1. These are two revision petitions filed under Section 38 of the Tamil Nadu General Sales Tax Act, 1959, to revise the order of the Sales Tax Appellate Tribunal dated 27th January, 1977. The assessee is a company dealing in Ambassador motor cars and automobile spare parts in Madras. With reference to the years 1972-73 and 1973-74, the assessee reported the turnovers by filing a return in the manner contemplated by the Central Sales Tax Act. The turnover as reported was thus accepted, but later on the assessing officer found that the assessee had effected inter-State sales on a turnover of Rs. 5,78,768.87 during the year 1972-73 and Rs. 6,01,866.36 during the year 1973-74. He, therefore, revised the assessments by taking proceedings under Section 16 of the Tamil Nadu General Sales Tax Act. The assessee appealed to the Appellate Assistant Commissioner who confirmed the order for the assessment year 1972-73 and gave a small relief in relation to the assessment for 1973-74. The assessee thereafter appealed to the Sales Tax Appellate Tribunal. Before the Tribunal, the contention of the assessee was that these transactions were local transactions in Andhra Pradesh and that, therefore, they could not be brought to tax under the Central Sales Tax Act. The Tribunal rejected this contention and, therefore, the matter is in revision before us.
2. Before proceeding further to consider the contentions, we shall describe the nature of the transactions. A party who requires an automobile has, under the prevalent regulations, to deposit a sum of Rs. 2,000 called 'security deposit' and keep it in a post office savings bank account. The security deposit account is then pledged in favour of an automobile dealer subject to withdrawal only with the written authority of the dealer. Taking one transaction as typical, there was a deposit on 29th July, 1971, at Nellore, by a party named G. Venkatanarayana Reddy. On 16th June, 1972, the assessee, after receiving the requisite number of vechicles from Hindustan Motors Limited, Calcutta, made what is called 'stock transfer' and this transfer was to its branch at Nellore. There is a delivery note executed by the branch at Nellore on the same date in favour of the head office of the assessee at Madras. On 17th June, 1972, the pledge of the deposit is released and there is a communication addressed to the Postmaster, Nellore, for the purpose. This letter is said to have been written by the Nellore branch. After obtaining a letter from the purchaser that he has not purchased any new motor car of any other brand during the calendar year anywhere in India, the assessee delivered the motor car on 16th June, 1972, to the party. The invoice purports to be by the Nellore branch of the assessee. The purchaser executed a letter for having taken delivery of the vehicle along with tools and accessories. There is also an intimation on the same date to the Regional Transport Officer about the sale of the vehicle. The contention in this and in similar cases of sale was that they were all local sales in Andhra Pradesh so that they cannot be taxed under the Central Sales Tax Act. It was also stated that the assessee had been taxed by the Andhra Pradesh sales tax authorities and that in spite of the fact that a reference was made to the assessment under the Central Sales Tax Act in Madras, the Andhra Pradesh sales tax authorities had proceeded on the basis that the assessment in Andhra Pradesh was proper.
3. In order to examine the taxability of the transaction, we shall have to refer to the statutory provision. Section 3 of the Central Sales Tax Act provides that 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 occasions the movement of goods from one State to another or is effected by a transfer of documents of title to the goods during their movement from one State to another. Section 4 provides that when a sale or purchase of goods is determined, in accordance with Sub-section (2) to that section, to take place inside a State, such sale or purchase shall be deemed to have taken place outside all other States. A sale or purchase of goods is deemed to take place inside a State if the goods are within the State-(a) in the case of specific or ascertained goods, at the time the contract of sale is made ; and (b) in the case of unascertained or future goods, at the time of their appropriation to the contract of sale by the seller or by the buyer, whether assent of the other party is prior or subsequent to such appropriation. On the basis of the determination of the place of sale, the State, within which the sale is deemed to take place, is liable to tax the transaction in accordance with the procedure set out in the State law.
4. This provision has been interpreted in several decisions of the Supreme Court. We were referred to Balabhagas Hulaschand v. State of Orissa  37 S.T.C. 207, which has considered the earlier ones and which has brought out the principles to be applied in a case like this. That was a case where a firm dealt in jute with its head office in Calcutta. It entered into a contract of sale with certain Calcutta firms by which it was agreed to sell raw jute of certain specifications. When the contract of sale was entered into, the raw jute was not in existence as it was being grown. After the goods were ready, the assessee, who was in Orissa, booked the goods in bags in the names of the buyers from certain railway stations in Orissa to the railway sidings of the buyers at Calcutta. The goods, on arrival in the buyers' railway siding at Calcutta, were inspected by the buyers and as they were found to be in accordance with the specifications mentioned in the contract of sale, they were accepted. The Orissa High Court held that these sales were inter-State sales and were liable to be taxed under Section 3(a) of the Central Sales Tax Act. On appeal to the Supreme Court, it was held that even though the sale took place at Calcutta, since the movement of goods preceded the sale in pursuance of the contract of sale, which contained a clear stipulation that the goods were to move from Orissa to Calcutta, the movement of goods was occasioned by the sale itself and it was, therefore, taxable under Section 3(a) of the Central Sales Tax Act. In the course of the judgment, some examples have been given. Case No. I at page 214 is described as follows :
A is a dealer in goods in State X and enters into an agreement to sell his goods to B in State Y. In pursuance of the agreement A sends the goods from State X to State Y by booking the goods in the name of B. In such a case it is obvious that the sale is preceded by the movement of the goods and the movement of goods being in pursuance of a contract which eventually merges into a sale the movement must be deemed to be occasioned by the sale. The present case clearly falls within this category.
5. Case No. II is described as follows :
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.
6. The attempt of the learned counsel for the assessee was to bring his case within the principle of case No. II extracted above. He pointed out that this is a case where the assessee had taken his vehicle to Nellore to his own branch and that thereafter the vehicle was sold to the purchaser. The Sales Tax Tribunal has pointed out that as far as files Nos. 4 to 25 and 30 to 34 are concerned, the movement of the cars have been occasioned by the contracts of sale, by taking into account the earmarking of each individual car with chassis numbers and the engine numbers in the stock transfer notes as relating to a particular purchaser. Where there has been earmarking in Madras and the subsequent transfer of the vehicle to Nellore, the question is whether there is an inter-State sale or a sale outside the State.
7. In South India Viscose Ltd., v. State of Tamil Nadu Pag 7 infra, the scope of case No. II transaction has been examined. In that case also, a similar argument was advanced and in dealing with that contention, it was pointed out:
We are of the opinion that this argument is misconceived. This argument assumes that in case No. II, extracted above, the contract or agreement to sell has preceded the movement of the goods, while actually in that illustration, though the order in which the facts of the illustration are stated may make one to think that the agreement was first entered into and the movement of the goods took place later, there is nothing to indicate positively that that was the case contemplated by that illustration. As a matter of fact that could not have been contemplated is made clear by the very judgment itself in a subsequent paragraph. In a subsequent paragraph of that decision, the decision of the Supreme Court in Kelvinator of India Ltd. v. State of Haryana  32 S.T.C. 629 already referred to was mentioned and thereafter it was stated :
'In that case, however, on the facts found by the High Court, this court held that the sale was not an inter-State sale but an internal sale which took place in Delhi. In that case there was no movement of the goods from one State to another in pursuance of the contract of sale. In other words, the facts of this case clearly fell within case No. II, which has been described by us above.'We have already referred to the facts of the case in Kelvinator of India Ltd. v. State of Haryana  32 S.T.C. 629 and the fact found in that case was that the movement of the goods preceded the contract of sale. Therefore, if we understand case No. II in this light, it will follow that the case will only cover a situation where the movement of the goods had preceded the sale.
7. In case No. II itself, as described by the Supreme Court in Balabhagas Hulaschand v. State of Orissa  37 S.T.C. 207, the following sentence occurs :
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.
8. In the present case, in view of the facts described above, it would be clear that there was a sale in favour of the purchaser and that the movement was occasioned by the sale. It may be that it was only a credit sale as the money was to be subsequently realised by the branch at Nellore. But this circumstance by itself would not show that this is a case where the movement of goods is not in pursuance of the agreement. The agreement was to sell Ambassador vehicle to the purchaser at Nellore and it is in pursuance of the agreement the vehicle was earmarked in Madras and was actually delivered in Nellore. In these circumstances, this is a case which falls squarely within the scope of Section 3(a) of the Central Sales Tax Act.
9. During the arguments, our attention was drawn to the decision of the Kerala High Court reported in Antony v. State of Kerala  42 S.T.C. 180. In the Kerala case  42 S.T.C. 180, the assessee was engaged in the manufacture of packing cases with its head office in Kerala State and a branch office in Madras. The Madras office received orders from the customers and transmitted them to the head office for compliance. The head office despatched the consignments of packing cases to the branch office, which delivered the cases to the customers in execution of the orders placed by them. The Tribunal held that the sale had occasioned the movement of the goods from Kerala State to Madras and that, therefore, it was an inter-State sale assessable to sales tax under the Central Sales Tax Act. On revision, the High Court held that the Madras branch was really the agent of the buyer and that when the branch transmitted the orders to the head office and the head office despatched the goods to it in Madras, the receipt and the delivery of the goods were really as agents of the buyer, and no more. It was, therefore, held that the conclusion of the Tribunal was correct. Though this case in a way supports the stand taken by the State in the present case, still we are unable to agree with it as we do not accept the reasoning that the branch, when it booked the order, was acting as the agent of the purchaser as correct. The branch would act only as the agent of the head office and not of a stranger. To treat the branch as an agent of the purchaser would be to ignore the terms in which business is ordinarily conducted. It is unnecessary to pursue this point further.
10. Basing his stand on State of Bihar v. Tata Engineering & Locomotive Co. Ltd.  27 S.T.C. 127, the learned counsel for the assessee contended that so long as there was possibility of diversion of the goods by the assessee before the actual delivery to the purchaser, it could not be stated that there was a sale in pursuance of which there was a movement of goods. That case itself refers to an earlier decision in K. G.' Khosla and, Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes, Madras  17 S.T.C. 473. In the last mentioned case, the Supreme Court held that before a sale could be said to have occasioned the import, the movement of goods must have been incidental to the contract or in pursuance of the conditions of the contract and that there should be no possibility of the goods being diverted by the assessee for any other purpose, meaning thereby that there should be no possibility of diversion, according to law or contract, and, not in breach of them. We have to consider the question in the light of the actual facts that happened in the present case. The vehicles after they were earmarked were transported to Nellore and were actually delivered to the purchaser for whom it was earlier earmarked. In the light of the Control Order which was existing in respect of the motor vehicles, there was no possibility of diversion by the assessee because the assessee would have to apply for permission from the concerned authorities. The earmarking is itself a recognition of a pre-existing contract of sale. Therefore, we are unable to hold that on the facts there was any possibility of diversion so that the transaction could not be said to be inter-State in nature. The contention is sought to be built on the basis that the appropriation which was made in the State was not the final appropriation, as the purchaser was not bound to accept the vehicle as appropriated by the assessee. Section 4(2)(b) of the Central Sales Tax Act, 1956, contemplates that a sale or purchase of goods shall be deemed to take place, in the case of unascertained or future goods, inside a State, if at the time of their appropriation to the contract of sale by the seller or by the buyer, whether assent of the other party is prior or subsequent to such appropriation, the goods were inside the State. Therefore, the assent of the buyer is not a sine qua non to fix up the location for the sale. After the appropriation had been made by the assessee, it would not have been possible for the assessee to divert the goods on the facts here. This is not a case where such goods were actually diverted. In these circumstances, the transactions were rightly treated as inter-State sales and the tax levied accordingly. The revision petitions fail and are dismissed with costs, Counsel's fee Rs. 250.