SALE AND AGREEMENT TO SELL: TRENDS AND JUDICIAL

INTERPRETATION – AN ANALYSIS

Submitted by

RAMANAH.V

Reg. No. BC0160031

Under the Guidance of

Mr Shriram C.R.
Assistant Professor

TAMIL NADU NATIONAL LAW SCHOOL

(A State University established by Act No. 9 of 2012)
Tiruchirappalli
Tamil Nadu – 620 009
 Sale and Agreement to Sell: Trends and Judicial Interpretation – An Analysis 2

TABLE OF CONTENTS

S. NO. TITLE PAGE NO.

1. ABSTRACT 6
2. INTRODUCTION 6
3. OBJECTIVE AND RESEARCH QUESTIONS 7
4. RESEARCH METHODOLOGY 8
5. BACKGROUND 8
6. ESSENTIAL REQUISITES OF SALE 9
7. CONTRACT OF SALE AS OPPOSED TO OTHER 10

TYPE OF CONTRACTS
8. SALE AS DISTINGUISHED FROM AGREEMENT 12

TO SELL
9. RECENT JUDICIAL TRENDS 14
10. CONCLUSION 17
11. BIBLIOGRAPHY 17
 Sale and Agreement to Sell: Trends and Judicial Interpretation – An Analysis 3

SALE AND AGREEMENT TO SELL: TRENDS AND JUDICIAL INTERPRETATION –

AN ANALYSIS

Ramanah.V

ABSTRACT

The development and the use of contract laws have been one of the cornerstones for the
establishment and survival of the capitalistic mode of production. Given that money being a
commodity for the exchange of goods, it is pertinent to understand such exchange; i.e. ‘sale’ of
goods. The legislature had enacted the Sale of Goods Act, 1930 to govern such transactions.
However, the word ‘sale’ is nuanced; it depends on the time the transfer of the property in the
goods. When such transfer is done at a particular time, it is called ‘sale’; however, if it is done at
a future time, it is called ‘agreement to sell’. This project aims to settle the difference between
the two.

This project would first discuss the word ‘sale’ and its essential requisites. It would then
discuss the differences between sale, bailment, work and agency for a nuanced understanding of
the word ‘sale’. It would then enumerate the differences between ‘sale’ and ‘agreement to sell’
which is the basis of this project. Finally, it would have a glance on the current judgments
relating to ‘sale’ and discuss their possible implications.

Keywords: agreement, goods, sale.

INTRODUCTION

Sale is an integral part of any business that it can be compared only to oxygen for the
humans.1 Section 4 of the Sale of Goods Act, 1930 describes the provisions related to sale and
agreement to sell. Since a sale is a subset of a contract, all the essential elements of a contract
also apply for a contract of sale. While the legislature had clearly differentiated between sale and
agreement to sell as a function of time, however, the judiciary had used its interpretative powers
to bring in certain elements for it to be qualified as a sale. Though interconnected, sale could be
distinguished from other types of contracts such as contract of work, bailment and agency, which

1
Gordon Tredgold, 43 THOUGHTS ON THE IMPORTANCE OF SALES INC.COM (2017), https://www.inc.com/gordon-
tredgold/43-thoughts-on-the-importance-of-sales.html .
 Sale and Agreement to Sell: Trends and Judicial Interpretation – An Analysis 4

would be attempted in this project. Though the difference between sale and agreement to sell is a
settled distinction, yet it is imperative to understand the views of the judiciary in order to really
appreciate the difference. The recent judgments on concepts relating to sale have clarified on the
basic concepts of law. Recently it was held that taxing a sale of goods element in a works
contract is permissible even after the incorporation of goods. It was also held in the affirmative
that though the registration of a motor vehicle is a post-sale event, it remains in the category of
unascertained or future goods till its appropriation to the contract of sale is occasioned by
handing over the possession at or near the office of registration authority in a deliverable and
registrable state. Only after getting the certificate of registration the owner would become
entitled to enjoy the benefits of possession and can obtain the required certificate to use the
motor vehicle. It was also held that transport of goods ordered online from one state to another
done through a delivery hub at the state of final delivery would amount to inter-state sale.

OBJECTIVE AND RESEARCH QUESTIONS

Despite section 4(3) of the Sale of Goods Act, 1930 enumerating the difference between
‘sale’ and ‘agreement to sell’, in simple terms, however the amount of interpretation undertaken
by the Courts is enormous. Given that sale is the centerpiece of the Sale of Goods Act, 1930, it is
necessary to understand the difference between sale and agreement to sell which can change the
liabilities of the parties itself. This project aims;

1) To explain the essentials requisites of sale.

a. Whether there has been a consensus among the Courts with regards to the
essentials of sale.
2) To enumerate the differences between contracts of sale, hire, agency, bailment and work.
a. Whether the difference is considerable so as to distinguish between sale, hire,
agency, bailment and work in a clear and concise manner.
3) To list out the differences between sale and agreement to sell.
a. Whether such difference is inclusive or exhaustive.
4) To discuss the recent cases relating to sale.
a. Whether such cases have cleared the existing confusion which had led to the
existence of the case in the first place.
 Sale and Agreement to Sell: Trends and Judicial Interpretation – An Analysis 5

RESEARCH METHODOLOGY

The research methodology used in this project is analytical and descriptive. Relevant data and
information had been obtained from judgments from legal databases as well as authoritative texts
on the relevant topics.

BACKGROUND

Section 4 of the Sale of Goods Act, 1930 clearly defines sale and agreement to sell. It is
enumerated as follows:
S.4. Sale and agreement to sell. – (1) A contract of sale of goods is a contract whereby the
seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a
contract of sale between one part-owner and another.
(2) A contract of sale may be absolute or conditional.
(3) Where under a contract of sale the property in the goods is transferred from the seller to the
buyer, the contract is called a sale, but where the transfer of the property in the goods is to take
place at a future time or subject to some condition thereafter to be fulfilled, the contract is called
an agreement to sell.
(4) An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled
subject to which the property in the goods is to be transferred.
Section 5 describes the formalities required to enter into a contract of sale.
S.5. Contract of sale how made. – (1) A contract of sale is made by an offer to buy or sell
goods for a price and the acceptance of such offer. The contract may provide for the immediate
delivery of the goods or immediate payment of the price or both, or for the delivery or payment
by installments, or that the delivery or payment or both shall be postponed.
(2) Subject to the provisions of any law for the time being in force, a contract of sale may be
made in writing or by word of mouth, or partly in writing and partly by word of mouth or may be
implied from the conduct of the parties.
 Sale and Agreement to Sell: Trends and Judicial Interpretation – An Analysis 6

ESSENTIAL REQUISITES OF SALE

Price is an essential element of sale.2 This is iterated in section 4(1) of the Sale of Goods Act,
1930 provides that a contract of sale is a contract between the buyer and the seller where the
seller transfers or agrees to transfer the property in goods to the buyer for a price (emphasis
supplied).3 This essentially means that the consideration for such a transfer of property in goods
must be price in the form of money and not another good; otherwise it would mean exchange or
barter.4 But, if the exchange or barter is made partly for a price and partly for a good then such a
contract for transfer of ownership in goods could be a sale to that extent. 5 In the case of R.C. Jal
v. Union of India6, it was held that “the transaction of sale is a composite transaction consisting
of agreement of sale, passing of title, delivery of goods and payment of price, costs and charges
of transportation.”
In the landmark case of State of Madras v. Gannon Dunkerley7, it was held that,
“According to the law both of England and of India, 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 of course 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.”
This presupposes that if the title to the goods passes on from one person to another without any
express or implied contract, then such a transfer of title would not amount to sale. 8 Thus, a
contract of sale would become a sale only when the property in the goods which is to be
transferred to the buyer by the seller is done under the terms of the contract itself. 9 This raises an
important and interesting question. Suppose that A buys a certain product X from Flipkart. Given
that A does not even know the retailer and merely relies on the online platform Flipkart, does a
contract for sale of goods arise?

2
Uttar Pradesh Coop Canes Union Federation v. West Uttar Pradesh Sugar Mills Association, 5 SCC 430 (2004).
3
Id.
4
Dhampur Sugar Mills Ltd v. Commissioner of Trade Tax, 5 SCC 624 (2006).
5
Aldridge v. Johnson (1857) 7 E&B 885 as cited in SATISH J. SHAH, POLLOCK AND MULLA, THE SALE OF GOODS
ACT 64 (8 ed. 2011).
6
R.C. Jal v. Union of India, 1972 CDJ 083 (1972).
7
State of Madras v. Gannon Dunkerley and Co. (Madras) Ltd., 1958 AIR 560 (1958).
8
Id.
9
Poppatlal Shah v. State of Madras, 1953 AIR 274 (1953). The Supreme Court held that in order that there should
be a sale of goods, there must be an agreement between the parties for the sale of the very goods in which the
property passes eventually; STATE OF MADRAS V. GANNON DUNKERLEY AND CO. (MADRAS) LTD., supra note 7.
 Sale and Agreement to Sell: Trends and Judicial Interpretation – An Analysis 7

Given that there needs to be a buyer and a seller for a contract of sale to be in existence,
there must be two persons, each taking up the respective roles. Thus, a sale cannot take place
unless there is a buyer and a seller.10 These buyer and seller must not be identical.11

CONTRACT OF SALE AS OPPOSED TO OTHER TYPES OF CONTRACTS

Contract of Sale v. Contract of work

In the case of Commissioner of Sales Tax v. Purushottam Premji12, the Supreme Court
summarized the distinction between a contract of work or service and a contract for sale of goods
as follows:
“The primary difference between a contract for work or service and a contract
for sale of goods is that in the former there is in the person performing work or
rendering service no property in the thing produced… in the case of a contract
for sale, the thing produced as a whole has individual existence as the sole
property of the party who produced it, at some time before delivery, and the
property therein passes only under the contract relating thereto to the other party
for a price.”
In Ram Singh and Sons Engineering Works v. Commissioner of Sales Tax13, the Supreme Court
held as follows:
“Now, the distinction between a contract of sale and a contract for work and
labour has been pointed out in Halsbury’s Laws of England, 3 rd Edn., Vol. 34,
para 3 at page 6 in the following words:
A contract of sale is a contract whose main object is the transfer of the property
in, and the delivery of the possession of, a chattel as a chattel to the buyer. Where
the main object of work undertaken by the payee of the price is not the transfer of
a chattel qua chattel, the contract is one for work and labour.”
The transfer of property in good for a price is the distinguishing feature of a contract of sale. The
difference could be found in 1) an overview of the terms of the contract; 2) circumstances of the

10
CIT v. Hind Construction Ltd., 4 SCC 460 (1972).
11
Mahendrakumar Ishwarlal and Co v. State of Madras, 1968 AIR 241 (1968). It was held in this case that a
transaction between two partnerships which had identical partners would not constitute a contract of sale as there
was no transfer of ownership.
12
Commissioner of Sales Tax Madhya Pradesh v. Purshottam Premji, 2 SCC 287 (1970).
13
Ram Singh and Sons Engineering Works v. Commissioner of Sales Tax, 1 SCC 487 (1979).
 Sale and Agreement to Sell: Trends and Judicial Interpretation – An Analysis 8

transaction; and 3) custom of the trade. 14 The following clearly distinguishes between a contract
of sale and a contract of work;
The Supreme Court has noted that there may be three categories of contracts: i) The contract may
be for work to be done or remuneration and for supply of materials used in the execution of the
work for a price, in which case this contract is a composite contract consisting of both types of
contract; ii) it may be a contract for work in which the use of the materials is accessory or
incidental to the execution of the work, in which case this contract is a contract for work and
labour not involving sale of goods; and 3) it may be a contract for supply of goods where some
work is required to be done as incidental to sale, in which case this contract is a contract for sale
where the goods are sold as chattels and the work done is merely incidental to sale.15

Sale v. Bailment
Though there may be confusion in the distinction, it could be determined by a test. It involves
determining whether the party delivering the goods is entitled to the specific return of what had
been delivered.16 Suppose that a certain good X is bailed to B by A with a view of B buying the
good; it is called as ‘sale or return’ or hire-purchase basis. Such transaction becomes a sale only
if B exercises the option to purchase X.17 Consider a case where goods are sold in barrels, sacks
or bottles. Whether such barrels or sacks or bottles are themselves the subject of a sale or are
merely bailed to the buyer, is a question of construction of the contract.18

Sale v. Agency
Whether a transaction is a sale or a contract of agency is a mixed question of fact and law. 19 Even
an agent can become a purchaser when the agent pays the price to the principal on his own
responsibility.20 In case of a contract of sale, the transferee is liable to the transferor as a debtor
for the price to be paid and not as an agent for the proceeds for the sale. 21 The person engaged to
sell a good as an agency is to sell the good to another person not as his/her own property but as

14
Hindustan Shipyard Ltd. v. State of A.P., 6 SCC 579 (2000).
15
Maharashtra Chamber of Housing Industry and others v. State of Maharashtra and others, 2012 Indlaw 657
(2012).
16
South Australian Insurance Co v. Randell (1869) LR 3 PC 101 as cited in SHAH, supra note 5 at 77.
17
Aluminium Industrie Vaassen BV v. Romalpa Aluminium Ltd [1976] 2 All ER 552 as cited in Id. at 77.
18
Gedding v. Marsh [1920] 1 KB 668 as cited in Id. at 77.
19
Sri Tirumala Venkateshwara Timber and Bamboo Firm v. Commercial Tax Officer, Rajahmundry, 1968 AIR 784
(1968).
20
Gordon Woodroffe and Co. (Madras) Ltd. v. Shaik MA Majid and Co, 1967 AIR 181 (1967).
21
SHAH, supra note 5 at 80.
 Sale and Agreement to Sell: Trends and Judicial Interpretation – An Analysis 9

the property of the principal who would continue to be liable to account for the sale proceeds. 22
“Mere formal description of a person as an agent or buyer is not conclusive, unless the context
shows that the parties clearly intended to treat a buyer as a buyer and not as an agent.”23

Scope of Sale not enough – cl 29-A in Article 366

It is a well settled proposition that for a tax to amount to a tax on the sale of goods, it must
amount to a sale according to the established concept of a sale in the Sale of Goods Act 1930. 24
The Supreme Court had held that the expression ‘sale of goods’ which were used in the entries in
the Seventh schedule had the same meaning as that provided in the Sale of Goods Act, 1930. 25
However, this definition was not enough as it had led to tax avoidance in various ways such as a
tax on the delivery of goods on hire-purchase. Thus, on the recommendation of the 61 st Law
Commission of India report, the legislature inserted cl (29A) in Article 366 of the Constitution of
India. This was held as constitutionally valid by the Supreme Court which held that,
“After the Forty-sixth Amendment, the sale element of those contracts which are
covered by the six sub-clauses of clause (29-A) of Article 366 are separable and
may be subjected to sales tax by the States under Entry 54 of List II and there is
no question of the dominant nature test applying.”26
Thus, in view of Article 366 (29-A), the states have been amending the definition of ‘sale’ in
their respective tax legislations.27

SALE AND AGREEMENT TO SELL – DISTINCTION

The definition of a contract of sale covers both actual sale and agreement to sell. Section 4(3) of
the Sale of Goods Act, 1930 defines the difference between the two.28 However, the concept of
‘agreement to sell’ would not be included in the expression ‘sale’ which occurs in other Acts
such as Central Sales Tax Act 1956.29

22
Id. at 80.
23
Bhopal Sugar Industries Ltd v. Sales Tax Officer Bhopal, 1977 AIR 1275 (1977).
24
Tamil Nadu Kalyana Mandapam Assn. v. Union of India and Ors., 5 SCC 632 (2004). The principle for which this case had
been cited could also be derived from M/s Gannon Dunkerley & Co. and Ors. v. State of Rajasthan and Ors. (1993) 1 SCC
364; The Sales Tax Officer, Pillbhit v. M/s Budh Prakash Jai Prakash [1955] 1 SCR 243.
25
STATE OF MADRAS V. GANNON DUNKERLEY AND CO. (MADRAS) LTD., supra note 7.
26
Bharat Sanchar Nigam Ltd v. Union of India, 3 SCC 1 (2006).
27
SHAH, supra note 5 at 92.
28
UTTAR PRADESH COOP CANES UNION FEDERATION V. WEST UTTAR PRADESH SUGAR MILLS ASSOCIATION, supra
note 2.
29
Consolidated Coffee Ltd. v. Coffee Board, Bangalore, 1980 AIR 1468 (1980).
 Sale and Agreement to Sell: Trends and Judicial Interpretation – An Analysis 10

An agreement to sell is an executory contract; it creates only a jus in personam; such that
the property which is to be sold remains with the seller. 30 A breach of such an agreement would
only provide the other party a right to sue for damages.31 The Supreme Court differentiated
between a sale and an agreement to sell as follows;
“The essential feature that distinguishes the contract for sale from an agreement
to sell is that in a contract of sale the property in the goods is transferred from
the seller to the buyer immediately whereas in an agreement to sell, property is
transferred on a future date/dates.”32
In certain cases, with regards to the specific goods to be ascertained at the time of the
contract, it is the intention of parties which determine whether the contract amounts to a sale or
an agreement to sell. Such conditions are expressed under ss20-22, 24 and 25 of the Sale of
Goods Act, 1930. Thus, if the goods are not specific and ascertainable at the time of making of
the contract, such a contract could only be an agreement to sell. 33 A clear cut difference between
sale and an agreement to sell was provided by the Supreme Court in the case of The Instalment
Supply Ltd v. STO Ahmedabad34 which is as follows;
“An agreement to sell is a contract pure and simple whereas a sale is a contract
plus a conveyance. By an agreement to sell a jus in personam is created, by a sale
a jus in rem also is transferred. Where goods have been sold and the buyer makes
default the seller may sue for the contract price on the count of ‘goods bargained
and sold’, but when an agreement to buy is broken, the seller’s normal remedy is
an action for unliquidated damages. If there has been a sale, and the seller
breaks his engagement to deliver the goods, the buyer has not only a personal
remedy against the seller, but also the usual proprietary remedies in respect of
the goods themselves. Again, if there be an agreement of sale, and the goods are
destroyed, the loss as a rule falls on the seller, while if there has been a sale, the
loss as a rule falls upon the buyer though the goods may have never come to his
possession.”

30
SHAH, supra note 5 at 85.
31
Id. at 85.
32
State of Uttaranchal v. Khurana Brothers, 2011 AIR 224 (2010).
33
SHAH, supra note 5 at 86.
34
The Instalment Supply Ltd v. Sales Tax Officer, Ahmedabad and others, 4 SCC 739 (1974).
 Sale and Agreement to Sell: Trends and Judicial Interpretation – An Analysis 11

In Union of India v. Tarachand35, where the defendants unilaterally cancelled the contract of
selling to the plaintiff all the coal-ash that might accumulate at a certain place for a period of one
year, and instead consumed a part and issued the remaining to third parties, it was held that as the
contract was for the sale of future goods, it was merely an agreement to sell.

SALE – RECENT JUDICIAL TRENDS

In the recent case of Indian Hume Pipe Company Limited v. State of Rajasthan and others 36 it
was made clear by the Supreme Court that by virtue of the 46 th amendment of the Constitution of
India, a single and indivisible contract is brought on par with a contract containing two separate
agreements; hence taxing the sale of goods element in a works contract is permissible even after
incorporation of goods, provided tax is directed to the value of goods at the time of incorporation
and does not purport to tax the transfer of immovable property.
The facts were that the assessee was a company engaged in manufacturing and laying of
pipelines for water supply schemes to which a work order was issued by the Public Health and
Engineering Department (PHED) of Rajasthan for providing and laying of pipes complete with
suitable jointing material specials, valves and construction of valve chamber, anchor blocks table
crossing, including testing and commissioning of pipelines. The assesse filed an application
before the Commercial Tax Officer seeking exemption from paying tax for a notification
inserting Rule 10B in the Rajasthan Sales Tax Rules, 1955 granted exemption to works contract.
However, the Commercial Tax Officer made it clear to the assessee that the pipes manufactured
and supplied by it fell within the definition of ‘sale of goods’ and that the contract was divisible
in nature. Hence the issue was that, in that particular case, whether the contract was divisible and
whether sales tax could be excised.
The assessee argued that a single, composite contract for the supply of goods, labour and
service would be treated as a works contract and that it is not permissible to label a contract as a
contract of sale or contract of work depending on the proportion of work and sale. 37 Unless there
are two clear contracts, they cannot be treated separately. 38 The respondents however argued that
the term ‘works contract’ appearing in Article 366 (29A)(b) of the Constitution of India takes
within its fold all genres of works provide for labour and services. For sustaining levy of tax on

35
Union of India v. Tarachand, 1975 Indlaw MP 100 (1975).
36
Indian Hume Pipe Company Limited v. State of Rajasthan and others, 2017 Indlaw 649 (2017).
37
Kone Elevator India Private Limited v. State of Tamil Nadu (2014) 7 SCC 1.
38
Id.
 Sale and Agreement to Sell: Trends and Judicial Interpretation – An Analysis 12

goods deemed to have been sold in execution of a works contract, three conditions would have to
be fulfilled: a) there must be a works contract; b) goods should have been involved in execution
of a works contract; and c) property in those goods must be transferred to a third party either as
goods or in some other form.
The Court, after citing several authorities had held that the agreement was clearly in two
parts, namely, (i) sale and supply of PSC pipes, jointing material specials, valves, anchor blocks
etc. and (ii) the remaining part being supply of labour and services. Hence the respondent was
right in excising sales tax for the supply of goods.
In the case of Securities and Exchange Board of India v. M/s. Opee Stock-Link Ltd. and
Anr.39, it was held that the Securities Contracts (Regulation) Act, 1956 is a special law to
regulate the sale and purchase of shares and securities and hence it prevails over the provisions
of the Indian Contract Act 1872 and Sale of Goods Act 1930 insofar as the matters which are
specifically dealt with by the SCRA.
In the case of Commissioner of Commercial Taxes, Thiruvananthapuram, Kerala v.
K.T.C. Automobiles40, it was alleged by the appellant that the respondent had sold their vehicles
in Kozhikode but had shown them to be sold at Mahe for the purpose of tax evasion to the tune
of 86 lakh. An interesting issue arose as to whether registration of a vehicle is a post-sale event
and if so, whether the owner is entitled to enjoy the benefits of possession before registration.
The appellants argued that the obligation to register a motor vehicle is on the owner and
that necessarily implies that registration under the Motor Vehicles Act is a post-sale event.
However, the respondents argued that till the engine number and the chassis number is
ascertained by the registering authority on physical verification of the vehicle and entered into
the prescribed form for showing registration, the vehicle cannot be identified as one belonging to
the purchaser. Only upon valid registration, the vehicle would be appropriated to the purchaser.
The Court accepted the argument of the appellants that registration is a post-sale event.
“However, though the registration of a motor vehicle is a post-sale event, the event of sale is
closely linked in time with the event of registration. It also noted that in order to satisfy the
requirement of law, the dealer can deliver possession and the owner can take possession and
present the vehicle for registration only when it reaches the office of Registering Authority. With
the handing over of the possession of a specific motor vehicle just prior to registration, the dealer
39
2016 Indlaw SC 492.
40
Commissioner of Commercial Taxes, Thirvananthapuram, Kerala v. K.T.C. Automobiles, 2016 Indlaw 80 (2016).
 Sale and Agreement to Sell: Trends and Judicial Interpretation – An Analysis 13

completes the agreement of sale rendering it a perfected sale.” Hence they held that “a motor
vehicle remains in the category of unascertained or future goods till its appropriation to the
contract of sale by the seller is occasioned by handing over the possession at or near the office of
registration authority in a deliverable and registrable state. Only after getting certificate of
registration the owner becomes entitled to enjoy the benefits of possession and can obtain
required certificate of insurance in his name and meet other requirements of law to use the motor
vehicle at any public place.”
In another significant case41, the petitioner used to transport goods based on order online
from one of the warehouses to Puducherry for which it had set up a delivery hub at Puducherry
for the purposes of sorting the deliveries based on the area/street for delivery to the customer.
The Commercial Taxes Department of Puducherry issued a notice calling the petitioner to pay
taxes as per the Puducherry Value Added Tax (PVAT). Thus the issue before the Court as to
whether the retail sale done by the petitioner via the online portal www.flipkart.com would
qualify as an inter-sale sale or a local sale within the union territory of Puducherry.
The petitioners argued that the hub acted as a sorting facility to sort the deliveries based
on the area/street to deliver to the customer and there is no sale or inventory holding transactions
that were effected from such hubs. They also argued that the purchase invoice was generated in
the name of the purchaser in the State from which the goods moved for which full rate of CST
was paid in the said relevant state. Thus, the distribution of the goods done from the delivery hub
would not amount to sale. Also, since the movement of goods is triggered on the expectations of
possible sale and not on account of contract of sale and it will not partake the character of inter-
state sale.
However the respondent argued that since there was no communication between the
actual buyer and the actual seller, there was a complete absence of any contractual relationship
between them according to the Indian Contract Act, 1872 and the Sale of Goods Act, 1930. Thus,
in the absence of proper offer and proper acceptance, the movement of goods from the
originating State to the destination State should not be treated as a sale within the meaning of
Section 3(a) of the CST Act. They also argued that a contract comes into existence only at that
place and time, where the ultimate customer decides to take the final delivery of the product and
pay for the sale and the event happens in Puducherry and therefore, the transaction ought to be

41
M/s. WS Retail Services Private Limited v. Union of India and others, 2017 (59) GST 248 (Mad).
 Sale and Agreement to Sell: Trends and Judicial Interpretation – An Analysis 14

taxed under Section 14 read with Section 22 of the PVAT Act. They also argued that the
consideration payable for the goods was paid at Puducherry, when the delivery boy takes the
goods from the depot at Puducherry and delivers it to the customer and accepts the cash.
Therefore, the sale within the State of Puducherry and the destination sale has full right to tax the
goods under the appropriate State legislation.
However, the Court held that “the purchase contract or the sale invoice being an
agreement to sell, results in the movement of goods from outside Puducherry, which is incidental
to the purchase contract and when it is not in dispute that the pursuant to such purchase order, the
goods have moved from one State to another, it is undoubtedly an inter-state sale.”

CONCLUSION

The Sale of Goods Act 1930 and the Indian Contract Act 1872 have withstood the ravages of
time and are the basis for even running companies. Such an important contract is now challenged
with the rise of e-contracts and online commercial transactions. Nevertheless such online
transactions are, to date, governed by the Indian Contract Act coupled with the IT Act. However,
the focus of contracts between buyer and seller has shifted towards the buyer; such as The
Consumer Protection Bill, 2015 pending before the Parliament. While the provisions of such
Acts have bended enough to accommodate modern phenomenons, yet there is a need to bring in
new legislations in order to clear the uncertainties that could possibly arise, especially in the area
of e-contracts that has taken the world by storm.

BIBLIOGRAPHY
1. Bharat Sanchar Nigam Ltd v. Union of India, 3 SCC 1 (SC 2006).
2. Bhopal Sugar Industries Ltd v. Sales Tax Officer Bhopal, 1977 AIR 1275 (SC 1977).
3. CIT v. Hind Construction Ltd., 4 SCC 460 (SC 1972).
4. Commissioner of Commercial Taxes, Thirvananthapuram, Kerala v. K.T.C. Automobiles,
2016 Indlaw 80 (SC 2016).
5. Commissioner of Sales Tax Madhya Pradesh v. Purshottam Premji, 2 SCC 287 (SC
1970).
6. Consolidated Coffee Ltd. v. Coffee Board, Bangalore, 1980 AIR 1468 (SC 1980).
7. Dhampur Sugar Mills Ltd v. Commissioner of Trade Tax, 5 SCC 624 (SC 2006).
8. Gordon Woodroffe and Co. (Madras) Ltd. v. Shaik MA Majid and Co, 1967 AIR 181
(SC 1967).
9. Hindustan Shipyard Ltd. v. State of A.P., 6 SCC 579 (SC 2000).
10. Indian Hume Pipe Company Limited v. State of Rajasthan and others, 2017 Indlaw 649
(SC 2017).
 Sale and Agreement to Sell: Trends and Judicial Interpretation – An Analysis 15

11. Maharashtra Chamber of Housing Industry and others v. State of Maharashtra and others,
2012 Indlaw 657 (MUM 2012).
12. Mahendrakumar Ishwarlal and Co v. State of Madras, 1968 AIR 241 (Mad 1968).
13. M/s. WS Retail Services Private Limited v. Union of India and others, 59 GST 248 (Mad
2016).
14. Poppatlal Shah v. State of Madras, 1953 AIR 274 (SC 1953).
15. Ram Singh and Sons Engineering Works v. Commissioner of Sales Tax, 1 SCC 487 (SC
1979).
16. R.C. Jal v. Union of India, 1972 CDJ 083 (SC 1972).
17. Shah, Satish J. Pollock and Mulla, The Sale of Goods Act. 8th ed. LexisNexis, 2011.
18. Sri Tirumala Venkateshwara Timber and Bamboo Firm v. Commercial Tax Officer,
Rajahmundry, 1968 AIR 784 (SC 1968).
19. State of Madras v. Gannon Dunkerley and Co. (Madras) Ltd., 1958 AIR 560 (SC 1958).
20. State of Uttaranchal v. Khurana Brothers, 2011 AIR 224 (SC 2010).
21. Tamil Nadu Kalyana Mandapam Assn. v. Union of India and Ors., 5 SCC 632 (SC 2004).
22. The Instalment Supply Ltd v. Sales Tax Officer, Ahmedabad and others, 4 SCC 739 (SC
1974).
23. Tredgold, Gordon. ‘43 Thoughts On The Importance of Sales’. Inc.Com, 27 March 2017.
https://www.inc.com/gordon-tredgold/43-thoughts-on-the-importance-of-sales.html.
24. Union of India v. Tarachand, 1975 Indlaw 100 (MP 1975).
25. Uttar Pradesh Coop Canes Union Federation v. West Uttar Pradesh Sugar Mills
Association, 5 SCC 430 (SC 2004).