Inter-State sale by pre-existing orders: branch dispatches linked to contracts were taxable, not mere branch transfers.

Goods moved from Hyderabad to branches and then delivered to a buyer were treated as inter-State sales because the movement was linked to pre-existing orders and contractual stipulations for identified quantities and varieties. The agreement, correspondence and allocation letters showed that the goods were manufactured and dispatched pursuant to specific requirements, while the branches merely facilitated delivery. The Court applied the settled test that a transaction is an inter-State sale when movement of goods from one State to another is occasioned by the contract of sale, and distinguished cases involving only forecasts or no firm orders. The disputed turnover was therefore taxable as inter-State sales, not branch transfers.

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Issues: Whether the turnover arising from dispatches of fans from Hyderabad to the branches and delivery to Usha Sales Ltd. constituted branch transfers or inter-State sales liable to tax.

Analysis: The decisive test was whether the movement of goods from one State to another was occasioned by, or incidental to, a pre-existing contract of sale. The agreement between the parties, read with the correspondence and letters of allocation, showed that specific quantities and varieties of goods were ordered, acknowledged, manufactured and moved to identified destinations. The Court treated the so-called forecasts as unsupported by the contract, found that the price was realised at the head office, and held that the branches merely facilitated delivery. Applying the settled principle that an inter-State sale exists when the movement of goods is integrally linked with the contract of sale, the Court distinguished cases where there were no firm orders and relied on authorities holding that movement pursuant to orders and specifications satisfies section 3(a).

Conclusion: The disputed turnover was held to be inter-State sales and not branch transfers, and the revision failed.

Ratio Decidendi: Where goods are moved from one State to another in pursuance of pre-existing orders or contractual stipulations for specified goods, the movement is an incident of the contract of sale and the transaction is an inter-State sale under section 3(a) of the Central Sales Tax Act, 1956.

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