JUDGMENT
Om Prakash, J.
1. This is a revision against the Tribunal’s order dated 24th March, 1986 (annexure 2 to the revision petition) by the assessee, who entered into an agreement (annexure 3 to the revision petition) with the Secretary to the President of India to sell gold laces, gold braids and gold jhallars at the rate, specified in Clause 1 of the aforesaid agreement. The assessee’s total taxable turnover was assessed by the Sales Tax Officer under the Central Sales Tax Act at Rs. 63,747 on which tax payable was worked out to Rs. 2,143.50. The Assistant Commissioner (Judicial) and the Sales Tax Appellate Tribunal both affirmed the order of the Sales Tax Officer.
2. This is how the assessee has come up in revision before this Court. The question for consideration is whether the sale of the aforesaid items to the President of India through the Secretary under the agreement to sell (annexure 3) was rightly held as inter-State sale within the meaning of Section 3(a) of the Central Sales Tax Act, 1956 (for short, “the Act, 1956”) by the authorities below. Section 3 of the Act, 1956, so far as relevant, reads thus:
A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase,-
(a) Occasions the movement of goods from one State to another ;
….
3. In Tata Iron and Steel Co. Ltd. v. S.R. Sarkar [1960] 11 STC 655, the Supreme Court took the view which has been consistently followed in a catena of authorities that the sale occasions the movement of goods from one State to another within Section 3(a) of the Central Sales Tax Act when the movement is the result of a covenant or incident of the contract of sale. In Balabhagas Hulaschand v. State of Orissa [1976] 37 STC 207, the Supreme Court held that the word “sale” appearing in Section 2(g) denning sale as also in Section 3(a) denning inter-State sale of the Act, 1956, includes an agreement to sell. Admittedly the assessee personally carried the items to the Rashtrapati Bhawan, New Delhi, which he agreed to sell under the agreement (annexure 3) to the President of India through the Secretary.
4. What is to be seen is whether the movement of such goods is a result of a covenant or incident of contract of sale. From a perusal of the agreement (annexure 3), it appears that the assessee agreed to sell three items named therein, at the rates specified therein. In para 2 of the agreement, the Secretary to the President reserved the right to reject any piece which may be found inferior or which did not conform the description of sample. That was to be approved by the Under Secretary (Co-ordination) in view of para 4 of the agreement. Para 3 of the agreement shows that the assessee agreed to deliver all the materials ordered by the Under Secretary (Co-ordination) within two months of the receipt of the order. Para 5 of the agreement enjoined upon the assessee to furnish security which was to be forfeited in case the assessee failed to execute the agreement. From para 3 of the agreement, it clearly appears that the assessee was under an obligation to supply the materials ordered by the Under Secretary (Co-ordination) within two months of the receipt of the order. It is in view of this contractual obligation, the assessee personally carried the goods named in the agreement to the Rashtrapati Bhawan, New Delhi. No doubt the sale of goods was subject to approval of the Secretary to the President in view of para 2 of the agreement.
5. The contention of Sri Bharatji Agarwal, learned counsel for the assessee, is that the movement of the goods was not the result of covenant or incident of the contract of sale. His argument is that the position would have been different had the assessee despatched the goods either by rail or otherwise in the name of the buyer, but since the assessee carried the goods personally to Delhi, it could not be said that the movement of the goods was a result of a covenant or incident of contract of sale, as the assessee was at liberty to divert the goods for any other purpose or sell them to anyone else in Delhi. Had the goods been sent by rail or otherwise in the name of the buyer, then Sri Bharatji Agarwal says that the possibility of the goods being diverted for any other purpose would have been ruled out. This contention has been rejected by the Tribunal and in my opinion rightly so. Language of the agreement to sell being plain, clear and unambiguous has to be understood without straining the words being used therein. The agreement clearly shows that the assessee agreed to sell three items to the Secretary to the President of India; the goods were to be supplied by the assessee conforming to the description of sample being retained by the Under Secretary (Co-ordination) in his office and that the goods were to be supplied within two months of the receipt of the order. There is no case of the assessee that no order was received from the Secretary to the President of India and no delivery was due thereunder; rather it is admitted that the assessee personally carried the goods to the Rashtrapati Bhawan. The very fact that the assessee carried the goods personally to the Secretary to the President of India goes to show that the movement of the goods had taken place pursuant to the agreement to sell. The hypothetical situation that since the goods were not dispatched either by rail or otherwise in the name of the buyer and, therefore, there was a possibility of being diverted them in Delhi to any other person, need not be considered to determine the question whether the movement of the goods was a result of a covenant or incident of a contract of sale. The facts that the assessee agreed to sell the items specified in the agreement at the agreed rate; that he caused them to be prepared according to specification and offered the delivery thereof to the Secretary to the President of India unmistakenly lead to the conclusion that the movement of the goods resulted from a covenant or was incident to contract of sale.
6. The aforesaid view taken by me is fully supported by K.G. Khosla and Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes [1966] 17 STC 473 (SC). In this case, the assessee M/s. Khosla and Co. entered into a contract with the Director-General of Supplies and Disposals, New Delhi (briefly, the D.G.S. & D.), to supply “axle-box bodies”. To fulfil this contract, the assessee entered into another contract with the manufacturer in Belgium to procure the goods to be supplied to the D.G.S. & D. The goods manufactured in Belgium were imported into India by the assessee and were cleared at the Madras Harbour by the clearing agents of the assessee. After clearance at the said harbour by the assessee, the goods were dispatched for delivery to the D.G.S. & D. There was no privity of contract between the manufacturer and the D.G.S. & D. The Supreme Court held, at page 489 :
Movement of goods from Belgium to India was in pursuance of the conditions of the contract between the assessee and the Director-General of Supplies. There was no possibility of these goods being diverted by the assessee for any other purpose.
7. In this authority also, the goods were not consigned from Belgium to India in the name of the buyer, that is the D.G.S. & D., but the goods sent by the manufacturer from Belgium to India, were cleared by the assessee and then the goods were delivered to the buyer. Still the Supreme Court took the view that the movement of goods was pursuant to the conditions of the contract. The only reason for holding so was that because the goods were got manufactured in Belgium for being supplied to the D.G.S. & D. and keeping that end in view, the goods were imported from Belgium into India and the assessee having received them at the harbour further delivered them to the buyer. The sequence of the facts shows that the movement of the goods was pursuant to the conditions of the contract and that the goods were imported into India for being sold only to the D.G.S. & D. and not for any other purpose. The nexus between the goods manufactured and the contract clearly existed. In this authority also, hypothetically it could be argued that the goods received from the manufacturer in India, could have been diverted by the assessee to any person other than the buyer, but on the facts of the case that the goods were got manufactured as per terms of the contract, the Supreme Court held that there was no possibility of the goods being diverted by the assessee for any other purpose. So the testing point is not the one whether the goods were dispatched from one State to another in the name of buyer, but what is decisive is whether the goods were manufactured or caused to be .manufactured as per terms of the contract and whether the delivery of them was intended to be made to the buyer. When the goods are got prepared according to specification and taken to be delivered in the State where the buyer resides, then the reasonable inference that can be drawn is that the movement of the goods was the result of a covenant or incident of contract of sale. Though hypothetically, it could be argued that since the goods were not dispatched in the name of the buyer by rail or by any other carrier, there was possibility of their being diverted for some other purpose. But in view of the peculiar facts that the goods were got manufactured as per terms of the contract, this hypothetical argument deserves to be wholly ignored.
8. Sri Bharatji Agarwal, heavily relied on the case of Balabhagas Hulaschand [1976] 37 STC 207 (SC). In this authority there were two sets of appeals : one was argued by Mr. Hardy and the other by Mr. Ghose. Whereas, the contention of Mr. Hardy was that from the facts found, it would appear that the movement of the goods from Orissa to West Bengal took place in pursuance of an agreement of sale and not in pursuance of the sale itself which actually took place in West Bengal and, therefore, the sale is not covered by Section 3(a) of the Act, 1956. Mr. Ghose who followed Mr. Hardy in the other set of appeals added that the agreements in the instant case were merely forward contracts in respect of unascertained and future goods and, therefore, fell beyond the ambit of the provisions of the Act, 1956. Therefore, the questions for consideration that arose before the Supreme Court were : (1) whether inter-State sale, within the meaning of Section 3(a) of the Act, 1956, includes agreement to sell and (2) whether, there could be inter-State sale in respect of unascertained and future goods. The Supreme Court negatived the contentions of both counsel for the appellants and at the end of page 212, the Supreme Court held that an agreement to sell by which the property did not actually pass, was also an element of sale. At the end of para 1 of page 214, the Supreme Court held:
Hence for the purpose of application of Section 3(a) of the Central Sales Tax Act, the question whether the contract is a forward contract or not makes no material difference.
9. The Supreme Court observed in second paragraph on page 214 as follows :
Normally what happens is that there is a contract between the two parties in pursuance of which the goods move and when they are accepted and the price is paid the sale takes place.
10. The above observation that the goods move normally in pursuance of a contract between the two parties fully supports the conclusion, already reached at by me in, the instant case. But Sri Bharatji Agarwal vehemently relied on example No. 2 entitled “Case No. II” as stated by the Supreme Court at page 214, which runs as under :
Case No. II.-A, who is a dealer in State X, agrees to sell goods to B but he books the goods from State X to State Y in his own name and his agent in State Y receives the goods on behalf of A. Thereafter the goods are delivered to B in State Y and if B accepts them a sale takes place. It. will be seen that in this case the movement of goods is neither in pursuance of the agreement to sell nor is the movement occasioned by the sale. The seller himself takes the goods to State Y and sells the goods there. This is, therefore, purely an internal sale which takes place in State Y and falls beyond the purview of Section 3(a) of the Central Sales Tax Act not being an inter-State sale.
11. Submission of Sri Bharatji Agarwal is that when the goods are booked by a dealer in his own name to another State and not in the name of the buyer, it cannot be said that the movement of the goods is in pursuance of the agreement to sell nor is the movement occasioned by the sale, because the seller himself takes the goods to other State and sells the goods there. The case of Balabhagas Hulaschand [1976] 37 STC 207 (SC) involved only two points for consideration, (i) whether the sale includes agreement to sell and (ii) whether there could be sale in respect of unascertained and future goods. No doubt, the example No. II as given by the Supreme Court at page 214 being obiter dicta is normally binding on all the courts, but to the facts of the instant case, the decision of the Supreme Court in K.G. Khosla and Co. (P.) Ltd. [1966] 17 STC 473 which was delivered by five Honourable Judges is squarely applicable and that was neither discussed nor was overruled in Balabhagas Hulaschand [1976] 37 STC 207 (SC) by a Bench of three Honourable Judges. For the reasons, the rule laid down in K.G. Khosla and Co. (P.) Ltd. [1966] 17 STC 473 (SC) still holds the field and is binding and, therefore, Sri Bharatji Agarwal cannot derive any support from the obiter dicta of their Lordships made in Balabhagas Hulaschand [1976] 37 STC 207 (SC).
12. In Oil India Ltd. v. Superintendent of Taxes [1975] 35 STC 445 (SC), their Lordships held: No matter in which State the property in the goods passes ; it is not necessary that the sale must precede the inter-State movement in order that the sale may be deemed to have occasioned such movement and it is also not necessary for a sale to be deemed to have taken place in the course of inter-State trade or commerce, that the covenant regarding inter-State movement must be specified in the contract itself, but it would be enough if the movement was in pursuance of and incidental to the contract of sale. This authority clearly negatives the submission of Sri Bharatji Agarwal that the movement of the goods was not a result of a concluded contract of sale, as the sale took place when the goods were approved by the Secretary to the President of India in Delhi. It is not necessary that the sale must precede the inter-State movement, but what is necessary is whether the movement of the goods was occasioned by a covenant or was incident of contract of sale.
13. For the reasons, the view of the Appellate Tribunal affirming the concurrent findings of the Sales Tax Officer and the Assistant Commissioner (Judicial) is upheld and the revision is dismissed. There will be, however, no order as to costs.