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Report No. 30

51. Second Travancore case.-In considering this question the Supreme Court applied the same principle of "integrated activities" as had been applied in the first Travancore case and stated (AIR p. 336, para. 10):-

"As regard the first-mentioned category, we are of opinion that the transactions are not within the protection of clause (1)(b) the expression "in the course of" not only implies a period of time during which the movement is in progress but postulates also a connected relation. A sale in the course of import should be understood in the context of clause (1)(b) as meaning a sale taking place not only during the activities directed to the end of exportation out of the country but also as part of or connected with such activities. The phrase

"integrated activities" was used in the previous decision to denote that "such a sale" (i.e., a sale which occasions export) cannot be dissociated from the export without which it cannot be effectuated and the sale and the resultant export form parts of a single transaction. It is in that sense that the two activities-the sales and the export-were said to be integrated.

It is not correct to speak of a purchase for export as an activity so integrated with the exportation that the former could be regarded as done "in the course of" the latter. A purchase for the purpose of export like production or manufacture is only an act preparatory to export and cannot, in our opinion, be regarded as an act done "in the course of the export of the goods out of the territory of India" any more than the other two activities (production or manufacture) can be so regarded."

"The same reasoning applies to the first sale after import which is a distinct transaction effected after the importation of goods into the country has been completed, and having no integral relation with it...... (page 338, end of page 14). We find no warrant in the language employed (In Article 286) to extend the protection to cover the last purchase before export or the first sale after import."

52. In para. 16 at p. 338, the Supreme Court stated its conclusions as follows:-

(1) Sales by export and purchases by import fall within the exemption under Article 286(1)(6). This held in the previous decision (I Travancore case).

(2) Purchases in the State by the exporter for the purpose of export as well as sales in the State by the importer after the goods have crossed the customs frontier are not within the exception.

(3) Sales in the State by the exporter or importer frontier are not within the exemption.

by transfer of shipping documents while the goods are beyond the customs frontier are within the exemption, assuming that the State power of taxation extends to such transaction.



Section 5 of the Central Sales Tax Act, 1956 - Taxation by the States of Sales in the Course of Import Back




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