The main legal point established in the judgment is that for an inter-State sale to occur under the Central Sales Tax Act, there must be a covenant in the contract of sale or an incident of the contract that results in the movement of goods from one state to another.

S. R. RAJASEKHARA MURTHY, J.

( 1 ) THE petitioner is an undertaking of the Kerala State Government and a company registered under the Companies Act, 1956 (the Act ). The petitioner entered into agreements with the suppliers of cement from Taiwan and South Korea for the importation of cement. A shipment of cement which was due to be berthed in Cochin had to be diverted to the Mangalore port on account of congestion in Cochin port and adequate berthing place was not available there.

( 2 ) THE cement meant for the petitioner was unloaded in Mangalore port on account of supervening circumstances and the exigencies mentioned above. The said cement imported was meant for sale by the petitioner-company in kerala. Even before the consignment left Taiwan and south Korea, the buyers in kerala had placed orders with the petitioner for supply of cement and had made payments in advance also. After the cement was unloaded in Mangalore port, a part of the consignment was transported in trucks to Kerala and a part of the consignment was sent to the depots of the petitioner situated at various places in Kerala and part of the consignment was dispatched direct to its customers in Kerala. Such dispatches made to the customers directly from the Mangalore port to various places in Kerala where the customers were evidenced by dispatch orders. A few samples of the orders placed by the customers in Kerala are produced along with the writ petitions.

( 3 ) THE petitioner has an office in Mangalore and is a registered dealer under the Karnataka Sales tax Act, 1957 (the Act), but has not registered under the Central Sales Tax Act, 1956, in mangalore.

( 4 ) THE petitioner had filed returns before the respondent for the years ending March 31, 1983 and march 31, 1984. A notice was issued to the petitioner on December 29, 1987, calling upon the petitioner to file returns under the Central Sales Tax Act. In continuation of the said notice, two proposition notices, as per annexure F and G, were issued by the respondent on February 17, 1988, proposing to conclude the assessments under the Central Sales Tax Act for the years ending March 31, 1983 and March 31, 1984. In these show cause notices it was proposed to conclude the assessments against the petitioner under the Central Sales Tax Act in respect of the inter-State sales of cement effected by the petitioner out of the consignment cleared from the vessel - "katan-Keerthi" on several dates during the two accounting years. These proposition notices are challenged by the petitioner in these writ petitions.

( 5 ) THE case of the department is that the petitioner effected sales of cement from Mangalore to its customers in Kerala pursuant to the orders placed by its customers in Kerala. These sales constituted inter-State sales, according to the department, and the movement of cement from mangalore to various places in Kerala State was pursuant to contract entered into by the petitioner with its customers in order to fulfil the prior orders. It was, therefore, proposed to subject the said inter-State sales to tax under the Central Sales Tax Act. The reason set out in the show cause notices is reproduced below : "you have effected import of cement from foreign countries and obtained delivery thereof at mangalore port. It is seen from the despatch sheets maintained by you that you have entered into contract with various consumers and dealers of Kerala State for supply of cement. To comply with these orders you have effected import of cement from foreign countries and taken delivery of the same at Mangalore port. Thereafter, to comply with your orders, you have effected transportation of cement from Mangalore port to various consumers as well as dealers. Such transaction constitutes inter-State sale of cement under section 3 (a) of the Central Sales Tax Act, 1956, inasmuch as the movement of goods from Mangalore to Kerala State is directly as a consequence of and to comply with your prior orders. This view is su

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