Export sale exemption depends on passage of property after the customs barrier, while certificate-based purchase tax relief fails if despatch conditions are not met.

F.O.B. sales were treated as sales in the course of export where property passed only after the goods entered the export stream, crossed the customs barrier, and remained subject to the seller's reserved right of disposal until payment and presentation of shipping documents; on that basis, the transactions were exempt from tax under Article 286(1)(b). Purchases under the Bombay Sales Tax Act were held liable to purchase tax where the statutory certificate-based despatch condition was not fulfilled in substance, because the goods were not despatched by the appellants in the manner required by the scheme of sections 8(b) and 10(b). The result was exemption for export sales, but liability for purchase tax remained.

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Issues: (i) Whether the sales effected under the F.O.B. contracts were sales in the course of export and exempt under Article 286(1)(b) of the Constitution of India; (ii) Whether the purchases made by the appellants were liable to purchase tax under section 10(b) of the Bombay Sales Tax Act, 1953.

Issue (i): Whether the sales effected under the F.O.B. contracts were sales in the course of export and exempt under Article 286(1)(b) of the Constitution of India.

Analysis: A sale is protected by the constitutional exemption only when it takes place after the goods have entered the export stream and have crossed the customs barrier, so that the transaction is part of the export movement and not merely preparatory to it. On the contract terms, payment was against presentation of shipping documents and the goods were to move under the buyers' export licence. The decisive question was when property passed. The Court treated the retention of the shipping documents and the condition of payment as showing that the sellers had reserved the right of disposal until payment, and that the buyer could not use the goods for any purpose other than export. On that footing, the sale was not a local sale but one connected with export.

Conclusion: The sales were exempt as sales in the course of export and could not be brought to tax.

Issue (ii): Whether the purchases made by the appellants were liable to purchase tax under section 10(b) of the Bombay Sales Tax Act, 1953.

Analysis: The scheme of sections 8(b) and 10(b) linked the purchaser's certificate to the subsequent despatch of the goods outside the State. The Court held that the expression used in the charging provision had to be read in the context of the certificate and the statutory scheme, so that liability arose when the purchasing dealer's representation that the goods would be despatched by him or by a registered dealer was not fulfilled. As the goods were not despatched by the appellants in the statutory sense and the export movement was attributable to the exporters, the claim to avoid purchase tax failed.

Conclusion: The purchases remained liable to purchase tax and the challenge on that ground failed.

Final Conclusion: The tax demand was unsustainable insofar as it related to the export sales, but the purchase tax objection was rejected, leaving only partial relief to the appellants.

Ratio Decidendi: A sale qualifies for exemption under Article 286(1)(b) only when property passes after the goods enter the export stream and cross the customs barrier, with the seller having no reserved right of disposal; statutory purchase-tax relief tied to a purchaser's certificate is unavailable where the certificate-based despatch condition is not fulfilled in substance.

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