2007 (1) TMI 521 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Nature of transactions between dealers and Bombay party.
2. Applicability of the decision in Mod. Serajuddin v. State of Orissa.
3. Determination of whether the transactions were in the course of export or inter-State sales.

Issue-wise Detailed Analysis:

1. Nature of Transactions Between Dealers and Bombay Party:
The dealers engaged in the business of brass taps and fittings appointed M/s. Eastern Oceanic (Bombay party) as their export agent through an agreement dated May 2, 1973. The Bombay party procured export orders and dispatched goods from the dealers to foreign buyers. The dealers claimed these dispatches were in the course of export, not inter-State sales. The Tribunal's findings, based on the agreement, indicated that the Bombay party acted as an agent for the dealers. The payments received from foreign buyers were debited in the dealers' accounts after deducting the agent's commission. The Tribunal concluded that the movement of goods from Mathura to Bombay was in pursuance of the export orders, thus constituting an export transaction.

2. Applicability of the Decision in Mod. Serajuddin v. State of Orissa:
The learned Standing Counsel argued that the decision in Mod. Serajuddin v. State of Orissa should apply, where the Supreme Court held that transactions between Serajuddin and the State Trading Corporation were on a principal-to-principal basis, not an agency relationship. However, the Tribunal distinguished this case, noting that in Mod. Serajuddin, there was no agency relationship, whereas in the present case, the Bombay party acted as an agent under a genuine agreement. The Tribunal found that the agreement between the Bombay party and foreign buyers was effectively between the dealers and foreign buyers, thus linking the movement of goods to the export orders.

3. Determination of Whether the Transactions Were in the Course of Export or Inter-State Sales:
The Tribunal examined the agreement and other facts, concluding that the movements of goods were in the course of export. The Tribunal referenced several cases from the Madras High Court, such as State of Tamil Nadu v. A. Rafeeq Ahmed & Co., which supported the view that sales through an agent for export purposes constituted export sales, even if the foreign buyers were unaware of the Indian principal. The Tribunal also noted that there was no material evidence to show that the goods were moved under a contract of sale between the dealers and the Bombay party, thereby rejecting the notion of inter-State sales.

Conclusion:
The High Court upheld the Tribunal's decision, confirming that the transactions were in the course of export and not inter-State sales. The revisions were dismissed, affirming the Tribunal's findings that the Bombay party acted as an agent for the dealers, and the movement of goods from Mathura to foreign buyers was in pursuance of export orders. The decision in Mod. Serajuddin was deemed inapplicable due to the different nature of the relationships involved.