Inter-State sale requires contractual movement of goods across States; later despatch after local purchase does not create immunity.

A sale or purchase is in the course of inter-State trade or commerce only when the contract itself contemplates or necessarily involves movement of goods from one State to another. Purchases of arecanut made within the State through commission agents were treated as completed local transactions because no contractual term required interstate transport. Subsequent despatch outside the State was merely an incident after purchase and did not convert the transactions into inter-State sales. The Court rejected the view that commercial flow or the normal course of trade alone is sufficient to attract constitutional immunity under Article 286(2), and held the turnover taxable.

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Issues: Whether purchases of arecanut made within the State through commission agents, followed by despatch outside the State, amounted to transactions in the course of inter-State trade or commerce so as to attract the constitutional immunity under Article 286(2).

Analysis: The constitutional expression was treated as requiring more than a mere factual movement of goods across State boundaries. The decisive element was whether the contract of sale itself contemplated or necessarily involved such movement. In the absence of any term in the contract requiring transport across the State frontier, the purchases were viewed as completed local transactions, with subsequent despatch outside the State being only an incident after purchase. The Court declined to read earlier authorities as laying down that commercial flow or the normal course of trade alone was enough to convert a completed intra-State purchase into an inter-State sale.

Conclusion: The transactions were not in the course of inter-State trade or commerce and were not exempt under Article 286(2).

Final Conclusion: The petition failed because the impugned turnover was held taxable as the purchases were completed within the State and the later movement of goods did not alter their character.

Ratio Decidendi: A sale or purchase is in the course of inter-State trade or commerce only when the contract of sale contemplates or necessarily involves movement of goods from one State to another; subsequent despatch after a completed local purchase does not by itself attract constitutional immunity.

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