RATNAM, J.


In this revision petition preferred by the assessee, who is a registered dealer under the Central Sales Tax Act, 1956, relating to the assessment year 1969-70 (CST), the main question that arises for consideration is whether the turnover of Rs. 3, 51, 050.84 represents stock transfer to branches of the assessee outside the State of inter-State sales effected by the assessee. Before the assessing authority, the assessee claimed that the turnover of Rs. 3, 51, 050.84 represented transfer of goods by the assessee to its branches at Bombay, Calcutta and Delhi, etc., and therefore, this amount cannot be included in the taxable turnover. The assessing authority was of the view that as the goods delivered to the outside State buyers were the same as those despatched by the assessee to its branches and there was numerical similarity, there had been an appropriation of goods occasioned by the orders placed by the buyers in accordance with the principles laid down in Madras Rubber Factory Ltd. v. Joint Commercial Tax Officer and that the goods had been moved outside the State with reference to the orders secured by the branches and therefore the turnover of Rs. 3, 51, 050.84 cannot be treated as stock transfers, but would be liable to tax under the Central Sales Tax Act. Accordingly, the assessing authority negatived the claim for exemption put forth by the assessee. On appeal, the Appellate Assistant Commissioner found tat though no contracts had been entered into between the assessee and the buyers outside the State, yet, the very same goods intended for particular customers against order placed by them, had been sold to them by despatch of the goods from the head office of the assessee to its branches, the branches having acted as depots for proper delivery of the goods to the buyers and for collection of the sale proceeds. In that view, the decision in Madras Rubber Factory Ltd. v. Joint Commercial Tax Officer was held to apply and the inclusion of the turnover of Rs. 3, 51, 050.84 as representing inter-State sales was upheld. On further appeal to the Tribunal, it was of opinion that though the assessee had despatched the goods to its branches treating them as stock transfers and the branches had entered the goods so received in their stock registers, yet, such transactions had to be treated as inter-State sales, as the goods were ear-marked for particular customers and the circumstance that the contracts were entered into through the branches would not make any difference. The Tribunal therefore affirmed the conclusion of the authorities below that the turnover of Rs. 3, 51, 050.84 represented inter-State sales liable to tax.


2. The learned counsel for the assessee contended that the orders placed by the outside State customers with the branches were not despatched to the head office and there was no despatch of goods pursuant to such orders from the head office to the customer direct, but that the standard goods manufactured by the assessee were despatched to the branches, cleared by them, brought into their stock registers, stored in the godown and supplied to the local customers whenever demanded by them and therefore, the turnover in dispute cannot be treated as inter-State sales. Reliance in this connection was placed by the learned counsel for the petitioner on the decision in State of Tamil Nadu v. Hercules Rubber Co. On the other hand, the learned Additional Government Pleader submitted that the movement of the goods from the head office to the branches in the other States was only with a view to fulfil the orders of the customers there, and therefore, there was a link or nexus between the movement of the goods and the contract of the buyers which would suffice to make the transactions in question inter-State sales. Strong reliance was placed on the decisions in English Electric Company of India Limited v. Deputy Commercial Tax Officer English Electric Company of India Ltd. v. Deputy Commercial Tax Officer and South India Viscose Ltd. v. State of Tamil Nadu.


3. Before embarking upon a consideration of submissions, it would be necessary to notice section 3 of the Central Sales Tax Act, which is 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." *


The two explanations have no bearing on the present controversy. In the light of the aforesaid provisions, what has to be considered is whether on the feature attendant upon the despatch of goods in this case, the sales effected by the assessee occasioned the movement of goods from Tamil Nadu to other States, as, only if a sale occasions the movement of goods from one State to another, it can be deemed to have taken place in the course of inter-State trade or commerce within the meaning of section 3(a) of the Central Sales Tax Act. Clause (b) of section 3 is also not material for this case. The method and manner of the transfer of the goods by the assessee to its branches outside Tamil Nadu, as could be gathered from the records, appears to be as under. The stock transfer invoices are drawn on the branch at Bombay, Calcutta or Delhi. The goods are despatched to the branches, taken delivery of by them, entered in the stock register, stored in their own godowns and then made available to the local buyers against the order placed the order placed the orders placed by such buyers with the branch officer. It does not appear that there was any contract for the supply of goods by the head officer to the outside State customer or any other link or nexus with such a buyer, either in the matter of despatch of goods or delivery of the branch office. Thee goods transferred by the assessee to its branch office at Bombay, Calcutta or Delhi were all standard items manufactured by it in the ordinary course of its business and not against specific orders with a view to fulfil the requirements of any particular buyer. In none of these cases of despatch of goods, the assessee had directly despatched the goods to the buyers. These transactions culminating in the transfer of goods to the branches are of a type where goods manufactured in the ordinary course of the business of the assessee, have been despatched to the branch offices for being sold, as and when offers are received by the branch of the assessee for their purchase. Prima facie, therefore, having regard to the circumstances under which and the mode by which the goods were transferred by the assessee to its branch offices, the transactions have to be considered as bare and simple branch transfers and not inter-State sales effected by the assessee.


4. We now proceed to consider the decisions relied on. State of Tamil Nadu v. Hercules Rubber Co. relied on by the assessee had to consider the question whether the supply of good by the assessee therein, who was a manufacturer in Madras to the branch office at Vijayawada, which booked orders for the supply of goods to the local purchasers, would be inter-State sales. There also, the orders were placed at Vijayawada, but the goods were despatched from Madras, received by the branch at Vijayawada and handed over to the purchasers and the price realised. The assessing authority held these transactions to be inter-State sales; but the Appellate Assistant Commissioner and the Tribunal thought otherwise. In challenging the correctness of the order of the Tribunal, it was contended that even at the time of package and despatch of the goods, the name of the purchaser had been marked and that indicated that the movement of the goods was in respect of a contract of sale entered into with that particular purchaser. The decision in South India Viscose Ltd. v. State of Tamil Nadu was also relied on in this connection. This Court took the view on the facts that there was no nexus between the Madras Office and the purchaser in Andhra Pradesh and the markings would at best indicate that the goods were intended for a person who had entered into a contract of purchase with the branch office in Andhra Pradesh, but that would not finally determine or conclude the question as to the nature of the transaction. It was also further held that the mere marking of the name of the purchaser on the consignment when the lorry receipts under which they were despatched stood in the name of the branch office, would not, by itself, be sufficient to bring about or establish a contract of sale between the assessee and the buyer in Andhra Pradesh. Admittedly, in this case, there is no contract for the supply of goods between the assessee and the outside State buyer. Indeed, the Appellate Assistant Commissioner has found so. As earlier pointed out, there is also no other link or nexus between the assessee and the outside State purchasers. The goods despatched are ordinarily manufactured by the assessee in its usual course of business and not to cater to the needs of any particular customer according to his specifications. The goods had been despatched to the branch offices, stored in their godowns and then delivered to the local buyer against the enquiry or order. The invoices are also drawn only on the branch. However, in the course of the order, the Tribunal has observed that there is a manuscript writing containing the names of the customer, but that, as pointed out in the decision referred to earlier, is really of no consequence. It does not appear under what circumstances it came to be written and even if the name of the purchaser had been marked, that by itself would not be conclusive or decisive to bring about a contract of sale between the assessee and the buyer outside the State. Thus the decision in State of Tamil Nadu v. Hercules Rubber Co. would undoubtedly support the case of the assessee, particularly having regard to the method and manner in which the transactions have been put through. In English Electric Company of India Limited v. Deputy Commercial Tax Officer relied on by the Revenue, the assessee, a manufacturer in Madras, had a branch at Bombay. Enquiries were made by a local buyer in Bombay office for certain articles and the Bombay office in turn secured the particulars from the Madras office and thereafter, the buyer placed and order with the Bombay office, which prepared the indent and addressed it to the Madras office. After the goods were manufactured, the Madras office despatched the goods to the place of business of the buyer by train. The assessee contended that there was no contract between the assessee and the buyer, that the mere movement of goods from one State to another was not decisive, as the goods had been consigned to Bombay as a result of the instructions of the Bombay office, and that it should not be deemed to be a sale, but would amount at best to the replenishing of the stock from one branch to another. This contention was repelled on a consideration of the several steps taken from the commencement of the transactions between the Bombay and Madras offices. It was held that the Bombay office was merely acting as an agent between the Madras branch and the buyer, that it was the Madras branch, which pursuant to the covenant in the contract of sale, though forged by the Bombay office, caused the movement, of the goods from Madras to Bombay, that the movement was as a result of the contract of sale and that sale, would, therefore, be an inter-State sale. This decision was affirmed by the Supreme Court in English Electric Company of India Ltd. v. Deputy Commercial Tax Officer. In doing so, the Supreme Court laid emphasis upon the direct despatch of the goods by the assessee to the buyer at Bhandup, Bombay. There was, therefore, no question of diversion of the goods sent to the buyer at Bombay. Besides, in that case the goods were manufactured to the specifications of the buyer and despatched to him and it was under those circumstances, the Supreme Court held that there was a conceivable link between the movement of the goods and the contract of the buyer. It was also further pointed out that if in the course of the inter-State movement, the goods moved only to reach the buyer in satisfaction of his contract of purchase and such a nexus is otherwise inexplicable, then, the sale or purchase of the specific or ascertained goods ought to be deemed to have taken place in the course of inter-State trade or commerce, as such a sale or purchase occasioned the movement of the goods from one State to another, and it would not make any difference if an intermediary, like the seller's own representative or branch office intercepted in the delivery State. In this case as seen earlier, the goods sent were goods normally manufactured by the assessee and they had been despatched to the branch offices and not to the buyer. It cannot therefore be said that the goods moved in order to reach a buyer in satisfaction of a contract of purchase entered into between the buyer and the assessee. We are therefore of the view that having regard to the characteristics of the transactions in this case, the decision in the English Electric Company of India Limited v. Deputy Commercial Tax Officer affirmed by the Supreme Court in English Electric Company of India Ltd. v. Deputy Commercial Tax Officer would not be applicable. In South India Viscose Ltd. v. State of Tamil Nadu the Supreme Court held that if there is a conceivable link between a contract of sale and the movement of goods from one State to another, in order to discharge the obligation under the contract of sale, the interposition of an agent of the seller, who may temporarily intercept the movement, will not alter the inter-State character of the sale. The existence of a prior contract of sale directly between the appellant and the buyer was found. Besides, the goods were admittedly sent pursuant to that contract of sale. It was in that context, the Supreme Court pointed out that so long as there is direct contract of sale between the assessee and the buyer and goods were despatched pursuant to that contract, the interception of a selling agent at a later stage would not alter the true character of the sale, as the selling agent was mere a conduit pipe and the sale effected by the assessee would be inter-State sale, for the goods had been despatched from one State to another pursuant to a contract of sale which had come into existence directly between the assessee and the buyer. Such is not the situation in this case. There is no direct link established between the assessee at Madras and the buyers in Bombay, Calcutta and Delhi. This decision also cannot therefore be pressed into service by

the Revenue. 5. We may also pint out that the Supreme Court of India in Union of India v. K. G. Khosla and Co. Ltd. has made a distinction between a case where the goods manufactured in the ordinary course of business of the assessee for being sold as and when offers are received by the manufacturer at the branch offices for that purpose and the contracts of sale of specific goods manufactured pursuant to such contracts. In that case, goods were manufactured according to certain specifications at Faridabad. Though the goods could have been despatched to the buyer directly from Faridabad, they were moved to Delhi as better godown and rail facilities were available at Delhi. The contract pursuant to which the goods were moved had been finalised at Delhi. Under those circumstances, the movement of the goods from Faridabad to Delhi was held to be as a result of or an incidence of the contract of sale made in Delhi and would be an inter-State sale. In holding so, the Supreme Court recognised an exception in favour of cases where the goods are manufactured in the ordinary or general course of business and moved for being sold as and when the manufacturer receives offers for the purchase. We are of the opinion that having regard to the facts and the circumstances under which the goods have been moved in this case, it would fall within the exception recognised by the Supreme Court in the decision referred to earlier. We therefore hold that the turnover of Rs. 3, 51, 050.84 cannot be taken to represent inter-State sales effected by the assessee. The tax revision case is, therefore, allowed. There will, however, be no order as to costs.