2014 (8) TMI 917 - HC - VAT and Sales Tax

Nature of transaction - local sale or export of goods - Failure to furnish evidence - Whether in the facts and circumstances of the case, the appellant Appellate Tribunal VAT was correct in holding that the transfer of property in the goods from the appellant company to M/s Hyaat, Katmandu (Nepal) took place after and not before the goods were cleared for export out of India - Held that - Law was settled and the expression in the course of export was well established and understood. Transactions in questions were covered under the expression in the course of export and were, therefore, exempt. The Supreme Court has recorded that when property in the goods passes to the buyer after they have crossed the customs frontier for the purpose of export to a foreign country, the sale is in the course of export out of the territory of India. This clarification and elucidation was required as the assessee, the exporter, in B. K. Wadeyar s case (1960 (9) TMI 64 - SUPREME COURT OF INDIA) was both the consignor and consignee in the FOB contract. But that does not mean that there cannot be and would not be any other case covered by the expression in the course of export . The quoted passage relates to and deals with second part of Section 5(1) of the Central Sales Tax Act, 1956. A case may well be covered by the first part. Facts of each case have to be examined to ascertain whether the transactions in question were in the course of export or not. Further, actual export has to be established and shown. Latter aspect has been dealt with in the case of Sita Juneja (1998 (9) TMI 649 - DELHI HIGH COURT). Matter remanded back - Decided in favour of assessee.

Issues Involved:
1. Whether the transfer of property in goods from the appellant company to the buyer took place after or before the goods were cleared for export out of India.
2. Applicability of Article 286 of the Constitution and Section 8 of the Delhi Sales Tax Act, 1975.
3. Interpretation of "in the course of export" as per legal precedents.
4. Determination of the exact and true facts for applying the legal ratio.

Issue-wise Detailed Analysis:

1. Transfer of Property in Goods:
The Tribunal held that the transfer of property in goods from the appellant company to the buyer took place after the goods were cleared for export out of India. The Tribunal distinguished the case from Max India Ltd., noting that the appellant company was not shown as a consignee in the goods receipt. The court found this reasoning insufficient to reject the appeal, emphasizing that the appellant company needed to provide evidence showing that the transfer of title to the buyer preceded the clearance of goods for export.

2. Applicability of Article 286 and Section 8:
Article 286 of the Constitution restricts the imposition of tax on sales or purchases of goods by states when such transactions occur outside the state or in the course of import/export. Section 8 of the Delhi Sales Tax Act, 1975, mirrors this constitutional mandate, exempting sales or purchases in the course of inter-state trade, outside Delhi, or in the course of import/export. The court reiterated that sales tax cannot be imposed on transactions that occur in the course of export out of India.

3. Interpretation of "In the Course of Export":
The Supreme Court in Ben Gorm Nilgiri Plantations Co-Conoor vs. Sales Tax Officer elucidated that a sale in the course of export involves a series of integrated activities from the agreement of sale to the delivery of goods for transport out of the country. The court also referenced the Division Bench's decision in Sita Juneja and Associates vs. Commissioner of Sales Tax, which emphasized that such sales cannot be disassociated from the export process. Additionally, in Commissioner of Sales Tax vs. Aero Traders (P) Ltd., it was noted that a sale is considered in the course of export if it occasions the export or involves the transfer of documents of title after crossing customs frontiers.

4. Determination of Exact and True Facts:
The court noted that the Tribunal had made some observations in favor of the appellant but did not reach a definitive conclusion. Given the Tribunal's unclear stance on the legal position, the court deemed it necessary to re-examine the facts to apply the correct legal principles. The court emphasized that each case must be examined on its facts to determine if the transactions were in the course of export and that actual export must be established.

Conclusion:
The court answered the question of law in favor of the petitioner assessee, stating that the Tribunal's findings were not sufficient to reject the appeal. The case was remitted back to the Tribunal for a fresh examination of the facts in light of the legal principles discussed. The reference was disposed of without costs.

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