MAHADEO RAM BALI RAM Vs. STATE OF BIHAR

JUDGEMENT

(1.) IN this case the Board of Revenue has submitted a statement of case under section 25(3) of the Bihar Sales Tax Act on the following question of law :-

(2.) AFTER hearing learned counsel for the parties we are satisfied that the question should be re-framed in the following manner so as to bring out the real point in controversy between the parties :-

(3.) IN support of this reference the argument of learned counsel for the assessee is that the sale of shellac was exempt from taxation because it was a sale in the course of export of goods outside the territory of India within the meaning of Article 286(1)(b) of the Constitution, as it stood before the amendment. We do not accept this contention as right. The expression "in the course of" in Article 286(1)(b) postulates that the transaction of sale must be an integral part of the activity of exporting the goods out of the country. We think that in order to attract exemption under Article 286(1)(b) it is necessary for the assessee to show that the sale took place not only during the activities directed towards the export of the goods out of the country, but also that the sale was a part of the activities of such export. That was the test applied by the Supreme Court in State of Travancore-Cochin and Others v. Shanmugha Vilas Cashew-Nut Factory and Others ([1953] 4 S.T.C. 205; [1954] S.C.R. 53) and it was held by the Supreme Court in that case that the purchase of goods for the purpose of export was only an act preparatory to their export and not an act done in the course of export of goods. It appears that the respondents in that case had purchased raw cashew-nuts within the State of Travancore-Cochin from the neighbouring States for the purpose of refining them and exporting them to America. One of the questions which were debated in that case was whether the respondents were exempted from taxation under Article 286(1)(b) with regard to the purchases made in the local markets of the State. The question was answered in the negative and it was held by the Supreme Court that as regards the purchases made in the local markets of the State, the respondents were not exempted under Article 286(1)(b) of the Constitution. The matter has been clearly put by the learned Chief Justice at page 61 of the report as follows :-