Bhargava, J. - (1.) These appeals arise out of proceedings for assessment of sales tax under the Madras General Sales Tax Act No. IX of 1939 (hereinafter referred to as "the Act") in respect of certain sales of cotton. The respondents were registered dealers in cotton, including kappas, groundnuts and cotton seeds with their Head Office at Bellary and Branch Offices at a number of places. They were also licensees under S. 8 of the Act in respect of cotton. They made various purchase of cotton at their places of business and subsequently sold them to different parties. Amongst these were a number of persons who were not resident within the area to which the Act applied. The question arose as to who was liable to pay the sales tax in respect of those transactions of sale of cotton in which the cotton had been sold by the respondents to non-residents. When the case came up before the Mysore Sales Tax Appellate Tribunal, the Tribunal determined the course of transactions and held as follows:-"The examination of the contracts, the invoices, the railway receipts, insurance policies and other documents relating to the disputed turnovers shows that the non-resident foreigners place orders for the required number of bales of cotton specifying the quality and the rate some times on phone which would be confirmed subsequently by Telegrams or letters and finally by written agreements. Thereupon, the appellants consign the cotton bales in their own name, the consignee being the non-resident foreign buyers (except in respect of a total turnover of Rs. 2,93,567-2-0 which would cover the items 1, 3, 5, 7, 31, 32, 33 and 44 of the typed statement of the account for the year 1954-55 and a total turnover of Rs. 3,71,880-13-0 which would cover the items 6, 10, 11, 12, 13, 14, 15, 16, 24, 25, 26, 29, 30, 31, 35, 36 and 37 of the typed statement of account for the year 1955-56) and send the railway receipts to their bankers at the other end for the collection of the amount. It is seen that notwithstanding the fact that there are specific provisions in the contract that 90 per cent of the invoice amounts should be paid to the bankers when the railway receipts would be delivered to the purchasers, surprisingly the said provision is rendered nugatory by reason of the fact that the appellants despatch the cotton in such a way that the consignee could get cotton bales at the other end even though without any payment to the banker. The moment the appellants consigned the goods, they will have lost complete control and dominion over the cotton thus despatched. Further, non-resident foreign buyers who obtained the necessary transport permit under the Cotton Control Order, 1950, actually insure the cotton bales as the owner thereof and transmit the same from Bellary to the destination. This is so even in cases where the appellants themselves have consigned the goods in their own name, the consignees being themselves. All these facts clearly go to show that the sales are completed at Bellary and the non-resident foreign buyers in whose favour the property in the goods had been transferred actually transported the cotton thus purchased. The State Representative does not seriously dispute about the correctness of the modus operandi of the appellants in their dealings with their purchasers during five years of assessments. Bearing these facts in mind, we shall now proceed to examine each of the contentions raised by the learned counsel".
(2.) On these facts, the question that fell for determination was whether for purposes of S. 5 (2) of the Act read with R. 4-A (iv) (b) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939 (hereinafter referred to as "the Rules"), the respondents were the dealers who bought the cotton in the State and were the last dealers not exempt from taxation under S. 3 (3) of the Act on the amount for which the cotton was bought by them. The contention on behalf of the respondents was that the cotton was sold by them within the State of Madras to parties who were residing outside the State of Madras; but the sales having been made by them within the State of Madras, they could not be held to be dealers who bought the cotton in the State and were the last dealers for that purpose not exempt from taxation. According to their contention, the parties to whom they sold the cotton within the State were the persons liable to be taxed in accordance with S. 5 (2) of the Act and R. 4-A (iv) (b) of the Rules. The Tribunal accepted this plea of the respondents, allowed the appeals, and set aside the orders of the subordinate authorities directing payment of sales tax by the respondents. That order was upheld by the High Court of Mysore when the revisions against the orders of the Tribunal came up for decision before it. These appeals before us coming up by special leave are directed against the above order of the High Court. We may mention that the revisions came up before the High Court of Mysore, because the area, in respect of which the dispute arose, was originally within the State of Madras, but, on Reorganisation of States, came within the State of Mysore. The law applicable to sales in the year in question, however, continued to be the Madras Sales Tax Act IX of 1939, and that area came to be designated as Madras Area of the State of Mysore .
(3.) In these appeals, two points were canvassed before us by learned counsel for the State of Mysore. At the initial stage, learned counsel for the State indicated that he did not intend to challenge the finding that the situs of the sales in question were all within the Madras area; but at a later stage, he challenged this finding as the second alternative point in support of these appeals. We may deal with this point first.;