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PETITIONER: ENGLISH ELECTRIC COMPANY OF INDIA LTD.

       Vs.

RESPONDENT: THE DEPUTY COMMERCIAL TAX OFFICER & ORS.

DATE OF JUDGMENT21/09/1976

BENCH: RAY, A.N. (CJ) BENCH: RAY, A.N. (CJ) BEG, M. HAMEEDULLAH SHINGAL, P.N.

CITATION:  1977 AIR   19            1977 SCR  (1) 631  1976 SCC  (4) 460  CITATOR INFO :  R          1981 SC1604  (13,14)  F          1985 SC1754  (8)

ACT:             Sale--Contract  for sale of goods,  whether  inter-State         sale  or intra-State sale  ....  Ingredients--Central  Sales         Tax Act--Section 3(a).             Privity of contract--When a company has several branches         and  there  is a contract between the buyer and one  of  the         branches,  the contract of sale is between the  company  and         the buyer.

HEADNOTE:              The  appellant company having its registered  office  at         Calcutta,  with  branches at Bombay, Delhi, Lucknow,  has  a         principal  factory-Cum-branch  at  Madras.  The   registered         office  and the various branches are registered  as  dealers         both under the Central Sales Tax Act and the local Sales Tax         Acts.  The  appellant company in respect of  the  assessment         year  1965-66, did not include a sum of Rs. 21.88,540.41  in         its turnover in the return filed under the Central Sales Tax         Act  on the ground that the turnover represented sales  out-         side the State of Madras.  The said sale related to a Bombay         buyer  who  placed the order with the Bombay branch  of  the         appellant  company after it was informed by the said  branch         in  consultation  with the Madras branch  factory  that  the         price  was  f.o.r. Madras at the buyer’s risk and  that  the         delivery  would  be ex-works, Madras. The Bombay  buyer  was         also  informed by the Bombay branch of all the  particulars,         condition of sale, the fact that the goods would be manufac-         tured at the Madras branch factory and would be supplied  by         the  Madras Branch etc. as advised by the Madras  branch  to         the Bombay branch.  The respondent treated it as inter-State         sale under s. 3(a) of the Central Sales Tax Act and issued a         notice  of demand whereupon the appellant filed an  applica-         tion  under Art. 226 of the Constitution in the Madras  High         Court  praying  for a writ of  Prohibition  restraining  the         respondents from taxing and/or including in the turnover for         the purposes of assessment for the year 1965-66.  The   said         petition  was dismissed.         Dismissing the appeals by certificate, the Court.

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           HELD: (1) When the movement of the 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 occasioned 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 sate or an incident of the contract.  It is  not         necessary  that the sale must precede the inter-State  move-         ment 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 2nd  incidental         to the contract of sale.  [634D-E]         (2)  Branches  have  no  independent  and  separate  entity.         Branches are  different agencies.  In the instant case,  the         contract  of sale is  between the appellant company and  the         Bombay buyer.  [634C]

JUDGMENT:         CIVIL  APPELLATE  JURISDICTION:  Civil   Appeal   No.   1838         of 1969.         Writ Petition Nos. 483-487 of 1974             (From  the Judgment and Order dated 2nd August  1968  of         the Madras High Court in Writ Petition No. 416/67).         632         Civil Appeal No. 608 of 1973              (From  the Judgment and Order dated 11th April 1972  of         the Madras High Court in Tax Case No. 44/72).              K.S.  Ramamurthi,  V. Nataraj, C.  Natarajan  and  D.N.         Gupta for the appellant/petitioners.         S.T. Desai for RR. 1 & 2 in CA 1838/69 and Writ petitions.         A. V. Rangam and Miss A. Subhashini, for respondents  in  CA         608/73.              S.N. Prasad, R.N. Sachthey and Girish Chandra, for R. 3         in CA 1838 of 1969 and Writ petitions.             D.N. Mukherjee, G.S. Chatterjee and D.P. Mukherjee,  for         respondent No. 4 in writ petitions.             S.C.  Manchanda and O.P. Rana, for respondent No.  5  in         Writ petitions.             M.C.  Bhandare and M.N. Shroff, for respondent No.  6  in         Writ petitions.         The Judgment of, the Court was delivered by         RAY,  C.J.   These two appeals by certificate and  the  writ         petitions turn on the question whether the contract for sale         of goods was an inter-State sale or an intra-State sale.             The appellant is a company having its registered  office         at  Calcutta. ’There are branches at Bombay,  Delhi,  Madras         and Lucknow. The main factory is at Madras.             In order to appreciate the real controversy it is neces-         sary to refer to the facts of one of the Civil Appeals as  a         pattern of transaction.             In  Civil  Appeal No. 1838 of 1969 Asha Metal  Works  of         Bombay  referred to as the Bombay buyer wrote to the  Bombay         branch  of  the  appellant asking for  lowest  quotation  of         certain  goods.  The Madras branch which has  the  principal         factctory  there for manufacture of goods was written to  by         the  Bombay branch.  The Madras branch wrote to  the  Bombay         branch quoting the prices F.O.R. Madras.  The Bombay  branch         then  wrote to the Bombay buyer that the’ price  was  F.O.R.         Madras  and delivery would be ex-works Madras.   The  Bombay

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       buyer thereupon placed the order with the Bombay branch.             On these facts counsel for the appellant contended  that         the  sale was at Bombay inasmuch as the Bombay buyer  placed         the firm order at Bombay, payment was to be made at  Bombay,         railway receipt was in the name of the Bombay branch and the         goods  were  to be delivered at Bombay.  It  was  emphasised         that  there  was no contract or privity between  the  Madras         branch  and the Bombay buyer- but the privity was only  with         the Bombay branch.         633             The only question is whether the sale was an inter-State         sale or a sale at Bombay.  If the movement of the goods from         Madras  to  Bombay was an incident of or occasioned  by  the         sale  itself it would be taxable under section 3(a)  of  the         Central Sales Tax Act.             There  was  not and there could not be any  contract  of         sale  between the factory of the seller appellant at  Madras         branch and the Bombay branch of the appellant.  It is  obvi-         ous that the Bombay branch is the agent of the seller appel-         lant.   The appellant could not be the buyer as well as  the         seller.               The contention of the appellant is that the goods were         sent  by the factory at Madras branch to the  Bombay  branch         and  thereafter the goods were sold by the Bombay branch  to         the Bombay buyer.             The  sale  as  well as the movement of  the  goods  from         Madras to Bhandup at Bombay was a part of the same  transac-         tion.  The movement of the goods from Madras to Bhandup  was         integrated  with  the  contract of sale  for  the  following         reasons.   The  Bombay  branch received the  Bombay  buyer’s         order and sent the same to the Madras branch factory.   When         the Bombay buyer asked  for  quotation  of prices the Bombay         branch wrote to the Madras branch and gave all the  specifi-         cations  and stated that the ’goods were  for   the   Bombay         buyer.  The Madras branch in reply referred to the order  of         the  Bombay buyer and gave particulars mentioning  that  the         price was F.O.R. Madras.  The Bombay branch thereafter wrote         to the Bombay buyer reproducing all the particulars,  condi-         tions  of sale and mode of despatch as stated by  the,Madras         branch and further stated that the goods -would be  manufac-         tured at the Madras branch factory.         It  is important to note that all prices were  shown  F.O.R.         Madras  and  it was further stated that all goods  would  be         despatched  at the risk of the Bombay buyer.  It is in  this         context  that  the Bombay buyer on 27 May,  1964  placed  an         order  with  the Bombay branch accepting all the  terms  and         conditions.  The  Bombay branch placed an indent  order  ad-         dressed to the Madras branch giving all the particulars  and         stated the buyer’s name as Asha Metal Works, Bombay and gave         the customer’s order number and the date viz., 27 May, 1964.         The  goods were to be invoiced to the Bombay branch and  the         goods were to be despatched F.O.R. Madras.             The Bombay branch wrote to the Bombay buyer on 28 August         1964  that they had received an invoice from the factory  at         the Madras ’branch that some of the goods against the  order         of  the  Bombay buyer were ready for despatch.   The  Bombay         branch  asked the Bombay buyer to give the details  of  des-         patch  and insurance instructions per return of  post.   The         Bombay branch thereafter wrote to the Madras branch  factory         stating "Please despatch the equipment covered by our above’         indent by goods train to Bhandup Railway Stastion freight to         pay.  The Railway Receipt and other documents to be sent  to         us for disposal".  The Madras branch factory despatched  the         goods from Madras to Bombay by goods train and gave  intima-         tion to the Bombay ’branch.  The goods were delivered to the

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       Bombay buyer at Bhandup through clearing agents.         634             The goods were despatched from Madras at the risk of the         buyer  to  Bombay.   The goods were  insured  and  insurance         charges   were  collected  from the buyer  at  Bombay.   The         freight  charged  from  Madras to Bombay was  borne  by  the         buyer.   The movement of the goods from Madras was an  inci-         dent of the contract of sale.             Counsel  for the appellant contended that there was   no         privity  between the Madras branch and the Bombay buyer  but         that the privity was only between the Madras branch and  the         Bombay  branch. It was also said that the Bombay branch  was         an  independent  and separate entity and the direct contract         was   between  the  Bombay branch and the Bombay  buyer  and         the Madras  factory  were not parties to the contract.             The  appellant has branches at different  places.    The         appellant  company is one entity and it carries on  business         at  different  branches. Branches have  no  independent  and         separate   entity.  Branches  are different  agencies.   The         contract  of sale is between the appellant company  and  the         Bombay buyer.             The appellant in the present case sent the goods  direct         from the Madras branch factory to the Bombay buyer at Bhand-         up,  Bombay.  The  railway receipt was in the  name  of  the         Bombay branch to secure payment against delivery.  There was         no question of diverting   the goods which were sent to  the         Bombay  buyer. 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  mater  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 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 tract.  It  is  not         necessary  that the sale must precede the inter-State  move-         ment in order that the sale may be deemed to have occasioned         ,such  movement.  It is also not necesary for a sale  to  be         deemed  have taken place in the course of inter-State  trade         or  commerce, that the covenant regarding inter-State  move-         ment  must be specified in the contract itself.  It will  be         enough if the movement is in pursuance and incidental to the         contract of sale.             When  a branch of a company forward 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  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  move-         ment 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  been  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         635         known  person on behalf of the seller in the delivery  State         and such person’s activities prior to or after the implemen-         tation of the contract may not alter the position.             The  steps taken from the beginning to the end  by   the         Bombay branch in co-ordination with the Madras factory  show

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       that the Bombay branch was merely acting as the intermediary         between  the  Madras factory and the buyer and that  it  was         the  Madras  factory which pursuant to the covenant  in  the         contract  of  sale  caused the movement of  the  goods  from         Madras  to Bombay.  The inter-State  movement of  the  goods         was  a result of the contract of sale and the fact that  the         contract  emanated from correspondence which passed  between         the Bombay branch and the company could not make any differ-         ence.             For  the foregoing reasons the appeals   are  dismissed.         The  writ petitions are also dismissed.  There. will  be  no         order  as  to costs.  It will be open to  the  appellant  to         apply for refund, if any,  if  permissible at law.         S.R.                                                 Appeals         dismissed.         9--1234SCI/76         636