G. A. GALIAKOTWALA & CO. (P) LTD., MADRAS versus THE STATE OF MADRAS

Citation: [1976] 3 S.C.R. 717 · Decided: 22-03-1976 · Supreme Court of India · Bench: A.N. RAY · Disposal: Dismissed

Judgment (excerpt)

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G. A. GALIAKOTWALA & CO. (P) LTD., MADRAS 
v. 
THE STATE OF MADRAS 
March 22 1976 
[A. N. RAY, C.J., M. H. BEG AND JASWANT SINGH, JJ.] 
717 
A 
B 
Central Sales Tax Act Ss. 3, 6(2), 8(3) 
and 
8(5)-Scope of-Goods 
despatched by "S' in Bombay to "B'' in Madras who has an agreement 
to purchase with "A" to whom Railway Receipts were sent by "S" as per direc-
tions and separate agreement-Transaction is an 'Inter state' sales within S. 
3(b) of the C.S.T. between "S" and "A"-Exemption uls 8(5) applies only 
to cases where the claimant paid tax himself under ,the State Act-Exemption 
u/s 6(2) is applicable on proof that the buyer is a aregistered dealer". 
C 
As per the directions of the appellant and on receipt of tlie requisite licence 
Under the cotton Transport Act 1923, for transport of cotton, the Bombay 
seller despatched cotton to the ultimate buyer mills at Madurai and sent the 
Railway Receipts to the appellant who endorsed the same in favour of the Mills 
after collection of the substantial portion of the sale priCe. The sales Tax 
authorities treated the transaction as intra sales and assessed the Mills as the 
J.ast purchaser under the Madras General Sales Tax and assessea the appellant 
D 
u/s 3(b) of the Central Sales Tax Act 1956. The question is wnether in the 
circumstances the transaction is. one of inter state sales falling U/s 3(a) or 
second sales under state sales u/s 3 (b) of the Central Sales Tax Act. 
The contentions of the appellant in this court were ; (1) The sale of cotton 
by the appellant assessee to the buyer mill fell within tlie scope of S. 3(a) of 
the Central Act as there was movement of goods from "Bombay to Madras 
as a result of covenant in or incidental to the contract of sale and therefore 
u/s 9(1) of the Central Sales Tax the jurisdiction lay with Bombay state from 
E 
where the goods moved from and (ii) Since the sale being in respect of dee~ 
lared goods, is exempt by the terms of notification of Otder No. 3602 dated 
28-12-63 issued u/s 8(5) of the C.S.T. and (ii) the turnover was exempt u/s 
6(2) of C.S.T. 
Dismissing the appeal the court, 
HELD : (1) The significant feature of the transaction viz. sending of tbe 
Railway Receipts by the Bombay seller to the appellant who thereafter endors-
ed the same to the mills, shows that (a.) there could not be any uncondi~ 
tional appropriation of the goods at Bombay towards the contract entered into 
between the appeliant; (b) It was an Inter state sales to the appellant and the 
sale by the appellant to the mills is an intra-state sales in as much as, the mere 
fact that the goods were consigned .by the Bombay seller to the mills in accord-
ance with the direction will not ·make the transaction inter state 
sales. 
[718G-H, 719A-BJ 
. 
(ii) The State sales Tax authorities, (respondent) had jurisai'ction to assess 
the transaction for sale by the appellant to the mills u/s 3 (b) of the Central 
Act. [7!9C] 
(iii) The exemption u/s 8(5) applies only to cases where the claimant had 
paid tax himself u/s 4 of the Madras Act in respect of locaf sales preceding 
the inter state transactions. 
In the instant case, as the appellant did not pay 
tax ul,s 4 of the Madras Act, he was not entitled to claim exemption under 
·the Government order. [719 E-F] 
F 
G 
H 
(iv) A dealer claiming exemption for subsequent sale duriiig the rriovement 
-0f goods from one state to another is required by s. 6(2) of tl:te Central Act 
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to furnish to the prescribed authority in the prescribed manner a certificate 
A 
B 
718 
SUPREME COURT REPORTS 
[1976] 3 s.c.R. 
duly filled and signed by the registered dealer by whom the goods were pur~ 
chased containing the particulars. 
In the instant case, the appellant produced 
the form from the Bombay seller but did not prove that his buyer was ai 
registered dealer in cotton which disentitled him to exemption u/s 6(2) of 
the Act. [720 B-C] 
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CIVIL APPELLATE JURISDICTION : Civil Appeal 
No. 1191 
of 
1973. 
Appeal by special leave from the Judgment and Order 
dated 
7-11-72 of the High Court of Madras iu T.C. No. 197 of 1968. 
C. K. Viswanatha Iyer, Mrs. S. Gopalakrishnan for the Appellant. 
S. T. Desai, A. V. Rangam and Miss A. Subhashini 
for 
the· 
respondent. 
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The Judgment of the Court was delivered by 
D 
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RAY, C. J.-This appeal by special leave is from the 
judgment 
llated 7 November, 1972 of the High Court of Madras. 
The principal question in this appe~l is whether the 
sales 
of + 
c

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