M/S I.D.L. CHEMICAL LTD. versus STATE OF ORISSA

Citation: [2007] 12 S.C.R. 91 · Decided: 16-11-2007 · Supreme Court of India · Bench: A.K. MATHUR · Disposal: Dismissed

Judgment (excerpt)

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MIS. I.D.L. CHEMICAL LTD. 
A 
v. 
STATE OF ORISSA 
NOVEMBER 16, 2007 
[A. K. MATHUR AND MARKANDEYKATJU,JJ.) 
B 
Central Sales Tax Act, 1956: 
Inter-State sale-Pursuant to an order placed by Coal India Ltd. C 
consignment agents of asses see supplying goods to Collieries of CIL 
in different States against indent placed by Collieries~Assessee 
claiming the dispatches of goods 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 moved from factory and sold D 
to subsidiaries of CIL through assessee 's consignment agents were 
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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 
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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 of India & Ors., [1980) Supp SCC 426; and Union of India 
I 
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& Anr. v.Mls.K. G.Khosla & Co. Ltd. & Ors., [1979] 2 SCC 242, relied 
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on. 
English Electric Company of India Ltd. v. Deputy Commercial 
H Tax Officer, [1976) 4 SCC 460, referred to. 
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M/S.l.D.L.CHEMICALLTD. v. STATE[A.K.MATHUR,J.] 
93 
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A 
The Godhra Electricity Co.Ltd & Anr. v. The State of Gujarat 
& 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 
agents were essentially meant to be sold to the subsidiaries of CIL B 
and as sych, it amounted to inter-State sale as has been rightly held 
by the Division Bench of the High Cour

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