Export Sale Test Fails for Chillies Sold to Local Buyer Despite Prior Foreign Shipment Commitment

Sales of chillies to a local buyer were treated as distinct and independent transactions, not sales in the course of export under section 5(1) of the Central Sales Tax Act, because the requisite direct and intimate link between the sales and the foreign export was absent. The governing test was whether the sale itself occasioned the export or whether the sale and export formed an inseparable part of one integrated transaction; on the facts, that test was not met. The contention that the second limb of section 5(1) applied through transfer of documents of title after the goods crossed the customs frontiers was also rejected, so exemption was unavailable.

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Issues: Whether the sales of chillies made to the local buyer were sales in the course of export within section 5(1) of the Central Sales Tax Act, 1956, so as to qualify for exemption.

Analysis: The sales were held to be distinct and independent sales to a local buyer, even though the buyer had a prior export commitment and the contract terms required shipment to Colombo in the buyer's name. The governing test was whether the sale itself occasioned the export or whether the sale and export formed an inseparable part of one integrated transaction. On the facts, the court found that the necessary direct and intimate link between the assessee's sales and the foreign export was absent. The contention based on the second limb of section 5(1) was not accepted, as the sales were not shown to involve a transfer of documents of title after the goods had crossed the customs frontiers in a manner that would convert them into export sales.

Conclusion: The sales were not sales in the course of export and the assessees were not entitled to exemption under section 5(1).

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