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2014 (6) TMI 589 - KARNATAKA HIGH COURTInter-State purchases of goods used in the execution of works contract - Denial of exemption claim - The goods were procured from outside the State - in the contract it clearly mentioned that the assessee would procure the goods only from within the State. - revenue contended that, movement of goods from outside the State was not a result of the contract or incidental to the contract, since the General Conditions of Contract did not mention about inter-State vendors and, therefore, it cannot be stated that the goods were moved in pursuance of the contract. Held that:- It is now well settled that if a contract of sale contains a stipulation for such movement, the sale would, of-course, be a inter-State trade. But it can also be inter- State sale even if the contract of sale does not itself provide for movement of goods from one State to another but such movement would be result of a covenant in the contract of sale or is an incident of such contract. (See Union of India vs. Khosla and company [1979 (3) TMI 176 - SUPREME COURT OF INDIA]). It is true, in the instant case, the contract of sale did not require or provide that goods should be moved from other States to the State of Karnataka at Bijapur. But it is not true to say that for the purpose of Section 3(a) of the Central Act it is necessary that the contract of sale must itself provide for and cause the movement of goods or that the movement of goods must be occasioned specifically in accordance with the terms of the contract of sale. A sale which occasions movement of goods from one State to another is a sale in the course of inter-State trade, no matter in which State the property in goods passes. It is not necessary that the sale must precede the inter-State movement in order that the sale may be deemed to have occasioned such movement, and it is also not necessary for a sale to be deemed to have taken place in the course of inter-State trade or commerce, that the covenant regarding inter-State movement must be specified in the contract itself. It would be sufficient if the movement was in pursuance of and incidental to the contract of sale. In the present case the movement of goods from one State to another may or may not be as a result of a covenant but definitely it was an incident of the contract. - Decided in favour of assessee.
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