Inter-State sale requires movement of goods under the sale contract; later out-of-state transport did not change tax treatment.

A sandalwood sale conducted through a tender-cum-auction within Tamil Nadu was treated as a local sale liable to value added tax, because the later movement of goods outside the State did not, by itself, make the transaction an inter-State sale. The court focused on the situs and character of the sale, holding that inter-State character arises only where the movement of goods is pursuant to the contract or a legal obligation forming part of the sale. Following the earlier binding view on identical facts, the claim for Central Sales Tax treatment was rejected and Tamil Nadu VAT was upheld.

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Issues: Whether the sandalwood transaction was an inter-State sale falling under the Central Sales Tax regime, or a local sale exigible to value added tax under the Tamil Nadu enactment.

Analysis: The transaction arose from a tender-cum-auction conducted within Tamil Nadu. The mere fact that the purchaser later transported the goods outside the State did not create an inter-State sale, because the movement of goods was not pursuant to any legal obligation forming part of the sale. The decisive element was the situs and character of the sale transaction, not the subsequent destination of the goods. Following the earlier binding view on identical facts, the sale turnover was held to be taxable as a local sale.

Conclusion: The claim that the transaction was an inter-State sale was rejected, and the levy of Tamil Nadu value added tax was upheld.

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