Inter-State sale under contract: goods moved outside Delhi as part of the bargain, so ex-works delivery did not make the sales local.

Delivery of goods in Delhi to purchasing dealers did not make the sales local where the contract, read as a whole, required the dealers to move the goods to their allotted territories outside Delhi. The decisive test was whether inter-State movement was a contractual covenant and an incident of the sale, rather than a mere later arrangement. Exclusive territorial assignments, prescribed selling rates, stock and market reporting, and provisions dealing with transport and freight showed that movement outside Delhi formed part of the bargain. Delivery ex-works and storage in Delhi did not change the character of the transaction. The sales were therefore inter-State sales under section 3(a) of the Central Sales Tax Act, 1956.

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Issues: Whether delivery of goods in Delhi to purchasing dealers, who were distributors/stockists for assigned territories outside Delhi, kept the sales local or made them inter-State sales under section 3(a) of the Central Sales Tax Act, 1956.

Analysis: The decisive test was whether the contract obliged the purchasing dealers to remove the goods from Delhi to their assigned territories and whether such movement actually occurred. The agreement assigned exclusive territories outside Delhi, fixed selling rates, required monthly stock and market reports, and contemplated transport to the territory outside Delhi with liability for freight and central sales tax if transport was arranged by the seller. On a reading of the contract as a whole, the movement of goods outside Delhi was not incidental or extraneous but was part of the contractual covenant. The fact that delivery was taken ex-works and the goods were stored in Delhi did not alter the character of the transaction where the dealers were contractually bound to move the goods to the allotted territories.

Conclusion: The sales were inter-State sales and not local sales; the assessee's challenge failed.

Ratio Decidendi: Where a sale is made under a contract that, in substance, obliges the purchaser to move the goods from one State to another and the movement is an incident of the contract, the transaction is an inter-State sale under section 3(a) of the Central Sales Tax Act, 1956, even if delivery is taken ex-works in the selling State.

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