Export-linked branch transfers cannot be taxed as local purchases when the goods are moved through the export chain.

Purchase tax under the Haryana General Sales Tax Act could not be levied on goods bought by a branch and transferred to the head office for export, because the movement formed part of the export transaction protected by Article 286 of the Constitution and section 5 of the Central Sales Tax Act. The court distinguished Mod. Serajuddin on the basis that that case involved a different contractual structure, with the exporter and foreign buyer being distinct and no privity between the assessee and the foreign buyer. As the goods were in fact exported after transfer to the head office, the levy was held unsustainable.

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Issues: Whether purchase tax under section 9 of the Haryana General Sales Tax Act, 1973 could be levied on goods purchased by the assessee for export, where the goods were moved from the branch office to the head office and ultimately exported out of India.

Analysis: Article 286 of the Constitution of India prohibits a State from imposing tax on a sale or purchase taking place in the course of export, and section 5 of the Central Sales Tax Act, 1956 formulates the principle for determining when a transaction is in the course of export. The assessee was a single company with a registered office at Calcutta and a branch office at Faridabad, and the record showed that the goods purchased at Faridabad were sent to the head office for export and were in fact exported. The authorities erred in treating the movement from Faridabad to Calcutta as outside the export chain and in applying the ratio of Mod. Serajuddin, which turned on a different contractual arrangement where the exporter and foreign buyer were distinct and there was no privity between the assessee and the foreign buyer.

Conclusion: The levy of purchase tax on the impugned purchases was not sustainable, and the assessee succeeded.

Ratio Decidendi: Where goods purchased by a branch are transferred to the head office and are thereafter exported pursuant to the export arrangement, the movement is part of the export transaction and cannot be taxed by the State under the sales tax law.

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