Inter-State purchase character bars State tax, and State recovery provisions cannot be used for Central sales tax liability.

Purchases made in Uttar Pradesh by a commission agent for out-of-State principals, followed by prompt despatch of the goods, were treated as an integrated inter-State transaction because the movement of goods was inseparably connected with the purchase. On that basis, the State lacked power to levy purchase tax under the U.P. Sales Tax Act, 1948, and article 286(1) barred such taxation. Section 3-B of the Act was also held inapplicable because it applies only where a false declaration causes short collection of tax leviable under the State Act, not where the alleged evasion concerns Central sales tax. The transactions were therefore outside State taxing power and the recovery provision could not be used for Central tax liability.

---

---

Issues: (i) Whether purchases made by a commission agent in Uttar Pradesh on behalf of out-of-State principals, followed by despatch of the goods to those principals, amounted to inter-State purchases and were outside the charging power of the State under the U.P. Sales Tax Act, 1948; (ii) Whether section 3-B of the U.P. Sales Tax Act, 1948 could be invoked where the tax allegedly evaded was Central sales tax and not tax leviable under the State Act.

Issue (i): Whether purchases made by a commission agent in Uttar Pradesh on behalf of out-of-State principals, followed by despatch of the goods to those principals, amounted to inter-State purchases and were outside the charging power of the State under the U.P. Sales Tax Act, 1948.

Analysis: A purchase falls within section 3(a) of the Central Sales Tax Act, 1956 when the movement of goods from one State to another is the result of, or is inseparably connected with, the purchase transaction. It is not necessary that the contract should expressly stipulate movement in terms; it is enough if the movement is implicit in the bargain and forms part of the same transaction. On the facts found, the goods were purchased by the commission agent for out-of-State principals and were despatched shortly thereafter in fulfilment of that arrangement. The purchase and the movement were treated as one integrated transaction. Once the purchases were inter-State in character, the State Legislature could not levy purchase tax on them under section 3-D, and article 286(1) operated to disable the State from taxing such transactions.

Conclusion: The purchases were inter-State purchases and were not exigible to tax under the U.P. Sales Tax Act, 1948. The finding is in favour of the assessee.

Issue (ii): Whether section 3-B of the U.P. Sales Tax Act, 1948 could be invoked where the tax allegedly evaded was Central sales tax and not tax leviable under the State Act.

Analysis: Section 3-B applies only where a false or wrong certificate or declaration results in non-collection or short collection of tax leviable under the State Act. It does not extend to a situation where the alleged evasion relates to Central sales tax. Since the liability asserted by the department was under the Central enactment and not under the State enactment, the statutory condition for action under section 3-B was not satisfied.

Conclusion: Section 3-B could not be applied to recover tax allegedly payable under the Central Sales Tax Act, 1956. The finding is in favour of the assessee.

Final Conclusion: The common sales transactions were held to be inter-State in character, outside the State's taxing power, and the special recovery provision under the State Act was held inapplicable to Central tax liability.

Ratio Decidendi: A sale or purchase is inter-State when the movement of goods from one State to another is occasioned by, and forms part of, the same transaction of sale or purchase; a State recovery provision limited to tax leviable under the State Act cannot be used to recover Central sales tax.

---