M/S HYDERABAD ENGINEERING INDUSTRIES versus STATE OF ANDHRA PRADESH

Citation: [2011] 3 S.C.R. 546 · Decided: 04-03-2011 · Supreme Court of India · Bench: D.K. JAIN · Disposal: Dismissed

Judgment (excerpt)

A 
B 
[2011] 3 S.C.R. 546 
M/S HYDERABAD ENGINEERING INDUSTRIES 
v. 
STATE OF ANDHRA PRADESH 
(Civil Appeal No. 3781 of 2003) 
MARCH 04, 2011 
[D.K. JAIN AND H.L. DATTU, JJ.] 
Central Sales Tax Act, 1956: 
c 
s.3(a) - Inter-State trade - Sales agreement between 
assessee and the purchaser - Movement of goods from one 
State to another State - Whether the sale can be regarded 
as sales in the course of inter-State trade, and, chargeable 
to tax under the Act - Held: For a sale to be in the course of 
0 inter-State trade or commerce uls.3(a), there must be sale of 
goods and such sale should occasion the movement of the 
goods from one State to another - A sale would be deemed 
to have occasioned the movement of the goods from one 
State to another within the meaning of clause (a) of s.3 when 
the movement of those goods is the result of a covenant or 
E incidence of the contract of sale, even though the property in 
the goods passes in either State - Mere transfer of goods 
from a head office to a branch office or an inter-branch transfer 
of goods cannot be regarded as sales in the course of inter-
state trade - In the instant case, there were prior contracts 
F between the purchaser and the assessee and in pursuance 
of those contracts, the goods moved from the assessee's 
factory at Hyderabad to its Branch offices to be delivered to 
the purchaser/their nominees - In pursuance to sales 
agreement, the purchaser placed monthly indents on the 
G assessee with instructions to dispatch the goods of given size 
and quantity to the named destination - Pursuant to such 
indents, the assessee dispatched the goods to its State 
godowns and the person-in-charge of the godowns to the 
pu_rchaser division office by raising sales invoice - Therefore, 
H 
546 
HYDERABAD ENGINEERING INDUSTRIES v. STATE 547 
. OF ANDHRA PRADESH 
the transaction between the assessee with its branch offices 
A 
was a clear case of inter-State sales within the meaning of 
s.3(a) and not branch transfers as claimed by assessee. 
s.2(g) - Sale of goods - Held: Includes agreement of 
sale of goods. 
· 
B 
Contract: Sale and agreement. of sale - Distinction 
between. 
The assessee, manufacturer of electrical fans ahd 
accessories, has its manufacturing units in different parts C 
of the country Including in Hyderabad, Andhra Pradesh. 
Outside the State of Andhra Pradesh, the assessee has 
its godown in different States. UIL-company has 16 
divisional offices at various places in the country 
wherever the assessee's godowns are located. The 
D 
assessee and UIL entered into sales agreement for a 
period of five years. Under the said agreement, the main 
function of UIL was to organize the sale and distribution 
of the products of the assessee and to arrange for sale 
promotion measures of the products and to provide after E 
sales service. The agreement also envisaged that UIL 
would purchase the said products as an independent 
principal and maintain adequate stocks and sell the same 
as such. 
· 
For tho assessment year 1981-82, the assessee filed 
F 
its annual returns under ttie Central Sales Tax Act. The 
assessee claimed exemt>tion on a turnover of Rs. 
8,87,75,643.00 towards goods transported to out-of-sjate 
depots on the ground that these transactions were not 
sales in the course of inter-State trade, and, therefore, not G 
. chargeable to tax under the Central Act. This contention 
of the assessee was n_egatived by the assessing 
authority, which view was confirmed by the Tribunaland 
the High Court. 
· 
H 
548 
SUPREME COURT REPORTS 
[2011] 3 S.C.R. 
A 
The question which arose for consideration in th& 
instant appeal was whether in the facts and 
circumstances of the case, the sale or purchase of goods 
could be said to have taken place in the course of inter-
state trade or commerce and thereby exigible to tax 
B under the Central Sales Tax Act, 1956. It was contended . 
for the assessee that the movement of the goods from 
the assessee's factory to its godowns situated outside 
the State was not in pursuance of the agreement between 
the assessee and UIL; that there was no firm commitment 
C between the assessee and UIL at the time of movement 
of the goods from the factory to the godowns; that the 
only communication between the assessee and UIL were · 
in the nature of forecasts; and the completion of the sale 
to the UIL did not take place at the factory place and the 
D appropriation of the goods were done at the godowns 
and it was ope

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