“3. When is a sale or purchase of goods said to take place in the course of inter-state trade or commerce — A sale or, purchase of goods shall be deemed to take place in the course of interstate trade or commerce if the sale or purchase—
a. occasion the movement of goods from one State to another; or
b. is effected by a transfer of documents of title to the goods during their movement from one State to another….”
Sec. 6 (2) of CST Act says when goods are in movement from one state to other in pursuance a contract of sale, then any subsequent sale effected by transfer of documents during such movement shall be exempt from CST.
The first requirement of a subsequent sale under section 6(2) is that it must have a relative prior sale “in the course of inter-state trade or commerce” which had (a) either occasioned the movement of such goods from one state to another, or (b) was effected by transfer of document of title of such goods during their movement from one state to another. In other words, a movement of the goods in pursuance to a prior sale is the first pre-requisite of a ‘subsequent sale’ contemplated by section 6(2) for enjoyment of exemption.
e.g. 1.) A of Delhi Orders B of Haryana to sell and dispatch to Delhi 50 bags of black paper. B dispatches the goods and send the railway receipt to A. In the mean time, A had sold identical quantity of same goods to C of Delhi. Instead of himself taking delivery of goods from railway and then delivering those goods to C at Delhi, A transfer to C the railway receipt which was sent to him by B. The sale by A to C is an inter-state sale because it was effected by a transfer of document of title, viz. railway receipt. If C is registered dealer, the sale from A to C may enjoy exemption from tax on fulfillment of other conditions of section 6(2), e.g. The production by A of prescribed certificate and/ or declaration etc.
The dealer had entered into a contract with a supplier in the same state and had furnished ‘C’ form to the supplier and directed him to deliver the goods to the petitioner’s customer in another State. It had obtained forms E1 forms its supplier and C form from customer state.