Inter-State sale requires movement of goods under the contract of sale; depot-based later sales do not attract tax.

Distribution arrangements for refrigerators were held to be mere frameworks for later sales, because they did not fix all quantities, prices were to be agreed from time to time, and sale and delivery were to occur in Delhi. The movement of goods from Faridabad to Delhi was not occasioned by any contract of sale, since the goods were first taken to the seller's Delhi office and godown, where orders, inspection, delivery and payment occurred. On that basis, the transactions were not inter-State sales under the Central Sales Tax Act and tax liability was not attracted.

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Issues: (i) Whether the distribution arrangements constituted contracts of sale or merely agreements for distribution of goods; and (ii) whether the movement of refrigerators from Faridabad to Delhi was occasioned by a contract of sale so as to attract liability as inter-State sales.

Issue (i): Whether the distribution arrangements constituted contracts of sale or merely agreements for distribution of goods.

Analysis: The agreements did not specify fixed quantities for all sales, and the prices were to be mutually agreed from time to time. The subsequent orders were placed only after the goods had reached Delhi, and the distribution arrangements operated as the framework within which separate sales were later concluded. The agreements also recorded that sale and delivery would take place in Delhi, which was inconsistent with treating the arrangements themselves as completed contracts of sale.

Conclusion: The distribution arrangements were merely agreements for distribution of goods and were not contracts of sale.

Issue (ii): Whether the movement of refrigerators from Faridabad to Delhi was occasioned by a contract of sale so as to attract liability as inter-State sales.

Analysis: For a sale to fall within inter-State trade, the movement of goods must be under and as a result of the contract of sale, with a direct nexus between the sale and the movement. Here, the goods were first taken to the assessee's Delhi office and godown, where the distributors placed orders, inspection took place, delivery was made, and price was received. The movement from Faridabad to Delhi was explained by the assessee's own storage and sales arrangement in Delhi, not by any prior contract of sale with the distributors. Any alleged appropriation at Faridabad was not established, and Section 23 of the Sale of Goods Act did not assist the department.

Conclusion: The movement was not occasioned by a contract of sale and the transactions were not inter-State sales.

Final Conclusion: The assessee was not liable to tax under the Central Sales Tax Act on these transactions, and the appeal succeeded.

Ratio Decidendi: A sale is an inter-State sale only when the movement of goods from one State to another is caused by, and is an integral part of, the contract of sale; where goods are first moved to the seller's own depot and sold there only on later orders, the prior movement is not occasioned by the contract of sale.

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