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Report No. 30

33. Contract must be between buyer and seller (State Trade Corporation case).- It is necessary to emphasise, though it seems to me obvious, that such a contract of sale must be between the seller and the buyer. Section 4 of the Sale of Goods Act, 1930 says that a contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price.

It is true that in 'State Trade Corporation of India Ltd. v. State of Mysore, [AIR 1963 SC 548: (1963) 3 SCR 792] and in Cement Marketing Company of India Ltd. v. State of Mysore', [AIR 1963 SC 980: (1963) 3 SCR 777], the contracts of sale were not directly between the buyers on the one hand and the sellers on the other.

In the first case, the contract of sale was between the buyer and the supplier, the Marketing Company. But it was admitted that the supplier made the sales to the buyers as the agent of the State Trade Corporation and the Marketing Company did not deny its liability to be taxed as such agent. In the course of its judgment the Supreme Court observed (AIR p. 550, para. 11):-

"Since the permits with which we are concerned provided that the supply had to be made from one or other factory situate outside Mysore, the contracts must be deemed to have contained a covenant that the goods should be supplied in Mysore from a place situate outside its borders. A sale under such a contract would clearly be an inter-State sale as defined in section 3(a) of the Central Sales Tax Act.".

Section 5 of the Central Sales Tax Act, 1956 - Taxation by the States of Sales in the Course of Import Back

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