Consignment versus inter-State sale turns on the governing agreement and contemporaneous evidence for the relevant period.

For post-agreement transactions, the nature of movement of goods must be determined from the governing agreement and contemporaneous evidence for the relevant period; pre-period material cannot by itself convert a consignment arrangement into an inter-State sale. Applying Section 3(a) and Section 6A of the Central Sales Tax Act, the agreement showed that the goods were consigned to agents, remained the principal's property until sale, and were to be treated as consignment transactions, so the turnover was not inter-State sales. Once that characterisation failed, the higher penalty resting on it also fell, while the reduced penalty sustained by the first appellate authority remained undisturbed.

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Issues: (i) Whether the turnover of Rs. 1,51,28,219/- for the period after 01.08.1995 represented inter-State sales or consignment sales; (ii) Whether the penalty levied on that turnover was sustainable.

Issue (i): Whether the turnover of Rs. 1,51,28,219/- for the period after 01.08.1995 represented inter-State sales or consignment sales.

Analysis: For an inter-State sale under Section 3(a) of the Central Sales Tax Act, 1956, the movement of goods must be occasioned by a sale or prior contract of sale. Where the dealer claims that the movement was otherwise than by sale, the burden under Section 6A of the Central Sales Tax Act, 1956 lies on the dealer, and the declaration in Form F is relevant to discharge that burden. The Agreement dated 01.08.1995 governed the post-01.08.1995 transactions and showed that the goods were consigned to agents, remained the property of the principal until sale, and were to be accounted for as consignment transactions. The Tribunal erred in extrapolating pre-01.08.1995 material and in drawing conclusions from presumption alone for the later period.

Conclusion: The turnover of Rs. 1,51,28,219/- was held to be consignment sale and not inter-State sale, in favour of the assessee.

Issue (ii): Whether the penalty levied on that turnover was sustainable.

Analysis: The penalty was restored by the Tribunal only because it had restored the assessment treating the turnover as inter-State sales. Once that conclusion was set aside, the basis for restoring the higher penalty disappeared. The reduced penalty fixed by the first appellate authority rested on its own reasoning and was not shown to be perverse.

Conclusion: The higher penalty was not sustainable, and the reduced penalty was liable to stand.

Final Conclusion: The assessee succeeded on the main characterisation issue, but the reduced penalty order remained undisturbed, so the appeal succeeded only in part.

Ratio Decidendi: For post-agreement transactions, the nature of movement of goods must be determined from the governing agreement and contemporaneous evidence for the relevant period, and pre-period material cannot by itself convert a consignment arrangement into an inter-State sale.

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