Inter-State sale principle governs when goods move across States under contract, excluding intra-State VAT treatment.

Movement of goods from Meghalaya to Mizoram pursuant to supply orders placed at the supplier's Guwahati office was treated as an inter-State sale because the contract occasioned movement of goods from one State to another. The presence of dispatch from Barapani to Aizawl, without any local office or local purchase in Mizoram, supported the inter-State character of the transaction. A separate stipulation that VAT would be paid did not alter statutory liability. On that basis, Mizoram VAT could not be levied and the show-cause notice was unsustainable.

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Issues: Whether the supply of goods from Meghalaya to Mizoram pursuant to the supply orders constituted an inter-State sale under section 3(a) of the Central Sales Tax Act, 1956 and, if so, whether the petitioner was liable to pay Mizoram VAT or the impugned show-cause notice was unsustainable.

Analysis: The supply orders were placed at the petitioner's registered office at Guwahati, and the goods were manufactured and dispatched from Barapani in Meghalaya to Aizawl in Mizoram. The material on record showed movement of goods from one State to another pursuant to the contract, bringing the transaction within section 3(a) of the Central Sales Tax Act, 1956. The facts did not show any office of the petitioner in Mizoram or any local purchase within Mizoram so as to characterise the transaction as intra-State. The mere stipulation in the supply order that MVAT would be paid separately did not determine statutory liability.

Conclusion: The transaction was an inter-State sale and the petitioner was not liable to pay Mizoram VAT; the show-cause notice could not be sustained.

Ratio Decidendi: Where a sale occasions movement of goods from one State to another, the transaction is an inter-State sale under section 3(a) of the Central Sales Tax Act, 1956 and cannot be subjected to State VAT as an intra-State sale.

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