Sales tax on aviation spirit supplies: Article 286 exemption denied where delivery, payment and consumption situs remained within one State.

Sales of aviation spirit supplied to aircraft for foreign travel were held not to be exempt from sales tax under Article 286. The Article 286(1)(a) test was applied by looking to the completed sale and the situs fixed by actual delivery; because seller, buyer, goods, delivery and payment were all in West Bengal, and no other State was identified as the place of consumption, the sales were treated as intra-State and taxable there. Under Article 286(1)(b), the sale was not regarded as taking place in the course of export because it did not occasion the export or form part of an integrated export transaction. The levy therefore remained within the State's taxing power.

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Issues: (i) Whether the sales of aviation spirit supplied to aircraft for foreign travel were exempt from sales tax as sales taking place outside the State under Article 286(1)(a) of the Constitution of India and its Explanation; (ii) Whether such sales were exempt as sales taking place in the course of export of goods out of the territory of India under Article 286(1)(b) of the Constitution of India.

Issue (i): Whether the sales of aviation spirit supplied to aircraft for foreign travel were exempt from sales tax as sales taking place outside the State under Article 286(1)(a) of the Constitution of India and its Explanation.

Analysis: The constitutional test under Article 286(1)(a) was treated as turning on the completed sale and the situs fixed by actual delivery as a direct result of the sale for consumption in another State. The Explanation was held to operate only where more than one State is involved and another State can be identified in which the goods are delivered for consumption. On the admitted facts, the seller, buyer, goods, delivery and payment were all within West Bengal, and no rival State was shown. The customs barrier did not alter the situs of the sale for sales tax purposes, and the Explanation could not be invoked merely because the goods were carried beyond that barrier or consumed during the flight.

Conclusion: The sales were not outside the State under Article 286(1)(a) and were taxable in West Bengal.

Issue (ii): Whether such sales were exempt as sales taking place in the course of export of goods out of the territory of India under Article 286(1)(b) of the Constitution of India.

Analysis: The constitutional phrase "in the course of export" was applied in the settled sense that the sale must be integrally connected with, and occasion, the export, and the goods must have a foreign destination so that they can be said to be imported there. A mere purchase for taking goods out of the country, or for use during a journey abroad, was treated as insufficient. The aviation spirit was bought for consumption by the aircraft and had no foreign destination as goods to be imported elsewhere. The sale did not occasion the export and was not part of a single integrated export transaction.

Conclusion: The sales did not fall within Article 286(1)(b) and were not exempt as export sales.

Final Conclusion: The sales were intra-State sales within West Bengal and remained within the State's taxing power under Article 286, so the challenge to the levy failed.

Ratio Decidendi: Article 286(1)(a) exempts a sale only where the goods are actually delivered as a direct result of the sale for consumption in another State, and Article 286(1)(b) exempts only a sale that itself occasions an export to a foreign destination as part of an integrated export transaction.

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