whether as a condition of giving the benefit of Section 6(2) of the said Act, the tax authorities can impose a limit or timeframe within which delivery of the respective goods has to be taken from a carrier when the goods are delivered to a carrier for transmission in course of inter-state sale?

1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2217 OF 2011
COMMERCIAL TAXES OFFICER …APPELLANT
VERSUS
M/S. BOMBAY MACHINERY STORE …RESPONDENT
WITH
CIVIL APPEAL NO. 2220 OF 2011
CIVIL APPEAL NO. 10000 OF 2017
CIVIL APPEAL NO. 10001 OF 2017
J U D G M E N T
ANIRUDDHA BOSE, J.
All these four appeals are being dealt with by this judgment
as they all involve adjudication on a common question of law
arising out of Sections 3 and 6 of the Central Sales Tax Act, 1956
(1956 Act), which was operational at the material point of time.
2
The question is as to whether as a condition of giving the benefit
of Section 6(2) of the said Act, the tax authorities can impose a
limit or timeframe within which delivery of the respective goods
has to be taken from a carrier when the goods are delivered to a
carrier for transmission in course of inter-state sale. For proper
appreciation of the dispute involved in these appeals, the aforesaid
provisions are reproduced below:-
“3. When is a sale or purchase of goods
said to take place in the course of interState trade or commerce. 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 of
title to the goods during their movement
from one State to another.
Explanation 1 — Where goods are delivered
to a carrier or other bailee for transmission,
the movement of the goods shall, for the
purposes of clause (b), be deemed to
commence at the time of such delivery and
terminate at the time when delivery is taken
from such carrier or bailee.
Explanation 2 — Where the movement of
goods commences and terminates in the
3
same State it shall not be deemed to be a
movement of goods from one State to
another by reason merely of the fact that in
the course of such movement the goods pass
through the territory of any other State.
Explanation 3 – Where the gas sold or
purchased and transported through a
common carrier pipeline or any other
common transport or distribution system
becomes co-mingled and fungible with
other gas in the pipeline or system and such
gas is introduced into the pipeline or system
in one State and is taken out from the
pipeline in another State, such sale or
purchase of gas shall be deemed to be a
movement of goods from one State to
another.”

  1. Liability to tax on inter-State sales.—
    [(1)] Subject to the other provisions
    contained in this Act, every dealer shall,
    with effect from such date as the Central
    Government may, by notification in the
    Official Gazette, appoint, not being earlier
    than thirty days from the date of such
    notification, be liable to pay tax under this
    Act on all sales [of goods other than
    electrical energy] effected by him in the
    course of inter-State trade or commerce
    during any year on and from the date so
    notified:
    [Provided that a dealer shall not be liable to
    pay tax under this Act on any sale of goods
    which, in accordance with the provisions of
    4
    sub-section (3) of section 5 is a sale in the
    course of export of those goods out of the
    territory of India.]
    [(1A) A dealer shall be liable to pay tax
    under this Act on a sale of any goods
    effected by him in the course of inter-State
    trade or commerce notwithstanding that no
    tax would have been leviable (whether on
    the seller or the purchaser) under the sales
    tax law of the appropriate State if that sale
    had taken place inside that State.]
    [(2) Notwithstanding anything contained in
    sub-section (1) or sub-section (1A), where a
    sale of any goods in the course of inter-State
    trade or commerce has either occasioned the
    movement of such goods from one State to
    another or has been effected by a transfer of
    documents of title to such goods during their
    movement from one State to another, any
    subsequent sale during such movement
    effected by a transfer of documents of title
    to such goods, –
    (a) to the Government, or
    (b) to a registered dealer other than the
    Government, if the goods are of the
    description referred to in sub-section (3) of
    section 8,
    shall be exempt from tax under this Act:
    Provided that no such subsequent sale shall
    be exempt from tax under this sub-section
    unless the dealer effecting the sale furnishes
    to the prescribed authority in the prescribed
    manner and within the prescribed time or
    5
    within such further time as that authority
    may, for sufficient cause, permit,—
    (a) a certificate duly filled and signed by the
    registered dealer from whom the goods were
    purchased containing the prescribed
    particulars in a prescribed form obtained
    from the prescribed authority; and
    (b) if the subsequent sale is made –
    (i) to a registered dealer, a declaration
    referred to in clause (a) of sub-section (4) of
    section 8, or
    (ii) to the Government, not being a
    registered dealer, a certificate referred to in
    clause (b) of section (4) of section 8:
    Provided further that it shall not be
    necessary to furnish the declaration or the
    certificate referred to in clause (b) of the
    preceding proviso in respect of a subsequent
    sale of goods if,—
    (a) the sale or purchase of such goods is,
    under the sales tax law of the appropriate
    State exempt from tax generally or is subject
    to tax generally at a rate which is lower than
    four per cent. (whether called a tax or fee or
    by any other name); and
    (b) the dealer effecting such subsequent sale
    proves to the satisfaction of the authority
    referred to in the preceding proviso that
    such sale is of the nature referred to in
    clause (a) or clause (b) of this sub-section.
    [(3) Notwithstanding anything contained in
    this Act, if –
    6
    (a) any official or personnel of –
    (i) any foreign diplomatic mission or
    consulate in India; or
    (ii) the United Nations or any other similar
    international body, entitled to privileges
    under any convention to which India is a
    party or under any law for the time being in
    force; or
    (b) any consular or diplomatic agent of any
    mission, the United Nations or other body
    referred to in sub-clause (i) or sub-clause (ii)
    of clause (a), purchases any goods for
    himself or for the purposes of such mission,
    United Nations or other body, then, the
    Central Government may, by notification in
    the Official Gazette, exempt, subject to such
    conditions as may be specified in the
    notification, the tax payable on the sale of
    such goods under this Act.”
    (4) The provisions of sub-section (3) shall
    not apply to the sale of goods made in the
    course of inter-State trade or commerce
    unless the dealer selling such goods
    furnishes to the prescribed authority a
    certificate in the prescribed manner on the
    prescribed form duly filled and signed by
    the official, personnel, consular or
    diplomatic agent, as the case may be.”
  2. We shall narrate the factual context of Civil Appeal No.2217
    of 2011, before we address the legal issue involved in these
    7
    appeals, treating this to be the lead case. The dispute relating to the
    other three appeals are not identical, but the question of law being
    the same in all these appeals, we shall avoid narrating in detail the
    sequence of events which led to filing of the said appeals, except
    to the extent such narration is necessary for understanding the
    scope of these appeals. In Civil Appeal No.2217 of 2011, the
    period of assessment is 1995-96. The respondent-assessee
    Bombay Machinery Store had purchased electricity motors and its
    parts in the said financial year out of the State and sold them to
    purchasers within the Kota region of the State of Rajasthan. For
    such sales, they obtained the benefit of exemption under Section
    6(2) of the 1956 Act. These goods had remained with the transport
    company upon arrival in Kota for more than a month. Revenue’s
    case is that after importing these goods into Rajasthan, sale was
    effected through bilty (transport receipt) on obtaining separate
    orders. Such sale, it is the revenue’s case, constituted sale within
    the State and hence taxable @12% per annum under the Rajasthan
    Sales Tax Act, 1954. Civil Appeal No.2220 of 2011 relates to the
    8
    same firm but for the assessment year 1994-95. Quantum of sales
    for the year 1994-95 effected through the same process was
    Rs.3,15,639/- and for 1995-96 it was Rs.2,60,93/-. Claim of
    benefit under Section 6(2) of the 1956 Act was rejected and tax
    along with interest and penalty was imposed under the State Act by
    Commercial Tax Officer, Anti-Evasion Circle-I, Kota after a
    survey by two orders, both dated 11th December, 1997. The
    appeals by Bombay Machinery Stores were allowed by the Deputy
    Commissioner (Appeals), Commercial Taxes, Kota following a
    decision delivered on 8th March, 1996 by the Rajasthan Tax Board
    in the case of CTO vs. Bhagwandas & Sons (1996 Tax World
    107). The orders of the first appellate authority were passed on
    interpretation of the first explanation to Section 3B(1) of the 1956
    Act. Imposition of tax, interest and penalty under the State Act was
    quashed. In State Tax authority’s appeal before the Tax Board,
    reliance was placed on two circulars issued by the Commissioner
    bearing S.No.1132A: CCT Circular F.11(3)CST/Tax/CCT/1/61
    dated 15th April, 1998, clarified by a further circular dated 19th July,
    9
  3. The Board did not take into consideration these two
    circulars. These were not referred to in the orders of the Tax
    Assessment Officer. The Board sustained the view of the Deputy
    Commissioner (Appeals) in a composite order. This order was
    challenged by the revenue by filing two revision petitions before
    the High Court, as two appeals were disposed of by the Board by
    its order dated 24.11.2004. The High Court, in the judgment
    delivered on 14th September, 2007 confirmed the Board’s order and
    quashed two circulars bearing S.No.115B dated 16th September,
    1997 and S.No.1132A dated 15th April, 1998. These circulars
    sought to impose a time limit on retention of goods in the carrier’s
    godown, beyond which time the revenue was to treat obtaining of
    constructive delivery of the goods involved. That judgment is
    under appeal before us. Before we deal with this judgment, we
    shall briefly refer to the other appeals which have been heard
    together.
  4. In Civil Appeal No.2220 of 2011, incidences of sale relate to
    different dates between 24th March, 1994 and 30th January, 1995.
    10
  5. Civil Appeal No.10000 of 2017 and Civil Appeal No. 10001
    of 2017 relate to another assessee, Unicolour Chemicals Company.
    That firm purchased chemical and colour from a Gujarat based
    company, and the goods reached the godown of the carrier
    transport company on 12th May, 2000. They were sold to a firm in
    Jaipur in two tranches, after 55 days and 80 days from the date of
    arrival. The monetary value of these goods was Rs.1,27,592. In
    Civil Appeal No. 10001 of 2017, revenue’s case is that survey of
    the business place of the same firm revealed that:-
    “the stock of taxable good colour chemical of
    price Rs.4,72,653/- has been found less and
    on doubt on the nature of sale showing in the
    Section 6(2) of the Central Sales Tax Act and
    seeing the possibility of tax evasion the
    record found in the survey of the business
    firm has been seized.”
    (quoted from the order
    annexed to the paper book)
    These goods had reached the godown of the transport
    company on 25th July, 2001. These were brought against bilty and
    the documents were transferred to the same firm on 4th September,
    11
  6. There was thus delay of 41 days. The tax fixation authorities
    directed application of the State Act treating the transactions to be
    local sales. This order was sustained by the Deputy Commissioner
    (Appeals) and the order of the Tax Board also went against
    Unicolour. The High Court, following the judgment in the case of
    Bombay Machinery Store (which we are treating as the lead case
    in this judgment), quashed the orders of the statutory authorities in
    both the appeals and also invalidated the two circulars.
  7. The two circulars issued by the Commissioner, Commercial
    Taxes Department, Rajasthan have been quoted in the impugned
    judgment in the case of Bombay Machinery Store. Henceforth,
    wherever we refer to the expression judgment under appeal, we
    shall imply that judgment only, unless we specifically refer to any
    of the three other decisions under appeal. These circulars read:-
    “S. No. 1115B : CCT Circular
    F.11(3)/CST/Tax/CCT/1997/1563 dated
    16.9.1997
    As you are aware of the fact that to avoid
    multiple taxation of goods sold by transfer
    of documents of title to the goods in their
    12
    single movement from one State-to another,
    provisions for exemption of such
    transaction are embodied in S. 6(2), CST
    Act, 1956. It appears that application of this
    provision has been made more or less
    mechanical by the assessing authorities in as
    much as on furnishing form E-I/E-II and C
    forms without looking into the material facts
    regarding single inter-State movement of
    such goods, benefits are conferred to such
    dealers. If the movement of the goods from
    one State to another terminates, the
    subsequent sales will be treated as intraState sales and benefit of the above subsection (2) of Section 6 will not be available
    in such cases. It is found that trade is often
    claiming large exemptions under this
    provision, particularly in respect of paper,
    dyes and chemicals, etc. It is, therefore,
    directed that all the assessing authorities
    should specifically examine the nature of
    transactions before granting benefit under
    the said section.
    It may be argued that in view of the
    Explanation I to Section 3 of the CST Act,
    1956, inter-State movement of goods
    continues until the consignee obtains
    physical delivery of goods from the carrier,
    after arrival of these goods at the
    destination. This argument is based on the
    incorrect notion that “delivery” in the
    Explanation means only “physical
    delivery”. This argument can be countered
    on the basis of the well settled proposition
    of “constructive delivery”.
    13
    The material fact to be looked into by the
    assessing authorities while granting benefit
    of Section 6(2) of the CST Act relate to the
    termination of the movement of goods in the
    inter-State transactions. If after arrival of the
    goods at the destination, the consignee asks
    the transporter expressly or impliedly, to
    retain the goods at his godown until further
    directions, then the carrier ceases to hold the
    goods as transporter, and in the eyes of law,
    the goods are as much in possession of the
    consignee as if he had taken them into his
    own godown. As per the settled legal
    concept this sequence of events tantamounts
    to constructive delivery of the goods by
    transporter to the consignee and transit ends.
    Any sale by the consignee thereafter will be
    local sale and benefit of Section 6(2) will
    not be available.
    The transporters, whether Railways or
    Roadways, impose condition of delivery of
    goods transported through them at the
    destination usually within ten days and the
    consignee is required to check up with such
    transporting agency as to the arrival of the
    goods. In these circumstances, if the carrier
    retains the goods for an extended period,
    then there is a clear inference that the
    consignee was aware of the arrival of his
    goods and the transporter is holding the
    goods on his behalf as a bailee for the
    consignee. These factual matrix leads to the
    conclusion that there is a local sale and not
    sale under said Section 6(2). Payment of
    warehouse rent/demurrage charges by the
    14
    consignee to the transporter is conclusive
    evidence that transporters have assumed the
    role of bailee and transit having ended. It
    may be observed that bailment can be either
    gratuitous or for remuneration or partially
    both. In law, there can also be bailment
    without contract.
    As per legal position, ‘transit’ gets over as
    soon as a reasonable time elapses for the
    consignee to elect whether he would take
    the goods away or leave them in the
    transporters premises, because at the
    conclusion of reasonable time there is
    deemed to be a constructive delivery of
    goods from the transporters to the
    consignee. If a dealer claims that the had not
    obtained the delivery of goods, the burden
    of proving that the goods really remained
    with the carrier from the date of their arrival
    till the date of their clearance is on the
    dealer. If the dealer fails to furnish this
    proof, then the assessing authority would be
    justified in concluding that the dealer had
    himself taken physical delivery of the goods
    from the carrier and thereby disallowing his
    claim of exemption under S. 6(2), CST Act.
    The decision of the Delhi High Court
    in Arjun Dass Gupta and Bros. v. Commer
    of Sales Tax, New Delhi, reported in (1980)
    45 STC 52, lays down the basic guidelines
    regarding exemption of sales under S. 6(2),
    CST Act. The Delhi High Court had held
    that Explanation I to S. 3(b) of the CST Act,
    1956 did not permit the dealer to expand the
    movement of goods beyond the time of
    15
    physical landing of the goods in the Union
    Territory of Delhi. As to the knowledge
    except this there are no other directly
    relevant or contra judgment reported from
    any other High Court. It is understood that
    Special Leave Petition is pending in the
    Supreme Court on the issue but there is no
    stay. As such Delhi High Court judgment
    holds the field.
    It is therefore, enjoined upon the assessing
    authorities that in future they should not
    grant the benefit of exemption under S. 6(2),
    CST Act, simply on furnishing of the Form
    E-I/E-II and C Form. If on the contrary
    it is found that assessee had taken physical
    delivery or the goods remained with the
    transporter beyond a reasonable time
    looking to the facts and circumstances of
    each case, the doctrine of constructive
    delivery should be invoked and action be
    taken accordingly.
    S. No. 1132A : CCT Circular F.11(3)
    CST/Tax/CCT/61 dated 15.04.1998
    It may be recalled that vide circular dated
    16.9.1997 [S. No.1115B], instructions were
    issued clarifying therein the legal position of
    granting benefits under Section 6(2) of the
    CST Act, 1956. It has been clarified that the
    concept of constructive delivery shall also
    be invoked while determining when the
    transit comes to an end. It was also clarified
    that the Railways or Roadways usually
    impose conditions of delivery of goods
    16
    transported by them at the destination within
    10 days and the consignee is required to
    check up with such transporting agency as
    to the arrival of the goods. In view of this, it
    was desired by the above referred circular
    that the AAs should ascertain the fact that
    whether the goods remained with the
    transporter beyond reasonable time.
    Looking to the facts and circumstances of
    each case, the doctrine of constructive
    delivery should be invoked and action be
    taken accordingly.
    The representatives of various associations
    of trade and industry had brought to the
    notice that in almost all cases the AAs are
    invoking the doctrine of constructive
    delivery in a mechanical manner
    immediately after ten days of arrival of the
    goods at the destination. As per these
    Associations, this approach has resulted in
    hardship to the dealers and avoidable
    harassment is being caused to them with
    adverse effect on the trade. They have
    requested for increasing this limit.
    Keeping in view these factual aspects and
    the discussions at the Govt; level, it is
    reiterated that the reasonability of the time
    should be looked into after analysing the
    facts and circumstances of each case and the
    usual period of treating constructive
    delivery which may even extend upto thirty
    days instead of ten days as suggested in the
    above referred circular.
    17
    Deputy Commissioner (Admn) should
    ensure that, while ensuring the State
    revenue, no harassment shall be caused to
    the dealers by enthusiastic assessing
    authorities while determining the end of
    transit.”
  8. The High Court has referred to two decisions, one by the
    Rajasthan High Court itself, in the case of Guljag Industries
    Limited vs. State of Rajasthan & Another reported in (2003) 129
    STC 3 (Raj.) and the other of the Delhi High Court in the case of
    Arjan Dass Gupta and Brothers vs. Commissioner of Sales Tax,
    Delhi Administration (1980) 45 STC 52 (Delhi). In the latter
    decision, a Bench of the Delhi High Court construed certain
    provisions of 1956 Act and the Bengal Finance (Sales Tax) Act,
    1941, (as it was applicable to Delhi at the material point of time).
    On the aspect of what would be implication of the expression
    ‘delivery’ in Section 3(b) of the 1956 Act, it was, inter-alia, held:-
    “10…….Normally, when the goods are
    carried by a carrier from one State to
    another, the delivery is taken by the
    importer immediately after the goods land in
    the importing State. Thus, normally, the
    18
    landing of the goods in the importing State
    and the delivery of the goods are almost
    simultaneous acts, although technically
    there will be some hiatus between the two.
    Considering these commercial facts, it is
    difficult to accede to the retailer’s contention
    that the movement of goods continues even
    if the goods have landed in Delhi only
    because the importer has transferred the
    documents of title to the purchasing retailers
    and such retailers take delivery from the
    railways at a subsequent time. If taking
    delivery is the test of termination of
    movement and not the landing of the goods
    in an importing State, Explanation 1
    to Section 3(b) of the Central Sales Tax Act
    would lead to anomalous results. If, after the
    landing of the goods in Delhi, the railway
    receipts are endorsed one after another to
    ten persons and the delivery is taken by the
    tenth person, say after three months, the
    movement of goods would on the dealer’s
    interpretation artificially continue for three
    months after the landing of the goods in
    Delhi.”
  9. In the judgment under appeal, the Rajasthan High Court,
    however, disagreed with this view of the Delhi High Court relying
    on the case of Guljag Industries Limited (supra), in which three
    19
    appeals were dealt with in a common judgment. It was held by the
    High Court in the judgment under appeal:-
    “12. Therefore, the proposition of law by
    the learned Commissioner in the impugned
    circulars that “as per legal position, ‘transit’
    gets over as soon as a reasonable time
    elapses for the consignee to elect whether he
    would take the goods away or leave them in
    the transporters premises, because at the
    conclusion of reasonable time there is
    deemed to be a constructive delivery of
    goods from the transporter to the
    consignee”, cannot be said to be a correct
    legal position. The subsequent Circular
    dated 15.4.1998 purportedly issued to
    ameliorate the situation for dealers created
    by previous circular dated 16.9.1997,
    merely ended up extending the time limit of
    10 days to 30 days without undoing the
    damage done by the previous circular by
    propounding a particular view of
    constructive delivery. In fact, the very
    power to issue such circulars by the learned
    Commissioner giving a particular
    interpretation of law purportedly binding on
    all the assessing authorities is doubtful.
    There is no specific provision in the Sales
    Tax Act, either under the RST Act or under
    the CST Act, empowering the
    Commissioner to issue such circulars, as
    against such powers conferred under
    Section 119 of the Income Tax Act on the
    Central Board of Direct Taxes. Even
    20
    Section 119 of the Income Tax Act, which
    empowers the highest administrative body
    under the Act, namely CBDT, by way of its
    proviso restricts and provides that no such
    order, instruction or direction shall be issued
    so as to require any Income Tax authority to
    make a particular assessment or dispose of a
    particular case in a particular manner and
    such orders or instructions shall also not
    interfere with the discretion of the
    Commissioner (Appeals) in exercise of its
    appellate functions. Therefore, this court
    cannot countenance the issuance of such
    circulars by the Commissioner of Sales Tax,
    which unduly fetter with the quasi-judicial
    discretion of the assessing authorities, who
    are expected in law to give their findings of
    fact and interpret the statutory law in their
    own quasi-judicial discretion in accordance
    with the law as interpreted by the Supreme
    Court or jurisdictional High Court. The
    circulars issued by the Commissioner in the
    aforesaid manner like done vide Circulars
    dated 16.9.1997 and 15.4.1998 are likely to
    hamper and throttle such quasi-judicial
    discretion which vests with the assessing
    authorities. Therefore, the aforesaid
    circulars issued by the Commissioner
    aforesaid on 15.4.1998 (S. No. 1132A) and
    16.9.1997 (S. No. 1115B) are in conflict
    with the Division Bench decision of this
    Court in Guljag Industries Ltd’s
    case (supra) and even otherwise they are
    found to be without any authority of law.
    Consequently, both these circulars are
    21
    found to be ultra vires and are hereby
    quashed.
  10. In view of aforesaid, since there was no
    basis for the learned Commissioner to
    stipulate the time frame of 10 days or 30
    days and thereafter, to require the assessing
    authority to invoke the concept of
    constructive delivery so as to deny the
    exemption of CST on subsequent sales
    made by transfer of documents of title to the
    goods made under Section 6(2) of Act,
    though requisite conditions of Section 6(2)
    of the Act are fulfilled by the dealer and
    such circulars have already been held to be
    ultra vires and have been quashed and in
    absence of any other material justifying the
    denial of exemption under Section 6(2) of
    the Act to the assessee, the impugned order
    of the Tax Board allowing such exemption
    to the assessee is not required to be
    interfered with in the present revision
    petitions filed by the Revenue.”
  11. We must add here that the decision in the case of Guljag
    (supra) was subsequently carried up in appeal before this Court. It
    appears from the records of this Court that two of these appeals
    were disposed of on 30th September, 2010 as the assessee chose to
    approach the statutory forum whereas another appeal was
    22
    dismissed having regard to the quantum of tax involved in the
    appeal.
  12. We, accordingly, shall test the revenue’s case including the
    question of legality of the said two circulars in the context of the
    provisions of Sections 3 and 6 of the 1956 Act. The respondent in
    this case had taken benefit of sub-section (2) on the ground that this
    was a case involving inter-state sale and the sale took place by way
    of transfer of documents of title of such goods during their
    movement from one State to another. It is also the respondents’
    case that the requisite forms and certificates were duly furnished
    pertaining to such sales. On the part of the State, barring retention
    of the goods in the transporters’ godown at the destination point for
    a long period of time, default on no other count by the assesses has
    been asserted.
  13. In the two appeals in which the respondent is Bombay
    Machinery Stores, sales pertained to financial years before the
    circulars came into subsistence. In these instances of sales, the
    Commercial Tax officer in the respective orders treated retention of
    23
    goods beyond 30 days in the transporters’ godown as the cut-off
    period. After that date, the assessee was deemed to have had taken
    constructive delivery of goods and sale beyond that period within
    the State of Rajasthan was held to be local sales and subjected to
    sales tax under the State Law. Same reasoning was followed in the
    respective orders of the tax authorities forming subject-matters of
    two appeals involving Unicolour Chemicals Company. The Tax
    Board, while deciding the issue in favour of revenue, referred to the
    aforesaid two circulars in upholding the concept of constructive
    delivery.
  14. As per the aforesaid circulars, retention of goods by the
    transporter beyond the time stipulated therein (being 30 days as per
    the later circular) would imply that constructive delivery of the
    goods has been made by the transporter to the consignee. In such a
    situation, the transit status of the goods would stand terminated and
    the deeming provision in first explanation to Section 3 of the 1956
    Act conceiving the time-point of delivery as termination of
    movement shall cease to operate.
    24
  15. In this set of appeals we have already indicated that transfer
    of documents of title were effected subsequent to the goods
    reaching the location within destination State. But when the goods
    are delivered to a carrier for transmission, first explanation to
    Section 3 of the 1956 Act specifies that movement of the goods
    would be deemed to commence at the time when goods are
    delivered to a carrier and shall terminate at the time when delivery
    is taken from such carrier. The said provision does not qualify the
    term ‘delivery’ with any timeframe within which such delivery
    shall have to take place. In such circumstances fixing of timeframe
    by order of the Tax Administration of the State in our opinion
    would be impermissible.
  16. Before the High Court, the revenue authorities has relied on
    Section 51 of the Sale of Goods Act, 1930 (hereinafter referred to
    as the “1930 Act”). But the said provision also does not aid or assist
    the revenue. Section 51 of the 1930 Act reads: –
    “51. Duration of transit.—(1) Goods are
    deemed to be in course of transit from the
    time when they are delivered to a carrier or
    25
    other bailee for the purpose of transmission
    to the buyer, until the buyer or his agent in
    that behalf takes delivery of them from such
    carrier or other bailee.
    (2) If the buyer or his agent in that behalf
    obtains delivery of the goods before their
    arrival at the appointed destination, the
    transit is at an end.
    (3) If, after the arrival of the goods at the
    appointed destination, the carrier or other
    bailee acknowledges to the buyer or his
    agent that he holds the goods on his behalf
    and continues in possession of them as
    bailee for the buyer or his agent, the transit
    is at an end and it is immaterial that a further
    destination for the goods may have been
    indicated by the buyer.
    (4) If the goods are rejected by the buyer and
    the carrier or other bailee continues in
    possession of them, the transit is not deemed
    to be at an end, even if the seller has refused
    to receive them back.
    (5) When goods are delivered to a ship
    chartered by the buyer, it is a question
    depending on the circumstances of the
    particular case, whether they are in the
    possession of the master as a carrier or as
    agent of the buyer.
    (6) Where the carrier or other bailee
    wrongfully refuses to deliver the goods to
    the buyer or his agent in that behalf, the
    transit is deemed to be at an end.
    26
    (7) Where part delivery of the goods has
    been made to the buyer or his agent in that
    behalf, the remainder of the goods may be
    stopped in transit, unless such part delivery
    has been given in such circumstances as to
    show an agreement to give up possession of
    the whole of the goods
  17. Sub-clause (1) of the said provision specifies when the goods
    shall be deemed to be in course of transit and sub-clause (3) thereof
    lays down the conditions for termination of transit. That condition
    is an acknowledgment to the buyer or his agent by the carrier that
    he holds the goods on his behalf. There is no material to suggest
    such an acknowledgment was made by the independent transporter
    in these appeals. In such circumstances we do not think the decision
    of the High Court requires any interference.
  18. In the case of Arjan Dass Gupta (supra) principle akin to
    constructive delivery was expounded and we have quoted the
    relevant passage from that decision earlier in this judgment. In our
    opinion, however, such construction would not be proper to
    interpret the provisions of Section 3 of the 1956 Act. A legal fiction
    is created in first explanation to that Section. That fiction is that
    27
    the movement of goods, from one State to another shall terminate,
    where the good have been delivered to a carrier for transmission, at
    the time of when delivery is taken from such carrier. There is no
    concept of constructive delivery either express or implied in the
    said provision. On a plain reading of the statute, the movement of
    the goods, for the purposes of clause (b) of Section 3 of the 1956
    Act would terminate only when delivery is taken, having regard to
    first explanation to that Section. There is no scope of incorporating
    any further word to qualify the nature and scope of the expression
    “delivery” within the said section. The legislature has eschewed
    from giving the said word an expansive meaning. The High Court
    under the judgment which is assailed in Civil Appeal No.2217 of
    2011 rightly held that there is no place for any intendment in taxing
    statutes. We are of the view that the interpretation of the Division
    Bench of the Delhi High Court given in the case of Arjan Dass
    Gupta does not lays down correct position of law. In the event, the
    authorities felt any assessee or dealer was taking unintended benefit
    under the aforesaid provisions of the 1956 Act, then the proper
    28
    course would be legislative amendment. The Tax Administration
    Authorities cannot give their own interpretation to legislative
    provisions on the basis of their own perception of trade practise.
    This administrative exercise, in effect, would result in supplying
    words to legislative provisions, as if to cure omissions of the
    legislature.
  19. For these reasons, we do not want to interfere with the
    judgments of the High Court in these four appeals. The appeals are
    dismissed. Any connected applications shall also stand disposed
    of.
    There shall be no order as to costs.
    ..………………………….J.
    (Deepak Gupta)
    …………..……………….J.
    (Aniruddha Bose)
    New Delhi,
    April 27, 2020.
    29