Penultimate export sale fiction does not convert a local sale into interstate despatch for purchase tax liability.

A penultimate sale protected under section 5(3) of the Central Sales Tax Act, 1956 does not alter the situs of a completed local sale or deem the seller to have despatched goods outside the State for purchase tax purposes. The Karnataka HC noted that section 6 of the Karnataka Sales Tax Act, 1957 is attracted only where the dealer himself despatches goods outside the State, and on the admitted facts the assessee sold the goods within Karnataka while the purchaser undertook the export movement. The statutory fiction safeguarding the export-linked sale therefore did not extend to the State levy, and purchase tax could not be sustained.

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Issues: Whether the assessee's local sale to an intermediary, though protected as a penultimate sale under section 5(3) of the Central Sales Tax Act, 1956, could be treated as a despatch by the assessee to a place outside the State so as to attract purchase tax under section 6 of the Karnataka Sales Tax Act, 1957.

Analysis: Section 5(3) of the Central Sales Tax Act, 1956 creates a legal protection for the penultimate sale preceding the export sale, but it does not alter the factual situs of the transaction or convert a completed intra-State sale into a despatch by the seller to outside the State. The wording of section 6 of the Karnataka Sales Tax Act, 1957 is material, because the levy is attracted only where the dealer himself despatches the goods outside the State. On the admitted facts, the assessee sold the goods within Karnataka to the intermediary and the export movement was undertaken by the purchaser. The statutory fiction protecting the sale in the course of export does not extend to treating the assessee as having despatched the goods outside the State. The definition and deeming provisions relating to intra-State sale also support the conclusion that the sale remained a local sale for the purposes of the State Act.

Conclusion: Section 6 was not attracted to the assessee's purchases. The levy of purchase tax on the assessee could not be sustained, and the assessment order was liable to be set aside.

Ratio Decidendi: A statutory fiction deeming a penultimate sale to be in the course of export does not change the situs of the sale or convert a local sale into a despatch by the seller outside the State for the purpose of purchase tax under section 6 of the Karnataka Sales Tax Act, 1957.

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