1989 (7) TMI 324 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the supply of coffee through the State Trading Corporation (STC) to a foreign buyer constitutes an export sale exempt from taxation under Section 5(1) of the Central Sales Tax Act, 1956.
2. Whether the dealer had sufficient opportunity to file C forms for concessional tax rates.

Detailed Analysis:

1. Export Sale Exemption under Section 5(1) of the Central Sales Tax Act, 1956:
The primary contention was whether the transactions between the Coffee Board (the dealer) and the STC amounted to export sales exempt from taxation under Section 5(1) of the Central Sales Tax Act, 1956. The assessing authority had found that the export of goods worth Rs. 1,07,88,750 through the STC did not qualify as a direct export sale. The Deputy Commissioner of Commercial Taxes upheld this view, noting the absence of privity of contract between the foreign buyer and the dealer, thus disqualifying the transaction from being considered as an export sale under Section 5(1). This was further affirmed by the Karnataka Appellate Tribunal, which held that the transactions between the dealer and the STC were independent of those between the STC and the foreign buyer.

The Court analyzed the provisions of the Constitution and the Act, particularly Article 286(1)(b) and Section 5 of the Act, which define when a sale or purchase occurs in the course of export. The Court referred to several Supreme Court judgments, including Ben Gorm Nilgiri Plantations Co. v. Sales Tax Officer and Mod. Serajuddin v. State of Orissa, which clarified that for a sale to be in the course of export, there must be a direct link between the Indian exporter and the foreign importer.

The Court concluded that the transactions between the Coffee Board and the STC did not satisfy the criteria for an export sale under Section 5(1) as there was no direct privity of contract with the foreign buyer. The sale to the STC was considered a separate transaction, and the STC was deemed the exporter. Hence, the transactions did not qualify for exemption under Article 286 of the Constitution.

2. Opportunity to File C Forms for Concessional Tax Rates:
The second issue was whether the dealer had sufficient opportunity to file C forms to avail of concessional tax rates. The Deputy Commissioner and the Tribunal had denied the dealer's request for more time to file C forms, noting that adequate time had already been provided. The Court, however, found this approach unreasonable, especially considering that the dealer had been contesting the nature of the transactions as export sales based on legal advice.

The Court noted that the transactions were between a statutory organization and a public sector undertaking, implying a level of trust and transparency. Therefore, it was deemed reasonable to allow the dealer an additional opportunity to submit the C forms. The Court directed that the dealer be permitted to produce the C forms within one month to claim the benefit of concessional tax rates.

Conclusion:
The Court partially allowed the revision petition. It upheld the finding that the transactions between the Coffee Board and the STC were not export sales exempt from taxation under Article 286 of the Constitution. However, it set aside the assessment order concerning the turnover of Rs. 1,07,88,760 and remanded the matter to the assessing authority to consider the dealer's claim based on C and D forms. The dealer was granted one month to produce the C and D forms for the period in question to avail of concessional tax rates. In all other respects, the assessment order as affirmed by the appellate authority and the Tribunal remained undisturbed.