Turnkey works contracts and CST classification: integrated supply and erection agreements can trigger inter-State sale and import treatment.

In a turnkey project arrangement, the contract must be read as a whole to determine its true tax character; where supply and erection obligations are integrated, the transaction is treated as an indivisible works contract. A claim to subsequent-sale exemption under Section 6(2) of the Central Sales Tax Act fails unless title passes during movement by transfer of documents of title, which did not occur here because property passed only after delivery, erection, testing and acceptance. The movement of identified goods from outside the State, and the import of equipment for the project, were held to be occasioned by the contracts and therefore fell within Sections 3(a) and 5(2), not as intra-State sales under the Andhra Pradesh VAT Act.

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Issues: (i) Whether the existence of an appellate remedy under the Andhra Pradesh Value Added Tax Act required the Court to decline writ jurisdiction; (ii) whether the supply and erection agreements were separate divisible contracts or, in substance, indivisible works contracts; (iii) whether the petitioners' sales claimably fell within Section 6(2) of the Central Sales Tax Act, 1956; (iv) whether the transactions nevertheless constituted inter-State sales under Section 3(a) of the Central Sales Tax Act, 1956; and (v) whether the import transactions were sales in the course of import under Section 5(2) of the Central Sales Tax Act, 1956.

Issue (i): Whether the existence of an appellate remedy under the Andhra Pradesh Value Added Tax Act required the Court to decline writ jurisdiction.

Analysis: The existence of an alternative remedy is not an absolute bar where the impugned orders are challenged as being without jurisdiction or contrary to settled law. The proceedings were already entertained and heard at length on questions going to jurisdiction, and the Court confined itself to the limited certiorari scope while addressing the recurring statutory issues.

Conclusion: The writ petitions were not rejected on the ground of alternative remedy.

Issue (ii): Whether the supply and erection agreements were separate divisible contracts or, in substance, indivisible works contracts.

Analysis: The agreements were read as a whole, including cross-fall breach clauses, inspection and certification requirements, risk allocation, payment linked to commissioning, and the integrated nature of procurement, erection and commissioning. These features showed that the supply and erection arrangements were not truly independent bargains but part of one composite undertaking for execution of turnkey projects.

Conclusion: The contracts were held to be indivisible works contracts in substance.

Issue (iii): Whether the petitioners' sales claimably fell within Section 6(2) of the Central Sales Tax Act, 1956.

Analysis: Section 6(2) was held to apply only to a subsequent sale effected during movement after a prior inter-State sale, and the sale had to be completed by transfer of documents of title while the goods were in transit. On the contractual terms, title passed only after delivery, inspection, erection, testing and acceptance, not during movement. The transit-sale clauses could not override the remaining contractual provisions showing that property passed after the goods had reached the site and were incorporated in the works.

Conclusion: The petitioners were not entitled to exemption under Section 6(2) of the Central Sales Tax Act, 1956.

Issue (iv): Whether the transactions nevertheless constituted inter-State sales under Section 3(a) of the Central Sales Tax Act, 1956.

Analysis: The supply agreements obliged the contractors to procure identified goods from outside the State for the very purpose of fulfilling the owners' turnkey contracts. The movement of goods from one State to another was occasioned by, and inseparably connected with, the contractual obligation to supply those specific goods for the project. An agreement to sell may itself occasion inter-State movement, and the fact that the goods were later delivered within the State did not destroy their inter-State character.

Conclusion: The transactions were held to be inter-State sales falling under Section 3(a) of the Central Sales Tax Act, 1956.

Issue (v): Whether the import transactions were sales in the course of import under Section 5(2) of the Central Sales Tax Act, 1956.

Analysis: The imported equipment was procured pursuant to the project obligations, was identified for the specified works, and moved into India for execution of the turnkey contracts. The sale to the owner was found to be the proximate and inextricable cause of the import, and the contractual and documentary circumstances showed that the import and the sale were integrally connected.

Conclusion: The import transactions were held to fall within Section 5(2) of the Central Sales Tax Act, 1956.

Final Conclusion: The assessment and revisional orders were set aside only to the extent they treated the transactions covered by Sections 3(a) and 5(2) as intra-State sales liable under the Andhra Pradesh VAT Act, while the challenge based on Section 6(2) failed. The matters were remitted for fresh consideration in accordance with law on the limited surviving issues.

Ratio Decidendi: In a turnkey works arrangement, the true character of the transaction depends on the contract read as a whole; a subsequent sale under Section 6(2) requires transfer of title during movement, whereas an agreement that occasions inter-State movement or an import inextricably linked with the sale falls within Sections 3(a) or 5(2) and cannot be taxed as an intra-State sale by the State.

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