Holding

The CIL order is a purchase order and the supplies made in pursuance of it are inter‑State sales liable to Central Sales Tax.

Summary

M/s IDL Chemicals Ltd., a manufacturer of explosives, supplied goods to Coal India Ltd.'s collieries in several states through its consignment agents. The company claimed that dispatches from its Rourkela factory to the agents were merely stock transfers and not inter‑State sales under the Central Sales Tax Act, 1956, arguing that the CIL order of 24‑Sept‑1976 was only an agreement to sell. The Supreme Court examined the nature of that order and held it to be a firm purchase order fixing price and quantity, which triggered the movement of goods. Consequently, the supplies to CIL subsidiaries were inter‑State sales liable to Central Sales Tax. The appeal was dismissed.

Issues considered

The nature of the CIL order dated 24‑Sept‑1976: whether it was a purchase order or merely an agreement to sell.
Whether the movement of goods from the factory to consignment agents constitutes a stock transfer or an inter‑State sale under the Central Sales Tax Act, 1956.
Whether the transaction falls within Section 3(a) of the Central Sales Tax Act.
Whether the indents placed by CIL collieries constitute a separate contract of sale.

Legislation cited

Central Sales Tax Act, 1956s. 3(a)

Subjects

Central Sales Taxinter‑State salepurchase orderstock transferconsignment agentsCoal India Ltd.explosivesSection 3(a)tax jurisdiction

Judgment

/
t

' MIS. I.D.L. CHEMICAL LTD.
v.
STATE OF ORISSA
A

NOVEMBER 16, 2007
B
[A. K. MATHUR AND MARKANDEYKATJU,JJ.)

Central Sales Tax Act, 1956:
Inter-State sale-Pursuant to an order placed by Coal India Ltd. C
consignment agents ofasses see supplying goods to Collieries of CIL
in different States against indent placed by Collieries~Assessee
claiming the dispatches ofgoods by it from its factory in one State to
its consignment agents in other States as stock transfer and not inter-
State sale-HELD: On facts, goods which movedfrom factory and sold D
to subsidiaries of CIL through assessee 's consignment agents were
-: essentially meant to be sold to subsidiaries in different States and it
amounted to inter-State sale liable to be assessed for Central Sales
Tax.
The assessee, a manufacturer of explosives and detonators E
having its manufacturing unit at Rourkela in Orissa, in pursuance
of the order dated 24.9.1976 placed by Coal India Ltd. supplied its
products to different collieries of CIL in the States of Madhya
Pradesh, Bihar, West Bengal and Orissa through its various
) consignment agents in the respective States against the indents F
placed by various collieries of the CIL. The claim of the assesse was
that the dispatches by the assessee from its factory at Rourkela in
Orissa to its consignment agents at places outside the State ofOrissa
were stock transfers and were not liable to be assessed to tax under
the Central Sales Tax Act, 1956 as the sales took place when the G
supplies were made to the collieries against the indents placed by
them with its consignment agents. The Division Bench of the High
Court by way of a reference held in favour of the Revenue.
In the instant appeal filed by the assessee, it was contended
91 H
I
1
92 SUPREME COURT REPORTS [2007] 12 S.C.R.

A for the appellant that the order dated 24.9.1976 placed by the CIL
,
for various purchases was not a purchase order but it was only an
agreement to supply certain quantity of goods to various collieries
ofCIL, and in fact the order was only an agreement to sell and not
a sale order and, therefore, the same cannot be treated as inter-
B State sale.
Dismissing the appeal, the Court

HELD: 1.1. The order dated 24.9.1976 is definitely a purchase
order. In the said order, the nature ofindent and the modalities were
C agreed, the quantity of the goods to be supplied to various collieries
at fixed price was firm, the insurance and freight was to be borne by
CIL and 98% of the payment was to be made by the collieries of
CIL. All supplies were made in pursuance of the said order of CIL.
Therefore, that was fountain head from where all supplies followed.
D In fact both the parties understood that way only and paid CST for
sometime but subsequently discontinued. Therefore, from this it
follows that the whole movement of the goods from the factory at
Rourkela was triggered in pursuance of the order dated 24.9.1976.
There was no independent contract by the subsidiaries of CIL with
E the appellant. The subsidiaries were issuing indents on the agents
of the appellant in pursuance of the order dated 24.9.1976.
Therefore, it is a purchase order issued by the apex body, CIL and
in pursuance of this, indents were placed by the collieries. It was a
convenient mode of supply by the appellant instead of directly
F supplying the goods from the factory. This was not transfer of stock
in trade to various branches. (Para 6) (100-E-H; 101-A-F)

South India Viscose Ltd. v. State of Tamil Nadu, [1981) 3 SCC
457; Sahney Steel and Press Works Limited & Anr. v. Commercial Tax
Officer & Ors., [1985) 4SCC173; Indian Oil Corporation Ltd. & Anr.
G v. Union ofIndia & Ors., [1980) Supp SCC 426; and Union ofIndia
& Anr. v.Mls.K. G.Khosla & Co. Ltd. & Ors., [1979] 2 SCC 242, relied \
on.
English Electric Company of India Ltd. v. Deputy Commercial
H Tax Officer, [1976) 4 SCC 460, referred to.
I
}-
M/S.l.D.L.CHEMICALLTD. v. STATE[A.K.MATHUR,J.] 93

' The Godhra Electricity Co.Ltd & Anr. v. The State of Gujarat A
& Anr., [1975] 1SCC199; andAshokLeyland Ltd. v. State o/TN. &
Anr., [2004] 3 SCC 1, cited.
1.2. On facts, the goods which were triggered from Rourkela
and sold to the subsidiaries ofCIL through appellant's consignment
B
agents were essentially meant to be sold to the subsidiaries of CIL
and as sych, it amounted to inter-State sale as has been rightly held
by the Division Bench of the High Court. [Para 10] [104-E-F]
2. The authorities will go into the factual aspects and find out
how much ofthe quantity of the goods were sentto the undertakings c
other than the subsidiaries of CIL and assess tax on the supplies
which were made to the subsidiaries ofCIL as inter-State sale.
[Para 11] [104-G]
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5272 of
D
, 2007.
l
From the final Judgment and Order dated 11.4.2006 of the High
Court ofOrrisa at Cuttack in S.J.C. No. 229of1995 & STREY No.
14 of2006.
E
S. Ganesh, S. Sukumaran and K. Rajeev for the Appellant.
Rakesh Dwivedi, Amit Singh, Shantanu Krishn~ Mukti Chaudhary,
Gaurav Liberhan, Poonarn Singh and Kirti Renu Misra for the Respondent.

-! The Judgment of the Court was delivered by
F
A.K. MA THUR, J. 1. Leave granted.
2. This appeal is directed against the order passed by the Division
Bench of the Orissa High Court dated 11.4.2006 whereby the High Court
has reversed the finding of the Orissa Sales Tax Tribunal.
G
) 3. Brief facts which are necessary for disposal of this appeal are
that the assessment under the Central Sales Tax Act, 1956 for the years
1976-77, 1977-78 to 1983-84, 1989-90 and 1990-91 was made in
respect of assessee, Mis. IDL Industries (formerly IDL Chemicals Ltd.),
a company under the Indian Companies Act having its registered office H
94 SUPREME COURT REPORTS [2007] 12 S.C.R.

A at Kukatpalli, Andhra Pradesh engaged in manufacturing explosive, f
detonators and accessories and holding licence under the Explosive Act,
1984. It has a manufacturing unit at Sonaparbet near Rourkela in Orissa
which is also registered under both Orissa Sales Tax Act, 1947 and the
Central Sales Tax Act, 1956 with the Sales Tax Officer, Rourkela I Circle,
B Rourkela. M/s. IDL Chemicals Ltd. is a regular supplier of its products
to different Government undertakings such as the Coal India Limited
(hereinafter to be referred to as 'CIL '),National Mineral Development
Corporation, Hindustan Zinc Limited etc. and supplies to these
undertakings constituted almost 90 per cent of its total production. CIL
c placed orders on the appellant for supply of explosive, detonators,
accessories etc. for its collieries inside and outside the State of Orissa with
a stipulation that delivery should be made against the indent placed by
the collieries. The appellant has its consignment agent at different places
out5ide the State. During the assessment years in question the appellant
D effected supplies through its consignment agents against indents placed by
the collieries and for this purpose it claimed to have dispatched the goods
to its consignment agents on stock transfer basis otherwise than by way
of sale. The contention of the appellant was that dispatches from its factory
at Rourkela were stock transfers and were not liable to be assessed to
E tax under the Central Sales Tax Act as the sales took place when the
supplies were made to the collieries against the indents placed by them
with their consignment agents. It may be relevant to mention here that the
appellant has its consignment agents in various States like Madhya
Pradesh, Bihar, West Bengal and Maharashtra. All the goods were sent
F to their consignment agents and from there those goods were dispatched
to various collieries of CIL. Therefore, it was not inter-State sale. As
against this, it was contended on behalf of the State before the High Court
that the supplies were made on account of the order placed by CIL and
the movement of the goods from the State of Orissa to outside States
was incident of the CIL's order for supply. The transactions were purely
G inter-State sale from the State of Orissa, as the appellant would not have
dispatched the goods outside the State for delivery to the collieries, had
there been no order of CIL. It was also contended on behalf of the State
that the indents were not contract of sale and that the indents placed by
the collieries were simple follow up action of the purchase order of CIL
H
M/S.I.D.L.CHEMICALLTD. v. STATE[A.K.MATHUR,J.] 95
/

dated 24.9.1976. A
4. We need not refer to various orders that were placed from time
to time by the CIL or otherwise. This matter was taken up by way of
reference by the High Court and the following questions of law were
referred.
B
" (1) That in view of the quotation offered by the assessee
company and supply order issued by M/s.CIL indicating the firm
order of rate of payment, quality to be purchased, period of
contract etc. on acceptance of the offer, whether the Sales Tax
Tribunal was correct in law to hold that it was not the contract of c
sale but the actual purchase and sale was triggered only when a
colliery placed indent with M/s.IDL Chemicals?
(2) That in view of the fact that M/s.IDL Chemicals moved goods
in pursuance to the supply order placed by Mis. CIL, whether the
Sales Tax Tribunal was correct in law to hold that the transactions D
Jo not constitute sale falling U/s. 3(a) of the C.S.T. Act?
(3) That in view of the fact that the indents placed by the
constituents ofM/s.IDL was mere indents to take delivery of the
goods, whether the Sales Tax Tribunal as correct to hold that the E
actual sales were triggered by such indents and taken place inside
the respective State and were intra-State sale subject to levy of
tax under the of that State ?"
5. The basic question which calls for determination is whether the
order placed by CIL amounted to sale triggered by CIL order or was an F
agreement to sell. On 24.9.1976 CIL placed order for supply of
explosives and detonators to its collieries. This is a crucial document from
which it would be clear whether it was an agreement to sell or it was a
purchase order on behalf of CIL. The supply of these goods was triggered
by the appellant to its consignment agents at various places and from there G
the explosives and detonators were supplied to the collieries of CIL.
Therefore, whether the sale was within the State or the sale was inter-
State. This is the only question which has to be answered by us.
6. Mr. Ganesh, learned senior counsel for the appellant strenuously H
96 SUPREME COURT REPORTS [2007] 12 S.C.R.

A urged before us that the order placed by the CIL dated 24.9.1976 for
various purchases was not a purchase order but it was only an agreement
to supply certain quantity of explosives and detonators to various collieries
of CIL. There was no firm quantity and it was only approximate and it
was subject to change. Therefore, this order was only an agreement to
B sell and not a sale order. It cannot be said that the goods triggered from
Rourkela to various consignment agents in pursuance of the order dated
24.9.1976, this cannot be treated as inter-State sale. It was therefore,
contended that the finding arrived at by the Sales Tax Tribunal and the
Sales Tax authorities was finding of fact and the High Court should not
c have interfered with the matter. In support of that learned senior counsel
invited our attention to various decisions of this Court to which we will
advert at appropriate stage. As against this, Mr. Rakesh Dwivedi, learned
senior counsel appearing for the respondent- State of Orissa submitted
that the supply of explosives and detonators triggered in view of the order
D placed by the CIL on 24.9.1976 and it was only the modus operandi of
supply of all these explosives and detonators to various collieries through
the consignment agents ofM/s. IDL Chemicals Ltd .. In fact the whole
purchase emanated by virtue of the sale order passed on 24.9.1976.
Therefore, the order dated 24.9.1976 should be construed as a sale order,
E as firm order was passed by the CIL and the goods moved in pursuance
of that order only. Mr. Dwivedi also contended that fright were charged
on the goods supplied to the collieries and insurance was paid by CIL.
Therefore, it was inter-State sale. Before we proceed to examine various
contentions referred to by both the sides, let us first examine the nature
F of the order dated 24.9.1976 placed by CIL. The order passed by CIL
on 24.9.1976 reads as under:
"COAL INDIA LIMITED
MATERIAL MANAGEMENT WING
15, PARK STREET,
CALCUTTA-700016.
G
Order No.CIL/C-2(0)/EXPL/IDL/5 l 7 Dated:24th Sept.'76
M/s.IDL Chemicals Limited High Explosive Division
Kukatpalli Rourkela-7

H
I
> M/S.l.D.L. CHEMICAL LTD. v. STATE[A.K.MATHUR,J.] 97
/

~
Post Bag No. I A
Hyderabad (A.P.)
Dear Sirs,
"''
Sub: Supply of Explosives, Detonators and Detonting/Safety fuses
to Coal India Ltd's collieries for The period 1-6-76 ti B
31.05.1997.
Ref: Your letter dated SD/APM/ dated 6-4-1976 and Your
subsequent letter and discussions.
Please supply the quantities of Explosives, Detonators and
Detonating/ safety fuses to the collieries of different areas as per
c
their indents. The total quantities have been given in the enclosed
schedule-I, II, III & IV. These are to be dispatched by Goods/
Passenger train 'Freight Paid' and/ or by road.
The Unit prices of the Explosives, Detonators and Detonating/ D
Safety fuses shall be as shown in Schedule-V attached herewith.
'7 Prices for non-permitted explosives, detonators and detonating/
safety fuses have not yet been finalized by DGS & D. Till
finalization, the prices given in Schedule V for these items will
prevail. If there is any deliveries/ dispatches should be made E
according to requisitions made from time to time by the different
colliery authorities and adjusted against the respective colliery's
account.
In case of Road delivery by your Van for supplies of Explosives
; the Van delivery charge shall be paid extra as shown in Schedule F
V enclosed herewith and mileage, covered by such Van shall be
recorded on the relevant invoices. For supplies of all types of
Detonators to CIL' s collieries situated in Bihar and District of
Burdwan, West Bengal, you shall not charge any transport charge.
G
Security Deposit : You are exempted from furnishing any deposit.
I
Insurance: Transit Insurance will be effected on us.
Dispatches :
H
98 SUPREME COURT REPORTS [2007] 12 S.C.R. ~
'-

A (a) Railway freight charges will be paid extra at actual Subject to
clause given in Schedule V.
(b) Actual Wagon deposit charges should be refunded if
Cancellation of such Wagon arises due to our instructions.
B (c) Excess supply made, if any, shall be acceptable to the extent
of 15% over the quantities against each item in respect of each
item in respect of each area as indicated in Schedules I to IV.
(d) Quantities of Explosives, Detonators and Detonating/ safety
fuses supplied on and from 1.06. 76 should be adjusted against
C this order and all supplies so made on and from 1-6-76 should
be governed by the terms and conditions of this supply order.
Price Variation:
Prices of explosives, detonators and accessories are finn for the
D contract period. In case of any reduction in prices for non-
permitted, explosives and accessories in the new DGS & D
contract, these will however, be applicable to this order. The new
prices of explosives given in this order take into account the
increase in prices of ammonia which took place from the 23rd Jl111e,
E 1976. In the event of any further substantial increase or decrease
in the price of Ammonia the explosive prices may be subject to
upward or downward revision at actuals on the basis ofjustification
to be provided by the manufacturer and accepted by CIL.
Notice of one month be given where revision in prices and delivery
F
as well as packing and forwarding charges in tenns of the above
para is contemplated. Any supply made during the notice period
will be paid for at the current prices and rates.
Discol111t:
G You will give 1 (one) percent rebate on the current prices for and
off-take exceeding 9000 tonnes on the full quantities of explosives
ordered. The rebate will be given on each invoice of supply as
and when supplies are made against this order. The rebate will be
applicable from 1-6-1976 for all supplies made from that date.
H
/J
t M/S.l.D.L. CHEMICAL LTD. v. STATE[A.K.MATHUR,J.] 99

i Please arrange to give credit notes for the past supplies made from A
1-6-76. Respective General Managers are requested to be
contacted for Monthwise allocation of Explosives and Accessories.
IDL Chemicals Limited, and/ or their consignment agents namely
Mis. B.P. Agarwalla & Sons (P) Ltd., P.O.Dhansar, Dist-
Dhanbad, (ii) Mis. William Jacks & Co (India) Pvt. Ltd. Asansol/ B
Calcutta and (iii) Abdul Hussain Mulla Allabuxji, Nagpur, will
supply explosives and accessories to mines on the basis of
convenience and locations. Mines will follow the existing system
of drawing their requirements from IDL and/ or their consignment
agents who will raise the bills accordingly and payments will be c
made by cheques drawn in favour ofIDL Chemicals Ltd.
Instructions contained in the attached Schedule VI should be
strictly and invariably followed.
Please acknowledge receipt of this order. D
Yours faithfully
1
Sd/-
(S.V. Gununoorthy)
Chief Controller of Stores & Purchase."
E
The important feature of thisorder is that all the Managers of the Collieries

.' , in the three States will have to place order with the consignment agents
ofIDL Chemicals from their depots. This is a modality adopted by the
appellant with a view to dispatch their goods from Rourkela to various
consignment agents and from there all the collieries ofCIL are bound to
)
F
purchase through their agents mentioned in the order above. Though each
colliery has to give its indents for purchase of explosives, detonators etc.
as per the requirement but the fixed quantity has been given in the schedule
appended to this order. The transit insurance was to be borne by the
collieries. The mode of dispatches was also mentioned. It further says
that excess supply made, if any, shall be acceptable to the extent of 15% G
over the quantities against each item in respect of each area as indicated
in Schedules I to IV. The price is firm for contract period. Then there is
a clause of price variation also. The respective General Managers are to
be contacted for month-wise allocation of explosives. IDL Chemicals
H
100 SUPREME COURT REPORTS [2007] 12 S.C.R. -\ ,,

A Limited, and/ or their consignment agents namely Mis. B.P. Agarwalla &
Sons (P) Ltd., P.O. Dhansar, Dist- Dhanbad, (ii) Mis. Willian1 Jacks &
Co (India) Pvt. Ltd. Asansol/Calcutta and (iii) Abdul Hussain Mulla
Allabu.xji, Nagpur (Maharashtra), will supply explosives and accessories
to mines on the basis of convenience and locations against this order. Mines
B 'l'iill follow the existing system of drawing their requirements from IDL and/
or their consignment agents who will raise the bills accordingly and
payments will be made by cheques drawn in favour ofIDL Chemicals
Ltd. Instructions contained in the attached Schedule VI should be strictly
and invariably followed. Copy of this letter was sent to all over respective
c collieries. Therefore, what it transpires is that all collieries of CIL were
under an obligation to purchase the explosives, detonators etc. from the
appellant only through their agents situated in the States of West Bengal,
Bihar and Maharashtra and each colliery has been given the quantities of
explosives, detonators and detonating/ safety fuses to be purchased from
the appellant only at the price fixed. This purchase order was issued from
D the apex body i.e. the CIL to its subsidiaries i.e. the collieries spreading
over these three States. They cannot purchase the goods from any other
company other than the appellant. Therefore, this firm order issued by
the CIL is in the nature of purchase order specifying the quantities and
the price thereof. It was only the convenient mode of supply, instead of
E sending the goods directly from Rourkela to various States. This
convenient device was worked out by the appellant and CIL so that the
goods need not directly be sent from the company at Rourkela but would
be sent through their agents in various States. This order is definitely a •
purchase order, the nature of indent and the modalities were agreed, the
F quantity of the goods to be supplied to various collieries at fixed price
"'"
was finn, the insurance and freight was to be borne by CIL and 98% of
the payment was to be made by the collieries of CIL. From these facts it
appears that this was a purchase order issued by the apex body, CIL by
fixing the price and the quantities to be purchased by their collieries.
G Various other evidence was produced to show that in fact there was
independent transaction with the subsidiaries and the consigmnent agents
of the appellant and the order dated 24.9.1976 does not constitute a firm
purchase order. But we regret that cannot be of any avail for the simple
reason that all supplies were made in pursuance of the order of the CIL.
Therefore, that was fountain head from where all supplies followed. If the
H
,} MIS. l.D.L. CHEMICAL LTD. v. STATE [A.K. MATHUR,].] 101

I terms of the order is to be construed as purchase order, then other A
evidence is secondary and irrelevant. In fact both the parties understood
that way only and paid CST for sometime but subsequently discontinued.
Therefore, from this it follows that the whole movement of the goods from
the factory at Rourkela was triggered in pursuance of the order dated
24.9.1976. There was no independent contract by the subsidiaries of CIL B
with the appellant. The subsidiaries were issuing indents on the agents of
the appellant in pursuance of the order dated 24.9.1976. In fact the
appellant instructed its consignment agents to supply the goods to the
collieries as per the indents placed by them. The collieries were also asked
by the very same order that they would place their indents to the C
consignment agents of the appellant on the price fixed in this order and
the quantity mentioned therein. Therefore, it is not a case in which there
wits any independent contract between the subsidiaries of CIL with that
of the appellant. It is in pursuance of this order dated 24.9.1976 the
collieries were placing their indents for supply of the goods and the
payment was made on the basis of the terms and conditions fixed in the D
order dated 24.9.1976. Therefore, the goods were moved from the
appellant's factory for supply to CIL in pursuance of this order. We need
not go into various evidence produced as we are of opinion that the order
dated 24.9.1976 is a purchase order and in pursuance of this order all
the indents were issued by the collieries of CIL and the payment was made E
as per this order and approximate quantity was fixed by this order.
Therefore, it is a purchase order issued by the apex body, CIL and in
pursuance of this, indents were placed by the collieries, It was a convenient
mode of supply by the appellant instead of directly supplying the goods
from the factory. This was not transfer of stock in trade to various F
branches. Hence, this was a firm order of purchase and the goods were
dispatched from Rourke!a to various consignment agents and from their
it was supplied to various collieries.
7. Mr. Ganesh, learned senior counsel for the appellant submitted
that all the I 00% of the goods were not supplied to CIL but to various G
other public sector undertakings. That may be so, but the fact of the matter
is that substantial quantities have been supplied to the subsidiaries of CIL
to the extent of75%. However, it was contended that 95% of the supply
was made to the subsidiaries of CIL. That is a matter of evidence but it
H
102 SUPREME COURT REPORTS [2007] 12 S.C.R.

A is beyond the dispute that major quantity of the goods were supplied to
the subsidiaries of CIL. Mr. Ganesh, learned senior counsel alternatively
submitted that 30 to 35 % of goods were supplied to other public
undertakings. This is a matter of evidence and we need not to go into
that question. But the substance of the matter is that major portion of the
B goods were supplied to the subsidiaries ofCIL and only a small quantity
was supplied to other public sector undertakings.
8. Both learned senior counsel for the parties have invited our
attention to various decisions of this Court. In some cases after review of
facts it was found to be inter-State sale and in some other cases it was
C found that it was a case of inter-State sale. No useful purpose will be
served to refer to those judgments because each case had its peculiar
facts. But the case which is nearer home is a case in South India Viscose
Ltd. v. State of Tamil Nadu, [1981] 3 SCC 457. In this case, sale of
goods from seller's factory in Tamil Nadu to buyers residing in Gujarat
D and Maharashtra was effected in pursuance of a direct contract between
the seller and the buyers and it was found to be inter-State sale. It was
observed that mere fact of inter-position of the seller's agent at Bombay
who prepared invoices and delivery orders for and on behalf of the seller,
would not change the nature of the sale. It was further observed that if
E movement of goods delivered to the buyer was occasioned by the contract
of sale, the mere fact that the actual sales pursuant to the contract were
effected.subsequently is immaterial. Their Lordships observed as follows:
" If there is a conceivable link between a contract of sale and
the movement of goods from one State to the other in order to
F discharge tl1e obligation under the contract of sale, the inter-position
of an agent of the seller who may temporarily intercept the
movement ought not to alter the inter-State character ofilie sale."
9. In Sahney Steel and Press Works Limited & Anr. v.
G Commercial Tax Officer & Ors., [1985] 4 SCC 173 it was observed
that movement of the goods from Hyderabad to the branch office was
only for the purpose of enabling the sale by the branch office and was
not in the course of fulfillment of the contract of sale. But this \Vas negatived
by this Court. This Court observed tlmt it appears that ilie movement from
the very beginning from Hyderabad all the way until delivery is received
H
M/S.l.D.L.CHEMICALLTD. v. STATE[A.K.MATHUR,J.] 103

by the buyer is an inter-State movement. Relying on an earlier decision A
in English Electric Company ofIndia Ltd. v. Deputy Commercial Tax
Officer, [1976] 4 SCC 460, their Lordships held that it amounts to inter-
State sale. Their Lordships observed as follows :
" What is decisive is whether the sale is one which occasions
the movement of goods from one State to another. It was also B
pointed out that the branches had no independent and separate
entity, that they were merely different agencies, and even where a
branch office sold the goods to the buyer it was a sale between
the Company and the buyer. It is true that in that case the goods,
on manufacture at the Madras branch factory, were directly C
dispatched to the Bombay buyer at his risk and all prices were
shown F.O.R. Madras, and the goods were delivered to the
Bombay buyer at Bhandup through clearing agents. In the instant
case, the goods were dispatched by the branch office situated
outside the State of Andhra Pradesh to the buyer and not by the D
registered office at Hydrabad. In our opinion, that makes no
difference at all. The manufacture of the goods at the Hydrabad
factory and their movement thereafter from Hydrabad to the
branch office outside the State was an incident of the contract
entered into with the buyer, for it was intended that the same goods E
should be delivered by the branch office to the buyer. There was
no break in the movement of the goods. The branch office merely
acted as a conduit through which the goods passed on their way
to the buyer. It would have been a different matter ifthe particular
J goods had been dispatched by the registered office at Hyderabad F
to the branch office outside the State for sale in the open market
and without reference to any order placed by the buyer. In such a
case if the goods are purchased from the branch office, it is not a
sale under which the goods commenced their movement from
·Hyderabad. It is a sale where the goods moved merely from the
branch office to the buyer. The movement of the goods from the G
registered office at Hyderabad to the branch office outside the
State cannot be regarded as an incident of the sale made to the
buyer."
This case clinches the issue and we need not multiply other cases as the H
104 SUPREME COURT REPORTS [2007] 12 S.C.R.

A facts of this case are nearer home.
10. Mr. Ganesh, learned senior counsel for the appellant has also
referred to various decisions which have peculiar facts but the case of
Sahney Steel & Press Works Ltd. (supra) is nearer home and therefore
it will not be necessary to multiply each case and unnecessarily overburden
B the judgment. Suffice it to say that one case which supports the view which
we have taken and which has been relied on by the High Court also.
Another case which is on the same line is Indian Oil Corporation Ltd.
& Anr. v. Union ofIndia & Ors., [1980] Supp SCC 426. Similar is the
case in Union ofIndia & Anr. v. Mis. K. G. Khosla & Co. Ltd. & Ors.,
C [1979] 2 SCC 242. Mr. Ganesh, learned senior counsel for the appellant
has also submitted that the Court should also look at as to how the parties
have understood the agreement and in support thereof placed reliance on
a decision of this Court in The Godhra Electricity Co. Ltd. & Anr. v.
The State of Gujarat & Anr., [1975] 1 SCC 199 and also submitted
D that the finding of fact recorded by the Tribunal should not have been
interfered with by the High Court and also invited our attention to a
decision of this Court in Ashok Leyland Ltd. v. State of TN & Anr.,
[2004] 3 sec 1 in support of his contention that the goods were not
subjected to inter-State sale. It is not necessary to go into all these facts
E as we have already held above on factual aspect that the goods which
were triggered from Rourkela and sold to the subsidiaries of the CIL
through the appellant's consignment agents were essentially meant to be
sold to the subsidiaries of the CIL and the goods primarily triggered from
Rourkela and were sent to the subsidiaiies of the CIL amounted to inter-
F State sale and the view taken by the Division Bench of the Orissa High l

Court is correct.
11. Before we part with this case we may observe that the auth01ities
will go into the factual aspects and find out how much of the quantity of
the goods were sent to undertakings other than the subsidiaries of CIL
G and assess tax on the supplies which were made to the subsidiaries of
CIL as inter-State sale.
12. As a result of our above discussion, we do not find any merit in
this appeal and the same is dismissed. No order as to costs.
I-I RP. Appeal dismissed.