Transit sale under CST law: direct supply to pre-determined buyer did not create Business Auxiliary Services liability.

The note explains that procuring goods from a subsidiary and supplying them directly to an ultimate buyer was treated as an inter-State sale, not Business Auxiliary Services. The transactions were supported by E-1 and C-Forms, the goods moved from Karnataka to Jharkhand, and title passed during transit, bringing the arrangement within section 6(2) of the Central Sales Tax Act. The fact that the ultimate buyer was already identified did not alter the character of the transit sale. On that basis, no service tax liability arose on the impugned transactions.

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Issues: Whether the transactions of procuring goods from the subsidiary and delivering them directly to the ultimate buyer amounted to Business Auxiliary Services or were only sale transactions covered by the Central Sales Tax law.

Analysis: The record showed that the appellant treated the transactions with the subsidiary as inter-State purchases, supported by E-1 and C-Forms filed before the sales tax authorities, while the subsequent supply to the ultimate buyer was supported by C-Forms issued by that buyer. The movement of goods from Karnataka to Jharkhand, together with transfer of documents of title during transit, brought the case within the framework of section 6(2) of the Central Sales Tax Act. The accepted statutory forms and assessments showed that the transaction was consistently treated as a sale and purchase arrangement, and the mere fact that the buyer was pre-determined did not change the character of the transit sale.

Conclusion: The activity was not taxable as Business Auxiliary Services and no service tax liability arose on the impugned transactions.

Ratio Decidendi: A subsequent sale effected by transfer of documents of title during movement of goods remains a valid inter-State transit sale under section 6(2) of the Central Sales Tax Act, and the benefit of that provision cannot be denied merely because the ultimate buyer was pre-determined.

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