Case: Union Of India &amp; Anr Vs. K. G. Khosla &amp; Co. (P) Ltd. &amp; Others

the Court declined to do so. In a recent decision of this Court in Oil India Ltd.v. Superintendent of Taxes and others1976 (3) SCR 779 it was observed by Mathew, J., who spoke for the Court, that : (1) a sale which occasions movement of goods from one State to another is a sale in the course of inter-State trade, no matter in which State the property in the goods passes; (2) it is not necessary that the sale must precede the inter-State movement in order that the sale may be deemed to have occasioned such movement: and (3) it is also not necessary for a sale to be deemed to have taken place in the course of inter-State trade or commerce, that the covenant regarding inter-State movement must be specified in the contract itself. It would be enoueh if the movement was in pursuance of and incidental to the contact of sale, (page 801). The learned Judge added that it was held in a number of cases by the Supreme Court that if the movement of goods from one State to another is the result of a covenant or an incident of the contract of sale, then the sale is an inter-State sale. 14. The decision in Tata Engineering & Locomotive Co. Limited v.The Assistant Commissioner of Commercial Taxes and Another 1970 (3) SCR 862 on which the Union of India relies, procceeds on a different consideration and is distinguishable. The appellant therein carried on the business of manufacturing trucks in Jamshedpur in the State of Bihar. The sales office of the appellant in Bombay used to instruct the Jamshedpur factory to transfer stocks of vehicles to the stockyards in various States after taking into account the production schedule and requirement of customers in different States. The stocks available in the stockyards were distributed from time to time to dealers. The transfer of the vehicles from the factory to the various stockyards was a continuous process and was not related to the requirement of any particular customer. It was the stockyard in charge who appropriated the reouired number of vehicles to the contract of sale out of the stocks available with him. Until such appropriation of vehicles was made, it was open to company to allot any vehicle to any purchaser or to transfer the vehicles from the stockyard in one State to a stockyard in another State. At page 870 of the report, a statement occurs in the judg-ment of Grover J., that it was not possible to comprehend how in the above situation it could be held that ?the movement of the vehicles from the works to the stockvards was occasioned by and covenant or incident of the contract of sale.? This statement is relied upon by the Union of India in support of its contention that the contract of sale must itself provide for the movement of goods from one State to another. We are unable to read any such implication in the observation cited above. At page 866 of the report, after referring to certain decisions) the Court observed that the principle admits of no doubt, according to the decisions of this Court, that the movement of goods ?must be the result of a covenant or incident of the contract of sale.? 15. This decision may be usefully contrasted with another decision bet-ween the same parties, which is reported in State of Bihar and Anr.v. Tata Engineering and Locomotive Co. Ltd.1971 (2) SCR 849. In that case the turnover in dispute related to the sales made by the company to its dealers of trucks for being sold in the territories assigned to them under the dealership agreements. Each dealer was assigned an exclusive territory and under the agreement between the dealers and the company, they had to place their indents, pay the price of the goods to be purchased and obtain delivery orders from the Bombay office of the company. In pursuance of such delivery orders trucks used to be delivered in the State of Bihar to be taken over to the territories as-signed to the dealers. Since under the terms of the contracts of sale the pur-chasers were required to remove the goods from the State of Bihar to other States, no question arose in the case whether it was or was not necessary for a sale to be regarded as an inter-State sale that the contract must itself provide for the movement of goods from one State to another. If a contract of sale contains a stipulation for such movement, the sale would, of course, be an inter-State sale. But it can also be an inter-State sale, even if, the contract of sale does not itself provide for the movement of goods from one State to another but such movement is the result of a covenant in the contract of sale or is an incident of that contract. 16. The decisions to which we have referred above show that in order that a sale may be regarded as an inter-State sale, it is immaterial whether the pro-perty in the goods passes in one State or another. The question as regards the na-ture of the sale, that is, whether it is an inter-State sale or an inter-State sale, does not depend upon the circumstances as to in which State the property in the goods passes. It may pass in either State and yet the sale can be an inter-State sale. 17. The High Court was, therefore, right in holding that the sales in question are inter-State sales and that the turnover of sales is assessable to sales tax under the Central Sales Tax Act, 1956 at the instance of the Sales Tax auth-orities at Faridabad. The amount of tax which respondent has wrongly paid to the Sales Tax authorities at Delhi on such inter-State sales from 1.4.1961 to 30.9.1965 shall have to be transferred by the Sales Tax authorities at Delhi to the Sales Tax authorities at Faridabad as directed by the High Court.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]There is a proviso to Section 9 (1) to which it is unnecessary to refer since it has no applicationIt is only if a sale occasions the movement of goods from one State to another that it can be deemed to have taken place in the course of inter-State trade or commerce within the meaning of Section 3 (a) of the Act. Clause (b) of Section 3 is not relevant for our purpose12. It is clear from these averments that goods were manufactured by respondent 1 in its factory at Faridabad, Haryana, in pursuance of specific orders received by its head office at Delhi. The contracts of sales were made at Delhi and in pursuance of those contracts, goods were manufactured at Faridabad according to specifications mentioned in the contracts. This there-fore, is not that type of case in which goods are manufactured in the general course of business for being sold as and when offers are received by the manu-facturer for their purchase. Contracts of sales were finalised in the instant case at Delhi and specific goods were manufactured at Faridabad in pursuance of those contracts. Those were ?future goods? within the meaning of Section 2 (6) of the Sale of Goods Act, 193013. It is true that in the instant case the contracts of sales did not require or provide that goods should be moved from Faridabad to Delhi. But it is not true to say that for the purposes of Section 3(a) of the Act it is necessary that the contract of sale must itself provide for and cause the movement of goods or that the move-ment of goods must be occasioned specifically in accordance with the terms of the contract of sale16. The decisions to which we have referred above show that in order that a sale may be regarded as an inter-State sale, it is immaterial whether the pro-perty in the goods passes in one State or another. The question as regards the na-ture of the sale, that is, whether it is an inter-State sale or an inter-State sale, does not depend upon the circumstances as to in which State the property in the goods passes. It may pass in either State and yet the sale can be an inter-State sale17. The High Court was, therefore, right in holding that the sales in question are inter-State sales and that the turnover of sales is assessable to sales tax under the Central Sales Tax Act, 1956 at the instance of the Sales Tax auth-orities at Faridabad. The amount of tax which respondent has wrongly paid to the Sales Tax authorities at Delhi on such inter-State sales from 1.4.1961 to 30.9.1965 shall have to be transferred by the Sales Tax authorities at Delhi to the Sales Tax authorities at Faridabad as directed by the High Court.