Strict proof for penultimate-sale export exemption under CST Act upheld; defective documents defeated the exemption and penalty remained intact.

Strict compliance with the declaration and documentary requirements for penultimate-sale export exemption under Section 5(3) of the Central Sales Tax Act is necessary, because the benefit applies only when the sale is proved to be in the course of export and supported by the prescribed Form H particulars. The Court treated these requirements as substantive, so discrepancies in the export documents justified denial of the exemption. It further held that, where export proof failed, the disputed sale could not be treated as inter-State merely on the basis of the asserted onward export and was liable, at best, as a local sale. The penalty imposed in revision was left undisturbed, as no material showed evasion.

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Issues: (i) Whether the assessee was entitled to exemption on the penultimate sale of drums claimed to be in the course of export under Section 5(3) of the Central Sales Tax Act despite discrepancies in the supporting documents and absence of full compliance with the prescribed declaration requirements; (ii) whether, if the export exemption was denied, the sales could nonetheless be taxed only as local sales and not as inter-State sales; (iii) whether penalty imposed in revisional proceedings was sustainable.

Issue (i): Whether the assessee was entitled to exemption on the penultimate sale of drums claimed to be in the course of export under Section 5(3) of the Central Sales Tax Act despite discrepancies in the supporting documents and absence of full compliance with the prescribed declaration requirements.

Analysis: Section 5(3) deems the last sale preceding the export sale to be in the course of export only if it is for complying with the export order, while Section 5(4) makes that benefit conditional upon furnishing the prescribed declaration in the prescribed manner. Rule 12(10) and Form H require specific export particulars so that the authority can verify that the goods sold were actually exported pursuant to the relevant order. The Court held that these requirements are substantive and not merely technical or procedural. Where the documents contained discrepancies, the revisional authority was justified in denying the exemption.

Conclusion: The assessee was not entitled to export exemption on the disputed sales, and the Tribunal should not have interfered with the revisional demand on that aspect.

Issue (ii): Whether, if the export exemption was denied, the sales could nonetheless be taxed only as local sales and not as inter-State sales.

Analysis: The assessee had sold the drums to a local purchaser, and the dispute was only whether the onward export was sufficiently proved to attract the deeming benefit under Section 5(3). In the absence of such proof, the character of the assessee's sale could not be elevated to inter-State sales merely because export was asserted. The demand had been framed on an inter-State basis, which was not justified on the facts found.

Conclusion: The sales were liable to be taxed, at best, as local sales, and the assessing authority was directed to revise the demand on that basis.

Issue (iii): Whether penalty imposed in revisional proceedings was sustainable.

Analysis: Under the Gujarat Sales Tax Act, penalty for the difference between assessed tax and tax already paid is discretionary. The Court found no material showing an attempt by the assessee to evade legitimate tax liability. On those facts, the Court declined to disturb the Tribunal's view on penalty. The broader question whether penalty can be levied for the first time in revision was left open.

Conclusion: The penalty order was not interfered with.

Final Conclusion: The denial of export exemption was upheld, the demand was confined to taxation on a local-sale basis, and the penalty component was sustained.

Ratio Decidendi: The benefit of the penultimate-sale export exemption is available only on strict compliance with the prescribed declaration requirements, and where the statutory proof is not furnished or is defective, the sale cannot claim the deeming protection under the export provision.

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