Inter-State sale test under CST hinges on movement occasioned by contract, not on where title passes.

Under section 3(a) of the Central Sales Tax Act, 1956, the decisive test is whether the movement of goods from one State to another is occasioned by the contract of sale, not where property passes. Goods despatched from the Madras factory against indents from Andhra Pradesh officers, in quantities matching those indents, and supplied under an agreement requiring delivery from Madras, were held to move in direct pursuance of the contract. Inspection and acceptance at the destination, or invoices raised in the name of the Guntur office, did not convert the supplies into local sales. The turnover was therefore treated as inter-State sales and held taxable.

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Issues: Whether the turnover arising from supplies despatched from Tamil Nadu to Andhra Pradesh under the supply agreement constituted sales in the course of inter-State trade or commerce under section 3(a) of the Central Sales Tax Act, 1956, and was therefore liable to tax.

Analysis: The decisive test under section 3(a) is not the place where property in the goods passes, but whether the movement of goods from one State to another is occasioned by the contract of sale or is a covenant or incident of that contract. The goods in question were despatched from the petitioner's Madras factory against indents placed by officers of the Andhra Pradesh Government, the quantities sent matched the indents, and the goods were accepted at the destination after inspection. The agreement itself required supply from the Madras factory, and the movement of goods was thus directly referable to the contract. The fact that the invoices were prepared in the name of the petitioner's office at Guntur or that inspection and acceptance occurred at the destination did not convert the transaction into a local sale. The authorities relied on by the petitioner did not assist because, on the admitted facts, the movement of goods was in pursuance of the contract and the ultimate sales were completed in the destination State.

Conclusion: The turnover represented inter-State sales falling within section 3(a) of the Central Sales Tax Act, 1956, and was exigible to tax.

Ratio Decidendi: For section 3(a) of the Central Sales Tax Act, 1956, the governing test is whether the movement of goods from one State to another is occasioned by the contract of sale or its incident, and not where title passes.

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