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PETITIONER: COMMISSIONER OF SALES TAX, U.P. AND ORS. ETC. ETC.

       Vs.

RESPONDENT: BAKHTAWAR LAL KAILASH CHAND ARETI AND ORS. ETC. ETC.

DATE OF JUDGMENT05/08/1992

BENCH: JEEVAN REDDY, B.P. (J) BENCH: JEEVAN REDDY, B.P. (J) RANGNATHAN, S. RAMASWAMI, V. (J) II

CITATION:  1992 AIR 1952            1992 SCR  (3) 733  1992 SCC  (3) 750        JT 1992 (4)   388  1992 SCALE  (2)138

ACT:         U.P. Sales Tax Act, 1948/U.P.  Sales Tax Rules, 1948:      Sections  2(e) and 3-D Purchase Tax-Levy  of-Commission agent/Dealer   purchasing  goods  on  behalf   of   ex-state principals  and  despatching them to places  outside  State- Whether  an  inter-State  purchase-Whether  liable  to   pay purchase Tax under the State Act.      Section 3-B, Form III-C-1:      Purchase   Tax-recovery   of-Dealer   wrongly   issuing Declaration form for inter-State transaction as  intra-State purchase-Whether  can be proceeded against for tax  leviable under Central Sales Tax Act-Provision applicable only to tax leviable under State Act evaded.      Central Sales Tax Act 1956:      Section  3(c)-Purchase of goods by dealer on behalf  of ex-State  principals and despatch to places  outside  State- Whether an inter-State purchase.

HEADNOTE:      The  common question for consideration in the batch  of appeals  filed by the appellant-State was whether the  goods purchased  by  a commission agent for and on behalf  of  the principals  outside  the  State of U.P.  and  dispatched  to principals,  were inter-State purchases under clause (a)  of Section  3  of  the Central Sales Tax Act,  1956  and  were, therefore, not exigible to tax under Section 3-D of the U.P. Sales Tax Act, 1948.      The  respondent-assessee,  in  one of  the  appeals,  a registered  dealer in Uttar Pradesh, dealing  in  foodgrains and  oils  among  others,  purchased  the  commodities  from Cartmen and agriculturists, both on his own account as  well as  for  and  on behalf of  his  ex-U.P.  principals,  i.e., dealers located outside the State, and claimed that inasmuch as the goods pur-                                                   735 chased  for  and on behalf of the ex-State  principals  were sent  to  them forthwith, the said purchases  squarely  fell under  clause (a) of section 3 of the Central Sales Tax  Act and  were not exigible to tax under the State Act.  However, the the case of the State was that the purchases in question

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were  to  be treated as intra-State purchases,  exigible  to purchase  tax under Section 3-D of the U.P. Sales  Tax  Act, 1948 and, therefore, tax thereon was payable by the  selling dealer.      The  High  Court held that the purchases  made  by  the commission  agents in the appellant-State on behalf  of  the principals  outside the State, where the goods so  purchased were   despatched  to  such  principals,  were   inter-State purchases not exigible to tax under the U.P. Sales Tax  Act, 1948.  It found that the purchase orders placed by  the  ex- State   principals  to the assessee were not on  the  record but,  from the conduct of the parties and on the facts,  it was  clear that the ex-State principals contracted with  the assessee  that he should purchase goods on their  behalf  in the State and despatch them to ex-State destinations on  the payment  of  commission and the goods were sent to  the  ex- State principals in fulfillment of the contract.      In  the  appeals before this Court, on  behalf  of  the State  it  was  contended that the  purchases  made  by  the respondent-dealer  in  the State were  completed  purchases once a purchase was complete in the State it was  immaterial whether the goods were later despatched to another State  or sold within the State; for the purpose of the U.P. Sales Tax Act, it was enough that a sale or purchase took place within the  State;  the  subsequent  movement  of  the  goods   was irrelevant; a concluded sale must necessarily take place  in the  other State and not in the State from which  the  goods emanated and a concluded or a completed sale must follow the movement  of goods and should not precede and if a  purchase or  sale  was  complete in the State from  which  the  goods emanated, it could never be an inter-State purchase or sale.      In  one  of  the connected  appeals  the  question  was whether  the respondent-dealer who had issued Forms  III-C-I and  paid  tax on the purchases made by him under  the  U.P. Sales Tax Act, but subsequently, relying on the High Court’s decision  under appeal, claimed and got, refund of  the  tax paid  by him, on the ground that the purchases  effected  by him were not assessable to tax under the U.P. Sales Tax Act, could be                                                   736 proceeded  against under Section 3-B of the U.P.  Sales  Tax Act,  for  making good the tax amount for issuing  wrong  or false  certificates or declaration and thus  preventing  the authorities  from taxing the transaction under  the  Central Act.      Dismissing the appeals, this Court, HELD:  1.  The purchases effected by  the  respondent-dealer were inter-State purchases.  The purchases were made by  the respondent  as a commission agent on behalf of the  ex-State principals  and  the  goods  purchases  under  each  of  the purchases were duly despatched to such principals, and  such despatch took place not later than three days from the  date of  purchase,  as soon as the railway wagon  was  available. The  purchase  of  goods  and  their  despatch  to  ex-State principal were parts of the same transaction.  The  movement of  goods  from  the appellant-State to  another  State  was occasioned  by  and was the result-or  the  incident  of-the purchase.   It  was the consequence of the  purchase.   Such movement of goods, though not proved to have been  expressly stated  in the contract of sale, was yet held to  have  been agreed  upon  between the parties.  The question  whether  a sale/purchase is an inter-State sale/purchase depends on the facts of each case.  The principles are well settled; it  is only  a question of application of these principles  to  the facts in each case.  If the respondent-dealer had  purchased

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the goods on behalf of the ex-State principals in the  first instance   and   thereafter  in  pursuance   of   subsequent instructions despatched the goods, then the instructions  to despatch  the goods are independent of the  instructions  to purchase.   There  is  a  break  between  the  purchase  and despatch of goods.  It would not be an inter-State purchase. An  out-State  principal may first instruct  his  commission agent  within the appellant-State to purchase the  goods  on his behalf and to await his further instructions.  Depending upon the market conditions and other circumstances, the  ex- State  principal may instruct his agent in the State  either to sell the goods within the State or to despatch the  goods beyond the State.  If such were the case, it would be  right to  say that the appellant-State  was competent to  tax  the purchase by the respondent-dealer.  But that is not the case in the instant case.  [743B-C,746F-G]      2.1  Where a sale or purchase, though  effected  within the   State  of  U.P.  occasions  the  movement   of   goods sold/purchased  thereunder from the State of U.P.  to  other State, it becomes an inter-State sale.  Such a sale                                                   737 cannot be taxed by the Legislature of Uttar Pradesh.  It  is taxable only under the Central Sales Tax Act, 1956. [746D]      2.2 According to clause (a) of Section 3 of the Central Sales Tax Act, 1956, an inter-State sale or purchase is  one which  occasions  the movement of goods from  one  State  to another.   In other  words, the movement of goods  from  one State  to  another  must be the  necessary  incident  -  the necessary consequence-of sale or purchase.  A case of  cause and  effect  -  the cause being the  sale/purchase  and  the effect  being  the movement of the goods to  another  State. [740F-G]      2.3 It is immaterial whether a completed sale  precedes the  movement of goods or follows the movement of goods,  or for that matter, takes place while the goods are in transit. What is important is that the movement of goods and the sale must  be inseparably connected.  If the goods move from  one State  to another in pursuance of an agreement of  sale  and the  sale is completed in the other State, it is  an  inter- State  sale.  Indeed, from the language employed  in  clause (a)  of Section 3 of the Central Sales Tax Act, 1956  it  is clear  that  the movement of goods follows upon and  is  the necessary  consequence of the sale or purchase, as the  case may be, and not the other way round. [746A-C]      Tata  Iron & Steel Co. Ltd., Bombay v. S.R. Sarkar  and Ors.,  [1961]  1 S.C.R. 379; Union of India &  Anr.   v.K.G. Khosla & Co. (P) Ltd. & Ors., [1979] 3 S.C.R. 453; Oil India Co.  Ltd. v, Superintendent of the Taxes and Ors., [1975]  3 S.C.R.  797 and Balabhagas Hulaschand  v. State  of  Orissa, [1976] 2 S.C.R. 939, relied on.      A. Hajee Abdul Shakoor & Co. v. State of Madras, [1964] 8  S.C.R.  217 and State of Travancore Cochin  v.  Shanmugha Vilas Cashew Nut Factory, [1954] S.C.R. 53, referred to.      3. Even assuming that the respondent-dealer represented to  the  authorities  by  issuing  Form  III-C-I  that   the purchases  effected by him were intra-State purchase  liable to be taxed under the State enactment and thereby  prevented the  authorities  from  taxing the  transactions  under  the Central  Sales  Tax  Act, the  respondent-dealer  cannot  be proceeded  against under Section 3-B of the U.P.  Sales  Tax Act  for  the  reason that the said  Section  applies  to  a situation  where  the tax "leviable under  this  Act"  i.e., State  Act,  is  evaded.  It does not apply  where  the  tax payable under the                                                   738

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    Central Government is evaded.  [747D-E]

JUDGMENT:      CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.  4560- 62 of 1990 etc. etc.      From  the  Judgment and Order dated  8.10.1984  of  the Allahabad High Court in Sales Tax Revision Nos.  446,447 and 448 of 1983.      D.V.  Sehgal,  B.S. Chauhan, R.B. Misra  and  Vishwajit Singh for the Appellants.      Raja  Ram Agrawal, R.D.U. Upadhyay,  P.K.  Chakraborty, Vijay  Hansaria,  Suresh Gupta, Puneet Tyagi,  Mrs.  Santosh Singh, P.S.  Jha,  Dr. Maya Rao, Ms.  Abha  Jain,  Mrs  Rani Chhabra, M.P. Shorawala, R.C. Verma and Sarva Mitter for the Respondents.      The Judgment of the Court was delivered by      B.P. JEEVAN REDDY, J. A common question arises in  this batch of Appeals and Special Leave Petitions.      Leave granted in S.L.Ps.      In Commissioner of Sales Tax, U.P.v. Hanuman Trading Co. [1979)  Vol. 43 Sales Tax Cases 408] a learned Single  Judge of the Allahabad High Court held that the purchases made  by Commission  Agents  in  U.P. on  behalf  of  the  principals outside  the  State,  where  the  goods  so  purchased  were despatched  to such principals, were  inter-state  purchases not  exigible  to tax under the U.P. Sales  Tax  Act,  1948. This decision was rendered on October 6,1978.  Civil  Appeal No.  1809 of 1982 is preferred against the same.   Following the  said decision a large number of cases were disposed  of by  the  Allahabad High Court which have given rise  to  the other Civil Appeals and the S.L.Ps. posted before us.  Since the  facts in all these appeals are stated to be  identical, it is enough to refer to the facts in Civil Appeal No.  1809 of  1982.  The facts as found recorded in the order  of  the High Court are to the following effect:      The respondent-assessee, Hanuman Trading Company, is  a registered  dealer in Uttar Pradesh, dealing  in  foodgrains and  oils  among others.  During the year  in  question,  he purchased  the said commodities both on his own  account  as well as for and on behalf of his ex-U.P.                                                   739 principals  i.e. dealers located outside the State  of  U.P. We  are  not  concerned  with  the  purchases  made  by  the respondent-dealer  on  his own account, but  only  with  the purchases made by him as the commission agent of the ex-U.P. principals.   These purchases were made by  the  respondent- dealer  from  three  sources, namely:  (1)  from  Registered Dealers  (2) from Cartmen, and (3) from Agriculturists.   So for as purchases made from registered dealers are concerned, we are not concerned with them.  The learned counsel for the State of U.P., stated before us that tax thereon is  payable by the selling dealer.  The controversy thus narrows down to purchases  made  by the respondent-dealer from  cartmen  and agriculturists.  The finding of the High Court with respect  to  the nature of the transactions may be set out  in  their own words:          "In  the present cases, the purchase orders  placed          by  the ex-U.P. principals to the assessee are  not          on the record but, from the conduct of the  parties          and  on the facts found, it is clear that  the  ex-          U.P.  Principals contracted with the assessee  that          he  should purchase goods on their behalf in U.  P.          and  despatch them to ex-U.P. destinations  on  the

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        payment of commission...........the goods were sent          to  the  ex-U.P. principals in fulfillment  of  the          contract."      Sales  of  agricultural produce by  agriculturists  are exempt  from tax under the U.P. Sales Tax Act by  virtue  of the proviso to the definition of the expression ’dealer"  in clause (e) of Section 2. The proviso says that "a person who sells agricultural or horticultural produce grown by himself or grown on any land in which he has an interest, whether as an owner,usufructuary mortgagee, tenant or otherwise, or who sells  poultry or dairy products from fowls or animals  kept by  him shall not, in respect of such goods be treated as  a dealer."   In  such a case, it is stated,  purchase  tax  is leviable on the purchaser.  If, however, the purchase is  an inter-state purchase as defined by Section 3 of the  Central Sales  Tax  Act,  1956 then the  State  Legislature  becomes disabled  from taxing it by virtue of Article 286(1) of  the Constitution of India.  It is this aspect which lies at  the root of the grievance of the State, and it is precisely  for this reason that it seeks to treat the purchases in question as  intra-state  purchases, exigible to  purchase-tax  under Section 3-D of the State Act.                                                   740      Section  3 of the Central Sales Tax Act,  1956  defines the  inter-State sale/purchase.  Omitting  the  Explanations which are not, necessary for our purpose, the Section  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.      Section  4  specifies when can a sale  or  purchase  of goods  be  said to have taken place inside a State;  once  a sale  or purchase is determined in accordance with the  said provision to have taken place inside a particular State,  it must  be  deemed that it has not taken place  in  any  other State.   Section 6 is the charging Section.  Coming back  to the definition in Section 3, an inter-State sale or purchase is  deemed to take place if "the sale or purchase  occasions the  movement  of the goods from one State  to  another"  or where  "the  sale or purchase is effected by a  transfer  of documents  of title to the goods during their movement  from one  State  to another."  The  respondent-dealer  says  that inasmuch as the goods purchased for and on behalf of the ex- State  principals were  sent to  them  forthwith,  the  said purchases squarely fall under clause (a) of Section 3      According  to clause (a) of Section 3,  an  inter-State sale  or  purchase is one which occasions  the  movement  of goods  from  one  State to another.   In  other  words,  the movement  of  goods from one State to another  must  be  the necessary incident - the necessary consequence - of sale  or purchase.  A case of cause and effect - the cause being  the sale/purchase  and  the effect being  the  movement  of  the goods to another State.  The purport of this clause has been succintly stated by Shah, J. In Tata Iron and Steel Co. Ltd. Bombay  v S.R.  Sarkar  and Ors., [1961]  1  S.C.R.  379,  a decision of the Constitution Bench:          "In  our view, therefore, within Cl.(b) of S.3  are          included  sales  in  which property  in  the  goods

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        passes during the movement of                                                   741          the goods from one State to another by transfer  of          documents  of title thereto: cl.(a) of  s.3  covers          sales, other than those included in Cl.(b) in which          the movement of goods from one State to another  is          the  result  of  a  covenant  or  incident  of  the          contract of sale, and property in the goods  passes          in either State."      To  the same effect is the decision in Union  of  India and  Anr.  v.K.G.  Khosla & Co. (P) Ltd. &  Ors.,  [1979]  3 S.C.R.  453.   Chandrachud,  CJ.,  speaking  on  behalf   of himself, D.A. Desai and R.S. Pathak, JJ. ruled:          "It  is  not true to say that for the  purposes  of          section  3(a) of the Act it is necessary  that  the          contract of sale must itself provide for and  cause          the movement of goods or that the movement of goods          must be occasioned specifically in accordance  with          the  terms  of  the contract  of  sale,   The  true          position in law is as stated in Tata Iron and Steel          Co.  Ltd.,  Bombay  v.S.R. Sarkar  and  others  (1)          wherein Shah, J. speaking for the majority observed          that  clauses (a) and (b) of section 3 of  the  Act          are mutually exclusive and that section 3(a) covers          sales in which the movement of goods from one State          to another "is the result of a covenant or incident          of the contract of sale, and property in the  goods          passes  in either State."  Sarkar, J. speaking  for          himself and on behalf of Das Gupta, J. agreed  with          the majority that clauses (a) and (b) of section  3          are  mutually  exclusive but differed from  it  and          held that "a sale can occasion the movement of  the          goods sold only when the terms of the sale  provide          that  the goods would be moved; in other  words,  a          sale  occasions  a  movement  of  goods  when   the          contract  of  sale so provides".  The view  of  the          majority was approved by this court in the  Central          Marketing  Co.  of India v. State  of  Mysore,  (1)          State  Trading  Corporation of india  v.  State  of          Mysore   (2)  and  Singareni  Collieries   Co.   v.          Commissioner of Commercial Taxes, Hyderabad. (3) In          K.G.   Kholsa  &  Co.  v.  Deputy   Commission   of          Commercial  Taxes,  (4)  counsel  for  the  Revenue          invited  the court to reconsider the  question  but          the court declined to do so.  In a recent  decision          of   this   court  in  Oil  India   Ltd.   v.   The          Superintendent  of  Taxes  and Others  (5)  it  was          observed  by Mathew, J., who spoke for  the  court,          that: (1) a sale which                                                   742          occasions  movement  of  goods from  one  State  to          another  is  a sale in the  course  of  inter-State          trade, no matter in which State the property in the          goods passes; (2) 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,  and (3) 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  would  be          enough  if  the movement was in  pursuance  of  and          incidental to the contract  of  sale.  The  learned          Judge  added that it was held in a number of  cases          by the Supreme Court that if the movement of  goods

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        from  one  State  to another is  the  result  of  a          covenant   or an incident of the contract of  sale,          then the sale is an inter-State sale."      The  decision  in Kholsa and Co. explains  that  to  be called an inter-State sale or purchase, it is not  necessary that the contract of sale must expressly provide for  and/or stipulate the movement of goods from one State to the other; it  is enough if such movement of goods is implicit  in  the contract  of  sale.  If, however, the movement of  goods  is neither  expressly  provided for in the contract nor  is  it implicit  in  it, the movement of goods from  one  State  to another,  - even if one takes place - cannot be  related  to the  sale/purchase.   In such a case the movement  of  goods would   be   un-connected  with  an   independent   of   the sale/purchase.   It would not fall under Section  3(a).   To fall thereunder, the sale and the movement of the goods must be parts of the same transaction.      In  the decision in A. Hajee Abdul Shakoor and  Company v.  State  of  Madras, [1964] 8  S.C.R.  217  the  following statement  occurs: "The mere fact that the article  sold  in the  State had been brought from outside the State does  not make  the  sale of that  article  a sale in  the  course  of inter-State trade or commerce.  It is only when A, in  State X,  purchased  through a commission agent in a State  Y  and receives  the  articles  purchased  through  the  commercial agency  that  the sale comes within the expression  ‘in  the course of inter-State trade’: See State of Travancore Cochin v.  Shanmugha Vilas Cashew Nut Factory."  This statement  is in accord with the ratio of the decisions aforementioned.                                                   743      If  we examine the facts of this case in the  light  of the  above principles, it would be clear that the  purchases effected   by   the   respondent-dealer   were   inter-State purchases.   The purchases were made by the respondent as  a commission agent on behalf of the ex-U.P. principals and the goods  purchased  under  each of  the  purchases  were  duly despatched  to  such  principals   It  is  found  that  such despatched  took  place not later than three days  from  the date  of  purchase,  as  soon  as  the  railway  wagon   was available.  The purchase of goods and their despatch to  ex- State  principal  were parts of the same  transaction.   The movement  of goods from Uttar Pradesh to another  State  was occasioned by and was the result - or the incident of -  the purchase.   It  was the consequence of the  purchase.   Such movement of goods, though not proved to have been  expressly stated  in the contract of sale, was yet held to  have  been agreed upon between the parties.  We must emphasise that the question   whether   a  sale/purchase  is   an   inter-State sale/purchase  depends  on  the facts  of  each  case.   The principles  are  well  settled; it is  only  a  question  of application  of these principles to the facts found in  each case.      Sri  Sehgal,  learned counsel for the  State  of  Uttar Pradesh contended that the purchases made by the respondent- dealer in the State of U.P. were completed purchases.   Once a  purchase  is complete in the State of Uttar  Pradesh,  he contends,  it  is  immaterial whether the  goods  are  later despatched  to another State or sold within the State.   For the  purpose of the U.P. Sales Tax Act, it is enough that  a sale   or  purchase  takes  place  within  the  State;   the subsequent  movement  of the goods is irrelevant,  says  the counsel.   We  find it not possible to agree.   As  held  by Mathew,  J. in Oil India Co. Ltd. v. Superintendent  of  the Taxes  and Ors., [1975] 3 S.C.R. 797, quoted approvingly  in Khosla  and  Co., "a sale which occasions  the  movement  of

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goods  from one State to another is a sale in the course  of the inter-State trade, no matter in which State the property in  the goods passes.  "Even if the goods move in  pursuance of  an  agreement of sale and the sale is completed  in  the State in which the goods are received, it will be an  inter- State  sale, as  explained  by  this  Court  in   Balabhagas Hulaschand v. State of Orissa, [1976] 2 S.C.R. 939.      Sri   Sehgal  placed  strong  reliance   upon   certain observations in Balabhagas v. State of Orissa.  The question that  arose for consideration in that case was  whether  the definition  of "sale" in Section 2(g) of the  Central  Sales Tax  Act  takes  in an agreement of  sale.   Fazal  Ali,  J; speaking  for the Bench comprising Mathew, J.  and  himself, held that it does.  Having said so, the                                                   744 learned  Judge made certain further observations which  read as follows:          "Furthermore,  we can hardly conceive of  any  case          where  a sale would take place before the  movement          of goods.  Normally what happens is that there is a          contract  between the two parties in  pursuance  of          which the goods move and when they are accepted and          the  price  is paid the sale  takes  place.   There          would,  therefore, hardly be any case where a  sale          would  take place even before the movement  of  the          goods.   We would illustrate our point of  view  by          giving some concrete instances:                Case No.1 - A is a dealer in goods in State X          and enters into an agreement to sell his goods to B          in State X.  In pursuance of the agreement A  sends          the  goods from State X to State Y by  booking  the          goods  in  the  name of B.  In such a  case  it  is          obvious  that the sale is preceded by the  movement          of  goods  being in pursuance of a  contract  which          eventually merges into a sale the movement must  be          deemed  to be occasioned by the sale.  The  present          case clearly falls within this category.                Case  No. II - A who is a dealer in  State  X          agrees  to sell goods to B but he books  the  goods          from  State  X to State Y in his own name  and  his          agent in State Y receives the goods on behalf of A.          Thereafter the goods are delivered to B in State  Y          and if B accepts them a sale takes place.  It  will          be seen that in this case the movement of goods  is          neither  in pursuance of the agreement to sell  nor          in the movement occasioned by the sale.  The seller          himself  takes the goods to State Y and  sells  the          goods there. This is, therefore, purely an internal          sale which takes place in State Y and falls  beyond          the  purview of Section 3(a) of the  Central  Sales          Tax Act not being an inter-State sale.                Case No. III - B a purchaser in State Y comes          to  State  X and purchases the goods and  pays  the          price  thereof.   After having purchased the  goods          he then books the goods from State X to State Y  in          his  own name.  This is also a case where the  sale          is  purely an internal sale having taken  place  in          State X and the movement of goods is not occasioned          by  the sale but takes place after the property  is          purchased by B and becomes his property.                                                   745          Generally  these  are only type of cases  that  can          occur  in the day to day  commercial  transactions.          It is, therefore, manifest that there can hardly be          a  case where once a sale takes place the  movement

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        is subsequent to the sale."      The Learned Judge proceeded further and held thus:       "(2)   That  are  following  conditions   must   be          satisfied  before a sale can be said to take  place          in the course of inter-State trade or commerce:          (i)  that  there  is an  agreement  to  sell  which          contains a stipulation express or implied regarding          the  movement  of  the  goods  from  one  State  to          another;          (ii)  that  in pursuance of the said  contract  the          goods in fact move from one State to another; and          (iii) that ultimately a concluded sale takes  place          in the State where the goods are sent which must be          different from the State from which the goods move.          If these conditions are satisfied then by virtue of          Section  9 of the Central Sales Tax Act it  is  the          State  from  which  the goods move  which  will  be          competent  to levy the tax under the provisions  of          the  Central  Sales Tax Act.  This  proposition  is          not, and cannot, be disputed by the learned counsel          for the parties."      Sri  Sehgal  relies particularly upon  "Case  No.  III" contained in the first extract and clause (iii) mentioned in the  second  extract.  Relying upon  these  statements,  the learned   counsel  contends  that  a  concluded  sale   must necessarily  take  place in the other State and not  in  the State  from  which the goods emanate.  According to  him,  a concluded  or a completed sale must follow the  movement  of goods  and  should not precede.  If a purchase  or  sale  is complete in the State from which the goods emanate, he says, it can never be an inter-State purchase or sale.  We  cannot accede  to this understanding of the learned counsel.    The said  observations, no doubt rather widely worded,  must  be understood  in  the context of the question that  arose  for consideration  in  that case viz., whether an  agreement  of sale is included within the definition of ‘sale’ as  defined in  the Central Sales Tax Act.  Be that as it may, the  true position has since been explained in the                                                   746 later decision in Khosla and Co.  It is immaterial whether a completed sale precedes the movement of goods or follows the movement of goods, or for that matter, takes place while the goods  are  in  transit.   What is  important  is  that  the movement   of  goods  and  the  sale  must  be   inseparably connected.   The ratio of Balabhagas is this: if  the  goods move from one State to another in pursuance of an  agreement of sale and the sale is completed in the other State, it  is an  inter-State sale.  The observations relied upon  by  Sri Sehgal  do  not  constitute the ratio of  the  decision  and cannot  come to the rescue of appellant-State.   Indeed,  if one looks to the language employed in clause (a) of  Section 3  it  seems to suggest that the movement of  goods  follows upon  and  is  the  necessary consequence  of  the  sale  or purchase, as case may be, and not the other way round.      Sri Sehgal is equally not right in saying that movement of  goods  from  the  State of U.P.  to  other  State(s)  is immaterial and that the U.P. Legislature is competent to tax each and every purchase that takes place within that  State. Ordinarily,  it is so, but where a sale or purchase,  though effected within the State of U.P. occasions the movement  of goods  sold/purchased thereunder from the State of  U.P.  to other  State, it becomes an inter-State sale.  Such  a  sale cannot be taxed by the Legislature of Uttar Pradesh.  It  is taxable only under the Central Sales Tax Act, 1956.      Situation could have been different if the  respondent-

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dealer  had  purchased the goods on behalf  of  the  ex-U.P. principals in the first instance and thereafter in pursuance of subsequent instructions despatched the goods.  In such an event the instructions to despatch the goods are independent of  the instructions to purchase.  There is a break  between the  purchase  and despatch of goods.  It would  not  be  an inter-State  purchase.   An out-State  principal  may  first instruct  his commission agent within the State of  U.P.  to purchase  the goods on his behalf and to await  his  further instructions.   Depending  upon the  market  conditions  and other circumstances, the ex-State principal may instruct his agent in the State either to sell the goods within the State or to despatch the goods beyond the State.  If such were the case,  Sri Sehgal would have been right in saying  that  the State  of  U.P.  was competent to tax the  purchase  by  the respondent-dealer.   But  that is not the case here  on  the facts found by the appropriate authorities.      For  the above reasons, the Civil appeals fail and  are dismissed, but in the circumstances without costs.                                                      747      CIVIL APPEAL NO. 1534 OF 1990.      A   Further  question  arises  in  this  appeal.    The respondent-dealer,   who  is  situated  similarly   to   the respondent-dealer  in Civil Appeal No. 1809 of 1982,  issued Forms  III-C-I  and paid tax on the purchases  made  by  him under  the U.P. Sales Tax Act.  However, after the  decision of  the  Allahabad High Court in Human Trading  Company,  he claimed  refund of the tax paid by him and probably got  it, contending  that  the  purchases effected by  him  were  not assessable to tax under the U.P. Sales Tax Act.  He was then proceeded  against under Section 3-B of the U.P.  Sales  Tax Act which provides that if a person issues a false or  wrong certificate  or declaration prescribed under the  provisions of  the said Act and the rules thereunder to another  person by  reason of which "a tax leviable under this Act"  on  the transaction  is  not  collected (or collected  at  a  lesser rate),   then  the  person  issuing  such  wrong  or   false certificate/declaration  becomes himself liable to pay  such tax.   The case of the authorities was that the  respondent- dealer represented to the authorities by issuing Form III-C- I  that  the  purchases  effected  by  him  are  intra-State purchases  liable to be taxed under the State enactment  and thereby   prevented   the  authorities   from   taxing   the transactions  under  the  Central Sales Tax  Act;  he  must, therefore,  make good that tax amount.  Assuming  that  what the  authorities say is true, even so the  respondent-dealer cannot be proceeded against under Section 3-B for the reason that  the said Section applies to a situation where the  tax "leviable  under this Act" i.e., State Act, is  evaded.   It does  not  apply  where the tax payable  under  the  Central enactment  is  evaded.  This appeal has to be  dismissed  on this short ground alone, and is accordingly dismissed.      No costs. N.P.V.                                   Appeals dismissed.                                                      748