Inter-State sale classification bars Karnataka VAT where goods move from Maharashtra under a supply-and-installation contract.

Writ jurisdiction remained available where the challenge went to the assessing authority's competence, so the alternative statutory remedy did not bar examination on merits. Goods moved from Maharashtra to Karnataka pursuant to a contract for supply, installation, testing and commissioning of elevators were treated as an inter-State sale under Section 3(a) of the Central Sales Tax Act, 1956. The court emphasised that the decisive test was whether the sale occasioned movement between States, not where property passed or whether installation and commissioning occurred in Karnataka. Karnataka VAT could not be levied on such inter-State sales, and the reassessment could not survive to that extent.

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Issues: (i) Whether the reassessment order under Section 39(1) of the Karnataka Value Added Tax Act, 2003 was without jurisdiction in a writ petition challenging the levy. (ii) Whether the movement of goods from Thane, Maharashtra, for supply, installation, testing and commissioning of elevators constituted a local sale taxable under the Karnataka Value Added Tax Act, 2003 or an inter-State sale under Section 3(a) of the Central Sales Tax Act, 1956.

Issue (i): Whether the reassessment order under Section 39(1) of the Karnataka Value Added Tax Act, 2003 was without jurisdiction in a writ petition challenging the levy.

Analysis: The availability of an alternative statutory remedy did not bar writ jurisdiction where the challenge was to the competence of the assessing authority. The objection on maintainability was therefore not accepted, and the matter was examined on merits.

Conclusion: The writ petition was maintainable and the challenge to jurisdiction was entertained.

Issue (ii): Whether the movement of goods from Thane, Maharashtra, for supply, installation, testing and commissioning of elevators constituted a local sale taxable under the Karnataka Value Added Tax Act, 2003 or an inter-State sale under Section 3(a) of the Central Sales Tax Act, 1956.

Analysis: The contract documents showed separate purchase and work orders, with the supply portion covering manufacture and dispatch from Maharashtra and the work order covering installation and commissioning. The goods moved from Maharashtra to Karnataka pursuant to the contract, and the decisive test was whether the sale occasioned inter-State movement, not where property in the goods passed. A composite or even split arrangement could not convert an inter-State transaction into a local sale merely because installation occurred in Karnataka or because the contract involved labour and service elements. The State VAT authorities lacked competence to tax such inter-State sales, and the levy under the Karnataka Value Added Tax Act could not be sustained.

Conclusion: The transaction was held to be an inter-State sale and not a local sale exigible to tax under the Karnataka Value Added Tax Act, 2003.

Final Conclusion: The reassessment order could not stand insofar as it sought to levy Karnataka VAT on the transaction, and the relief was granted in favour of the assessee.

Ratio Decidendi: Where goods move from one State to another pursuant to the contract, the sale is inter-State under Section 3(a) of the Central Sales Tax Act, 1956, and State sales tax authorities cannot tax it merely because installation or commissioning occurs within the State or because the arrangement has works-contract features.

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