R.L.GULATI, J. - (1.) UNDER Section 11(1) read with Section 11(3) of the U.P. Sales Tax Act, the Additional Judge (Revisions) Sales Tax, U.P., Lucknow, has submitted this reference along with the connected reference for the opinion of this court on the following question of law: Whether on the facts and circumstances of the case as discussed in the assessment, appellate and my orders the transactions regarding the sales of Rs. 9,85,160 and Rs. 73,160 were inter -State sales and not intra -State sales?
(2.) THE facts are short and not in dispute. The assessee carried on business of manufacture and sale of jute goods at Kanpur within the State of Uttar Pradesh. The goods are supplied to the purchasers both inside and outside Uttar Pradesh. During the assessment year 1960 -61 the assessee received orders for the supply of goods from parties mostly of Kanpur. One of the terms of the contract was that the assessee will despatch goods to the destination indicated by the purchasers subsequently. In pursuance of the despatching instruction received, the assessee despatched goods outside Uttar Pradesh worth Rs. 9,85,160 and another lot amounting to Rs. 73,160. The assessee claimed that these sales were inter -State sales and their turnover was assessable under the Central Sales Tax Act. The Sales Tax Officer did not accept the contention and treated the turnover to be of intra -State sales and levied tax under the U.P. Sales Tax Act on the two lots of sales referred to above under Rule 41(5) and under Section 21 respectively. The assessor's appeals were allowed. The appellate authority held that the turnover in dispute was of inter -State sales and as such was not liable to tax under the U.P. Sales Tax Act. The Commissioner of Sales Tax applied in revision but failed. At the instance of the Commissioner this reference has now been brought before us. Section 3 of the Central Sales Tax Act defines the inter -State sales: 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 to title to the goods during their movement from one State to another.
(3.) IN the instant case there is no dispute that the goods in question were delivered outside Uttar Pradesh according to the instructions of the purchasers. It is also not in dispute that the purchasers were entitled to give such instructions as per one of the terms in the contract of sale between the parties. The only contention raised on behalf of the department is that the term relating to despatching instruction was not an essential term of the contract but related merely to its execution and as such the contract should be deemed to have been completed in Uttar Pradesh and the subsequent despatch of the goods outside Uttar Pradesh would be irrelevant. Precisely, a similar question arose before the Supreme Court in Amritsar Sugar Mills Co. Ltd. v. Commissioner of Sales Tax, Uttar Pradesh 1966] 17 S.T.C. 405 (S.C). That was a case of an assessee who carried on the business of manufacture and sale of sugar. Some of the parties to whom the sugar was sold carried on the business inside Uttar Pradesh but the sugar was despatched to stations outside Uttar Pradesh in compliance with the instructions issued by the buyers. The assessee -claimed rebate on such sales under Section 5 of the Act which authorises rebate in respect of sale of goods for delivery outside Uttar Pradesh. According to the standard form of agreement executed between the assessee and the buyers it was provided that the delivery of the sugar was to be made F.O.R. Rohana Kalan Station but there was a further clause in the agreement which entitled the buyers to give despatching instructions to the assessee's mill. The goods were despatched outside Uttar Pradesh in pursuance of that clause. A contention similar to the one raised in the instant case was rejected by the Supreme Court which held that the clause relating to the despatching instructions was an integral part of the contract and that when despatching instructions were given, it was not a case of performing the contract but specifying a term of the contract. The Supreme Court further observed that if the place of actual delivery had been specified and it was a question merely of communicating the route by which the goods were to be delivered this would perhaps relate to the mode of performance of the contract. But communication of the place where actual delivery is to be given does not relate to the mode of performance but formation of the contract.;