JUDGMENT Rajes Kumar, J.
1. These are three revisions filed by the Commissioner of Sales Tax against the order of the Tribunal dated February 5, 1991 relating to the assessment years 1969-70, 1970-71 and 1971-72 under the Central Sales Tax Act, 1956.
2. The brief facts of the case are that the dealer-opposite party was carrying on business of manufacture and sale of kattha and cutch at Bareilly. The dealer had a sale depot at Calcutta. Dealer had appointed M/s. Kedia Brothers, Calcutta, as a sole distributor for West Bengal, Orissa. During all the aforesaid years it has been stated that kattha and cutch have been dispatched to the depot by way of stock transfer. Assessing authority has treated the stock transfer of kattha and cutch as inter-State sale. Dealer filed appeal before the Deputy Commissioner (Appeals) Sales Tax, Bareilly, which was rejected. Dealer filed second appeals before the Tribunal which were allowed in part. Before the Tribunal dealer had accepted the stock transfer of cutch as inter-State sale and also admitted the liability of tax thereon. Tribunal has levied the tax on the turnover of cutch which has been accepted as inter-State sale. Tribunal however, has accepted the plea of the dealer with regard to the stock transfer of kattha and deleted the tax assessed by the assessing authority. Being aggrieved by the order of Tribunal, the Commissioner of Sales Tax filed the present revisions.
3. I have heard learned Standing Counsel and Sri Bharat Ji Agrawal, Senior Advocate appearing on behalf of the opposite party.
4. The contention of learned Standing Counsel is that the assessing authority has found that the dealer had entered into an agreement with M/s. Kedia Brothers, Calcutta, appointing it as a sole distributor (stockist) for West Bengal, Orissa. Under the agreement M/s. Kedia Brothers gave written order for supply of the goods and in pursuance of the purchase order the goods had been dispatched and the delivery of goods had been taken by it. Goods were sent by railway and the freight was borne by company. The charge in the bill was f. o. r. destination and on the receipt of purchase order, the goods were supplied from Bareilly. It has been observed by the assessing authority that M/s. R.R. Grender Aurtho Knott the managing agent of the company was receiving the order from stockist and was giving the instructions for the dispatch of the goods. Bareilly office had prepared the builty in the name of M/s. R.R. Grender Aurtho Knott or in the name of self which was endorsed in favour of M/s. Kedia Brothers. It has also been observed that in the order given by M/s. R.R. Grender Aurtho Knott it was specifically stated that the goods had to be dispatched to M/s. Kedia Brothers or at the desired destination. It has been observed that during the assessment proceedings on November 29, 1973 it has been accepted that the managing agent at the head office endorsed the R.R. in favour of M/s. Kedia Brothers and in the stock transfer document it was mentioned that R.R. was being sent to M/s. R.R. Grender Aurtho Knott for endorsement and delivery to M/s. Kedia Brothers for example the invoice No. 260 and R.R. No. 5015, dated September 29, 1968 was referred. It has also been observed that goods were dispatched from Bareilly to M/s Kedia Brothers, head office and a man named Budh Ram Sharma had inspected the goods. Assessing authority had also referred one letter No. 4.2.24, dated July 29, 1979 which was addressed to M/s. Kedia Brothers in which it was stated that "the following goods of cutch are ready for dispatch. We had already informed to your representative at Bareilly Sri Budh Ram Sharma. We shall be pleased if you will arrange the delivery in the above cases at the earliest position". On the above fact it has been inferred that the goods have been dispatched from Bareilly factory in pursuance of the prior contract of sale to M/s. Kedia Brothers as inter-State sale. Before assessing authority, an affidavit of Sri Satish Kumar Kedia partner of M/s. Kedia Brothers, Calcutta, was filed in which it was averred that they had taken the delivery of the goods from Calcutta godown and they were purchasing the goods from Calcutta office and payment also made to Calcutta office. The assessing authority then observed that in affidavit M/s. Kedia Brothers had not disputed that they had not given orders to the head office, Calcutta and to the managing agent. The assessing authority observed that even if it is assumed that the delivery of the goods had been taken from Calcutta head office it did not make any difference and accordingly the alleged stock transfer of Rs. 13,24,360 was treated as inter-State sale for the assessment year 1969-70. Likewise for the assessment year 1970-71 the stock transfer for Rs. 10,64,780 was treated as inter-State sale and for the assessment year 1971-72 the alleged stock transfer of Rs. 10,64,789.90 was treated as the inter-State sale. The assessing authority in the assessment year 1970-71 had also referred statement of Sri R. P. Saxena, authorised representative in which it was stated as follows:
M/s. Kedia Brothers hamare Calcutta, Orissa tatha Jamshedpur mei vikri karne ke lie stockist hai. Wah apna order B. M. & Company tatha Calcutta Mukhyalya ko dete hai. Mukhyalya nirdesh Bareilly Bheita Hai. Kabhi-kabhi nirdeshon me yeh bhi spast kiya jata hai ki yah kattha tatha kaccha kis account yani Calcutta, Orissa ya Jamshedpur me kahan ke liye mangaya ja raha hai. Yahan se builty self ki banai jati hai ise kabhi G.M. & Company ya Calcutta head office dwara party ko endorse kar diya jata hai, kabhi swayam bhi chhudaya jata hai.
5. The statement of Sri Kumar Swami representative of the company dated November 29, 1973 given during the assessment year 1969-70 was also referred as follows:
Ham R.R. IWP Company Ltd., ke nam se banai gayee hai tatha vahi M/s. Kedia Brothers ko endorsed ki gayee hai.
6. The first appellate authority on the basis of the material referred in the assessment order also held that the stock transfer was inter-State sale. Learned Standing Counsel stated that the mode of sending the goods in the case of cutch and kattha was same. The dealer has accepted the stock transfer of cutch as inter-State sale and accordingly the Tribunal has treated the stock transfer of Cutch as inter-State sale but without any valid reason treated the alleged dispatch of kattha as a stock transfer. Learned Standing Counsel submitted that the material relied upon by the assessing authority and by the first appellate authority has not been considered by the Tribunal and without any basis the Tribunal has observed on the basis of table furnished by the dealer that the goods had first reached to the managing agent at Calcutta depot and thereafter, on the receipt of the supply order, which was received later on, the goods were supplied to M/s. Kedia Brothers, and as such, the goods did not move in pursuance of a contract of sale from factory. Learned Standing Counsel has submitted that the Tribunal even after accepting that the goods R. R. were endorsed in favour of M/s. Kedia Brothers has accepted the plea of the dealer that such transaction was not liable to tax for the year under consideration because amendment was made under Section 9 of the Central Sales Tax Act, 1956 with effect from September 3, 1976 by Act No. 103 of 1976 while the cases relates to the prior period. Learned Standing Counsel submitted that Tribunal has erred in holding so, because the amendment by Act No. 103 of 1976, dated September 7, 1976 was not relevant to the issue involved inasmuch as for the year under consideration as per the provision which existed, that State had a right to levy the tax from where the movement of goods started and since the movement of goods started from Bareilly, therefore, the State of U.P. had a right to levy the tax on such transaction treating it as inter-State sale.
7. In reply to the submission of learned Standing Counsel, Sri Bharat Ji Agrawal, learned Senior Counsel for the dealer submitted that so far as the transaction of kutch is concerned there is no dispute because the Tribunal has treated the claimed stock transfer as inter-State sale. He submitted that there was two nature of transactions one in which the goods were dispatched to the Head Office and thereafter on the receipt of the order the goods were delivered to M/s Kedia Brothers and another nature of the transaction was where the R.R. was made in the name of the managing agent or in the name of the self and were subsequently endorsed in favour of M/s. Kedia Brothers. He submitted so far as the first nature of the transaction is concerned it was stock transfer and so far as the second nature of transaction is concerned which was by way of endorsement of R.R. in favour of M/s. Kedia Brothers, it was inter-State sale. He however, fairly submitted that the view of the Tribunal that the transaction in which the R.R. was endorsed in favour of M/s. Kedia Brothers was not liable to tax for the year under consideration is wrong. He fairly submitted that the amendment in Section 9 by Act No. 103 of 1976, with effect from September 7, 1976 is not relevant to the issue involved and during the relevant years, the State from where the movement of goods started had right to levy the tax.
8. I have perused the order of the Tribunal and authority below.
Section 3 of the Central Sales Tax Act, 1956 reads as follows:
3. When is a sale or purchase of goods said to take place in the course of inter-State trade or commerce.--A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase,-
(a) occasions the movement of goods from one State to another; or
(b) is effected by a transfer of documents of title to the goods during their movement from one State to another.
9. In the case of English Electric Company of India Ltd. v. Deputy Commercial Tax Officer reported in [1976] 38 STC 475 the honourable Supreme Court has held (page 479):
...When the movement of goods from one State to another is an incident of the contract it is a sale in the course of inter-State sale. It does not matter in which State the property in the goods passes. What is decisive is whether the sale is one which occasions the movement of goods from one State to another. The inter-State movement must be the result of a covenant, express or implied, in the contract of sale or an incident of the contract. It is not necessary that the sale must precede the inter-State movement in order that the sale may be deemed to have occasioned such movement. It is also not necessary for a sale to be deemed to have taken place in the course of inter-State trade or commerce, that the covenant regarding inter-State movement must be specified in the contract itself. It will be enough if the movement is in pursuance of and incidental to the contract of sale.
When a branch of a company forwards a buyer's order to the principal factory of the company and instructs them to despatch the goods direct to the buyer and the goods are sent to the buyer under those instructions it would not be a sale between the factory and its branch. If there is a conceivable link between the movement of the goods and the buyer's contract, and if in the course of inter-State movement the goods move only to reach the buyer in satisfaction of his contract of purchase and such a nexus is otherwise inexplicable, then the sale or purchase of the specific or ascertained goods ought to be deemed to have taken place in the course of inter-State trade or commerce as such a sale or purchase occasioned the movement of the goods from one State to another. The presence of an intermediary such as the seller's own representative or branch office, who initiated the contract may not make the matter different. Such an interception by a known person on behalf of the seller in the delivery State and such person's activities prior to or after the implementation of the contract may not alter the position.
10. In the case of Sahney Steel & Press Works Ltd. v. Commercial Tax Officer reported in [1985] 60 STC 301 : [1986] UPTC 105 the honourable Supreme Court held as follows (page 305 of STC):
...We are unable to agree. Even if, as in the present case, the buyer places an order with the branch office and the branch office communicates the terms and specifications of the orders to the registered office and the branch office itself is concerned with the sales despatching, billing and receiving of the sale price, the conclusion must be that the order placed by the buyer is an order placed with the company, and for the purpose of fulfilling that order the manufactured goods commence their journey from the registered office within the State of Andhra Pradesh to the branch office outside the State for delivery of the goods to the buyer. We must not forget that both the registered office and the branch office are offices of the same company, and what in effect does take place is that the company from its registered office in Hyderabad takes the goods to its branch office outside the State and arranges to deliver them to the buyer. The registered office and the branch office do not possess separate juridical personalities. The question really is whether the movement of the goods from the registered office at Hyderabad is occasioned by the order placed by the buyer or is an incident of the contract. If it is so, as it appears no doubt to us, its movement from the very beginning from Hyderabad all the way until delivery is received by the buyer is an inter-State movement....
In the instant case, the goods were despatched by the branch office situated outside the State of Andhra Pradesh to the buyer and not by the registered office at Hyderabad. In our opinion, that makes no difference at all. The manufacture of the goods at the Hyderabad factory and their movement thereafter from Hyderabad to the branch office outside the State was an incident of the contract entered into with the buyer, for it was intended that the same goods should be delivered by the branch office to the buyer. There was no break in the movement of the goods. The branch office merely acted as a conduit through which the goods passed on their way to the buyer. It would have been a different matter if the particular goods had been despatched by the registered office at Hyderabad to the branch office outside the State for sale in the open market and without reference to any order placed by the buyer. In such a case if the goods are purchased from the branch office, it is not a sale under which the goods commenced their movement from Hyderabad. It is a sale where the goods moved merely from the branch office to the buyer. The movement of the goods from the registered office at Hyderabad to the branch office outside the State cannot be regarded as an incident of the sale made to the buyer.
11. Keeping in view the principle laid down by the honourable Supreme Court as stated above, in my opinion on the facts of the present case, the order of Tribunal is erroneous and illegal for the following reasons:
(A) The Tribunal has not drawn any distinction between the mode of stock transfer in the case of cutch and in the case of kattha still treated the transfer of cutch as inter-State sale and kattha as stock transfer. I see no reason for drawing any such distinction.
(B) It is not correct that there were two nature of transactions (i) in which the goods had been dispatched to the head office and thereafter on the receipt of the orders, the goods had been supplied to M/s. Kedia Brothers, (ii) R.R. were prepared in the name of managing agent or the self and subsequently it was endorsed in favour of M/s. Kedia Brothers.
Assessment order shows there were only second nature of transactions and not first.
(C) The findings of the Tribunal that the goods had been first received at Calcutta depot and thereafter on the basis of the subsequent receipt of the supply order, the sale was made to M/s. Kedia Brothers is without any basis and perverse. The table which has been made basis for coming to the conclusion does not prove such fact.
(D) The assessing authority in its assessment order has referred the statement of Sri Saxena in which he has admitted the receipt of the orders and the despatch of goods to M/s. Kedia Brothers in pursuance of the said order. He has also admitted that R.R. was made in the name of managing agent and self which was subsequently endorsed in favour of the M/s. Kedia Brothers.
(E) Assessing authority has referred the instructions given in Invoice No. 160, dated September 19, 1968 that the R.R. was being sent to M/s. R.R. Grinder Aurtho Knott, Calcutta, for endorsement and delivery to M/s. Kedia Brothers, stockist.
(F) Assessing authority has also considered the affidavit of Sri Satish Kumar Kedia and had stated that in the affidavit M/s. Kedia Brothers had not disputed that they have not given orders to the Head Office, Calcutta, and to its managing agent.
(G) Tribunal has wrongly held that the transaction which R.R. was endorsed in favour of M/s. Kedia Brothers was not liable to tax in the year under consideration. Since amendment in Section 9 by Act No. 103 of 1976 was with effect from September 7, 1996. It is stated that Amendment in Section 9 by Act No. 103 of 1976 has no relevance to the issue involved inasmuch as in the years under consideration State from which the movement of goods started had a jurisdiction to levy tax. Thus State of U.P. from where the movement of goods started had a jurisdiction to levy tax.
12. The fact as found by the authority below which are referred above and which could not be controverted, namely, that M/s. Kedia Brothers, the sole distributors given the orders through the managing agent and managing agent passed on the orders to the company and on the basis of such orders the goods had been dispatched, in which R.R. was made either in the name of managing agent or in the name of self and are subsequently endorsed in favour of M/s. Kedia Brothers clearly establishes the conceivable link between the movement of goods from Bareilly and buyers order and movement of goods to outside the State of U.P. in pursuance of the prior contract of sale and thus those transactions were inter-State sale.
13. In the result, all the revisions are allowed. Order of Tribunal dated February 5, 1991 is set aside.