D.K. Mahajan J.
1. The Sales Tax Tribunal, Haryana, by its order dated 10th August, 1970, referred the following question of law for the opinion of this court :
Whether on the facts and circumstances of the case, the agreement between M/s, Kelvinator of India (assessee) and M/s. Spencer & Co. Ltd., M/s. Blue Star Engineering Co. and M/s. General Equipment Ltd., in pursuance of which the refrigerators manufactured by M/s. Kelvinator of India at Faridabad moved to Delhi were merely for distribution of goods between the principal and his agents or were agreements of sale between two parties ?
2. When another reference No. G.S.T. 1 of 1965, (M/s. Krishan Lal Kashmiri Lal v. The State  27 S.T.C. 578, was placed before me and Sandhawalia, J., by our order dated 8th January, 1970, we directed 'the Tribunal to state the case properly. In order to guide the Tribunal, we suggest that a copy of an income-tax reference pending in this court be sent to the Tribunal so that it is known how a case is to be stated. The attention of the Tribunal is invited to the relevant part of Section 22(4) of the Sales Tax Act'. Keeping this direction in view, Mr. M. L. Batra, the then Sales Tax Tribunal, in the present case drew up the statement of the case and referred the question of law set out above for the opinion of this court. Thereafter, the present reference was placed before me and Gopal Singh, J., on 24th March, 1971. Mr. Sibal, the learned counsel for the assessee at the hearing, pointed out that the agreements between the assessee and the distributors, that is, the distribution agreements dated 26th April, 1965, 15th September, 1965 and 11th December, 1965, had not been made part of the statement of the case, as also the Tribunal's order dated 24th November, 1969, on the review application made on 14th August, 1969. There were certain other documents which the counsel stated should have been made part of the statement of the case. For instance, the modified original assessment order dated 2nd May, 1968 and the affidavits filed by the assessee before the Assessing Authority dated 10th June, 1966, 29th March, 1967, 30th March, 1967 and 31st March, 1967. On the submissions of the learned counsel, I and my learned brother Gopal Singh, J., recorded the following order :
It appears to us that the Tribunal is not aware of the practice that is normally followed when the statement of the case is drawn up. The practice is that a notice is issued to the assessee and in the presence of the departmental representative and the assessee an agreed statement of the case is drawn up. If there is any divergence between the two, the Tribunal records its findings and its reasons for accepting one view point or the other. In the present case, it appears that the statement of the case was drawn up without calling upon the assessee to be present and that is why all these omissions have been made.
3. A direction was then issued to the Tribunal to follow the aforesaid procedure and draw up a proper statement of the case. This has been done and the following question has been referred for our opinion :
Whether on the facts and circumstances of the case, the agreements between M/s. Kelevinator of India Ltd., (assessee) and M/s. Spencer & Co. Ltd., M/s. Blue Star Engineering Co., Bombay and M/s. General Equipment Merchants in pursuance of which all refrigerators manufactured by M/s. Kelvinator of India at Faridabad moved to Delhi were merely for distribution of goods between principal and its agents or were agreements of sale between the parties.
4. The assessment year in question is 1965-66, i. e., from 1st April, 1965, to 31st March, 1966. The assessee-company, M/s. Kelvinator of India, Faridabad, is situate at Faridabad in Haryana. It manufactures refrigerators, deep-freezers, compressors, home appliances, spare parts, etc. The factory went into production in the year 1964. Its registered office and sales office and the godown are situate at 19-A, Alipur Road, Delhi. It is a registered dealer under the Punjab General Sales Tax Act, 1948 (hereinafter referred to as the Act). It is also registered under the Central Sales Tax Act, 1956 (hereinafter referred to as the Central Act). The registrations with the department have been made at Faridabad. The refrigeration equipment manufactured by the assessee is done under a collaboration agreement with an American company known as Kelvinator International Corporation. The assessee-company enjoys exclusive rights not only to manufacture refrigerators and deep-freezers but also to market them in brands known as 'Kelvinator', 'Leonard' and 'Gem'. They have also the right under the collaboration agreement to use further brands for its products.
5. As soon as the company started its production, it passed on its entire production to Spencer & Co., Delhi, for sale in the market. The procedure adopted by the company was that the goods manufactured at F'aridabad were sent to its godowns in Delhi and from the godowns in Delhi they were sold to Spencer & Co. So far as these sales are concerned the department has not taken the plea that they are inter-State sales or that the movement of the goods was occasioned by reason of the sales made to Spencer & Co.
6. On 20th April, 1965, the company entered into a distribution agreement with Spencer & Co. and similar agreements were entered into with the Blue Star Ltd. on 15th September, 1965 and the General Equipment Merchants on 11th December, 1965. The agreement with Spencer & Co. was to take effect from 1st January, 1965, whereas the other agreements were to take effect on the date on which they were entered. The clauses in these agreements are more or less the same. The only difference between the agreement with Spencer & Co. and the other two distributors is in Clause 1 and also in the matter of minimum take-off of the refrigerators manufactured by the assessee. In the case of Spencers no such minimum is provided, whereas in the case of other two companies the minimum is provided. It would be necessary to incorporate the relevant parts of these agreements for facility of reference :
Spencer Agreement :-Whereas the distributors have agreed to be and to act as distributors of the company now it is hereby mutually agreed and declared between the parties hereto as follows :
1. The company hereby undertakes to sell and the distributors hereby undertake to buy all products manufactured by the company as mutually agreed upon from time to time. The distributors shall have the right to sell the company's Kelvinator and such other trade mark products, spare parts and parts within the territory. Due consideration to the recommendation of the distributors in regard to change/alteration in existing products or additions of new products will all the time be given by the company.
2. All purchases by the distributors from the company shall be on principal to principal basis at mutually agreed prices.
3. The distributors shall make payments of the company's bills within two weeks of the delivery of the goods in sound merchandising condition.
4. The goods shall be delivered to the distributors from the company's registered office in Delhi and the property in the same shall pass to the distributors only in Delhi on delivery, where the sale shall always take place.
5. For the purpose of determining the liability of distributors for payment to the company, the price quoted will be ex company's works at Faridabad. The distributors shall also pay to the company all the charges on the transport of the goods from the company's works at Faridabad to the company's registered office in Delhi.
6. The distributors shall at all times warrant the goods to their customers only on the warranty terms issued by the company. All goods leaving the company's factory will pass through rigorous inspection procedures laid down by the company. No responsibility for shortage or damage occurring in transit will be accepted by the company.
7. This agreement shall be deemed to have commenced on the 1st day of January, 1965 and shall remain in force up to the 31st day of December, 1969, or till terminated by giving at least 6 months clear notice on either side delivered through registered post. On the termination of this agreement, the distributors will have the right to return at the company's expenses all unsold units and spare parts thereof purchased from the company under these premises, but shall have no other claims whatsoever on the company on any other account except for outstanding warranty claims, if any.
Blue Star Agreement:- 1. The company hereby undertakes to sell only to the distributors and the distributors hereby undertake to buy from the company all Leonard refrigerators manufactured by the company.
3. For the purpose of Clause 1 and in order to enable the company to arrange its production schedule the distributors guarantee and undertake to purchase from the company a minimum quantity of 1,500 refrigerators per year at a rate not less than 80 refrigerators per month. It is agreed that the distributors will be relieved of their obligation under the agreement to the extent that the company is unable to supply the guaranteed minimum quantity of 80 refrigerators per month.
8. All the goods leaving the company's factory will pass through rigorous inspection procedure laid down by the company and will be packed in crates and will be delivered to the distributors as such. The company in no case shall be responsible for any shortage or damage that may occur in further transit, once the goods have been delivered and inspected by the distributors at Delhi.
General Equipment Merchants Agreement:- 1. The company hereby undertake to sell only to gem the gem refrigerators manufactured by them. The gem also agrees to purchase the gem refrigerators manufactured by the company.
3. In order to facilitate the company's arrangement of its production schedule, gem undertakes to buy from the company a minimum quantity of 2000 refrigerators of both 10.1 cu. ft. and 6.2 cu. ft. capacity in the first year at a rate of not less than 150 refrigerators per month. Likewise, for the 2nd year gem agrees to buy 3000 refrigerators and for the 3rd year 4000 refrigerators of both sizes. The company will, however, incur no liabilities if, for any reasons, it is unable to make the supply according to the minimum quantities stipulated above. If for some reasons gem is unable to accept or purchase the respective minimum yearly stipulated quantities, gem will incur no liability save the cancellation of the agreement at the company's choice.
8. (Same as in the case of Blue Star Agreement).
7. The Assessing Authority has brought to tax the refrigerators sold by the company to these distributors under the distribution agreements on the ground that the goods have moved from the factory to Delhi in pursuance of the said agreements and the movement being an integral part of the said agreements, the sales that have followed the movements of goods are inter-State sales. The assessee's contention, on the other hand, was that these sales were not inter-State sales and in support of that contention the assessee relied upon the following facts. Some of these facts are mentioned in the objections filed by the assessee on 10th June, 1966 and are as follows:
That the mode of transfer of goods in the case of the company is the same as was being followed in the above-mentioned two years (these two years are prior to the distribution agreement with Spencers). The same was accepted as a case of valid transfer by the highest Tribunal under the Sales Tax Act; the authorities below cannot agitate the question which has once been settled in between the parties.
8. The procedure for the transfer of the goods from Faridabad to the company's registered office at 19-A, Alipur Road, Delhi, stated in the objections, is as follows:
The company gets the goods cleared from the excise for destination to its Delhi office godown in piecemeal, pay the octroi themselves at the Delhi barrier along with the freight charges and the goods are taken delivery of by its registered office. The buyer places its specific order according to its requirement and to the extent goods are available at Delhi, delivery is given by the Delhi office after the goods are approved in good condition by the purchaser. That the goods never move from factory in pursuance of any contract, but are moved as per routine for storage at Delhi in accordance with the company's own convenience. Specific orders are placed by the buyers when the goods are already lying in stock. The movement of the goods as such is not in furtherance of any contract of sale but move to Delhi independently of any stipulation.
9. Four affidavits were filed before the Assessing Authority. The first one is of Mr. M. B. Sutaria, Secretary, Kelvinator of India. The relevant paragraphs from this affidavit are reproduced below:
3. That after the goods are manufactured in the factory an excise clearance pass is obtained after payment of excise duty for the transport of goods from the factory to the company's godown in Delhi. The excise pass is always for movement of goods in favour of self.
4. That during the transport of the goods from Faridabad to Delhi, the octroi at the barrier is paid by the company.
5. That at destination the goods are received by the company's staff and taken in their godown.
6. That after the goods have already been received by the company an order is received from the customer for the supply of goods.
7. That in pursuance of the said orders Delhi staff give delivery of the goods at Delhi to the customer under a challan prepared at Delhi.
8. That thereafter the bill is raised from Delhi and the price of the goods is received by the company at Delhi and deposited in the company's account in its Delhi bank.
10. The second affidavit is of V.A. Rao of Spencer and Co. Ltd. The relevant paragraph in his affidavit is reproduced below :
2. That we select the pieces of refrigerators lying in the godowns of Kelvinator of India Ltd., Delhi and if on inspection, we find the pieces of refrigerators suiting to our requirements, we place specific orders on Kelvinator of India Ltd,, Delhi, to supply us the goods.
11. The aforesaid paragraph occurs in the other affidavits of Rajinder Nath Seth of Blue Star Engineering Company Ltd. and Mrs. Usha Batra of General Equipment Merchants Ltd.
12. The company has taken a policy of insurance to cover lorry risk as per motor lorry risk clauses, including theft, pilferage and non-delivery, denting, scratching and breakage or any other damage due to any external means, including the risk of S.R.C.C. from warehouse to warehouse.
13. The Assessing Authority, vide its order dated 2nd March, 1968, rejected the contention of the assessee and held that the sales in question to the distributors in pursuance of the distribution agreements were not inter-State sales. It took the view that the movement of goods from Faridabad to Delhi had been occasioned by the sales made to the distributors. The relevant parts of the order of the Assessing Authority are quoted below :
During the year under assessment the dealer manufactured and sold refrigerators with trade marks of 'Kelvinator', 'Leonard' and 'Gem'. The sale of each brand was made through a separate distributor appointed for this purpose. I have studied the agreements in respect of each of them. The names of distributors, trade marks of refrigerators and dates of agreements are given below :
Distributor Trade marks of Date ofrefrigerator executionSpencer & Co. Ltd. Kelvinator 26-4-1965(operative w. e. f.1-1-1965)Blue Star EngineeringCo. Bombay Pvt. Ltd. Leonard 15-9-1965General EquipmentMerchants Ltd. Gem 11-12-1965* * *A peep into the actual performance of the contract has revealed that the refrigerators moving from the factory at Faridabad on a particular day were delivered to the distributors concerned the same day.
Examples typifying the mode are given below :
* * *The manner of movement which is plain enough to understand has been explained by the dealer in a rather circuitous way. According to them, the refrigerators move from the factory to the head office at Delhi where these are stored. Then buyers place orders according to their requirements and the goods move from the company's godowns to the distributors concerned. This kind of a gimmick can scarcely conceal the true nature of transactions.
Apparently an attempt is now being made to state that the contract of sale was entered into after the goods had moved from Faridabad to Delhi. This explanation cannot stand the test of scrutiny. It merely aims at creating a smoke-screen of confusion like the one whether the egg came first or hen. The agreements which are the basic documents to bring the buyers and sellers together cannot be brushed aside. The refrigerators are earmarked for delivery to the specific distributors the moment they are manufactured in the factory under a given trade mark. Judged in the context of agreement discussed above, the dealer has absolutely no choice or option in the selection of buyers and he is bound to sell a Kelvinator refrigerator to Spencer, a Leonard to Blue Star and a Gem to General Equipment Merchants. The contract is perpetual and each consignment moves from the factory in pursuance of the agreement. The ingredients of sale are that there should be two parties, viz., the buyer and the seller. Secondly, there should be an agreement between them that one is to buy and the other is to sell. Thirdly, the contract should be for cash or for deferred payment. Fourthly, the goods should be delivered in pursuance of the contract. All these elements consist in the fullest measure in the present case. It is abundantly clear that the goods were appropriated to the contract at Faridabad before their despatch.
14. The assessee then moved a review application to the Assessing Authority and it was pointed out that certain items which had been sent from Faridabad to Delhi had not been sold to the distributors and, therefore, they could not be brought to tax under Section 3(a) of the Central Act. One of the items was refrigerators exported out of India. The Assessing Authority allowed this application and observed as follows :
The items to the inclusion of which an objection has been raised are given below:
1. Sales of coolers sub-assembliesto M/s. Electronics Ltd. Rs. 80,000.002. Export outside India Rs. 48,304.393. Sales of scrap to be treated astax-free goods Rs. 28,318.58 --------------Total Rs. 1,56,622.97 ---------------I have carefully examined each item and find that the sales of coolers to the extent of Rs. 80,000 were made within the State and as such they could not be assessed under the Central Sales Tax Act, Action has separately been initiated to tackle this amount, under the Punjab General Sales Tax Act. Documentary evidence produced by the dealer established beyond doubt that goods worth Rs. 48,304.39 were exported outside India, hence beyond the purview of taxation. As regards the third item of Rs. 28,318.58 it relates to the aggregate of scrap sales made in the course of inter-State trade. As already held in Part A of the order dated 2nd March, 1968, the sale of scrap does not fall within the business activities of the dealer.
15. Against the final order of the Assessing Authority, the assessee preferred an appeal to the Deputy Excise and Taxation Commissioner, Ambala Division. The Appellate Authority allowed the appeal and it will be appropriate to set out the reasons of that authority in its own words :
The true effect of this agreement to my mind is to constitute Spencer and Co. as the sole channel for distribution of Kelvinator refrigerators. It is not a contract for sale of a specified number of refrigerators by the appellant-company to Spencers. It is neither for ready goods nor in itself a contract to buy future goods. The words 'as mutually agreed upon from time to time' are significant. The effect of the agreement is not that the company may manufacture any number of refrigerators as they like and the distributors are bound to take them and pay for them. The effect really is that the distributors agree to buy from no one else. It is of course known to the company that the distributors will require refrigerators from time to time and that their needs may vary. Hence in my opinion it is not a contract for sale of specific number of Kelvinators but on the other hand it is only a distributorship agreement.
The second and third agreements entered by the appellant with Blue Star Engineering Co. and the General Equipment Merchants (gem) respectively have substantially the same terms as the first one with Spencer & Co., except for a little variation here and there. This little variation has no effect on the real nature of the agreement which in my opinion has been made by the appellant with the main idea of appointing a certain party as his sole distributor of a particular brand of refrigerators manufactured by him.
The learned counsel for the appellant Shri P. N. Khanna had further stressed before me that under the terms of the agreement there was no price fixed by the parties for the sale of refrigerators inasmuch as it was to be mutually agreed upon. He, therefore, argued that there could be no contract of sale unless a specific price was settled in the agreement itself. I think there is some force in this contention of the learned counsel.
The Honourable Supreme Court in the case of Tata Iron and Steel Co. Ltd. v. 5. R. Sarkar and Ors.  11 S.T.C. 655 (S.C.), has held that in order to constitute inter-State sale under Sub-section (a) of Section 3 of the Central Sales Tax Act, the goods must move from one State to another as a result of covenant or incident of the contract of sale. Judged from these principles laid down in the above ruling of the Supreme Court the movement of goods in the present case from Faridabad to Delhi was not the result of any covenant or incident of a contract of sale but on the other hand the goods move because of distributorship agreements entered into by the appellant with Spencer and Co., Blue Star Engineering Co. and General Equipment Merchants Ltd. and, therefore, such movements did not constitute any inter-State sales.
16. The Excise and Taxation Commissioner suo motu acted under Section 9(3) of the Central Act read with Section 21(1) of the Act and revised the order of the Appellate Authority. The relevant part of the order of the Commissioner is as follows. After setting out the relevant clauses of the agreements, it is stated :
In the face of these provisions of the agreement, I really wonder how the Appellate Authority came to a conclusion that the agreement was not an agreement of sale but of distribution only. This agreement fulfils all the requirements of Sub-section (1) of Section 4 of the Sale of Goods Act, 1930. The respondent agreed to transfer the property in 'Kelvinator' refrigerators to the distributors for a price as soon as the goods were manufactured at Faridabad. The sale was complete as soon as the price was settled and the goods were delivered under the agreement. I, therefore, hold that the agreement is an agreement to sell ...it is obvious that as soon as the 'Kelvinator' refrigerators were manufactured, they were appropriated to the contract and their movement from Faridabad to Delhi was under the agreement to sell. The movement of goods from the State of Haryana to the Union territory of Delhi was, therefore, directly occasioned by the agreement to sell and not otherwise. It is not material for the purposes of Section 3(a) of the Act as to where the agreement is executed and the price is paid....
The criteria to determine when a sale of goods takes place in the course of inter-State trade or commerce or outside a State or in the course of import or export out of the territory of India have been laid down by Parliament in Sections 3 to 5 of the Central Sales Tax Act, 1956. It is these provisions which are to determine whether the sales, which are the subject-matter of this revision, are inter-State sales or otherwise. Any agreement which goes counter to these provisions of law is void and cannot be enforced. The provision in the agreement is, therefore, of no avail to the respondent.
17. Against the decision of the Commissioner, an appeal was taken to the Sales Tax Tribunal, Haryana and the Tribunal rejected the appeal, but before we deal with the order of the Tribunal it will be pertinent to refer to grounds 4, 11 and 16 that were taken before the Tribunal. They are as follows :
4. That the learned Commissioner has specifically ignored the following, amongst other provisions of the contract and circumstances of the case:
(a) That the distributorship agreement is not a 'contract of sale' for any specified number of refrigerators.
(b) That the said agreement relates neither to any ready goods nor to any future goods. The quantity itself is left to be determined at some future time, 'from time to time'.
(c) That the important clause 'as mutually agreed upon from time to time' and its significance and true meaning has been totally ignored by the learned Commissioner. Even 'the price' of the goods which is an essential element of a sale contract has been left to be determined from time to time. The distributorship agreement does not provide any machinery for fixation of the price except that the parties are left free to mutually agree upon the same from time to time or not to agree.
(d) That the learned Commissioner has failed to notice the effect of a possible non-agteements between the parties on the price at which the goods may be offered to be sold or purchased or the number and quantity available for sale. Such disagreement, if any, will not saddle any of the parties with any responsibility.
(e) That the learned Commissioner has erred in thinking that the appellant undertook to sell and the distributor undertook to buy all products manufactured by the appellant. In fact, it is admitted that some of the products manufactured by the appellant-company are being sold to Blue Star Engineering Co. (Bombay) Pvt. Ltd. and some others to General Equipment Merchants Limited, How much to the one and how much to the other is not disclosed in the distributorship agreement and is left to be decided by mutual agreement from time to time.
(f) That the appellant has even reserved the right to be consulted by the distributor while fixing his (distributor's) price to his consumers.
(g) That the appellant's transport, of goods to Delhi godown in anticipation, makes no difference, especially there is no contract of sale of specific goods to which the movement of item can be attributed. The distributor may lift the goods immediately on arrival or may not do so. The goods may lie in godown for months or even may be sold to another. Even the name plates may be interchanged, if so required, or considered necessary.
(h) In respect of a certain fixed percentage of the units, the appellant has even reserved a right to dictate the price at which the distributor will further sell (not a mere right to be consulted).
(i) That the distributor has also the right to return the unsold units at the termination of the contract.
18. All these factors amongst others clearly establish that it is not a contract of sale at all. Rather it is a mere distributorship agreement.
11. That there was no justification for observing that since Kelvinator refrigerators were manufactured they were appropriated to the contract. The learned Commissioner failed to notice that goods which may be transported from Faridabad to Delhi may or may not be picked up by the distributor for months together in case his requirements so demand. And then, the name plates being interchangeable they could be changed at Delhi, if and when so required. There was thus no question of appropriation at the time of manufacture; more so, as there would be no sale, if the price was not finally agreed upon. Sale, in fact, may never take place to the particular distributor concerned.
16. That the learned Commissioner has failed to notice that all the refrigerators manufactured by the appellant are similar in every respect except for the name plate and that in emergency there is nothing to prevent the appellant from easily changing the name plate from one brand to the other if the exigencies of demand for a particular brand may so require.
19. The Tribunal rejected the appeal taking the view that the question that had to be decided was whether the agreement was between a principal and an agent or between a principal and a principal. After noticing the various clauses of the distribution agreements, the Tribunal observed as follows:
The case of the appellant is that these agreements merely appoint the distributors as the sole channels for distribution of the different makes of refrigerators manufactured by their factory at Faridabad. The agreements are neither for ready goods nor contracts to buy future goods. The refrigerators produced were transported by the appellant at its own cost and risk to its Delhi godowns and transport charges, insurance premia, octroi, loading and unloading charges at Delhi were paid by the appellant-company. Since there was a great shortage of refrigerators in the market, the refrigerators were handed over to the distributors against pending orders but the distributors took delivery only after proper inspection. Deliveries were made against requisitions received from the distributors in which mutually agreed prices were mentioned and charged. It is argued that these agreements did no more than give an option to the distributors on the goods manufactured by the appellant and merely gave them the first right of refusal to purchase. The appellant had a say in the matter of fixing sale prices and it was stipulated that the refrigerators were to be delivered and the title passed to the distributors only in Delhi on delivery.
There is happily no great controversy in this case regarding definition of sale and what constitutes an inter-State sale under the Central Sales Tax Act. It is settled law now that in order that the sales may be deemed to be sales made in the course of inter-State trade, the movement of goods must be occasioned by a contract of sale and there should be in the contract some incidental provision to which the movement from one State to another can be definitely attributed. The learned counsel for the appellant has himself referred to the observations of the Supreme Court in the case of State of Madras v. Gannon Dunkerley & Co.(Madras) Ltd.  9 S.T.C. 353 (S.C.) in order to define the term 'sale of goods'. I agree that its essential ingredients are an agreement to sell movable property for a price and of the property passing hands pursuant to that agreement. In other words, for constituting a sale, it is necessary that there should be an agreement between the parties for purposes of transferring the title of the goods and that as a result of the transaction, the title to the property must actually pass to the other party. The tests that may, therefore, be applied to these agreements to ascertain their true import are as follows :
(a) Whether or not the distributors were under a contract to purchase, on payment of money consideration, the refrigerators produced by the company at Faridabad ?
(b) Did the appellant-company have any discretion in the disposal of the said refrigerators to any other party so long as the agreement subsisted ?
(c) Did the distributors have any option to decline to buy the refrigerators except on grounds of technical or other defects, even though they could defer the purchase ?
On a plain reading of these agreements, the answers to the last two questions are in the negative and to the first question in the affirmative. In my view, matters like fixation of sale prices to consumers and mutual consultation in policies of sales promotion between the parties written into the agreements were incidental to the transactions and did not affect their basic character. The agreements have to be read as a whole and their effect has to be seen in the context in which the refrigerators were moved from Faridabad to Delhi. It is clear that but for the existence of these so-called agency contracts, the refrigerators would not have passed into the hands of the distributors and thus their movement to Delhi was entirely in pursuance of the provisions contained in these contracts. From the moment of their despatch from Faridabad, these machines were as good as sold to the distributors. It is not even the case of the appellant-company itself that the refrigerators were merely entrusted to the distributors for sale. Its case is that the sales to the distributors were made not in pursuance of the provisions in the agency agreements but took place later after the goods had reached Delhi and the prices were settled between the parties. This contention is sought to be supported by means no other than the agency agreements themselves in which it was stipulated that the prices would be such 'as mutually agreed upon from time to time' and the property in the goods shall pass to the distributors only in Delhi after delivery. The prices were admittedly not to be settled for individual machines but periodically for all machines of the same make and specifications. The settlement of prices was incidental to the agreement which moved the machines to Delhi and were not separate agreements. In fact both went hand-inhand and any disagreement regarding prices meant virtual disappearance of the agency agreements. These agreements can, therefore, only be deemed to be agreements of sale and not as agreements of distribution or agency. In this connection, I might refer to the following observations of their Lordships of the Supreme Court in the case of Sri Tirmuala Venkateswara Timber and Bamboo Firm v. Commercial Tax Officer, Rajahmundry  21 S.T.C. 312 (S.C.) :
'As a matter of law there is a distinction between a contract of sale and a contract of agency by which the agent is authorised to sell or buy on behalf of the principal and make over either the sale proceeds or the goods to the principal. The essence of a contract of sale is the transfer of title to the goods for a price paid or promised to be paid. The transferee in such a case is liable to the transferor as a debtor for the price to be paid and not as agent for the proceeds of the sale. The essence of agency to sell is the delivery of the goods to a person who is to sell them, not as his own property but as the property of the principal who continues to be the owner of the goods and will, therefore, be liable to account for the sale proceeds. The true relationship of the parties in each case has to be gathered from the nature of the contract, its terms and conditions and the terminology used by the parties is not decisive of the legal relationship.'
The facts and -circumstances of this case clearly show that the agreements in question were not agreements of agency or distribution, but were agreements of sale and the refrigerators joined the inter-State traffic of trade at Faridabad and their sales have rightly been held to be inter-State sales as defined under Section 3(a) of the Central Sales Tax Act. The order of the Commissioner, therefore, must be upheld.
20. The assessee then made an application for review before the Tribunal under Section 21A of the Act. The relevant part of this is quoted below:
3. Question of fact(s) decided That the refrigerators wereby the impugned order : handed over to the intendingpurchasers against 'pendingorders'.5. Fresh facts which were not Despite the fact that thebefore the authority when it refrigerators of 10.1 cu. ft.passed the order(stated briefly size and capacity were manu-with a narrative) : factured and marketed by thecompany at the time of theexecution of the distributor-ship agreements, the com-pany manufactured inFebruary, 1966, refrigera-tors of another size andcapacity, i. e., 6.2 cu. ft, theprice of which was appre-ciably lower. These were alsosent to the company's headoffice for sale. There is, ofcourse, no mention of eitherprices or sizes in the saidagreements. The purchaserscould know of the avail-ability of refrigerators ofparticular sizes and capa-cities only when they checkedup the stocks of goods lyingat the Delhi godown of theapplicant-company. Onlyat that stage, purchase ordersfor a definite quantity of aparticular size and capacityof refrigerators were placedby the purchasers on theapplicant-company for thespecific quantity and sizesinspected and approved bythem keeping in view theirown market demand.6. Question of facts now raised: 1. The size of the refri-gerators, i. e., 10.1 cu. ft. and6.2 cu. ft., were not agreedto be sold in the allegedagreements.2. The difference in priceswas not stipulated in theagreement.3. The supplies were nevermade by the applicant-company against the pendingorders as has been held in theimpugned order. The saleswere effected as stated inpara. 5 above.
21. The review application was disposed of by the Tribunal by its order dated 24th November, 1969, in the following terms:
In that case, the appeal of the applicant, M/s. Kelvinator of India Limited, Faridabad, was dismissed by the impugned order on the main ground that the agency contracts entered into by this firm with certain other dealers, namely, M/s. Spencer & Co. Ltd., M/s. Blue Star Engineering Co. (Bombay) Pvt. Ltd. and M/s. General Equipment Merchants Ltd., were in fact as well as in law contracts of sale and, therefore, the transactions between M/s. Kelvinator of India Ltd. and these firms were interState sales liable to tax under Section 9(3) of the Central Sales Tax Act, 1956. M/s. Kelvinator of India Ltd. in this application have moved for the review of that order on the ground that, while interpreting these contracts, I omitted to take into account certain points of evidence which were brought up during arguments but which did not find mention therein. The first point is that the contracts were entered into in the first instance in respect of refrigerators of 10.1 cu. ft. size, but later the company started manufacturing other sizes which were also sold in a similar manner to the three purchasing firms. The second point is that according to these contracts, the purchase orders were placed by the three purchasing firms after the goods reached the head office of M/s. Kelvinator at Delhi. A perusal of the impugned order shows that these points are merely variation of the arguments that were advanced and that have been duly dealt with. The facts that the prices were not settled for individual machines and that deliveries are made through indents received from the purchasing dealers in the head office of Kelvinators at Delhi were duly considered and stand disposed of. The application is obviously misconceived and is dismissed.
22. The assessee then made an application under Section 22 of the Act read with Section 9(2) of the Central Act for reference of the following questions of law for the opinion of this court:
(1) Whether on the facts and circumstances of the case, the sales were local sales of Delhi or were in the course of inter-State trade and commerce giving rise to the commencement of movements in the State of Haryana ?
(2) Whether on the facts and circumstances of the case, the distributorship agreements could validly be construed to be contracts of sale even when they lack all the essential ingredients for the formation of the same ?
(3) Whether on the facts and circumstances of the case, the movement of the goods from Faridabad to company's godown at Delhi at its own risk and cost could be termed to be commercial movements warranting the imposition of the tax under the Central Sales Tax Act or interdepartmental movement for facility of better enjoyment of rights ?
(4) Whether on the facts and circumstances of the case, did the Commissioner have any jurisdiction and/or right to suo motu revise the order of the Deputy Commissioner ?
23. By its order dated 24th November, 1969, the Tribunal referred the following question of law :
Whether on the facts and circumstances of the case, the agreement between M/s. Kelvinator of India (the assessee) and M/s. Spencer & Co. Ltd., M/s. Blue Star Engineering Co. (Bombay) Private Ltd. and M/s. General Equipment Merchants Ltd., in pursuance of which the refrigerators manufactured by M/s. Kelvinator of India at Faridabad moved to Delhi were merely for distribution of goods between a principal and his agents or were agreements of sale between the parties.
24. The contentions on behalf of the assessee are :
(1) That the distribution agreements do not amount to a contract of sale in the eyes of law and, therefore, even if the movement of goods has taken place in pursuance of these agreements, it will not fall within the mischief of Section 3(a) of the Central Act.
(2) That the movement of goods from the factory of the company at Faridabad to its godowns in Delhi was in routine and had no connection whatever with the ultimate sales made to the distributors.
(3) That the authorities below erred in not examining each transaction independently. A duty was cast on the Assessing Authority to examine each individual transaction and then decide whether it constituted an inter-State sale exigible to tax under the provisions of the Act. This contention is based on the observations of the Supreme Court in Tata Engineering & Locomotive Co. Ltd. v. Assistant Commissioner of Commercial Taxes, Jamshedpur  26 S.T.C. 354 (S.C.).
25. So far as the second contention is concerned, it is stated that the assessee had no storage godown at the factory and in order to store its manufacture it had to move whatever was manufactured to Delhi; that what was manufactured was merely refrigerators and the branded name was given to them at Delhi; that the actual orders were placed by the distributors at Delhi after the goods had been inspected and selected by the distributors, the goods were sold to them in accordance with their orders; that the price for the goods was agreed at Delhi; that the company had also the right not to sell or meet the demand of the distributors if it was so minded and that the refrigerators manufactured were not sold only to the three distributors but were also exported. The machines could be put in the market under another brand and need not have been branded with the brands for which the distributors had been appointed. The option to brand the machines was entirely of the assessee.
26. The contention on behalf of the State is that we should not look at the surrounding circumstances or the business contracts of the company. We should only look at the distribution agreements. They lead to the only conclusion that the brands 'Kelvinator', 'Leonard' and 'Gem' had to be sold to their respective distributors. The company had no option in the matter and the goods having been sold to the said distributors, the movement necessarily was the result of the said agreements.
27. These are the respective contentions which are to be examined in order to determine whether the sales to the distributors occasioned the movement of goods from Faridabad to Delhi.
28. It would be proper at this stage to set out the relevant statutory provisions which have to be kept in mind while dealing with the respective contentions of the learned counsel.
29. The primary provision is Section 3(a) of the Central Act and is in the following terms :
3. 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....
30. Section 2(g) defines 'sale' in the following terms:
2. In this Act, unless the context otherwise requires....
(g) 'sale', with its grammatical variations and cognate expressions, means any transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable consideration and includes a transfer of goods on the hire-purchase or other system of payment by instalments, but does not include a mortgage or hypothecation of or a charge or pledge on goods.
31. Sections 18 to 26 of the Indian Sale of Goods Act, 1930, lay down the rules indicating when there is transfer of property in the goods sold between the seller and the buyer. Section 18 lays down that the goods must be ascertained. Section 19 may be reproduced in extenso:
19. (1) Where there is a contract for the sale of specific or ascertained goods, the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred.
(2) For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case.
(3) Unless a different intention appears, the rules contained in Sections 20 to 24 are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer.
32. Under Section 20, in an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer as soon as the contract is made. Under Section 21, the property in goods does not pass till the seller has put the goods in a deliverable state by doing something in that behalf. Sections 22 and 23 have some bearing on the matter and are set down in extenso:
22. Where there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh, measure, test or do some other act or thing with reference to the goods for the purpose of ascertaining the price, the property does not pass until such act or thing is done and the buyer has notice thereof.
23. (1) Where there is a contract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be expressed or implied and may be given either before or after the appropriation is made.
(2) Where, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the contract.
33. Section 25 is again material and is reproduced below :
25. (1) Where there is a contract for the sale of specific goods or where goods are subsequently appropriated to the contract, the seller may, by the terms of the contract or appropriation, reserve the right of disposal of the goods until certain conditions are fulfilled. In such case, notwithstanding the delivery of the goods to a buyer or to a carrier or other bailee for the purpose of transmission to the buyer, the property in the goods does not pass to the buyer until the conditions imposed by the seller are fulfilled.
(2) Where goods are shipped and by the bill of lading the goods are deliverable to the order of the seller or his agent, the seller is prima facie deemed to reserve the right of disposal.
(3) Where the seller of goods draws on the buyer for the price and transmits the bill of exchange and bill of lading to the buyer together to secure acceptance or payment of the bill of exchange, the buyer is bound to return the bill of lading if he does not honour the bill of exchange and if he wrongfully retains the bill of lading the property in the goods does not pass to him.
34. Section 26 merely enunciates the principle that risk prima facie passes with property.
35. The only other provisions of law to which a reference has to be made are the definitions of 'agreement' and 'contract' in the Contract Act. Section 2(e) defines 'agreement' and Section 2(h) a 'contract'. They are in the following terms :
2. In this Act the following words and expressions are used in the following senses, unless a contrary intention appears from the context....
(e) Every promise and every set of promises, forming the consideration for each other, is an agreement....
(h) An agreement enforceable by law is a contract.
36. Now, I propose to deal with the decisions which have interpreted Section 3(a) and other provisions of the Central Act which have been cited at the Bar.
37. In Tata Iron and Steel Co. Ltd., Bombay v. S. R. Sarkar A.I.R. 1961 S.C. 65, it was observed :
A transaction of sale is subject to tax under the Central Sales Tax Act on the completion of the sale and a mere contract of sale is not a sale within the definition of sale in Section 2(g)...a mere contract of sale which does not result in transfer of property occasioning movement of goods from one State to another does not fall within the terms of Section 3(a). That transaction alone in which there is 'transfer of goods' on the hire-purchase or other system of payment by instalments is included in the definition of 'sale'...clause (a) of Section 3 covers sales, other than those included in Clause (b), in which the movement of goods from one State to another is the result of a covenant or incident of the contract of sale and property in the goods passes in either State.
38. It will be profitable at this stage to refer to the observations of Das, Acting Chief Justice, in Bengal Immunity Company's case  2 S.C.R. 603:
The situs of an intangible concept like a sale can only be fixed notionally by the application of artificial rules invented either by Judges as part of the judge-made law of the land, or by some legislative authority. But as far as we know, no fixed rule of universal application has yet been evolved for determining this for all purposes. There are many conflicting theories: one, which is more popular and frequently put forward and is referred to and may indeed be urged to have been adopted by the Constitution...favours the place where the property in the goods passes, another which is said to be the, American view...fixes upon the place where the contract is concluded, a third which prevails in the continental countries of Europe prefers the place where the goods sold are actually delivered, a fourth points to the place where the essential ingredients which go to make up a sale are most densely grouped.
39. In the State of Madras v. Gannon Dunkerley and Co. (Madras) Ltd.  9 S.T.C. 353 (S.C.), Venkatarama Aiyar, J., laid down the criteria to determine what constitutes sale. The relevant observations are quoted below :
In order to constitute a sale it. is necessary that there should be an agreement between the parties for the purpose of transferring title to goods, which presupposes capacity to contract, that it must be supported by money consideration and that as a result of the transaction property must actually pass in the goods. Unless all these elements are present, there can be no sale. Thus, if merely title to the goods passes but not as a result of any contract between the parties, express or implied, there is no sale. So also if the consideration for the transfer is not money but other valuable consideration, it may then be exchange or barter but not a sale. And if under the contract of sale, title to the goods has not passed, then there is an agreement to sell and not a completed sale. Moreover under the law there cannot be an agreement relating to one kind of property and a sale as regards another. There must be an agreement between the parties for the sale of the very goods in which eventually property passes.
40. In Ben Gorm Nilgiri Plantations Co., Coonoor v. The Sales Tax Officer, Special Circle, Ernakulam  15 S.T.C. 753 (S.C.), three out of five Honourable Judges of the Supreme Court, constituting the Bench, observed as follows:
A sale in the course of export predicates a connection between the sale and export, the two activities being so integrated that the connection between the two cannot be voluntarily interrupted, without a breach of the contract or the compulsion arising from the nature of the transaction. In this sense to constitute a sale in the course of export, there must be an intention on the part of both the buyer and the seller to export, there, must be an obligation to export and there must be an actual export. The obligation may arise by reason of statute, contract between the parties, or from mutual understanding or agreement between them, or even from the nature of the transaction which links the sale to export. A transaction of sale which is a preliminary to export of the commodity sold may be regarded as a sale for export, but is not necessarily to be regarded as one in the course of export, unless the sale occasions export. And to occasion export there must exist such a bond between the contract of sale and the actual exportation, that each link is inextricably connected with the one immediately preceding it. Without such a bond, a transaction of sale cannot be called a sale in the course of export of goods out of the territory of India. There are a variety of transactions in which the sale of a commodity is followed by export thereof. At one end are transactions in which there is a sale of goods in India and the purchaser immediate or remote exports the goods out of India for foreign consumption. For instance, the foreign purchaser either by himself or through his agent purchases goods within the territory of India and exports the goods and even if the seller has the knowledge that the goods are intended by the purchaser to be exported, such a transaction is not in the course of export for the seller does not export the goods and it is not his concern as to how the purchaser deals with the goods. Such a transaction without more cannot be regarded as one in the course of export because etymologically 'in the course of export' contemplates an integral relation or bond between the sale and the export. At the other end is a transaction under a contract of sale with a foreign buyer under which the goods may under the contract be delivered by the seller to a common carrier for transporting them to the purchaser. Such a sale would indisputably be one for export, whether the contract and delivery to the common carrier are effected directly or through agents. But in between lie a variety of transactions in which the question whether the sale is one for export or is one in the course of export, i. e., it is a transaction which has occasioned the export, may have to be determined on a correct appraisal of all the facts. No single test can be laid as decisive for determining that question. Each case must depend upon its facts. But that is not to say that the distinction between transactions which may be called sales for export and sales in the course of export is not real. In general where the sale is effected by the seller and he is not connected with the export which actually takes place, it is a sale for export. Where the export is the result of sale, the export being inextricably linked up with the sale so that the bond cannot be dissociated without a breach of the obligation arising by statute, contract or mutual understanding between the parties arising from the nature of the transaction, the sale is in the course of export.
41. In Tata Engineering & Locomotive Co, Ltd. v. Assistant Commissioner of Commercial Taxes, Jamshedpur  26 S.T.C. 354 (S.C.), after noticing the decisions already referred to, the Supreme Court observed as follows:
The explanation of the procedure followed by the appellant which firima facie seems to be business-like and plausible together with the proved absence of any firm orders lends support to the argument pressed on its behalf that the allocation letters and the statements furnished by the dealers did not by themselves bring about transactions of sale within the meaning of Section 2(g) of the Act. The Assistant Commissioner himself found that sometimes the vehicles were sent from the works at Jamshedpur even before an allocation letter had been issued. It would appear from the materials placed before us that generally the completion of the sales to the dealers did not take place at Jamshedpur and the final steps in the matter of such completion were taken at the stock-yards. Even if the appellant took into account the requirements of the dealers which it naturally was expected to do when the vehicles were moved from the works to the stock-yards, it was not necessary that the number of vehicles allocated to the dealer should necessarily be delivered to him. The appropriation of the vehicles was done at the stock-yards through specification of the engine and the chassis number and it was open to the appellant till then to allot any vehicle to any purchaser and to transfer the vehicles from one stock-yard to another. Even the Assistant Commissioner found that on some occasion vehicles had been moved from a stock-yard in one State to a stock-yard in another State. It is not possible to comprehend how in the above situation it could be held that the movement of the vehicles from the works to the stock-yards was occasioned by any covenant or incident of the contract of sale. As regards the so-called firm orders it has already been pointed out that none have been shown to have existed in respect of the relevant periods of assessment. Even on the assumption that any such orders had been received by the appellant they could not be regarded as anything but mere offers in view of the specific terms in exhibit I (the dealership agreement) according to which it was open to the appellant to supply or not to supply the dealer with any vehicle in response to such order. What was, therefore, relevant was the acceptance of firm orders occasioning the movement of vehicles out of the State of Bihar.
42. It is not necessary to refer to any more cases cited at the Bar, because the Supreme Court decisions have clearly enunciated the principles to find out whether a particular sale is or is not an inter-State sale. The difficulty only arises in the application of these principles to the facts of a given case, particularly of a border-line case. It will be, therefore, necessary to set down the facts that are not disputed. The sum total of these facts will ultimately determine whether on the rule laid down by the Supreme Court the sales in question are inter-State sales or not.
43. The facts fall in two categories : those which have been dealt with by the departmental authorities and have been accepted by them though they have put a different interpretation on them. The other category of facts is where nothing is said by the departmental authorities one way or the other. Those facts were asserted by the assessee but they have not been either rejected or dealt with in their respective orders. First I propose to set up the facts which have been accepted by the departmental authorities :
1. The dealer manufactured and sold refrigerators.
2. These refrigerators were sold with the trade marks of 'Kelvinator', 'Leonard' and 'Gem'.
3. The sale of each brand was made through a separate distributor appointed for this purpose.
4. The manner of movement is laid down in Clause 6 of Spencer's agreement and Clause 8 of Blue Star and General Equipment Merchants' agreements.
5. The dealer is bound to sell a 'Kelvinator' to Spencers, a 'Leonard' to Blue Star and a 'Gem' to General Equipment Merchants.
6. The refrigerators were exported outside India.
7. The price of the refrigerators is fixed as mutually agreed upon from time to time.
8. The property in goods passes at Delhi after delivery.
9. The prices are not settled for individual machines but periodically.
10. The purchase orders are placed by the three distributors after the goods reach the head office at Delhi.
44. The second category of facts are:
1. That after the goods are manufactured in the factory an excise clearance pass is obtained after payment of excise duty for the transport of goods from the factory to the company's godown in Delhi. The excise pass is always for movement of goods in favour of self.
2. That during the transport of the goods from Faridabad to Delhi, the octroi at the barrier is paid by the company.
3. That at destination the goods are received by the company's staff and taken in their godown.
4. That in pursuance of the said orders Delhi staff give delivery of the goods at Delhi to the customer under a challan prepared at Delhi.
5. That thereafter the bill is raised from Delhi and the price of the goods is received by the company at Delhi and deposited in company's account in its Delhi bank.
6. That all that the assessee does is to manufacture refrigerators and they are branded for the purpose of sale and distribution.
45. The stock register, which was before the department reveals that from 11th January, 1964, up to the end of August, 1965, whatever refrigerators were manufactured they were sold to Spencers excepting those that were found unsuitable or defective. On 13th September, 1965, one machine was sent to U. S. A. On 9th October, 1965, 18 machines were received from the factory and all the 18 were given to Blue Star. Thereafter, the machines received were either given to Blue Star or to Spencers, On 12th February, 1966, 9 machines received on 9th February, 1966, were given to General Equipment Merchants. Thereafter, the machines were being given to Spencers, Blue Star and General Equipment Merchants. For the first time from 7th April, 1966, onwards, machines are being exported out of India. So far, more or less, a set of machines received was given to Spencers, another set received was given to Blue Star and another set received was given to General Equipment Merchants and after 7th April, 1966, a set received was exported. But from the month of May, 1966, this procedure seems to have undergone a change. Machines received necessarily were not passed on to one or the other. Some machines were left over and it cannot be said that the machines received were specifically received for delivery to any particular distributor or for export.
46. This is all the material which has to be kept in view in order to correctly and properly construe the agreements.
47. After giving our thoughtful consideration to the entire material as well as to the various judicial pronouncements, we are of the view that in the circumstances of this case, the answer to the question referred to us for decision has to be in favour of the department.
48. As earlier observed, so far as the law on the subject is concerned, certain principles have been enunciated by their Lordships of the Supreme Court in their decision to which reference has been made in the earlier part of our judgment, in order to find out whether a particular sale is or is not an inter-State sale and it is in the light of those principles that each particular case has to be decided on its own facts. In the instant case, the agreements when read as a whole, leave no manner of doubt that they are not just distribution agreements. At this stage it would be advisable to refer again to Clauses 5 and 6 in Spencer's agreement and Clauses 5 and 8 in the agreements with Blue Star and General Equipment Merchants. Clause 6 of Spencer's agreement and Clause 8 of the other two agreements are more or less similar excepting that in the Spencer's agreement, there is no provision that the machines will be packed in crates. From these clauses, keeping the Spencer's case out for the present and only confining ourselves to the cases of Blue Star and the General Equipment Merchants, it is apparent that thorough inspection of the refrigerators is made at the factory at Faridabad. Thereafter, they are packed in crates and then forwarded to the company's godown at Delhi. The freight from Faridabad to Delhi is borne by the distributors, that is, the Blue Star and the General Equipment Merchants. Any shortfall or damage in transit is also the responsibility of Blue Star and the General Equipment Merchants; the responsibility for this does not fall on the manufacturer. Leaving aside at present other considerations and keeping then two pertinent matters in view, it necessarily follows that the movement of machines has been occasioned under the agreements inasmuch as the appropriation of machines to Blue Star and General Equipment Merchants was made at the factory and once the appropriation was made, it is immaterial where the sale actually takes place.
49. Adverting to the case of Spencers, so far as this aspect of the matter is concerned, the only missing fact is that the machines are not packed in crates although the procedure of rigorous inspection as well as the provision that no responsibility for shortage or damage occurring in transit will be accepted by the company exists in Clause 6, but this fact alone would not make much difference especially when there is no evidence that the machines, when they left the factory, were not labelled 'Kelvinator', the trade mark which has been assigned to Spencers. If there was evidence that-the machines had left without any label, possibly the contention that the machines were not appropriated to the Spencer's agreement would have had some material bearing, but in the absence of such evidence, we must assume that the machines, when they left for Spencers, were labelled at the factory and that would be in compliance with Clause 6, which definitely lays down that all machines leaving the company's factory will pass through rigorous inspection procedure laid down by the company. In the presence of these Clauses, the contention of Mr. Sibal, learned counsel for the assessee, that the movement of goods from the factory of the company at Faridabad to its godown in Delhi was in routine, becomes meaningless. If the movement of the goods is in routine for the purpose of storage in the godowns at Delhi, then the effect of Clause 8 would be completely wiped out. The inspection procedure is warranted by the Clauses referred to above and, therefore, the machines must necessarily be deemed to have been earmarked for that particular distributor.
50. Further under the agreements no choice is left with the dealer to select his buyer as he is bound to sell a 'Kelvinator' refrigerator to Spencers, a 'Leonard' to Blue Star and a 'Gem' to General Equipment Merchants. The company has no discretion in the disposal of the said refrigerators to any other party so long as the agreements subsisted, nor did the distributors have any option to decline to buy the refrigerators except on the grounds of some technical defect. The clauses in the agreement which related to matters like fixation of sale price, consumers and mutual consultation in policies of sales promotion between the parties were incidental and did not affect the basic character of the transactions. The effect of the agreements when read as a whole has to be seen in the context in which the refrigerators were moved from Faridabad to Delhi. But for these agreements the refrigerators would not have passed into the hands of the distributors nor would they have been entitled to carry out rigorous inspection under Clause 8 and would have accepted the responsibility of any shortage or damage occurring in transit. The refrigerators are earmarked for delivery to the specific parties under the agreement the moment they are manufactured in the factory under the given trade mark. It may be observed at this stage that there is no material on the record to show that the machines left the factory without any label and that the labelling was done according to the need of a particular distributor in the godown at Delhi. It would also be pertinent to mention that on this aspect, no arguments were advanced even before the Tribunal nor was any finding invited on the sams. In this view of the matter, there can be no manner of doubt that the Tribunal was right in its conclusion that the movement of machines had been occasioned by the aforesaid agreements between the manufacturers and the distributors.
51. For the reasons recorded above, we answer the question referred to us in favour of the department, finding that the machines moved from Faridabad to Delhi in pursuance of the agreements of sale which have been termed as distribution agreements. In the circumstances of the case, we make no order as to costs.