Export sale remains tax-exempt, but misuse of resale declaration for pre-existing export contracts breaches the statutory undertaking.

A dealer breaches a resale declaration when goods are obtained on the footing of intra-State resale but are in fact purchased to fulfil pre-existing export contracts; the proviso to the relevant Orissa sales tax provision is therefore attracted. A sale remains in the course of export where it forms part of an integrated export transaction beginning with the foreign buyer's contract and ending with export delivery, and it is not split into a local sale merely because delivery occurs at an inland port; that sale is outside State taxing power. The export-sale protection was upheld, while the misdeclaration issue was decided against the assessee.

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Issues: (i) Whether the assessee contravened the declaration furnished under rule 27(2) of the Orissa Sales Tax Rules by purchasing goods on the footing that they would be resold within the State; (ii) Whether the sale to the foreign buyer was protected as a sale in the course of export under article 286(1)(b) of the Constitution read with section 5 of the Central Sales Tax Act.

Issue (i): Whether the assessee contravened the declaration furnished under rule 27(2) of the Orissa Sales Tax Rules by purchasing goods on the footing that they would be resold within the State.

Analysis: The purchasing dealer had obtained the goods on declarations that they would be resold within Orissa, but the goods were in fact acquired to fulfil pre-existing export contracts with foreign buyers. The declaration concealed the true purpose of the purchases and the existence of the export commitment. Where goods are obtained against such a declaration but are diverted for export pursuant to a prior arrangement, the undertaking to resell within the State is breached and the statutory proviso is attracted.

Conclusion: The declaration was contravened and the proviso to section 5(2)(A)(a)(ii) of the Orissa Sales Tax Act was attracted.

Issue (ii): Whether the sale to the foreign buyer was protected as a sale in the course of export under article 286(1)(b) of the Constitution read with section 5 of the Central Sales Tax Act.

Analysis: A sale in the course of export is part of an integrated transaction beginning with the agreement with the foreign buyer and ending with the export delivery. Such a sale cannot be split into a local sale merely because delivery or appropriation takes place at an inland port. The export sale remained in the course of export and was therefore outside the taxing power of the State.

Conclusion: The sale to the foreign buyer was protected as a sale in the course of export and was not exigible to sales tax.

Final Conclusion: The export-sale issue was decided in favour of the assessee, but the misdeclaration issue was decided against it, leaving the State's appeals successful only to the extent of the declaration contravention and the resulting liability.

Ratio Decidendi: A dealer who obtains goods on a declaration that they are meant for resale within the State but actually purchases them to satisfy a pre-existing export contract contravenes the declaration, even though the subsequent foreign sale remains exempt as a sale in the course of export.

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