JUDGMENT [ENTITY], J.
1. These tax revision cases arise out of a common order of the Sales Tax Appellate Tribunal, Trivandrum, and although the petitioners are different, the same question is involved in both the revision cases.
2. The petitioners are dealers in coir-yarn residing at Parur in the erstwhile Travancore-Cochin State. They effected sales of coir-yarn to certain firms in Fort Cochin which was then part of Madras State. [CASE NUMBER] relates to the assessment year 1955-56 and [CASE NUMBER] relates to the assessment year 1954-55. When proceedings were initiated for levy of tax on the turnover relating to the sales to the firms in Fort Cochin, the assessee objected contending inter alia that the sales were in the course of inter-State trade exempt under [SECTION] of the [ACT] and no tax was exigible. This contention did not find favour with the assessing authority and tax was levied. The appeals filed by the petitioners before the Appellate Assistant Commissioner and the Sales Tax Appellate Tribunal were dismissed.
3. The contention raised for the petitioners is that the sales were in the course of inter-State trade and commerce, having been effected by transporting the goods from Travancore-Cochin State to Madras State in pursuance to prior contracts and that the sales are exempt under [SECTION] of the [ACT] as inter-State sales. As per a statement recorded on 27th October, 1964, the transactions were effected in the following manner : "The dealer used to go to the firms at Fort Cochin area and enter into written agreements with them to sell specified varieties of coir-yarn against samples shown to him and retained by the purchasing firms. The price per candy of coir will be fixed. The dealer then used to purchase coir from various manufacturers, transport the goods at his expense to the purchasing firms at Fort Cochin and when the goods arrived at Fort Cochin the dealer or his agent used to deliver the goods to the purchasers and receive an advance payment. After a week or two the coir will be dried, inspected and rehanked and its grade will be fixed. After final weighment and baling the invoice will be drawn and the balance due received." The Sales Tax Officer took the view that there was no prior contract of sale pursuant to which the goods have moved inter-State and hence the transaction is not exempt. The question that arises for consideration is whether the movement of the goods was incidental to the contract of sale and whether it has been occasioned by the said contract. The Supreme Court in [PRECEDENT], has laid down that the sale in the course of export predicated connection between the sale and export, the two activities being so integrated that the connection between the two cannot be voluntarily interrupted without a breach of the contract or the compulsion arising from the nature of the transaction. To occasion export there must exist such a bond between the contract of sale and the actual exportation, that each link is inextricably connected with the one immediately preceding it. The principle thus is that the sales to be exigible to tax under the Act must be shown to have occasioned the movement of the goods or articles from one State to another. The movement must be the result of a covenant or incident of the contract of sale.
4. The point which requires determination in these cases is whether the movement of the goods from Parur in Travancore-Cochin State to Fort Cochin in Madras State is occasioned by any covenant or incident of the contract of sale.
5. In [PRECEDENT], it was laid down by the Supreme Court that a sale occasions the movement of goods from one State to another when the movement is the result of a covenant or incident of the contract of sale. Before movement of goods from one State to another can be determined to be movement in the course of inter-State trade or commerce, what is required is to ascertain whether the cumulative effect of the circumstances in which movement of the goods begins from one State to another point to the movement having been occasioned by or the result of a contract of sale. In order that a sale may qualify for exemption under [SECTION] of the [ACT] as being a sale in the course of export, the sale must occasion the export. In other words, there should be a common intention of both the sellers and the buyers to export, there is an obligation to export, and there is an actual export. As has been explained in [PRECEDENT], the obligation to export may arise either by the terms of contract or from the nature of the transaction. According to the Supreme Court, the obligation may be the result of statutory provisions of a contract or from mutual understanding or agreement or even from any of the transactions which links the sale to export.
6. In [PRECEDENT] it was made clear that before a sale could be said to have occasioned the import it was not necessary that the sale should have preceded the import, and that all that was required was that the sale had occasioned the import. In the cases before us the goods were brought from the Travancore-Cochin State to the Madras State as a result of the contract of sale between the petitioners and the firms at Fort Cochin and we have no doubt that the movement was occasioned by the contracts of sale.
7. Counsel for the revenue contended that before the movement of goods from one State to another can be predicated as a movement in the course of inter-State trade or commerce, it must also be proved that there is no possibility of diverting the goods for any other purpose and that in this case the petitioners notwithstanding the contracts could have sold the goods to others. This contention does not appear to us to be of any substance. The facts in these cases show that the petitioners used to enter into written agreements with the firms at Fort Cochin agreeing to sell specified varieties of coir-yarn against samples shown and accepted. A copy of the printed agreement which has been extracted in the order of the Appellate Assistant Commissioner indicates that the petitioners have contracted to sell and deliver coir-yarn of the quality and on terms and conditions stated on the reverse of the form and it was after entering into such a contract that the goods were moved from Travancore-Cochin State to Madras. If after entering into such a contract the goods are diverted and not sold, it would amount to a breach of contract and penal consequences are bound to follow. Therefore, the movement of the goods was the direct result of the contract of sale, which was necessarily incidental to the sale, and the transaction, therefore, comes within the exemption to [SECTION] of the [ACT].
In the result, the revisions are allowed. But in the circumstances of the case we make no order as to costs.