M/S. A & G PROJECTS & TECHNOLOGIES LTD. versus STATE OF KARNATAKA

Citation: [2008] 17 S.C.R. 321 · Decided: 11-12-2008 · Supreme Court of India · Bench: S.H. KAPADIA · Disposal: Appeal(s) allowed

Judgment (excerpt)

[2008] 17 S.C.R. 321 
_... 
M/S. A & G PROJECTS & TECHNOLOGIES LTD. 
A· 
'r . ...... 
v. 
STATE OF KARNATAKA 
(Civil Appeal No. 7233 of 2008) 
DECEMBER 11, 2008 
B 
[S.H. KAPADIA AND AFTAB ALAM, JJ.] 
>-~ 
Central Sales Tax Act, 1956: 
s.3(a), s.9(1) and its proviso - Inter-state sales - If sales 
are covered under s.3(a) and the assessee is held not entitled c 
to exemption under s. 6(2) then the State from which the 
movement of the goods commenced is 'Appropriate State' 
entitled to collect tax in respect of goods sold - Question of 
taxing such sales under the proviso to s.9(1) would not arise 
- Kamataka Sales Tax Act, 1957. 
D 
Appellant-Company was engaged in execution of 
ct 
electrical works contracts and was registered dealer 
under the Karnataka Sales Tax Act, 1957 and Central 
Sales Tax Act, 1956. It was awarded three independent 
contracts towards the supply of capacitor banks E 
(equipment), execution of civil works and erection ~nd 
commissioning of equipments on various such stations 
of KPTCL in the State of Karnataka. Pursuant to the 
contracts, appellant appointed EPC contractor located 
outside the State of Karnataka for procuring the F 
equipments because these EPC contractors had prior 
~ 
arrangement with the manufacturers of said equipment. 
In that transaction, four parties were involved namely, the 
appellant, the EPC contractor, the manufacturers of the 
equipment and KPTCL, being the ultimate consumer. 
For the assessment year 2000-01, the appellant filed G 
its return and turnover under the Central Sales Tax Act. 
·~ 
Before the A.O., appellant contended that the goods 
~ 
originated from the manufacturers and ultimately reached 
321 
H 
... 
322 
SUPREME COURT REtPORTS 
[2008) 17 S.C.R. 
A 
KPTCL though the title to the goods vested originally 
with EPC contractor but in tutn transferred the title to the 
goods to the appellant when they were in transit and in 
turn the appellant transferred the title by endorsing the 
lorry receipt in favour of KPTCL. According to the 
B . appellant, the second and the third sales were the 
subsequent sales, and hence appellant was entitled to 
exemption from tax for such sales under s.6(2) of 1956 
Act. The A.O. held that all the three contracts came under 
s.3A and therefore appellant was not entitled to claim 
C exemption under s.6(2) of 1956 Act. 
The Tribunal held· that the dealer was located in the 
State of Karnataka and the purchaser was also in the 
State of Karnataka. The movement of goods under the 
contract was not from State of Karnataka but into the 
State of Karnataka and, therefore, there was no inter-State 
D sale in the State of Karnataka and, therefore, levy of tax 
. on the value of goods supplied was totally unjustified. 
. 
'· 
The Department filed revision .petition before High 
Court, wherein it was held ithat sale of goods in favour 
of KPTCL. was completed when the goods were 
E appropriated by KPTCL before the commencement of 
movement of goods from the place of manufacturers in 
Tamil Nadu to KPTCL in the State of Karnataka and, 
therefore, the inter-State sale of goods fell under s.3A and 
appellant was not entitled 'to exemption under s.6(2) of 
F 
the Act. Further it held that since sale did not comply with 
the conditions in s.6(2), matter came under first proviso 
to s.9(1) and consequently the State of Karnataka was the 
"Appropriate State" entitled to collect tax in respect of the 
goods sold by the appellant to KPTCL under the CST 
G Act, 1956~ Aggrieved appellant filed the instant appeal. 
I 
Allowing the appeal, the Court 
HELD: 1.1. The question whether a particular sale is 
an inter-State sale or an intra-State sale, though 
essentially one of fact, is' not the pure question of fact 
H inasmuch as the facts of a given case have to be 
e 
M/S. A & G PROJECTS & TECHNOLOGIES LTD. v . 
323 
.3TATE OF KARNATAKA 
and, therefore, it is a mixed question of fact and law. S.3 A· 
;.-- ~ 
of the CST Act 1956 formulates the principles fQr 
... 
determining when a sale or purchase takes place in th~ 
course of inter-State trade or commerce. Two tests a~e 
applied, one of which is that a sale or purchase take$ 
place in the course of inter-State trade if it occasion$ 
movement of the goods from one State to another, anti B 
the other test is that a sale or purchase takes place by 
~"t· 
transfer of documents of title, during the movement of the 
goods from one State to another. A sale (transfer of 
property) becomes inter-State

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