1973 (11) TMI 76 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the sales by the assessee to M.M.T.C. were in the course of export and thus exempt from tax under Article 286(1)(b) of the Constitution.
2. Whether the sales were intra-State sales within Mysore and not subject to tax under the Central Sales Tax Act, 1956.

Issue-wise Detailed Analysis:

1. Exemption from Tax Under Article 286(1)(b):

The primary contention of the assessee was that the sales to M.M.T.C. were in the course of export and thus exempt from tax under Article 286(1)(b) of the Constitution. The judgment emphasized that to qualify as a sale in the course of export, the sale must either occasion the export or be effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India, as per Section 5(1) of the Central Sales Tax Act, 1956.

The court referred to the Supreme Court's interpretation in State of Travancore-Cochin v. Bombay Co. Ltd. and State of Travancore-Cochin v. S.V.C. Factory, which clarified that a sale by export involves a series of integrated activities from the agreement of sale with a foreign buyer to the delivery of goods to a common carrier for transport out of the country. The court also cited the Supreme Court's decision in Coffee Board v. Joint Commercial Tax Officer, which held that a sale in the course of export must be a single sale causing the export, with no room for intermediary sales.

In this case, the assessee's sales to M.M.T.C. were not pursuant to any agreement with a foreign importer but were internal sales to M.M.T.C., which had the license to export. Thus, there were two distinct sales: one from the assessee to M.M.T.C. and another from M.M.T.C. to the foreign buyer. The court concluded that only the second sale by M.M.T.C. qualified for exemption under Article 286(1)(b).

The court examined the terms of the contract, noting that it was a f.o.r. contract, with the railway receipts taken in M.M.T.C.'s name and payment obtained against the "payment copy" of the R/R. Under Section 23(1) of the Sale of Goods Act, the property in the goods passed to the buyer when the goods were unconditionally appropriated to the contract. In this case, the goods were appropriated when loaded into railway wagons in Mysore State, long before entering the export stream.

The court dismissed the argument that the final settlement of accounts and the right of M.M.T.C. to reject consignments linked the sale to export. It found that the final analysis and rejection rights pertained to the shipment stage at Cuddalore, not the foreign port.

2. Nature of Sales - Inter-State vs. Intra-State:

The alternative contention was that the sales were intra-State within Mysore and not subject to inter-State tax. The court highlighted that the contract required the ore to be loaded into railway wagons at Papinaikanahalli in Mysore for transmission to Cuddalore in Tamil Nadu. The contract also stipulated shared charges for weighment, sampling, and analysis at Cuddalore, indicating the movement of goods across state lines.

Thus, the sales were deemed inter-State sales, attracting tax under the Central Sales Tax Act, 1956.

Conclusion:

The court upheld the Commissioner's view that the sales by the assessee to M.M.T.C. were not in the course of export and were inter-State sales subject to tax. Consequently, the appeal was dismissed with costs.