Inter-State sale by contractual movement upheld where supply order fixed essential terms and agents only handled delivery convenience.

A supply order containing essential terms of supply, delivery, freight, insurance and payment created a binding contract of sale, not a mere rate contract triggered only by collieries' indents. Goods moved from the Rourkela unit to out-of-State agents pursuant to that contract, and the agents' custody for storage or delivery convenience did not break the nexus with the original sale. The movement was therefore an inter-State sale under section 3(a) of the Central Sales Tax Act, 1956, and the sales were completed in performance of the contract at the Rourkela exit point, leaving them taxable in Orissa.

---

---

Issues: (i) Whether the supply order issued by CIL and the surrounding circumstances showed a contract of sale, or only a purchase and sale triggered on indents placed by the collieries; (ii) Whether the movement of goods from the assessee's Rourkela unit to agents in other States was in the course of inter-State sale under section 3(a) of the Central Sales Tax Act, 1956; (iii) Whether the sales were completed only at the agents' magazines so that the State of Orissa could not levy tax on the transactions.

Issue (i): Whether the supply order issued by CIL and the surrounding circumstances showed a contract of sale, or only a purchase and sale triggered on indents placed by the collieries.

Analysis: The purchase order, read with the quotation, specified the goods, rates, quantities, delivery arrangement, freight, transit insurance, and payment mechanism. The indents placed by the collieries operated only as a mode of taking delivery under the existing supply arrangement. The materials showed that the order was not a mere rate contract lacking enforceable supply obligations, but a binding contract for supply of goods.

Conclusion: The Tribunal was not correct in treating the collieries' indents as the point at which sale first arose; the transaction was founded on a contract of sale.

Issue (ii): Whether the movement of goods from the assessee's Rourkela unit to agents in other States was in the course of inter-State sale under section 3(a) of the Central Sales Tax Act, 1956.

Analysis: The goods moved pursuant to the supply order and were meant for the identified collieries from the outset. The consignment agents merely intercepted the movement for storage and delivery convenience. The payment of freight and transit insurance by CIL, the reference to the supply order in invoices, and the absence of any diversion to unrelated purchasers established a conceivable link between the contract and the movement of goods across State boundaries.

Conclusion: The movement constituted inter-State sales within section 3(a) of the Central Sales Tax Act, 1956.

Issue (iii): Whether the sales were completed only at the agents' magazines so that the State of Orissa could not levy tax on the transactions.

Analysis: Since the movement from Rourkela was occasioned by the contract itself, the temporary custody of the goods with agents did not alter the character of the transactions. The sales were completed when the goods moved in performance of the contract, not when the collieries physically took delivery from the agents. The transactions therefore remained taxable in the originating State.

Conclusion: The sales took place at the exit point of the Rourkela unit and were taxable by the State of Orissa under the Central Sales Tax Act, 1956.

Final Conclusion: The references were answered against the assessee, the transactions were held to be inter-State sales, and the State's taxing power was upheld.

Ratio Decidendi: Where a supply order contains the essential terms of supply and the goods move from one State to another in performance of that order, the presence of an intermediary agent for storage or delivery does not break the inter-State character of the sale.

---