Inter-State sale test confirms goods movement under contract bars local registration-based detention and notice

A contract requiring movement of goods from Haryana to Punjab brought the transaction within the settled test for an inter-State sale under section 3 of the Central Sales Tax Act, 1956, because the movement of goods was the proximate result of the contract and the sale was completed after that movement. On that basis, the purchaser could not be treated as requiring local registration in Punjab merely because the goods were destined for a buyer in the State. The resulting detention of goods and issuance of notice were unsustainable, as a contrary approach would risk multiple taxation and restrict free movement of trade and commerce.

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Issues: Whether the transaction was an inter-State sale under section 3 of the Central Sales Tax Act, 1956 and, if so, whether the petitioner was required to register under the Punjab Value Added Tax Act, 2005 so as to justify detention of the goods and issuance of the impugned notice.

Analysis: The sale was governed by a contract that required movement of the goods from Haryana to Punjab for delivery, and the documents showed that the goods in fact moved pursuant to that contract. Applying the settled test for inter-State sale, the movement of goods was the proximate result of the contract and the sale concluded in Punjab after such movement. Once the transaction was found to be an inter-State sale, the petitioner could not be treated as liable to local registration in Punjab merely because the goods were destined for a purchaser in the State. A contrary view would expose the transaction to multiple taxation and hinder free movement of goods, which is inconsistent with the constitutional protection of trade and commerce.

Conclusion: The transaction was an inter-State sale, the petitioner was not in violation of section 21 of the Punjab Value Added Tax Act, 2005, and the detention notice was unsustainable.

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