Inter-unit transfers are not sales unless they occur between distinct legal entities with consideration under sales tax law.

Transfer of goods between two units of the same incorporated company does not amount to a sale under the Tamil Nadu General Sales Tax Act unless there is a transfer of property in goods between distinct legal persons for consideration. Separate registration certificates and different business activities do not by themselves create separate legal entities. The Tribunal's approach was faulty because it relied on independent registrations without first deciding whether the units were legally separate and capable of inter se transfer. The matter was remanded for that foundational determination, and if the units are part of the same company, the levy cannot be sustained.

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Issues: Whether transfer of goods between two units of the same company constitutes a sale under Section 2(n) of the Tamil Nadu General Sales Tax Act, 1959.

Analysis: For a transaction to amount to sale, there must be a transfer of property in goods from one person to another for consideration. Separate registration certificates or different lines of business by units of the same incorporated company do not by themselves create distinct legal entities. The relevant enquiry is whether the two units are legally separate persons capable of transferring goods inter se. The Tribunal proceeded on independent registrations and differing business activity without first examining this foundational question. The documents relied upon by the petitioner were said to indicate that both units were part of the same company.

Conclusion: Mere independent registration and different business activities do not establish a sale. The matter was remanded to the Tribunal to determine whether the two units are different units of the same company, and if so, the levy cannot be sustained.

Ratio Decidendi: Inter-unit transfer is not taxable as sale unless the transfer is between two distinct legal entities and satisfies the statutory requirements of transfer of property in goods for consideration.

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