Khanna, J. - (1.) This appeal by Special Leave by M/a Kelvinator of India Ltd. is directed against the judgment of Punjab and Haryana High Court whereby that court answered the following question referred to it by the Sales Tax Tribunal Haryana in favour of the department and against the appellant:"whether on the facts and circumstances of the case, the agreement between M/s. Kelvinator of India (Assessee), M/s. Spencer and Co. Ltd., Messrs Blue Star Engineering Co., ant 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.) The matter relates to the assessment year l965-66, i e. the period from April 1, 1965 to March 31, 1966. The appellant campany has a factory at Faridabad in Haryana. It manufactures refrigerators, deep freezers, compressors and other similar articles. The factory went into production in 1964. Its registered office and sales office are at 19A, Alipore Road, Delhi. The appellant has godowns in Delhi having full staff of godown keepers and clerks. The appellant is a registered dealer under the Punjab General Sales Tax Act, 1948 and the Central; Sales Tax Act, 1956. The registration has been done at Faridabad. Refrigerators and other articles are manufactured by the appellant under a collaboration agreement with an American company known as Kelvinator International Corporation. The refrigerators and other articles manufactured by the appellant are marketed under trade marks "Kelvinator,', "Leonard" and "Gem',., The entire sale of refrigerators, compressors and spare parts in l964 was made to Spencer and Co. Ltd. at Delhi. Such transfers were accepted as genuine by the sales tax authorities. In respect of these sales the department did not take the stand that they were inter-State sales or that the movement of goods from Faridabad to Delhi was occasioned by reason of sales made to Spencer Co. Ltd.
(3.) On April 26, l965 the appellant entered into a distribution agreement with Spencer and Co. Ltd. in respect of refrigerators and other products having Kelvinator trade mark. Similar distribution Agreements were entered into with Blue Star Engineering Co. (Bombay) Pvt. Ltd. on September 15, 1965 in respect of Leonard refrigerators and on December 11, l965 with General Equipment Merchants Ltd. in respect of Gem refrigerators. The agreement with Spencer and Co. was to take effect from April 1, 1965 and the other two agreements from the dates on which they were entered into. The terms of the agreements were substantially similar, except in certain matters with which we are either not concerned or to which reference would be made hereinafter. The relevant clauses of agreement dated April 26, 1965 are as under: " Whereas in terms of the Manufacturing and Sales Agreement entered into by the Company (the appellant company) with Kelvinator International Corporation, Detroit (Michigan U. S. A.), the Company is granted exclusive right and licence to manufacture, assemble and sell the products designed and/or manufactured by the Company under Trade mark "Kelvinator" or any other Trade mark in India (hereinafter called the Territory) and whereas the (Company in its Factory at Faridabad (Punjab) has commenced the manufacture of Kelvinator Refrigerators, parts and spare parts etc., and whereas the Distributors (Spencer and Co. Ltd.) 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 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. ********** 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 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 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. ********** ********** " Clauses 3, 6, 7 and 8 of agreement dated September 15, 1965 in respect of Leonard refrigerators were as under: " 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 1500 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 this agreement to the extent that the Company is unable to supply the guaranteed minimum quantity of 80 refrigerators per month. 6. For calculating the liability of the Distributors for payment to the Company, the price quoted will be ex-factory Company's works at Faridabad, excluding Central Excise and all other taxes, duties and charges (but not octori charges payable between Faridabad and Delhi which will be to the Company's account) which may be levied or introduced by the Government or any local authority from time to time and which will be charged in addition to the said ex-factory price. The Distributors shall pay to the Company, the transport charges for the goods from the Company's works at Faridabad to the Company's godowns in Delhi. 7. All the goods shall remain the property of the Company till they reach Delhi and are delivered to the Distributors in Delhi, where alone the property therein shall pass to the Distributors. The sale shall always take place in Delhi. 8. All 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 packed 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 in Delhi." Clauses 6, 7 and 8 of the agreement dated December 11, 1965 in respect of Gem refrigerators were substantially similar to clauses 6, 7 and 8 of agreement dated September 15, l965. Clause of agreement dated December 11, 1965 was as under: " 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 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." Procedure for transfer of goods; from the factory at Faridabad to the appellant company's sales office and godowns at 19A, Alipore Road, Delhi was described in the objections filed on behalf of the appellant before the sales tax authority as under: " The company gets the goods cleared from the Excise for destination to its Delhi office godown in piece-meal 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 the 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." Four affidavits were also filed before the assessing authority. The first affidavit is of M. B. Sutaria, secretary of the appellant company. Relevant parts of this affidavit are as under: " 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 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 goods at Delhi to the customer under a challan prepared at Delhi. 8. That thereafter the bill is raised from Delhi and price of the goods is received by the Company at Delhi and deposited in the Company's account in its Delhi Bank." The other three affidavits were those of V A. Rao of Spencer and Co. Rajinder Nath Seth of Blue Star Engineering Co. Ltd. and Mrs. Usha Batra of General Equipment Merchants Ltd. In the affidavit of V. A. Rao it was stated: " 2. That we select the pieces of Refrigerators lying in the godowns of Kelvinator of India Ltd., Delhi and if on inspection we find that pieces of Refrigerators suiting to our requirements, we place specific orders on Kelvinator of India Ltd., Delhi to supply us the goods." The affidavits of Rajinder Nath Seth and Mrs. Usha Batra contained similar paragraphs. The appellant company took 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 certain other risks from warehouse to warehouse.;