Contract-linked fuel supply was held to be an intra-State first sale, with the Government treated as a dealer.

Government supply of petrol and diesel to a contractor was not an inter-State sale because the contract did not require the State to procure or move the fuel from outside the State. The movement of goods from Pollachi to Pothundi arose from the Government's own purchase arrangements, not from any contractual necessity with the contractor. On that basis, the supply was treated as a first sale within the State and liable to sales tax. The Government was also regarded as a dealer because supplying fuel to contractors constituted an adventure in the nature of trade or business, so it was entitled to collect the tax.

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Issues: Whether the Government's supply of petrol and diesel oil to the contractor was an inter-State sale outside the State's taxing power, or a first sale in the State liable to sales tax; and whether the Government could be treated as a dealer for the purpose of collecting the tax.

Analysis: The decisive question was whether the movement of petrol and diesel oil from Pollachi to Pothundi was occasioned by the contract with the contractor. A sale falls within inter-State trade only when the contract itself occasions the movement of goods from one State to another. Here, the contractor had only an option to purchase fuel from the departmental pump, and there was no contractual obligation requiring the Government to procure the fuel from outside the State or to transport it for the contractor. The inter-State movement resulted from the Government's own purchase arrangements with its supplier and not from any necessary incident of the contract with the contractor. On the statutory definitions, the Government could be a dealer if it carried on an adventure in the nature of trade or business, and the supply of fuel to contractors constituted such activity.

Conclusion: The supply to the contractor was not an inter-State sale under the contract; it was a first sale in the State and was liable to sales tax. The Government was a dealer entitled to collect the tax, and the challenge to the recovery failed.

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