Inter-State sale test turns on contractual movement of goods; post-sale transport alone does not defeat sales tax liability.

A sale is inter-State only where the contract itself requires movement of goods from one State to another, or where out-of-State delivery is an integral term of the bargain; mere post-sale transport across State borders is insufficient. Applying that principle, the coal transactions were held not to be inter-State sales because no express or implied term required delivery outside the State, the sellers' obligation ended when the coal was put on rail at the collieries, and later despatches followed buyers' rail-head instructions. Clause 10-A of the Colliery Control Order, 1945, did not change the character of the sales, and section 3 of the Central Sales Tax Act, 1956 reflected the same test. The Article 286 protection therefore did not apply, and the transactions remained liable to sales tax.

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Issues: Whether the disputed coal transactions were sales in the course of inter-State trade or commerce so as to attract the protection of Article 286 of the Constitution and escape sales tax under the Hyderabad General Sales Tax Act.

Analysis: The governing principle was that a sale becomes inter-State only when the contract itself contemplates movement of the goods from one State to another, or when delivery outside the State is an integral term of the bargain. Mere transport of goods across State borders after the sale is completed does not suffice. On the facts, no express or implied contractual term required delivery outside the State. The coal was allotted under a controlled scheme, price was paid in advance, and the sellers' obligation ended when the goods were put on rail at the collieries. The buyers' rail-head instructions showed that despatches outside the State were made pursuant to the buyers' requests and not as a contractual incident of sale. Clause 10-A of the Colliery Control Order, 1945, did not alter the character of the transactions, because the seller had already completed delivery and the controller's power of diversion operated on coal already in transit. Section 3 of the Central Sales Tax Act, 1956, also did not assist the petitioners, as it adopts the same principle that the movement must be occasioned by the sale itself.

Conclusion: The transactions were not inter-State sales and were liable to sales tax. The contention based on Article 286 failed.

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