THE STATE OF TAMIL NADU versus MADURAI SOUTH INDIA CORPORATION (P) LTD.

Citation: [1973] 2 S.C.R. 10 · Decided: 01-09-1972 · Supreme Court of India · Bench: K.S. HEGDE · Disposal: Dismissed

Judgment (excerpt)

10 
THE STATE OF TAMIL NADU 
v. 
MADURAI sourn INDIA CORPORATION lP) LTD. 
September 1, 1972 
' 
[K. S. HEGDE, P. JAGANMOHAN REDDY AND H. R. KHANNA, JL) 
Inter-state Sale-Mc.dras General Sales Tax Act 1959-Central Saks 
Tax Act, 1956-Sale in the State of Tamil Nadu pursuant t-0 contract 
uf inter.,stale sale-Goods rhus purchased by branches outside State trans-
fe"ed to Tamil Nadu end sold to local dealers-Whether again chargeable 
ro tax in the State as first sale. 
The respondent is a registered dealer with its head otlicc at Madras and 
branches ins:idc the State of Tamil Nadu and also. in certain places in 
the States of Kerala and Andhra Pradesh. During the years 1960-61 to 
J964-6S and 1966-67 jt was dealing in various goods including cloth, yarn, 
etc', and was being asse.<sed to tax under the Act 011. the turnover of the 
business. 
The gross turnover of the respondent included the sales of 
yarn, by the Madurai Mills Limited to the respondent to its head office 
in Madras and aho to its branches. 
The method which was followed 
by the head office of the respondent was that it would place orders from 
Madras on Madurai Mills Limited pursuant to which supplies would be 
mnde by the Madurai Mills either to the respondent's head office or to 
its branches in accordance with the instructions given by the head-0ffice. 
Where deliveries were made to the respondent inside the State the seller 
collec~ed the tax due under Madras General Sales-tax Act, 
195~; with 
reference to item 3 of the second Schedule to the Act. 
But in res~t 
of deliveries made to the respondent's branches outside the State, the Madu_ 
rai Mills collected tax under s. 3 of the Central Sales-tax Act. During the 
year 196S-66 the respondent transferred to the State of Tamil Nadu cer-
tain quantities of yarn from the stocks so purchased ·at its branches in 
the States of Andhra Pradesh and 
Kerala 
and sold the same to local 
dealers. 
The appellant thereupon called upon the respondent to produce 
accounts and certain other doet1ments on the assumption that the sales 
so effected were chargeable to tax as first sales in the State. . The res-
pondent objected to these proceeding< ·on the ground that the sales were 
second sales not liable to tax and filed writ _petitions in the High Court. 
The writs were allowed by the High Court. Dismissing the appeal 
. 
A 
n 
' 
.D 
E 
c 
HELD : When cotton yarn was sold to the respondent in Madras, 2-L'i 
the goods were in the State of Tamil Nadu when the contract of inter-
state sale was entered into, it 'Yill be a first sale in the State, . Once that 
sale has taken place, and the goods were delivered in the States of Andhra 
Pradesh and Kerala pursuant to that inter-state sale, there was not further 
(; 
sale to the respondent when it transferred to 'its bran~ those. good:t 
which have already been subject to tax in the State of Tamil Nadu. They 
are exempted from being taxed again since they have already been sub-
jected to tax on the .first sale inside the State. [14 HJ 
•
LThe Court did not find it necessary to consider the 'llle&tion whether 
the provisions of section IS of the Central Sales-tax Act..m~kes ah. inroad 
inlO ·the texture of the local law so that .section 6 of ·thb focal Act will 
H ~ 
have to be read subject to and in conformity with the pt"Ollisions of Sec· 
tion 15 and the policy underlining that section and whether Section 6 will--
he inapplicable to sales of declared goods.] [IS Al 
12 
SUPREME COURT REPORTS 
[1973] 2 s.c.R 
-Office in Madras and also to its branches. The method which 
was followed by the head office of the respondent was that it 
would place orders from Madras on Madurai Mills Limited pur-
suant to which the supplies would be made by the Madurai Mills 
Limited either to the respondent's head office or to its branches 
in accordance with the instructions given by the head office .. 
Where deliveries we1e made to the respondent inside the State the 
seller collected the tax due under the Act with reference to item 
3 of the second Schedule to the Act. 
But in respect of deliverir.s 
made to the respondent's branches outsid.: the State, the Madurai 
Mills collected tax under section 3 of the Central Sales Tax Act 
(hereinafter called the Central Act). 
During the year 1965-66 
the respondent transferred to Madras State certain quantities of 
yarn from the stock so purchased at its branches in the State of 
Andhra Pradesh and Kerala and sold the same to local dealers. 

Excerpt shown. Read the full judgment & AI analysis in Lexace.