Export sale exemption denied where intermediary purchase was separate from later export, and the transaction was treated as inter-State sale.

A sale of iron ore to an intermediary was not treated as a sale in the course of export because the export exemption applies only where the sale itself occasions the export or the transfer of documents of title occurs after customs clearance. The assessee sold on an f.o.r. basis, delivered the goods for transmission to the buyer, and did not retain a right of disposal; the later export by the purchaser did not convert that domestic sale into an export sale. The contract also contemplated movement of goods from one State to another, so the transaction was characterised as an inter-State sale and remained taxable under the Central Sales Tax Act.

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Issues: (i) Whether the assessee's sale of iron ore to the intermediary corporation was a sale in the course of export and therefore exempt under Article 286(1)(b) of the Constitution and Section 5(1) of the Central Sales Tax Act, 1956. (ii) Whether the transaction was an intra-State sale or an inter-State sale exigible to tax under the Act.

Issue (i): Whether the assessee's sale of iron ore to the intermediary corporation was a sale in the course of export and therefore exempt under Article 286(1)(b) of the Constitution and Section 5(1) of the Central Sales Tax Act, 1956.

Analysis: A sale is protected as a sale in the course of export only when it occasions the export or is effected by transfer of documents of title after the goods have crossed the customs frontiers. The governing principle requires a direct and integrated link between the sale and the export, with the exporter and importer being the necessary parties. Where a third party independently buys the goods and later exports them, the chain is broken and there are two distinct sales. On the contract terms, the assessee sold to the intermediary corporation on an f.o.r. basis, delivered the goods to rail for transmission to that purchaser, and did not reserve the right of disposal. Under Section 23 of the Sale of Goods Act, 1930, the goods were unconditionally appropriated to the contract when loaded for transmission. The later export by the intermediary did not convert the assessee's earlier domestic sale into a sale in the course of export.

Conclusion: The sale was not a sale in the course of export and was not exempt under Article 286(1)(b) or Section 5(1).

Issue (ii): Whether the transaction was an intra-State sale or an inter-State sale exigible to tax under the Act.

Analysis: The contract contemplated movement of the goods from Mysore to Cuddalore in another State, with shipment-related obligations and payments linked to that movement. The transaction therefore involved movement of goods from one State to another, which brought it within the concept of inter-State sale for tax purposes.

Conclusion: The transaction was an inter-State sale and was liable to tax under the Act.

Final Conclusion: The assessee failed on both contentions, and the assessment order sustaining tax liability was upheld.

Ratio Decidendi: A sale to an intermediary is not a sale in the course of export unless the sale itself occasions the export; if the buyer takes title and later exports the goods through a separate sale, the exporter's sale is outside the constitutional export exemption. A contract that contemplates movement of goods from one State to another constitutes an inter-State sale.

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