Report No. 30

32. Test of contract.- Thus in the cases of inter-State sales which arose before the enactment of the Central Sales Tax Act, 1956, the Supreme Court had adopted the same test for determining when a sale took place in the course of inter-State trade or commerce, as was later adopted in construing section 3(a) of the Act, for the same purpose. The test wa.-as indeed it is under the Act-whether the contract of sale contained a covenant or whether it is an incident of such contract and whether as a result of such covenant or incident there was movement of the goods from one State to another.

Where a dealer in A State agrees to sell goods to another in B State and undertakes as part of that contract to deliver the goods to the purchaser in the B State and the goods are transported from A State to B State, whatever be the means of transport-air, road or rail-, the transaction viewed as a whole is an inter-State sale or purchase. The movement of goods from one State to another in a contract of inter-State sale is the necessary result of the covenant or incident of the contract as otherwise the contract cannot be fulfilled or performed.