2026 Supreme(SC) 539
SUPREME COURT OF INDIA
J.K. MAHESHWARI, ATUL S. CHANDURKAR, JJ.
State of Uttar Pradesh and Others – Appellants
Versus
Reliance Industries Limited and Others – Respondents
Civil Appeal No. 3910 of 2016
WITH
State of Uttar Pradesh and Others – Appellants
Versus
M/s. Tata Chemicals Ltd. and Others – Respondents
Civil Appeal No. 3913 of 2016
WITH
State of Uttar Pradesh and Others – Appellants
Versus
M/s. Kribhco Shyam Fertilizers Ltd. and Others – Respondents
Civil Appeal No. 3914 of 2016
WITH
State of Uttar Pradesh and Others – Appellants
Versus
Indian Farmers Fertilizers Cooperative Ltd. and Others – Respondents
Civil Appeal No. 3915 of 2016
Decided On : 15-05-2026
Advocates appeared:
For the Appellant(s) : Mr. Dinesh Dwivedi, Sr. Adv. Mr. Bhakti Vardhan Singh, AOR Mr. Vikas Singh Jangra, Adv. Mr. Nishant Singh, Adv. Mr. Narendra Pandey, Adv. Mr. Sauvik Singh, Adv. Mr. J Tarun Kumar, Adv. Mr. Ankit Khatri, Adv.
For the Respondent(s): Dr. Abhishek Manu Singhvi, Sr. Adv. Mr. K.R. Sasiprabhu, AOR Mr. Shubhranshu Padhi, Adv. Mr. Ashwin M. Dave, Adv. Mr. Ketan Dave, Adv. Mr. Rishit Badiani, Adv. Mr. Avishkar Singhvi, Adv. Mr. Vishnu Sharma A.S., Adv. Mr. Nidhiram Sharma, Adv. Mr. Pranav Giri, Adv. Mr. Yashrath Misra, adv. Mr. tushar Bhardwaj, Adv. Mr. Naveen Kumar, AOR Ms. Nidhi Mohan Parashar, AOR Mr. Shailendra Swarup, AOR Mr. Kavin Gulati, Sr. Adv. Ms. Ruby Singh Ahuja, Adv. Ms. Ravneet Kaur Malik, Adv. Mr. Devang Kumar, Adv. Mr. Abhyuday Mishra, Adv. M/S. Karanjawala & Co., AOR Dr. N. Visakamurthy, AOR Ms. Devina Sehgal, AOR Mr. Sahil Bhalaik, AOR
A contract of sale that occasions movement of goods from one State to another constitutes an inter-state sale under CST provisions; situs remains fixed at delivery point irrespective of later co-mingling or processing.
Headnote:(A) Constitution of India - Articles 269, 286, 246, 265, Entry 54 List II, Entry 92A List I - Central Sales Tax Act, 1956 - Sections 3, 4, 7 - Uttar Pradesh Value Added Tax Act, 2008 - Section 7 - Sale of goods - Inter-state sale - When sale occasions movement of goods from one State to another - Delivery point fixes situs - Common carrier pipeline and co-mingling do not alter character (Paras 61-72, 83-85).
(B) Taxation - Constitutional competence - State Legislature cannot tax inter-state sales or purchases - Section 4 CST subject to Section 3 - Clarificatory Explanation added by amendment applies retrospectively (Paras 34-37, 63-66).
Facts of the case:
Extracted goods are delivered at designated terminal in originating State under concluded contract and transported via common pipelines across multiple States to facilities in destination State; local assessment orders levied tax treating transaction as intra-state due to unascertained nature after co-mingling.
Findings of Court:
Contract occasions inter-state movement with title and risk passing at delivery terminal; subsequent transportation, processing and re-metering are incidental; origin State alone competent under CST framework; impugned assessment quashed.
Issues: Whether transaction constitutes inter-state sale under statutory test of movement occasioned by contract; whether destination State possesses jurisdiction to impose local tax.
Ratio Decidendi: Sale effected by contract that directly causes goods to move from one State to another is inter-state irrespective of place where property passes or later co-mingling; subsequent incidents of carriage cannot relocate situs or create fresh taxing power.
Result: Appeals dismissed.
Judgement Key Points
- Key Points:
- The judgment holds that a contract of sale that occasions movement of goods from one state to another constitutes an inter-state sale under CST, with situs fixed at delivery point irrespective of co-mingling or processing (!) (!) (!) (!) .
- It declares origin state (Uttar Pradesh) as the competent authority to levy CST/VAT on inter-state gas sale, and quashes intra-state taxation (!) (!) (!) (!) (!) .
- It analyzes the clarificatory nature of Explanation 3 to Section 3 of CST Act, holding it clarifies preexisting law and is retrospective unless expressly stated otherwise; it applies to the discussed transactions, not creating new rights (!) (!) (!) (!) .
What is inter-state sale under CST Act and how does movement of goods affect situs?
What is the competent taxing authority for inter-state gas transactions under CST Act and VAT Act?
What is the effect of Explanation 3 to Section 3 of CST Act (2016) on the retroactive application to pre-2016 transactions?
| Table of Content |
|---|
| 1. federal structure and free inter-state trade under constitution (Para 1 , 2 , 3) |
| 2. facts of nelp, psc, gspa, gta and assessment history (Para 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20) |
| 3. state argues sale ascertained only in uttar pradesh as intra-state (Para 21) |
| 4. respondent argues transaction is inter-state sale under cst section 3 (Para 22 , 23) |
| 5. constitutional division of taxing powers and federalism limits (Para 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43 , 44 , 45 , 46 , 47 , 48 , 49 , 50 , 51 , 52 , 53 , 54 , 55 , 56 , 57) |
| 6. cst act sections 3 and 4 interplay; explanation 3 is clarificatory (Para 58 , 59 , 60 , 61 , 62 , 63 , 64 , 65 , 66 , 67 , 68 , 69 , 70 , 71 , 72 , 73 , 74 , 75 , 76) |
| 7. transaction is inter-state sale; state of up lacks vat jurisdiction (Para 77 , 78 , 79 , 80 , 81 , 82 , 83 , 84 , 85 , 86 , 87 , 88 , 89 , 90) |
JUDGMENT :
J.K. MAHESHWARI, J.
CIVIL APPEAL NO. 3910 OF 2016
1. India is a Union of States. Reality is that all States are not endowed equally. There is stark disparity in the economic scenario among various States in India. Each State has its unique contributions and products. It is the free flow of trade and commerce that seeks to nullify some effects of inequality with just exceptions. But for the Union, generally it is observed that federating units would want to cut corners by instituting protectionist measures to augment their resources over others. It is in this context that the framers of the Constitution have laid down a road map to ensure that the Union Government takes over fiscal policies touching upon inter-state or international trade and commerce. This avowed purpose, we are here to secure.
2. On the same lines, Alexander Hamilton, one of the founding fathers of the United States of America, in his Federalist Paper No. 11 (1787), recounts the benefits of free trade:
“An unrestrained intercourse between the States themselves will advance the trade of each by an interchange of their respective productions, not only for the supply of reciprocal wants at home, but for exportation to foreign markets. The veins of commerce in every part will be replenished, and will acquire additional motion and vigor from a free circulation of the commodities of every part. Commercial enterprise will have much greater scope, from the diversity in the productions of different States. When the staple of one fails from a bad harvest or unproductive crop, it can call to its aid the staple of another. The variety, not less than the value, of products for exportation contributes to the activity of foreign commerce. It can be conducted upon much better terms with a large number of materials of a given value than with a small number of materials of the same value; arising from the competitions of trade and from the fluctuations of markets. Particular articles may be in great demand at certain periods, and unsalable at others; but if there be a variety of articles, it can scarcely happen that they should all be at one time in the latter predicament, and on this account the operations of the merchant would be less liable to any considerable obstruction or stagnation. The speculative trader will at once perceive the force of these observations, and will acknowledge that the aggregate balance of the commerce of the United States would bid fair to be much more favorable than that of the thirteen States without union or with partial unions.It may perhaps be replied to this, that whether the States are united or disunited, there would still be an intimate intercourse between them which would answer the same ends; but this intercourse would be fettered, interrupted, and narrowed by a multiplicity of causes, which in the course of these papers have been amply detailed. A unity of commercial, as well as political, interests, can only result from a unity of government.”
3. This Appeal is filed against the impugned or
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