UNION OF INDIA & ANR. versus K. G. KHOSLA & CO. (P) LTD. & OTHERS

Citation: [1979] 3 S.C.R. 453 · Decided: 06-03-1979 · Supreme Court of India · Bench: Y.V. CHANDRACHUD · Disposal: Dismissed

Cited by 3 judgment(s) · cites 7 · see the full citation network in Lexace

Judgment (excerpt)

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453 
UNION OF INDIA & ANR. 
v. 
K. G. KHOSLA & CO. (P) LTD. & OTHERS 
March 6, 1979 
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[Y. V. CHANDRACHUD, C.J., D. A. DESAI AND R. S. PATHAK, JJ.] 
Central Sales Tax Act, 1956 S. 3(a)-Scope of-Goods manufacturf!d in the 
State of Haryana in accordance with production progrannne advised by 
head 
office-Goods despatched from-Delhi-Whether inter-state or intra-state sale. 
A 
B 
The respondent company who was a manufacturer of afr compressors and 
garage equipment had its- factory at Farid21bad (in the State of Haryana) and 
C 
its head office in Delhi (Union Territory of Delhi). The head office drew the 
production programme and advised the factory to manufacture the goods in 
accordance therewith. After the goods were so manufactured in the factory 
they \Vere collected by the head office and brought to Delhi and despatched to 
various customers Whether outside Delhi or in Delhi. The price of goods was 
received at the head office. In other words excepting the manufacture of goods 
at the factory all other activities, were catTied out from the head office in Delhi. 
D 
In respect of sale of goods manufactured at Faridabad the respondent com-
pany filed sales tax returns with the sales tax authorities at Delhi on the ground 
that the sales ·were effected from Delhi by the head office -and that they were 
intra-state sales within the territory of Delhi and accordingly paid sales tax at 
Delhi. 
In November, 1965, however, the sales tax authorities of Haryana demand-
ed payment of sales tax under the East Punjab General Sales Tax, Act, 1948 
for the period commencing from April 1, 1961 and ending \Vith the year 1964-65 
pointing out that the sales effected were inter-state sales liable· to be assessed 
by them under the Central Sa\'es Tax Act, 1956. 
In its writ petition the respondent-company alleged that since all its activi-
ties were being carried on by or through the head office in Delhi and no sales 
were effected by. or from the factory at Farida.bad sales tax was paid by it in 
Delhi and since the sales tax authorities in Haiyana were demanding payment 
of Central Sales Tax in respect of the same transaction the High Court might 
resolve the controversy . 
The High Court held that the sales fell under s. 3(a) of the Central Sales 
Tax Ac~ 19 56 and were liable to be assessed to inter-state sales tax by the Sales 
Tax Authorities at Faridabad and accordingly ordered that the sales tax 
paid by the respondent in Delhi be transferred to the Sales Tax Authorities at 
Faridabad. 
On appeal the Union of India contended that since the situs of sale was 
Delhi Sales Tax was payable in De1hi. 
·Dismissing tht appeal, 
,. 
E 
F 
G 
H 
A 
B 
c 
D 
F 
G 
H 
454 
SUPREME COURT REPORTS 
[1979] 3 s.c.R. 
HELD 
l(a) The High Court was right in holding that the sales were inter· 
state sales and that the turnover on sales was assessable to sales tax under the 
Central Sales Tax Act, 1956 and that the amounts of sales tax wrongly paid in 
Delhi be transferred to the Sales Tax Authorities at Faridabad. [462 A-BJ 
(b) In order that a sale may be regarded as an inter-state sale it is immater-
ial whether the pro.Jfrty in the goods passes in one State or another. The 
question as regards the nature of the sale, that is, whether it is an inter State 
sale or an intra-State saJe does 
~ot depend upon the circum11tance as to ~n 
which State the property in the goods passes. It may pass in either and yet 
the sale can he ao inter-State sale. [461 G-H, 462 A] 
In the instant case the contract! of sales were made at Delhi and in pursu· 
ance of those contracts, goods were manufactured at Faridabad according to 
specifications mentioned in the contract:-i. This, therefore, is not that type of 
case in which goods are manufactured in the general course of business for 
being sold as and when offers are received by the manufacturer for their 
pur~ 
chase. Contracts of sales were finalised in the instant case at Delhi and specific 
goods were manufactured at Fa.ridabad in pursuance of those contracts. These 
were "future goods" within the meaning of s. 2(6) of the Sale of Goods Act, 
1930. After the goods were manufactured to agreed specifications, they were 
despatched to the head office at Delhi for being forwarded to the respective 
customers at who9e instance and pursuant to the contracts with whom the goods 
were manufactured. The despatch ·of goods of Delhi was but a 
convenient 
made of securing the pe1fo

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