1984 (7) TMI 346 - HC - VAT and Sales Tax

Summary

Issues:
- Dispute over exemption claim for export sales under Tamil Nadu General Sales Tax Act, 1959 for the assessment year 1972-73.
- Interpretation of agency agreement between the assessee and Kothandaraman & Co. regarding sales transactions to Ceylon.
- Determination of the nature of sales transactions and privity between parties involved in the export sales.

Analysis:
The case involved an appeal by the assessee against the Board of Revenue's decision to revise the order of the Appellate Assistant Commissioner regarding the denial of exemption for export sales amounting to Rs. 4,04,420 under the Tamil Nadu General Sales Tax Act for the assessment year 1972-73. The Appellate Assistant Commissioner had initially allowed the exemption, considering the transaction as a single sale from the assessee to the foreign buyer through an agent. However, the Board of Revenue revised this finding, asserting that the sale was between the assessee and the agent, Kothandaraman & Co., not directly to the foreign buyer, based on the advance payment made by the agent. The key issue was the interpretation of the sales transaction and the privity of contract between the parties involved.

The assessee contended that the disputed turnover was related to the sale of transformers to the Ceylon Electricity Board by the selling agent, Kothandaraman & Co., as per the agency agreement between the parties. The agreement stipulated that the agent would receive a commission for sales and make an advance payment to the assessee. The Court analyzed the substance of the contract, emphasizing that the transaction should be viewed as an export sale by the assessee, even if the agent had made an advance payment. The absence of the principal's name in the invoices raised by the agent was highlighted by the Board of Revenue as evidence of two separate sales transactions. However, the Court rejected this argument, citing a previous decision that emphasized the actual nature of the transaction over the disclosure of the principal's name.

In a similar case previously adjudicated by the Court, it was established that the lack of privity between the foreign buyer and the local seller did not alter the fact that the sales were made by the assessee, even if conducted through an agent. The Court referred to earlier decisions that supported the principle that export sales through an agent do not change the identity of the seller. Consequently, the Court set aside the Board of Revenue's decision and upheld the Appellate Assistant Commissioner's order, emphasizing the legal precedence and the true nature of the sales transactions. The judgment favored the assessee, concluding that there was only one sale from the assessee to the foreign buyer, warranting the exemption claimed.