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Issues: (i) Whether the auction sale of sandalwood to a unit located in a Special Economic Zone constituted a sale in the course of export or an inter-State sale so as to escape tax under the local enactment; (ii) whether the appellant could claim exemption under the Special Economic Zones Act, 2005 or the Central Sales Tax Act, 1956; (iii) whether the transaction fell within section 6(7)(b) of the Kerala Value Added Tax Act, 2003.
Issue (i): Whether the auction sale of sandalwood to a unit located in a Special Economic Zone constituted a sale in the course of export or an inter-State sale so as to escape tax under the local enactment.
Analysis: Article 286 of the Constitution of India and section 5 of the Central Sales Tax Act, 1956 protect only those sales that occasion export or are inextricably linked with export. The sale here was concluded in Kerala on the terms of the e-auction, with delivery taken from the State depot after payment of the bid amount and tax. The later movement of the goods to another State or intended use in an export-oriented activity did not convert the completed local sale into an export sale or an inter-State sale. The tender conditions made tax payable in Kerala and the bidder accepted those conditions without protest.
Conclusion: The transaction was a local sale exigible to tax under the Kerala Value Added Tax Act, 2003 and not a sale in the course of export or an inter-State sale.
Issue (ii): Whether the appellant could claim exemption under the Special Economic Zones Act, 2005 or the Central Sales Tax Act, 1956.
Analysis: Section 2(m) of the Special Economic Zones Act, 2005 defines export for purposes of that Act, but section 7 grants exemption only subject to prescribed terms and conditions and in relation to enactments in the First Schedule. No prescribed rules or State notification under section 50 were shown to extend the benefit to the levy under the Kerala Value Added Tax Act, 2003. The statutory deeming provisions for SEZ status did not override the completed intra-State sale at issue, and the requirements of section 5(3) and section 5(4) of the Central Sales Tax Act, 1956 were not satisfied.
Conclusion: No exemption was available under the Special Economic Zones Act, 2005 or section 5(3) of the Central Sales Tax Act, 1956.
Issue (iii): Whether the transaction fell within section 6(7)(b) of the Kerala Value Added Tax Act, 2003.
Analysis: Section 6(7)(b) of the Kerala Value Added Tax Act, 2003 concerns specified goods sold to a developer or industrial unit in a Special Economic Zone in the State for setting up the unit or for use in manufacture, subject to prescribed conditions. The appellant's unit was situated in Tamil Nadu, not in Kerala, and the provision did not cover a claim based on export use of sandalwood purchased at auction. The appellant therefore could not invoke that clause to defeat the tax levy.
Conclusion: Section 6(7)(b) of the Kerala Value Added Tax Act, 2003 did not apply.
Final Conclusion: The appeal failed because the auction sale was held to be a taxable local sale in Kerala, and none of the claimed export or SEZ-based exemptions was established.
Ratio Decidendi: A sale completed within the State on unqualified auction terms, with delivery and payment occurring there, does not become a sale in the course of export merely because the buyer later transports the goods to another State or uses them for export-related activity; statutory SEZ or export exemptions apply only when their express conditions are satisfied.
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