Transcript Document

PRI
CENTRAL SALES TAX
P RAJU IYER
7/18/2015
1
PREAMBLE
the fundamental principle behind the Sales Tax Laws
“An Act to formulate principles when a sale or
purchase of goods takes place in the course of
inter-state Trade or Commerce or outside a
State or in the Course of Import into or export
from India, to provide for the levy, collection
and distribution of taxes on sales of goods in
the course of Inter-State Trade or Commerce
and to declare certain goods to be of special
importance in Inter-State Trade or Commerce
and specify the restrictions and conditions to
which State Laws imposing taxes on the sale or
purchase of such goods of special importance
shall be subject.”
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Modern business operations and trading modalities have
become so complex that Laws had to be amended frequently
to stretch the arms for roping every type of transactions to
maximize the revenue collection.
The classification of sale for the purpose of Sales Tax Law can
be analyzed:
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S
-
Inter-State Sales
A
-
Intra-State / Local Sales
L
-
Sale in the course of Import / Export
E
-
Deemed Sales – Works Contracts, HirePurchase, Right to Use, etc.
3
The scheme of Sales Tax Levy based on above, comes
within the purview of the following statutes –
A. Central Sales Tax Act, 1956 read with the Central
Sales Tax (Registration & Turnover) Rules,1957
B. Sales Tax Act read with the rules thereof enacted
by the individual States concerned
Individual States Sales Tax Act will be replaced
by VAT
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CST applicable in case of Inter-State Sales
• Levy of the Central Government subject to the
powers given under the Constitution of India.
• Inter State Sales and Export Sales are taxed
under CST.
• The CST is 4 % where C form is applicable
• Where C Form is not applicable, 10% or the
respective TNGST levy whichever is Higher.
• In case of declared goods, Double the levy to
the unregistered Dealer.
• Registration shall be before the Inter-State Sale
and can be voluntary also.
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Objects of CST

a. To formulate principles for determining when a
sale or purchase of goods takes place
i. in the course of Inter-State trade or
commerce (S.3); or
ii. outside a State (S.4); and
iii. In the course of import or export from India
(S.5)
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b. To provide for i.
Levy (S. 6 & 8)
ii.
Collection (S. 9 (1) & (2))
iii.
Distribution (S. 9 (3)
of taxes on sale of goods in the course of Inter-State
trade or commerce
c. To declare certain goods to be of special importance in
Inter-State trade or commerce
d. To Specify the restrictions and conditions to which
State laws imposing taxes on the sale or purchase of
such goods of special importance shall be subjected
(S.15)
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DEFINITIONS
APPROPRIATE STATE – S. 2 (a)
‘Appropriate State’ means that State in which
business is situated.
1.
2.
If a dealer has one or more places of business
situated in the SAME STATE, then, that State is the
appropriate State.
If a dealer has places of business in DIFFERENT
States, then, every SUCH State with respect to the
place (or places) of business situated within its
territory shall be treated as “Appropriate State”.
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BUSINESS – S. 2 (aa)
Business includes the following:
1. Any trade, commerce or manufacture
2. Any adventure or concern in the nature of trade, commerce of
manufacture.
The above may be carried on WITH or WITHOUT motive to
make gain or profit. Further, gain or profit MAY or MAY NOT
accrue from such trade, commerce, manufacture, adventure
or concern,
3. Any TRANSACTION in connection with or incidental or
ancillary to such trade, commerce, manufacture, adventure or
concern.
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SALE - S. 2 (g)
“Sale” means transfer of property (ownership) in the
goods by one person to another. It may be –
a. for cash or
b. for deferred payment or
c. for any OTHER valuable consideration
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IT INCLUDES –
i. A transfer of property in any goods for cash,
deferred
payment
OR
other
valuable
considerations.
This transfer is otherwise
than in pursuance of the contract.
ii. A transfer of property in goods involved in the
execution of a works contract. This may be
goods OR may be in any other form.
iii. A delivery of goods on hire purchase or any
system of payment by installments.
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iv. A transfer of the right to use any goods for any
purpose. This may or may not be for a specified
period. This may be for cash, deferred payment OR
other valuable consideration.
v. A supply of goods by any incorporated association OR
body of persons to its member.
vi. A supply of goods being food or any other article for
business consumption OR the supply of any drink
which may or may not be intoxicating. The supply is
made by way of OR part of any service.
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‘SALE’ DOES NOT INCLUDE –
A. A Mortgage OR
B. Hypothecation of OR
C. A charge on OR
D. A Pledge of the goods
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PLACE OF BUSINESS
Place of Business includes –
i. Where a dealer carries on business through an
AGENT, then the place of business of SUCH AGENT
ii. A warehouse, go-down or other place where a dealer
STORES goods and
iii. A place where a dealer keeps his books of account.
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SALE PRICE – S. 2(h)
means the amount payable to a dealer as consideration for
the sale of any goods.
Any sum allowed as CASH
DISCOUNT according to the practice normally prevailing in
the trade shall be deducted from the above amount.
Sale Price INCLUDES any sum charged for anything done
by the dealer in respect of the goods at the TIME of or
BEFORE the delivery of the goods.
It DOES NOT INCLUDE the cost of freight or delivery or the
cost of installation in cases where such cost is SEPARATELY
charged.
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GOODS - S. 2 (d)
Sale of “goods” is liable to sales tax.
Goods include all materials, articles or commodities and
all kinds of movable property.
IT DOES NOT INCLUDE newspapers, actionable claims,
stocks shares or securities.
Goods include animate objects such as livestock, animals
and birds in captivity, uprooted trees, second hand goods,
rejected goods, worn out goods, etc.
Immovable property which includes things permanently
attached to or permanently fastened to anything attached to
the earth are not goods. Standing trees are not goods.
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DECLARED GOODS – s. 2(c)
“Declared Goods” means goods declared under
Section 14 to be of special importance in InterState trade or commerce.
Cereals (paddy, rice, wheat, maize, ragi
Coal, Cotton, Cotton Fabrics, Cotton Yarn, Crude Oil, Iron and
Steel, Jute, Oil Seeds, Pulses, Sugar, Woven fabrics of wool
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DEALER – S. 2(b)
“Dealer” means any person who carries on
(whether regularly or otherwise) the business
of buying, selling, supplying or distributing
goods, directly or indirectly, for cash or for
deferred payment or for commission,
remuneration or other valuable consideration.
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Includes –
a.

b.
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A local authority, a body corporate, a company, any
co-operative society or other society, club, firm,
HUF or other association of persons which carries on
such business;
a factor, broker, commission agent, del credere agent,
or
any other mercantile agent, by whatever name
called and whether of the same description as
hereinbefore mentioned or not, who carries on the
business of buying, selling, supplying or distribution,
goods belonging to any
principal whether disclosed
or not; and
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An auctioneer who carries on the business of selling or
auctioning goods belonging to any principal, whether disclosed
or not and whether the offer of the intending purchaser is
accepted by him or by the principal or a nominee of the principal.
Persons selling Illegal Goods is also a dealer for the purposes
of CST Act.
Professional services – A person providing services of
professional nature (doctors) shall not be considered as
Dealers.
GOVERNMENT AS A “DEALER” – Government, which (whether
or not in the course of business) buys, sells, supplies or
distributes goods (directly or otherwise), for cash or for deferred
payment or for commission, remuneration or other valuable
considerations shall be a “dealer”.
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The Provisions of CSA Act are attracted,
if the following conditions are satisfied
i.
There is a Dealer - S. 2 (b)
ii.
He must be a registered dealer i.e. dealer
registered under the CST Act – S.7
iii.
The dealer must carry on a business - S. 2(aa)
iv.
There must be sale –2 (g)
v.
The sale must be of goods – 2 (d)
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vi.
The sale may be of declared goods or otherwise
vii.
The sale must be in the course of Inter-State trade
or commerce
viii.
It should not be a sale inside a State – s. 4(2)
ix.
The sale should not take place in the course of
import or export – S.5
x.
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The buyer may be a registered dealer or not.
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
Newspaper specifically excluded – from Both
Union and State List. The obvious reason is
that newspaper have very vital role to play in
democratic society. Freedom of speech and
free flow of information is the backbone of
democracy and hence newspapers have been
excluded from the tax – “Newspapers” are
“goods” in the normal sense, only specifically
excluded.
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Provisions of CST Act are attracted – if the
conditions are satisfied




1.
2.
CST shall be levied
It shall be levied on turnover, which is the aggregate of
sale price, at a specified rate.
3. It shall be collected in the State from which the
movement of goods commences and by the registered
dealer.
4. The registered dealer shall submit return and assessment
shall be completed by the assessing authority in the
appropriate State.
5. As CST Act makes a very few provisions for rules and
procedures, provision of the respective State shall be
applicable regarding returns, assessment, appeals, etc.
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Goods for the purpose of CST have
been divided into two categories

i.
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Declared goods or goods of special
importance in Inter-state Trade or Commerce
– CST on such goods is charged at NIL rate
or at a lower rate, which cannot be more
than 4%, if such goods are sold to registered
dealer. If such declared goods are sold to an
unregistered dealer, CST will be charged at
twice the rate applicable to such goods.
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
ii. Other goods – CST on such goods are charged
at 10% or at rate applicable to such goods
inside the appropriate State, whichever is
higher. However, if such goods are sold to
registered dealer against prescribed form
issued by the registered dealer, the rate of CST
will be 4% instead of normal rate.
The
prescribed forms are Form C – if buyer is
Registered Dealer and Form D – if buyer is
Government.
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SALE – S. 2 (g)

Sale, with its grammatical variations and cognate
expressions, means any transfer of property in
goods by one person to another for cash or for
deferred payment or for any other valuable
considerations, but does not include a mortgage or
hypothecation of or a charge or pledge on goods.
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DEEMED SALE – Pursuant to amendment of Article
366 (29A) of the Constitution
* the following deemed transactions are also covered by the
expression “sale” –
 a.
a transfer otherwise than in pursuance of a contract, of
property in any goods for cash, deferred payment or
other valuable consideration;
 b.
a transfer of property in goods (whether as goods or in
some other form) involved in the execution of a works
contract;
 c.
a delivery of goods on hire purchase or any system of
payment by installments;
 d.
a transfer of the right to use any goods for any purpose
(whether or not for a specified period) for cash, deferred
payment or other valuable consideration;
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

e. supply of goods by any unincorporated
association or body of persons to a member
thereof for cash, deferred payment or other
valuable consideration;
f. a supply, by way of (or part of) any service (or
in any other manner whatsoever) of goods,
being food or any other article for human
consumption or any drink (whether or not
intoxication), where such supply or service, is
for cash, deferred payment or other valuable
consideration.
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Hire Purchase – Constitution amended in
1982 to specifically include “hire purchase”
in the definition of SALE.
Works Contract – Sales tax cannot be
levied on the full value of the works
contract, but only on value of goods
actually transferred in execution of the
works contract.
Sale v, Agreement to Sell – Unless there is
‘transfer of property’ there is no sale. Mere
‘agreement to sell’ does not amount to sale
as there is no transfer of property.
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




Sale takes place only when there is transfer of
property and goods transferred are ascertained
goods.
Sale includes
- Barter / Exchange
- Illegal goods sale (like income from illegal
source under IT Act)
- Compulsory transfer of controlled goods
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Ingredients of Sale –
i. A bargain or a contract of sale
ii. The payment or promise of payment of price
iii. The delivery of goods
iv. The transfer of property in the goods i.e.
actual passing of the title.
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Sale DOES NOT Include mortgage or
hypothecation of or a charge or
pledge on goods
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INTER-STATE SALE or PURCHASE

A sale or purchase of goods shall be deemed to take place
in the course of Inter-state trade or commerce if the sale or
purchase

a.

b.

Can be as per S.3 a or b
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occasions the movement of goods from one State to
another or
Is effected by a transfer of documents to the goods
during their movement from one State to another.
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Restrictions on powers of taxation on imposition
of tax on sale or purchase of goods are provided
in Articles of 286 of Constitution of India, as
follows:
State Government cannot impose tax on sale or
purchase during imports or exports; or tax on
sale outside the State
Parliament is authorized to formulate principles
for determining when a sale or purchase takes
place (a) outside the State (b) in the course of
import and export
Parliament can place restrictions on tax on sale
or purchase of goods declared as goods of
special importance and State Government can
tax such declared goods only subject to these 35
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SALE BY TRANSFER OF DOCUMENTS
1.
What is ‘Document to Title of Goods”
What is transfer ‘During Movement of Goods’
The documents of title (Lorry Receipt, Railway
Receipt, Bill of Lading, AirWay Bill) is in favor of
Agent/Banker/Self, who can transfer the title to
Purchaser by way of endorsement. Transfer of
Documents is a symbolic delivery of goods to the
purchaser, which carries with it full ownership of
goods.
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The following shall not be part of sale price







1. Freight / transport charges for deliver of goods, if charged
separately
2. Cost of installation, if charged separately
3. Cash discounts for making timely payment (shall be
deducted from the sale price)
4. Trade discounts (it may be given periodically a the end of
month / quarter / year, it is not the requirement that it shall
be given only at the time of sale)
5. Insurance charged of goods insured on behalf of the
buyer or at the request of the buyer
6. Goods returned within 6 months of the date of sale
7. Goods rejected.
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TURNOVER – S. 2(j)

It is the aggregate of the sale prices received and
receivable by the dealer in respect of sales of any
goods in the course of inter-State trade or
commerce made during any prescribed period.
Prescribed period is the period in which sales tax
return is filed as per the local sales tax law of the
State.

Turnover is determined in accordance with the
provisions given in section 8A.
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REGISTERED DEALER – S 2(f)


It means a dealer who is registered under Section
7.
S. 7 – There can be two ways in which a dealer
can get himself registered - Compulsory
registration or Voluntary registration.
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Compulsory Registration – S. 7 (1)

Every dealer liable to pay tax under the CST Act shall (within
such time as may be prescribed for the purpose) make an
application for registration under the Act to such authority in
the appropriate State as the Central Government (by general
or special order) specify and every such application shall
contain such particulars as may be prescribed.

As per S. 6 (1) every dealer effecting in the course of InterState trade or commerce is liable to CST. Every dealer liable
to CST has to necessarily register himself with the Sales Tax
Authority of the particular State
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WHO IS A PERSON


The word ‘person’ is not defined under the CST
Act.
However, includes the following – i. Natural
Person, ii.
legal person, iii. Company, iv.
Associations, v. society, vi. a HUF, vi. Institutions,
vii. Firm, viii. Chambers of Commerce; ix. clubs,
x. A local authority, xi. Central Government, xii.
State Government
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STOCK TRANSFER / BRANCH TRANSFER

One of the important conditions to come within the
purview of the term “inter-State sale” is that there
should be sale is that there be sale. Transfer of
goods to a branch or dispatch of goods to a
consignment agent does not amount to “sale” and
consequently there is not inter-State and CST
liability, though goods move from one State to
another. The person retains ownership of goods.
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CROSSING THE CUSTOMS
FRONTIERS OF INDIA – S. 2(ab)

It means crossing the limits of the area of a
customs station in which imported goods or
export goods are ordinarily kept before clearance
by customs authorities, “Customs station” and
“Customs authorities” shall have the same
meaning as in Customs Act, 1962.
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Penultimate Sale for Export

As Exports is a specialized business (foreign buyer
contacts and expensive advertisement & promotions) and
many small units unable to export directly, effected through
specialized agencies like Export Houses, etc. Certain
goods can be exported through specialized agencies –
State Trading Corporation. Such indirect exports also need
exemption from taxes to make the Indian products
competitive.
Hence, such penultimate sales – sale
preceding the sale occasion exports is also deemed to be
in the course of export under S. 5 (3). Conditions to be
fulfilled are:
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

a. there must have been pre-existing agreement or
order to sell the specific goods to a foreign buyer.
b.
the last purchase referred to in section 5 (3)must
have taken place after that agreement with
the
foreign buyer was entered into.
c. the last purchase must have been made for the
purpose of complying with the pre-existing
agreement or order.
Only if these 3 conditions are satisfied, the transaction falls
under S. 5(3).
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Example –

A of Delhi receives an order for export of certain goods from G
of Germany. To execute this order, he buys the goods from B
of Ludhiana. The sale by B to A, which is the last sale before
actual export sale, shall also be deemed to have taken place
in the course of export, although B has sold the goods to A in
India. This sale shall therefore, not be taxable under State
Sales Tax law or CST law.


PURCHASE PRIOR TO PENULTIMATE SALE NOT EXEMPT
– Only penultimate sale is exempt but purchases earlier to
penultimate sale are not exempt and purchase tax is payable
if prescribed – State of Tamilnadu Vs. Madras Pack Marine.
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SALE DURING IMPORT

As per Article 286(1) of Constitution of India,
sales tax cannot be levied in respect of sale
during import. A sale or purchase of goods is
deemed to be in course of import of the goods
into the territory of India, only if (a) the sale or
purchase either occasions such import or (b) is
effected by a transfer of documents of title to
goods before the goods have crossed the
customs frontiers of India – S. 5(2).
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Imports could be



i. direct imports
ii. imports through agent
iii. imports by transfer of documents.

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Year – S. 2(k) –

‘Year’, in relation to a dealer, means the year
applicable in relation to him under the general
sales tax law of the appropriate State, and where
there is no such year applicable, the financial
year.
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G S T

General Sales Tax Law means the law for the
time being in force in any State or part thereof
which provides for the levy of tax on the sale or
purchase of goods generally.

Sales Tax law includes General Sales Tax Law,
the law relating to imposition of surcharge and
additional sales tax, etc.
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Rounding off of tax – S. 9B of CST Act

The amount of tax, Interest, Penalty, Fine or any sum
payable and the amount of refund due, under the
provision of this Act shall be rounded off to the nearest
rupee and for this purpose, where such amount contains
a part of a rupee consisting of paise, then if such part is
fifty paise or more, it shall be increased to one rupee and
if such part is less than fifty paise, it shall be ignored.
However, the said provision is not applicable to a dealer
while collecting any amount of tax in the case of interstate sale of any goods. In other words, he should collect
tax in the invoice without rounding up. However, while
paying sales tax to Government on monthly/quarterly
basis, the amount should be rounded to nearest rupee.
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Following Transactions Taxable
under CST Act
i. Subsequent Sales by transfer of documents – CST Act
envisages a single point levy at the first point of sale.
Subsequent sales during movement of goods exempt to
avoid multi- point levy of tax.
ii. Exemption if local sales is generally exempt – CST is leviable
even if sale of goods inside a State is exempt from sales tax
in that State (S. 6(1A). However, under section 8(2A), if sale
inside State is generally exempt from local sales tax or is
generally taxable at rate less than 4 %, then CST payable will
be NIL or actual tax payable on Intra-State sale as the case
may be. Thus, S. 6(A) has applications only when local sale
is not generally exempt.
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
i.


a.
b.
c.
d.

e.
Exemption by notification – State Government can grant
exemption under S. 8(5) in respect of inter-State sales
effected from the State. Such notification should be in
Public Interest
By way of notification of Official Gazette
Exemption may be subject to condition
Exemption may be i. to any dealer for goods or classes of
goods or ii. in respect of all sales of classes of goods by
any class of dealers
Exemption may be total or partial.

ii.
iii.
Sale during Import/Export – these are exempt from tax.
Sale to unit in SEZ



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Meaning of ‘Occasions such
export/import sale1s’ under
CST ACT, 1956



‘Occasions’ means ‘to cause’ or ‘to be the immediate
cause of. As per the Supreme Courts judgments
‘occasions import/export sales’ must comprise of 3
elementsi. there shall be a common intention of both buyer
and seller to export/import
ii.
there shall be an obligation to export/import
there shall be an actual export/import
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to occasion export, there must exist
such a bond between the contracts
of sale and the actual exportation
that each link is inextricably
connected with the one immediately
preceding it. Without such a bond, a
transaction of sale cannot be called
a sale in the course of export of
goods out of the territory of India.
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