whether as a condition of giving the benefit
of Section 6(2) of the said Act, the tax authorities can impose a
limit or timeframe within which delivery of the respective goods
has to be taken from a carrier when the goods are delivered to a
carrier for transmission in course of inter-state sale?
1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2217 OF 2011
COMMERCIAL TAXES OFFICER ...APPELLANT
VERSUS
M/S. BOMBAY MACHINERY STORE ...RESPONDENT
WITH
CIVIL APPEAL NO. 2220 OF 2011
CIVIL APPEAL NO. 10000 OF 2017
CIVIL APPEAL NO. 10001 OF 2017
J U D G M E N T
ANIRUDDHA BOSE, J.
All these four appeals are being dealt with by this judgment
as they all involve adjudication on a common question of law
arising out of Sections 3 and 6 of the Central Sales Tax Act, 1956
(1956 Act), which was operational at the material point of time.
2
The question is as to whether as a condition of giving the benefit
of Section 6(2) of the said Act, the tax authorities can impose a
limit or timeframe within which delivery of the respective goods
has to be taken from a carrier when the goods are delivered to a
carrier for transmission in course of inter-state sale. For proper
appreciation of the dispute involved in these appeals, the aforesaid
provisions are reproduced below:-
“3. When is a sale or purchase of goods
said to take place in the course of interState trade or commerce. A sale or
purchase of goods shall be deemed to take
place in the course of inter-State 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.
Explanation 1 — Where goods are delivered
to a carrier or other bailee for transmission,
the movement of the goods shall, for the
purposes of clause (b), be deemed to
commence at the time of such delivery and
terminate at the time when delivery is taken
from such carrier or bailee.
Explanation 2 — Where the movement of
goods commences and terminates in the
3
same State it shall not be deemed to be a
movement of goods from one State to
another by reason merely of the fact that in
the course of such movement the goods pass
through the territory of any other State.
Explanation 3 – Where the gas sold or
purchased and transported through a
common carrier pipeline or any other
common transport or distribution system
becomes co-mingled and fungible with
other gas in the pipeline or system and such
gas is introduced into the pipeline or system
in one State and is taken out from the
pipeline in another State, such sale or
purchase of gas shall be deemed to be a
movement of goods from one State to
another.”
6. Liability to tax on inter-State sales.—
[(1)] Subject to the other provisions
contained in this Act, every dealer shall,
with effect from such date as the Central
Government may, by notification in the
Official Gazette, appoint, not being earlier
than thirty days from the date of such
notification, be liable to pay tax under this
Act on all sales [of goods other than
electrical energy] effected by him in the
course of inter-State trade or commerce
during any year on and from the date so
notified:
[Provided that a dealer shall not be liable to
pay tax under this Act on any sale of goods
which, in accordance with the provisions of
4
sub-section (3) of section 5 is a sale in the
course of export of those goods out of the
territory of India.]
[(1A) A dealer shall be liable to pay tax
under this Act on a sale of any goods
effected by him in the course of inter-State
trade or commerce notwithstanding that no
tax would have been leviable (whether on
the seller or the purchaser) under the sales
tax law of the appropriate State if that sale
had taken place inside that State.]
[(2) Notwithstanding anything contained in
sub-section (1) or sub-section (1A), where a
sale of any goods in the course of inter-State
trade or commerce has either occasioned the
movement of such goods from one State to
another or has been effected by a transfer of
documents of title to such goods during their
movement from one State to another, any
subsequent sale during such movement
effected by a transfer of documents of title
to such goods, -
(a) to the Government, or
(b) to a registered dealer other than the
Government, if the goods are of the
description referred to in sub-section (3) of
section 8,
shall be exempt from tax under this Act:
Provided that no such subsequent sale shall
be exempt from tax under this sub-section
unless the dealer effecting the sale furnishes
to the prescribed authority in the prescribed
manner and within the prescribed time or
5
within such further time as that authority
may, for sufficient cause, permit,—
(a) a certificate duly filled and signed by the
registered dealer from whom the goods were
purchased containing the prescribed
particulars in a prescribed form obtained
from the prescribed authority; and
(b) if the subsequent sale is made –
(i) to a registered dealer, a declaration
referred to in clause (a) of sub-section (4) of
section 8, or
(ii) to the Government, not being a
registered dealer, a certificate referred to in
clause (b) of section (4) of section 8:
Provided further that it shall not be
necessary to furnish the declaration or the
certificate referred to in clause (b) of the
preceding proviso in respect of a subsequent
sale of goods if,—
(a) the sale or purchase of such goods is,
under the sales tax law of the appropriate
State exempt from tax generally or is subject
to tax generally at a rate which is lower than
four per cent. (whether called a tax or fee or
by any other name); and
(b) the dealer effecting such subsequent sale
proves to the satisfaction of the authority
referred to in the preceding proviso that
such sale is of the nature referred to in
clause (a) or clause (b) of this sub-section.
[(3) Notwithstanding anything contained in
this Act, if –
6
(a) any official or personnel of –
(i) any foreign diplomatic mission or
consulate in India; or
(ii) the United Nations or any other similar
international body, entitled to privileges
under any convention to which India is a
party or under any law for the time being in
force; or
(b) any consular or diplomatic agent of any
mission, the United Nations or other body
referred to in sub-clause (i) or sub-clause (ii)
of clause (a), purchases any goods for
himself or for the purposes of such mission,
United Nations or other body, then, the
Central Government may, by notification in
the Official Gazette, exempt, subject to such
conditions as may be specified in the
notification, the tax payable on the sale of
such goods under this Act.”
(4) The provisions of sub-section (3) shall
not apply to the sale of goods made in the
course of inter-State trade or commerce
unless the dealer selling such goods
furnishes to the prescribed authority a
certificate in the prescribed manner on the
prescribed form duly filled and signed by
the official, personnel, consular or
diplomatic agent, as the case may be.”
2. We shall narrate the factual context of Civil Appeal No.2217
of 2011, before we address the legal issue involved in these
7
appeals, treating this to be the lead case. The dispute relating to the
other three appeals are not identical, but the question of law being
the same in all these appeals, we shall avoid narrating in detail the
sequence of events which led to filing of the said appeals, except
to the extent such narration is necessary for understanding the
scope of these appeals. In Civil Appeal No.2217 of 2011, the
period of assessment is 1995-96. The respondent-assessee
Bombay Machinery Store had purchased electricity motors and its
parts in the said financial year out of the State and sold them to
purchasers within the Kota region of the State of Rajasthan. For
such sales, they obtained the benefit of exemption under Section
6(2) of the 1956 Act. These goods had remained with the transport
company upon arrival in Kota for more than a month. Revenue’s
case is that after importing these goods into Rajasthan, sale was
effected through bilty (transport receipt) on obtaining separate
orders. Such sale, it is the revenue’s case, constituted sale within
the State and hence taxable @12% per annum under the Rajasthan
Sales Tax Act, 1954. Civil Appeal No.2220 of 2011 relates to the
8
same firm but for the assessment year 1994-95. Quantum of sales
for the year 1994-95 effected through the same process was
Rs.3,15,639/- and for 1995-96 it was Rs.2,60,93/-. Claim of
benefit under Section 6(2) of the 1956 Act was rejected and tax
along with interest and penalty was imposed under the State Act by
Commercial Tax Officer, Anti-Evasion Circle-I, Kota after a
survey by two orders, both dated 11th December, 1997. The
appeals by Bombay Machinery Stores were allowed by the Deputy
Commissioner (Appeals), Commercial Taxes, Kota following a
decision delivered on 8th March, 1996 by the Rajasthan Tax Board
in the case of CTO vs. Bhagwandas & Sons (1996 Tax World
107). The orders of the first appellate authority were passed on
interpretation of the first explanation to Section 3B(1) of the 1956
Act. Imposition of tax, interest and penalty under the State Act was
quashed. In State Tax authority’s appeal before the Tax Board,
reliance was placed on two circulars issued by the Commissioner
bearing S.No.1132A: CCT Circular F.11(3)CST/Tax/CCT/1/61
dated 15th April, 1998, clarified by a further circular dated 19th July,
9
1999. The Board did not take into consideration these two
circulars. These were not referred to in the orders of the Tax
Assessment Officer. The Board sustained the view of the Deputy
Commissioner (Appeals) in a composite order. This order was
challenged by the revenue by filing two revision petitions before
the High Court, as two appeals were disposed of by the Board by
its order dated 24.11.2004. The High Court, in the judgment
delivered on 14th September, 2007 confirmed the Board’s order and
quashed two circulars bearing S.No.115B dated 16th September,
1997 and S.No.1132A dated 15th April, 1998. These circulars
sought to impose a time limit on retention of goods in the carrier’s
godown, beyond which time the revenue was to treat obtaining of
constructive delivery of the goods involved. That judgment is
under appeal before us. Before we deal with this judgment, we
shall briefly refer to the other appeals which have been heard
together.
3. In Civil Appeal No.2220 of 2011, incidences of sale relate to
different dates between 24th March, 1994 and 30th January, 1995.
10
4. Civil Appeal No.10000 of 2017 and Civil Appeal No. 10001
of 2017 relate to another assessee, Unicolour Chemicals Company.
That firm purchased chemical and colour from a Gujarat based
company, and the goods reached the godown of the carrier
transport company on 12th May, 2000. They were sold to a firm in
Jaipur in two tranches, after 55 days and 80 days from the date of
arrival. The monetary value of these goods was Rs.1,27,592. In
Civil Appeal No. 10001 of 2017, revenue’s case is that survey of
the business place of the same firm revealed that:-
“the stock of taxable good colour chemical of
price Rs.4,72,653/- has been found less and
on doubt on the nature of sale showing in the
Section 6(2) of the Central Sales Tax Act and
seeing the possibility of tax evasion the
record found in the survey of the business
firm has been seized.”
(quoted from the order
annexed to the paper book)
These goods had reached the godown of the transport
company on 25th July, 2001. These were brought against bilty and
the documents were transferred to the same firm on 4th September,
11
2001. There was thus delay of 41 days. The tax fixation authorities
directed application of the State Act treating the transactions to be
local sales. This order was sustained by the Deputy Commissioner
(Appeals) and the order of the Tax Board also went against
Unicolour. The High Court, following the judgment in the case of
Bombay Machinery Store (which we are treating as the lead case
in this judgment), quashed the orders of the statutory authorities in
both the appeals and also invalidated the two circulars.
5. The two circulars issued by the Commissioner, Commercial
Taxes Department, Rajasthan have been quoted in the impugned
judgment in the case of Bombay Machinery Store. Henceforth,
wherever we refer to the expression judgment under appeal, we
shall imply that judgment only, unless we specifically refer to any
of the three other decisions under appeal. These circulars read:-
“S. No. 1115B : CCT Circular
F.11(3)/CST/Tax/CCT/1997/1563 dated
16.9.1997
As you are aware of the fact that to avoid
multiple taxation of goods sold by transfer
of documents of title to the goods in their
12
single movement from one State-to another,
provisions for exemption of such
transaction are embodied in S. 6(2), CST
Act, 1956. It appears that application of this
provision has been made more or less
mechanical by the assessing authorities in as
much as on furnishing form E-I/E-II and C
forms without looking into the material facts
regarding single inter-State movement of
such goods, benefits are conferred to such
dealers. If the movement of the goods from
one State to another terminates, the
subsequent sales will be treated as intraState sales and benefit of the above subsection (2) of Section 6 will not be available
in such cases. It is found that trade is often
claiming large exemptions under this
provision, particularly in respect of paper,
dyes and chemicals, etc. It is, therefore,
directed that all the assessing authorities
should specifically examine the nature of
transactions before granting benefit under
the said section.
It may be argued that in view of the
Explanation I to Section 3 of the CST Act,
1956, inter-State movement of goods
continues until the consignee obtains
physical delivery of goods from the carrier,
after arrival of these goods at the
destination. This argument is based on the
incorrect notion that “delivery” in the
Explanation means only “physical
delivery”. This argument can be countered
on the basis of the well settled proposition
of “constructive delivery”.
13
The material fact to be looked into by the
assessing authorities while granting benefit
of Section 6(2) of the CST Act relate to the
termination of the movement of goods in the
inter-State transactions. If after arrival of the
goods at the destination, the consignee asks
the transporter expressly or impliedly, to
retain the goods at his godown until further
directions, then the carrier ceases to hold the
goods as transporter, and in the eyes of law,
the goods are as much in possession of the
consignee as if he had taken them into his
own godown. As per the settled legal
concept this sequence of events tantamounts
to constructive delivery of the goods by
transporter to the consignee and transit ends.
Any sale by the consignee thereafter will be
local sale and benefit of Section 6(2) will
not be available.
The transporters, whether Railways or
Roadways, impose condition of delivery of
goods transported through them at the
destination usually within ten days and the
consignee is required to check up with such
transporting agency as to the arrival of the
goods. In these circumstances, if the carrier
retains the goods for an extended period,
then there is a clear inference that the
consignee was aware of the arrival of his
goods and the transporter is holding the
goods on his behalf as a bailee for the
consignee. These factual matrix leads to the
conclusion that there is a local sale and not
sale under said Section 6(2). Payment of
warehouse rent/demurrage charges by the
14
consignee to the transporter is conclusive
evidence that transporters have assumed the
role of bailee and transit having ended. It
may be observed that bailment can be either
gratuitous or for remuneration or partially
both. In law, there can also be bailment
without contract.
As per legal position, ‘transit’ gets over as
soon as a reasonable time elapses for the
consignee to elect whether he would take
the goods away or leave them in the
transporters premises, because at the
conclusion of reasonable time there is
deemed to be a constructive delivery of
goods from the transporters to the
consignee. If a dealer claims that the had not
obtained the delivery of goods, the burden
of proving that the goods really remained
with the carrier from the date of their arrival
till the date of their clearance is on the
dealer. If the dealer fails to furnish this
proof, then the assessing authority would be
justified in concluding that the dealer had
himself taken physical delivery of the goods
from the carrier and thereby disallowing his
claim of exemption under S. 6(2), CST Act.
The decision of the Delhi High Court
in Arjun Dass Gupta and Bros. v. Commer
of Sales Tax, New Delhi, reported in (1980)
45 STC 52, lays down the basic guidelines
regarding exemption of sales under S. 6(2),
CST Act. The Delhi High Court had held
that Explanation I to S. 3(b) of the CST Act,
1956 did not permit the dealer to expand the
movement of goods beyond the time of
15
physical landing of the goods in the Union
Territory of Delhi. As to the knowledge
except this there are no other directly
relevant or contra judgment reported from
any other High Court. It is understood that
Special Leave Petition is pending in the
Supreme Court on the issue but there is no
stay. As such Delhi High Court judgment
holds the field.
It is therefore, enjoined upon the assessing
authorities that in future they should not
grant the benefit of exemption under S. 6(2),
CST Act, simply on furnishing of the Form
E-I/E-II and C Form. If on the contrary
it is found that assessee had taken physical
delivery or the goods remained with the
transporter beyond a reasonable time
looking to the facts and circumstances of
each case, the doctrine of constructive
delivery should be invoked and action be
taken accordingly.
S. No. 1132A : CCT Circular F.11(3)
CST/Tax/CCT/61 dated 15.04.1998
It may be recalled that vide circular dated
16.9.1997 [S. No.1115B], instructions were
issued clarifying therein the legal position of
granting benefits under Section 6(2) of the
CST Act, 1956. It has been clarified that the
concept of constructive delivery shall also
be invoked while determining when the
transit comes to an end. It was also clarified
that the Railways or Roadways usually
impose conditions of delivery of goods
16
transported by them at the destination within
10 days and the consignee is required to
check up with such transporting agency as
to the arrival of the goods. In view of this, it
was desired by the above referred circular
that the AAs should ascertain the fact that
whether the goods remained with the
transporter beyond reasonable time.
Looking to the facts and circumstances of
each case, the doctrine of constructive
delivery should be invoked and action be
taken accordingly.
The representatives of various associations
of trade and industry had brought to the
notice that in almost all cases the AAs are
invoking the doctrine of constructive
delivery in a mechanical manner
immediately after ten days of arrival of the
goods at the destination. As per these
Associations, this approach has resulted in
hardship to the dealers and avoidable
harassment is being caused to them with
adverse effect on the trade. They have
requested for increasing this limit.
Keeping in view these factual aspects and
the discussions at the Govt; level, it is
reiterated that the reasonability of the time
should be looked into after analysing the
facts and circumstances of each case and the
usual period of treating constructive
delivery which may even extend upto thirty
days instead of ten days as suggested in the
above referred circular.
17
Deputy Commissioner (Admn) should
ensure that, while ensuring the State
revenue, no harassment shall be caused to
the dealers by enthusiastic assessing
authorities while determining the end of
transit.”
6. The High Court has referred to two decisions, one by the
Rajasthan High Court itself, in the case of Guljag Industries
Limited vs. State of Rajasthan & Another reported in (2003) 129
STC 3 (Raj.) and the other of the Delhi High Court in the case of
Arjan Dass Gupta and Brothers vs. Commissioner of Sales Tax,
Delhi Administration (1980) 45 STC 52 (Delhi). In the latter
decision, a Bench of the Delhi High Court construed certain
provisions of 1956 Act and the Bengal Finance (Sales Tax) Act,
1941, (as it was applicable to Delhi at the material point of time).
On the aspect of what would be implication of the expression
‘delivery’ in Section 3(b) of the 1956 Act, it was, inter-alia, held:-
“10…….Normally, when the goods are
carried by a carrier from one State to
another, the delivery is taken by the
importer immediately after the goods land in
the importing State. Thus, normally, the
18
landing of the goods in the importing State
and the delivery of the goods are almost
simultaneous acts, although technically
there will be some hiatus between the two.
Considering these commercial facts, it is
difficult to accede to the retailer's contention
that the movement of goods continues even
if the goods have landed in Delhi only
because the importer has transferred the
documents of title to the purchasing retailers
and such retailers take delivery from the
railways at a subsequent time. If taking
delivery is the test of termination of
movement and not the landing of the goods
in an importing State, Explanation 1
to Section 3(b) of the Central Sales Tax Act
would lead to anomalous results. If, after the
landing of the goods in Delhi, the railway
receipts are endorsed one after another to
ten persons and the delivery is taken by the
tenth person, say after three months, the
movement of goods would on the dealer's
interpretation artificially continue for three
months after the landing of the goods in
Delhi.”
7. In the judgment under appeal, the Rajasthan High Court,
however, disagreed with this view of the Delhi High Court relying
on the case of Guljag Industries Limited (supra), in which three
19
appeals were dealt with in a common judgment. It was held by the
High Court in the judgment under appeal:-
“12. Therefore, the proposition of law by
the learned Commissioner in the impugned
circulars that “as per legal position, ‘transit’
gets over as soon as a reasonable time
elapses for the consignee to elect whether he
would take the goods away or leave them in
the transporters premises, because at the
conclusion of reasonable time there is
deemed to be a constructive delivery of
goods from the transporter to the
consignee”, cannot be said to be a correct
legal position. The subsequent Circular
dated 15.4.1998 purportedly issued to
ameliorate the situation for dealers created
by previous circular dated 16.9.1997,
merely ended up extending the time limit of
10 days to 30 days without undoing the
damage done by the previous circular by
propounding a particular view of
constructive delivery. In fact, the very
power to issue such circulars by the learned
Commissioner giving a particular
interpretation of law purportedly binding on
all the assessing authorities is doubtful.
There is no specific provision in the Sales
Tax Act, either under the RST Act or under
the CST Act, empowering the
Commissioner to issue such circulars, as
against such powers conferred under
Section 119 of the Income Tax Act on the
Central Board of Direct Taxes. Even
20
Section 119 of the Income Tax Act, which
empowers the highest administrative body
under the Act, namely CBDT, by way of its
proviso restricts and provides that no such
order, instruction or direction shall be issued
so as to require any Income Tax authority to
make a particular assessment or dispose of a
particular case in a particular manner and
such orders or instructions shall also not
interfere with the discretion of the
Commissioner (Appeals) in exercise of its
appellate functions. Therefore, this court
cannot countenance the issuance of such
circulars by the Commissioner of Sales Tax,
which unduly fetter with the quasi-judicial
discretion of the assessing authorities, who
are expected in law to give their findings of
fact and interpret the statutory law in their
own quasi-judicial discretion in accordance
with the law as interpreted by the Supreme
Court or jurisdictional High Court. The
circulars issued by the Commissioner in the
aforesaid manner like done vide Circulars
dated 16.9.1997 and 15.4.1998 are likely to
hamper and throttle such quasi-judicial
discretion which vests with the assessing
authorities. Therefore, the aforesaid
circulars issued by the Commissioner
aforesaid on 15.4.1998 (S. No. 1132A) and
16.9.1997 (S. No. 1115B) are in conflict
with the Division Bench decision of this
Court in Guljag Industries Ltd's
case (supra) and even otherwise they are
found to be without any authority of law.
Consequently, both these circulars are
21
found to be ultra vires and are hereby
quashed.
13. In view of aforesaid, since there was no
basis for the learned Commissioner to
stipulate the time frame of 10 days or 30
days and thereafter, to require the assessing
authority to invoke the concept of
constructive delivery so as to deny the
exemption of CST on subsequent sales
made by transfer of documents of title to the
goods made under Section 6(2) of Act,
though requisite conditions of Section 6(2)
of the Act are fulfilled by the dealer and
such circulars have already been held to be
ultra vires and have been quashed and in
absence of any other material justifying the
denial of exemption under Section 6(2) of
the Act to the assessee, the impugned order
of the Tax Board allowing such exemption
to the assessee is not required to be
interfered with in the present revision
petitions filed by the Revenue.”
8. We must add here that the decision in the case of Guljag
(supra) was subsequently carried up in appeal before this Court. It
appears from the records of this Court that two of these appeals
were disposed of on 30th September, 2010 as the assessee chose to
approach the statutory forum whereas another appeal was
22
dismissed having regard to the quantum of tax involved in the
appeal.
9. We, accordingly, shall test the revenue’s case including the
question of legality of the said two circulars in the context of the
provisions of Sections 3 and 6 of the 1956 Act. The respondent in
this case had taken benefit of sub-section (2) on the ground that this
was a case involving inter-state sale and the sale took place by way
of transfer of documents of title of such goods during their
movement from one State to another. It is also the respondents’
case that the requisite forms and certificates were duly furnished
pertaining to such sales. On the part of the State, barring retention
of the goods in the transporters’ godown at the destination point for
a long period of time, default on no other count by the assesses has
been asserted.
10. In the two appeals in which the respondent is Bombay
Machinery Stores, sales pertained to financial years before the
circulars came into subsistence. In these instances of sales, the
Commercial Tax officer in the respective orders treated retention of
23
goods beyond 30 days in the transporters’ godown as the cut-off
period. After that date, the assessee was deemed to have had taken
constructive delivery of goods and sale beyond that period within
the State of Rajasthan was held to be local sales and subjected to
sales tax under the State Law. Same reasoning was followed in the
respective orders of the tax authorities forming subject-matters of
two appeals involving Unicolour Chemicals Company. The Tax
Board, while deciding the issue in favour of revenue, referred to the
aforesaid two circulars in upholding the concept of constructive
delivery.
11. As per the aforesaid circulars, retention of goods by the
transporter beyond the time stipulated therein (being 30 days as per
the later circular) would imply that constructive delivery of the
goods has been made by the transporter to the consignee. In such a
situation, the transit status of the goods would stand terminated and
the deeming provision in first explanation to Section 3 of the 1956
Act conceiving the time-point of delivery as termination of
movement shall cease to operate.
24
12. In this set of appeals we have already indicated that transfer
of documents of title were effected subsequent to the goods
reaching the location within destination State. But when the goods
are delivered to a carrier for transmission, first explanation to
Section 3 of the 1956 Act specifies that movement of the goods
would be deemed to commence at the time when goods are
delivered to a carrier and shall terminate at the time when delivery
is taken from such carrier. The said provision does not qualify the
term ‘delivery’ with any timeframe within which such delivery
shall have to take place. In such circumstances fixing of timeframe
by order of the Tax Administration of the State in our opinion
would be impermissible.
13. Before the High Court, the revenue authorities has relied on
Section 51 of the Sale of Goods Act, 1930 (hereinafter referred to
as the “1930 Act”). But the said provision also does not aid or assist
the revenue. Section 51 of the 1930 Act reads: -
“51. Duration of transit.—(1) Goods are
deemed to be in course of transit from the
time when they are delivered to a carrier or
25
other bailee for the purpose of transmission
to the buyer, until the buyer or his agent in
that behalf takes delivery of them from such
carrier or other bailee.
(2) If the buyer or his agent in that behalf
obtains delivery of the goods before their
arrival at the appointed destination, the
transit is at an end.
(3) If, after the arrival of the goods at the
appointed destination, the carrier or other
bailee acknowledges to the buyer or his
agent that he holds the goods on his behalf
and continues in possession of them as
bailee for the buyer or his agent, the transit
is at an end and it is immaterial that a further
destination for the goods may have been
indicated by the buyer.
(4) If the goods are rejected by the buyer and
the carrier or other bailee continues in
possession of them, the transit is not deemed
to be at an end, even if the seller has refused
to receive them back.
(5) When goods are delivered to a ship
chartered by the buyer, it is a question
depending on the circumstances of the
particular case, whether they are in the
possession of the master as a carrier or as
agent of the buyer.
(6) Where the carrier or other bailee
wrongfully refuses to deliver the goods to
the buyer or his agent in that behalf, the
transit is deemed to be at an end.
26
(7) Where part delivery of the goods has
been made to the buyer or his agent in that
behalf, the remainder of the goods may be
stopped in transit, unless such part delivery
has been given in such circumstances as to
show an agreement to give up possession of
the whole of the goods
14. Sub-clause (1) of the said provision specifies when the goods
shall be deemed to be in course of transit and sub-clause (3) thereof
lays down the conditions for termination of transit. That condition
is an acknowledgment to the buyer or his agent by the carrier that
he holds the goods on his behalf. There is no material to suggest
such an acknowledgment was made by the independent transporter
in these appeals. In such circumstances we do not think the decision
of the High Court requires any interference.
15. In the case of Arjan Dass Gupta (supra) principle akin to
constructive delivery was expounded and we have quoted the
relevant passage from that decision earlier in this judgment. In our
opinion, however, such construction would not be proper to
interpret the provisions of Section 3 of the 1956 Act. A legal fiction
is created in first explanation to that Section. That fiction is that
27
the movement of goods, from one State to another shall terminate,
where the good have been delivered to a carrier for transmission, at
the time of when delivery is taken from such carrier. There is no
concept of constructive delivery either express or implied in the
said provision. On a plain reading of the statute, the movement of
the goods, for the purposes of clause (b) of Section 3 of the 1956
Act would terminate only when delivery is taken, having regard to
first explanation to that Section. There is no scope of incorporating
any further word to qualify the nature and scope of the expression
“delivery” within the said section. The legislature has eschewed
from giving the said word an expansive meaning. The High Court
under the judgment which is assailed in Civil Appeal No.2217 of
2011 rightly held that there is no place for any intendment in taxing
statutes. We are of the view that the interpretation of the Division
Bench of the Delhi High Court given in the case of Arjan Dass
Gupta does not lays down correct position of law. In the event, the
authorities felt any assessee or dealer was taking unintended benefit
under the aforesaid provisions of the 1956 Act, then the proper
28
course would be legislative amendment. The Tax Administration
Authorities cannot give their own interpretation to legislative
provisions on the basis of their own perception of trade practise.
This administrative exercise, in effect, would result in supplying
words to legislative provisions, as if to cure omissions of the
legislature.
16. For these reasons, we do not want to interfere with the
judgments of the High Court in these four appeals. The appeals are
dismissed. Any connected applications shall also stand disposed
of.
There shall be no order as to costs.
..………………………….J.
(Deepak Gupta)
…………..……………….J.
(Aniruddha Bose)
New Delhi,
April 27, 2020.
29
1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2217 OF 2011
COMMERCIAL TAXES OFFICER ...APPELLANT
VERSUS
M/S. BOMBAY MACHINERY STORE ...RESPONDENT
WITH
CIVIL APPEAL NO. 2220 OF 2011
CIVIL APPEAL NO. 10000 OF 2017
CIVIL APPEAL NO. 10001 OF 2017
J U D G M E N T
ANIRUDDHA BOSE, J.
All these four appeals are being dealt with by this judgment
as they all involve adjudication on a common question of law
arising out of Sections 3 and 6 of the Central Sales Tax Act, 1956
(1956 Act), which was operational at the material point of time.
2
The question is as to whether as a condition of giving the benefit
of Section 6(2) of the said Act, the tax authorities can impose a
limit or timeframe within which delivery of the respective goods
has to be taken from a carrier when the goods are delivered to a
carrier for transmission in course of inter-state sale. For proper
appreciation of the dispute involved in these appeals, the aforesaid
provisions are reproduced below:-
“3. When is a sale or purchase of goods
said to take place in the course of interState trade or commerce. A sale or
purchase of goods shall be deemed to take
place in the course of inter-State 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.
Explanation 1 — Where goods are delivered
to a carrier or other bailee for transmission,
the movement of the goods shall, for the
purposes of clause (b), be deemed to
commence at the time of such delivery and
terminate at the time when delivery is taken
from such carrier or bailee.
Explanation 2 — Where the movement of
goods commences and terminates in the
3
same State it shall not be deemed to be a
movement of goods from one State to
another by reason merely of the fact that in
the course of such movement the goods pass
through the territory of any other State.
Explanation 3 – Where the gas sold or
purchased and transported through a
common carrier pipeline or any other
common transport or distribution system
becomes co-mingled and fungible with
other gas in the pipeline or system and such
gas is introduced into the pipeline or system
in one State and is taken out from the
pipeline in another State, such sale or
purchase of gas shall be deemed to be a
movement of goods from one State to
another.”
6. Liability to tax on inter-State sales.—
[(1)] Subject to the other provisions
contained in this Act, every dealer shall,
with effect from such date as the Central
Government may, by notification in the
Official Gazette, appoint, not being earlier
than thirty days from the date of such
notification, be liable to pay tax under this
Act on all sales [of goods other than
electrical energy] effected by him in the
course of inter-State trade or commerce
during any year on and from the date so
notified:
[Provided that a dealer shall not be liable to
pay tax under this Act on any sale of goods
which, in accordance with the provisions of
4
sub-section (3) of section 5 is a sale in the
course of export of those goods out of the
territory of India.]
[(1A) A dealer shall be liable to pay tax
under this Act on a sale of any goods
effected by him in the course of inter-State
trade or commerce notwithstanding that no
tax would have been leviable (whether on
the seller or the purchaser) under the sales
tax law of the appropriate State if that sale
had taken place inside that State.]
[(2) Notwithstanding anything contained in
sub-section (1) or sub-section (1A), where a
sale of any goods in the course of inter-State
trade or commerce has either occasioned the
movement of such goods from one State to
another or has been effected by a transfer of
documents of title to such goods during their
movement from one State to another, any
subsequent sale during such movement
effected by a transfer of documents of title
to such goods, -
(a) to the Government, or
(b) to a registered dealer other than the
Government, if the goods are of the
description referred to in sub-section (3) of
section 8,
shall be exempt from tax under this Act:
Provided that no such subsequent sale shall
be exempt from tax under this sub-section
unless the dealer effecting the sale furnishes
to the prescribed authority in the prescribed
manner and within the prescribed time or
5
within such further time as that authority
may, for sufficient cause, permit,—
(a) a certificate duly filled and signed by the
registered dealer from whom the goods were
purchased containing the prescribed
particulars in a prescribed form obtained
from the prescribed authority; and
(b) if the subsequent sale is made –
(i) to a registered dealer, a declaration
referred to in clause (a) of sub-section (4) of
section 8, or
(ii) to the Government, not being a
registered dealer, a certificate referred to in
clause (b) of section (4) of section 8:
Provided further that it shall not be
necessary to furnish the declaration or the
certificate referred to in clause (b) of the
preceding proviso in respect of a subsequent
sale of goods if,—
(a) the sale or purchase of such goods is,
under the sales tax law of the appropriate
State exempt from tax generally or is subject
to tax generally at a rate which is lower than
four per cent. (whether called a tax or fee or
by any other name); and
(b) the dealer effecting such subsequent sale
proves to the satisfaction of the authority
referred to in the preceding proviso that
such sale is of the nature referred to in
clause (a) or clause (b) of this sub-section.
[(3) Notwithstanding anything contained in
this Act, if –
6
(a) any official or personnel of –
(i) any foreign diplomatic mission or
consulate in India; or
(ii) the United Nations or any other similar
international body, entitled to privileges
under any convention to which India is a
party or under any law for the time being in
force; or
(b) any consular or diplomatic agent of any
mission, the United Nations or other body
referred to in sub-clause (i) or sub-clause (ii)
of clause (a), purchases any goods for
himself or for the purposes of such mission,
United Nations or other body, then, the
Central Government may, by notification in
the Official Gazette, exempt, subject to such
conditions as may be specified in the
notification, the tax payable on the sale of
such goods under this Act.”
(4) The provisions of sub-section (3) shall
not apply to the sale of goods made in the
course of inter-State trade or commerce
unless the dealer selling such goods
furnishes to the prescribed authority a
certificate in the prescribed manner on the
prescribed form duly filled and signed by
the official, personnel, consular or
diplomatic agent, as the case may be.”
2. We shall narrate the factual context of Civil Appeal No.2217
of 2011, before we address the legal issue involved in these
7
appeals, treating this to be the lead case. The dispute relating to the
other three appeals are not identical, but the question of law being
the same in all these appeals, we shall avoid narrating in detail the
sequence of events which led to filing of the said appeals, except
to the extent such narration is necessary for understanding the
scope of these appeals. In Civil Appeal No.2217 of 2011, the
period of assessment is 1995-96. The respondent-assessee
Bombay Machinery Store had purchased electricity motors and its
parts in the said financial year out of the State and sold them to
purchasers within the Kota region of the State of Rajasthan. For
such sales, they obtained the benefit of exemption under Section
6(2) of the 1956 Act. These goods had remained with the transport
company upon arrival in Kota for more than a month. Revenue’s
case is that after importing these goods into Rajasthan, sale was
effected through bilty (transport receipt) on obtaining separate
orders. Such sale, it is the revenue’s case, constituted sale within
the State and hence taxable @12% per annum under the Rajasthan
Sales Tax Act, 1954. Civil Appeal No.2220 of 2011 relates to the
8
same firm but for the assessment year 1994-95. Quantum of sales
for the year 1994-95 effected through the same process was
Rs.3,15,639/- and for 1995-96 it was Rs.2,60,93/-. Claim of
benefit under Section 6(2) of the 1956 Act was rejected and tax
along with interest and penalty was imposed under the State Act by
Commercial Tax Officer, Anti-Evasion Circle-I, Kota after a
survey by two orders, both dated 11th December, 1997. The
appeals by Bombay Machinery Stores were allowed by the Deputy
Commissioner (Appeals), Commercial Taxes, Kota following a
decision delivered on 8th March, 1996 by the Rajasthan Tax Board
in the case of CTO vs. Bhagwandas & Sons (1996 Tax World
107). The orders of the first appellate authority were passed on
interpretation of the first explanation to Section 3B(1) of the 1956
Act. Imposition of tax, interest and penalty under the State Act was
quashed. In State Tax authority’s appeal before the Tax Board,
reliance was placed on two circulars issued by the Commissioner
bearing S.No.1132A: CCT Circular F.11(3)CST/Tax/CCT/1/61
dated 15th April, 1998, clarified by a further circular dated 19th July,
9
1999. The Board did not take into consideration these two
circulars. These were not referred to in the orders of the Tax
Assessment Officer. The Board sustained the view of the Deputy
Commissioner (Appeals) in a composite order. This order was
challenged by the revenue by filing two revision petitions before
the High Court, as two appeals were disposed of by the Board by
its order dated 24.11.2004. The High Court, in the judgment
delivered on 14th September, 2007 confirmed the Board’s order and
quashed two circulars bearing S.No.115B dated 16th September,
1997 and S.No.1132A dated 15th April, 1998. These circulars
sought to impose a time limit on retention of goods in the carrier’s
godown, beyond which time the revenue was to treat obtaining of
constructive delivery of the goods involved. That judgment is
under appeal before us. Before we deal with this judgment, we
shall briefly refer to the other appeals which have been heard
together.
3. In Civil Appeal No.2220 of 2011, incidences of sale relate to
different dates between 24th March, 1994 and 30th January, 1995.
10
4. Civil Appeal No.10000 of 2017 and Civil Appeal No. 10001
of 2017 relate to another assessee, Unicolour Chemicals Company.
That firm purchased chemical and colour from a Gujarat based
company, and the goods reached the godown of the carrier
transport company on 12th May, 2000. They were sold to a firm in
Jaipur in two tranches, after 55 days and 80 days from the date of
arrival. The monetary value of these goods was Rs.1,27,592. In
Civil Appeal No. 10001 of 2017, revenue’s case is that survey of
the business place of the same firm revealed that:-
“the stock of taxable good colour chemical of
price Rs.4,72,653/- has been found less and
on doubt on the nature of sale showing in the
Section 6(2) of the Central Sales Tax Act and
seeing the possibility of tax evasion the
record found in the survey of the business
firm has been seized.”
(quoted from the order
annexed to the paper book)
These goods had reached the godown of the transport
company on 25th July, 2001. These were brought against bilty and
the documents were transferred to the same firm on 4th September,
11
2001. There was thus delay of 41 days. The tax fixation authorities
directed application of the State Act treating the transactions to be
local sales. This order was sustained by the Deputy Commissioner
(Appeals) and the order of the Tax Board also went against
Unicolour. The High Court, following the judgment in the case of
Bombay Machinery Store (which we are treating as the lead case
in this judgment), quashed the orders of the statutory authorities in
both the appeals and also invalidated the two circulars.
5. The two circulars issued by the Commissioner, Commercial
Taxes Department, Rajasthan have been quoted in the impugned
judgment in the case of Bombay Machinery Store. Henceforth,
wherever we refer to the expression judgment under appeal, we
shall imply that judgment only, unless we specifically refer to any
of the three other decisions under appeal. These circulars read:-
“S. No. 1115B : CCT Circular
F.11(3)/CST/Tax/CCT/1997/1563 dated
16.9.1997
As you are aware of the fact that to avoid
multiple taxation of goods sold by transfer
of documents of title to the goods in their
12
single movement from one State-to another,
provisions for exemption of such
transaction are embodied in S. 6(2), CST
Act, 1956. It appears that application of this
provision has been made more or less
mechanical by the assessing authorities in as
much as on furnishing form E-I/E-II and C
forms without looking into the material facts
regarding single inter-State movement of
such goods, benefits are conferred to such
dealers. If the movement of the goods from
one State to another terminates, the
subsequent sales will be treated as intraState sales and benefit of the above subsection (2) of Section 6 will not be available
in such cases. It is found that trade is often
claiming large exemptions under this
provision, particularly in respect of paper,
dyes and chemicals, etc. It is, therefore,
directed that all the assessing authorities
should specifically examine the nature of
transactions before granting benefit under
the said section.
It may be argued that in view of the
Explanation I to Section 3 of the CST Act,
1956, inter-State movement of goods
continues until the consignee obtains
physical delivery of goods from the carrier,
after arrival of these goods at the
destination. This argument is based on the
incorrect notion that “delivery” in the
Explanation means only “physical
delivery”. This argument can be countered
on the basis of the well settled proposition
of “constructive delivery”.
13
The material fact to be looked into by the
assessing authorities while granting benefit
of Section 6(2) of the CST Act relate to the
termination of the movement of goods in the
inter-State transactions. If after arrival of the
goods at the destination, the consignee asks
the transporter expressly or impliedly, to
retain the goods at his godown until further
directions, then the carrier ceases to hold the
goods as transporter, and in the eyes of law,
the goods are as much in possession of the
consignee as if he had taken them into his
own godown. As per the settled legal
concept this sequence of events tantamounts
to constructive delivery of the goods by
transporter to the consignee and transit ends.
Any sale by the consignee thereafter will be
local sale and benefit of Section 6(2) will
not be available.
The transporters, whether Railways or
Roadways, impose condition of delivery of
goods transported through them at the
destination usually within ten days and the
consignee is required to check up with such
transporting agency as to the arrival of the
goods. In these circumstances, if the carrier
retains the goods for an extended period,
then there is a clear inference that the
consignee was aware of the arrival of his
goods and the transporter is holding the
goods on his behalf as a bailee for the
consignee. These factual matrix leads to the
conclusion that there is a local sale and not
sale under said Section 6(2). Payment of
warehouse rent/demurrage charges by the
14
consignee to the transporter is conclusive
evidence that transporters have assumed the
role of bailee and transit having ended. It
may be observed that bailment can be either
gratuitous or for remuneration or partially
both. In law, there can also be bailment
without contract.
As per legal position, ‘transit’ gets over as
soon as a reasonable time elapses for the
consignee to elect whether he would take
the goods away or leave them in the
transporters premises, because at the
conclusion of reasonable time there is
deemed to be a constructive delivery of
goods from the transporters to the
consignee. If a dealer claims that the had not
obtained the delivery of goods, the burden
of proving that the goods really remained
with the carrier from the date of their arrival
till the date of their clearance is on the
dealer. If the dealer fails to furnish this
proof, then the assessing authority would be
justified in concluding that the dealer had
himself taken physical delivery of the goods
from the carrier and thereby disallowing his
claim of exemption under S. 6(2), CST Act.
The decision of the Delhi High Court
in Arjun Dass Gupta and Bros. v. Commer
of Sales Tax, New Delhi, reported in (1980)
45 STC 52, lays down the basic guidelines
regarding exemption of sales under S. 6(2),
CST Act. The Delhi High Court had held
that Explanation I to S. 3(b) of the CST Act,
1956 did not permit the dealer to expand the
movement of goods beyond the time of
15
physical landing of the goods in the Union
Territory of Delhi. As to the knowledge
except this there are no other directly
relevant or contra judgment reported from
any other High Court. It is understood that
Special Leave Petition is pending in the
Supreme Court on the issue but there is no
stay. As such Delhi High Court judgment
holds the field.
It is therefore, enjoined upon the assessing
authorities that in future they should not
grant the benefit of exemption under S. 6(2),
CST Act, simply on furnishing of the Form
E-I/E-II and C Form. If on the contrary
it is found that assessee had taken physical
delivery or the goods remained with the
transporter beyond a reasonable time
looking to the facts and circumstances of
each case, the doctrine of constructive
delivery should be invoked and action be
taken accordingly.
S. No. 1132A : CCT Circular F.11(3)
CST/Tax/CCT/61 dated 15.04.1998
It may be recalled that vide circular dated
16.9.1997 [S. No.1115B], instructions were
issued clarifying therein the legal position of
granting benefits under Section 6(2) of the
CST Act, 1956. It has been clarified that the
concept of constructive delivery shall also
be invoked while determining when the
transit comes to an end. It was also clarified
that the Railways or Roadways usually
impose conditions of delivery of goods
16
transported by them at the destination within
10 days and the consignee is required to
check up with such transporting agency as
to the arrival of the goods. In view of this, it
was desired by the above referred circular
that the AAs should ascertain the fact that
whether the goods remained with the
transporter beyond reasonable time.
Looking to the facts and circumstances of
each case, the doctrine of constructive
delivery should be invoked and action be
taken accordingly.
The representatives of various associations
of trade and industry had brought to the
notice that in almost all cases the AAs are
invoking the doctrine of constructive
delivery in a mechanical manner
immediately after ten days of arrival of the
goods at the destination. As per these
Associations, this approach has resulted in
hardship to the dealers and avoidable
harassment is being caused to them with
adverse effect on the trade. They have
requested for increasing this limit.
Keeping in view these factual aspects and
the discussions at the Govt; level, it is
reiterated that the reasonability of the time
should be looked into after analysing the
facts and circumstances of each case and the
usual period of treating constructive
delivery which may even extend upto thirty
days instead of ten days as suggested in the
above referred circular.
17
Deputy Commissioner (Admn) should
ensure that, while ensuring the State
revenue, no harassment shall be caused to
the dealers by enthusiastic assessing
authorities while determining the end of
transit.”
6. The High Court has referred to two decisions, one by the
Rajasthan High Court itself, in the case of Guljag Industries
Limited vs. State of Rajasthan & Another reported in (2003) 129
STC 3 (Raj.) and the other of the Delhi High Court in the case of
Arjan Dass Gupta and Brothers vs. Commissioner of Sales Tax,
Delhi Administration (1980) 45 STC 52 (Delhi). In the latter
decision, a Bench of the Delhi High Court construed certain
provisions of 1956 Act and the Bengal Finance (Sales Tax) Act,
1941, (as it was applicable to Delhi at the material point of time).
On the aspect of what would be implication of the expression
‘delivery’ in Section 3(b) of the 1956 Act, it was, inter-alia, held:-
“10…….Normally, when the goods are
carried by a carrier from one State to
another, the delivery is taken by the
importer immediately after the goods land in
the importing State. Thus, normally, the
18
landing of the goods in the importing State
and the delivery of the goods are almost
simultaneous acts, although technically
there will be some hiatus between the two.
Considering these commercial facts, it is
difficult to accede to the retailer's contention
that the movement of goods continues even
if the goods have landed in Delhi only
because the importer has transferred the
documents of title to the purchasing retailers
and such retailers take delivery from the
railways at a subsequent time. If taking
delivery is the test of termination of
movement and not the landing of the goods
in an importing State, Explanation 1
to Section 3(b) of the Central Sales Tax Act
would lead to anomalous results. If, after the
landing of the goods in Delhi, the railway
receipts are endorsed one after another to
ten persons and the delivery is taken by the
tenth person, say after three months, the
movement of goods would on the dealer's
interpretation artificially continue for three
months after the landing of the goods in
Delhi.”
7. In the judgment under appeal, the Rajasthan High Court,
however, disagreed with this view of the Delhi High Court relying
on the case of Guljag Industries Limited (supra), in which three
19
appeals were dealt with in a common judgment. It was held by the
High Court in the judgment under appeal:-
“12. Therefore, the proposition of law by
the learned Commissioner in the impugned
circulars that “as per legal position, ‘transit’
gets over as soon as a reasonable time
elapses for the consignee to elect whether he
would take the goods away or leave them in
the transporters premises, because at the
conclusion of reasonable time there is
deemed to be a constructive delivery of
goods from the transporter to the
consignee”, cannot be said to be a correct
legal position. The subsequent Circular
dated 15.4.1998 purportedly issued to
ameliorate the situation for dealers created
by previous circular dated 16.9.1997,
merely ended up extending the time limit of
10 days to 30 days without undoing the
damage done by the previous circular by
propounding a particular view of
constructive delivery. In fact, the very
power to issue such circulars by the learned
Commissioner giving a particular
interpretation of law purportedly binding on
all the assessing authorities is doubtful.
There is no specific provision in the Sales
Tax Act, either under the RST Act or under
the CST Act, empowering the
Commissioner to issue such circulars, as
against such powers conferred under
Section 119 of the Income Tax Act on the
Central Board of Direct Taxes. Even
20
Section 119 of the Income Tax Act, which
empowers the highest administrative body
under the Act, namely CBDT, by way of its
proviso restricts and provides that no such
order, instruction or direction shall be issued
so as to require any Income Tax authority to
make a particular assessment or dispose of a
particular case in a particular manner and
such orders or instructions shall also not
interfere with the discretion of the
Commissioner (Appeals) in exercise of its
appellate functions. Therefore, this court
cannot countenance the issuance of such
circulars by the Commissioner of Sales Tax,
which unduly fetter with the quasi-judicial
discretion of the assessing authorities, who
are expected in law to give their findings of
fact and interpret the statutory law in their
own quasi-judicial discretion in accordance
with the law as interpreted by the Supreme
Court or jurisdictional High Court. The
circulars issued by the Commissioner in the
aforesaid manner like done vide Circulars
dated 16.9.1997 and 15.4.1998 are likely to
hamper and throttle such quasi-judicial
discretion which vests with the assessing
authorities. Therefore, the aforesaid
circulars issued by the Commissioner
aforesaid on 15.4.1998 (S. No. 1132A) and
16.9.1997 (S. No. 1115B) are in conflict
with the Division Bench decision of this
Court in Guljag Industries Ltd's
case (supra) and even otherwise they are
found to be without any authority of law.
Consequently, both these circulars are
21
found to be ultra vires and are hereby
quashed.
13. In view of aforesaid, since there was no
basis for the learned Commissioner to
stipulate the time frame of 10 days or 30
days and thereafter, to require the assessing
authority to invoke the concept of
constructive delivery so as to deny the
exemption of CST on subsequent sales
made by transfer of documents of title to the
goods made under Section 6(2) of Act,
though requisite conditions of Section 6(2)
of the Act are fulfilled by the dealer and
such circulars have already been held to be
ultra vires and have been quashed and in
absence of any other material justifying the
denial of exemption under Section 6(2) of
the Act to the assessee, the impugned order
of the Tax Board allowing such exemption
to the assessee is not required to be
interfered with in the present revision
petitions filed by the Revenue.”
8. We must add here that the decision in the case of Guljag
(supra) was subsequently carried up in appeal before this Court. It
appears from the records of this Court that two of these appeals
were disposed of on 30th September, 2010 as the assessee chose to
approach the statutory forum whereas another appeal was
22
dismissed having regard to the quantum of tax involved in the
appeal.
9. We, accordingly, shall test the revenue’s case including the
question of legality of the said two circulars in the context of the
provisions of Sections 3 and 6 of the 1956 Act. The respondent in
this case had taken benefit of sub-section (2) on the ground that this
was a case involving inter-state sale and the sale took place by way
of transfer of documents of title of such goods during their
movement from one State to another. It is also the respondents’
case that the requisite forms and certificates were duly furnished
pertaining to such sales. On the part of the State, barring retention
of the goods in the transporters’ godown at the destination point for
a long period of time, default on no other count by the assesses has
been asserted.
10. In the two appeals in which the respondent is Bombay
Machinery Stores, sales pertained to financial years before the
circulars came into subsistence. In these instances of sales, the
Commercial Tax officer in the respective orders treated retention of
23
goods beyond 30 days in the transporters’ godown as the cut-off
period. After that date, the assessee was deemed to have had taken
constructive delivery of goods and sale beyond that period within
the State of Rajasthan was held to be local sales and subjected to
sales tax under the State Law. Same reasoning was followed in the
respective orders of the tax authorities forming subject-matters of
two appeals involving Unicolour Chemicals Company. The Tax
Board, while deciding the issue in favour of revenue, referred to the
aforesaid two circulars in upholding the concept of constructive
delivery.
11. As per the aforesaid circulars, retention of goods by the
transporter beyond the time stipulated therein (being 30 days as per
the later circular) would imply that constructive delivery of the
goods has been made by the transporter to the consignee. In such a
situation, the transit status of the goods would stand terminated and
the deeming provision in first explanation to Section 3 of the 1956
Act conceiving the time-point of delivery as termination of
movement shall cease to operate.
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12. In this set of appeals we have already indicated that transfer
of documents of title were effected subsequent to the goods
reaching the location within destination State. But when the goods
are delivered to a carrier for transmission, first explanation to
Section 3 of the 1956 Act specifies that movement of the goods
would be deemed to commence at the time when goods are
delivered to a carrier and shall terminate at the time when delivery
is taken from such carrier. The said provision does not qualify the
term ‘delivery’ with any timeframe within which such delivery
shall have to take place. In such circumstances fixing of timeframe
by order of the Tax Administration of the State in our opinion
would be impermissible.
13. Before the High Court, the revenue authorities has relied on
Section 51 of the Sale of Goods Act, 1930 (hereinafter referred to
as the “1930 Act”). But the said provision also does not aid or assist
the revenue. Section 51 of the 1930 Act reads: -
“51. Duration of transit.—(1) Goods are
deemed to be in course of transit from the
time when they are delivered to a carrier or
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other bailee for the purpose of transmission
to the buyer, until the buyer or his agent in
that behalf takes delivery of them from such
carrier or other bailee.
(2) If the buyer or his agent in that behalf
obtains delivery of the goods before their
arrival at the appointed destination, the
transit is at an end.
(3) If, after the arrival of the goods at the
appointed destination, the carrier or other
bailee acknowledges to the buyer or his
agent that he holds the goods on his behalf
and continues in possession of them as
bailee for the buyer or his agent, the transit
is at an end and it is immaterial that a further
destination for the goods may have been
indicated by the buyer.
(4) If the goods are rejected by the buyer and
the carrier or other bailee continues in
possession of them, the transit is not deemed
to be at an end, even if the seller has refused
to receive them back.
(5) When goods are delivered to a ship
chartered by the buyer, it is a question
depending on the circumstances of the
particular case, whether they are in the
possession of the master as a carrier or as
agent of the buyer.
(6) Where the carrier or other bailee
wrongfully refuses to deliver the goods to
the buyer or his agent in that behalf, the
transit is deemed to be at an end.
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(7) Where part delivery of the goods has
been made to the buyer or his agent in that
behalf, the remainder of the goods may be
stopped in transit, unless such part delivery
has been given in such circumstances as to
show an agreement to give up possession of
the whole of the goods
14. Sub-clause (1) of the said provision specifies when the goods
shall be deemed to be in course of transit and sub-clause (3) thereof
lays down the conditions for termination of transit. That condition
is an acknowledgment to the buyer or his agent by the carrier that
he holds the goods on his behalf. There is no material to suggest
such an acknowledgment was made by the independent transporter
in these appeals. In such circumstances we do not think the decision
of the High Court requires any interference.
15. In the case of Arjan Dass Gupta (supra) principle akin to
constructive delivery was expounded and we have quoted the
relevant passage from that decision earlier in this judgment. In our
opinion, however, such construction would not be proper to
interpret the provisions of Section 3 of the 1956 Act. A legal fiction
is created in first explanation to that Section. That fiction is that
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the movement of goods, from one State to another shall terminate,
where the good have been delivered to a carrier for transmission, at
the time of when delivery is taken from such carrier. There is no
concept of constructive delivery either express or implied in the
said provision. On a plain reading of the statute, the movement of
the goods, for the purposes of clause (b) of Section 3 of the 1956
Act would terminate only when delivery is taken, having regard to
first explanation to that Section. There is no scope of incorporating
any further word to qualify the nature and scope of the expression
“delivery” within the said section. The legislature has eschewed
from giving the said word an expansive meaning. The High Court
under the judgment which is assailed in Civil Appeal No.2217 of
2011 rightly held that there is no place for any intendment in taxing
statutes. We are of the view that the interpretation of the Division
Bench of the Delhi High Court given in the case of Arjan Dass
Gupta does not lays down correct position of law. In the event, the
authorities felt any assessee or dealer was taking unintended benefit
under the aforesaid provisions of the 1956 Act, then the proper
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course would be legislative amendment. The Tax Administration
Authorities cannot give their own interpretation to legislative
provisions on the basis of their own perception of trade practise.
This administrative exercise, in effect, would result in supplying
words to legislative provisions, as if to cure omissions of the
legislature.
16. For these reasons, we do not want to interfere with the
judgments of the High Court in these four appeals. The appeals are
dismissed. Any connected applications shall also stand disposed
of.
There shall be no order as to costs.
..………………………….J.
(Deepak Gupta)
…………..……………….J.
(Aniruddha Bose)
New Delhi,
April 27, 2020.
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