Export exemption for shellac sales failed where the transaction was only preparatory, and the tax levy remained valid.

Shellac sales were not exempt as sales in the course of export under Article 286(1)(b) because the transaction had to be an integral part of the export movement itself, and a sale merely preparatory to later export did not satisfy that test. The alternative claim under Article 286(1)(a) also failed because there was no factual basis showing sale for delivery and consumption in another State. Article 286(2) did not bar the levy for the relevant period, as the Sales Tax Continuance Order, 1950 preserved the tax. The sales tax assessment on the shellac turnover was therefore upheld.

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Issues: (i) Whether the sale of shellac was exempt from sales tax as a sale in the course of export under Article 286(1)(b) of the Constitution of India. (ii) Whether the sale could alternatively claim exemption under Article 286(1)(a) of the Constitution of India. (iii) Whether Article 286(2) of the Constitution of India barred the levy of tax for the relevant period in view of the Sales Tax Continuance Order, 1950.

Issue (i): Whether the sale of shellac was exempt from sales tax as a sale in the course of export under Article 286(1)(b) of the Constitution of India.

Analysis: The expression "in the course of" requires the sale to be an integral part of the export movement itself. A transaction that is merely preparatory to export, or that occurs while goods are intended for later export by the purchaser, does not satisfy the constitutional test. Applying that principle, the sale to Calcutta firms was not shown to be part of the export activity in the necessary legal sense.

Conclusion: The exemption under Article 286(1)(b) was not available, and the levy was upheld against the assessee.

Issue (ii): Whether the sale could alternatively claim exemption under Article 286(1)(a) of the Constitution of India.

Analysis: The alternative plea depended on a factual foundation that the shellac was sold for delivery and consumption in West Bengal. That foundation was absent, because the assessee's own case was that the goods were sold for export outside India. In the absence of a finding that the sales were for local consumption in another State, the constitutional protection under Article 286(1)(a) could not be invoked.

Conclusion: The alternative exemption under Article 286(1)(a) failed and the assessee was not entitled to relief on that ground.

Issue (iii): Whether Article 286(2) of the Constitution of India barred the levy of tax for the relevant period in view of the Sales Tax Continuance Order, 1950.

Analysis: Although Article 286(2) imposed a constitutional restriction on taxation, the President's Sales Tax Continuance Order, 1950 continued the lawful levy of sales tax for the period covered by it. The levy for the relevant period was therefore saved from the constitutional bar.

Conclusion: Article 286(2) did not invalidate the tax for the period in question, and the assessment was sustained.

Final Conclusion: The reference was answered against the assessee, and the sales tax assessment on the shellac turnover was upheld as legally valid.

Ratio Decidendi: For constitutional exemption under Article 286(1)(b), the sale must form part of the export transaction itself and not be merely preparatory to export; where the factual basis for an alternative exemption is absent, and the constitutional bar under Article 286(2) is overridden for the relevant period by a continuance order, the levy is sustainable.

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