Stock transfer

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Raj (Querist)

14 January 2015 Dear All,

I had one doubt, if a company (in Chennai) billed to Consignee (in Delhi) but shiped to buyer which is not consignee (in Delhi), Is this transaction is Stock Transfer or Interstate Sale.

Thanks & Regards

Rupesh Jain

Rupesh Jain (Expert)

14 January 2015 you are selling the goods against C form.
it will be stock tfr. if recipient of goods is your consignment agent or you have yard in delhi.

Raj

Raj (Querist)

14 January 2015 Thank u Sir for reply

Kindly clarify the same

But in following case study it is said that where goods were sold through branch, but buyer was known and identified before goods were dispatched from factory. Obviously this was held as inter state sales and not a stock transfer- Electric Construction and Equipment Co. Ltd. V State of Haryana- (1990) 77 STC 424 (P&H HC DB)

Thanks and Regards

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)

25 July 2025 Great question! This is a classic confusion in VAT and interstate sales law, so let's break it down clearly:

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### Scenario:

* Company in Chennai bills **Consignee in Delhi** (so the invoice is in the name of consignee).
* But goods are **shipped to a different buyer in Delhi** who is **not the consignee**.
* The question: Is this **stock transfer** or **interstate sale**?

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### What is Stock Transfer?

* Stock transfer usually means goods moved **between different branches or locations of the same business**.
* Usually **no sale takes place**; it’s like moving your own inventory from one place to another.
* Often covered by **C Form** (for VAT purposes) if interstate.

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### What is Interstate Sale?

* Actual sale to a **third-party buyer**, not your branch or agent.
* Buyer is known and identified **before dispatch**.
* Sale involves **transfer of ownership**.
* VAT and CST apply accordingly.

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### Your Case Explained:

* If the goods are billed to **Consignee A** but physically delivered to **Buyer B**, who is **not the consignee or your branch/agent**, then ownership is effectively passing to a third party.
* Even if the invoice says consignee, the actual transaction is a **sale to Buyer B**.
* This means it's **not stock transfer**, but an **interstate sale**.

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### Supporting Case Law:

* **Electric Construction and Equipment Co. Ltd. v State of Haryana (1990) 77 STC 424 (P\&H HC DB)**
The court held that if the buyer is identified before goods are dispatched, the transaction is a **sale** and **not stock transfer**, even if goods move through a branch.

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### Summary:

| Condition | Classification |
| --------------------------------------------------- | --------------- |
| Goods moved to your own branch/yard or agent | Stock Transfer |
| Goods sold to third party buyer identified upfront | Interstate Sale |
| Goods delivered to party other than consignee/agent | Interstate Sale |

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### So for your question:

* Since goods shipped to a buyer **not consignee or your branch**, this is an **Interstate Sale** (not stock transfer).
* You should treat it accordingly for tax purposes (CST/VAT as per interstate sale rules).

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