Inter-State sales arise when goods move on prior direct orders and the consignee has no power to divert delivery.

Transactions are inter-State sales where goods move from outside the State pursuant to prior orders placed directly with the seller, even if a local representative takes delivery and distributes them. Here, the paper mills manufactured against specific indents, separately packed and billed the goods, consigned them only for delivery to the named purchasers, and retained direct debit arrangements with the buyers. Because the consignee had no discretion to divert the goods to others, direct privity existed between seller and purchaser. The court therefore treated the movement as part of inter-State trade and rejected local sale treatment under the Madras General Sales Tax Act.

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Issues: Whether the transactions in question were inter-State sales and therefore not liable to tax as local sales under the Madras General Sales Tax Act.

Analysis: The respondents were sole selling representatives of the paper mills, but the dealers in the State placed orders directly with the paper mills, through the respondents. The goods were manufactured against those indents, separately packed with distinctive marks, separately billed, and consigned to the respondents only for delivery to the concerned purchasers. The paper mills debited the purchasers directly, and the respondents had no discretion to divert the goods to anyone else. These features established direct privity between the mills and the purchasers and showed that the movement of goods from outside the State was in pursuance of prior orders.

Conclusion: The transactions were inter-State sales and could not be taxed as local sales under the Madras General Sales Tax Act; the Tribunal's view was and the revenue's challenge failed.

Final Conclusion: The common challenge to the Tribunal's orders was rejected, and the assessments based on local sale treatment were not sustained.

Ratio Decidendi: Where goods move from outside the State pursuant to prior orders placed directly with the seller, and the consignee merely takes delivery and distributes them without liberty to divert the goods, the transactions are inter-State sales rather than local sales.

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