Inter-State sale tax turns on contract-caused movement; declaration-form rules were treated as directory, preserving exemption.

Inter-State sale tax liability arose only if the movement of beer from Bangalore to Ernakulam was occasioned by a contract of sale under section 3 of the Central Sales Tax Act; the record did not establish privity of contract between the assessee and the brewery, and the court declined to treat the intermediary as a mere buying agent, so the disputed turnover was not taxable as an inter-State sale. Non-production of declaration forms did not defeat the exemption claim because the relevant sales tax rules were treated as directory, not mandatory, and the point had not been raised before the authorities, so the exemption stood.

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Issues: (i) Whether the turnover from sales of beer to the assessee constituted the first sales in the State so as to attract sales tax as inter-State sales. (ii) Whether non-production or alleged non-compliance with declaration-form rules defeated the exemption claim.

Issue (i): Whether the turnover from sales of beer to the assessee constituted the first sales in the State so as to attract sales tax as inter-State sales.

Analysis: The liability depended on whether the movement of goods from Bangalore to Ernakulam was occasioned by a contract of sale within the meaning of section 3 of the Central Sales Tax Act. The terms of the distributorship arrangement showed that the brewery's invoices were raised in the name of McDowell & Co. Ltd., Shertallai, and the record did not establish privity of contract between the assessee and the United Breweries Ltd., Bangalore. The materials were insufficient to treat McDowell & Co. Ltd. as merely the assessee's buying agent, and the Court declined to infer that the assessee's purchases were inter-State sales on that basis alone.

Conclusion: The turnover from the sales received by the assessee was not liable to sales tax as an inter-State sale, and this issue was decided in favour of the assessee.

Issue (ii): Whether non-production or alleged non-compliance with declaration-form rules defeated the exemption claim.

Analysis: The revenue relied on the relevant sales tax rules to contend that declaration forms were required to support the exemption. The Court held that the rules were directory and not mandatory in light of the governing precedent, and also noted that the point had not been taken before the authorities when the matter was heard.

Conclusion: Non-compliance with the declaration-form rules did not defeat the exemption claim, and this issue was decided in favour of the assessee.

Final Conclusion: The appeal failed, and the assessment to tax on the disputed turnover was not sustained.

Ratio Decidendi: A sale is taxable as an inter-State sale only when the movement of goods from one State to another is occasioned by a contract of sale, and in the absence of proved privity of contract or a showing that the purchaser's arrangement itself caused the movement, tax liability cannot be fastened on the assessee; declaration-form rules of this kind are directory unless the statute clearly makes them mandatory.

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