Inter-State sale principle: goods moved under the sales contract were held to be inter-State transactions, not outside-State sales.

A sale is in the course of inter-State trade or commerce when the contract itself, or a necessary incident of it, requires movement of goods from one State to another; on the facts, the dealership arrangements made such movement integral to the bargain, so the transactions were inter-State sales. By contrast, sales are not outside a State merely because the goods are later escorted or received elsewhere; the decisive factor is where delivery and transfer of property actually occur. Here, delivery was effected in Bihar, so the sales were not outside the State. The disputed transactions were therefore treated as inter-State sales, subject to the validation period under the Sales Tax Laws Validation Act.

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Issues: (i) Whether the impugned sales of trucks, bus chassis and spare parts were sales outside the State of Bihar within Article 286(1)(a) of the Constitution of India. (ii) Whether the same sales were sales in the course of inter-State trade or commerce within Article 286(2) of the Constitution of India.

Issue (i): Whether the impugned sales of trucks, bus chassis and spare parts were sales outside the State of Bihar within Article 286(1)(a) of the Constitution of India.

Analysis: The decisive question was where delivery and transfer of property actually took place. The Court found that delivery was effected at Jamshedpur and that the subsequent escort, second receipt at an outside-State destination, and payment arrangements could not alter the legal character of the transaction. The explanation to Article 286(1)(a) applied only where both delivery and consumption were in the outside State, which was not established here.

Conclusion: The sales were not outside the State of Bihar and the assessee was not entitled to exemption on that ground.

Issue (ii): Whether the same sales were sales in the course of inter-State trade or commerce within Article 286(2) of the Constitution of India.

Analysis: The dealership agreements required the buyers to remove the goods from Bihar to assigned territories in other States, and the inter-State movement was an integral and contemplated part of the bargain. The Court applied the settled principle that a sale is in the course of inter-State trade when the contract of sale, or its necessary incident, occasions movement of goods from one State to another. On the facts, the movement was not merely subsequent conduct but part of the contract itself.

Conclusion: The sales were in the course of inter-State trade or commerce, but for the period protected by the Sales Tax Laws Validation Act they remained liable to Bihar sales tax.

Final Conclusion: The High Court was correct in holding that the disputed transactions were inter-State sales, and the State's challenge failed.

Ratio Decidendi: Where a contract of sale requires the buyer to remove goods from one State to another, and such movement is a necessary incident of the bargain, the sale is in the course of inter-State trade or commerce.

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