( 1. ) THE respondent in this appeal is a company incorporated under the Indian Companies Act. The respondent carries on the business of manufacturing paper. The respondents paper mills are situated at Raniganj in the State of West Bengal. The respondent obtained a forest contract on 8th May, 1968, for extraction of bamboos from the forests situated in the Bilaspur, Raigarh and North Surguja Forest Divisions of the State of Madhya Pradesh. The contract is for a period of 12 years commencing from 16th October, 1968, and ending on 30th June, 1980. Between 1968 and 1971, the appellant-State recovered from the respondent diverse sums of money aggregating Rs. 1,70,786. 48 on account of sales tax alleged to be payable under the Madhya Pradesh General Sales Tax Act, 1958, in respect of bamboos felled and removed by the respondent from the forests in Madhya Pradesh to its mills at Raniganj in West Bengal. The respondent also paid a sum of Rs. 1,385. 56 on account of sales tax in respect of bamboos and/or timber utilised by the respondent for constructing huts for the labourers employed in the said forests and for providing them with fuel. The respondent instituted the suit out of which this appeal arises on 3rd March, 1972, claiming that the aforesaid sums as sales tax were paid under a mistaken belief that the same were lawfully payable to the appellant-State as part of price under the contract. The respondent contended that on a true construction of the contract dated 8th May, 1968, there was no sale of bamboos by the appellant-State to the respondent. In the alternative, the respondent pleaded that the sales were in the course of inter-State trade and commerce and were not liable to tax under the Madhya Pradesh General Sales Tax Act. It was also pleaded that the State was not a dealer either under the Madhya Pradesh Act or under the Central Sales Tax Act, 1956. The respondent prayed for recovery of Rs. 1,72,172. 01 paid as sales tax to the appellant-State.

( 2. ) THE District Judge, Bhopal, who tried the suit, by his judgment and decree dated 10th April, 1974, held that the contract in its true sense was a contract for sale of bamboos; that the sales were inter-State sales; that the State was not a dealer under the Central Sales Tax Act; and that the State was not entitled to recover any sales tax from the respondent. The respondents suit was decreed on these findings. It is against this decree that the present appeal has been filed by the State and its officers who were defendants in the trial court.

( 3. ) THE question whether the contract resulted in sales of bamboos by the State to the respondent is concluded against the respondent by the decision of the Supreme Court in State of M. P. v. Orient Paper Mills A. I. R. 1977 S. C. 687. In that case, a similar contract between the State and the Orient Paper Mills for extraction of bamboos was construed by the Supreme Court and it was held that the contract resulted in sale of bamboos. Following that decision, we affirm the finding reached by the trial court. The Learned Counsel for the respondent tried to distinguish the case of the Orient Paper Mills A. I. R. 1977 S. C. 687 on the ground that there was some difference between the contract considered in that case and the contract before us. We do not, however, find any substantial difference between the two contracts and we do not accept the contention that the Orient Paper Mills case A. I. R. 1977 S. C. 687 is not applicable.

( 4. ) THE next question is whether the sales of bamboos arising under the contract are inter-State sales or intra-State sales. We have earlier stated that the respondents paper mills are situated at Raniganj in West Bengal. Under clause 4 of the contract, it is specifically provided that the forest produce extracted by the respondent shall be used only for the purpose of manufacturing paper at the respondents paper mills situated at Raniganj in Burdwan district of West Bengal and shall not be used or p