Inter-State sale treatment turns on pre-existing contracts and timely despatch; concessional tax needs prescribed C forms.

Goods moved from the factory to the head office and then quickly to buyers in other States were held to be inter-State sales, because the surrounding circumstances showed the movement was occasioned by pre-existing contracts of sale rather than mere stock transfers. The absence of any meaningful intervening stock, the matching quantities transferred and despatched, and the immediate onward movement supported that conclusion, making the transactions exigible to tax. Separate sales in Delhi could not receive the concessional rate without production of the prescribed C forms, so the higher rate applied in the absence of proof that the purchasers were registered dealers.

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Issues: (i) Whether the movement of goods from the factory to the head office and onwards to purchasers in other States constituted inter-State sales exigible to tax. (ii) Whether sales effected at Delhi against concessional tax treatment could be assessed at the higher rate in the absence of C forms.

Issue (i): Whether the movement of goods from the factory to the head office and onwards to purchasers in other States constituted inter-State sales exigible to tax.

Analysis: The transaction pattern showed that the goods were transferred in the same quantities as received at the head office and were despatched almost immediately to buyers in other States, often on the same day or within a day or two. The circumstances, including the numerical correspondence between inward transfers and outward sales, absence of any stock apart from the disputed transactions, and the improbability of such despatches without pre-existing orders, established that the movement of goods was occasioned by contracts of sale already entered into at the head office. The goods were therefore not mere stock transfers in the ordinary course.

Conclusion: The movement of goods constituted inter-State sales and was exigible to tax.

Issue (ii): Whether sales effected at Delhi against concessional tax treatment could be assessed at the higher rate in the absence of C forms.

Analysis: The record showed that no C forms were produced before the Haryana sales tax authorities. In the absence of such forms, there was no proof that the sales were made to registered dealers so as to attract the concessional rate. The authorities were therefore justified in refusing the reduced rate and applying the higher rate.

Conclusion: The sales were taxable at 10 per cent and not at 3 per cent.

Final Conclusion: Both referred questions were decided against the assessee, and the reference was answered in favour of the revenue on all substantive issues.

Ratio Decidendi: Where the surrounding circumstances show that goods were moved pursuant to pre-existing sales contracts, the movement is attributable to the contract of sale and constitutes an inter-State sale; concessional tax treatment cannot be claimed without the prescribed C forms.

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