Export sale test requires the sale itself to occasion export; penalty also needs concealment or knowingly inaccurate particulars.

A sale qualifies as a sale in the course of export only where the sale itself occasions the export and is so integrally connected with movement of the goods to a foreign destination that export is its immediate and necessary result; sales completed in India with payment received there and delivery at the airport before customs clearance did not meet that test, so the transactions were not protected under section 5(1) of the Central Sales Tax Act. Penalty could not be sustained under the Bombay Sales Tax Act because there was no finding of deliberate concealment or knowingly furnishing inaccurate particulars, and a failed legal contention on taxability was insufficient by itself.

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Issues: (i) Whether the sale transactions were sales in the course of export within section 5(1) of the Central Sales Tax Act, 1956. (ii) Whether the penalty levied under section 36(2)(c) Explanation (1) of the Bombay Sales Tax Act, 1959 was sustainable.

Issue (i): Whether the sale transactions were sales in the course of export within section 5(1) of the Central Sales Tax Act, 1956.

Analysis: The controlling distinction is between a sale that merely precedes export and a sale that occasions export. A transaction is protected only when the export is the immediate and necessary result of the sale, and the goods are committed to a foreign destination as part of the sale itself. On the facts, the sales were completed on the shop counter, consideration was received in India, and delivery at the airport before customs area did not by itself establish that the sale occasioned export. The absence of material showing compulsory customs clearance or an inextricable link between the sale and actual export meant that the transaction remained a sale for export, not a sale in the course of export. Reliance on the Income-tax export deduction cases did not alter the position because the concept of export out of India under section 80HHC of the Income-tax Act, 1961 is not identical to sale in the course of export under section 5(1).

Conclusion: The transactions were not sales in the course of export and the answer was against the assessee.

Issue (ii): Whether the penalty levied under section 36(2)(c) Explanation (1) of the Bombay Sales Tax Act, 1959 was sustainable.

Analysis: Penalty under this provision requires concealment of particulars or knowingly furnishing inaccurate particulars of a transaction liable to tax. The dispute turned on a difficult question of statutory interpretation and competing legal views on the character of the transactions. There was no finding of deliberate concealment or conscious furnishing of inaccurate particulars. In such circumstances, the penal provision could not be invoked merely because the assessee's legal contention failed on the taxability issue.

Conclusion: The penalty was not sustainable and the answer was in favour of the assessee.

Final Conclusion: The reference was answered partly in favour of the Revenue on the export question and partly in favour of the assessee on the penalty question, leaving the tax liability intact but deleting the penalty.

Ratio Decidendi: A sale is in the course of export only when the sale itself occasions the export and is integrally connected with the movement of goods to a foreign destination; a mere sale completed in India with later delivery for possible export does not qualify, and penalty cannot be imposed absent concealment or knowingly inaccurate particulars.

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