1980 (10) TMI 189 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the sales in question were inter-State sales or local sales.
2. Whether the transactions were sales "in the course of export" and thus not exigible to tax.
3. Determination of the applicable tax rate for the escaped turnover.
4. Interpretation of the agreement clauses between the assessee and Messrs. Rasul & Co.

Issue-wise Detailed Analysis:

1. Whether the sales in question were inter-State sales or local sales:
The Tribunal had divergent views on whether the sales to Messrs. Rasul & Co., Bombay, were inter-State sales. The Chairman believed they were inter-State sales, while the Accounts Member and Departmental Member concluded otherwise, albeit for different reasons. The High Court, after examining the facts and the agreement, determined that the sales were indeed inter-State sales. The contract stipulated the movement of goods from Kerala to Bombay, and the inter-State movement was an incident of the sale contract. The Court cited Supreme Court precedents to support that the decisive factor is whether the sale occasioned the movement of goods from one State to another, which in this case, it did.

2. Whether the transactions were sales "in the course of export" and thus not exigible to tax:
The assessee contended that the transactions were in the course of export and hence not taxable. The Tribunal unanimously rejected this argument, noting there was no privity of contract between the assessee and the foreign buyers. The High Court upheld this view, stating that the mere mention of f.o.b. price in the agreement did not make the transactions export sales. The goods were sold to Messrs. Rasul & Co., who then exported them, making the assessee a third party to the export contract.

3. Determination of the applicable tax rate for the escaped turnover:
Initially, the assessing authority taxed the escaped turnover at 10%, which was later revised to 3% after the assessee produced C form declarations. The High Court did not find any issue with this revised assessment rate, indicating that the procedural aspects of tax rate determination were correctly followed by the assessing authority and the Deputy Commissioner (Appeals).

4. Interpretation of the agreement clauses between the assessee and Messrs. Rasul & Co.:
The High Court meticulously analyzed the agreement clauses, emphasizing that the goods were to be delivered on board ships at designated ports, with ownership passing only after the goods were put on board. The agreement allowed for the movement of goods to ports other than Cochin or Calicut upon the buyer's request, with the seller retaining title until shipment. The Court concluded that these clauses clearly indicated an inter-State sale, as the movement of goods from Kerala to Bombay was a direct result of the sale agreement.

Conclusion:
The High Court allowed the revision petition, setting aside the Tribunal's order and restoring the assessing authority's decision. The Court held that the sales were inter-State sales, exigible to tax under the Central Sales Tax Act, and not local or export sales. The parties were directed to bear their respective costs.