Export-linked sales tax exemption requires an integrated sale and export transaction; mere export intention or quota rights are not enough.

Sales are protected from State sales tax under Article 286(1)(b) only when the sale and the export form one integrated transaction and the sale itself occasions the export. Mere knowledge that the buyer intends to export, or that export quota rights are transferred with the goods, is insufficient if there is no statutory or contractual obligation making export an inseparable part of the bargain. On the facts, the sellers had no concern with the actual export after delivery, the purchasers could lawfully divert the goods, and the Tea Act only facilitated export. The majority therefore held that the transactions were sales for export, not sales in the course of export, and were taxable by the State.

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Issues: Whether the auction sales of tea chests together with export quota rights to agents or intermediaries of foreign buyers constituted sales in the course of export and were therefore exempt from State sales tax under Article 286(1)(b) of the Constitution of India.

Analysis: The majority held that a sale is protected only when the sale and the export form parts of one integrated transaction and the sale occasions the export. Mere knowledge that the purchaser intends to export, or that the goods are sold with export rights, does not by itself create the necessary bond between sale and export. On the facts, the sellers had no concern with the actual export after the sale was completed, the purchasers were free in law to divert the goods, and there was no statutory or contractual obligation making export an inseparable part of the sale. The Tea Act and the transfer of export quota rights merely facilitated export and did not compel it. The transactions were therefore sales for export and not sales in the course of export.

Conclusion: The sales were not exempt under Article 286(1)(b) and were taxable by the State.

Dissenting Opinion: Ayyangar, J. held that the sales and the export were part of a single integrated transaction, since the goods were sold to foreign buyers through their agents with an understanding that they would be exported, and the transfer of export quota rights formed part of the bargain. On that view, the sales occasioned the export and were protected from State taxation.

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