Iyanahalli Bakkappa & Sons. v. State of Mysore
P. Jaganmoban Reddy, J. This Appeal is by certi
ficate against the judgment of the Mysore High Court dismissing
the Revision Petition against the order of the Mysore Sales Tax
Appellate Tribunal, by and under which the assessment order of
the Commercial Tax Officer and the Appellate order of the
Deputy Commissioner of Commercial Tax was confirmed. The
question of law which arose out of the decision of the Sales Tax D
authorities for consideration of the High Court was" whether on
the facts and circumstances of the case the assessee's. turn-over
in respect of safety matches is not liable to tax on the ground
that the sales effected by the assessee are not the first sales in
the State." The appellants declared for the assessment year
1959-60 a total turn-over of Rs. 13,04,097 /- in respect of the
purchase of safety matches and claimed exemption on the entire
tum-over on the ground that it was a subsequent sale from the
-dealers in the State of Mysore. During the relevant ass.essment
year sale of matches was taxable under sec. 5 ( 3) (a) of the
Mysore Sales Tax Act, 1957 (hereinafter called the Act) qn the
first or earliest of the successive dealers in the State of Mysore. F
The appellants contention was that it purchases the matches from
the Sales Depots of the National Match Works, Lakshmi Match
Works and Palaniappa Match Industries at Devangere who were
the first sellers of matches in the State of Mysore liable to tax and
that the appellant was the second dealer in the State not liable to
tax in respect of its sales.
The Modus operandi of the appellant in purchasirtg these
matches was that it placed orders with the aforesaid Sales Depots.
of M/s. National Match Works, Lakshmi Match Works and
Palaniappa Match Industries at Devangers, which Depots are
registered dealers under the Act. On receipt of these otders
from the Appellant the respective Managers of the three ·sales
Depots forward the orders to their Head Offices at Sivakasi and
instruct thein to despatch the matches ordered direct to the appel
lant at Devangere. The matches are thereafter despatched by
JI
J .. BAKKAPPA & SONS v. MYSORE (Jaganmohan Reddy, J.) 215
lorcy. to the Appellant in accordance with the instructions receiv·
ed from the Sales Depots. The Sales Depots send to the appel
lant detailed invoices of the matches despatched by their
factories The Appellant gives credit to the value of the matches
after deducting therefrom the amount covered by debit 11otes
in respect of Octroi, lorry freight and other incidental charges
incurred by it and at the request of the sales office the assessee
remits the value of the matches direct to the factory by means
of draft and telegraphic transfer. On these findings the correct
ness of which was not disputed the assessing authority came to
the conclusion that the transactions were inter-State sales within
the meaning of sec. 3(a) of the Central Sales Tax Act and since
the appellant was the first dealer in matches in Mysore State it
was liable to pay Sales Tax and accordingly, it was so assessed.
Against the said assessment order the appellant filed an appeal
to the Deputy Commissioner of Commercial Taxes who dismis
sed the appeal. The further appeal to the Tribunal was equally
unsuccessful.
Before us it is contended by the learned Advocate for the
appellant relying upon the despatch advice, delivery notes and
invoices issued in the name of the assessee in which the Sales
Tax @ 2 % was charged that the sale by the manufacturer at
Sivakasi was effected in favour of their respective sales Depots in
Mysore and it is only thereafter that the appellants purchased
from these Sales Depots the matches and cannot therefore be
treated as the first purchaser in the Mysore State. It appears to
us on the facts as set out above which were not in dispute, the
sales were madeby the respective factories direct to the appellant,
the sales price was also sent directly to the factories at Sivakasi.
No doubt the orders were routed through the Sales Depot but on
that account it cannot be said that the factory sold the goods
ordered by the appellant to its Sales Depot. It does not appear
that the contention based on the invoices showing that the Sales
Tax was charged by the Sales Depot was urged before any of the
authorities or before the High Court nor was there any finding
on this aspect as is evident from the facts found by the Sales Tax
authorities which were not in dispute. It is also inconceivable
that there can be a sale between the manufacturer and its Sales
Depot.
It is not disputed that under the provisions oi the Act it is
the first sale in the State that is exigible to tax. Sale is defined
in sec. 2(t) of the Act as follows:-
" 'Sale' with all its grammatical variations and cog
nate expressions means every transfer of the property
in goods by one person to another in the coune rzf,, trade
SUPREME COURT REPORTS (1972] 2 S.CR.
or business for cash or for deferred payments or other
valuable consideration, but does not include a mortgage
hypothecation, charge or pledge".
Explanation (3) to this definition which is relevant is given
below:-
" (a) The sale or purchase of goods shall be deemed
for the purpose of this Act, to have taken place
in the· State wherever the contract of sale or pur
chase might have been made, if .the goods are
within the State :
(I) In the case of specific or ascertained goods,
at the time the contract or sale or purchase
is made; and
(II) in the case of imascertained or future
goods, at the time of their appropriation to
the contract of sale or purchase by the seller
,or by the purchaser, whether the assent of
the other party is prior or subsequent to
such appropriation".
It is apparent from the above provisions that the transactions
in question under explanation 3 (a) are the first sales in favour
of the appellant and they took place within the State of Mysore.
The learned advocate relies on the decision in Ram Narain &
Som v. The Assistant Commissioner of Sales-Tax & Others(1).
for the contention that in similar circumstances the sale was said
to have been affected to the depots and consequently the sale to
the assessee was the second sale and is, therefore, not assessable
to tax. The High Court. before which this decision was cited,
did not rely upon it because it felt that it was not possible to as
certain whether under the statute this Court was called upon to
consider the definition of sale similar to that contained in section
2 ( t) of the Act. It is true that in that ca8e while this Court was
considering the question whether the sales were inter-State sales
or inside sales, the definition of 'sale' under the Madhya Pradesh
Sales Tax Act was not specitkally referred to or examined. A
perusal of that decision, however, would show that what this Court
was considering was whether the transactions fell within the de
finition of sale contained in explanation II to section 2(g) of the
Madhya Pradesh Sales Tax Act and that so far as ·the post-Cons
titution period was concerned, whether they were saved from the
ban of Article 286(l){a) and the explanation thereto, by the
· President's order made under the proviso to Article 286(2). The
Advocate General of Madhya Pradesh, no doubt, urged that the
(l) [l9SS1 (2) S.C.R. 483.
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I. BAKKAPPA & SONS v. MYSORE (Jaganmohan Reddy, J.) 217
transactions were pure inside sales entered into by the assessees
in Madhya Pradesh on orders received by them from ou\side the
State, and accepted by the petitioners in that State. It was also
contended that the goods were appropriated,to the contracts, and
the property in the goods passed within the State of Madhya Pra
desh, as such the sales were inter-State sales or inside sales which,
it was within the competence of the State of Madhya Pradesh to
tax. The facts disclosed that the assessees manufactured beedis
in Madhya Pradesh. They had various sales depots in U.P. and
other State and also had selling agents through whom they sold
their goods. Apart from affecting sales through the said agencies.
they also sold direct to customers who placed orders with them.
The question was whether some or all of those sales took place
in Madhya Pradesh or in U.P. and it was held that having regard
to the transactions in respect of all the aforesaid categories of
sales, they were affected in U.P. We are unable to appreciate how
this case really assists the appellants. On the other hand, it would
appear that the sale by the assessee was affected in U.P., which
if applied to the facts in this case, would indicate that the first
sale by the Sivakasi firms was in Mysore. In that view, the ques
tion of inter-State sale not being urged as necessary for considera
tion, it was rightly held by the High Court that the sales in ques
tion fell within clause (a) of explanation ( 3) of section 2 ( t)
of the Act; as such this appeal is dismissed but in the circums
tances, without costs.
G. C. Appeal Dismissed.
15 --L~56S·.q1Cf 7~