Art.286(1)(b) exempts sales and purchases which themselves occasion the export or the import of the goods, as the case may be, out of or into the territory of India from assessment under the Sales Tax Act.

Headnote:
Sales Tax - Assessment under the United State of Travancore and Cochin Sales Tax Act - Art.286(1)(b)
Fact of the Case:

Connected appeals from the High Court of Travancore-Cochin quashing the assessment under the United State of Travancore and Cochin Sales Tax Act on the turnover of sales of commodities (coir products, lemon grass oil, and tea) in which the respondents dealt. The respondents claimed exemption from assessment on the ground that the sales took place 'in the course of the export of the goods out of the territory of India' within the meaning of Art.286(1)(b) of the Constitution.
Finding of the Court:

The court held that the sales in question, which occasioned the export in each case, fell within the scope of the exemption under Art.286(1)(b). The court emphasized that a sale by export involves a series of integrated activities commencing from the agreement of sale with a foreign buyer and ending with the delivery of the goods to a common carrier for transport out of the country by land or sea. Such a sale cannot be dissociated from the export without which it cannot be effectuated, and the sale and resultant export form parts of a single transaction.
Issues: The main issue was the interpretation of Art.286(1)(b) and whether the sales in question qualified for exemption from assessment under the Sales Tax Act.
Ratio Decidendi: The court interpreted Art.286(1)(b) to include sales and purchases which themselves occasion the export or the import of the goods, as the case may be, out of or into the territory of India, and held that such sales were exempt from assessment.
Final Decision: The court dismissed the appeals with costs, agreeing with the conclusion of the High Court, though on different grounds.

Judgment :-

1. These are connected appeals from the judgment and order of the High Court of Travancore-Cochin quashing the assessment under the United State of Travancore and Cochin Sales Tax Act, (No. 11 of 1125 M.E.) (hereinafter referred to as "the Act") on the respondents on the turnover of the sales of the commodities (coir products in C.A. 25, lemon grass oil in C.A. 28 and tea in C.A. 29) in which they respectively deal.

2. The dealings followed more or less the same pattern in all the cases and consisted of export sales of the respective commodities to foreign buyers on C.I.F. or F.O.B. terms as the case may be.

3. The respondents in each case claimed exemption from assessment in respect of the sales effected by them on the ground, inter alia that such sales took place "in the course of the export of the goods out of the territory of India" within the meaning of Art.286(1)(b) of the Constitution. The Sales Tax Authorities rejected the contention as, in their view, the sales were completed before the goods were shipped and could not, therefore be considered to have taken place in the course of the export.

4. Thereupon the respondents by separate petitions applied to the High Court of the United State of Travancore and Cochin (hereinafter referred to as the State) under Art.226 of the Constitution for issue of writs of certiorari and prohibition quashing the assessments made on them and prohibiting such assessments in future. The applications were heard along with nine others, applications for similar reliefs by dealers in cashew nuts, by a Division Bench (Kunhiraman, C.J. and Subramonia Iyer, J.) who upheld the claim of exemption and quashed the assessment orders in respect of the transactions subsequent to the commencement of the Constitution. From that decision the State has preferred appeals in all the cases on a certificate granted by the High Court under Art.132(1) of the Constitution.

5. As the appeals involved important questions of law which may have a bearing on the sales tax legislation of the various States in India, this Court directed notice of these proceedings to the Attorney General for India and the Advocate-General of those States, and they have intervened and participated in the debate at the hearing of these appeals.

6. When the argument had proceeded for some time, it was discovered that the material facts relating to the course of dealings in cashew nuts, which were more complex in character, had not been clearly ascertained and consequently the relative appeals were remitted to the High Court for findings on certain points agreed upon by the parties. These three appeals were, however, fully heard as they were found to admit of disposal of the materials on record.

Art.286(1), on which the respondents found their claims to exemption, runs thus:

"No law of a State shall impose, or authorise the imposition of a tax on the sale or purchase of goods where such sale or purchase takes place

[a] outside the State; or

[b] in the course of the import of the goods into, or export of the goods out of, the territory of India.

Explanation:- For the purposes of Sub-Cl. [a], a sale or purchase shall be deemed to have taken place in the State in which the goods have actually been delivered as a direct result of such sale or purchase for the purpose of consumption in that State, notwithstanding the fact that under the general law relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State."

7. On the scope and meaning of Cl. (b), the learned judges expressed their views as follows:

"The words "in the course of" make the scope of this clause very wide. It is not restricted to the point of time at which goods are imported into or exported from India. The series of transactions which necessarily precede export or import of goods will come within the purview of this clause. Therefore, while in the course of that series of transactions the sale has taken place, such a sale is

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