1958 (2) TMI 28 - SC - VAT and Sales Tax

Whether even if this is not a case of agency in the contractual sense of the term, it is an agency in its wider connotation and he referred to Webster s Dictionary where one of the meanings given to agency is instrumentality. Held that - In our opinion, the only kind of agency that will serve the respondents is an agent as understood in the law of principal and agent. There were two sales here and both could not have occasioned the export, only the second of the two did that, and the respondents were not parties to it either directly or through the exporters as their agents. It follows that the first sale, with which alone the respondents were associated, did not do that. If it did not, then it hardly matters whether the goods were exported through the instrumentality of the exporters or not because, according to the decisions of this Court, all sales that precede the one that occasions the export are taxable. But even if the facts were as stated, that would not help because, as we have already pointed out, this Court has decided that only the sale that occasions the export is exempt and that the sale to the exporter that preceded it is not, even if it was made with a view to , or for the purpose of , export - we are in favour of the appellant on the first point - Case remanded.

Summary

Issues:
1. Sales tax imposition on sales made by two respondents between specific dates.
2. Exemption claim under Article 286(1)(b) of the Constitution for sales made in the course of export.
3. Interpretation of previous court decisions regarding sales made in the course of export.
4. Examination of the relationship between the mills and licensed exporters in the export process.
5. Determination of agency status between mills and exporters in the sales transactions.
6. Consideration of alternative exemption claim under Article 286(2) for sales in the course of inter-State trade and commerce.
7. Lack of examination by the High Court on the inter-State trade exemption claim.

Analysis:
The Supreme Court judgment pertains to the imposition of sales tax by the State of Mysore on sales made by two textile mills between specific dates. The respondents, the Mills, claimed exemption under Article 286(1)(b) of the Constitution, arguing that the sales were made in the course of export. The Court analyzed previous decisions and concluded that sales preceding the one directly occasioning export are taxable, as per established legal principles. The Court rejected the contention that sales were exempt due to the Government's export regulations, emphasizing that the sales did not directly lead to export. The High Court's presumption of agency between the mills and exporters was dismissed, as the facts did not support such a relationship.

The Court further clarified that the sales to exporters, even if for eventual export, were taxable as they did not directly occasion the export. The judgment highlighted the necessity for the sale directly leading to export to be exempt under Article 286(1)(b). The respondents' argument that goods were manufactured primarily for export was also rejected, emphasizing the legal requirement for the sale directly linked to export to be exempt. The alternative claim of exemption under Article 286(2) for inter-State trade was not addressed by the High Court, leading to a remand for further consideration.

In conclusion, the Supreme Court remanded the case to the High Court for a decision on the inter-State trade exemption claim, as the primary contention for exemption under Article 286(1)(b) was not upheld. The judgment emphasized the legal principles governing sales tax imposition on transactions not directly leading to export, reaffirming the importance of the sale directly occasioning export for exemption under Article 286(1)(b).