SOUTH INDIA VISCOSE LTD. versus STATE OF TAMIL NADU

Citation: [1982] 1 S.C.R. 44 · Decided: 22-07-1981 · Supreme Court of India · Bench: R.S. PATHAK · Disposal: Dismissed

Judgment (excerpt)

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SOUTH INDIA VISCOSE LTD. 
,., 
STATE OF TAMIL NADU 
July 22, 1981 
[R.S. PATHAK AND E.S. VENKATARAMIAH, JJ.] 
Central Sales Tax Act, 1956-Section 3 ( a)-Scope of-Goods manufactured 
in Tamil -Nadu sold to huyurs in other neighbouring States through an agent in 
Bombay-Firm contract, under the systern of distribution. completed after the 
supply of goods to buyers-Situs of sale-Sale if attracts Central Sales Tax under 
section 3 (a). 
To regulate the allotment of indigenous art silk yarn, the Government of 
India constituted the Art Silk Yarn Distribution Committee which issued allot-
ment cards to individual weavers. 
Under the terms of the card without waiting 
for the allottee to approach the manufacturer the manufacturer had to offer the 
allottee art silk yarn within seven days of the date of allocation of the card and 
within a period of 2 l days from the date of allocation of the card, a firm contract 
for the supply of yarn was to be completed. 
The appellant, a nianufacturer or art silk yarn with its factory in the State 
of Tamil Nadu, supplied yarn to cardholders in the States of Maharshtra and 
Gujarat by delivering the goods at Bombay through its selling agent at that 
place. 
On the question of exigibility of the goods to Central Sales tax the appellant 
clai1ned that since the goods were despatched to Bombay at the request of the 
agent and not as a result of any sale in favour of the purchaser the sale had 
taken place at Bon1bay, and secondly since the movement of goods from the 
State of Tamil Nadu to Bombay \Vas not connected with the sales the sales were 
not inter.State sales within the meaning of section 3 (a) of the Central Sales Tax 
Act. 
This claim was rejected by the Joint Com1nercial Tax Officer and his order 
was upheld at the different stages of app~al. The High Court dismissed the 
appellant·s revision petitions. 
On the question whether the sales were inter-State sales, the Cour,i 
HELD : The goods having been despatched from one State to another 
pursuant to a contract of sale that came into existence directly between the buyer 
and seller within a few days after the date of the allocation card, the sale was an 
inter-State sale. 
To constitute an inter-State sale within the meaning of section 3(a) :or the 
Central Sales Tax Act there must co-exist a sale of the goods and movement of 
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S.l. VISCOSE LTD. V. TAMIL NADU 
45 
goods from one State to another under the contract of sale. 
Where there is a 
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link between a contract of sale and movement of goods fro.m one State to another 
pursuant to the contract of sale, interposition of an agent ought not to alter the 
inter.State character of the sale. [49·F] 
In the instant case the card contemplated a contract of sale to be completed 
within 21 days of the dat~ of its issue. The agent requested the appellant to 
despatch certain number of cases to a purchaser and that was done. The!.e facts 
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cumulatively suggest that the goods had been 'transported from the factory in 
Tamil Nadu to Bombay for being delivered to the purchaser as a result of contract 
of sale established in accordance with the terms of the allocation card. 
[ 49-G-50-B; E] 
The fact that actual sale pursuant to the said contract had taken place subse-
quently does not militate against the transaction being treated as an inter-State 
sale under section 3(a) because the movement of goods delivered to the buyer was 
occasioned by the contract of sale brought into existence under the terms of the 
allocation card. [51-E] 
The authorities below have found, on the basis of the terms of the allocation 
card and other material on record, that there was a contract of sale within the 
stipulated time between the parties. [51-GJ 
English Electric Company of India Ltd. v. The Deputy Commercial Tax Officer 
& Ors., (1976) 38 S.T.C. 475, followed. 
Tata Engineering and Locomotive Co. Ltd. v. Assistant Comn1issioner of 
Co1nmercial Taxes. Jamshedpur & Anr. (1970) 26 S.T.C. 354 and Kelvinator of 
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India Ltd. v. State of Haryana (1973) 32 S.T.C. 629, held inapplicable. 
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CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 1192-94 of 
1971. 
From the judgment and order dated the 20th October, 1976 
of the High Court of Madras in Tax Cases Nos. 205 to 207 of 
1971. 
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S. T. Desai, A.K. Verma and J.B. D.1dacha11ji for the Appellant. 
A.K. Sen and A.V. Rangam for the Respondent. 
The Judgment of the Court was delivered by 
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VENKATARAMIAH J. The 

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