Inter-State sale tax principles: movement under the supply contract determines situs, not later processing of semi-finished goods.

Writ jurisdiction can be invoked against an assessment order where the challenge turns on a basic legal error or excess of jurisdiction, and the existence of alternate statutory remedies does not bar interference as an absolute rule. On the sales tax issue, a sale is inter-State when the contract occasions movement of goods from one State to another, and tax is leviable in the State from which that movement commences. The Court treated the movement of goods under the supply contract as decisive and held that their semi-finished condition or further processing in another State did not alter the inter-State character of the transaction.

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Issues: (i) whether the assessment order could be interfered with in writ jurisdiction despite the availability of an alternate remedy, and (ii) whether the impugned turnover was rightly treated as an inter-State sale taxable in Maharashtra.

Issue (i): whether the assessment order could be interfered with in writ jurisdiction despite the availability of an alternate remedy.

Analysis: A writ petition against an assessment order is not barred as an absolute rule merely because statutory remedies exist. Where the assessment is founded on a basic legal error and the authority is said to have acted beyond jurisdiction, the High Court may intervene under Article 226 of the Constitution of India. The existence of factual disputes does not by itself prevent interference when the controversy turns on a jurisdictional and legal misapprehension.

Conclusion: The challenge was maintainable and the Court was justified in entertaining the writ petition.

Issue (ii): whether the impugned turnover was rightly treated as an inter-State sale taxable in Maharashtra.

Analysis: Under Section 3 of the Central Sales Tax Act, 1956, a sale is inter-State if the contract of sale occasions movement of goods from one State to another. Under Section 9 of the Central Sales Tax Act, 1956, tax is leviable in the State from which the movement of goods commenced. The decisive test is the movement occasioned by the contract of sale, not whether the goods are described as finished or semi-finished at an intermediate stage. The Court found that the assessing authority had proceeded on an erroneous assumption that movement of semi-finished goods to another State for further processing altered the situs of the inter-State sale, whereas the movement remained traceable to the supply contract with the Defence Ministry and commenced from Hyderabad.

Conclusion: The assessment was unsustainable; the transaction was not taxable in Maharashtra on the footing adopted by the assessing authority.

Final Conclusion: The writ petition succeeded, the impugned assessment was set aside, and the demand raised against the petitioner could not be sustained.

Ratio Decidendi: For the purposes of the Central Sales Tax Act, the State competent to levy tax on an inter-State sale is the State from which the movement of goods under the contract of sale commences, and the inter-State character of the transaction is not lost because the goods are moved in a semi-finished condition for further processing before final delivery.

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