Inter-State sale cannot be treated as inside-State sale; outside-State resale of declared tax-free purchases attracts tax liability.

A sale in the course of inter-State trade cannot be treated as an inside-State sale under the Orissa Sales Tax Act, because such a transaction necessarily involves movement of goods from one State to another under the contract. Where a registered dealer purchases goods on the declared footing of resale within Orissa but instead resells them outside the State, the proviso to section 5(2)(A)(a)(ii) applies and tax liability arises. The burden of proving compliance with the declared intra-State resale purpose rests on the assessee, not the taxing authority.

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Issues: Whether sales effected in the course of inter-State trade and commerce could be treated as sales inside the State under section 2(g) of the Orissa Sales Tax Act, 1947, and whether the proviso to section 5(2)(A)(a)(ii) was attracted when the purchasing dealer resold the goods outside the State contrary to the declaration given for resale within Orissa.

Analysis: The statutory scheme allowed a registered dealer to purchase goods without tax on the footing that they would be resold within Orissa, with the tax deferred to the stage contemplated by the Act. The assessee, however, resold the goods in the course of inter-State trade and commerce. A sale in inter-State trade necessarily involves movement of goods from one State to another under the contract, and such a sale cannot at the same time be characterised as a sale inside Orissa under section 2(g). Once the assessee departed from the declared purpose of resale within the State, the proviso to section 5(2)(A)(a)(ii) directly applied and the tax liability arose. The burden of showing compliance with the declared intra-State resale was on the assessee, not on the taxing authority.

Conclusion: The question was answered against the assessee. Inter-State sales could not be treated as sales inside the State, and the proviso to section 5(2)(A)(a)(ii) was rightly attracted.

Ratio Decidendi: A sale in the course of inter-State trade cannot simultaneously be treated as a sale inside the State for the purposes of the Orissa Sales Tax Act, and resale of tax-free purchases outside the declared State purpose attracts the proviso imposing tax liability.

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