Inter-State sale classification controls taxing jurisdiction where contract-driven movement begins in another State.

Goods appropriated to specific contracts and moved from Maharashtra to other States were held to constitute inter-State sales under section 3(a) of the Central Sales Tax Act, because the contract occasioned the movement and the sale was completed when the goods were put on rail. The same transaction could not be split and treated again as a transfer-of-documents sale under section 3(b) merely because railway receipts were endorsed or routed through a Madras office. Even on the alternative assumption under section 3(b), Tamil Nadu could not levy tax under section 9(1) since taxing jurisdiction followed the State from which the movement commenced. The revised assessment was unsustainable.

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Issues: (i) Whether the disputed turnover represented inter-State sales falling under section 3(a) of the Central Sales Tax Act, 1956, or sales effected by transfer of documents of title during transit falling under section 3(b) of that Act. (ii) Whether, even if the transactions were treated as sales under section 3(b), the State of Tamil Nadu had jurisdiction to levy tax under section 9(1) of the Central Sales Tax Act, 1956.

Issue (i): Whether the disputed turnover represented inter-State sales falling under section 3(a) of the Central Sales Tax Act, 1956, or sales effected by transfer of documents of title during transit falling under section 3(b) of that Act.

Analysis: The movement of goods from Maharashtra to the southern States was found to have been occasioned by the contracts placed by the customers and the appropriation of machinery at Bombay when the goods were put on rail. On that footing, the sales were completed as inter-State sales under section 3(a). The same transaction could not be split up and treated again as a sale under section 3(b) merely because the railway receipts were endorsed or routed through the Madras office. A single transaction cannot be simultaneously brought under both clauses, and section 4 supports the conclusion that the situs and character of the sale are fixed by the appropriation and the covenant causing movement.

Conclusion: The disputed transactions were inter-State sales under section 3(a) and not sales under section 3(b).

Issue (ii): Whether, even if the transactions were treated as sales under section 3(b), the State of Tamil Nadu had jurisdiction to levy tax under section 9(1) of the Central Sales Tax Act, 1956.

Analysis: The Court held that where the movement of goods commenced from Maharashtra, the taxing power under the Central Sales Tax Act could not be assumed by Tamil Nadu merely because the documents of title were handled by the Madras office. Even on the alternative assumption that the transactions fell under section 3(b), the State from which the movement commenced was the competent taxing State, and the facts did not justify assessment by Tamil Nadu.

Conclusion: The State of Tamil Nadu had no jurisdiction to tax the turnover under section 9(1).

Final Conclusion: The revised assessment could not be sustained, as the transactions were taxable only as inter-State sales originating from the State of movement and not by Tamil Nadu.

Ratio Decidendi: Where goods are appropriated to specific contracts and the contract itself occasions their movement from one State to another, the sale is an inter-State sale under section 3(a); the same transaction cannot simultaneously be recharacterised under section 3(b), and the taxing jurisdiction follows the State from which the movement commences.

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