Assessee, a joint venture company between Russia and India, had been established for purpose of design, development, production and sale of Brahmos Cruise Missile weapon system. The Indian Armed Forces awarded contract to the assessee for manufacture and supply of Brahmos Cruise Missiles.
A manufacturing unit of the assessee had been set up at Hyderabad. The missiles manufactured at Hyderabad unit were sent to Nagpur unit for the purpose of integration of warhead. Subsequently such missiles were dispatched to the Indian Armed Forces from Nagpur as directed by the Hyderabad office.The assessee treated the said transactions as inter-state sales of Missiles affected from its Hyderabad unit and, accordingly, charged and collected CST and paid the same to its assessing authority at Hyderabad. The State of Maharashtra demanded tax from assessee on the ground that was a local sale affected from Nagpur and hence State VAT would be levied.
The High Court held as under:
It denied the demand of Maharashtra VAT department and held that the sale of missile occur from the Hyderabad and not from the Nagpur. There was branch transfer of missile between Nagpur and Hyderabad for their War head integration. The Nagpur would not be treated as a place from where sale occasioned first for delivery.