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TMI Blog2009 (10) TMI 496X X X X Extracts X X X X X X X X Extracts X X X X ..... e case, the insertion of Sub Section 3 in Section 5 of the Central Sales Tax Act was declaratory in nature and if so, whether the Tribunal was justified in rejecting the petitioner's claim of exemption of the sales, as being in the course of export out of the territory of India? ii) Whether on the facts and circumstances of the case, the Tribunal was justified in holding that the sales of petitioner made to foreign buyers could not be said to be sale in the course of export out of the territory of India within the meaning of Section 5 of the Central Sales Tax Act?" According to the statement of case, the petitioner is a registered dealer engaged in the business of manufacture and sale of oil machinery and spare parts at Ballabgarh, District Faridabad under the Haryana General Sales Tax Act, 1973 (for brevity "1973 Act"). In the returns filed under the Central Sales Tax Act, 1956 (for brevity "1956 Act"), for the assessment year 1975-76, the petitioner claimed deduction of an export sale of Rs.7,95,000/- made to M/s Egyptian Salt and Soda Company, Alexendria (Egypt) (for brevity "Egyptian Firm") concerning sale of two cotton oil seed expellers. The case of the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner-firm, however, in view of the contents of the letter dated 1.4.1974, relied upon to establish a privity of contract between the petitioner firm and the Egyptian Firm, it could not be held to be a case of direct export to the foreign buyer but was actually a case of export through the Calcutta Firm. Thus, the Tribunal vide order dated 2.3.1987 upheld the orders passed by the lower authorities in disallowing such transaction as an export sale. 5. Aggrieved against the order dated 2.3.1987 passed by the learned Tribunal, the petitioner filed an application for making reference to this Court on the aforesaid/reproduced two questions of law arising out of the order dated 2.3.1987. Learned Tribunal, however, vide its order dated 18.3.1988 referred the questions of law framed at (i) only. Petitioner then approached this Court by filing GSTR No.1 of 1989 praying for reference of questions of law framed at (ii) as well. This Court vide its order dated 21.1.1987 directed the Tribunal to refer the question (ii) as well and hence the aforesaid two questions have been referred for adjudication of this Court along with the statement of case. 6. Learned counsel for the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be deemed to take place in the course of the export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India. (2) xx xx xxx xxx [(3)] Notwithstanding anything contained in sub-section (1), the last sale or purchase of any goods preceding the sale or purchase occasioning the export of those goods out of the territory of India shall also be deemed to be in the course of such export, if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for or in relation to such export.]" Sub Section (1) of Section 5 of 1956 Act was authoritatively interpreted in AIR 1964 SC 1752 titled Ben Gorm Nilgiri Plantations Company Coonoor v. S.T.O, Special Circle, Ernakulam and (1969) 3 SCC 349 titled Coffee Board, Gangalore v. Joint Commercial Tax Officer, Madras. The crucial test for sale purchase to be in the course of export, which was laid down in Nilgiri Plantations' case (supra) as well as in Coffee Board's case (supra), is whether there were independent transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in initiating contract between the petitioner and Egyptian Firm and stood as surety for payment due to the reasons that letter of credit had already been opened in their favour by the Egyptian Firm and this was a case of direct export sale out of territory of India by the petitioner firm and not a case of export through Calcutta Firm. The property in goods i.e 2 machines was never transferred to the Calcutta Firm. Before proceeding any further, it would be advantageous to refer to the following provisions of the Indian Contract Act, 1872 (hereinafter referred to as "Contract Act"). Section 2(h) of the Contract Act defines that an agreement enforceable by law is a contract. Section 10 of the Contract Act envisages what agreement are contract and which reads as under: "10. What agreements are contracts- All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Nothing herein contained shall affect any law in force in India and not hereby expressly repealed, by which any contract is required to be made in writing or in the presence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance the same and not open a fresh L/Credit in your favour for Rs.7,95,000/- as the charges for a fresh L/Credit are very heavy and due to restrictions prevailing in our country we cannot ask for another import license for the same particular item for which we have already established the L/Credit. However, for your convenience we are requesting our Bankers to accept "THIRD PARTY B/LADING ACCEPTANCE" in which case you can ship the machinery direct to us. As regards financial implications for recovering the invoice value you may deal direct with M/s United Engineering (Eastern) Corporation, Calcutta. Subject to the above terms and conditions may treat the order as confirmed and with the manufacture of the expellers as specifications given in your letter dated 2.3.1974. Yours faithfully, The Egyptian Salt Soda Company. Sd/- " 14. Perusal of communication dated 1.4.1974 sent by the Egyptian Firm to the petitioner proves in no uncertain terms that the contract of export sale of two Cotton Seed Oil Expellers has emanated from this particular letter and had in all safety concluded with the export of the machines by the petitioner to the Egyptian Firm and receipt of considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supported the entire case of the assessee that under what circumstances original order placed to the Calcutta Firm did not materialise and then order was placed to the petitioner for supply the two cotton oil seed expellers with the given mode of payment by giving the reasons that charges for fresh letter of credit were very heavy and due to restrictions in their country it was not possible to ask for another import license for the same machines/oil expellers for which a letter of credit had already been opened. 16. It is not disputed on record that two oil expellers were shipped directly by the petitioner firm to the Egyptian Firm and this fact has been taken note of by the learned Tribunal in its order dated 2.3.1987. Merely because payment has come through Calcutta Firm, it cannot be inferred much less concluded that there was no contract of sale in the course of export between the petitioner and the Egyptian Firm. In our opinion, in the facts of the case, the Calcutta Firm at best can be said to be acting as a guarantor of the payment of the consideration for the export sale of two said oil expellers to the Egyptian Firm. 17. Therefore, in our considered view, the findings ..... X X X X Extracts X X X X X X X X Extracts X X X X
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