Inter-State sale requires a link to movement of goods; post-transit Kerala sales were treated as local sales.

Goods moved from Tamil Nadu through Kerala for onward dispatch to Karnataka were held to be local sales in Kerala because the sales occurred after the goods had come to rest in Kerala and were not occasioned by, or connected with, the earlier movement. Section 3(a) of the Central Sales Tax Act did not apply, and section 3(b) also failed because there was no sale by endorsement of title to goods. The Central sales tax paid in Karnataka was held unsustainable on these facts. The tax and penalty demand under the Kerala General Sales Tax Act was maintained, subject to revocation of penalty if the tax with interest was paid within the stipulated period.

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Issues: (i) Whether the impugned transactions were inter-State sales covered by section 3(a) or section 3(b) of the Central Sales Tax Act or local sales exigible to tax under the Kerala General Sales Tax Act; (ii) Whether the penalty could be sustained, subject to the conditional opportunity granted for payment of tax and interest.

Issue (i): Whether the impugned transactions were inter-State sales covered by section 3(a) or section 3(b) of the Central Sales Tax Act or local sales exigible to tax under the Kerala General Sales Tax Act.

Analysis: The goods were moved from Tamil Nadu through Kerala on transit pass declarations for onward movement to Karnataka, but the sales were found to have occurred when the goods were already in Kerala. The movement from Tamil Nadu was not under any contract of sale, and the subsequent sales in Kerala were not connected with or relatable to the earlier movement so as to satisfy section 3(a). Section 3(b) also did not apply because there was no sale by endorsement of title to goods. The payment of Central sales tax in Karnataka was also held to be unsustainable because tax under the Central Sales Tax Act is payable in the State from which the movement of goods commences, and the movement in this case did not culminate in Karnataka.

Conclusion: The transactions were local sales in Kerala and not inter-State sales under section 3(a) or section 3(b) of the Central Sales Tax Act.

Issue (ii): Whether the penalty could be sustained, subject to the conditional opportunity granted for payment of tax and interest.

Analysis: The demand of tax and penalty under section 30B(3) of the Kerala General Sales Tax Act was upheld, but the appellant was given a limited opportunity to avoid penalty by paying the entire tax with interest within one month. The order thus preserved the demand while granting a conditional route for exoneration from penalty on compliance.

Conclusion: The tax demand was sustained, and the penalty was to stand confirmed unless the appellant paid the tax with interest within the stipulated period, in which event the penalty would be revoked.

Final Conclusion: The appeals were disposed of with the tax liability maintained and only a conditional relief against penalty granted on compliance with the stated payment condition.

Ratio Decidendi: A sale is not an inter-State sale merely because the goods were earlier in transit across States; it must be occasioned by, or be in the course of, the inter-State movement, and a sale after the goods have come to rest in the State is a local sale.

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