Inter-State works contract sales can arise where goods move incidentally to performance and turnover is assessable through State machinery.

Inter-State movement of bituminous mixture from Haryana to Delhi for road works was held to be an inter-State sale because the movement was necessarily incidental to, and inseparably connected with, performance of the works contracts under section 3(a) of the Central Sales Tax Act, 1956. The absence of an express contractual stipulation did not matter where the surrounding terms and circumstances showed that such movement was contemplated. Turnover relating to the works contract was also held assessable under the Central Sales Tax Act, since section 9(2) permitted use of the State law machinery for determining sale price, and the 2005 amendment to section 2(h) was treated as clarificatory rather than disabling.

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Issues: (i) Whether the movement of bituminous mixture from Haryana to Delhi for execution of road works constituted an inter-State sale under section 3(a) of the Central Sales Tax Act, 1956. (ii) Whether, in the absence of the 2005 amendment to section 2(h), the turnover relating to the works contract could nevertheless be determined and taxed under the Central Sales Tax Act, 1956.

Issue (i): Whether the movement of bituminous mixture from Haryana to Delhi for execution of road works constituted an inter-State sale under section 3(a) of the Central Sales Tax Act, 1956.

Analysis: The statutory test under section 3(a) is whether the movement of goods from one State to another is the result of the contract or an incident of it, and whether the movement and the sale are inseparably connected. Express stipulation in the contract is not essential if the contract, its terms, and the surrounding circumstances show that inter-State movement was contemplated. The road work contracts required hot-mix processing outside Delhi because such plants could not be operated within Delhi, and the material was prepared in Haryana and dispatched to identified work sites in Delhi. On the facts, the movement of the mixture was not a detachable or independent act but was necessarily incidental to performance of the contracts.

Conclusion: The transactions were inter-State sales under section 3(a), and the finding of the Haryana Tribunal on this point was affirmed, against the assessee.

Issue (ii): Whether, in the absence of the 2005 amendment to section 2(h), the turnover relating to the works contract could nevertheless be determined and taxed under the Central Sales Tax Act, 1956.

Analysis: The charging and machinery provisions of the Central Sales Tax Act permit assessment of turnover for inter-State works contracts by resort to the State law machinery through section 9(2). The later proviso to section 2(h) was treated as an enabling and clarificatory measure, and the Supreme Court's ruling in Mahim Patram was applied to hold that the absence of a separate Central rule did not disable assessment. The Haryana statutory framework already provided a method for determining sale price in works contracts, and that machinery could validly be used for Central sales tax assessment.

Conclusion: The turnover could be determined and taxed under the Central Sales Tax Act notwithstanding the absence of the 2005 amendment at the relevant time, against the assessee.

Final Conclusion: The appeal failed in its entirety, and the inter-State sales characterization as well as the assessment of the disputed turnover under the Central Sales Tax regime were sustained.

Ratio Decidendi: A works contract attracts section 3(a) of the Central Sales Tax Act, 1956 when inter-State movement of goods is necessarily incidental to and inseparably connected with the contract, and the turnover of such deemed sales may be computed by applying the assessment machinery available under section 9(2) even if the Central rule-making mechanism is not separately invoked.

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