Inter-State sale characterization applies where sleeper supplies are linked to movement outside the State for railway use.

Sleeper supplies made under a pre-existing arrangement for railway use in Bihar were treated as inter-State sales because the contract linked the sale with movement of the goods outside Orissa. The physical delivery through State machinery did not break the nexus between the sale and the transport, so the transactions could not be characterised as independent local sales under the Orissa Sales Tax Act. The legal position noted was that such connected supplies are exigible to Central sales tax when the sale and movement form part of one integrated transaction.

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Issues: Whether the sale of sleepers supplied to the railway authorities constituted intra-State sale under the Orissa Sales Tax Act, or inter-State sale exigible to Central sales tax.

Analysis: The supply of sleepers was made pursuant to an arrangement which linked the purchase of the goods with their movement to Bihar for railway use. The facts showed a pre-existing contract and a clear nexus between the sale and the transport of the sleepers outside Orissa. On those facts, the transactions could not be treated as independent local sales merely because delivery took place through the State machinery. The earlier view that similar transactions were liable to Central sales tax was treated as correctly stating the law.

Conclusion: The transactions were exigible to Central sales tax and were not intra-State sales under the Orissa Sales Tax Act.

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