# SHREE BAJRANG JUTE MILLS LTD v. STATE OF ANDHRA PRADESH

- **Citation:** [1964] 6 S.C.R. 691
- **Court:** Supreme Court of India
- **Decided:** 1964-02-06
- **Bench:** P. B. Gajendragadkar, K. N. Wanchoo, K. c. DAS GUPTA, J.C. Shah, N. Rajagopala Ayyangar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/shree-bajrang-jute-mills-ltd-v-state-of-andhra-pradesh-3214
- **Pages:** 9

## Headnote

Sales Tax-Goods delivered to places outside State for consumption itt
those States-Liability .to
tax-"Explanation
Salei'-Exprtssion
''Actually delivered",
meaning of-Constitu1ion of India,
Art.
286(1)(a)-·lndian Sale of Goods Act, 1930, r. 39.
The appellant, carrying on business as a manufacturer of jute goods
with its factory at Guntur, u~ed to send jute bags by railway to the
cement factories of the A.C.C. outside the State of Andhra. Fer securing
a regular supply of jute bags, the A.C.C. entered into a contract with
the appellant and under the despatch instructions. from that company,
the appellant loaded the goods in th!; railway wagons, obtained railway
receipts in the name of the A.C.C. as consignee and against payment
of the price, delivered the receipts to the Krishna Cement Works,
Tadepalli, which was for the purpose of receiving the railway receipt
and making payment, the agent of the A.C.C. From the amounts shown
as
gros~ turnover in the return for the assessment year 1954-55, the
appellant claimed reductidn of certain amounts in respect of the goods
supplied by rail to the A.C.C. outside the State of Andhra Pradesh
under its despatch instructions. The Commercial Tax Officer and the
Deputy Commissioner of Commercial Taxes disallowed the claim and
held that as the railway receipts were delivered to the agent of the
buyer within the State of Andhra, and price was also realized from
the agent of the buyer within the State, goods must be deemed to have
been delivered to the buyer in the State of Andhra Pradesh, and the
appellant was liable to pay tax on the sales. On appeal, this order·
was reversed by the Appellate Tribunal. In revision the High Court
restored the order of the Deputy Commissioner of Commercial Taxes.
The question for determination in this appeal was whether the sales to
the A.C.C. by the appellant may be regarded as "non·Explanation sales",
i.e. falling outside the Explanation to Art. 286(1).
Held: (i) If the gocxls were delivered pursuant to the contracts of
sale outside the State of Andhra for the purpose of consumption in
the State into which the gocxls were delivered, the State of Andhra
couid have no right to tax those sales by virtue of the restriction imposed
by Art. 286(l)(a) read with Explanation.
To attract the Explanation, the goods had to be actually delivered
a' a direct result of the sale, for the purpose of consumption in the
State in which they were delivered. The expression "actually delivered"
in the context in which it occurs, can only mean physical delivery of
.964
Febru1ry 6.
SUPREME COURT REPORTS
1964
the goods, or such action as puts the goods in the poMOSSion of tho
lllrH
Ba/rang purchaser; it does not contemplate mere symbolical or notional delivery.
lut• MilLr
C. Govindarajulu Naidu cl Co. v. State of Madras, A.l.R. 1953
"'* .J• Andhro Mad. 116, Mis. Capco Ltd. v. Sales Tax Officer, A.l.R. 1960 All. 62
Prada/I
and Khaitan Minerals v. Sales Tax Appellate Tribunal for Mysor<, A.I.II. •
. 1963 Mysore 141, followed.
..,, 1.
Poppat Lal Shah v. State of Madras, [1953] S.C.R. 617, Tata Iron A:
Steel Co. Ltd. v. State of Bihar, [1958] S.C.R. 1355, Tobacco Man ..
facturtrs (India) Ltd. v. Commissioner of Sales Tax, Bihar, [1961)
2 S.C.R. 106, Indian Copper Corporation Ltd. v. State of Bihar, [1961}
2 S.C.R. 276 and State of Kera/a v. Cochin Coal Co. Ltd., [1961] 2
S.C.R. 219. referred to.
(ii) Section 39 of the Indian Sale o! Goods Act will not make mere
delivery · of -the railway receipts representing title to the goods,
act'~11
delivery of goods for the purpose of Art. 286. The rule · contained ;,.
s. 39(1) h~ no ·applicat.ion in dealing with a constitutional provi.sio•
which while' imposiJ:\8 a restriction upon the legislative power of the
States entrusts exclusive power to levy sales tax to the State in which
the goocjs, have been ~ly delivered for the purpose of consumption.
CIV~L APPELLATE JURISDICTION: Civil Appeal No. 542
of 1962.
Appeal from the judgment and order dated April

## Text

6 S.C.R.
SUPREME COURT REPORTS
691
SHREE BAJRANG JUTE MILLS LTD.
v.
STATE OF ANDHRA PRADESH
(P. B. GAJENDRAGADKAR, C.J., K. N. WANCHOO, K. c. DAS
GUPTA, J.C. SHAH AND N. RAJAGOPALA AYYANGAR JJ.)
Sales Tax-Goods delivered to places outside State for consumption itt
those States-Liability .to
tax-"Explanation
Salei'-Exprtssion
''Actually delivered",
meaning of-Constitu1ion of India,
Art.
286(1)(a)-·lndian Sale of Goods Act, 1930, r. 39.
The appellant, carrying on business as a manufacturer of jute goods
with its factory at Guntur, u~ed to send jute bags by railway to the
cement factories of the A.C.C. outside the State of Andhra. Fer securing
a regular supply of jute bags, the A.C.C. entered into a contract with
the appellant and under the despatch instructions. from that company,
the appellant loaded the goods in th!; railway wagons, obtained railway
receipts in the name of the A.C.C. as consignee and against payment
of the price, delivered the receipts to the Krishna Cement Works,
Tadepalli, which was for the purpose of receiving the railway receipt
and making payment, the agent of the A.C.C. From the amounts shown
as
gros~ turnover in the return for the assessment year 1954-55, the
appellant claimed reductidn of certain amounts in respect of the goods
supplied by rail to the A.C.C. outside the State of Andhra Pradesh
under its despatch instructions. The Commercial Tax Officer and the
Deputy Commissioner of Commercial Taxes disallowed the claim and
held that as the railway receipts were delivered to the agent of the
buyer within the State of Andhra, and price was also realized from
the agent of the buyer within the State, goods must be deemed to have
been delivered to the buyer in the State of Andhra Pradesh, and the
appellant was liable to pay tax on the sales. On appeal, this order·
was reversed by the Appellate Tribunal. In revision the High Court
restored the order of the Deputy Commissioner of Commercial Taxes.
The question for determination in this appeal was whether the sales to
the A.C.C. by the appellant may be regarded as "non·Explanation sales",
i.e. falling outside the Explanation to Art. 286(1).
Held: (i) If the gocxls were delivered pursuant to the contracts of
sale outside the State of Andhra for the purpose of consumption in
the State into which the gocxls were delivered, the State of Andhra
couid have no right to tax those sales by virtue of the restriction imposed
by Art. 286(l)(a) read with Explanation.
To attract the Explanation, the goods had to be actually delivered
a' a direct result of the sale, for the purpose of consumption in the
State in which they were delivered. The expression "actually delivered"
in the context in which it occurs, can only mean physical delivery of
.964
Febru1ry 6.
SUPREME COURT REPORTS
1964
the goods, or such action as puts the goods in the poMOSSion of tho
lllrH
Ba/rang purchaser; it does not contemplate mere symbolical or notional delivery.
lut• MilLr
C. Govindarajulu Naidu cl Co. v. State of Madras, A.l.R. 1953
"'* .J• Andhro Mad. 116, Mis. Capco Ltd. v. Sales Tax Officer, A.l.R. 1960 All. 62
Prada/I
and Khaitan Minerals v. Sales Tax Appellate Tribunal for Mysor<, A.I.II. •
. 1963 Mysore 141, followed.
..,, 1.
Poppat Lal Shah v. State of Madras, [1953] S.C.R. 617, Tata Iron A:
Steel Co. Ltd. v. State of Bihar, [1958] S.C.R. 1355, Tobacco Man ..
facturtrs (India) Ltd. v. Commissioner of Sales Tax, Bihar, [1961)
2 S.C.R. 106, Indian Copper Corporation Ltd. v. State of Bihar, [1961}
2 S.C.R. 276 and State of Kera/a v. Cochin Coal Co. Ltd., [1961] 2
S.C.R. 219. referred to.
(ii) Section 39 of the Indian Sale o! Goods Act will not make mere
delivery · of -the railway receipts representing title to the goods,
act'~11
delivery of goods for the purpose of Art. 286. The rule · contained ;,.
s. 39(1) h~ no ·applicat.ion in dealing with a constitutional provi.sio•
which while' imposiJ:\8 a restriction upon the legislative power of the
States entrusts exclusive power to levy sales tax to the State in which
the goocjs, have been ~ly delivered for the purpose of consumption.
CIV~L APPELLATE JURISDICTION: Civil Appeal No. 542
of 1962.
Appeal from the judgment and order dated April 7,
1960, of the Andhra Pradesh High Court in Tax Revision
case No. 27 of 1958.
M. C. Seta/vad, K. Srinivasamurthy and Naunit Lal, for
the ap;iellant.
A. Ranganadham Chetty and B. R. G. K. Achar, for the
respondent.
February 6, 1964. The Judgment of the Court was
delivered by
SHAH, J.-With certificate of fitness granted by the High
Court of Andhra Pradesh this appeal is preferred by Shree
Bajrang Jute Mills Ltd.
The appellant is engaged in the manufacture of jute
goods, and is a registered dealer under the Madras General
Sales, Tax Act.
For the assessment year 1954-55 the
appellant submitted its return for sales-tax claiming a
deduction of Rs. 21,80,118-1-3 from the turnover in respect
6 S.C.R.
SUPREME COURT REPORTS
693
of the jute goods supplied by rail to the Associated Cement
1964
Company Ltd.-hereinafter for the sake of brevity called Shr••
Ba/Nlf6
'the A.C.C.' under despatch instructions from that Company.
J~t• MW.
The Commercial Tax Officer rejected the claim of the Stat• ,J· Andlft
appellant for deduction and that order was confirmed in
Pradt1/i
appeal to the Deputy Commissioner of Commercial Taxes.
Sliah J.
In appeal to the Sales Tax Appellate Tribunal, the order
was reversed, the Tribunal holding that the appellant was
entitled to exemption in respect of the turnover for the goods
supplied to the A.C.C. A revision petition presented against
the order to the High Court of Andhra Pradesh was heard
with a large number of other petitions which raised certain
common questions. The High Court reversed the order of
the Tribunal and restored the order gassed by the Deputy
Commissioner of Commercial Taxes.
The factory of the appellant is situated at Guntur. The
A.C.C. owns cement factories at many places (including
one at Tadepalli in the State of Andhra called the Krishna
Cement Works) and for the purpose of marketing its products it requires jute packing bags. For securing a regular
supply of jute bags, the A.C.C. entered into a contract with
the appellant of which the following four c~nditions are
material:
"1. All the goods are sold F.O.R. Guntur unless
otherwise expressly stated in this contract.
2. Goods to be packed. . . . well pressed and marked
in . . . . bound bales of . . . . per each.
3. Payments to be made in cash, in exchange for
Mills Delivery Order on sellers on due date or
for Railway receipts or for Dock receipts, or
for Mate's receipts, (which Dock receipts or
Mate's receipts are to be handed by a Dock's or
Ship's Officer to the seller's representative).
4. The buyers agree that the property in the goods
sold shall not pass from the sellers to the buyers
so long as the sellers are in possession of any
bilh of lading, railway receipts, dock-warrants
nr Mat..:'s re.ceipts or any other document of
19M
Slllte of Andhra
Jute Mills
v.
~
of Andhra
Pradesh
Sha~ J,
694
SUPREME COURT REPORTS
[1964]
title whether such documents are in the names
of sellers or buyers, until payment is made in
full.
(a) The buyers agree that the risk of loss, deterioration or damage in the goods during transit
whether by land or canal or sea or when the
goods are in the custody of the seller or any
third person in a warehouse, dock or any premises shall be borne by the buyers notwithstanding that the pm;ierty in the goods does not pass
to the buyers during such transit or custody."
As and when the gunny bags were needed for packing its
products the A.C.C. issued despatch instructions calling
upon the appellant to send jute bags by railway to the cement
factories of the A.C.C. outside the State of Andhra.
Pursuant to those instructions the appellant loaded the
goods in the railway wagons, obtained railway receipts in
the name of the A.C.C. as consignee and against payment
of the ~rice, delivered the receipts to the Krishna Cement
Works, Tadepalli-which, it is common ground, was for the
purpose of receiving the railway receipts and making payment, the agent of the A.C.C. It is also common ground
that the jute bags were sold to the A.C.C. for the purpose
of packing cement by the factories of the A.C.C. to which
they were sent and not for any other purpose.
The assessing authority and the Deputy Commissioner
held that as the railway receipts were delivered to the agent
of the buyer within the State of Andhra, and price was also
realized from the agent of the buyer within the State, the
goods must be deemed to have been delivered to the buyer
in the State of Andhra, and the appellant was liable to pay
sales-tax on the price of the goods sold.
With tnat view
the High Court agreed.
Under the Government of India Act, 1935, the Legislatures of every Province could legislate for levying tax on
sales of goods in respect of all transactions, whether the
property in tile goods passed within or without the Province,
provided the Province had a territorial nexus with one or
more elements constituting the transaction of sale : Poppat
6 S.C.R.
SUPREME COURT REPORTS
695
Lal Shah v. The State of Madras(') and The Tata Iron &:
1964
Steel Company Ltd. v. State of Bihar(2). But this resulted Shm
Bo/r1111
in simultaneous levy of sales tax by many Provinces in .
Jut• MilU
respect of the same transaction each fixing upon one or State of· A.ndhro
more element constituting the sale, with which it had a
Prod.,lt
territorial nexus. With the dual purpose of maintaining.an
Shah J.
important source of revenue to the States, and simultaneously
preventing imposition of an unduly heavy burden upcn the
consumers by multiple taxation upon a single transaction of
sale, the Constitution made a special provision imposing
restrictions upcn the legislative power of the States in Art.
286 which as originally enacted ran as follows :
" (I) 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.
Explanation.-For the purposes of sub-clause (a)
a sale or purchase shall be deemed to have
taken place in the State in which the goods have
actually been delivered as a direct result of such
sale or purchase for the purpose of consumption
in that State, notwithstanding the fact that
under the general law relating to sale of goods
the property in the goods has by reason of such
sale or purchase passed in another State.
{ '.l) Except in so far as Parliament may by law
otherwise provide, no law of a State shall
impose, or authorise the imposition of, a tax on
the sale or purchase of any goods where 1uch
sale or purchase takes place in the course of
inter-State trade or commerce :
Provided that the President may by order direct that
any tax on the sale or purchase of goods whicil
-----
(!) [1953] S.C.R. 677.
(2) {!9581 S.C.ll. 1355
1964
5hree
Bajranr
Jute Mi/iii
v.
State of Andnra.
Prade.h
S;1ali J.
696
t3)
SUPREME COURT REPORTS
was being lawfully levied by the Government of
any State immediately before the commencement of this Constitution shall, notwithstanding
that the imposition of such tax is contrary to
the provisions of this
clause, continue to be
levied until the thirty-first day of March, 1951.
No law made by the Legislature of a State
i'llposing, or authorising the imposition of, a
tax on the sale or purchase of any such goods
as have been declared by Parliament by law to
be essentiai for the life of the community shall
have effect unless it has been reserved for the
consideration of the President and has received
his assent."
After the enactment of the Constitution, by a Presidential
Order the Provincial Sales Tax Acts were made to accord
with the restrictions imposed by Art. 286 of the Constitution.
It is manifest that by Art. 286 the legislative authority of
the States to impose taxes on sales and purchases was
restricted by four limitations-in respect of sales or purchases
outside the State, in respect of sales or purchases in the
course of imports into or exports out of India, in respect
of sales or purchases which take place in the course of interState trade or ·commerce and in respect of sales and purchases of goods declared by Parliament to be essential for
the life of the community. These limitations may overlap,
but the power of the State to tax sale or purchase transactions
may be exercised only if it is not hit by any of the limitations.
The restrictions are cumulative.
The sales in the !'"esent case are not sales, which have
taken place in the course of inter-State trade or commerce.
The only point of contest is whether they are "outside the
'State" of Andhra. It is now well-settled that by Art. 286( 1)
(as it stood before it was amended by the Constitution
Sixth Amendment Act, 19 5 6) sales as a direct result oi
whlch goods were deliven;d in a State for consumption in
SllCb State i.e. the sales falling within the Explanation to
Art. 286(1) were fictionally to be regarded as inside that
State for the purpose of cl. ( I ) (a) and so within the taxing
..
~ S.C.R.
SUPREME COURT REPORTS
697
power of the State in which such delivery took place and
1964
being outside all other States exempt from sales-tax by those Shm
Bairat11
other States : Tobacco Manufacturers (India) Ltd. v. The
Jute Mills
v.
Commissioner of Sales-tax, Bihar, Patna( 1 ): lndzan Copper State of A.ndhra
Corporation Ltd. "· ::1e State of Bihar and others('): and
Pradesh
T!te State of Kerala ~ •d others v. The Cochin Coal ComShah J.
pany Ltd.('). But the Explanation is not exhaustive of what
may be called "inside sales". Clause (I )(a) excludes from
the reach of the power of the States sales outside the State
but it does not follow from the Explanation that it localises
the situs of all sales. The power of the State under Entry 54
List IT of the Seventh Schedule to tax sales [not falling
within els. (l)(b), (2) and (3)] which are outside the
Explanation, and which may for the sake of brevity be called
'non-Explanation' sales, remains unim;>aired. It is not necessary for the purpose of this case to express an opinion,
whether the theory of territorial nexus of the taxing State,
with one or more elements which go to make a completed
sale authorises since the promulgation of the Constitution
the exercise of legislative power under Entry 54, List II of
the Sevent!o Schedule to tax sales, where property in goods
has not passed within the taxing State.
The question which then falls to be determined is
whether the sales to the A.C.C. by the a;>pellant may be
regarded as "non-Explanation sales". There can be no doubt
that if the goods were delivered pursuant to the contracts
of sale outside the State of Andhra for the purpose of
consumption in the State into which the goods were delivered, the State of Andhra could have no right to tax those
sales by virtue of the restriction imposed by Art. 286 ( 1 )(a)
read with the Explanation.
The facts found by the taxing authorities clearly establish
that property in the goods despatched by the appellant
passed to the A.C.C. within the State of Andhra when the
railway receipts were handed over to ilie agent of the A.C.C.
against payment of price. The question still remains : were
(I) [1961] 2 S.C.R. 106
(2) (1961] 2 S.C.R. 276
(3) [1961] 2 S.C.R. 219.
SUPREME COURT REPORTS
1964
the transactions 'non-Explanation sales' i.e. falling outside
Shr••
Bajrang the Explanation to Art. 286 ( 1)? To attract the Explana-
/ut• Mills
tion, the goods had to be actually delivered as a direct result
&tote of' Andhra of the sale, for the purpose of consumption in the State in
Pradesh
which they were delivered. It is not disputed that the goods
Shah 1.
were supplied for the purpose of consumption outside the
State of Andhra, and in the States in which they were
supplied. It is submitted that the goods were actually
delivered within the State, when the railway receipts were
handed over to the agent of the buyer. But the expression
"actually delivered" in the context in which it occurs, can
only mean physical delivery of the goods, or such action as
rputs the goods in the possession of the purchaser : it does
not contemplate mere symbolical or notional delivery e.g.
by entrusting the goods to a common carrier, or even
delivery of documents of title like railway receipts. In
C. Govindaraiulu Naidu & Company v. State of Madras(1)
Venkatarama Ayyar, J., dealing with the concept of actual
delivery of goods, so as to attract the application of the
Explanation to Art. 28 6 (1 )(a) rightly observed :
"In the context it can mean only physical delivery
and not constructive delivery such as by tran~
fer of documents of title to the goods.
The
whole object of the Explanation is to give a
power of taxation in respect of goods actually
entering the State for the purpose of use therein
and it will defeat such a purpose if notional
delivery of goods as by transfer of documents
of title to the goods within the State is held tt>
give the State a power to tax, when the good
are actually delivered in another State."
A similar view has been expressed in two otlier cases :
M Is. Capco Ltd. v. The Sales Tax Officer and another('):
and Khaitan Minerals v. Sales Tax Appeiiate Tribunal for
Mysore(').
(1) A.I.R. 1953 Mad. 116.
(3) A.LR. 1963 Mysore 141.
---~
(2) A.I.R. 1960 All. i2.
6 S.C.R.
SUPREME COURT REPORTS
699
Counsel for the respondent-State relied upon s. 39 of
1964
the Indian Sale of Goods Act, 1930, which provides in so Shru
Ba/Tfl111
·
Jule Milla
far as it is material, by the first sub-section that where, m
v.
pursuance of a contract of sale, the seller is authorised to State of Andhra
send the goods to the buyer, delivery of the goods to a
P~h
carrier, for the purpose of transmission to the buyer, is
Shah J.
prima facie deemed to be delivery of the goods to the buyer.
But that provision will not make mere delivery of the railway
receipts representing title to the goods, actual delivery of
goods for the purpose of Art. 286. The rule contained in
s. 39(1) of the Indian Sale of Goods Act raises a prima
facie inference that the goods have been delivered if the
conditions prescribed thereby are satisfied: it has no application in dealing with a constitutional provision which while
imposing a restriction upon the legislative power of the
States entrusts exclusive power to levy sales tax to the State
in which the goods have been actually delivered for the
purpose of consumption.
The High Court was therefore in error in inferring from
the fact that •the property had passed within the State of
Andhra against delivery of the railway receipts, that the
goods were actually delivered within the State. If the inference raised by the High Court that the goods were actually
delivered within the State of Andhra cannot be accepted,
on the facts found there is no escape from the conclusion
that the State of Andhra had no authority to levy tax in
respect of those sale transactions in which the goods were
sent under railway receipts to places outside the State of
Andhra and actually delivered for the purpose of consumption i.n those States.
The appeal must therefore be allowed.
The order of
the High Court is set aside and the order of the Appeliate
Tribunal is restored. The appellant to get its costs in this
Court and the High Court from the respondent-State.
Appeal allowed.