vil Appeal No 1838 of 1969
Writ Petition Nos
483 487 of 1974 From the Judgment and Order dated 2nd August 1968 of the Madras High Court in Writ Petition No 41667
632 Civil Appeal No 608 of 1973 From the Judgment and Order dated 11th April 1972 of the Madras High Court in Tax Case No 4472
KS Ramamurthi V Nataraj C Natarajan and DN Gupta for the appellantpetitioners
ST Desai for RR
1  2 in CA 183869 and Writ petitions
A V Rangam and Miss A Subhashini for respondents in CA 60873
SN Prasad RN Sachthey and Girish Chandra for R 3 in CA 1838 of 1969 and Writ petitions
DN Mukherjee GS Chatterjee and DP Mukherjee for respondent No 4 in writ petitions
SC Manchanda and OP Rana for respondent No 5 in Writ petitions
MC Bhandare and MN Shroff for respondent No 6 in Writ petitions
The Judgment of the Court was delivered by RAY CJ These two appeals by certificate and the writ petitions turn on the question whether the contract for sale of goods was an inter State sale or an intra State sale
The appellant is a company having its registered office at Calcutta There are branches at Bombay Delhi Madras and Lucknow
The main factory is at Madras
In order to appreciate the real controversy it is neces sary to refer to the facts of one of the Civil Appeals as a pattern of transaction
In Civil Appeal No 1838 of 1969 Asha Metal Works of Bombay referred to as the Bombay buyer wrote to the Bombay branch of the appellant asking for lowest quotation of certain goods
The Madras branch which has the principal factctory there for manufacture of goods was written to by the Bombay branch
The Madras branch wrote to the Bombay branch quoting the prices FOR Madras
The Bombay branch then wrote to the Bombay buyer that the  price was FOR Madras and delivery would be ex works Madras
The Bombay buyer thereupon placed the order with the Bombay branch
On these facts counsel for the appellant contended that the sale was at Bombay inasmuch as the Bombay buyer placed the firm order at Bombay payment was to be made at Bombay railway receipt was in the name of the Bombay branch and the goods were to be delivered at Bombay
It was emphasised that there was no contract or privity between the Madras branch and the Bombay buyer but the privity was only with the Bombay branch
633 The only question is whether the sale was an inter State sale or a sale at Bombay
If the movement of the goods from Madras to Bombay was an incident of or occasioned by the sale itself it would be taxable under section 3a of the Central Sales Tax Act
There was not and there could not be any contract of sale between the factory of the seller appellant at Madras branch and the Bombay branch of the appellant
It is obvi ous that the Bombay branch is the agent of the seller appel lant
The appellant could not be the buyer as well as the seller
The contention of the appellant is that the goods were sent by the factory at Madras branch to the Bombay branch and thereafter the goods were sold by the Bombay branch to the Bombay buyer
The sale as well as the movement of the goods from Madras to Bhandup at Bombay was a part of the same transac tion
The movement of the goods from Madras to Bhandup was integrated with the contract of sale for the following reasons
The Bombay branch received the Bombay buyer s order and sent the same to the Madras branch factory
When the Bombay buyer asked for quotation of prices the Bombay branch wrote to the Madras branch and gave all the specifi cations and stated that the goods were for the Bombay buyer
The Madras branch in reply referred to the order of the Bombay buyer and gave particulars mentioning that the price was FOR Madras
The Bombay branch thereafter wrote to the Bombay buyer reproducing all the particulars condi tions of sale and mode of despatch as stated by theMadras branch and further stated that the goods would be manufac tured at the Madras branch factory
It is important to note that all prices were shown FOR Madras and it was further stated that all goods would be despatched at the risk of the Bombay buyer
It is in this context that the Bombay buyer on 27 May 1964 placed an order with the Bombay branch accepting all the terms and conditions
The Bombay branch placed an indent order ad dressed to the Madras branch giving all the particulars and stated the buyer s name as Asha Metal Works Bombay and gave the customer s order number and the date viz 27 May 1964
The goods were to be invoiced to the Bombay branch and the goods were to be despatched FOR Madras
The Bombay branch wrote to the Bombay buyer on 28 August 1964 that they had received an invoice from the factory at the Madras branch that some of the goods against the order of the Bombay buyer were ready for despatch
The Bombay branch asked the Bombay buyer to give the details of des patch and insurance instructions per return of post
The Bombay branch thereafter wrote to the Madras branch factory stating Please despatch the equipment covered by our above  indent by goods train to Bhandup Railway Stastion freight to pay
The Railway Receipt and other documents to be sent to us for disposal
The Madras branch factory despatched the goods from Madras to Bombay by goods train and gave intima tion to the Bombay branch
The goods were delivered to the Bombay buyer at Bhandup through clearing agents
634 The goods were despatched from Madras at the risk of the buyer to Bombay
The goods were insured and insurance charges were collected from the buyer at Bombay
The freight charged from Madras to Bombay was borne by the buyer
The movement of the goods from Madras was an inci dent of the contract of sale
Counsel for the appellant contended that there was no privity between the Madras branch and the Bombay buyer but that the privity was only between the Madras branch and the Bombay branch
It was also said that the Bombay branch was an independent and separate entity and the direct contract was between the Bombay branch and the Bombay buyer and the Madras factory were not parties to the contract
The appellant has branches at different places
The appellant company is one entity and it carries on business at different branches
Branches have no independent and separate entity
Branches are different agencies
The contract of sale is between the appellant company and the Bombay buyer
The appellant in the present case sent the goods direct from the Madras branch factory to the Bombay buyer at Bhand up Bombay
The railway receipt was in the name of the Bombay branch to secure payment against delivery
There was no question of diverting the goods which were sent to the Bombay buyer
When the movement of goods from one State to another is an incident of the contract it is a sale in the course of inter State sale
It does not mater in which State the property in the goods passes
What is decisive is whether the sale is one which occasions the movement of goods from one State another
The inter State movement must be the result of a covenant express or implied in the contract of sale or an incident of the tract
It is not necessary that the sale must precede the inter State move ment in order that the sale may be deemed to have occasioned such movement
It is also not necesary for a sale to be deemed have taken place in the course of inter State trade or commerce that the covenant regarding inter State move ment must be specified in the contract itself
It will be enough if the movement is in pursuance and incidental to the contract of sale
When a branch of a company forward a buyer s order to the principal factory of the company and instructs them to despatch the goods direct to the buyer and the goods are sent to the buyer under those instructions it would not be a sale between factory and its branch  If there is a conceivable link between the movement of the goods and the buyer s contract and if in the course of inter State move ment the goods move
only to reach the buyer in satisfaction of his contract of purchase and such a nexus is otherwise inexplicable then the sale or purchase of the specific or ascertained goods ought to be deemed to have been taken place in the course of inter State trade or commerce as such a sale or purchase occasioned the movement of the goods from one State to another
The presence of an intermediary such as the seller s own representative or branch office who initiated the contract may not make the matter different
Such an interception by a 635 known person on behalf of the seller in the delivery State and such person s activities prior to or after the implemen tation of the contract may not alter the position
The steps taken from the beginning to the end by the Bombay branch in co ordination with the Madras factory show that the Bombay branch was merely acting as the intermediary between the Madras factory and the buyer and that it was the Madras factory which pursuant to the covenant in the contract of sale caused the movement of the goods from Madras to Bombay
The inter State movement of the goods was a result of the contract of sale and the fact that the contract emanated from correspondence which passed between the Bombay branch and the company could not make any differ ence
For the foregoing reasons the appeals are dismissed
The writ petitions are also dismissed
There will be no order as to costs
It will be open to the appellant to apply for refund if any if permissible at law
SR Appeals dismissed


Summary:
The appellant company having its registered office at Calcutta with branches at Bombay Delhi Lucknow has a principal factory Cum branch at Madras
The registered office and the various branches are registered as dealers both under the Central Sales Tax Act and the local Sales Tax Acts
The appellant company in respect of the assessment year 1965 66 did not include a sum of Rs 218854041 in its turnover in the return filed under the Central Sales Tax Act on the ground that the turnover represented sales out side the State of Madras
The said sale related to a Bombay buyer who placed the order with the Bombay branch of the appellant company after it was informed by the said branch in consultation with the Madras branch factory that the price was for
Madras at the buyer s risk and that the delivery would be ex works Madras
The Bombay buyer was also informed by the Bombay branch of all the particulars condition of sale the fact that the goods would be manufac tured at the Madras branch factory and would be supplied by the Madras Branch etc
as advised by the Madras branch to the Bombay branch
The respondent treated it as inter State sale under section 3a of the Central Sales Tax Act and issued a notice of demand whereupon the appellant filed an applica tion under article 226 of the Constitution in the Madras High Court praying for a writ of Prohibition restraining the respondents from taxing andor including in the turnover for the purposes of assessment for the year 1965 66
The said petition was dismissed
Dismissing the appeals by certificate the Court
HELD 1 When the movement of the goods from one State to another is an incident of the contract it is a sale in the course of inter State sale
It does not matter in which State the property in the goods passes
What is decisive is whether the sale is one which occasioned the movement of goods from one State to another the inter State movement must be the result of a covenant express or implied in the contract of sate or an incident of the contract
It is not necessary that the sale must precede the inter State move ment in order that the sale may be deemed to have occasioned such movement
It is also not necessary for a sale to be deemed to have taken place in the course of inter State trade or commerce thatthe covenant regarding inter State movement must be specified in the contract itself
It will be enough if the movement is in pursuance of 2nd incidental to the contract of sale
634D E 2 Branches have no independent and separate entity
Branches are different agencies
In the instant case the contract of sale is between the appellant company and the Bombay buyer
634C