Inter-State sale of ATMs under purchase orders barred Karnataka sales tax where contract itself caused movement of goods
Sale of ATMs manufactured at Pondicherry and dispatched to Karnataka branch locations pursuant to bank purchase orders was an inter-State sale because the contract itself occasioned the movement of goods from one State to another; the situs of sale was therefore immaterial. Delivery at the destination and inspection or certification by engineers did not convert the transaction into an intra-State sale. The arrangement was also not a deemed sale by transfer of the right to use goods, but a sale of goods under a written contract. Karnataka could not levy sales tax under the KST Act or KVAT Act on such turnover.
Issues: Whether the sale of ATMs manufactured at Pondicherry and dispatched to bank branches in Karnataka pursuant to purchase orders was an inter-State sale under section 3 of the Central Sales Tax Act, 1956, so as to exclude the applicability of the Karnataka Sales Tax Act, 1957 and the Karnataka Value Added Tax Act, 2003.
Analysis: The governing test is whether the sale occasions the movement of goods from one State to another or is effected by transfer of documents of title during such movement. The situs of sale is immaterial where the transaction is an inter-State sale. On the admitted facts, the orders placed by the banks caused the goods to be manufactured at Pondicherry and moved to Karnataka for delivery. The fact that the bank branches received the consignments and the company's engineers inspected and certified the machines at the destination did not convert the transaction into an intra-State sale. The Court also distinguished the principles governing transfer of the right to use goods, holding that this was not a deemed sale of that kind but a sale of goods under a written contract. The movement of goods was thus an incident of the contract and not a local sale in Karnataka.
Conclusion: The transaction was an inter-State sale, and Karnataka had no competence to levy tax under the KST Act or the KVAT Act on such turnover.
TaxTMI 
AI Drafter ✕
TaxTMI 
