Penultimate sale exemption depends on an inextricable link between purchase and export, defeating the same goods objection.

Penultimate sale exemption under Section 5(3) of the Central Sales Tax Act turns on whether the local purchase and export are inextricably linked. Where raw hides and skins are purchased pursuant to export orders and exported as dressed hides and skins, the export transaction retains the required connection with export, and the same goods theory does not defeat exemption. On that reasoning, the levy under Section 7-A(1)(c) of the Tamil Nadu General Sales Tax Act could not be sustained, and the assessee's claim for exemption was upheld.

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Issues: Whether the assessee was entitled to exemption under Section 5(3) of the Central Sales Tax Act, 1956 on the purchase of raw hides and skins which were later exported as dressed hides and skins, and whether the liability under Section 7-A(1)(c) of the Tamil Nadu General Sales Tax Act, 1959 could be sustained.

Analysis: The controlling test is whether the local purchase and the export are inextricably linked. Where the purchase of raw hides and skins is made pursuant to export orders and the exported goods are the processed form of the very goods purchased, the export transaction satisfies the requirement of an inseverable connection with export. In such a situation, the same goods theory does not defeat the claim for exemption under Section 5(3). The earlier Tribunal view imposing liability under the State Act could not stand in the face of the binding rule laid down in the Constitution Bench decision applied in the judgment.

Conclusion: The assessee was entitled to exemption under Section 5(3) of the Central Sales Tax Act, 1956, and the levy under Section 7-A(1)(c) of the Tamil Nadu General Sales Tax Act, 1959 was not sustainable.

Final Conclusion: The revision succeeded and the Tribunal's order was set aside, with the substantial questions of law answered in favour of the assessee.

Ratio Decidendi: For claiming penultimate sale exemption, the decisive test is whether the local purchase and export are inextricably linked; if so, the same goods theory cannot be used to deny exemption under Section 5(3) of the Central Sales Tax Act, 1956.

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