered into
between the appeliant; (b) It was an Inter state sales to the appellant and the
sale by the appellant to the mills is an intra-state sales in as much as, the mere
fact that the goods were consigned .by the Bombay seller to the mills in accordance with the direction will not ·make the transaction inter state
sales.
[718G-H, 719A-BJ
.
(ii) The State sales Tax authorities, (respondent) had jurisai'ction to assess
the transaction for sale by the appellant to the mills u/s 3 (b) of the Central
Act. [7!9C]
(iii) The exemption u/s 8(5) applies only to cases where the claimant had
paid tax himself u/s 4 of the Madras Act in respect of locaf sales preceding
the inter state transactions.
In the instant case, as the appellant did not pay
tax ul,s 4 of the Madras Act, he was not entitled to claim exemption under
·the Government order. [719 E-F]
F
G
H
(iv) A dealer claiming exemption for subsequent sale duriiig the rriovement
-0f goods from one state to another is required by s. 6(2) of tl:te Central Act
•
to furnish to the prescribed authority in the prescribed manner a certificate
A
B
718
SUPREME COURT REPORTS
[1976] 3 s.c.R.
duly filled and signed by the registered dealer by whom the goods were pur~
chased containing the particulars.
In the instant case, the appellant produced
the form from the Bombay seller but did not prove that his buyer was ai
registered dealer in cotton which disentitled him to exemption u/s 6(2) of
the Act. [720 B-C]
\

## Text

I
•
•
'
G. A. GALIAKOTWALA & CO. (P) LTD., MADRAS
v.
THE STATE OF MADRAS
March 22 1976
[A. N. RAY, C.J., M. H. BEG AND JASWANT SINGH, JJ.]
717
A
B
Central Sales Tax Act Ss. 3, 6(2), 8(3)
and
8(5)-Scope of-Goods
despatched by "S' in Bombay to "B'' in Madras who has an agreement
to purchase with "A" to whom Railway Receipts were sent by "S" as per directions and separate agreement-Transaction is an 'Inter state' sales within S.
3(b) of the C.S.T. between "S" and "A"-Exemption uls 8(5) applies only
to cases where the claimant paid tax himself under ,the State Act-Exemption
u/s 6(2) is applicable on proof that the buyer is a aregistered dealer".
C
As per the directions of the appellant and on receipt of tlie requisite licence
Under the cotton Transport Act 1923, for transport of cotton, the Bombay
seller despatched cotton to the ultimate buyer mills at Madurai and sent the
Railway Receipts to the appellant who endorsed the same in favour of the Mills
after collection of the substantial portion of the sale priCe. The sales Tax
authorities treated the transaction as intra sales and assessed the Mills as the
J.ast purchaser under the Madras General Sales Tax and assessea the appellant
D
u/s 3(b) of the Central Sales Tax Act 1956. The question is wnether in the
circumstances the transaction is. one of inter state sales falling U/s 3(a) or
second sales under state sales u/s 3 (b) of the Central Sales Tax Act.
The contentions of the appellant in this court were ; (1) The sale of cotton
by the appellant assessee to the buyer mill fell within tlie scope of S. 3(a) of
the Central Act as there was movement of goods from "Bombay to Madras
as a result of covenant in or incidental to the contract of sale and therefore
u/s 9(1) of the Central Sales Tax the jurisdiction lay with Bombay state from
E
where the goods moved from and (ii) Since the sale being in respect of dee~
lared goods, is exempt by the terms of notification of Otder No. 3602 dated
28-12-63 issued u/s 8(5) of the C.S.T. and (ii) the turnover was exempt u/s
6(2) of C.S.T.
Dismissing the appeal the court,
HELD : (1) The significant feature of the transaction viz. sending of tbe
Railway Receipts by the Bombay seller to the appellant who thereafter endorsed the same to the mills, shows that (a.) there could not be any uncondi~
tional appropriation of the goods at Bombay towards the contract entered into
between the appeliant; (b) It was an Inter state sales to the appellant and the
sale by the appellant to the mills is an intra-state sales in as much as, the mere
fact that the goods were consigned .by the Bombay seller to the mills in accordance with the direction will not ·make the transaction inter state
sales.
[718G-H, 719A-BJ
.
(ii) The State sales Tax authorities, (respondent) had jurisai'ction to assess
the transaction for sale by the appellant to the mills u/s 3 (b) of the Central
Act. [7!9C]
(iii) The exemption u/s 8(5) applies only to cases where the claimant had
paid tax himself u/s 4 of the Madras Act in respect of locaf sales preceding
the inter state transactions.
In the instant case, as the appellant did not pay
tax ul,s 4 of the Madras Act, he was not entitled to claim exemption under
·the Government order. [719 E-F]
F
G
H
(iv) A dealer claiming exemption for subsequent sale duriiig the rriovement
-0f goods from one state to another is required by s. 6(2) of tl:te Central Act
•
to furnish to the prescribed authority in the prescribed manner a certificate
A
B
718
SUPREME COURT REPORTS
[1976] 3 s.c.R.
duly filled and signed by the registered dealer by whom the goods were pur~
chased containing the particulars.
In the instant case, the appellant produced
the form from the Bombay seller but did not prove that his buyer was ai
registered dealer in cotton which disentitled him to exemption u/s 6(2) of
the Act. [720 B-C]
\
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 1191
of
1973.
Appeal by special leave from the Judgment and Order
dated
7-11-72 of the High Court of Madras iu T.C. No. 197 of 1968.
C. K. Viswanatha Iyer, Mrs. S. Gopalakrishnan for the Appellant.
S. T. Desai, A. V. Rangam and Miss A. Subhashini
for
the·
respondent.
•
c
The Judgment of the Court was delivered by
D
E
RAY, C. J.-This appeal by special leave is from the
judgment
llated 7 November, 1972 of the High Court of Madras.
The principal question in this appe~l is whether the
sales
of +
cotton by the appellant to the mills at Tirunelveli and Karur were··
inter-State sales under section 3(a) of the Central Sales Tax Act
called the Central Act or are second sales under State Sales under
section 3 (b) of the Central Act.
•
The appeljant has its place of business at Coimbatore. The Mills
are situated within the State of Madras.
The Mills entered into an
agreement with t_he appellant for purchase of cotton. The appellant
in turn placed orders ~ith its sellers at Bombay for purchase of
cotton. The appellant directed its Bombay sellers to despatch the
goods to the mills as co_nsignees.
The Bombay
seller
sent
the
consignment to the mills but the railway receipts were sent by the·
Bombay seller to the appellant.
The appellant then endorsed the
same in favour of the mills after collection of the substantial portion
of the sale price.
The appellant contended that the consignments were sent directly
'F
by the Bombay seller to the mills, and, therefore, these were direct
inter-State sales by the Bombay seller to the mills
and that the
property in the goods passed to the mills when the
goods
were·
loaded at Bombay.
The Sales Tax Authorities found that the Mills
were the last purchaser and therefore these were
inter-State sales
between the Appellant and the Mills.
G
H
A most significant feature is that the railway receipts were sent
by the Bombay seller to the appellant, and the appellant thereafter
endcrsed the same to the mills. It is, therefore, apparent that
there could not be an unconditional, appropriation of the goods at
Bombay towards the contract entered into between
the
appellant
and the mills.
The property in tlhe goods passed only when the
mills took delivery of the railway receipts from the appellant.
The
Bombay seller dealt with the railway. receipts in such a way that it
is proved that the intention of the appellant to part with the goods
in any event is not until. substantial payment is made by the mills.
The Bombay seller ha>) no privity of contract with the Mills.
The
I
•
•
•
•
G. A. GAL!AKOTWALA V. MADRAS (Ray, C. J.)
719
Bombay seller sold the goods to tlie appellant.
The sale by the
Bombay seller to the appellant was ail inter-State sale.
The sale
by the appellant to the mills cannot be said to have caused the inter- .
~tate movement of goods.
The mere fact that the
goods
were
consigned by the Bombay seller to the mills in accorda~ce with the
direction of the appellant will not make the transactions inter-State
~oles. The sale by the Bombay seller to the appellant occasioned
the movement of goods.
The High Court was correct in holding
that the sale by the Bombay seller to the appellant is an inter-State
sale and the sale by the appellant to the mills is not an inter-State
sale.
Therefore, the State Sales Tax Authorities had jurisdiction to
assess the tran~action for sale by the appellant to the mills under
section 3 (b) of the Central Act.
The appellant raised a second contention that the appellant is
entitled to the benefit of Government Order No. 3602 which exempts
from sales tax declared goods sold in the course of inter-State trade
A
B
c
or co=erce where tax has been levied or collected in respect
D
of sales or purchase of such declared goods under section 4 of 'the
Madras General Sales Tax Act, 1959 called the Madras Act.
The
Goverrunent Order No. 3602 was issued in exercise of powers conferred by section 8 ( S) of the Central Act.
The appellant contended
that the mills paid the tax on their purchases of cotton and the same
transaction could not be brought to charge 'in the iYands of the
E
appellant
as
inter-State
sale.
If
the
transaction
attracts
levy of tax under the Central Act it is not taxable under the Madras
Act.
If the mills had paid tax under the impression
that
their
purchases are taxable under the Madras Act that will not enable the
appellant to claim the benefit of the
exemption.
The exemption
applies only to cases where the claimant has paid tax himself under
F
~ectiou 4 of the Madras Act in respect of local sales preceding the
inter-State transactions.
The appellant in the present case did not
pay tax under section 4 of the Madras Act. The High Court, there-
~ore, correctly held ihat the appellant was not entitled
to claim
exemption under the Government Order.
The third contention of the appellant was that the appellant was
entitled to exemption in respect of turnover under section 6(2) of
the Central Act.
Section 6(2) of the Central Act lays down that
where a sale in the course of inter-State trade or co=erce of
goods of the description referred to in section 8 ( 3) of the Central
G
Act has occasioned the movement of goods from one State to another
H
or has been effected by a transfer of documents of title to such goods
· during their movement from one State to another, any subsequent
A
B
c
720
SUPREME COURT REPORTS
(1976] 3 S.C.R.
sale to a registered dealer during such movement effected by a transfer of documents of title to such goods shall not be subject to tax
under the Act.
A dealer claiming exemption for subsequent sale
during the movement of goods from one State to another is required
by section 6(2) of the Central Act to furnish to the prescribed
authority in the prescribed manner a certificate duly filled and signed
by the registered dealer by whom the goods were purchased containing the particulars. In the present case, the appellant would be entitled
to exemption in production of appropriate form by the Bombay seller
and by showing that the buyer is I!: registered dealer.
The appellant
produced the form from Bombay seller but did not prove that his
buyer was a registered dealer in cotton.
Therefore, the Tribunal
rightly held that the appellant was not entitled to exemption under
section 6(2) of the Act.
The appeal is, therefore, dismissed with costs.
S.R.
Appeal dismissed.
\
•
•
..