1970 (11) TMI 91 - HC - VAT and Sales Tax

Issues Involved:

1. Whether the sale of linseed oil amounting to Rs. 16,200.10 is exempt from sales tax under Article 286(1)(b) of the Constitution.
2. Interpretation of "in the course of export" under Article 286(1) of the Constitution and Section 5(1) of the Central Sales Tax Act, 1956.
3. Determination of whether the sale occasioned the export of goods.

Issue-wise Detailed Analysis:

1. Exemption from Sales Tax under Article 286(1)(b):
The primary issue is whether the sale of linseed oil to Netherland Selling Organisation Ltd. is exempt from sales tax under Article 286(1)(b) of the Constitution. The applicant, a registered dealer, claimed exemption under Section 5(2)(a)(v) of the Bengal Finance (Sales Tax) Act, 1941, which aligns with Article 286(1) of the Constitution. Article 286(1) prohibits state laws from imposing tax on sales or purchases that occur in the course of export out of India. The Commercial Tax Officer, Assistant Commissioner, Additional Commissioner of Commercial Taxes, and the Board of Revenue all rejected the applicant's claim, asserting that the sale did not occasion the export but was a sale for the purpose of export.

2. Interpretation of "In the Course of Export":
The court examined the expression "in the course of export" as per Article 286(1) and Section 5(1) of the Central Sales Tax Act, 1956. The amended Section 5(1) states that a sale is deemed to occur in the course of export if it either occasions the export or is effected by a transfer of documents of title after the goods have crossed the customs frontiers of India. The applicant contended that the transaction fell within the first limb, i.e., the sale occasioned the export.

3. Determination of Whether the Sale Occasioned the Export:
The court analyzed whether the sale occasioned the export by examining the terms of the agreement and the nature of the transaction. The agreement specified that the goods were to be delivered f.o.b. (free on board) Calcutta, with the purchaser arranging insurance and bearing shipment marks indicating destinations in Indonesia. The court noted several key facts:
- The goods were placed on board a ship named by the purchaser.
- The export was under the seller's export license, and customs duties were paid by the seller.
- Payment was to be made against the presentation of a "clean on board" mate's receipt.

The court referred to various Supreme Court judgments to understand the principles determining when a sale occasions an export. The principles include:
- The export is an incident or covenant of the sale.
- The export is part of or connected with the activity of sale.
- The export is a direct result of the sale.
- The export and the sale constitute parts of an integrated activity.

The court concluded that the sale in question satisfied these principles. The seller's obligation to put the goods on board, the shipment marks indicating export destinations, and the export under the seller's license demonstrated that the sale and export were integrated activities. Therefore, the sale occasioned the export, making it exempt from sales tax under Article 286(1)(b) of the Constitution.

Conclusion:
The court answered the reference in the affirmative, holding that the sale of linseed oil amounting to Rs. 16,200.10 is exempt from sales tax under Article 286(1)(b) of the Constitution. The assessee was entitled to the costs of the reference.

Judgment:
The judgment was delivered by SANKAR PRASAD MITRA, J., with ROY, J. concurring. The reference was answered in the affirmative.

← Previous Next →