Inter-State sales test turns on contractual nexus with movement of goods, and form documents do not override substance.

A sale is treated as an inter-State sale under the Central Sales Tax Act, 1956 when the movement of goods from one State to another is pursuant to, or incidental to, a contract of sale; mere dispatch to a branch or agent for later sale does not suffice. The substance of correspondence, dispatch instructions, pro forma invoices, banking documents, and the actual manner of movement may show that the transfer was linked to buyers in another State, and the use of F forms alone does not change that character. Revisional jurisdiction under section 22-A of the Karnataka Sales Tax Act, 1957 may be invoked where the appellate order ignores material evidence or applies the law incorrectly, making the order erroneous and prejudicial to revenue.

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Issues: (i) Whether the transactions in question were inter-State sales under the Central Sales Tax Act, 1956 or merely transfers to an agent or branch for sale outside the State. (ii) Whether the revisional authority was justified in invoking section 22-A of the Karnataka Sales Tax Act, 1957 on the ground that the appellate order was erroneous and prejudicial to the interests of revenue.

Issue (i): Whether the transactions in question were inter-State sales under the Central Sales Tax Act, 1956 or merely transfers to an agent or branch for sale outside the State.

Analysis: A sale is an inter-State sale when there is movement of goods from one State to another pursuant to a contract of sale, or when such movement is the covenant or incident of that contract. Where goods are merely sent to a branch or agent for sale, and the movement is independent of any concluded sale transaction, the transfer is not exigible as an inter-State sale. The surrounding correspondence, despatch instructions, pro forma invoices, retirement of documents through bank, and the manner in which the goods moved at the instance of a third party were relevant to decide whether the movement was really in pursuance of a sale. On the facts found, the transactions were not genuine branch transfers but were linked to buyers in other States, and the use of F forms did not by itself displace the real nature of the transactions.

Conclusion: The transactions were correctly treated as inter-State sales and were liable to tax under section 3 of the Central Sales Tax Act, 1956.

Issue (ii): Whether the revisional authority was justified in invoking section 22-A of the Karnataka Sales Tax Act, 1957 on the ground that the appellate order was erroneous and prejudicial to the interests of revenue.

Analysis: Revisional power could be exercised where the appellate authority failed to examine the material evidence and took a view not supported by law. The appellate order had not properly considered the effect of the correspondence and surrounding documents, and had treated the transactions as mere consignment sales without adequately testing whether there was a prior or implied contract giving rise to inter-State movement. Since the appellate order suffered from legal error affecting revenue, the revisional interference was warranted.

Conclusion: The revisional authority validly exercised jurisdiction under section 22-A of the Karnataka Sales Tax Act, 1957.

Final Conclusion: The assessment of the transactions as inter-State sales was upheld, and the appellate interference was corrected in revision, leaving the revenue's levy intact.

Ratio Decidendi: For a transaction to fall within section 3 of the Central Sales Tax Act, 1956, the movement of goods to another State must be pursuant to, or incidental to, a contract of sale; where the substance of the correspondence and surrounding conduct shows such a nexus, the transaction is taxable as an inter-State sale notwithstanding the use of F forms or the form of dispatch documents.

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