Inter-State sale and State rule limits: check-post declaration requirements cannot burden goods moved under a sale contract.

A booking application alone does not create a sale contract, but the surrounding documents may show that specific goods were earmarked for identified buyers and that their movement from one State to another was occasioned by the bargain; on that basis, the transaction is an inter-State sale under section 3(a) of the Central Sales Tax Act, 1956. A State rule requiring check-post declaration in form ST-18 is valid only if ancillary to levy, collection and recovery of intra-State sales tax; it cannot regulate or burden inter-State sales beyond the State's rule-making power. Rule 62-A and the related notification were therefore ultra vires.

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Issues: Whether a contract of sale existed between the parties and whether the movement of scooters from Kanpur to Rajasthan constituted an inter-State sale under section 3(a) of the Central Sales Tax Act, 1956; whether rule 62-A of the Rajasthan Sales Tax Rules, 1955 requiring declaration in form ST-18 at the check post was beyond the powers conferred by the Rajasthan Sales Tax Act, 1954 and the legislative competence of the State.

Issue (i): Whether a contract of sale existed between the parties and whether the movement of scooters from Kanpur to Rajasthan constituted an inter-State sale under section 3(a) of the Central Sales Tax Act, 1956.

Analysis: A mere booking application did not by itself create a contract, but the accompanying documents, including the booking intimation, option letter, despatch advice, invoice, sale letter and gate pass, showed that specific scooters were allotted and earmarked for identified customers with engine number, chassis number, colour and model. The movement of goods from Uttar Pradesh to Rajasthan was thus not independent of the bargain but was occasioned by the contract of sale. On that footing, the transaction satisfied the statutory test of an inter-State sale.

Conclusion: The sale was an inter-State sale under section 3(a) of the Central Sales Tax Act, 1956.

Issue (ii): Whether rule 62-A of the Rajasthan Sales Tax Rules, 1955 requiring declaration in form ST-18 at the check post was beyond the powers conferred by the Rajasthan Sales Tax Act, 1954 and the legislative competence of the State.

Analysis: The power of the State to make ancillary or incidental provisions extends only to measures connected with levy, collection and recovery of State sales tax on intra-State transactions. A rule that compels declaration at the check post even where the goods are brought into Rajasthan pursuant to an inter-State sale travels beyond the scope of section 22-A and the rule-making power under section 26 of the Rajasthan Sales Tax Act, 1954. The provision was also inconsistent with the settled limitation that a State cannot, in the guise of preventing evasion, impose restrictions on inter-State trade transactions. The challenged rule was therefore not supportable as an ancillary measure under entry 54 of List II.

Conclusion: Rule 62-A and the related notification were ultra vires.

Final Conclusion: The challenge succeeded, and the impugned declaration requirement could not be sustained in law.

Ratio Decidendi: A State sales tax rule is valid only to the extent it is ancillary or incidental to the levy, collection and recovery of State tax on transactions within the State, and it cannot impose check-post restrictions that regulate or burden inter-State sales.

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