Inter-State sale characterization controls purchase tax liability; levy cannot stand without proper findings on the transaction nature.

Purchase tax under Section 6 of the Karnataka Sales Tax Act, 1957 depends on the true character of the transaction. Where the movement of goods from one State to another is occasioned by, or inseparable from, the contract of sale, the transaction is an inter-State sale under Section 3(1) of the Central Sales Tax Act, 1956 and falls outside the purchase tax provision. The Tribunal had not made a proper finding on the nature of the transactions on the material before it and relied only on a general observation that the dispatches were branch transfers. The levy therefore could not be sustained and the matter required fresh consideration.

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Issues: Whether purchase tax under Section 6 of the Karnataka Sales Tax Act, 1957 could be levied without a finding on whether the transactions were inter-State sales under Section 3(1) of the Central Sales Tax Act, 1956.

Analysis: Liability under Section 6 depends on the character of the transaction. If the movement of goods from one State to another is occasioned by, or is an inseparable incident of, the contract of sale, the transaction is an inter-State sale and falls outside the purchase tax provision. The record showed that the Tribunal had not recorded a finding on the nature of the transactions with reference to the material on record and had proceeded on a general observation that the dispatches were branch transfers. Such an approach was insufficient before sustaining the levy.

Conclusion: The levy could not be upheld without a proper determination of the nature of the transaction, and the matter was required to be considered afresh by the Tribunal.

Ratio Decidendi: Purchase tax under Section 6 of the Karnataka Sales Tax Act, 1957 cannot be sustained unless the authority first determines, on proper findings, that the transaction is not an inter-State sale under Section 3(1) of the Central Sales Tax Act, 1956.

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