Inter-State sale test under CST: routed through branch depots, goods moved pursuant to pre-existing contractual orders.

Contemporaneous contract terms, correspondence and allocation letters showed that the goods were required in specified sizes, varieties and quantities for delivery at named destinations, and that movement from Hyderabad to branch offices occurred pursuant to pre-existing orders. Applying section 3(a) of the Central Sales Tax Act, 1956, the Court held that where movement of goods is occasioned by the contract of sale or incidental to it, the transaction is an inter-State sale even if delivery is routed through branch depots. The assessee's forecast or market-survey theory was rejected on the facts, and the Tribunal's finding that the turnover was inter-State sales rather than branch transfers was upheld.

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Issues: Whether the disputed turnover represented branch transfers or inter-State sales.

Analysis: The agreement between the manufacturer and the selling agent, read with the contemporaneous correspondence and allocation letters, showed that the goods were required in specified sizes, varieties and quantities for delivery at named destinations. The Tribunal found that the orders were acknowledged and complied with, that the alleged forecast or market-survey theory did not find place in the contract, and that the movement of goods from Hyderabad to the branches was undertaken in pursuance of the pre-existing orders. Applying the settled test under section 3(a) of the Central Sales Tax Act, 1956, the Court held that where the movement of goods is occasioned by the contract of sale or is incidental to it, the transaction is an inter-State sale even if delivery is routed through branch offices. The authorities relied upon by the assessee were distinguished on facts, while the decisions recognising inter-State movement arising from contractual obligation were treated as supporting the Revenue.

Conclusion: The disputed turnover was rightly treated as inter-State sales and not as branch transfers; the finding of the Tribunal was upheld.

Ratio Decidendi: Where contemporaneous contractual materials and correspondence establish that movement of goods to out-of-State destinations was made pursuant to pre-existing orders and in discharge of the contractual obligation, the transaction is an inter-State sale under section 3(a) of the Central Sales Tax Act, 1956 notwithstanding routing through branch depots.

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