Works contract goods moved inter-State cannot be split into separate local sales absent proof of a severable transaction.

Goods specially procured for execution of a works contract, and moved from other States or outside India because the contract required that procurement, were treated as part of an inter-State transaction under the Central Sales Tax framework. The movement was found to be integrally linked to the contractual sale or deemed sale, so it could not be split into independent local purchase and sale transactions for levy under the Telangana VAT Act unless the revenue proved a distinct and severable transaction. The revisional order taxing the movement as separate local sales was therefore unsustainable, and the matter was remitted for reconsideration under the governing principle.

---

---

Issues: Whether the movement of tailor-made goods from other States or outside the country pursuant to the works contracts amounted to inter-State sales falling within the Central Sales Tax Act, and whether such transactions could be split into separate purchase and local sale transactions for levy under the Telangana Value Added Tax Act.

Analysis: The contracts required procurement from nominated suppliers and the goods were non-standard and specially manufactured for the contract. The movement of goods was occasioned by the covenant of the works contract and was integrally connected with their use in execution of the works. Such transactions could not be artificially vivisected into two independent sales unless the revenue established that the interstate movement was an independent transaction unconnected with the contractual sale or deemed sale. The revisional authority had not placed material to dislodge the assessee's case or to justify departure from the earlier view taken in the assessee's own matter.

Conclusion: The transaction was held to fall within the ambit of inter-State trade and the impugned revision taxing it as separate local purchase and sale under the VAT Act could not be sustained; the matter was remitted for fresh orders in accordance with the governing legal principle.

Final Conclusion: The petitioner succeeded on the substantive tax issue, and the revisional order was set aside with a direction for reconsideration by the authority.

Ratio Decidendi: Where goods are specially procured and moved pursuant to a works contract, and the movement is integrally linked to that contract, the transaction cannot be split into separate local and inter-State sales absent proof of an independent and severable transaction.

---