1968 (2) TMI 106 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the turnover of the applicant on account of sales made to Nepal purchasers can be treated as sales in the course of export of goods out of the territory of India and thus exempt from sales tax.

Detailed Analysis:

1. Facts and Procedural History:
The assessee, a registered dealer under the Bihar Sales Tax Act, carried on business at Jainagar in the district of Darbhanga. For the period from April 1, 1958, to March 31, 1959, the assessee was assessed to sales tax on a gross turnover of Rs. 5,64,631 and a taxable turnover of Rs. 2,92,319. The assessee claimed exemption for sales worth Rs. 1,11,220 made to Nepal purchasers, arguing that these sales occurred in the course of export. The Assistant Superintendent of Commercial Taxes rejected this claim, stating that the sales were completed in Bihar. The Deputy Commissioner allowed a partial deduction for sales made by rail but disallowed the rest. The Board of Revenue upheld the disallowance, stating that the sales did not occasion the export of goods to Nepal.

2. Legal Question:
The primary legal question referred to the High Court was whether the sales to Nepal purchasers could be treated as sales in the course of export and thus exempt from sales tax under section 5(1) of the Central Sales Tax Act, 1956, and Article 286(1)(b) of the Constitution.

3. Relevant Legal Principles:
Article 286(1)(b) of the Constitution exempts sales that take place in the course of export from sales tax. The Supreme Court, in the two cashew-nut cases (The State of Travancore-Cochin v. The Bombay Company Ltd. and The State of Travancore-Cochin v. The Shanmugha Vilas Cashew-nut Factory), laid down that a sale in the course of export involves integrated activities that commence with the agreement of sale and end with the delivery of goods for transport out of the country. The sale and export must form parts of a single transaction, and there must be an obligation to export, either by the seller or the buyer.

4. Application of Legal Principles:
The High Court examined whether the sales to Nepal purchasers had the necessary integrated activities and obligation to export. The facts showed that the Nepal purchasers took delivery of goods in Bihar, transported them to Nepal, and paid customs duty. The Board of Revenue noted that the sale was completed at Jainagar, and the seller had no further responsibility for the goods once delivered to the buyer.

5. Comparison with Previous Cases:
The High Court compared the facts of this case with the case of Dulichand Hardwari Mull v. State of Bihar, where similar sales to Nepal were held to be in the course of export. However, the High Court noted that the crucial finding in Dulichand was that the goods were exported in pursuance of the contract of sale. In the present case, no such obligation to export was established.

6. Conclusion:
The High Court concluded that the sales to Nepal purchasers did not qualify as sales in the course of export. The necessary link of an obligation to export, either by contract or mutual understanding, was missing. Therefore, the turnover in question was not exempt from sales tax.

7. Final Judgment:
The High Court answered the question of law against the assessee, holding that the turnover on account of sales to Nepal purchasers could not be treated as sales in the course of export of goods out of the territory of India and was not exempt from sales tax. No order as to costs was made.

Separate Judgments:
- Narasimham, C.J.: Agreed with the main judgment, emphasizing the distinction between a sale for export and a sale in the course of export, and the necessity of an obligation to export.
- Tarkeshwar Nath, J.: Agreed with the main judgment.

Summary:
The High Court held that for sales to be considered in the course of export and thus exempt from sales tax, there must be an integrated series of activities culminating in the export of goods and an obligation to export. In this case, such an obligation was not established, and therefore, the sales to Nepal purchasers were not exempt from sales tax.

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