Stock transfer versus inter-State sale: depot movement was not taxable where no prior binding contract compelled purchase.

Movement of goods from the manufacturing unit in Rajasthan to depots in Bihar was not treated as an inter-State sale because the Master Agreement and Bihar Liquor Policy did not create a binding obligation to purchase specified quantities. The Corporation had no minimum procurement obligation, supply depended on Orders for Supply issued from time to time, and delivery was linked to the validity of those orders. The arrangement was therefore a standing supply framework, while the earlier movement to depots was only to maintain stock for possible future demand. Central sales tax was not exigible on that movement, and the assessment and Tax Board order were unsustainable, with consequential refund relief following.

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Issues: Whether the movement of goods from the appellant's manufacturing unit in Rajasthan to its depots in Bihar was an inter-State sale liable to central sales tax, or merely a stock transfer not occasioned by any prior contract of sale.

Analysis: The dispositive question was whether the Master Agreement and the Bihar Liquor Policy created a binding obligation to purchase specified quantities of beer, or whether they merely regulated later supplies pursuant to Orders for Supply placed from time to time. The terms considered showed that the Corporation was under no obligation to procure minimum quantities, the quantity and timing of supply depended on the Orders for Supply, delivery was to be made within the validity period of such orders, and the arrangement did not compel any inter-State movement pursuant to a concluded bargain. The supply against the Orders for Supply was treated as an agreement to sell under Section 4(3) of the Sale of Goods Act, while the earlier movement from Rajasthan to the Bihar depots was undertaken only to maintain stock and meet possible future demand. On that basis, the Master Agreement was held to be akin to a standing arrangement and not an agreement to sell.

Conclusion: The movement of goods to the Bihar depots was not occasioned by any prior contract of sale and was only a stock transfer; central sales tax was therefore not exigible on that movement.

Final Conclusion: The assessment and the Rajasthan Tax Board order could not be sustained, and the appellant was entitled to the consequential refund relief granted by the Tribunal.

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