9911796707
TMI Blog1964 (4) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... - C.A. Nos. 396, To 413 of 1963, Writ Appeal No. 104, Writ Appeal No. 105, To 116 & 119, 120, 123, 124, 122 of 1961 - - - Dated:- 10-4-1964 - GAJENDRAGADKAR P.B., WANCHOO K.N., SHAH J.C., RAJAGOPALA AYYANGAR N. AND SIKRI S.M. JJ. V.P. Gopalan Nambiar, Advocate-General for the State of Kerala (Dr. V.A. Seyid Muhammed with him), for the respondents in all the appeals. M.C. Setalvad, Senior Advocate, (J.B. Dadachanji, O.C. Mathur and Ravinder Narain of J.B. Dadachanji and Co., with him), for the appellants in all the appeals. -------------------------------------------------- The judgment of Gajendragadkar, C.J., Shah and Sikri, JJ., was delivered by Shah, J. The judgment of Wanchoo and Rajagopala Ayyangar, JJ., was delivered by Rajagopala Ayyangar, J. SHAH, J.- The Sales Tax Officer, Special Circle, Ernakulam, assessed the appellants under the Travancore-Cochin General Sales Tax Act (XI of 1125 M.E.) to pay sales tax on transactions of sale of tea chests at the auctions held at Fort Cochin in the years 1956-57 to 1958-59, rejecting their contention that the sales were exempt from tax by virtue of Article 286(1)(b) of the Constitution. The appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such right may again transfer the whole or any part of his right provided that nothing in the sub- section shall operate to restrict the issue of licences for the export of tea expressed to be sold with export rights. The other provisions are not material in deciding this group of appeals. Trade in tea in the State of Kerala-internal as well as export- is carried on through certain defined channels. A manufacturer of tea applies for and obtains from Tea Board allotment of export quota rights on payment of the necessary licence fee. The manufactured tea in chests is then sent to M/s. T. Stanes and Company Ltd., who ware- house the chests at Willingdon Island. Chests of tea are then sold by public auction through brokers at Fort Cochin. With the chests of tea for which export quota rights are obtained, export quota rights are sold by the auctioneer. At the auction sale, bids for tea chests with export quota rights are given by the agents or intermediaries in Cochin of foreign buyers. Tea chests are delivered at the warehouses by M/s. T. Stanes and Company Ltd., to the purchasers whose bids are accepted. The agents or intermediaries of the foreign buyers then obtain licences from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of sale which occasions export or which is effected by a transfer of documents of title after the goods have crossed the customs frontiers is, therefore, exempt from sales tax levied under any State legislation. The appellants set out in their respective petitions the manner in which sales of tea chests were conducted at Fort Cochin and in certain petitions affidavits in reply even were not filed by the State of Kerala. In the remaining petitions in which affidavits in reply were filed it was contended that the export of goods was made by the purchasers who had taken delivery of the goods from the manufacturers in Travancore- Cochin and in pursuance of the export licences obtained by the purchasers goods were exported, but such subsequent export by the purchasers did not affect the character of the sales by the manufacturers to the purchasers. It is true that there is no finding by the Sales Tax Authorities that the respective purchasers at the auctions were agents of foreign buyers, but the Advocate appearing on behalf of the State argued the case before the High Court on the footing that the bids were offered at the auctions by the agents or intermediaries of foreign buye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seller to export, there must be an obligation to export, and there must be an actual export. The obligation may arise by reason of statute, contract between the parties, or from mutual understanding or agreement between them, or even from the nature of the transaction which links the sale to export. A transaction of sale which is a preliminary to export of the commodity sold may be regarded as a sale for export, but is not necessarily to be regarded as one in the course of export, unless the sale occasions export. And to occasion export there must exist such a bond between the contract of sale and the actual exportation, that each link is inextricably connected with the one immediately preceding it. Without such a bond, a transaction of sale cannot be called a sale in the course of export of goods out of the territory of India. There are a variety of transactions in which the sale of a commodity is followed by export thereof. At one end are transactions in which there is a sale of goods in India and the purchaser immediate or remote exports the goods out of India for foreign consumption. For instance, the foreign purchaser either by himself or through his agent purchases goods w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ea chests are sold together with export rights imputes knowledge to the seller that the goods are purchased with the intention of exporting. But there is nothing in the transaction from which springs a bond between the sale and the intended export linking them up as part of the same transaction. Knowledge that the goods purchased or intended to be exported does not make the sale and export parts of the same transaction, nor does the sale of the quota with the sale of the goods lead to that result. There is no statutory obligation upon the purchaser to export the chests of tea purchased by him with the export rights. The export quota merely enables the purchaser to obtain export licence, which he may or may not obtain. There is nothing in law or in the contract between the parties, or even in the nature of the transactions which prohibits diversion of the goods for internal consumption. The sellers have no concern with the actual export of the goods, once the goods are sold. They have no control over the goods. There is therefore no direct connection between the sale and export of the goods which would make them parts of an integrated transaction of sale in the course of export. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts found there could be no dispute that the sale by the assessee occasioned export, for in pursuance of the contract the assessee had exported the goods sold. The next case which came before this Court was The State of Travancore-Cochin and Others v. Shanmugha Vilas Cashew-nut Factory and Others [1954] S.C.R. 53; 4 S.T.C. 205. It was held by this Court that purchases in the State made by the exporters for the purpose of export are not within the exemption granted by Article 286(1)(b) of the Constitution. Patanjali Sastri, C.J., speaking for the majority of the Court observed: "The word 'course' etymologically denotes movement from one point to another, and the expression 'in the course of' not only implies a period of time during which the movement is in progress but postulates also a connected relation; ....... A sale in the course of export out of the country should similarly be understood in the context of clause (1)(b) as meaning a sale taking place not only during the activities directed to the end of exportation of the goods out of the country but also as part of or connected with such activities." He further observed that the phrase "integrated activities" can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o, which preceded the export sale did not fall within its purview though it is made for the purpose of or with a view to export. One more judgment of this Court may be noticed: B.K. Wadeyar v. M/s. Daulatram Rameshwarlal [1961] 1 S.C.R. 924; 11 S.T.C. 757. The assessees in that case sold goods to an Indian purchaser, who had agreed to sell them to a foreign buyer. The sales by the assessees "were on F.O.B. contracts under which they continue to be owners" till the goods crossed the customs barrier, and entered the export stream. It was held by this Court that since the goods remained the property of the assessees till they reached the export stream, the sales were exempt from tax imposed by a State under Article 286(1)(b). This was undoubtedly a case of two sales resulting in export, and the first sale was held immune from State taxation; but that was so because the property in the goods had passed to the Indian purchaser when the goods were in the export stream. The first sale itself was so inextricably connected with the export that it was regarded as a sale in the course of export. Mr. Setalvad on behalf of the appellants placed strong reliance upon the judgment of the Madra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though the appellants knew that the buyers in offering the bids for chests of tea and the export quotas were acting on behalf of foreign principals, and that the buyers intended to export the goods. There was between the sale and the export no such bond as would justify the inference that the sale and the export formed parts of a single transaction or that the sale and export were integrally connected. The appellants were not concerned with the actual exportation of the goods, and the sales were intended to be complete without the export, and as such it cannot be said that the said sales occasioned export. The sales were therefore for export, and not in the course of export. The appeals therefore fail and are dismissed with costs. One hearing fee. AYYANGAR, J.- We regret out inability to concur in the order that these appeal should be dismissed. We are clearly of the opinion that the appeals should be allowed. This batch of 18 appeals which have been heard together are directed against a common judgment of the High Court of Kerala and are before this Court by virtue of special leave granted to the appellants. The appellants filed writ petitions in the High Court which were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... export" is "a sale in the course of export". The details of the sales on which tax is sought to be levied by the respondent, together with the facts relating thereto, as well as the several contentions urged before us and the decision on which reliance is placed on either side have all been narrated in the judgment just now pronounced and we do not think it necessary to restate them. Similarly, the provisions of the Tea Act, 1953, and the rules framed thereunder so far they are relevant for the decision of the question involved in these appeals have also been set out and so we are not repeating them either. We shall confine ourselves to the very restricted area of our disagreement with our learned brethren which has occasioned this separate judgment. As preliminary to the discussion of the question involved, we shall put aside certain types of transactions as regards which there is no dispute that they clearly fall on one side of the line or the other. On the one side of the line would be the case where a seller in pursuance of a contract of sale with a foreign buyer puts the goods sold on board a ship bound for a foreign destination. Such a sale would be an "export sale" whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sactions, viz., the sale and the factual export. The sales involved in the present appeals are not of the 2nd type for here there is a single sale direct to a foreign buyer, the contract being concluded with and the goods sold delivered to his agent. It is hardly necessary to add that for purposes relevant to the decision of the question before us there could be no difference in legal effect between a sale to a foreign buyer present in India to take delivery of the goods for transport to his country and a sale to his resident agent for that purpose. Pausing here we should mention that there is no dispute; (1) that the persons who bid at the auction at Fort Cochin and purchased the tea of the assessees were agents of foreign buyers; or (2) regarding their having made these purchases under the directions of their foreign principals in order to despatch the goods to the latter-a contractual obligation that they admittedly fulfiled. Under the sales here involved, though to foreign buyers and intended for export, the goods were not under the terms of the contract of sale placed by the seller on board the ship in the course of its outward voyage and that is the only reason why th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat estate whose tea he purchased to the extent needed to effect export of the tea purchased. The purchases were thus made only on the basis that the export rights of the seller would be transferred to the buyer and on the basis of these transfers, the purchasers obtained export licences from Government for exporting the tea and effected the exports. The purchases were made by agents of foreign principals and it was part of the contractual duty of these agents vis-a-vis the principals to consign the goods purchased to them without avoidable delay. There was proof by the certificates produced that these agents had fulfilled their obligations to their principals and had shipped the goods bought as early as practicable to foreign destinations. The principal contention urged by the learned Advocate-General of Kerala to persuade us to hold that the sales did not "occasion the export" was based on two circumstances: (1) that it was not part of the contract between the assessees and their buyers that the goods shall only be exported and not sold in the local market. In other words, it was urged that in the absence of such a specific term of contract it would have been open to the buye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the understanding between the seller and the buyer, inferable from all the circumstances attendant on the transaction, that the buyer was bound to export. Pausing here, we would add that we understand that importance is attached in his context to the need of a term in the sale contract laying an obligation on the part of the buyer to export only for the purpose of demonstrating the intimate connection between the sale and the export for establishing that it was the sale that occasioned the export. If we are right, then what is of significance is the real and common intention of the two parties to the transaction-whether they contemplated the goods purchased being sold locally, or whether they intended the goods sold being only exported-and not whether there is such a term in the contract between the parties. Coming next to the contention that the Tea Act does not compel export of goods covered by the quotas granted we might mention that no evidence was led as to the prices prevailing in the local market as compared to that in the foreign countries where the principals of the resident buyers resided, which would have disclosed whether a local sale of the tea bought ostensibly for ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
