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Issues: Whether the sales of blocks to the Russian Embassy at New Delhi were sales in the course of export out of the territory of India and therefore exempt under article 286(1)(b) of the Constitution of India.
Analysis: The premises occupied by the Russian Embassy at New Delhi were held to be within the territory of India, and no provision of Indian law treated them as being beyond or outside India. Diplomatic privileges and immunities did not alter the territorial character of the premises for the purpose of sales tax. The Vienna Convention on Diplomatic Relations was also found not to assist the assessee, because its tax exemption for diplomatic agents did not extend to indirect taxes of the kind involved here. A later notification issued under the Central Sales Tax Act was held irrelevant to transactions that had taken place years earlier and was not regarded as merely clarificatory.
Conclusion: The sales were not in the course of export and were not exempt under article 286(1)(b); the answer was against the assessee and in favour of the Revenue.
Ratio Decidendi: A sale to a foreign embassy situated within India is not a sale in the course of export merely because the buyer is a diplomatic mission; territorial location and the legal character of the transaction remain decisive.
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