Purchase tax on penultimate export sale: "sale in the State" under Karnataka law is confined to local sales.

Purchase tax under section 6 of the Karnataka Sales Tax Act applies where taxable goods are bought from unregistered dealers and are later dealt with otherwise than by a local sale in the State. A sale in the course of export under section 5(3) of the Central Sales Tax Act is not an intra-State sale or an inter-State sale, so the phrase "sale in the State" in section 6 is confined to local sales. On that footing, fish oil bought as a penultimate export sale attracted purchase tax because the subsequent despatch outside the State fell within section 6, and the contrary view of the High Court was rejected.

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Issues: Whether purchase tax was leviable under section 6 of the Karnataka Sales Tax Act, 1957 on fish oil purchased from unregistered dealers and sold as the penultimate sale preceding export under section 5(3) of the Central Sales Tax Act, 1956.

Analysis: Section 6 of the Karnataka Sales Tax Act levies purchase tax where taxable goods are purchased in circumstances in which no tax is leviable on the sale price and the dealer thereafter consumes the goods, disposes of them otherwise than by sale in the State, or despatches them outside the State except as a direct result of inter-State trade or commerce. The Court held that a sale in the course of export under section 5(3) of the Central Sales Tax Act is neither an intra-State sale nor a sale in the course of inter-State trade or commerce. The expression "sale in the State" in section 6 refers only to a local or intra-State sale. Since the respondent's sale to the buyer for export was a penultimate export sale, the subsequent despatch of the goods outside the State fell within the mischief of section 6 and did not fall within the exemption recognized by the High Court.

Conclusion: Purchase tax was payable under section 6 of the Karnataka Sales Tax Act, 1957 and the contrary view of the High Court was incorrect.

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