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PETITIONER: KELVINATOR OF INDIA LTD.

       Vs.

RESPONDENT: THE STATE OF HARYANA

DATE OF JUDGMENT23/08/1973

BENCH: KHANNA, HANS RAJ BENCH: KHANNA, HANS RAJ ALAGIRISWAMI, A.

CITATION:  1973 AIR 2526            1974 SCR  (1) 463  1973 SCC  (2) 551  CITATOR INFO :  R          1976 SC1016  (23)  RF         1981 SC 446  (6)  D          1981 SC1604  (12)

ACT: Central  Sales  Tax  Act, (74 of  1956)  S.  3(a)-Scope  of- movement  of  goods when occasioned by  sale-Manufacture  of goods  in  one State and sold in  another  to  distributors- Distribution agreement if constitutes contract of  safe-Sale of Goods Act (3 of 1930).  S. 23-Scope of.

HEADNOTE: Section  6 of the Central Sales Tax Act, 1956,  makes  every dealer liable for payment of tax under the Act on all sales- effected  by  him  in  the course  of  interstate  trade  or commerce.  A sale of’ goods can be held to have taken  place in  the course of interstate trade under s. 3 (a) if it  can be shown that the sale has occasioned the movement of  goods from one State to another, that is, if, (i) there is a sale, (ii)  there  is actual movement of goods from one  State  to another, and (iii) the sale and movement of the goods formed integral  parts of the same transaction.  A sale  being.  by the  definition  in  the Act, transfer of  property,  to  be exigible  to  tax under the Act it must be  shown  that  tie movement  was  the result of a covenant or incident  of  the contract  of sale’ The movement of goods which  takes  place independently of acontract of sale    would    not    fall within the ambit of s. 3(a). There must be acontract     of sole  preceding  the  movement of goods from  one  State  to anotherand the movement of goods should have been  caused by and be the result of that contract of sale.  If there was no  contract  of sale preceding the movement  of  goods  the movement can obviously be not ascribed to a contract of sale nor  can it ’be said that. the sale has occasioned  movement of goods from one State to the other. [471F-473B] In  the  present case, the appellant was a  manufacturer  of refrigerators  in  Faridabad.  Presene  refrigerators.  were sold  with  three different trade marks.  The sale  of  each brand  was  made  through a separate  distributor  in  Delhi appointed for that purpose and the appellant entered into an agreement   with  each  of  the  three  distributors.    The appellant dealer was bound to sell each of the brands of the

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refrigerator  to one of the distributors.  The price of  the refrigerators  was  to  be fixed  mutually  as  agreed  upon between  the  appellant and his distributors  from  time  to time.   The  prices  were not settled  for  each  individual machine  but periodically.  The goods were  manufactured  in the  factory  at  Faridabad and excise  clearance  pass  was obtained after the payment of excise duty for the  transport of  goods  from  the factory to the  appellant’s  godown  in Delhi.   The excise pass was in favour of self.  During  the transport of the goods from Faridabad to Delhi the octroi at the  barrier was paid by the appellant.  At the  destination the  goods were received by the staff of the  appellant  and taken  to their godown.  The purchase orders were placed  by the  three  distributors after the goods reached  the  Head- office  of  the  appellant at Delhi.  In  pursuance  of  the orders  given  by  the distributors  the  Delhi  staff  gave delivery  of the goods at Delhi under a challan prepared  at Delhi.   The  property in the goods passed at Delhi  to  the distributors  after  delivery.  The price of the  goods  was received  by  the appellant at Delhi and  deposited  in  the appellant’s  account in its Delhi bank.   The  refrigerators were also exported putside India. The  High Court, in a reference by the Tribunal,  held  that the distribution agreements constituted agreements ’of sale, that  the  refrigerators moved from Faridabad to:  Delhi  in pursuance of the agreements of sale, and that the  appellant was  therefore liable to pay sales-tax under s. 3(a) of  the Act. Allowing the appeal to this Court, 464 HELD (1) The three agreements between the appellant and  the distributors were merely agreements for distribution and did not constitute contracts of sale. [480B-C] (a)The number of refrigerators which were to be  purchased by  each  of  the  distributors was  not  specified  in  the distribution  agreements nor did the agreements contain  the price which was to be charged for each refrigerator.  In two of  the  distribution  agreements  the  minimum  number   of refrigerators which had been agreed upon to be purchased  by the  distributors  was  mentioned but the  exact  number  of refrigerators  to  be  sold by the appellant  to  those  two distributors   was  still  left  to  the  volition  of   the appellant.  The mode of dealing between the parties was that orders  were placed by the distributors with  the  appellant after  the refrigerators had reached the  appellant’s  sale- office and godown in Delhi.  The price of refrigerators  was also  to  be mutually agreed upon from time  to  time.   The sales by the appellant to the distributor thus depended upon the future agreement between the parties from time to  time. Therefore,  it was the orders which were placed in Delhi  by the distributors and the acceptance thereof by the appellant that  resulted  in  the  mutual  agreement  of  sale.    The distribution  agreement with each distributor only  provided the  framework within which the different contracts of  sale were  to  be  entered  into  by  the  distributor  with  the appellant,  and the distribution agreement and  contract  of sale were distinct transactions. [474B-G] (b)It is not correct to say that the distributor with whom the  first agreement was entered into was bound to  purchase all  the  products of the appellant.  The  words  ’the  sale would  be as mutually agreed upon from time to  time’  Would lose  all  significance  if that was the  intention  of  the parties.   Also,  the  facts  that  subsequently  two  other distribution  agreements were entered into with  two  others and  that  the  appellant was in a position  to  export  its

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products  to foreign countries during the  assessment  year, show that there was no such agreement. [474G-475B] (c)There  was no appropriation towards the agreement  with each of the distributors, at Faridabad by affixing the  name plates to the refrigerators, and hence, there was no sale of refrigerators  at Faridabad.  There was no evidence to  show that. the name plates were actually affixed at Faridabad and not  at  Delhi.   Even if they were  so  affixed  there  was nothing to prevent the appellant from changing them  because the  three  different brands of refrigerators  were  in  all respects  identical  and the name plates  were  also  easily interchangeable. of the sale of the-refrigerators in  favour of the distributors had already taken place at Faridabad and the  refrigerators  had be-en appropriated there  would  not have arisenany occasion for the placing of a  subsequent order in Delhi by a distributor. But  in  fact  orders  in respect  of  the various refrigerators  were placed  by  the distributors  only in Delhi after they had been  transported to the Delhi sale-office and godown of the appellant.  Since there was no appropriation at Faridabad, there was no  legal bar  to  the changing of name plates by the  appellant  till such  time as orders were placed by the  distributors  after inspection at Delhi.  In answering the question whether  the transactions  constituted sales in the course of  interstate trade  or commerce the Court should look not merely  at  the distribution  agreement  but should also pay regard  to  the entire course of dealings between the parties. [475 B-H] (d)Apart  from the fact that the  distribution  agreements could  not  be construed as contracts of sale  there  is  no material  to  show that there was any assent,  expressed  or implied,  by the distributors, to the appropriation  of  the refrigerators by the appellant at Faridabad; and hence s. 23 of  the Sale of Goods Act is not applicable.   No  authority was   given  by  the  distributors  to  the   appellant   to appropriate  the goods at Faridabad, Further  the  appellant was  not, under the terms of the contract, authorised to  do some act or thing with reference to the refrigerators  which could not be done until the refrigerators were appropriated. [477 H-478H] (2)There  was no movement of refrigerators from  Faridabad to Delhi under a contract of sale. [476G] 465 (a)If there is a choice before the parties of so arranging their  matters that lift one case they would have  to  incur liability to, pay tax and in the other case the liability to pay tax would not be attracted, they would Prefer the latter course’There  is  nothing illegal or impermissible  to  a party so arranging its affairsthat the liability to pay tax would not be attracted or would be reduced. [476C-D] The appellant could have sold the refrigerators at either of the  two places, Faridabad or Delhi.  But liability  to  pay tax   under  the  Act  would  arise  if  the  sale  of   the refrigerators   to  distributors  were  to  take  place   at Faridabad  and the movement of refrigerators from  Faridabad to Delhi were to take place under the contract of sale.  So, the  parties expressly stated in each of the  three  distri- bution  agreements that it would be in Delhi that  the  sale would  take  place  to the  distributors  and  the  property therein  would pass to them.  In fact, it was in Delhi  that the  orders were placed by the distributors, the goods  were delivered  to  the  distributors,  and  the  price  of   the refrigerators was paid.  Hence it could not be said that the transport  of the refrigerators from Faridabad to Delhi  was in  pursuance  of a contract of sale.  The appellant  had  a godown  and  sale office in Delhi and there is  no  evidence

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that  it  had a godown in Faridabad.  The  movement  of  the goods from Faridabad to the appellant’s godown in Delhi  can therefore  be ascribed only to the fact that  the  appellant had a godown facility in Delhi. [476D-G] (b)The  inclusion  of  the charges for  the  transport  of refrigerators  from Faridabad to Delhi in the price  payable by  the  distributors would not show that  the  movement  of refrigerators from Faridabad to Delhi was occasioned by  the contract of sale.  The price payable by the distributors was the  aggregate of the ex-factory price of refrigerators  and the  transportation charges.  As the exfactory price of  the refrigerators was fixed from time to time and as the  agree- ments  with the distributors provided that the sale  of  the refrigerators  as  well  as  the  delivery  thereof  to  the distributors  ’would  take place in Delhi  the  distribution agreements provided that the transportation charges would be added  to  the  exfactory  price  of  the  refrigerators  in calculating  the amount payable by the distributors  to  the appellant.   Further, in two of the distribution  agreements it was provided that the liability of the appellant for  any shortage or damage would cease only after the goods had been inspected by and delivered to the distributors at Delhi.  In the  3rd agreement it was provided that the appellant  would accept  no  responsibility  for shortage  or  damage  during transit,  but even in that case, it was not the  distributor but  the  insurer who would have to bear the  loss  and  the transit  insurance  expenses were borne  by  the  appellant. [476G477G] Tata  Engineering & Locomotive Co. Limited v. The  Assistant Commissioner of Commercial Taxes & Another, [1970] 3  S.C.R. 862, followed. Tata  Iron  and Steel Co. Ltd. v. S. R.   Sarkar  and  Ors.. [1961]  1  S.C.R.  379, Ben Gorm  Niligiri  Plantations  Co. Cooncor  &  Ors.  v. Sales  Tax  Officer.   Special  Circle, Ernakulam. & Ors. [1964] 7 S.C.R. 706, and Halsbury’s  Law’s of England, 3rd Ed.  Vol. 34. pp. 62-63, referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2005 (NT) of 1972:. Appeal by special leave from the order dated the 11th  April 1972 of the Punjab and Haryana High Court at Chandigarh,  in General Sales Tax Reference No. 8 of 1970. N.A.  Palkhivala,  H. L. Sibal, J. B. Dadachanji,  A.  K. Verma, Kapil Sibal and S. C. Agnihotri, for the appellant. Y.M. Tarkunde, Narendra Goswami and M. N. Shroff, for the respondent. S. T. Desai, and 1. N. Shroff, for the intervener. 466 The Judgment of the Court was delivered by KHANNA, J.  This appeal by special leave by M/s.  Kelvinator of  India Ltd. is directed against the judgment of Punjab  & Haryana High Court whereby that court answered the following question referred to it by the Sales Tax Tribunal Haryana in favour of the department and against the appellant               "Whether on the facts and circumstances of the               case,  the agreement between M/s.   Kelvinator               of India (Assessee) M/s.  Spencer & Co.  Ltd.,               Messrs  Blue  Star Engineering Co,,  and  M/s.               General Equipment Ltd., in pursuance of  which               the   refrigerators   manufactured   by   M/s,               Kelvinator  of  India at  Faridabad  moved  to               Delhi  were merely for distribution  of  goods

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             between  the principal and his agents or  were               agreements of sale between two parties?" The matter relates to the assessment year 1965-66, i.e.  the period from April 1, 1965 to March 31, 1966.  The  appellant company  has  a,  factory  at  Faridabad  in  Haryana.    It manufactures  refrigerators, deep freezers, compressors  and other similar articles.  The factory went into production in 1964.   Its  registered office and sales office are  at  19A Alipore  Road,  Delhi.  The appellant has godowns  in  Delhi having  full  staff  of  godown  keepers  and  clerks.   The appellant  is a registered dealer under the  Punjab  General Sales  Tax  Act, 1948 and the Central Sales Tax  Act,  1956. ’The    registration   has   been   don--   at    Faridabad. Refrigerators  and  other articles are manufactured  by  the appellant  under a collaboration agreement with an  American company known as Kelvinator International Corporation.   The refrigerators   and  other  articles  manufactured  by   the appellant  are  marketed  under  trade  marks  ’Kelvinator’, ’Leonard’  and  ’Gem’.  The entire  sale  of  refrigerators, compressors  and spare parts in 1964 was made to Spencer  &- Co.  Ltd. at Delhi.  Such transfers were accepted is genuine by the sales tax authorities.  In respect of these sales the department did not take the stand that they were inter-State sales  or  that the movement of goods  -.from  Faridabad  to Delhi  was occasioned by reason of sales made to  Spencer  & Co. Ltd. On April 26, 1965 the appellant entered into a  distribution agreement   with   Spencer  &  Co.  Ltd.   in   respect   of refrigerators  and  other products having  Kelvinator  trade mark.   Similar  distribution agreements were  entered  into with  Blue  Star  Engineering Co. (Bombay)  Pvt.   Ltd.,  on September  15, 1965 in respect of Leonard refrigerators  and on  December 11, 1965 with General Equipment Merchants  Ltd. in respect of Gem refrigerators.  The agreement with Spencer &  Co. was to take effect from April 1, 1965 and  the  other two  agreements  from the dates on which they  were  entered into.   The  terms  of  the  agreements  were  substantially similar, except in certain matters with which we arc  either not   concerned  or  to  which  reference  would   be   made hereinafter.  The relevant clauses of agreement dated  April 26, 1965 are as under "Whereas  in terms of the Manufacturing and Sales  Agreement entered  into  by the Company (the appellant  company)  with Kelvinator International Corporation, Detroit (Michigar- 467 U.S.A.), the Company is granted exclusive right and  licence to  manufacture,  assemble and sell  the  products  designed and/or   manufactured  by  the  Company  under  Trade   mark "Kelvinator"  or any other Trade mark in India  (hereinafter called the Territory) and whereas the Company in its Factory at  Faridabad  (Punjab) has commenced  the,  manufacture  of Kelvinator  Refrigerators, parts and Spare parts  etc.,  and whereas  the Distributors (Spencer. & Co. Ltd.) have  agreed to  be and to act as Distributors of the Company, now it  is hereby mutually agreedand  declared between  the  parties hereto as follows :- 1.The   Company  hereby  undertakes  to  sell   and   the Distributorshereby   undertake   to  buy   all   products manufactured  by  the Company as mutually agreed  upon  from time to time.  The Distributors shall have the right to sell the Company’s Kelvinator and such other trademark  products, spare   parts   and  parts  within   the   Territory.    Due consideration  to  the recommendations  of  Distributors  in regard   to  change/alteration  in  existing   products   or additions of new products will all the time be given by  the

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Company. 2. All purchases by the Distributors from the Company  shall be  on  principal  to principal  basis  at  mutually  agreed prices. 3. *         *           *            *        * 4.  The goods shall, be delivered to the  Distributors  from the  Company’s registered office in Delhi and the,  property in  the  same  shall pass to the Distributors  in  Delhi  on delivery, where the sale shall always take place. 5.For the purpose of determining the liability of Distri- butors for payment to the Company, the price quoted will  be ex-Company’s  works  at Faridabad.  The  Distributors  shall also pay to the Company all the charges on the transport  of the  goods  from  the Company’s works at  Faridabad  to  the Company’s Registered Office in Delhi. 6.The  Distributors shall at all times warrant the  goods to their customers only on the warranty terms issued by  the Company.  All goods leaving the Company’s factory will  pass through rigorous inspection procedures laid down by the Com- pany.  No responsibility for shortage or damage occurring in transit will be accepted by the Company.           ********************           ******************** " Clauses 3, 6, 7 and 8 of agreement dated September 15,  1965 in respect of Leonard refrigerators were as under               "3. For the purpose of clause (1) and in order               to   enable   the  Company  to   arrange   its               production    schedule,    the    Distributors               guarantee  and undertake to purchase from  the               Company    a   minimum   quantity   of    1500               Refrigerators  per  year, at a rate  not  less               than 80 Refrigerators per month.  It is agreed               468               that  the  distributors will  be  relieved  of               their  obligation under Ibis Agreement to  the               extent  that the Company is unable  to  supply               the   guaranteed   minimum  quantity   of   80               refrigerators per month.               6.For  calculating  the liability  of  the               Distributors  for payment to the Company,  the               price  quoted  will  be  ex-factory  Company’s               works  at Faridabad, excluding Central  Excise               and  a11 other taxes, duties and charges  (but               not  octroi charges payable between  Faridabad               and  Delhi  which  will be  to  the  Company’s               account) which may be levied or introduced  by               the  Government  or any local  authority  from               time  to  time and which will  be  charged  in               addition  to the said ex-factory  price.   The               Distributors  shall  pay to the  Company,  the               transport  charges  for  the  goods  from  the               Company’s works at Faridabad lo the  Company’s               godowns in Delhi.               7.All the goods shall remain the  property               of  the Company till they reach Delhi and  are               delivered to the Distributors in Delhi,  where               alone  the  property  therein  shall  pass  to               Distributors.   The  sale  shall  always  take               place in Delhi.               S.All goods leaving the Company’s  factory               will   pass   through   rigorous    inspection               procedure  laid down by the Company, and  will               be  packed in Crates and will be delivered  to               the Distributors packed as such.  The  Company               in no case, shall responsible for any shortage

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             or  damage that may occur in further  transit,               once   the  goods  have  been  delivered   and               inspected by the Distributors in Delhi." Clause..-,  6, 7 and 8 of agreement dated December 11,  1965 in  respect of Gem refrigerators were substantially  similar to clauses 6, 7 and 8 of agreement dated September 15, 1965. Clause 3 of agreement dated December 11, 1965 was as under:               "3.In  order  to facilitate  the  Company’s               arrangement  of its production  schedule,  Gem               undertakes  to buy from the Company a  minimum               quantity  of 2000 refrigerators of  both  10.1               cu. ft. and 6.2 cu. ft. capacity in the  first               year   at  a  rate  of  not  less   than   150               refrigerators  per month.  Likewise,  for  the               and year, Gem agrees to buy 3000 refrigerators               and  for 3rd year, 4000 refrigerators of  both               sizes.   The Company will, however,  incur  no               liabilities if for any reasons it is unable to               make  the  supply  according  to  the  minimum               quantities  stipulated  above.   If  for  some               reasons  Gem is unable to accept  or  purchase               the   respective  minimum  yearly   stipulated               quantities,  Gem will incur no liability  save               the  cancellation  of  the  Agreement  at  the               Company’s choice." Procedure  for  transfer  of  goods  from  the  factory   at Faridabad  to  the appellant’s company’s  sales  office  and godowns  at  19A, Alipore Road, Delhi was described  in  the objections filed on behalf of the appellant before the sales tax authority as under :               "The  company gets the goods cleared from  the               Excise for               destination  to  its Delhi  office  godown  in               piece-meal pay the               469               octroi  themselves at the Delhi barrier  along               with  the  freight charges and the  goods  are               taken  delivery of by its  registered  office.               The buyer places its specific order  according               to its requirement and to the extent goods are               available  at Delhi, delivery is given by  the               Delhi  office after the goods are approved  in               good  condition  by the purchaser.   That  the               goods,   never  move  from  the   factory   in               pursuance of any contract but are moved as per               routine  for  storage at Delhi  in  accordance               with the company’s own convenience.   Specific               orders are placed by the buyers when the goods               are already lying. in stock.  The movement               of the goods as such is not in furtherance  of               any  contract  of  sale  but  move  to   Delhi               independently of any stipulation." Four  affidavits  were  also  filed  before  the   assessing authority.  The affidavit is of M. B. Sutaria, Secretary  of the appellant company. Relevant parts of this affidavit  are as under :               "3. That after the goods are I manufactured in               the  factory  an  excise  clearance  pass   is               obtained after payment of excise duty for  the               transport  of  goods from the factory  to  the               company’s godown in Delhi.  The excise pass is               always  for  movement of goods  in  favour  of               self.               4.    That during the transport of goods  from               Faridabad to,

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             Delhi,the  octroi at the barrier is  paid               by the company.               5.    That   at  destination  the  goods   are               received by the com-               pany’s staff and taken in their godown.               6.That  after the goods have already  been               received by, the company an order is  received               from the customer for the supply of good,,;.               7.That  in  pursuance of the  said  orders               Delhi  staff  givedelivery of  the,  goods  at               Delhi to the customer under a challan prepared               at Delhi.               8.That  thereafter  the bill  is  raised  from               Delhi and price of thegoods is received by               the Company at Delhi and deposited inthe               Company’s account in its Delhi Bank." The  other  three  affidavits were those of  V.  A.  Rao  of Spencer  & Co., Rajinder Nath Seth of Blue Star  Engineering Co. Ltd. and Mrs. Usha Batra of General Equipment  Merchants Ltd.  In the affidavit of V. A. Rao it was stated               "2.    That   we   select   the   pieces    of               Refrigerators   lying   in  the   godowns   of               Kelvinator  of  India Ltd.  Delhi  and  if  on               inspection    we   find   that    pieces    of               Refrigerators suiting to our requirements,  we               place  specific orders on Kelvinator of  India               Ltd., Delhi to supply us the goods." The  affidavits  of Rajinder Nath Seth and Mrs.  Usha  Batra contained similar paragraphs.  The appellant company took  a policy  of insurance to cover lorry risk as per Motor  Lorry Risk clauses, including theft, 470 pilferage  and non-delivery denting scratching and  breakage or  any  other damage due to any external  means,  including certain other risks from warehouse to warehouse. In  the  reference order dated April 1, 1971 the  Sales  Tax Tribunal  while  dealing with the transport  of  goods  from Faridabad to Delhi observed :               "The Refrigerators manufactured by the Company               were  transferred  to  its  sale,  office  and               godowns  at 19A.  Alipore Road, Delhi-6  under               despatch  notes.   Necessary  entries  in  the               stock  register showing receipt were  made  in               the  stock register maintained by the  Company               in the godowns and sale office at Delhi.   The               issue.   entries  were  also  made   in   such               registers.   The  payments  such  as  freight,               octroi,  transit insurance and other  expenses               i.e.  upto the stage of sale and delivery-  of               ,goods  to the respective distributors at  the               sale  office  at  Delhi  were  borne  by   the               company.    The   purchasers,   namely,    the               distributors  placed their specific orders  at               various  times  at Delhi  upon  examining  and               finding  the  suitability of the  machines  in               pursuance  of  which  the  refrigerators  were               delivered   against   receipt   on    delivery               challans.   Bills  were  raised  by  the  sale               office  at  Delhi and consideration  was  also               received by it." The  assessing authority vide its order dated March 2,  1968 held ,that the transactions between the parties were  inter- State sales and liable to be taxed as such.  The movement of refrigerators  from  Faridabad  to  Delhi  was  held  to  be occasioned  by the sales to the distributors.  At first  the

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sales tax-payable by the assessee was assessed by the  Sales Tax Officer to be Rs. 8,14,112.25 at the rate of 10 per cent cf   the  ’transactions  amounting  to   Rs.   81,41,142.45. Subsequently  on review ,application the tax  liability  was reduced to Rs. 1,59,691.19. On  appeal  filed by the appellant,  the-Deputy  Excise  and Taxation Commissioner as per order dated July 24, 1968  held that the distribution agreements were not contracts of sale. It was further held that the refrigerators were  transported to   Delhi  prior  to  their  sale  to  distributors.    The transactions  in  question  were consequently  held  not  to constitute  interstate  sales.   The  Excise  and   Taxation Commissioner  thereafter  took  suo motu  action  and  after hearing  both  the  parties  he  held  as  per  order  dated September  12, 1968 that as soon as the  refrigerators  were manufactured  they  were appropriated to the  contracts  and that  movement  from  Faridabad  to  Delhi  was  under   the agreement  to  sell.  The matter was then taken  up  by  the assessee in appeal to the Sales Tax Tribunal.  The  Tribunal as  per order dated August 14, 1969 took the view  that  the agreements with the distributors were agreements of sale and that the sales in question were inter-State sales.  The  ap- pellant thereafter filed review application but the same was dismissed by the Tribunal on November 24, 1969.  Application was  thereafter  filed before the, Tribunal  praying,  inter alia,  that the, following questions ,of law be referred  to the High Court : "1.  Whether on the facts and circumstances of the case  the Sales were local sales of Delhi or were in the course. of 471 inter-State   trade   and  commerce  giving  rise   to   the commencement of movements in the State of Haryana. 2.Whether on the facts and circumstances of the case  the distributorship agreements could validly be construed to  be contracts  of  sales even when they lack all  the  essential ingredients for the formation of the same. 3.Whether on the facts and circumstances of the case  the movement of the goods from Faridabad to Company’s godowns at Delhi at its, own ’risk and cost could be termed to be  com- mercial movements warranting the imposition of the tax under the Central Sales Tax Act or inter-departmental movement for facility of better enjoyment of rights." The Tribunal, however, thought that the question  reproduced earlier  would combine all the three questions suggested  by the  appellant.   Accordingly the question set  out  at  the beginning of this judgment was referred to the High Court. The  High Court in answering the question in favour  of  the department  found that the machines moved from Faridabad  to Delhi  in  pursuance of agreements of sale  which  had  been termed distribution agreements. In  appeal  before  us,  Mr. Palkhiwala  on  behalf  of  the appellant  company  has argued that the  three  distribution agreements  do  not constitute contracts of  sale.   In  the alternative,  he  submits  that  even  if  the  distribution agreements were construed to be contracts of sale, the move- ment of goods in question from Faridabad to Delhi cannot  be said to have been occasioned by the distribution agreements. It  is  also urged that there was no  appropriation  of  the goods  at  Faridabad  to the contract  with  any  particular distributor.  As against that, Mr. Tarkunde on behalf of the respondent  contends that the three distribution  agreements did  constitute  contracts  of sale and  that  it  were  the aforesaid agreements which occasioned the movement of  goods from  Faridabad to Delhi The appropriation of goods  to  the contract  with each of the distributors also,  according  to

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the learned counsel, took place in Faridabad. Before dealing with the contention of the parties, it  would be  apposite to refer to the relevant  statutory  provisions and  examine  the legal position Section 6  of  the  Central Sales  Tax  Act (hereinafter referred to as the  Act)  makes every dealer liable for payment of tax under the Act on  all sales effected by him in the course of inter-State trade  or commerce.   "Sale"  with  its  grammatical  variations   and cognate expressions, has been defined in section 2(g) of the Act, to mean any transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable consideration, and includes a transfer of goods  on the   hirre-purchase   or  other  system   of   payment   by instalments,   but   does   not  include   a   mortgage   or hypothecation of or a charge or pledge on goods.   According to  section 3 of the Act, 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               472               (b)is  effected by a transfer of  documents               of  title to the goods during  their  movement               from one State to another. We are concerned in the present case with clause (a) and not with clause (b).  A sale of goods can be held to have  taken place in the course of inter-state trade under clause (a) of Section  3 of the Act if it can be shown that the  sale  has occasioned the movement of goods from one State to  another. A  sale  in  the  course  of  inter-state  trade  has  three essentials  : (i) there must be a sale, (ii) the goods  must actually  be moved from one State to another, and (iii)  the sale  and  movement of the, goods must be part of  the  same transaction.   The  word "occasions" is used as a  verb  and means  ’to cause or to be the immediate cause of’.   In  the case  of  Tata Iron and Steel Co. Ltd. v. S. R.  Sarkar  and Ors;.(1) Shah J. (as he then was) speaking for the  majority observed that a transaction of sale is subject to tax  under the  Act on the completion of the sale.  A mere contract  of sale  is  not  a sale within the  definition  of  "sale"  in section 2(g).  A sale being, by the definition, transfer  of property becomes taxable under section 3(a) "if the movement of  goods from one State to another is under a  covenant  or incident  of  the contract of sale".  In  Ben  Gorm  Nilgiri Plantations Co. Cooncor & Ors. v. Sales Tax Officer, Special Circle,  Ernakulam  &  Ors(2)  this  Court  dealt  with  the provisions of section 5 of the Act which relates to sale  or purchase of goods in the course of import or export.  It was held  that  a sale in the course of export  predicated  con- nection  between  the sale and export,  the  two  activities being  so  integrated that the connection  between  the  two cannot  be voluntarily interrupted without a breach  of  the contractor  the  compulsion arising from the nature  of  the transaction.  The export, it was further observed should  be inextricably linked up with the sale so that the bond cannot be dissociated the observations in the case of Tata Iron and Steel Co. a s well as Ben Gorim Nilgiri Plantations Co. were relied  upon  by a Constitution Bench of this Court  in  the case  of  Tata Engineering & Locomotive Co. Limited  v.  The Assistant Commissioner of Commercial Taxes & Another (3) and it  was held that the sales to be exigible to tax under  the Act  must be shown to have occasioned the movement of  goods or articles from one State to another and that the  movement must  be  the  result  of a convenant  or  incident  of  the

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contract of sale.  It can, therefore, be said that a sale of goods  is in the course of interState trade if the sale  and movement  of  goods from one State to another  are  integral parts  of the same transaction.  There must exist  a  direct nexus  between the sale and the movement of goods  from  one State  to the other.  In other words the movement should  be incident of and be necessitated by the contract of sale  and thus be interlinked with the sale of goods. It  is also plain from the language of section 3 (a) of  the Act  that the movement of goods from on.-. State to  another must  be  under the contract of sale.  A movement  of  goods which takes place independently of a contract of sale  would not  fall within the ambit of the above clause.  Perusal  of section  3(a)  further makes it manifest that there  must  a contract of sale preceding the movement of the goods from (1) [1961] 1 S. C. R. 379                    (2) [1964] 7 S. C. R. 706. (3)[1970] 3 S. C. R. 862 473 one State to another, and the movement of goods should  have been  caused by and be the result of that contract of  sale. If  there was no contract of sale preceding the movement  of goods,  the  movement  can obviously be not  ascribed  to  a contract  of  sale  nor can it be said  that  the  sale  has occasioned  the  movement  of goods from one  State  to  the other. In  the light of the principles enunciated above, it  cannot in  our opinions be said that the transactions  in  question amount to sale in the course of inter-state trade.  The High Court  in  the  course of its judgment has  noted  that  the following   facts   were  accepted   by   the   departmental authorities :               "1.   The   dealer   manufactured   and   sold               refrigerators.               2.  These  refrigerators were  sold  with  the               trade  marks  of ’Kelvinator’,  ’Leonard’  and               ’Gem’.               3.The sale of each brand was made  through               a  separate  distributor  appointed  for  this               purpose.               4.The  manner of movement is laid down  in               clause  6 of Spencer’s agreement and clause  8               of  Blue Star and General Equipment  Merchants               agreements.               5.The   dealer   is  bound   to   sell   a               ’Kelvinator’ to Spencers, a ’Leonard’ to  Blue               Star   and  a  ’Gem’  to   General   Equipment               Merchants.               6.    That refrigerators were exported outside               India.               7.    The price of the refrigerators is  fixed               as mutually agreed               upon from time to time.               8.    The  property in-goods passes  at  Delhi               after delivery.               9.    The   prices   are   not   settled   for               individual machine, but               periodically.               10.The  purchase orders are placed  by  the               three  distributors after the goods reach  the               head office at Delhi." It  has  further  been  found by the  High  Court  that  the appellant had asserted the following facts and the assertion of  the appellant was neither rejected by  the  departmental authorities nor was it dealt with in ,the respective  orders

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:               "1.  That after the goods are manufactured  in               the  factory  an  excise  clearance  pass   is               obtained after payment of excise duty for  the               transport  of  goods from the factory  to  the               company’s godown in Delhi.  The excise pass is               always  for-  movement of goods in  favour  of               self.               2.That  during the transport of the  goods               from  Faridabad  to Delhi, the octroi  at  the               barrier is paid by the Company.               3.    That   at  destination  the  goods   are               received by company’s staff and taken in their               godown.               4.  That  in pursuance of  the,.  said  orders               Delhi staff give delivery of the goods at  Del               to  the customer under a challan pre-pared  at               Delhi.               474               5.That thereafter the bill is raised  from               Delhi  and the price of the goods is  received               by  the  Company  at Delhi  and  deposited  in               company’s account in its Delhi bank.               6.That  all that the assessee does  is  to               manufacture refrigerators and they are branded               for the purpose of sale and distribution." In  the  face of the facts of the present case, we  find  it difficult  to  hold that the sale of refrigerators  by  the. appellant to the three distributors took place at Faridabad. We  are  also unable to agree with the High Court  that  the distribution agreements constituted agreements of sale.   It is noteworthy in this context to observe that the number  of refrigerators  which  were to be purchased by  each  of  the distributors   was   not  specified  in   the   distribution agreements,  nor did the agreements contain the price  which was  to be charged for each refrigerator.  According to  the agreement  dated April 26, 1965 the appellant  undertook  to sell and the distributors undertook to purchase the products of  the  appellant  "as mutually agreed upon  from  time  to time".  It is, therefore, plain that sales by the  appellant company--to the distributor re,fered to in the  distribution agreement  dated  April 26, 1965 depended  upon  the  future agreement  between  the  parties from time  to  time.   Dis- tribution  agreements dated September 15, 1965 and  December 11,  1965 no doubt mentioned the minimum number  of  Leonard and Gem refrigerators which had been agreed to be  purchased by the distributors; the exact number of refrigerators to be sold  by the appellant to these two distributors  was  still left  to volition of the appellant.  The appellant  company, it  was also mentioned, would incur no liability if  it  was unable to supply the guaranteed minimum number of refrigera- tors.   The  mode of dealings between the parties  was  that subsequent  to  the  distribution  agreements,  orders  were placed  by  the distributors with the  appellant  after  the refrigerators  had reached the appellant’s sale  office  and godown in Delhi.  The price of the refrigerators was also to be mutually agreed upon from time to time.  It is Plain that it  is  the  orders  which  were  placed  in  Delhi  by  the distributors  and  the acceptance thereof by  the  appellant that  resulted in mutual agreement of sale.  It was, in  our opinion,  the mutual agreement between the parties  at  ’the time of the placing of the order by the distributor with the appellant which constituted the contract of sale and not the distribution  agreement.   The distribution  agreement  with each  distributor  provided the framework within  which  the

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different  contracts  of  sale-were  entered  into  by   the distributor  with the appellant.  This  circumstance  should not  make  us lose sight of the fact that  the  distribution agreements  and  the  subsequent  contracts  of  sale   were distinct transactions. We  are not impressed by Mr. Tarkunde’s argument that  under agreement  dated April 26, 1965 Spencer & Co. was  bound  to purchase all the products of the appellant company.  Spencer &  Co.  undertook to buy the products  manufactured  by  the appellant  company subject to the stipulation  contained  in the words "as mutually agreed upon from time to time".   Had it been the intention of the parties that, Spencer & Co. was bound to purchase all products manufactured by the appellant company  irrespective  of any future agreement  between  the parties,  the  words "as mutually agreed upon from  time  to time" in clause                             475 1  of  agreement  dated  April  26,  1965  would  lose   all significance.   It  would not have also in that  event  been possible  for  the  appellant to enter into  the  other  two distribution  agreements of September 15, 1965 and  December 11, 1965 regarding Leonard and Gem refrigerators which  were manufactured by the appellant.  The fact that the  appellant was  in  a  position  to  export  its  products  to  foreign countries during the assessment year in question also  shows that  there  was no agreement between the parties  that  the appellant  was bound to sell and Spencer & Co. was bound  to purchase all products manufactured by the appellant. The  argument that the sale of refrigerators to each of  the distributors  took  place at Faridabad and that  it  was  at Faridabad  that the refrigerators were appropriated  towards the agreement with each of the three distributors appears to us  to be not well-founded.  The argument proceeds upon  the assumption that trade-mark name plates on, the refrigerators were  affixed at Faridabad by the appellant company.   There is, however, no direct material to show that the name plates on, the refrigerators were actually affixed at Faridabad and not in Delhi.  Assuming that the name plates were, in  fact, affixed to the refrigerators by the appellant at  Faridabad, there was nothing to prevent the appellant from changing the name plate of a refrigerator and affixing the name plate  of a different brand of refrigerator on the refrigferator  from which  the  name  plate was removed.   The  three  different brands  of  refrigerators  were in  all  respects  identical except in respect of the name plate.  The said name  plates, it has been demonstrated to us,. are easily interchangeable. In  the circumstances, the alleged affixation of  trade-mark plates  to the refrigerators at Faridabad would  not  neces- sarily  show  that the appropriation  of  the  refrigerators towards  the  agreement with a particular  distributor  took place  at Faridabad.  A very significant circumstance  which should not be lost sight of, in this context is that  orders in  respect of the various refrigerators were placed by  the distributors  in  Delhi  after the  refrigerators  had  been transported  to  the  Delhi sale office and  godown  of  the appellant.   If the sale of the refrigerators in  favour  of the distributor hid already taken place at Faridabad and the refrigerators  had been appropriated there towards the  sale contract,  there  would  have arisen  no  occasion  for  the placing  of the subsequent order in Delhi by  a  distributor with  regard  to  the said  refrigerators.   The  fact  that subsequent  orders had to be placed by the  distributors  in Delhi with regard to the different refrigerators after their arrival  in  Delhi shows that there was no earlier  sale  or appropriation of those refrigerators towards any contract of

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sale  with the distributors.  The stand taken on  behalf  of the  department that the appropriation of the  refrigerators took  place at Faridabad towards the contracts of sale  with the  distributors is inconsistent with the entire course  of dealings between the parties.  It may also be observed  that in  deciding the question whether the  transactions  between the  parties constituted sales in the course of  inter-State trade  or commerce, the court should look not merely at  the distribution agreements, regard should be had of the en-tire course of dealings between the parties. Assuming   that  the  distribution  agreements   constituted contracts of sale, it would still have to be shown that  the sale  by  the appellant to the distributors  occasioned  the movement of refrigerators from Farida- 476 bad  to Delhi in this respect we find that according to  the facts  found by the Tribunal the appellant had a godown  and sale  office  in Delhi.  There is nothing to show  that  the appellant  has also a godown in Faridabad.  The movement  of refrigerators  from Faridabad to the appellant’s  godown  in Delhi in the circumstances can well be ascribed to the  fact that  the appellant has a godown facility in  Delhi.   There were  two  places  at  which in the  nature  of  things  the appellant   could  have  sold  the  refrigerators   to   the distributors.   It  could be either at Faridabad  where  the appellant  has  its factory wherein  the  refrigerators  are manufactured  or in Delhi where the appellant has  its  sale office  and godown and where- also the,  three  distributors have  their  offices.   The  selection  of  place  of  sale. depended  upon  mutual agreement between the parties  it  is also obvious that if there is a choice before the parties of so arranging their matters that in. one case they would have to  incur  liability to pay tax and in the  other  case  the liability  to  pay tax would not be  attracted,  they  would prefer  the  latter  course.  There is  nothing  illegal  or impermissible  to a party so arranging its affairs that  the liability  to  pay tax would not be attracted  or  that  the brunt  of  taxation would be reduced to  the  minimum.   The appellant  company  in  the  present  case  would  incur  no liability  to pay tax under the Act if it were to  transport the  refrigerators from its factory in Faridabad to its  own office  and godown in Delhi and thereafter to sell  them  to the  distributors.  The liability to pay tax under  the  Act would,  however, arise if the sale of the  refrigerators  to distributors  were  to  take  place  at  Faridabad  and  the movement  of refrigerators from Faridabad to Delhi  were  to take  place under the contract of sale.  ’The question  with which we are concerned is whether the appellant entered into such an arrangement with the distributors that the liability to pay tax would be attracted and not the other  arrangement under  which  no  such liability could be  fastened  on  the appellant.   So far as this question is concerned,  we  find that  the  parties  expressly stated in each  of  the  three distribution  agreements that it would be in Delhi that  the sale  of refrigerators would take place to the  distributors and  the property therein would pass to them.  It was  again in  Delhi  that  the refrigerators  were  delivered  to  the distributors.  The orders for the refrigerators were  placed by the distributors in Delhi and it was also here that,  the price  of refrigerators was paid.  Looking to all the  facts of  the case, we have no doubt that the arrangement  between the  parties  was that refrigerators would be  sold  by  the appellant   to   the  distributors  after  they   had   been transported  to the sale office and godown of the  appellant on Alipore Road, Delhi so that no liability to pay tax under

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the Act would arise.  It cannot in-the circumstances be said that  the transport of the refrigerators from  Faridabad  to Delhi  was  in pursuance of contracts of  sale  between  the appellant and the distributors. Reference has been made by Mr. Tarkunde to the fact that the distributors  were  to  bear the  freight  charges  for  the transportation of refrigerators from Faridabad to Delhi.  In this  respect we find that the distribution agreements  show that  reference  was  made  to  transportation  charges  for determining   the  amount  or  price  to  be  paid  by   the distributors to the appellant company.  The price payable by the  distributors was the aggregate of the ex-factory  price of refrigerators and 477 the  transportation charges.  As the ex-factory.,  price  of refrigerators  was  fixed  from  time to  time  and  as  the agreements  with the distributors provided that the sale  of the  refrigerators  as well as the delivery thereof  to  the distributors  would take place in Delhi, there  was  nothing surprising in the clause of the distribution agreements that the transportation charges would be added to the  ex-factory prices  of  the  refrigerators  in  calculating  the  amount payable by the distributors to the appellant.  The inclusion of  the charges for the transport of the refrigerators  from Faridabad to Delhi in the. price payable by the distributors would  not  show  that the movement  of  refrigerators  from Faridabad to Delhi was occasioned by the contract of sale. The High Court in the course of its judgment has observed-:               "The freight from Faridabad to Delhi is  borne               by the Distributors that is the Blue Star  and               the General Equipment Merchants.  Any shortage               or    damage   in   transit   is   also    the               responsibility  of Blue Star and  the  General               Equipment  Merchants; the  responsibility  for               this does not fall on the manufacturer." The observations in the above paragraph that any shortage or damage  in transit was the responsibility of the  Blue  Star and  the General Equipment Merchants and the  responsibility for  that  did not fall on the manufacturer is  not  correct because  clause  8  of  each of  the  two  agreements  dated September 15, 1965 and December 11, 1965 relating to Leonard and  Gem  refrigerators  shows that  the  liability  of  the appellant  company  for any shortage or  damage  that  might occur  would cease only after the goods had  been  delivered and  inspected by the distributors at Delhi.  The  appellant no doubt stipulated in its agreement with Spencer & Co. that it  (the  appellant)  would  accept  no  responsibility  for shortage or damage occurring in transit after the goods  had passed through rigorous inspection at the time they left the appellant’s  factory.   This must, however, be  regarded  in the-  nature  of things to be a matter of  mutual  agreement between  the parties.  Spencer & Co. might well have  agreed to  bear that loss on the assumption that the  advantage  of becoming  the  distributor for sale of  Kelvinator  refrige- rators would far outweigh the loss borne by the said company in this respect.  Indeed, the possibility of any loss  being borne  by  Spencer & Co. because of any shortage  or  damage occurring  in  transit of refrigerators  from  Faridabad  to Delhi  was  only theoretical, is according to the  order  of reference  the expenses of transit insurance were  borne  by the  appellant  company.  It would thus be the  insurer  who would  have  to bear the loss caused by shortage  or  damage occurring during transit.  It may also be mentioned in  this context  that  the  octroi charges in  connection  with  the movement of refrigerators from Faridabad to Delhi were  paid

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by the appellant. We  have been referred to section 23 ’of the ’Sale of  Goods Act.   According to that section, where there is a  contract for   the   sale  of  unascertained  or  future   goods   by description.  and    goods  of  that  description  and  in  a deliverable  state are unconditionally appropriated  to  the contract,  either by the seller with the assessment  of  the buyer or by the 478 buyer  with the assent of the, seller, the property  in  the goods  thereupon  posses to the buyer.  Such assent  may  be expressed  or  implied, and may be given  either  before  or after the appropriation is made. , The said section, in  our opinion, cannot be of much avail to the respondent.   Apart, from  the fact that the distribution agreements  cannot,  in our  opinion, be construed as contracts of We. there- is  no material  to  show that there was any  assent  expressed  or implied  by  the distributors to the appropriation  of.  the refrigerators by the appellant at Faridabad. Reference  has been made by Mr. Tarkunde to  the-  following observations on pages 62-63 in Vol. 34 of Halsbury’s Laws of England Third Edition               "An authority given by one party to the  other               to appropriate the goods is an implied  assent               by  the  party  giving  the  authority  to   a               subsequent  appropriation by the  other,  pro-               vided the appropriation is made in  accordance               with the contract.  Such an authority  confers               an election on the party authorised.               An authority to appropriate is presumed where,               by the terms of the contract, one party is  to               do  with  reference to the goods some  act  or               thing which cannot be done until the goods are               appropriated.   When the party authorised  has               determined  his election by doing such act  or               thing,  the  appropriation  is  finally  made.               Until  that  time any act or thing  done  with               reference  to the goods towards  appropriation               by  the party authorised is revocable,  unless               it  has  previous  to  its  revocation,   been               assented to by the other party." So  far  as  the observations made in  the  first  paragraph reproduced  above  are concerned, we find that there  is  no material  on the record to show that an authority was  given by  the  distributors to the appellant  to  appropriate  the goods at Faridabad.  As such, the aforesaid paragraph cannot be  of  any  material help to the  respondent.   The  second paragraph reproduced above relates to an authority which may be  presumed  from the fact that one party by the  terms  of contract  is to do with reference to the goods some  act  or thing which cannot be done until the goods are appropriated. In  respect  of this paragraph also,  as  already  indicated above,  we find that there is no material to show  that  the appellant  was under the terms of contract authorised to  do some act or thing with reference to the refrigerators  which could not be done until the refrigerators were appropriated. Apart  from  that we find that the observation  that  "until that time any act or thing done with reference to the  goods towards appropriation by the party authorised is  revocable’ would  show that there was no legal bar to the  changing  of name  plates  by  the appellant company till  such  time  as orders  with regard to the refrigerators were placed by  the distributors after inspection of those, refrigerators. A  case which was considerable bearing on the facts of  the’ present case is that of Tata Engineering and Locomotive  Co.

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Ltd.    V.  Assistant  Commissioner  of  Commercial   Taxes, Jamshedpur  and  Anr. (supra).  In that case  the  appellant company, which manufactured trucks and 479 buses  in Jamshedpur in the State of Bihar, transferred  the vehicles  to  stock-yards operated by its own  personnel  in other  States and supplied them to the dealers.   After  the promulgation  of the Commercial Vehicles  (Distribution  and Sale)  Control Order, 1963 the appellant issued  a  circular dated  June 14, 1963, to the dealers asking them  to  submit monthly statements regarding fresh applications  registered, retail sales, applications cancelled and stock and sales.  , A new form of dealership agreement was also introduced under which  the  appellant  agreed  to sell  from  its  works  in Jamshedpur or its depots and stockvirds outside the State of Bihar to the dealer the vehicles which shall be allotted  at its  discretion.   Clause 11(b) of :the  agreement  provided that  "the dealer shall mail to the company on the  15th  of each  month  ......  his  firm order  for  purchases  to  be effected during  the next succeeding month and his estimated requirements.,  for  the  two  months  following  the   next succeeding  month In fact however no firm order  was  called for by the company.  Pursuant to authorisation issued by the sales  office  of  the appellant in  Bombay,  vehicles  were transferred  from  its works at Jamshedpur  to  the  various stockyards  in  the  States.  The stocks  available  in  the stock-yards  were  then  distributed from time  to  time  to dealers  for which purpose an allocation letter  was  issued each  month by the sales office.  There were many  instances where  vehicles had been actually delivered from the  stock- yard  prior to the issue of the allocation letter.   It  was also  found that on some occasions vehicles bad  been  moved from a stock-yard in on-, State to a stock-yard in  another. Treating   the  allocation  letters  together   with   their confirmation  as transactions of sale, and the  movement  of vehicles  from  the works to the stock-yards as  the  direct result of the allocation so made, the Assistant Commissioner imposed  tax  under  the Central Sales  Tax  Act,  1956,  in relation  to  the sales during the period April 1,  1964  to March 31, 1966, of vehicles which had moved from  Jamshedpur to  the  stock-yards in the various States. it was  held  by this  Court  that the procedure followed  by  the  appellant together  with  the  proved  absence  of  any  firm  orders, indicated  that the allocation letters and  the  statement’s furnished  by  the dealers did not  themselves  bring  about transactions  of sale within the meaning of section 2(g)  of the Act.  This Court further observed :               "It  would  appear from the  materials  placed               before us that generally the completion of the               sales  to  the dealers did not take  place  at               Jamshedpur  and the final steps in the  matter               of  such completion were taken at  the  stock-               yards.   Even  if  the  appellant  took   into               account the requirements of the dealers  which               it  naturally  was  expected to  do  when  the               vehicles  were  moved from the  works  to  the               stock-yards  it  was not  necessary  that  the               number  of  vehicles allocated to  the  dealer               should  necessarily be delivered to him.   The               appropriation of the vehicles was done at  the               stockyards through specification of the engine               and the chassis number and it was open to  the               appellant  till then to allot any  vehicle  to               any  purchaser  and to transfer  the  vehicles               from  one  stockyard  to  another.   Even  the

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             Assistant  Commissioner  found  that  on  some               occasion   vehicles   had  been   moved   from               stockyards in one State to a               480               stockyard in another State. it is not possible               to  comprehend how, in the above situation  it               could  be  held  that  the  movement  of   the               vehicles from the works to the stockyards  was               occasioned by any covenant or incident of  the               contract of sale." The  facts  of  the present case have a  certain  amount  of similarity  to  the  facts of the above  case  and,  in  our opinion,  the dictum laid down therein fortifies us  in  the conclusion at which we have arrived. We accordingly accept the appeal and set aside the  judgment of  the High Court.  The answer given by the High  Court  to the question referred to it is discharged.  In our  opinion, the   three  agreements  between  the  appellant   and   the distributors were merely agreements for the distribution  of goods  and were not agreements of sale between the  parties. It  cannot,  in  our opinion, be said  that  there  was  any movement  of refrigerators from Faridabad to Delhi  under  a contract  of  sale.  The question in  the  circumstances  is answered  against the department.  The transactions  between the appellant and the distributors did not, in our  opinion, constitute  sale  in  the course  of  inter-State  trade  or commerce.  As such, there was no liability to pay tax  under the Act.  The appellant shall be entitled to the costs  from the respondent of this Court as well as in the High Court. V.P.S. Appeal allowed. 481