1977 (9) TMI 105 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Interpretation of Section 5(1) of the Central Sales Tax Act, 1956.
2. Whether the sales made by the appellants to the National Agricultural Co-operative Marketing Federation Ltd. qualify as sales in the course of export.

Detailed Analysis:

1. Interpretation of Section 5(1) of the Central Sales Tax Act, 1956:
The primary issue in these tax revision cases is the interpretation of Section 5(1) of the Central Sales Tax Act, 1956. Section 5(1) states: "A sale or purchase of goods shall be deemed to take place in the course of the export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India."

The court examined the historical context of this provision, referencing earlier interpretations of Article 286(1) by the Supreme Court, specifically the Travancore-Cochin cases. These cases established that multiple sales linked to form a single transaction causing the export could qualify as sales in the course of export. However, the current governing provision is Section 5(1), as interpreted in the Supreme Court's decision in Mod. Serajuddin v. State of Orissa. The Supreme Court emphasized that the sale or purchase must directly occasion the export for it to be considered in the course of export.

2. Whether the Sales to the National Agricultural Co-operative Marketing Federation Ltd. Qualify as Sales in the Course of Export:
The facts of the case revolve around the appellants, who are dealers in chillies, selling to the National Agricultural Co-operative Marketing Federation Ltd. (local buyer), which had an exclusive right to export dried chillies to Ceylon. The local buyer had pre-existing contracts with the foreign importer in Colombo, and the appellants' sales were made in pursuance of these commitments. The contracts specified that the appellants would export the chillies to the foreign importer on behalf of the local buyer, with the local buyer receiving a commission.

The court noted that the Supreme Court in Mod. Serajuddin v. State of Orissa had determined that sales to an intermediary (State Trading Corporation) did not qualify as sales in the course of export because the intermediary's contract with the foreign buyer was the immediate cause of the export. Similarly, the court found that the sales by the appellants to the local buyer were distinct and separate from the export by the local buyer to the foreign importer.

The court also addressed the argument that the second limb of Section 5(1) might apply, which requires the transfer of property in goods by transfer of documents of title after the goods have crossed customs frontiers. The court rejected this argument, noting that it had not been raised before the Tribunal and that there was no plausible case for its application based on the Supreme Court's rulings.

In conclusion, the court held that the sales made by the appellants to the National Agricultural Co-operative Marketing Federation Ltd. did not qualify as sales in the course of export. The court set aside the order of the Tribunal, allowed the revision petitions, and directed that the assessees were not entitled to claim exemption for these sales as sales in the course of export.

Final Judgment:
The petitions were allowed, and the sales made by the assessees to the National Agricultural Co-operative Marketing Federation Ltd. were not considered sales in the course of export. Each party was directed to bear their respective costs.