2006 (2) TMI 171 - SC - VAT and Sales Tax

EXPORT GOODS - PENULTIMATE SALE MANUFACTURER SECURING ORDER FOR EXPORT OF BUSES MANUFACTURER SUPPLYING CHASSIS TO BODY BUILDER

Issues Involved:
1. Entitlement of the assessee to the benefit under Section 5(3) of the Central Sales Tax Act, 1956.
2. Definition and scope of "sale" under Section 2(g) of the Central Sales Tax Act.
3. Interpretation of the phrase "in relation to such exports" in Section 5(3).
4. Applicability of previous judgments on the current case.

Issue-wise Detailed Analysis:

1. Entitlement of the assessee to the benefit under Section 5(3) of the Central Sales Tax Act, 1956:
The department contended that the assessee, a bus-body manufacturer, is not entitled to the benefit of Section 5(3) of the Central Sales Tax Act, 1956. According to the department, the contract given to the assessee by the exporter is for the bus-body, which is a separate saleable commodity distinct from the complete bus. Therefore, the commodity exported (complete bus) differs from the commodity purchased by the exporter (bus-body), disqualifying the assessee from the exemption under Section 5(3). The department relied on previous judgments, such as Consolidated Coffee v. Coffee Board, Sterling Foods v. State of Karnataka, Vijaylakshmi Cashew Company v. Dy. Commercial Tax Officer, and Satnam Overseas (Export) v. State of Haryana, to support their argument.

2. Definition and scope of "sale" under Section 2(g) of the Central Sales Tax Act:
The department argued that the term "sale" under Section 2(g) indicates the transfer of property in goods by one person to another for consideration. They emphasized that for a transaction to constitute a "sale," the agreement and the sale must relate to the same subject matter. In this case, the department asserted that the transfer of property between the bus-body manufacturer (assessee) and the purchaser (TATA) is confined only to the bus-body and not the complete bus.

3. Interpretation of the phrase "in relation to such exports" in Section 5(3):
The assessee contended that the purpose behind the amendment of Section 5, post the judgment in Mohd. Serajuddin v. State of Orissa, was to boost exports and foreign exchange earnings. They argued that the courts should adopt a purposive interpretation of Section 5(3), considering current international market realities. The assessee maintained that the subject matter of the inter-State movement and export is the complete bus, not just the bus-body. The assessee emphasized that the words "in relation to such exports" in Section 5(3) should be given due weightage, arguing that the sale of the bus-body is in relation to the export of the complete bus, thereby qualifying for the exemption under Section 5(3).

4. Applicability of previous judgments on the current case:
The court noted that previous judgments, such as Sterling Foods and Vijaylakshmi Cashew Company, applied the test of "the same goods" to determine the applicability of Section 5(3). However, the court observed that these judgments did not give due weightage to the phrase "in relation to such exports" in Section 5(3). The court highlighted that the subject matter of the export is a "bus" and not a "bus-body," and the sale of the bus-body by the assessee to the exporter is in the course of export. The court also referred to the judgment in K. Gopinathan Nair v. State of Kerala, which outlined two conditions for penultimate sales to qualify for exemption under Section 5(3): the sale must take place after the export order and must be for the purpose of complying with the export order.

Conclusion:
The court concluded that the scope of Section 5(3) needs reconsideration, particularly in light of the phrase "in relation to such exports." The court found merit in the assessee's argument that the sale of the bus-body is in relation to the export of the complete bus and that previous judgments did not adequately address this aspect. Consequently, the court opined that the judgments in Sterling Foods and Vijaylakshmi Cashew Company require reconsideration by a larger bench. The matter was referred to the Chief Justice of India for further directions.

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