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Issues: Whether the movement of goods from the Goa unit to the Karnataka site, in the course of executing the contract at Mangalore, made the transaction an inter-State sale or an independent supply liable to tax under section 5B of the Karnataka Sales Tax Act, 1957.
Analysis: The contract was entered into at Mangalore, the work was to be executed at Mangalore, and the consideration was payable at Mangalore. The movement of diesel generating sets from Goa was only to procure material for executing that contract and did not occasion the contract of sale itself. Payment of tax in Goa, or the fact that the invoice was raised from the Goa unit, did not alter the character of the transaction. The movement from Goa was treated as an independent transaction, distinct from the Karnataka contract, and the sale was held to have taken place within Karnataka.
Conclusion: Section 5B of the Karnataka Sales Tax Act, 1957 was attracted and the addition was rightly restored.
Final Conclusion: The tax authority's revisionary order was upheld because the transaction was not an inter-State sale but a taxable intra-State transaction connected with the Karnataka works contract.
Ratio Decidendi: Where a contract is entered into, executed, and paid for within the State, the mere procurement of goods from outside the State for performance of that contract does not convert the transaction into an inter-State sale.
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