The judgment establishes the conditions for a sale to be considered in the course of inter-State trade or commerce as per Art.286(2) of the Constitution and relevant legal commentaries.

1. The petitioner, the Kerala Arecanut Company, Kokala, Trichur, is a registered firm consisting of three partners. The 1st respondent is the State of Travancore-Cochin, and the 2nd, the Sales Tax Officer, First Circle, Trichur.

2. Art.286(2) of the Constitution as it stood before the Sixth Amendment (excluding the proviso) read as follows:-

"Except in so far as Parliament may by law otherwise provide, no law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of any goods where such sale or purchase takes place in the course of inter-State trade or commerce".

and the contention urged on behalf of the petitioner is that the transaction with which we are concerned took place "in the course of inter-State trade or commerce" and are as a result exempt from taxation under the Travancore-Cochin General Sales Tax Act, 1125.

3. The assessment order impugned is Ext. C, an order of the 2nd respondent dated 24-11-1955. The order is not challenged on any ground other than the one mentioned above and it is hence unnecessary to consider any of the provisions of the Travancore-Cochin General Sales Tax Act, 1125, or the Travancore-Cochin General Sales Tax Rules, 1950, except to point out that under R.4 (2) (c) of the said rules the gross turnover of a dealer in arecanuts is the amount for which the goods are bought by him and that R.5 A provides:

"The tax shall be levied on the turnover of arecanuts under S.3, sub-section (1) when purchased by a person who in the State is the last dealer in such goods liable to tax and who is not exempt from taxation under the Act. Provided that the burden of proving that a transaction is riot liable for taxation under this rule shall be on the dealer".

4. No Parliamentary legislation as contemplated by the opening words of Art.286 (2) or any Presidential Order in pursuance of the proviso thereto also arises for consideration.

5. The petitioner acts as a commission agent both for the sellers and purchasers of arecanut. It is agreed that the following averments in the affidavit filed by the 2nd respondent may be taken as a correct description of the course of dealing in respect of the purchases effected by the petitioner on behalf of its non-resident principals:

"They (the petitioner firm) are commission agents with authority to purchase on behalf of their non-resident constituents. The statement that the non-resident purchasers or their representatives fix the price and directly purchase from the owners is wrong. The price is fixed and the purchase is made by the petitioners on behalf of the non-resident constituents. The petitioners also pay the price on behalf of the non-resident constituents. After the purchase, the petitioners take signed memos from the constituents confirming the purchase. Subsequently the goods are despatched to the purchasers by the petitioner. The bills sent to the purchasers contain the amounts spent by the petitioners on account of packing, postage, and other incidental and customary charges". (paragraph 2)

6. It is not contended that transportation across the State frontier is a term of the contracts of sale and the question for determination is whether in the absence of such a term the purchases can be considered as purchases which took place "in the course of inter-State trade or commerce". We take the view that they cannot be so considered and that the law on the subject is as laid down by Venkatarama Ayyar, J., in his dissenting judgment in (1955) VI S. T. C. 446:

"A sale could be said to be in the course of inter-State trade only if two conditions concur: (1) A sale of goods, and (2) a transport of those goods from one State to another under the contract of sale. Unless both these conditions are satisfied, there can be no sale in the course of inter-State trade. Thus, if X, a merchant in State A goes to State B, purchases goods there and transports them into A, there is undoubtedly a movement of goods in inter-State commerce. But that is n