2010 (4) TMI 991 - HC - VAT and Sales Tax

Whether the transaction between the assessee and Air India cannot be considered as a sale made by the assessee as an export sale? Held that - Considering the background of this case that Air India is an Indian company and is not engaged in exchange of export business as Air India has not purchased liquor from the assessee for exporting to a foreign country, we are of the opinion that the questions of law framed in this revision petition are to be answered in favour of the Revenue and against the assessee. We are also of the opinion that the Tribunal without considering the nature of the transaction between the assessee and Air India has wrongly come to the conclusion that the transaction between Air India and the assessee falls in the course of export business. Therefore, we have to set aside the order passed by the Tribunal by answering all the questions of law in favour of the Revenue and against the assessee. Revision petition allowed.

Issues Involved:
1. Interpretation of "extended territorial jurisdiction" or "territorial jurisdiction" under the Sales Tax Act.
2. Whether the absence of an importer is essential to define "export."
3. Classification of Air India Limited as a "foreign company" or a "domestic company."
4. Validity of the Tribunal's decision that the sales to Air India constituted an export.

Issue-wise Detailed Analysis:

1. Interpretation of "Extended Territorial Jurisdiction" or "Territorial Jurisdiction" under the Sales Tax Act:
The court considered whether the term "extended territorial jurisdiction" recognized by international law should influence the interpretation of the Sales Tax Act. The judgment noted that the goods sold to Air India were delivered crossing the customs frontiers of India, but this did not automatically classify the transaction as an export sale. The court emphasized that for a sale to be considered in the course of export, it must meet specific criteria under Section 5(1) of the Central Sales Tax Act, which includes either occasioning such export or being effected by a transfer of documents of title to the goods after crossing customs frontiers.

2. Absence of Importer as Essential to Define "Export":
The court addressed whether the absence of an importer is crucial to the definition of "export." It was clarified that for a transaction to be considered an export, there must be an Indian exporter and a foreign importer. In this case, Air India, being an Indian company, did not qualify as a foreign importer. The court referred to the definition under Section 2(ab) of the CST Act, which specifies that crossing customs frontiers alone does not constitute an export if the buyer is not a foreign entity.

3. Classification of Air India Limited as a "Foreign Company" or a "Domestic Company":
The court determined that Air India Limited is a domestic company incorporated under the Companies Act and is a public sector undertaking of the Union of India. This classification was crucial because the nature of the buyer (foreign or domestic) significantly impacts the classification of the transaction as an export sale. The court concluded that Air India, being a domestic company, could not be considered a foreign buyer, which is essential for a sale to be classified as an export.

4. Validity of the Tribunal's Decision on Export:
The Tribunal had previously ruled that the sales to Air India were in the course of export. However, the High Court found this conclusion erroneous. The court emphasized that Air India did not claim the transactions as export sales, and merely delivering goods across customs frontiers did not satisfy the criteria for an export sale under the CST Act. The court cited previous judgments, including State of Travancore-Cochin v. Bombay Company Ltd., to support its conclusion that the transactions did not constitute export sales because the buyer was not foreign and the goods were not intended for export by Air India.

Conclusion:
The High Court concluded that the transactions between the assessee and Air India did not qualify as export sales. It held that the Tribunal had erred in its interpretation and application of the law. Consequently, the court answered all the substantial questions of law in favor of the Revenue and against the assessee, setting aside the Tribunal's order and allowing the revision petition.

← Previous Next →