Inter-State purchase of cotton under a firm contract was not a local sale, making Tamil Nadu tax levy unsustainable.

Purchase of cotton moved from Maharashtra to Tamil Nadu under a firm contract, supported by delivery orders, invoices and transport documents, was treated as an inter-State purchase because the movement of goods from one State to another was occasioned by the contract within section 3(a) of the Central Sales Tax Act, 1956. Delivery in Tamil Nadu after payment, and the passing of property there, did not change the character of the transaction. The levy under the Tamil Nadu General Sales Tax Act, 1959 was therefore unsustainable.

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Issues: Whether the purchase of cotton moved from Maharashtra to Tamil Nadu pursuant to the parties' contract was an inter-State purchase or a local purchase liable to tax under the Tamil Nadu General Sales Tax Act, 1959.

Analysis: The transaction was supported by the contract, delivery order, sales bills and transport documents, all of which showed that the goods were moved from one State to another in pursuance of a firm purchase order for specified quantity and quality. Under section 3(a) of the Central Sales Tax Act, 1956, a sale or purchase is in the course of inter-State trade if it occasions movement of goods from one State to another. The fact that delivery was given in Tamil Nadu after payment, or that property passed there, did not alter the inter-State character of the transaction. The movement was not a case of the seller carrying goods to Tamil Nadu and later searching for buyers.

Conclusion: The transaction was an inter-State purchase and not a local sale, and the levy under the Tamil Nadu General Sales Tax Act, 1959 was unsustainable.

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