When is a sale or purchase of goods said to take place in the course of inter-State trade or commerce
Section 3 of the Central Sales Tax Act, 1956 deals with 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 inter-State trade or commerce if the sale or purchase-- (a) occasions the movement of goods from one State to another; The Act came into force on 05 Jan 1957.
A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase--
(a) occasions 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.
Explanation 1.--Where goods are delivered to a carrier or other bailee for transmission, the movement of the goods shall, for the purposes of clause (b), be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee.
Explanation 2.--Where the movement of goods commences and terminates in the same State it shall not be deemed to be a movement of goods from one State to another by reason merely of the fact that in the course of such movement the goods pass through the territory of any other State.
1[Explanation 3.--Where the gas sold or purchased and transported through a common carrier pipeline or any other common transport or distribution system becomes co-mingled and fungible with other gas in the pipeline or system and such gas is introduced into the pipeline or system in one State and is taken out from the pipeline in another State, such sale or purchase of gas shall be deemed to be a movement of goods from one State to another.]
Section 3, The Central Sales Tax Act, 1956 (Act 74 of 1956).
Cross-references
Extracted from the operative text of the enactments themselves. Every destination below exists in our corpus.
Referred to by 34
- Arunachal Pradesh Goods Tax Act, 2005 (Act No. 3 of 2005) s. 7
- Assam Sales Tax (Amendment) Act s. 2
- Bihar Value Added Tax Act s. 96 Transitory provisions
- s. 4 When is a sale or purchase of goods said to take place outside a State
- s. 9 Levy and collection of tax and penalties
- M.P. Commercial Tax Act s. 79 Sales not liable to tax
- Daman and Diu Value Added Tax Regulation 2005 s. 7
- Goa Value Added Tax Act s. 9 Input Tax Credit
- Goa Value Added Tax Act s. 87 Savings
- Gujarat Motor Spirit Cess Act s. 33
- Jharkhand Value Added Tax Act s. 9 Levy of Tax on Sale and Determination of Taxable Turnover
- Jharkhand Value Added Tax Act s. 10
and 22 more
Related judgements & precedents
These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.
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A&g Projects & Technologies LTD vs State of Karnataka
Court's Decision & Legal Precedent
The proviso to Section 9(1) of the Central Sales Tax Act, 1956 applies only to subsequent inter-state sales falling under Section 3(b) of the Act and not to sales falling under Section 3(a). When all sales in a transaction are classified under Section 3(a) (i.e., where movement of goods is under the contract), the tax must be levied and collected by the State from which the movement of goods commenced, as specified in Section 9(1), and not by the State where the goods are ultimately delivered. The classification of sales under Section 3(a) versus Section 3(b) is determined by whether movement of goods is under the contract (3(a)) or whether the contract comes into existence after commencement and before termination of inter-state movement (3(b)).
On this section: Definition of when sales or purchases take place in the course of inter-state trade or commerce, with focus on distinguishing sales that occasion movement versus those effected by transfer of documents during movement
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Hyderabad Engineering Industries vs State of A. P
Court's Decision & Legal Precedent
When goods move from one state to another pursuant to a sales agreement or as an incident of such agreement, the transaction constitutes an inter-State sale taxable under Section 3(a) of the Central Sales Tax Act, 1956, regardless of whether: (a) the contract explicitly provides for such inter-State movement; (b) the movement is effected through the seller's own branch offices; (c) the orders are termed 'allocation letters' or 'forecasts' rather than firm orders; or (d) the branch offices have discretion to sell to other customers. The essential requirement is that there must be a conceivable link between the contract of sale and the inter-State movement of goods, and the movement must be in pursuance of and incidental to the contract of sale.
On this section: Core provision defining inter-State sales; the court interpreted that a sale occasions inter-State movement when movement is result of covenant or incident of contract, regardless of whether explicitly stated in contract
The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.
Judgments citing this section
These may be obiter dicta or a precedent, for you to study. These are the judgments where this section is quoted.
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… All these four appeals are being dealt with by this judgment as they all involve adjudication on a common question of law arising out of Sections 3 and 6 of the Central Sales Tax Act, 1956 (1956 Act), which was operational at the material point of time. The question is as to whether as a condition of giving the benefit of Section 6(2) of the said Act, the tax authorities can impose a limit or timeframe within which delivery of the respective goods has to be …
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… All these four appeals are being dealt with by this judgment as they all involve adjudication on a common question of law arising out of Sections 3 and 6 of the Central Sales Tax Act, 1956 (1956 Act), which was operational at the material point of time. The question is as to whether as a condition of giving the benefit of Section 6(2) of the said Act, the tax authorities can impose a limit or timeframe within which delivery of the respective goods has to be …
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… All these four appeals are being dealt with by this judgment as they all involve adjudication on a common question of law arising out of Sections 3 and 6 of the Central Sales Tax Act, 1956 (1956 Act), which was operational at the material point of time. The question is as to whether as a condition of giving the benefit of Section 6(2) of the said Act, the tax authorities can impose a limit or timeframe within which delivery of the respective goods has to be …
Made under this section, and citing it
4 instruments state that it was made under this provision — the power to make it comes from here, so a change to any of them changes what this section requires in practice. Newest first.
Questions about Section 3
What have the courts held on Section 3 of the Central Sales Tax Act?
A&g Projects & Technologies LTD vs State of Karnataka (11 Dec 2008) is the leading judgment on this section among those set out below: Definition of when sales or purchases take place in the course of inter-state trade or commerce, with focus on distinguishing sales that occasion movement versus those effected by transfer of documents during movement. Another 1 judgment on this section is set out below, all of them from the Supreme Court. They run from 2008 to 2011.
How do I find court cases under Section 3 of the Central Sales Tax Act?
In judgments and charge sheets this section is written several ways, and each form finds a different set of orders. These search the full text of every order eCourtsIndia holds, best matches first: Central Sales Tax Act 3, section 3 Central Sales Tax Act, section 3 of the Central Sales Tax Act. People searching for it also type section 3 of central sales tax act. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 2 reported judgments on this section are set out on this page, beginning with A&g Projects & Technologies LTD vs State of Karnataka (11 Dec 2008).
What should I read with Section 3 of the Central Sales Tax Act, and has it changed?
34 other provisions in this corpus refer back to it. The rules and notifications made under it are where it actually bites, and there are 4: most recently Central Sales Tax (Delhi) Amendment Rules, 2014. (2014), then Central Sales Tax(Delhi)AmendmentRules,2014 (2014), and 2 more.
When did Section 3 of the Central Sales Tax Act come into force?
Section 3 of the Central Sales Tax Act, cited as Central Sales Tax Act 3, came into force on 05 Jan 1957, having been enacted on 21 Oct 1956. It is in force as at the date shown on this page.
Other sections of this Act
- 7. Registration of dealers1541 words
- 2. Definitions1286 words
- 13. Power to make rules1029 words
- 8. Rates of tax on sales in the course of inter-State trade or commerce992 words
- 9. Levy and collection of tax and penalties807 words
- 6. Liability to tax on inter-State sales664 words
Source and method. Compiled from the enactments of Parliament and of the State legislatures as published on India Code, and republished together with commentary and other original matter under section 52(1)(q)(ii) of the Copyright Act, 1957. Structured, cross-referenced and maintained by eCourtsIndia. Text as in force on 15 Oct 2026. This page is not a substitute for legal advice.