1998 (12) TMI 89 - SC - VAT and Sales Tax

Whether the sales made by the appellants were sales in the course of export and therefore exempt from the levy of sales tax? Held that - The High Court and the authorities below were in error in concluding that the sales made by the appellants were not sales in the course of export and therefore not exempt from the levy of sales tax. Appeal allowed.

Summary

Issues Involved:
1. Determination of whether the sales made by the appellants to Richco were sales in the course of export and thus exempt from sales tax.
2. Interpretation of Section 5 of the Central Sales Tax Act, 1956.
3. Analysis of the Off-Take Agreement and Charge Chrome Agreements to ascertain the nature of sales.
4. Consideration of relevant case law, particularly the judgment in Md. Serajuddin and Ors. v. The State of Orissa.
5. Evaluation of the affidavit filed by the Union of India supporting the appellants' stand.

Issue-wise Detailed Analysis:

1. Determination of whether the sales made by the appellants to Richco were sales in the course of export and thus exempt from sales tax:
The appellants contended that their sales to Richco were sales in the course of export, exempt from sales tax. The respondents argued that these sales were intra-State sales subject to tax. The Supreme Court concluded that the sales to Richco were indeed sales in the course of export, as the Charge Chrome Agreements indicated that the appellants were the exporters and the sales were directed to foreign ports, thus occasioning the export.

2. Interpretation of Section 5 of the Central Sales Tax Act, 1956:
Section 5(1) and (3) of the Central Sales Tax Act, 1956, were analyzed. The Court noted that a sale is deemed to take place in the course of export if it occasions the export or is effected by a transfer of documents of title after the goods have crossed customs frontiers. Additionally, the last sale preceding the export is also deemed to be in the course of export if it complies with the export agreement.

3. Analysis of the Off-Take Agreement and Charge Chrome Agreements to ascertain the nature of sales:
The Court examined the Off-Take Agreement and Charge Chrome Agreements. It was determined that the Off-Take Agreement was an agreement to sell, not a contract of sale, as it did not specify the quantity or price of charge chrome. The Charge Chrome Agreements, however, specified the quantity, price, and foreign destination, indicating they were the actual contracts of sale. These agreements showed that the sales were to Richco abroad, thus occasioning the export.

4. Consideration of relevant case law, particularly the judgment in Md. Serajuddin and Ors. v. The State of Orissa:
The Court referred to the Constitution Bench judgment in Md. Serajuddin and Ors. v. The State of Orissa, which laid down principles to determine which sale occasioned the export. The Court distinguished the present case from situations involving intermediaries, noting that Richco was not an intermediary but the direct buyer abroad, thus the sales to Richco were in the course of export.

5. Evaluation of the affidavit filed by the Union of India supporting the appellants' stand:
The affidavit filed by the Union of India supported the appellants, stating that the appellants' charge chrome plant was Customs bonded and no domestic sales were made without approval. The Union of India confirmed that all export sales were exempt from State and Central Sales Tax. The respondents did not contest this affidavit, further supporting the appellants' case.

Conclusion:
The Supreme Court allowed the appeals, setting aside the High Court's judgment and quashing the assessment orders. The Court held that the sales made by the appellants were in the course of export and thus exempt from sales tax. The respondents were ordered to pay the costs of the appeals.