Inter-State sale test: goods despatched under customer contracts retain their tax character despite branch-level delivery and collection handling.

Goods identified to specific customer contracts, appropriated at the factory, and despatched from one State to another pursuant to those contracts were treated as moving in the course of inter-State trade. The fact that the receiving branch accepted orders, issued invoices, handled delivery, and collected payment did not sever the contractual link or convert the movement into a branch transfer. The transaction therefore satisfied the legal test for an inter-State sale, and the turnover was not liable to tax under the Tamil Nadu General Sales Tax Act, 1959.

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Issues: Whether the turnover from sale of crown corks was part of inter-State sales and therefore not taxable under the Tamil Nadu General Sales Tax Act, 1959.

Analysis: The turnover related to supplies made against identified customer contracts, with the Calcutta office accepting orders, raising invoices, and despatching goods in packages marked for the specific customers. The goods were appropriated at the factory and their movement from Calcutta to Madras was not an independent branch transfer but a movement occasioned by the contract of sale and necessary for its ance. The fact that the Madras branch handled delivery and collections did not break the link between the contract and the movement of goods. The transaction therefore satisfied the legal test of a sale in the course of inter-State trade.

Conclusion: The turnover was held to be inter-State sales and was not exigible to tax under the Tamil Nadu General Sales Tax Act, 1959.

Ratio Decidendi: Where goods are identified, appropriated, and despatched pursuant to a customer contract, and their movement from one State to another is the necessary incident of that contract, the sale is an inter-State sale under section 3(a) of the Central Sales Tax Act.

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