Inter-State sale requires contractual movement across State lines; mere despatch at buyer's request is not enough.

A sale is inter-State only where the contract itself makes movement of goods from one State to another an integral and necessary part of performance; mere despatch across State borders at the buyer's instruction, or delivery of railway receipts, is insufficient unless the movement is stipulated by the bargain. On the stated facts, buyers could take delivery within the State or direct despatch to destinations inside or outside the State, so crossing the border was not an essential contractual term and the sales did not qualify as inter-State sales. The article also notes that, in any event, retrospective validation legislation removed the constitutional bar for the relevant period, so the sales were taxable and included in turnover.

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Issues: Whether the sales in question were sales in the course of inter-State trade or commerce so as to attract the exemption under Article 286(2) of the Constitution.

Analysis: A sale is inter-State only when the contract of sale itself makes the movement of goods from one State to another an integral and necessary part of performance. Mere despatch of goods across State borders at the buyer's instruction, or delivery of railway receipts, is not enough unless such movement is stipulated by the contract. On the facts, the buyers could take delivery within the State or direct despatch to destinations either within or outside the State, and the crossing of the State border was not an essential term of the bargain. The sales therefore did not qualify as inter-State sales. Even otherwise, inter-State sales during the relevant period were taxable because the parliamentary validation legislation lifted the constitutional ban retrospectively, and the State charging provision operated accordingly.

Conclusion: The sales were not protected by Article 286(2) and were rightly included in the taxable turnover; the answer to the reference was in favour of the Revenue.

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