STATE OF KARNATAKA versus B.M. ASHRAF AND CO.

Citation: [1997] SUPP. 4 S.C.R. 520 · Decided: 20-10-1997 · Supreme Court of India · Bench: S.C. AGRAWAL · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
STATE OF KARNATAKA 
v. 
B.M. ASHRAF AND CO. 
OCTOBER 20, 1997 
B 
[S.C. AGRAWAL AND B.N. KIRPAL, JJ.] 
Sales Tax: 
C 
Karnataka Sales Tax Act, 1975-Section 6--Purchase tax-Liability of 
the assessee to pay purchase tax-Assessee a registered dealer purchasing 
fish oil from unregistered dealer and selling the same within the State to 
another dealer, for selling it to a foreign buyer pursuant to export order-
Sale of fish oil by assessee to K, although effected within the State, held, 
nonetheless a sale in the course of export under Section 5(3) of the Central 
D Sales Tax Act and not a ''sale in the State'' falling under Section 6(i)-Hence 
assessee, held, liable to pay tax under Section 6 on the purchase of the fish 
oil-Central Sales Tax Act, 1956-Set:tions 5(3) & (1)-Constitution of 
India, Article 286. 
E 
J:Vord~ and Phrases : 
Words ''sale in the State' '-Meaning of -In the context of Karnataka 
Sales Tax Act. 
The respondent was a registered dealer under the Karnataka Sales Tax 
Act. He used to purchase fish oil from unregistered dealer and, in turn, sold 
F the same in the State itself to K, another dealer. K purchased the fish oil 
from the assessee in order to comply with the export order from a foreign 
buyer. For Assessment Year 1978-79, the respondent-assessee claimed and 
was granted exemption from payment of sales tax on sales made to K as the 
export sales of the goods referred to under Section 5(3) of the Central Sales 
G Tax, Act 1957. The question was whether the respondent was iiable to pay 
purchase tax 11nder Section 6 of the Karnataka Sales Tax Act on purchase of 
the fish oil which was sold to K. The High Court answered the question in the 
negative on the ground that the purchases made by the assessee-respondent 
were sold within the State of Karnataka and as such the ingredients of Section 
6 of the Karnataka Sales Tax Act were not attracted. Hence this appeal by the 
H 
s20 
STATE v. B.M. ASHRAF 
521 
States. 
A 
Allowing the Appeal, the Court 
HELD : 1.1. Whereas intra-State sale or the inter-State sale would be 
a reason for purchase tax not being levied but sale in the course of export 
would not exclude the applicability of the levy of purchase tax under Section B 
6 of the Karnataka Sales Tax Act. The sale by respondent to K is the last sale 
preceding the sale occasioning the export of those goods out of thr. territory 
of India and is , therefore , deemed to be sale in the course of export as 
envisaged by Section 5(3) of the Central Sales Tax Act and therefore no tax 
was levied thereon under Section 5 of the Karnataka Act. The sale by K to C 
the foreign purchaser wa~ also a sale in the course of export falling under 
5(1) of the Central Act. [525-H; 526-A-B) 
1.2. The High Court erred in holding that the respondent having sold 
the fish oil to K within the State of Karnataka would be a "sale in the State" 
under Section 6(i) of the Karnataka Act and, therefore, exempt from levy of D 
purchase tax. [525-G) 
2. In the case of inter- State sale or sale in the course of export, the 
property in the goods may stand transferred within the state but merely 
because of the passing of title or sale takes place in a State would not detract E 
it from its character as inter-State or export, sale. Similarly situs is irrelevant 
as regards the sales being in the course of export, as in the present case. In 
the context of sales tax law, the expression "sale in the State" occurring in 
Section 6 of the Karnataka Act can only mean a local sale or an intra-State 
sale as opposed to sale in the course of export or in the course of inter- State 
trade or commerce. Therefore, whenever, there is a sale in the course of export F 
or an inter-State sale, then, that would not be regarded as a "sale in the State" 
falling under Section 6(i) of the Karnataka Act and, therefore sale by the 
respondent to K, which was admittedly a sale in the course of export under 
section 5(3) of the Central Sales Tax would not be regarded as "sale in the 
State". [526-F; 527-A-B) 
G 
Bengal Immunity Company Ltd. v. State of Bihar and Ors., [1955] VI 
S.T.C. 446, relied on. 
Murli Manohar & Co. and Anr. v. State o/Haryana & Anr., [1991) 80 
STC 79, distinguished. 
H 
522 
SUPREME COURT REPORTS {1997) SUPP. 4 S.C.R. 
A 
Mohd. Serajuddin v. State of Orissa, (1975) 36 STC 136 SC, referred 
to. 
3. By virtue of Section 5(3) of the Central Act, the sale effected by the' 
respondent to K has to be regarded to be in the cour

Excerpt shown. Read the full judgment & AI analysis in Lexace.