Inter-State sale doctrine controls taxability where contract-driven movement of goods from one State to another is established.

Hank yarn obligation turnover was treated as consideration for hank yarn manufactured and transferred to other mills' accounts to discharge a statutory obligation, and the Tribunal's factual finding on that issue was not disturbed; the assessment was therefore sustained. Cotton purchases from the Maharashtra Federation were held to be inter-State purchases because firm orders, delivery documents and transport records showed that the contract occasioned movement of goods from Maharashtra to Tamil Nadu. Passing of property at the destination did not alter the inter-State character, so the turnover was not liable to local sales tax.

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Issues: (i) Whether the assessment on the turnover relating to hank yarn obligation was sustainable. (ii) Whether the cotton purchases from the Maharashtra Federation constituted inter-State purchases not liable to tax under the Tamil Nadu General Sales Tax Act.

Issue (i): Whether the assessment on the turnover relating to hank yarn obligation was sustainable.

Analysis: The hank yarn obligation was treated as consideration received for hank yarn manufactured and transferred to other mills' accounts to discharge a statutory obligation. The factual findings on this aspect were reappreciated by the Tribunal on the material before it and no ground was made out to interfere with that conclusion.

Conclusion: The assessment on the hank yarn obligation was upheld against the assessee.

Issue (ii): Whether the cotton purchases from the Maharashtra Federation constituted inter-State purchases not liable to tax under the Tamil Nadu General Sales Tax Act.

Analysis: The purchases were made pursuant to firm purchase orders specifying quantity and quality, and the goods moved from Maharashtra to Tamil Nadu in execution of that contract. The inter-State character of a sale is determined by whether the sale occasions movement of goods from one State to another, and the passing of property in the goods in the State of delivery does not convert such a transaction into a local sale. The records, including the contract, delivery orders, sale bills and transport documents, showed a direct nexus between the contract and the movement of goods.

Conclusion: The cotton purchases were held to be inter-State purchases and not liable to tax as local purchases.

Final Conclusion: The writ petition succeeded only in respect of the cotton purchase turnover, while the assessment on hank yarn obligation was sustained.

Ratio Decidendi: A sale is an inter-State sale when the movement of goods from one State to another is occasioned by the contract of sale, and the subsequent passing of property in the destination State does not alter that character.

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