1977 (11) TMI 120 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the transactions of supply of designs by the respondents to their customers were sales as defined by the Central Sales Tax Act.
2. Whether the sales of blocks by the respondents to the Russian Embassy at New Delhi were exempt from tax under article 286(1)(b) of the Constitution of India.

Analysis:
1. The Court declined to answer question No. (1) regarding the supply of designs. However, for question No. (2), it was established that the respondents supplied blocks to the Russian Embassy at New Delhi during specific assessment periods. The Sales Tax Officer taxed these transactions under the Central Sales Tax Act as inter-State sales. The respondents appealed and went through various stages of appeal, leading to the Tribunal's decision that the sales were exempt under article 286(1)(b) of the Constitution of India as exports out of India.

2. The main issue was whether the sales to the Russian Embassy could be considered sales in the course of export, thus exempt from tax under article 286(1)(b) of the Constitution. The Court analyzed the geographical location of the Russian Embassy in New Delhi and the legal status of diplomatic premises. It was noted that New Delhi is within the territory of India, and there was no provision in any law to consider diplomatic premises as outside Indian territory. The Court also discussed the Vienna Convention on Diplomatic Relations, highlighting that even under this convention, sales to embassies were not exempt from taxes. The Court dismissed the relevance of a later notification exempting sales to diplomatic officers in New Delhi, as it did not apply to the transactions in question.

3. The Court concluded that the sales to the Russian Embassy did not qualify as exports under article 286(1)(b) of the Constitution. Therefore, the sales were not exempt from tax. The Tribunal's decision was overturned, and the respondents were directed to pay costs to the applicant. The Court emphasized that there was no legal basis for considering the sales to the Russian Embassy as exports, leading to the negative answer to question No. (2).

This detailed analysis of the judgment highlights the Court's reasoning and legal interpretation regarding the exemption of sales to diplomatic entities under the relevant constitutional provisions and international conventions.