Inter-State sales test upheld for elevator supplies moved under purchase orders, despite later installation and commissioning.

The Karnataka HC noted that the existence of an alternative statutory appeal under the VAT law did not bar writ intervention where the controversy was already governed by binding precedent, so the challenge on maintainability failed. On the tax issue, the Court applied section 3(a) of the Central Sales Tax Act and found that elevators manufactured in Maharashtra and moved to Karnataka pursuant to purchase orders were inter-State sales, even though erection, installation, testing and commissioning followed at the site. The transactions were therefore not treated as a composite local works contract exigible to State VAT, and the Revenue's challenge was rejected.

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Issues: (i) Whether the writ petitions could be entertained despite availability of an alternative statutory appeal under the VAT law. (ii) Whether the transactions for supply, erection, installation, testing and commissioning of elevators constituted inter-State sales under the Central sales tax law or a composite works contract exigible to tax under the State VAT law.

Issue (i): Whether the writ petitions could be entertained despite availability of an alternative statutory appeal under the VAT law.

Analysis: The appellate remedy under the VAT statute was available, but the writ court had exercised its discretion. Since the controversy was already covered by an earlier binding Division Bench decision and the matter was not one requiring fresh examination on merits for the purpose of maintainability, the existence of an alternate remedy did not warrant interference in appeal.

Conclusion: The challenge on the ground of alternative remedy failed.

Issue (ii): Whether the transactions for supply, erection, installation, testing and commissioning of elevators constituted inter-State sales under the Central sales tax law or a composite works contract exigible to tax under the State VAT law.

Analysis: The purchase orders, transport documents, delivery records and invoices showed that the elevators were manufactured in Maharashtra and their movement to Karnataka was occasioned by the purchase orders. The Court applied the test under section 3(a) of the Central Sales Tax Act, 1956 and followed the earlier Division Bench ruling holding that such supplies, even when followed by installation and commissioning at the customer site, amount to inter-State sales. The Court also noted that the earlier decision had been accepted by the Revenue and was binding in the present case.

Conclusion: The transactions were held to be inter-State sales and not a taxable local works contract under the State VAT law.

Final Conclusion: The appeals did not disclose any legal infirmity in the impugned orders and the Revenue's challenge was rejected in entirety.

Ratio Decidendi: Where goods are manufactured in one State and their movement to another State is occasioned by the purchase order, the transaction falls within section 3(a) of the Central Sales Tax Act, 1956 even if installation and commissioning are subsequently undertaken at the customer's site, and the mere presence of an alternate statutory remedy will not necessarily preclude writ interference when the controversy is governed by binding precedent.

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