Inter-State sale principle applies where contract requires goods to move across State borders as part of the bargain.

Written contracts requiring manganese ore to be moved from Madhya Pradesh to destinations outside the State showed that inter-State movement was an integral term of the bargain, not a mere incident. On that basis, the sales fell within Section 3(a) of the Central Sales Tax Act, 1956, because the movement of goods from one State to another was caused by the contract of sale. The turnover was therefore treated as inter-State sales and was not liable to tax under the Madhya Pradesh General Sales Tax Act, 1958.

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Issues: Whether the disputed sales of manganese were inter-State sales or intra-State sales and, consequently, whether they were taxable under the Madhya Pradesh General Sales Tax Act, 1958.

Analysis: The sales were made under written contracts that required movement of manganese ore from Katangjhiri in Madhya Pradesh to destinations outside the State, namely Gondia and Vishakhapatnam Port. The contractual stipulations regarding despatch, delivery, and final payment showed that inter-State movement was not incidental but formed part of the bargain itself. Under Section 3 of the Central Sales Tax Act, 1956, a sale is in the course of inter-State trade or commerce when the movement of goods from one State to another is the result of a covenant or incident of the contract of sale. The constitutional scheme after the Sixth Amendment and the Central Sales Tax Act, 1956 supported that conclusion.

Conclusion: The disputed turnover represented inter-State sales of manganese and was not liable to tax under the Madhya Pradesh General Sales Tax Act, 1958; the reference was answered in favour of the assessee.

Ratio Decidendi: Where the movement of goods from one State to another is an integral term of the contract of sale, the sale is an inter-State sale within Section 3(a) of the Central Sales Tax Act, 1956.

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