Export exemption under section 5(3) denied where rough granite blocks became commercially distinct polished tiles before export.

Section 5(3) exemption under the Central Sales Tax Act applies only where the penultimate sale is of the very goods ultimately exported. Applying the commercial parlance test, rough granite blocks sold to a 100 per cent export oriented unit were found to have undergone substantial transformation into cut, sliced and polished tiles, creating a commercially distinct commodity with added value. Because the goods sold were not the same as the goods exported, the sale did not qualify as a sale in the course of export. The assessee was therefore not entitled to exemption under section 5(3).

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Issues: Whether rough granite blocks sold to a 100 per cent export oriented unit and exported after cutting and polishing as tiles were the same goods so as to qualify for exemption under section 5(3) of the Central Sales Tax Act, 1956.

Analysis: Exemption under section 5(3) applies only when the last sale or purchase preceding export is of the very same goods that are exported. The governing test is whether, in commercial parlance, the goods retain their original identity after processing. On the facts found, the assessee sold rough granite blocks, while the export consisted of cut, sliced and polished tiles. The processing brought about substantial transformation and value addition, and the exported tiles were treated in trade as a different commodity from rough granite blocks. The reliance placed on decisions concerning mere cutting or polishing did not assist the assessee, because the present case involved conversion into a distinct commercial product.

Conclusion: The goods sold and the goods exported were not the same, so the sale did not fall within section 5(3) of the Central Sales Tax Act, 1956. The assessee was not entitled to exemption.

Ratio Decidendi: For exemption under section 5(3) of the Central Sales Tax Act, 1956, the penultimate sale must be of the very goods exported, and where processing changes the commodity into a commercially distinct product, the sale is not deemed to be in the course of export.

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