Inter-State sale depends on contractual obligation, not later transport of goods outside the State after a local auction sale.

Sale of sandalwood through auction in Tamil Nadu did not become an inter-State sale merely because the purchaser later transported the goods outside the State. The Court held that the sale was concluded within Tamil Nadu and that subsequent movement was voluntary, with no contractual or legal obligation in the auction terms linking the sale to out-of-State transport. Applying the earlier Division Bench view, the place and nature of the auction determined the tax character of the transaction. The challenge to levy of Tamil Nadu value added tax therefore failed, and the State levy was upheld.

---

---

Issues: Whether the sale of sandalwood through auction in Tamil Nadu could be treated as an inter-State sale merely because the purchaser transported the goods outside the State, or whether it remained a local sale liable to tax under the State enactment.

Analysis: The petitioners sought to characterise the transaction as an inter-State sale on the basis that the goods were moved out of Tamil Nadu after purchase. The Court held that such movement, by itself, does not alter the character of an auction sale concluded within the State. There was no legal covenant or obligation in the auction terms connecting the sale with transport outside the State. The movement of goods was therefore voluntary and independent of the sale transaction. The Court also followed the earlier Division Bench view that the place and nature of the auction sale, not the subsequent movement of goods at the purchaser's option, determined the tax character of the transaction.

Conclusion: The transaction was not an inter-State sale; the challenge to levy of Tamil Nadu value added tax failed.

Final Conclusion: The writ petitions were dismissed and the State's levy was upheld.

Ratio Decidendi: A sale concluded within the State does not become an inter-State sale merely because the purchaser subsequently moves the goods outside the State, unless the movement is occasioned by a contractual or legal obligation forming part of the sale.

---