Inter-State sale requires contractual nexus with movement of goods; bamboos and tendupatta transactions remained taxable under State law.

Sale of goods is inter-State only where movement from one State to another is occasioned by the contract itself, either by an express or implied covenant, or as an inseparable incident of the transaction. Mere buyer residence outside the State, exporter status, transit passes, or subsequent movement of the goods is insufficient. On the facts, the tender and purchase agreements for bamboos and tendupatta did not require or necessarily contemplate movement outside Madhya Pradesh, and the transit movement was independent of the sale. The transactions were therefore not inter-State sales under section 3(a) of the CST Act and remained taxable under State law.

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Issues: Whether the sale of bamboos and tendupatta under the tender and purchase agreements constituted an inter-State sale under section 3(a) of the Central Sales Tax Act, 1956, so as to exclude liability to State commercial tax or VAT.

Analysis: Inter-State sale requires that the sale or purchase occasions movement of goods from one State to another, and the movement must be the result of an express or implied covenant of the contract, or otherwise be an inseparable incident of the transaction. Mere residence of the purchaser outside the State, possession of exporter status, issuance of transit passes, or the fact that goods are ultimately transported to another State is not enough. The decisive enquiry is whether the agreement itself contemplates or necessarily involves inter-State movement as part of the same transaction. On the facts, the tender and purchase agreements for bamboos and tendupatta contained stipulations for payment of commercial tax, forest development cess, and other taxes as part of the purchase price, but they did not impose any express or implied obligation that the goods be moved outside Madhya Pradesh. The movement shown by transit passes and allied documents was therefore independent of the sale and not inseparably connected with it.

Conclusion: The sales of bamboos and tendupatta were not inter-State sales and remained taxable under the State law.

Ratio Decidendi: A sale is inter-State only when movement of goods from one State to another is occasioned by the contract of sale or is its inseparable incident; absent such contractual nexus, the transaction is taxable as an intra-State sale.

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