Inter-State sale characterization depends on movement of goods and transfer of title during transit, not local sale treatment.

Sales of foodgrains were held to be inter-State sales where the goods were despatched outside U.P. at the instance of U.P. buyers, the railway receipts initially stood in the dealer's name, and title was later endorsed during movement. The contract was linked to the movement of goods across State boundaries, and the transfer of title occurred while the goods were in transit. On those facts, the transactions fell within the statutory concept of inter-State sale and not local sale within U.P., so the sales were taxable as inter-State sales.

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Issues: Whether the sales effected by the assessee were inter-State sales liable to tax as such, or local sales within U.P.

Analysis: The sales arose from transactions in which foodgrains were despatched outside U.P. at the instance of U.P. buyers, railway receipts stood in the dealer's name, and were later endorsed in favour of the buyers. On these facts, the sale contract was connected with the movement of goods outside the State, and the title was also dealt with while the goods were in movement. Such transactions fell within the statutory concept of inter-State sale rather than a local sale.

Conclusion: The sales were inter-State sales and were taxable accordingly; the answer was against the assessee and in favour of the department.

Ratio Decidendi: Where goods are despatched pursuant to a contract with an out-of-State movement and the title is transferred during such movement, the sale is an inter-State sale and not a local sale.

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