The main legal point established in the judgment is the interpretation of the provisions of section 5(1) and section 5(3) of the Central Sales Tax Act in relation to purchases in the course of export, and the applicability of entry 13a of the Third Schedule.

V. K. SINGHAL, J. - The petitioners have challenged the levy of tax on purchases of shrimps and prawns under entry 13a of the Third Schedule to the Karnataka Sales Tax Act. The entry with regard to shrimps, prawns and lobsters other than frozen shrimps, prawns and lobsters prescribed rate of tax of 4 per cent for the year from September 1, 1978 to March 31, 1986 and 5 per cent thereafter. Section 6 of the KST Act, 1957, prescribes the circumstances under which the purchases can be made liable to tax.

2. Petitioners are the fast stage purchasers in the State of Karnataka and have exported these items. The validity of entry 13a of the Third Schedule to the Act have been assailed on the ground that it is violative of section 5(1) of the Central Sales Tax Act, 1956. Reliance is placed on the decision given in the case of Nipha Exports Pvt. Limited v. State of Haryana [1998] 108 STC 337 (P&H), wherein the machinery and the parts purchased by the assessee and despatched to its head office for export in the execution of orders of foreign buyers were held not liable to tax. In the case of the assessee the purchases have been made from unregistered dealer and by the charging section 6 liability of purchase tax comes into play. The dispute is in respect of the period prior to insertion of section 5(3) of the Central Sales Tax Act. The question of purchases by an exporter were considered by the apex Court in the case of Mod. Serajuddin v. State of Orissa [1975] 36 STC 136, wherein the word "occasions" used in section 5 of the Central Sales Tax Act, was considered and it was found that there was contract between the corporation and the foreign buyer and the appellant who sold the goods to the corporation, has not occasion the export of goods. It is in this context the provisions of section 5(3) were subsequently incorporated under the Central Sales Tax Act.

3. The words "sale" or "purchase" used in section 5 of the Central Sales Tax Act have to be read along with "in the course of export of goods". There can be a sale in the course of export of goods. In a case where a foreign buyer is having its branch in India which purchases the goods then the said purchase would be considered in the course of export of goods. The purchase by transfer of document in the course of export will also be covered under sub-section (1). The purchases by exporter to a foreign buyer will not come in the saving clause under section 5(1) which will fall only under section 5(3) from the date the amendment has been made. Since the purchases have been made by the petitioner from an unregistered dealer there is liability of purchase tax under section 6 of the Karnataka Sales Tax Act, 1957.

4. The statement of objects and reasons while enacting section 5(3) of the Central Sales Tax Act for giving relief in respect of penultimate sale was as under :

"According to section 5(1) of the Central Sales Tax Act, a sale or purchase of goods can qualify as a sale in the course of export of the goods out of the territory of India only if the sale or purchase has either occasioned such export or is by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India. The Supreme Court has held (vide : Mohd. Serajuddin v. State of Orissa [1975] 36 STC 136; AIR 1975 SC 1564) that the sale by an Indian exporter from India to the foreign importer alone qualifies as a sale which has occasioned the export of the goods. According to the Export Control Orders, exports of certain goods can be made only by specified agencies such as the State Trading Corporation. In other cases also, manufacturers of goods, particularly in the small-scale and medium sectors, have to depend upon some experienced export house for exporting the goods because special expertise is needed for carrying on export trade. A sale of goods made to an export canalising agency such as the State Trading Corporation or to an export house to enable such agency or export hous