1972 (4) TMI 84 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the agreements between the assessee and the distributors were for the distribution of goods between a principal and his agents or were agreements of sale between two parties.
2. Whether the movement of goods from Faridabad to Delhi was in pursuance of the distribution agreements and constituted inter-State sales.
3. Whether the authorities below erred in not examining each transaction independently.
4. Whether the Commissioner had jurisdiction to suo motu revise the order of the Deputy Commissioner.

Issue-wise Detailed Analysis:

1. Nature of Agreements:
The primary issue was to determine if the agreements between the assessee and the distributors (Spencer & Co. Ltd., Blue Star Engineering Co., and General Equipment Merchants Ltd.) were for mere distribution or constituted agreements of sale. The agreements included clauses that indicated the distributors were to buy all products manufactured by the company, and the property in the goods was to pass to the distributors only in Delhi upon delivery. The Tribunal concluded that these agreements were not just for distribution but were indeed agreements of sale. The clauses in the agreements, such as the rigorous inspection at the factory, the responsibility for transit damages, and the obligation to buy specific brands, indicated that the distributors were bound to purchase the goods, making these agreements contracts of sale.

2. Movement of Goods:
The Tribunal and the court examined whether the movement of goods from Faridabad to Delhi was occasioned by the distribution agreements, thus making them inter-State sales under Section 3(a) of the Central Sales Tax Act. The court found that the movement of goods was indeed in pursuance of the agreements, as the goods were appropriated to the contract at the factory in Faridabad. The rigorous inspection and the responsibility for transit damages further supported this conclusion. Therefore, the movement of goods from Faridabad to Delhi was directly occasioned by the agreements, making the sales inter-State sales.

3. Examination of Transactions:
The assessee contended that each transaction should have been examined independently to determine if it constituted an inter-State sale. The court, however, found that the agreements themselves provided sufficient basis to conclude that the movement of goods was occasioned by the sales agreements. The detailed clauses in the agreements and the consistent practice of moving goods from the factory to the Delhi godown for delivery to the distributors indicated that the transactions were inter-State sales.

4. Jurisdiction of Commissioner:
The Commissioner had revised the order of the Deputy Commissioner suo motu under Section 9(3) of the Central Sales Tax Act read with Section 21(1) of the Punjab General Sales Tax Act. The court upheld the Commissioner's jurisdiction to revise the order, as the agreements clearly indicated that the movement of goods was occasioned by the sales agreements, making them inter-State sales.

Conclusion:
The court concluded that the agreements between the assessee and the distributors were indeed agreements of sale, and the movement of goods from Faridabad to Delhi was occasioned by these agreements, making the sales inter-State sales. The Tribunal's decision to treat the transactions as inter-State sales was upheld, and the Commissioner's jurisdiction to revise the Deputy Commissioner's order was affirmed. The reference was answered in favor of the department, and no order as to costs was made.