Factory dispatches to out-of-State branch godowns treated as inter-State sales under CST s.3(a), not stock transfers; appeal dismissed.

Whether dispatches from the assessee's factory to its own out-of-State godowns/branch offices constituted inter-State sales under s. 3(a) CST Act or mere branch/stock transfers was determined by examining whether the movement of goods was pursuant to, or a necessary incident of, a contract of sale. The SC held that correspondence styled as "allocations/forecasts" was, on facts, composite indents specifying model, quantity and delivery destinations, forming firm orders under a five-year sales arrangement; branch offices functioned only as conduits. The assessing authority's document-based finding, affirmed by the State Tax Tribunal, was not perverse. The transactions were held to be inter-State sales exigible to CST, and the appeal was dismissed.

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Issues: Whether the disputed turnover for the assessment year 1981-82 arose from sales in the course of inter-State trade or commerce within the meaning of section 3(a) of the Central Sales Tax Act, 1956, or whether the movements were mere branch (stock) transfers not exigible to tax under the Central Act.

Analysis: The court analysed section 3(a) which deems a sale to take place in the course of inter-State trade if it occasions movement of goods from one State to another, and the related statutory scheme including sections 6, 9 and 6A of the Central Sales Tax Act, 1956. Authorities were examined establishing that inter-State movement need not be expressly stipulated in a contract; it suffices if the movement is the result of, or incidental to, the contract of sale. The agreement between the parties (a five-year sales/distribution contract) and the contemporaneous correspondence (monthly indents/letters of allocation) were considered together. The agreement obliged supply to purchaser or its nominees and allowed deliveries to the assessee's godowns at purchaser's option; purchasers' divisional offices placed indents and confirmed receipts; invoices were raised in favour of purchaser's constituent units; and stock movements from the factory to out-of-State godowns followed the contractual arrangement and indents. The assessing authority and appellate fact-finding tribunal considered voluminous documents and concluded that the movements were in pursuance of the sales agreement and indents (not mere forecasts), creating the requisite nexus between contract and inter-State movement. The court held that these findings of fact were not perverse and applied settled principles that a sale or agreement to sell which causes or results in movement of goods across States falls within section 3(a).

Conclusion: The transactions in question are inter-State sales within the meaning of section 3(a) of the Central Sales Tax Act, 1956; the assessee's appeal is dismissed and the assessment treating the disputed turnover as exigible to tax under the Central Act is upheld (decision in favour of the Revenue).

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