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TMI Blog1973 (11) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... iah Setty and Sons[1965] 16 S.T.C. 231 (S.C.). After the Act was amended with retrospective effect by the Central Sales Tax (Amendment) Act, 1969, the Commercial Tax Officer passed an order under rule 38 of the Mysore Sales Tax Rules, 1957, rectifying his earlier order and bringing to tax the turnover that had been exempted earlier. The assessee appealed to the Deputy Commissioner of Commercial Taxes (Appeals), Dharwar, before whom it contended that the sales were in the course of export out of the territory of India and, therefore, exempt from tax under article 286(1)(b) of the Constitution and that in the alternative, as no tax was collected by the dealers the assessee was entitled to exemption in view of section 10 of the Central Sales Tax (Amendment) Act, 1969. The Deputy Commissioner of Commercial Taxes agreed with the first contention and allowed the appeal. He, however, did not consider the second contention. The Commissioner of Commercial Taxes after issue of a show cause notice revised the order of the Deputy Commissioner and held that the sales by the assessee pursuant to contract No. 43163 were not sales in the course of export and, therefore, the relative turnover w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed results not within the guaranteed specification the buyers had the right to reject the consignment or accept it at a reduced price. We set out here below the material portions of the appendix to the agreement: Appendix to iron-ore f.o.r. purchases contract No. 43/63. "(1) (i) For purpose of provisional settlement of accounts the weight of the ore supplied by the seller shall be determined as follows. Railway receipt weight determined by weigh-bridge at the loading station or en route or at destination or on the, basis of volume weight ratio fixed by the railways. (ii) Final weight will be determined in accordance with the provivision of the buyers' relevant sale contract and/or any other relevant agreement with its foreign buyers. The seller will be free to obtain from the buyers information about the relevant provisions of the buyers relevant sale contract. All charges for weighment at Cuddalore port shall be shared equally by the buyers and the sellers. (2) Analysis determined in accordance with the relevant provisions of the buyers' relevant sale contract and/or any other agreement with its foreign buyers will be final. The seller will be free to obtain from the buy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r this contract on final analysis shows results not within the guaranteed specifications, the buyers shall have the right to reject the consignment or accept it at a reduced price arrived at on the basis of penalties/damages that may be imposed by the foreign buyers of the buyers and also to cancel the contract for the balance undelivered quantity and/or claim damages. In case the buyers agree to accept further deliveries the seller shall produce when required by the buyers, at seller's cost. The buyer shall accept such further deliveries only if the stack analysis report shows that the ore conforms to the guaranteed specifications..........." Sri K. Srinivasan, the learned counsel for the assessee, relying on clauses (1), (2) and (7) in the appendix to the agreement set out above urged that the sale in the instant case is directly linked with the sale by the M.M.T.C. to their foreign buyers and, consequently, the sale should be regarded as a sale in the course of export entitled to exemption under article 286(1)(b) of the Constitution. Clauses (1) and (2) of article 286, after the same was amended by the Constitution (Sixth Amendment) Act, 1956, read thus: "286. (1) No law o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntier are not within the exemption. By enacting section 5 in the Act, the Parliament gave legislative recognition of the exposition of law made by the Supreme Court earlier. A purchase by the exporter, however much linked to the exporter's contract with a foreign importer, is not entitled to the exemption from tax guaranteed under article 286(1)(b). Such a sale or purchase is not in the course of export of the goods but a sale or purchase for export as laid down by the Supreme Court in Coffee Board v. Joint Commercial Tax Officer[1970] 25 S.T.C. 528 (S.C.). In the Coffee Board's case(3), the Supreme Court reviewed its earlier decisions relating to the interpretation of article 286(1)(b) of the Constitution. Hidayatullah, C.J., delivering the majority judgment of the court said: "The phrase 'sale in the course of export' comprises in itself three essentials: (1) that there must be a sale, (ii) that the goods must actually be exported, and (iii) the sale must be a part and parcel of the export. Therefore either the sale must take place when the goods are already in the process of being exported which is established by their having already crossed the customs frontiers, or the sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way to the importer and (b) when the sale itself causes the export to take place, that is to say, the exporter and importer negotiate and complete a sale which without more would result in the export of the goods. No other sale can qualify for the exemption under section 5(1) read with article 286(1)(b)." (Underlining is ours). It has been laid down and the law is settled that in order to establish an export a person exporting and a person importing are necessary elements and the course of export is between them introduction of a third party dealing independently with the seller on the one hand and with the importer on the other breaks the link between the two. Therefore there must be a single sale which itself causes export. There is no room for two or more sales in the course of export. It is not disputed that the assessee's sales are not pursuant to any agreement of sale with any foreign importer. The sales are pursuant to a contract with the M.M.T.C. which alone had the licence to export ore out of India. There are two sales in the picture. The first is a sale by the assessee to the M.M.T.C. and the second sale is by the M.M.T.C. to the foreign importers. It is only the sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not reserve the right of disposal of the goods. Therefore, the assessee should be deemed to have unconditionally appropriated the goods to the contract when it loaded the iron-ore in railway wagons at Papinaikanahalli in Mysore State which was long before the ore was put into the export stream by the M.M.T.C. It was strenuously urged by Sri K. Srinivasan that the payment of 15 per cent of the price of ore depended on the final settlement of accounts on the basis of final weight and analysis determined according to clauses (1)(ii) and (2) of the appendix to the contract and that the M.M.T.C. had the right to reject the consignment under clause (7) and those conditions of the contract could be effectuated only when the goods were exported. It is true that the final settlement of accounts between the parties is dependent upon the final weight and analysis obtained by the M.M.T.C. on their sales to foreign importers. It is also true that there is a clause entitling the M.M.T.C. to reject the consignments if the final analysis showed results not within the guaranteed specification. It is not clear whether the final analysis referred to in clause (7) is the analysis obtained at the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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