# LTD. AND ANOTHER v. THE STATE OF MYSORE AND ANOTHER

- **Citation:** [1963] 3 S.C.R. 777
- **Court:** Supreme Court of India
- **Decided:** 1960-03-21
- **Case number:** Civil Appeal No. 255 of 1961
- **Bench:** Das, J. L. Kapur, A. K. Sarkar, M. Hidayatullah, Raghu:Sar Dayal
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/ltd-and-another-v-the-state-of-mysore-and-another-2673
- **Pages:** 15

## Headnote

Sales Tax-Sale of goods-Transactions involving move·
ment of goods across the border from one State to anotherLiability to tax-Mysore Sales Tax Act, 1948 (Mysore 46 of
1948)-Constitution of India, Art.286(2);
The second appellant was a manufacturer of cement and
at the material time it had over a dozen factories in different
parts of India none of which was in the State of Mysore.
The first appellant was its sales manager and ~ad its head
office in Bombay with a branch office at Bangalore in the
State of Mysore. Cement was a controlled article· and everyone wishing to buy cement had to get an authorisation from
the appropriate Government authorities in a standard form
which authorised the first appellant to sell cement in quantities
mentioned therein and the cement had to be supplied from
the factory therein mentioned. The purchaser had to place
an order with the first appellant stating the requirement,
where the goods were to be sent and how they were to be sent.
In the present ca~e, all the goods were sent against the
authorisations from the various factories belonging , to the
second appellant which were all outside the. State of Mysore
and were received in the State of Mysore by the various
-
l9G2
Augtiil 28 • .
196B
01mtnt Market_ing
C•., of f,.rlia Ltd •
.•. '
·st•te oj Jly.-or11
778
SUPREME OOURT REPORTS [1963j
purchasers. The Sales Tax Officer by his order dated March
31, 1958, took the view that though the property in the goods
passed to the dealers and consumers outside the State pf
Mysore, since the goods had actually been delivered in the
State of Mysore as a direct result of such sales for purposes
of consumption in the· State, the sales must be deemed to
have taken place in that State and, therefore, the s~les
.effected by the first appellant as the sales manager of the
second appellant,_ to customers in Mysore State amounted
to intra-State sales and liable to tax under provisions of the
Mysore Sales Tax Act, 1948. The High Court held that as
the actual delivery to the purchasers was within the State of
Mysore, the cement loaded outside the State and despatched
to the purchaser did not convert the sales into
inter~State
sales but were intra-State sales.
Held, that the sales which tookplace in the present case
in which the mov~ment of goods was from one State to
anoiher as a result of a convenant or incident of the contract
of sale, were in the course of inter-State trade or commerce
and felt within Art.286(2) of the Constitution of India.
Consequently, the imposition of sales tax on such sales was
unconstitutional.
Mfs. Mohan Lal Hargobind v, Th• State of Madhya.
Pradesh, [1955] 2 S.C.R. 509, followed.
·. •
Endapuri Narasimhan & 80n v. The Stale of OriBaa,
[1962].1 S.C.R. 314, Bengallmmunitg Go. Ltd. v. The State
of Bihar, [1955] 2 S.C.R. 603 M/s. Reim Narain & Sons v.
Assistant Commissioner of Sales Tax, [1955] 2 S.C.R. 483 and
Tata Iron and Steel Go. Ltd. Bombay v. S. R. Sarkar, [1961]
I S.C.R. 379, relied on.
Rohtas IndustrieB Ltd. v. The State of Bihar, [1961] 12
. S.T.C. 615, distinguished.

## Text

...
3 s.c.:R.
SUPREME dOUR'i' R~POR'l'S
777
under Art. 226, the High Court can exami~e the
merits of the order passed by appellant No. Im such
cases.
Beard of
1!I iltfi SchtJOI &.
/nlmntdi.te
Etl111Jatitm U.P.
v.
The result is though we agree with the appellants that the orde; passed by the. H~gh ~ourt was
not justified, we refrain from settmg it aside for the
reasons just explained. There would be no o~der
as to costs.
Bt1gleshwar Prasai
-~-
THE CEMENT MARKETING CO., OF INDIA
LTD. AND ANOTHER
v.
THE STATE OF MYSORE AND ANOTHER
(S. K, DAS, J. L. KAPUR, A. K. SARKAR, M.
HIDAYATULLAH and RAGHU:SAR DAYAL, JJ.)
Sales Tax-Sale of goods-Transactions involving move·
ment of goods across the border from one State to anotherLiability to tax-Mysore Sales Tax Act, 1948 (Mysore 46 of
1948)-Constitution of India, Art.286(2);
The second appellant was a manufacturer of cement and
at the material time it had over a dozen factories in different
parts of India none of which was in the State of Mysore.
The first appellant was its sales manager and ~ad its head
office in Bombay with a branch office at Bangalore in the
State of Mysore. Cement was a controlled article· and everyone wishing to buy cement had to get an authorisation from
the appropriate Government authorities in a standard form
which authorised the first appellant to sell cement in quantities
mentioned therein and the cement had to be supplied from
the factory therein mentioned. The purchaser had to place
an order with the first appellant stating the requirement,
where the goods were to be sent and how they were to be sent.
In the present ca~e, all the goods were sent against the
authorisations from the various factories belonging , to the
second appellant which were all outside the. State of Mysore
and were received in the State of Mysore by the various
-
l9G2
Augtiil 28 • .
196B
01mtnt Market_ing
C•., of f,.rlia Ltd •
.•. '
·st•te oj Jly.-or11
778
SUPREME OOURT REPORTS [1963j
purchasers. The Sales Tax Officer by his order dated March
31, 1958, took the view that though the property in the goods
passed to the dealers and consumers outside the State pf
Mysore, since the goods had actually been delivered in the
State of Mysore as a direct result of such sales for purposes
of consumption in the· State, the sales must be deemed to
have taken place in that State and, therefore, the s~les
.effected by the first appellant as the sales manager of the
second appellant,_ to customers in Mysore State amounted
to intra-State sales and liable to tax under provisions of the
Mysore Sales Tax Act, 1948. The High Court held that as
the actual delivery to the purchasers was within the State of
Mysore, the cement loaded outside the State and despatched
to the purchaser did not convert the sales into
inter~State
sales but were intra-State sales.
Held, that the sales which tookplace in the present case
in which the mov~ment of goods was from one State to
anoiher as a result of a convenant or incident of the contract
of sale, were in the course of inter-State trade or commerce
and felt within Art.286(2) of the Constitution of India.
Consequently, the imposition of sales tax on such sales was
unconstitutional.
Mfs. Mohan Lal Hargobind v, Th• State of Madhya.
Pradesh, [1955] 2 S.C.R. 509, followed.
·. •
Endapuri Narasimhan & 80n v. The Stale of OriBaa,
[1962].1 S.C.R. 314, Bengallmmunitg Go. Ltd. v. The State
of Bihar, [1955] 2 S.C.R. 603 M/s. Reim Narain & Sons v.
Assistant Commissioner of Sales Tax, [1955] 2 S.C.R. 483 and
Tata Iron and Steel Go. Ltd. Bombay v. S. R. Sarkar, [1961]
I S.C.R. 379, relied on.
Rohtas IndustrieB Ltd. v. The State of Bihar, [1961] 12
. S.T.C. 615, distinguished.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 255 of 1961.
Appeal from the judgment and order dated
March 21, 1960, of the Mysore High Court in
Writ Petition No. 14 7 of 1958.
,,,
R: J. Kolah, J. B. Dadachanji, O. C. Mathur
and Ravin.der Narain, for the appellants.
). .
3 S.d.:R.
SUPREME COURT REPORTS
119
0, K. · Daphtary, Solioitor-General of India,
J3. R. L. Iyengar and P. D. Menon, for respondents.
1962. August. 28. The Judgment of the
Court was delivered by.
KAPUR, J.-This is an appeal against the
judgment and order of the HigQ. Court of Mysore
in Writ Petition No.147of1958 dismissing the appell·
ant's petition under Arts. 226 and 227 of the Constitution for quashing the order of assessment for
the period of assessment 1955-56 i.e, from April
1, 1955, to March 31, 1956. In this appeal -because
of the Validating Act (VII of 1956) the appellants
did not cballange their liability for the period
April 1, 1955, to September 6, 1955.
The facts necessary for the decision of this
appeal are these : Appellant No. 1-The Cement
Marketing Co. Ltd-are the Sales Managers of the
second appellant-The Associated Cement Co. Ltd.
-appointed under an agreement dated April 21,
1954. The High Court has described the first
appellant to be the Distributors of the second
apppellant.
The second appellant is a manu·
facturer of cement and at the material time
it had over a dozen factories in different parts of
India, none of which was in the State of Mysore.
The head office of first appellant is at Bombay and
it had then a branch office at Bangalore in the
State of Mysore. The first appellant was registered
as a dealer under the Mysore Sales Tax Act 1948,
hereinafter called the ·•Mysore Act".
At all
material times cement was and still is a controlled
article. Whether the sale was to a Government Dep•
artment i.e. _to the Director General of Supplies &
Disposal, Government of India., New Delhi, or to a
person authorised by the said Officer or to the
public it was effected on authorisations given to the
buyers by appropriate Government authorities and
19112
Ciim111I Marluting
e-,,., of lndis Ltd.
v.
SliJu of Mjsori
.·1962
Cem~t MarleJing
C~ •• of lndi• Ltd.
v •
. li.W. of liJ .. ,,
780
SUPREME COUR'r RlllPOR'.l'S [l963j
produced hY' them in the office of the first appellant.
Both in regard to purchases by the public and t}Je
Govern:nent the modus operandi was more or less
identical. It was this : Every one wishing to buy
cement had to get an authorisation in a standard
form which authorised the first appellant to sell
cement in quantities mentioned, therein and the
cement had to be supplied from the factory therein
mentioned. That document was in the following
form which actu~lly ralates to a Rale to a Government contractor.
"Government of India-Ministrary of
Commerce & Industry.
Office of the Regional Honorary Cement
Adviser 4/12 Race Course Road, Coimbatore.
Central Quota.
Dated 8-10·1955.
Authorisation No. RA/CT/28/CMI/ 17 2 CQ.
(CENTELEC)
Period IV/55
Name of Suppliers :
The Cement Marketing,
Co. of India
P. Box No. 613, Sugar
Company BuldingBangalore-2.
You are authorised to sell cement in quantity mentioned
b~low under this authorisation.
The sale will be a direct deal between yourself and
' .
.~
.........
.... '
3 S.C.R.
SUPREME COURT REPORTS
781
the purch 'tSer. The Government
undertakes no
responsibility of any nature whatsoever:-
Name and Name of the Quan- Name of Rly. Readdress
cement
tity Stn. to which marks
of the person factory or
cement is to
in whose
company
be booked.
favour
required to
authorisation supply
is issued.
cement.
I
2
3
M/s. G. S.
Mudhukkarai
300
Duggal & Co
Shahabad
tons
Ltd .Kngineers & Contractors,
Jalhalli P.O.
Bangalore.
Bangalore
5
Ref: No. J/117/115 date 29-9-55 from the above
indentors-]for manufacture of the tiles for the
Bharat Electronics Ltd. Supply rPoommended by the
Commander Works Engineers(B.E.I.P.), Jalahalli.
Full details of the purpose for which and
the place at
which cement will actually be
consumed; Priority, Defence work.
Sd. C.C. Ramanath,
Reg, Hon. Cement Advisor
(Coimbat ire)
Copy to I. The indentor.
2. The D.v. Development Officer, Govt.
of India, Ministry of Commerce &
Industry, D.welopment Wing,(Chemicals
I, Mineral Industries) Shahjehan Road,
New Delhi.
3. The Controller of Civil Supplies in My.
sore Bangalore for information".
1963
Gemme '11 arketi.1g
Co., of India Ltd..
•
Stale of Mya111
KapurJ.
1912
C1m1nt Mark1ting
Co., of India Lfd,
••
Stat1 of Mysor1
Eapur J.
782
SUPREME COURT REPORTS (1963)
This authorisation was subject to the following conditions: It was to be utilised within
15 days; the cement released could be
used
only for the purpose for which it was given;
the
authorisation was not transferabl'l;
the
issuing authority could, if necessary, revoke the
authorisation at any time and even the orders
booked under the authorisation could be cancelled.
The purchaser or the indentor had then to place an.
order with the first appellant as Sales Managers
of the second appellant stating the requirement,
where the goods were to be sent and how they were
to be sent. The seller entered into a contract with
the first appellant. This contract is in a standared
form and gives conditions of sale. Thereupon the
first appellant instructed its Bombay office to
· despatch the cement in accordance with the instructions of the buyer and the authorisation. In this
letter they had to mention the number of the
authorisation and the person who had issued it and
also to whom the goods were to be sent and how
and c~rtain other details which are not necessary
for the purposes of this appeal were also to
be given.
Each instruction indicates that it was issued
for and on behalf of appellant No. 2 by appellant
No. I as its Sales Managers. A copy of the letter of
instruction was
sent to the factory from where
the goods were to be despatched and the particularR
of the authorisation had to be mentioned therein.
Thereafter the first appellant sent an advice to
.,...;
f
••
,.
>-.
)" .
3S.C.R.
SUPREME COURT REPORTS
783
the purchaser enclosing therewith the Railway
Receipt for the goods and this advice also mentioned
the parti0ulars of the authorisation against which
the goods were being sent. Both the contract of
sale and the advice above mentioned stated that
the goods were being despached at the buyer's risk
from the time the delivery was ma.de by the factory
to the carriers
and the railway receipt was
obtained for the goods. In the present case all the
goods were sent, as indeed they had to be sent,
against the authorisations
from
the
various
factories belonging to the second appellant which
at the relevant time were all situate outside the
State of Mysore and were received in the State of
Mysore by the various purchasers.
The position of the first appellant is as was
accepted by the Sales tax Officer in his order dated
March 31, 1958, that of Sales Managers of the
second appellant but in regard to the nature of the
transactions the Sales ta.x Officer found: -
"Though the property in the goods pa11s
to tbe dealers and consumers outside the
State immediately the goods are h11.nded over
to the carriers outside the l::ltate and railway
receipt is taken out since the goods have
actually been delivered Jn Mysore State as a
direct result of such sale for purposes of
consumption in the State, sale is deemed to
have taken place in Mysore State".
and a.gain he said:-
"Thus the sales of cement manufactured
by A.C.U. Factories situated outside Mysore
State effected by the dealers M/s. Cement
Marketing Company of India Ltd. Bangalore,
to dealers and customers in Mysore State •
amounts to intra-State sales and therefore
liable to Mysore Sales Tax Act 48".
1962
Cement Markrti•i
Ch., of lndi;1, Ltd.
"'·
State of Mys.,-.
KapurJ
1952
Cem1nl Marktting
Co., of India Lid.
v.
State oj Mysor1
Kapur J.
784
SUPREME COURT REPORTS (1963)
In its judgment the High Court took into consideration the faot that the first appellant had a
branch office at Bangalore within the State
of
Mysore and that the public placed their orders with
the first appellant for supplies of cement against
permits granted to them; that the first appellant,
who after accepting the offer for the supplies of
Cf'ment, oollected the price from the intending purchasers and then directed one of the factories of
the second appellant to supply cement to the purchasers and actual delivery to the purchaser was
whhin the State of Mysore and therefore the contention that cement was loaded outside the 8tate of
Mysore and despatched to the pnrohaser did not
not convert sales into inter-State sales but were
intra-State sales. It appears that the true nature
of the transaction was not correotly considered by
the High Court.
The modus operandi above mentioned shows
that before an intending purchttser could obtain
cement he had to get what is called an authoririation
from a Government authority which nominated the
factory from whioh the intending purohaser had to
get his supplies of cement. That authorisation with
an order had to be given to the first appellant; and
after a contract in the standard form was entered
into the first appellant sent the order to the factory
named in the authorisation and that factory then
supplied the requisite goods to the purchaser. The
factory from where the cement was to be supplied
was not in the hands or at the option of the first
appellant, but was entirely a
matter for the
Government authority to decide, so that the cement
which was supplied from a particular factory was
supplied not at the choice of the first appellant but
pursuant to the authorisation.
It was contended that the sales which took
place in the present case in which the movement of
....
.. "'
-"
'->-···
.J '
3 S.C.H..
SUPREME COURT REPORTS
785
goods was from one State to ar1other as a result of a
covenant or incident of the contract of sale fell
within Art. 286(2) of the Consitution and therefore
the imposition of Sales tax on such sales was
unconstitutional. The Article applicable at the
relevant time i.e., before its amendment was as
follows:-
286 (1) "No law of a State shall impose or
authorise the imposition of a tax on the
sale or purchase of goods where such sale
or purchase takes place.
(a) outside the State; or
{b) in the course of the import of the goods
into or export of the goods out of, the
territory of India.
Explaootion ......... ~ ................................... .
(2)
•et I e' I e Io e e 't f I ff ff e f
f e f ff e t If f It ff ff I ff f ff t e f ff ff f I f t f
Except in so far as Parliament may by
law otherwise provide, no Jaw of a State
shaU impose, or authorise the imposition
of, a tax on the sale or purchase of any
goods where such sale or purchase takes
place in the course of inter-State or
commerce:
>·
Provided ...................................... ~ ......... '~
The Article had since been repealed and another
substituted in its place by the Constitution (Sixth
Amendment) Act but the sales in question were
prior to the amendment.
In the present case the contract itself involved
.,, .
the movement of goods from the factory to the
purchaser i. e. across the broder from one State
to another because the factories were outside the
State of Mysore and the ref ore transactions were
1962
Cemonl Ma•fretint
l'o , of lndia Ltd.
v.
Stat1 of Myso r•
KapurJ.
1961
Ctml'nt M orketing
Co., of India Ltd.
..
Slate of My101e
Eopur J.
786
SUPREME OOURT REPORTS [1963)
cle&rly transactions of sale of goods in the oourse
of inter-State trade or commerce. Taking the
nature of the transaction and preliminaries which
are necessary for the sale or purchase of cement it
cannot be said that the sale itself did not occasion
the movement of goods from one State to another.
The essential features of the contracts proved in
the preeent case are itnalogous to those in
Mfs. Mohan Lal Hargovind v, The State of Madhya
PradeBh.(') In that case the assessees were a firm
carrying on business of making and selling bids in
Madhya P111desh. In the course of their business
they imported finished tobacco from dealers in
Bombay State, rolled it into biiis and exported
the biris to various other States. Both the exportern
of tobacco from Bombay :State who .supplied the
assessees and the asseseees were registered dealers
under the C. P. & Berar Sales Tax Act, 1947. It
was held that the assessees imported the finished
tobacco into Madhya. Pradesh from persons who
were carrying on in the State of Bombay busines~
of processing tobacco and selling the goods and
there was, as a result of these transactions move
ment of goods from the State of Bombay to the
State of Madaya Pradesh and therefore the transactions involved movement of goods across t be
State border and they were not li&ble to be taxed
by virtue of Art. 286 ( 2) of the Constitution. In
The State of Travancore Cochin &: Others v. The
Bombay Co Ltd.(') which was a case under Art. 286
( 1) ( b j i. e. sale and purchase in the course of
export trade, Patanjali Sastri, C. J., observed:--
,, A sale by export thus involves a series
of integrated
activities commencing from
the agreement of sale with a foreign buyer
. -
. ;..
. ""
and ending with the delivery of the goods to a
. "'
common carrier for transport out of the
(l) (1955) 2 s. C. R.
~Qt>.
(2) (1952) S. C.R. IIJ2,
..J '
>·
3 S.C.R.
SUPREME COURT REPORTS
787
country by land or sea.
Such a sale can~ot
be dissooia.ted from the export without which
it cannot be effectuated, and the sale and
resultcJ.nt export from
parts of a single
transaction".
At p. 1120 the learned Chief Justice again observed:
"We accordingly hold that whatever
else may or may not fall within article 286 (1)
sales and purchases which themselves occasion
the export or the import of the goods, as
the case may be, out of or into the territory
of India come within the exemption and
that is enough to dispose of these appeals".
Thus a sale to fall within Art. 286 (1) (b) has to
be a sale which occasions the export. Again in
the
State of Travancore
Cochin
& Others v.
Shammugha Vilas Cashew..:\ ut Factory & Others (1) the
words ''in the course of" were interpreted to mean
a sale taking place not only during the activities
directed to the end of exportation of the goods
out of the oontury but also as a part of or connected with such activities.
At p. 63 the learned Chief
Justice explained the words ''integrated activities"
as follows:-
"The phrase "integrated activities" was
used in the previous decision to denote that
"such a sale" (i. e. a sale which occasions the
export) "cannot be
dissociated from the
export without which it oanot be afrectuated,
and the sale and the resultant export form
parts of a single transaction". It is in that
sense that the two activities-the sale and
the export-were said to be integrated".
In Endupuri N arasimham &: Son v. The State
of Orissa, (2) it was held in the case of sales covered
(I) (1954) S. C. R. 53.
(2) (1962) I S. C. R. 314,
1968
Cement
ark1ting
Oo., of India Ltd.
V•
Slat1 •f M ysli'6
Kapur J,
1962
Cnnenl Marketing
Co., of India Ltd.
••
State of .M.Jao11
Jra;urJ.
788
SUPRE~iE COURT REFO&TlS [963]
by Art. 286 ( l) (b) that only sale or purchase of
goods which occasions the export or import of the
goods out of or into the territory of India were
exempt from the imposition of tax on the sale or
purchase of goods and in regard to prohibition
against · imposition of tax on inter-State sales the
test, it was said, was that in order that a sale or
purchase might be inter-State it is essential that
there must be transport of goods from one State
to another under the contract of sale or purchase.
The following observatins from the Bengal Immunity
Co. Ltd. v. The State of Bihar (I) were quoted with
approval in support of the proposition:·-
" A s11le 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 tnose 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 tiade".
Thus the tests which have been laid down to
bring a sale within inter-State sales are tha,t the
transaction must involve movement of goods
across the border (Mohanlal Hargovind's case (2 ) );
transactions are inter-State in which as a direct
result of suoh sales the goods are actually delivered
for consumption in another State; Mjs Ram Narain
& Sons v. Assistant Commissioner of Sales tax (') a
contract of sale must involve transport of goods
from one State to another under the contract of
~ale; Bengal Immunity Go' case('). In the case of sal~s
m the course of export or import the test laid
down
was a
series of
integrated
actiTities
commencing
from an . agreement of sale and
ending with the delivery of goods to a common
ll) (1955)2 S. C.R. C03, 784•5.
(2) 11»55) 2 S.G R.509.
(SJ (1955) 2 S, C.R. 483, 504.
., -
' l.
.....
iii .
3 S.C.R.
SUPREME COURT REPORTS
789
carrier for export by land or by sea ; The Bombay
Go. LfJJ, case (1).
•'In the course of" was explained
to mean a sale taking place not only during the
activities directed to the end of the exportation of
the goods out of the country but also as part of or
connected with such activies and "integrated activities" was explained in similar langauage. This Court
again accepted these tests in Endupuri N arasimham's case ( 2). In s. 3 of the Central Salos Tax Act,
1956 (Act 74 of 1956), the legislature has accepted
the principal governing inter-State sales as laid
down in Mohan Lal Hargovind's case (3). The principles for determining when a sale or purchase
of goods ta.kes place in the course of inter-state sale
or commerce outside the state are :
"S.3 A sale or purchase of goods shall be
deemed to take place in the course of interState 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".
In Tata Iron & Steel Go. Ltd, Bomb(Lp v. S.R. Sarkar
& Another (4) Shah, J., in explaining what sales are
coyered by cl. (a) of s.3 above said :
"Cl. (a) of s. 3 covers sales, other than those
included in Cl. (b), in which the movement of
goods from one btate to another is the result
of a convenant or incident of the contract of
sale, and property in the goods passes in either
State".
As stated above under the contracts of sale in
the present case there was transport of goods from
(1) If52 s C.R. r112.
l2} (1962) I s.c.R. 314.
l3J (19551 2 s.c.R. 509.
' t+J \1S61J 1 s.c.R. 379, 391.
19611
Cement Marlceting
Co., of lndia Ltd.
v.
State of My1or1
KapurJ,
1962
Cenunt M ark1ting
Co., •f India Ltd.
v.
State of M yaore
KapurJ.
790
SUPREME COURT REPORTS [1963]
outside the State of Mysore into the State of
Mysore and the transactions themselves involved
movement of goods across the border. Thus if the
goods moved under the contract of sale, it cannot
be said that they were intra-State
~ales. It was
not the volition of the first appellant to supply to
the purchaser the goods from any of the factories
of the second appellant. The factories were nominated by the Government by authorisations which
formed the basis of the contract between the buyer
and the seller. Applying these tests to the facts of
the present case we are of the opinion that the sales
were in the nature of inter-State sales and were
exempt from Sales tax. In these circumstances the
contracts of sale in the present case have been
erroneously considered to be intra-State sales.
The decision in Rohtas Industries Ltd. v. The
State of Bihar(1) to which reference was made by the
respondent does not apply to the facts of the present .
case because the agreement between the first appellant and the second appellant is different from that
which existed between Rohtas Industries Ltd. and
the Cement .Marketing Co of India in the case above
cited. Un an examination of the agreement bet.ween
those two companies this court held that the relationship which exis_ted between the two was of seller
and buyer and not of principal agent. In the present
case the agreement
is quite different. In the
first clause of the agreement between the two appellants and the Patiala Cement Co. dated April 21,
1954, the first appellant was appointed the sole and
exclusive Sales Manager of the second appellant and
as such the first appellant was entitled to enter into
contracts of sale, receive payment of the same and do
all acts and things necessary for the effective management in connection with the contracts of sale
entered into on behalf of the principals. The sale
price and the terms and conditions of sale were to be
(I) (1961) 12 S.T.C. 615.
....
" ,
3 S.C.R.
SUPREME COURT REPORTS
791
determined by the principals. The Se.les Manager
was to keep its administrative and technical staff at
such places in India as was determined by the principals. All the establishment charges and other expenses of the Sales Managers were for and on behalf
of the principals and were to be defrayed by the
principals in proportion to their annual sales. At
the end of every month the Sales Managers were to
submit to the principals accounts showing sales contracts by it on behalf of each one of the principals.
At the end of each financial year ending July 31, the
Sales Managers had to make a proper account of
all their operatione during the year and after submit•
ting them for confirmation to the principals had to
pay the price of annual sales relizations to each of •
the principals to whom they happened to relate.
Clause 10 provided that subject to imtructions of
the principals the Sales Managers were to make all
necessary arrangements to secure speedy and economicial transport of cement. These terms are quite
different from those in the case of Rohtas Industries
Ltd. and therefore that decision has no application to
the facts of the prese-qt <'ase.
In the result, the impoeition of the Sales tax
on the appellant for the year of assessment except
for the period April 1, 1955, to ~eptember 6, 1955,
was illegal and was not leviable for that period.
The appeal is therefore allowed to that extent and
> .
the petition of the appellants succeeds but it will
not effect the tax paid for the period abovementioned. In view of the partial success of appellants
they will be entitled to half costs of the appeal .
.Appeal allowed in part.
(l) (1961 l 12 S.T.C. 6!5.
196!
Cetr.ent A1a1ketin11
Ce., of India Lttl.
v.
State of Mysore
Eapur J.;