Export sales protected from indirect state tax levy under constitutional bar, with Section 3(4) held inapplicable.

Export sales of manufactured goods cannot be brought within the ambit of Section 3(4) of the Tamil Nadu General Sales Tax Act, 1959 where the levy would directly or indirectly burden exports. The Court followed its earlier ruling that export sales are protected by Article 286, so the State cannot create tax liability on the turnover of goods exported by taxing concessional inputs or the value of the exported goods. The Revenue's construction was held inconsistent with the constitutional embargo, and the revision was decided in favour of the assessee.

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Issues: Whether export sales of manufactured goods could be brought within the ambit of Section 3(4) of the Tamil Nadu General Sales Tax Act, 1959 so as to levy tax on the turnover derived from such sales.

Analysis: The challenge turned on whether the levy under Section 3(4) could be sustained where the goods manufactured with concessional input purchases were sold by way of export. The Court followed its earlier decision holding that export sales are protected by the constitutional restriction under Article 286, and that the State cannot indirectly create a tax liability on export sales by taxing the inputs or the value of goods so exported. The Court held that the construction urged by the Revenue would conflict with the constitutional embargo and that no tax can be collected without authority of law.

Conclusion: Section 3(4) of the Tamil Nadu General Sales Tax Act, 1959 does not apply to export sales, and the revision was decided against the Revenue and in favour of the assessee.

Ratio Decidendi: A State levy cannot be applied so as to impose, directly or indirectly, tax on export sales in the face of the constitutional prohibition under Article 286.

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