Export-linked tax exemption requires a true sale in the course of export; sale to an exporter alone is insufficient.

A manufacturer with a recognition certificate under section 4B of the U.P. Trade Tax Act could not claim raw-material exemption merely because finished goods were sold to an exporter against form H. The article explains that a sale to an exporter is not the same as a sale in the course of export; only transactions falling within the statutory meaning of export, as interpreted under the Central Sales Tax Act, qualify for export-linked relief. It also states that a trade tax circular inconsistent with the Supreme Court's declaration of law cannot prevail, so the reopening and denial of exemption were sustained.

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Issues: (i) Whether a manufacturer holding a recognition certificate under section 4B of the U.P. Trade Tax Act was entitled to exemption on raw materials when the manufactured goods were sold to an exporter against form H, on the footing that the goods were exported out of India. (ii) Whether the circular issued by the trade tax authorities could override the law declared by the Supreme Court.

Issue (i): Whether a manufacturer holding a recognition certificate under section 4B of the U.P. Trade Tax Act was entitled to exemption on raw materials when the manufactured goods were sold to an exporter against form H, on the footing that the goods were exported out of India.

Analysis: Section 4B granted special relief to notified manufacturers only where the notified goods were intended to be sold by the dealer in the State, in inter-State trade or commerce, or in the course of export out of India. The notification issued under that provision had to be read consistently with the statute and with the meaning of export adopted in the Central Sales Tax Act. The Court applied the principle that a sale to an exporter is not the same as a sale in the course of export. Relying on the Supreme Court's interpretation of sections 5(1) and 5(3), it held that the transaction in question was a local sale to an exporter and not a penultimate sale occasioning export.

Conclusion: The exemption claimed on the strength of form H was not admissible, and the reopening based on the Supreme Court ruling was justified.

Issue (ii): Whether the circular issued by the trade tax authorities could override the law declared by the Supreme Court.

Analysis: A circular inconsistent with the law declared by the Supreme Court cannot prevail. Once the Supreme Court had authoritatively decided the scope of export sale and penultimate sale, any earlier circular contrary to that declaration had to yield.

Conclusion: The circular did not control the outcome and could not defeat the Supreme Court's declaration of law.

Final Conclusion: The writ petitions failed, as the disputed transactions did not qualify for export-linked exemption under the statutory scheme and the impugned reopening orders were sustained.

Ratio Decidendi: For purposes of exemption under section 4B, a sale to an exporter is not necessarily a sale in the course of export; only transactions that fall within the statutory meaning of export can attract the benefit, and a contrary administrative circular cannot override the Supreme Court's interpretation of the governing law.

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