Inter-State sale and import nexus principles govern whether project supplies fall outside Delhi VAT.

Supplies made under a project contract were treated as inter-State sales where the contract required manufacture outside Delhi and the movement of goods to Delhi was integral to performance; an express stipulation was unnecessary if the contract and movement had a real nexus. Goods imported for the project were also treated as being supplied in the course of import where the import was occasioned by the contract, even without direct privity between the end user and the foreign supplier. On that reasoning, the Delhi VAT levy did not apply to those transactions.

---

---

Issues: (i) whether the supplies made under the contract with the project authority constituted inter-State sales under section 3 of the Central Sales Tax Act, 1956 so as to fall outside the Delhi Value Added Tax Act, 2004; (ii) whether the goods procured from foreign and domestic sources were supplied in the course of import within section 5(2) of the Central Sales Tax Act, 1956 and were therefore exempt from levy under the Delhi Value Added Tax Act, 2004.

Issue (i): whether the supplies made under the contract with the project authority constituted inter-State sales under section 3 of the Central Sales Tax Act, 1956 so as to fall outside the Delhi Value Added Tax Act, 2004.

Analysis: The contract required the goods to be manufactured at identified factories outside Delhi, with the project authority approving suppliers, specifications, inspection, and delivery for the specific project. The movement of goods from other States to Delhi was not accidental or independent of the contract, but was contemplated as part of its performance. For section 3(a), it is sufficient if the movement of goods is in pursuance of and incidental to the contract of sale; an express stipulation in so many words is not necessary. The existence of a conceivable link between the contract and the movement of goods brought the transactions within inter-State trade.

Conclusion: The supplies were inter-State sales and were not liable to Delhi VAT on that footing.

Issue (ii): whether the goods procured from foreign and domestic sources were supplied in the course of import within section 5(2) of the Central Sales Tax Act, 1956 and were therefore exempt from levy under the Delhi Value Added Tax Act, 2004.

Analysis: The contract showed that the project authority fixed the specifications, approved vendors, required pre-inspection, and had the goods custom-made for the project. The foreign sourced goods were ordered and imported solely for that project, were marked for that use, and the transaction was part of an integrated supply arrangement. For section 5(2), what matters is whether the import was occasioned by the sale, not whether title passed directly to the end user or whether there was privity of contract between the end user and the foreign supplier. The facts established that the import was occasioned by the contract.

Conclusion: The supplies from foreign sources were in the course of import and were exempt from Delhi VAT.

Final Conclusion: The common order of the Tribunal was set aside and the assessee succeeded on all questions, with the demand and penalty based on Delhi VAT not surviving.

Ratio Decidendi: A sale falls within section 3(a) of the Central Sales Tax Act, 1956 or section 5(2) of that Act when the movement of goods or import is in pursuance of, or incidental to, the contract and there is a real nexus between the contract and the movement, even without an express stipulation or direct privity between the end user and the supplier.

---