STATE OF TAMIL NADU versus DHARANGADHARA TRADING CO. LTD.

Citation: [1988] 3 S.C.R. 805 · Decided: 03-05-1988 · Supreme Court of India · Bench: R.S. PATHAK · Disposal: Dismissed

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Judgment (excerpt)

STATE OF TAMIL NADU 
v. 
A 
DHARANGADHARA TRADING CO. LTD. 
MAY 3, 1988 
-)( 
[R.S. PATHAK, en AND M.H. KANIA, J.] 
B 
Central Sales Tax Act, 1956: Section 3-Assessee-Manufac-
turer-Booked goods to destinations as required by out of State 
~ 
buyers-Only documents of title handed over to Trading Company-
Nature of sales by Manufacturer to Trading Company-Whether inter-
state or intra-state. 
c 
An agreement was entered into by Dharangadbara Chemical 
Works Ltd. (Chemical Company) for the sale of all its products to the 
respondent (Trading Company). The agreement contained general 
terms; and the actual quantity sold, the sale price, the booking station 
and the destination stations were to be determined in the actual con- .D 
tracts for sale in respect of definite or specified quantities. The mode in 
which sales were effected was that the respondent Trading Company 
used to obtain orders from out of State buyers, and enter into agree-
~· 
ments of purchase with the Chemical Company for these specified 
quantities. All the goods sold under these contracts of sale were booked 
at a particular railway station in the State to the various places outside 
E 
the State, where buyers from the respondent Trading Company 
required the goods and then the railway receipts and invoices concerned 
were endorsed and handed over to the respondent Trading Company . 
.. 
-:-.c 
In the assessment order for the assessment year 1980-81 the asses-
sing authority treated the sales effected by the Chemical Company to 
F 
the respondent Trading Company .as intra-State sales and those by the 
respondent Trading Company to the out of State buyers as inter-State 
.sales falling under s. 3 of the Central Sales Tax Act, 1956. The asses-
sees, namely, the Chemical Company and the respondent Trading 
Company filed appeals before the Appellate AsSistant Commissioner 
contending that sales by the Chemical Company to the respondent G 
"' 
Trading Company were also inter-State sales as these sales were comp-
\ 
leted by the delivery of railway receipts ana invoices only after the 
inter-State journey of the goods had commenced. The . Appellate 
Assistant Commissioner dismissed the appeals. 
Both the assessees filed appeals to the Tribunal. After considering H 
8Q5 
806 
SUPREME COURT REPORTS 
[1988] 3 S.C.R. 
A 
the manner in which the sales were effected and despatches made by the 
Chemical Company and examining some specimen orders placed by 
respondent Trading Company with the Chemical Company, the . Tri· 
bunal came to the conclusion that delivery was effected by the Chemical 
Company to the respondent Trading Company by delivery of docu· 
men ts of title, namely, the receipts of invoices and the railway receipts 
B 
and allowed the appeals. 
""-
The High Court upheld the views of the Tribunal and dismissed 
the revision petitiom; filed by the State. 
In the appeals by the State it was contended that the first set of 
~ 
C 
sales by the Chemical Company to the respondent Company were local 
or intra-State sales, because under the agreement the delivery was to be 
effected at the booking stations. 
Dismissing the appeal, 
D 
HELD: The orders were placed for booking specified goods to out 
of State buyers and the Chemical Company never gave physical delivery 
of the goods to the respondent Trading Company but booked the goods 
to the destinations as required by the out of State buyers and merely 
handed over documents of title to the respondent Trading Company. 
The movement of the goods from the State to the outside State was 
E 
occasioned by the terms of the contract themselves and the sales were 
inter-State sales falling under-sub-s. (a) of s. 3 of the Central Sales Tax 
Act, 1956. Alternatively, since the deliveries of goods sold were effected 
by the transfer of documents after the movement of the goods from the 
State to the other States had commenced, the sales could be regarded as 
.covered under sub·s. (b) of s. 3 of the Act. [809GH; 810A-B] 
F 
G 
The agreement entered into by the Chemical Company with the 
respondent Trading Company is merely a general agreement. The 
actual terms of the contracls of sales as well as the instructions of the out 
of State buyers have to be taken·into account in determining the nature 
of the sales in question. [8IOE-F] 
The conclusion arrived at by the Tribunal as well as the High 
Court that the sales by the Chemical Company to the respondent Trad· 
ing Company were inter-State sales cannot therefore b

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