1984 (3) TMI 365 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of section 3-AAAA of the U.P. Sales Tax Act in relation to the liability of a dealer for tax on purchases meant for export. Application of section 5(3) of the Central Sales Tax Act to determine whether a sale is in the course of export or an inter-State sale.

Analysis:
The case involved two revisions under section 11(1) of the U.P. Sales Tax Act concerning the liability of a dealer for tax on purchases intended for export. The dealer had entered into an agreement with the State Trading Corporation for the supply of shoes meant for export to Russia. The Tribunal held that the dealer was not liable to pay tax under section 3-AAAA as the sale to the State Trading Corporation was considered an inter-State sale. However, the Commissioner of Sales Tax contended that the sale was in relation to export and not an inter-State sale, invoking section 5(3) of the Central Sales Tax Act.

The Court analyzed section 5 of the Central Sales Tax Act, specifically focusing on sub-section (3), which deems the penultimate sale to be in the course of export under certain conditions. The Court highlighted the requirements for a sale to be deemed in the course of export, including a pre-existing agreement with a foreign buyer and the purpose of complying with that agreement. The Tribunal had not considered the effect of section 5(3) in its decision, as the provision was inserted after the relevant precedents were decided.

Referring to the Supreme Court's interpretation in Consolidated Coffee Ltd. v. Coffee Board, the Court emphasized that if the conditions of section 5(3) are met, the sale would be deemed in the course of export, not an inter-State sale. The Court rejected the argument that section 5(3) only extended an exemption from tax liability, clarifying that it establishes a general principle for penultimate sales satisfying the specified conditions.

The Court held that the Tribunal's decision was erroneous and directed a fresh consideration of the case, emphasizing the need to assess whether the conditions of section 3-AAAA and section 5(3) were fulfilled. If met, the sales to the State Trading Corporation would be considered in the course of export, not inter-State sales, making the dealer liable to pay tax under section 3-AAAA. Both revisions were allowed, setting aside the Tribunal's order and instructing a reassessment of the appeals.

In conclusion, the Court clarified the application of section 3-AAAA of the U.P. Sales Tax Act and the significance of section 5(3) of the Central Sales Tax Act in determining the tax liability of a dealer for purchases intended for export, emphasizing the need to consider the specific conditions for deeming a sale in the course of export.