Sales tax exemption under Article 286 depends on actual delivery for interstate sales and an integrated export-linked transaction.

Sales tax exemption under Article 286 depended on strict proof of the constitutional conditions for interstate sale and export sale. For sales claimed as outside the State, actual delivery of the goods had to be shown as a direct result of the sale and for consumption in the destination State; mere endorsement of railway receipts or f.o.r. destination terms was insufficient, so the turnover was exempt in Andhra Pradesh. For sales claimed as in the course of export, the sale and export had to form an integrated transaction supported by a binding export obligation; absent such proof, the turnover remained taxable.

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Issues: (i) Whether the turnover of Rs. 40,393-6-0 was exempt from sales tax as a sale outside the State under Article 286(1)(a) of the Constitution of India; (ii) Whether the turnover of Rs. 2,30,880-11-0 was exempt from sales tax as a sale in the course of export under Article 286(1)(b) of the Constitution of India.

Issue (i): Whether the turnover of Rs. 40,393-6-0 was exempt from sales tax as a sale outside the State under Article 286(1)(a) of the Constitution of India.

Analysis: The constitutional explanation to Article 286(1)(a) makes the situs of sale depend on actual delivery of the goods as a direct result of the sale for the purpose of consumption in the State. Mere endorsement and handing over of railway receipts, or the fact that the contracts were f.o.r. destination, did not by itself amount to actual delivery. Section 39 of the Sale of Goods Act was held to be relevant only for general sale law and not to control the constitutional test of actual delivery. On the facts, the goods were intended for consumption in the destination State and there was no material to show actual delivery in Andhra Pradesh.

Conclusion: The turnover was not taxable in Andhra Pradesh and was exempt under Article 286(1)(a).

Issue (ii): Whether the turnover of Rs. 2,30,880-11-0 was exempt from sales tax as a sale in the course of export under Article 286(1)(b) of the Constitution of India.

Analysis: A sale in the course of export requires an integrated connection between the sale and the export, so that the two form part of a single transaction and export is occasioned by the sale. A mere subsequent export by the purchaser, or knowledge that the goods may be exported, is insufficient. The record disclosed no contract, no proved obligation to export, and no reliable material establishing that the assessee's sales to Reply & Co. were inseparably linked with the foreign export. Section 3(b) of the Central Sales Tax Act was referred to as reflecting the governing principle on transfers of documents of title during movement, but the essential element of an export-linked sale was not established.

Conclusion: The turnover was not exempt as a sale in the course of export and remained taxable.

Final Conclusion: The revision succeeded only to the extent of the first disputed item, while the export claim failed for the second disputed item.

Ratio Decidendi: For exemption under Article 286, actual delivery must be proved as the direct result of the sale and for consumption in the destination State, and a sale qualifies as being in the course of export only when the sale and export are part of an integrated transaction supported by a binding export obligation.

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