Export sale exemption applies only to the contract that directly occasions export, not to a preparatory local sale.

Only the sale that itself occasions export qualifies as a sale in the course of export under article 286 and section 5(1) of the Central Sales Tax Act, 1956; a preparatory or implementing local arrangement linked to a main export contract does not gain exemption merely because it facilitates the export, and the later insertion of section 5(3) could not be applied retrospectively. On that basis, the claim for deduction failed. A penalty for delayed filing of return was maintained in principle, but the amount was reduced in light of delay, mitigating circumstances, and financial difficulty.

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Issues: (i) Whether the petitioner's turnover of Rs. 1,47,19,885 constituted a sale in the course of export and was deductible under section 5(2)(a)(v) of the Bengal Finance (Sales Tax) Act, 1941 read with section 5(1) of the Central Sales Tax Act, 1956; (ii) Whether the penalty imposed for delayed filing of return was liable to be interfered with.

Issue (i): Whether the petitioner's turnover of Rs. 1,47,19,885 constituted a sale in the course of export and was deductible under section 5(2)(a)(v) of the Bengal Finance (Sales Tax) Act, 1941 read with section 5(1) of the Central Sales Tax Act, 1956.

Analysis: Under article 286 of the Constitution of India and section 5(1) of the Central Sales Tax Act, 1956, only that sale qualifies as being in the course of export which occasions the export or is effected by transfer of documents of title after the goods cross the customs frontiers. The relevant legal position at the material time permitted only one sale to be treated as the sale in the course of export. The main contract between the canalising agency and the foreign buyer showed that the export obligation, the mode of delivery, payment terms, packing, transport, insurance and other export-related incidents were all embedded in that contract. The subsequent arrangement with the petitioner was held to be only for implementation of the main export contract and not an independent contract that itself occasioned the export. The later statutory insertion of section 5(3) of the Central Sales Tax Act, 1956 could not apply retrospectively to the transaction.

Conclusion: The petitioner's sale was not a sale in the course of export, and the claim for deduction failed.

Issue (ii): Whether the penalty imposed for delayed filing of return was liable to be interfered with.

Analysis: The delay in filing return attracted penalty, but the successive authorities had enhanced and then maintained the amount without any clear rationale. In view of the prolonged pendency, the admitted mitigating circumstances, and the petitioner's financial difficulties, the quantum of penalty required moderation rather than reaffirmation in the amount originally sustained by the appellate authority.

Conclusion: The imposition of penalty was upheld, but the amount was reduced to Rs. 1,000.

Final Conclusion: The petition failed on the export-deduction issue, while the penalty was retained only with a reduced amount; thus the impugned order was sustained in substance with limited modification on penalty.

Ratio Decidendi: For transactions governed by section 5(1) of the Central Sales Tax Act, 1956 as it stood before section 5(3) was inserted, only the sale that itself occasions the export can qualify as a sale in the course of export, and a preparatory or implementing local sale does not become exempt merely because it is connected with an export contract.

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