1989 (11) TMI 299 - AT - VAT and Sales Tax

Issues Involved:
1. Whether the purchases of tea by the applicant-companies from wholesalers/tea brokers for ultimate export to Iran were the last sales or purchases preceding the sale or purchase occasioning export of those goods.
2. Whether these purchases are deemed to be in the course of export within the meaning of sub-section (3) of section 5 of the Central Sales Tax Act, 1956.
3. Whether the sales of tea to the foreign buyer are exempted under sub-clause (b) of clause (1) of article 286 of the Constitution of India and sub-section (1) of section 5 of the CST Act.
4. Whether the department's move to realize sales tax on the purchases from tea brokers is unwarranted and illegal.

Issue-wise Detailed Analysis:

1. Whether the purchases of tea by the applicant-companies from wholesalers/tea brokers for ultimate export to Iran were the last sales or purchases preceding the sale or purchase occasioning export of those goods:

The applicant-companies argued that the exports were directly made by themselves, and thus the sales of tea were made by them to the foreign buyer, with the STC acting merely as their agent. Consequently, no sale of goods between them and STC was involved in the process. The Revenue, however, contended that the export sales were actually made by the STC, with the applicants selling the teas to the STC and shipping the same as its agent. The Tribunal concluded that the agreements between the STC and the applicants were contracts for the sale of tea by the applicants to the STC, with the applicants shipping the goods on behalf of the STC as its agent for that limited purpose. Thus, the purchases from tea brokers at auctions were not the last sales preceding the export sales.

2. Whether these purchases are deemed to be in the course of export within the meaning of sub-section (3) of section 5 of the Central Sales Tax Act, 1956:

The Tribunal held that the agreements between the STC and the applicants indicated two contracts: one for the sale of goods to the STC and the other for the shipment of goods to the foreign buyer. The Tribunal noted that the mere fact that the goods were shipped using the export licenses/permits of the applicants did not make it a direct export by them to the foreign buyer. Therefore, the purchases from tea brokers at auctions were not deemed to be in the course of export under section 5(3) of the CST Act.

3. Whether the sales of tea to the foreign buyer are exempted under sub-clause (b) of clause (1) of article 286 of the Constitution of India and sub-section (1) of section 5 of the CST Act:

The Tribunal found that the STC entered into the export contracts independently and there was no privity of contract between the applicants and the foreign buyer. The Tribunal concluded that the sale from the applicants to the STC and the subsequent sale from the STC to the foreign buyer were distinct transactions. Consequently, the sales of tea to the foreign buyer were not exempt under article 286(1)(b) of the Constitution of India and section 5(1) of the CST Act.

4. Whether the department's move to realize sales tax on the purchases from tea brokers is unwarranted and illegal:

The Tribunal determined that the purchases from tea brokers at auctions were exigible to sales tax under the BFST Act, as no exemption under section 5 of the CST Act was available to these purchases/sales. The Tribunal dismissed the writ petitions, thereby upholding the department's move to realize sales tax on the purchases from tea brokers.

Conclusion:

The Tribunal dismissed the two writ petitions, concluding that the purchases of tea by the applicant-companies from wholesalers/tea brokers were not the last sales preceding the export sales and were not deemed to be in the course of export. The sales of tea to the foreign buyer were not exempt under article 286(1)(b) of the Constitution of India and section 5(1) of the CST Act. The department's move to realize sales tax on the purchases from tea brokers was found to be warranted and legal. The interim orders were vacated.

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