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TMI Blog1985 (11) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... hen cleaned, peeled, processed, frozen and packed in cartons which are stated to be exported to foreign buyers outside India under prior contracts of sale. 6.. For the month of April, 1982, that is, from 1st April, 1982, to 30th April, 1982, the petitioner filed its "statement of monthly turnover" on 22nd May, 1982 (annexure A), and tax paid in advance before the ACCT under the KST Act, inter alia, disclosing a sales turnover of Rs. 8,67,581.82 and purchase turnover of Rs. 22,73,331.14 of "frozen shrimps" for the said period, however, claiming total exemption over the "purchase turnover", with which claim only we are concerned, on the ground that the same had been purchased in the course of export. 7.. In his notice No. 3010136 dated 24th May, 1982 (annexure B), the ACCT apprised the petitioner that the purchase turnover of shrimps was subject to tax under entry No. 13a of the Third Schedule to the KST Act as amended and that it should file revised return and pay the taxes due thereon and continue to do so in future. In response to the said notice, the petitioner filed its reply on 27th May, 1982 (annexure C), reiterating its earlier stand and denying its liability to pay tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how the learned counsel for the petitioners, which in our opinion also is correct, addressed their arguments before us. 15.. Sri Iyer has urged that frozen shrimps, prawns and lobsters were also shrimps, prawns and lobsters under entry No. 13a of the Third Schedule to the KST Act and there was no difference and distinction between raw shrimps, prawns and lobsters or those cleaned, peeled, processed or frozen and exported by the petitioners. 16.. Sri Babu has urged that the legislature had deliberately treated "raw" and "frozen" shrimps, prawns and lobsters differently and distinctly and this Court cannot treat them as one and the same. 17.. In his notice dated 9th July, 1982 (annexure E), addressed to the petitioner in W.P. No. 27805 of 1982, the ACCT, inter alia, observed thus: "Whereas I am of the opinion that the statement of account in form 3 submitted by you for the month of April, 1982/May, 1982, is incorrect and incomplete. I propose to proceed to make a provisional assessment for the said month and hence you were called upon to produce the accounts. From the verification of the accounts on 6th July, 1982, it is revealed that you have purchased raw prawns, shrimps an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Indian shrimps, which is a different commodity not covered in entry 13a of the Third Schedule." In his assessment orders, the ACCT carefully examined the objections urged by the petitioner, the rulings relied on by it and expressed thus: "Their contentions are that the purchases were in the course of export as the purchases were made in pursuance to the contract for supply of frozen prawns, shrimps and lobsters and hence the same cannot be brought to taxation under the K.S.T. Act, 1957, in view of section 5(3) of the C.S.T. Act, 1956. They also contend that the raw shrimps, prawns and lobsters and the frozen shrimps, prawns and lobsters are one and the same commodity in view of the Supreme Court's decision in the case of Deputy Commissioner of Sales Tax (Law) v. Pio Food Packers [1980] 46 STC 63 (SC). They have also cited the Kerala High Court decision in the case of Deputy Commissioner of Sales Tax (Law) v. Neroth Oil Mills Co. Ltd. [1982] 49 STC 249. The contentions of the assessees were examined. In the case of Pio Food Packers, the Sales Tax Officer had to levy tax on the purchases of pineapple under section 5A(1)(a) of the K.G.S.T. Act, 1963, for the reasons that they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is not similar to that of the one in the schedule of the K.G.S.T. Act, 1963. It has not been brought to the notice or there is any indication in the above decision to the effect that the entry 13a is similar to the entry in the K.G.S.T. Act, 1963. As could be construed from the said above decision, the frozen shrimps, prawns and lobsters are not excluded from that of the raw shrimps, prawns and lobsters in the entry of the schedule to the K.G.S.T. Act. The Honourable Karnataka High Court in the case of S. Soundarapandian v. Commissioner of Commercial Taxes, Bangalore [1980] 46 STC 211 has upheld that words used in the entries in sales tax laws should be understood by the meaning attached to those words at common parlance and the technical meaning attached to those words and given in dictionaries could not be a safeguard for arriving at a correct conclusion. The legislature has clearly indicated by amending the entry 13a of the Third Schedule, w.e.f. 1st September, 1978, 'shrimps, prawns, and lobsters, other than frozen shrimps, prawns and lobsters' that the frozen shrimps, prawns and lobsters is a different commodity which has been exported. The Supreme Court in a case. Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3)(b) of the Act and none of those entries brought raw or frozen shrimps, prawns and lobsters to purchase tax, which position continued till 31st March, 1973. 18.. The Karnataka Sales Tax (Amendment) Act, 1973 (Karnataka Act 7 of 1973) (1973 Act), that came into force from Ist April, 1973, introduced a new entry, viz., entry No. 13a to the Third Schedule to the K.S.T. Act, which reads thus: "THIRD SCHEDULE Goods in respect of which a single point purchase tax only is leviable under section 5(3)(b). --------------------------------------------------------------------------- Sl. No. Description of the Point of levy Rate of tax goods --------------------------------------------------------------------------- * * * * 13a Shrimps, prawns and Purchase by the last Four per cent." lobsters. dealer in the State liable to tax under this Act. --------------------------------------------------------------------------- Section 9 of the Karnataka Sales Tax (Amendment) Act of 1978 (Karnataka Act 18 of 1978) (1978 Act) amended the said entry as hereunder: "........(2) in the entries relating to serial number 13a, in column 2, after the word 'lobsters', the words 'other tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a word of every day use it must be construed in its popular sense meaning 'that sense which people conversant with the subject-matter with which the statute is dealing would attribute to it'. It is to be construed as understood in common language: Craies on Statute Law, page 153 (5th Edition). It was so held in Planters Nut and Chocolate Co. Ltd. v. The King [1952] 1 Dom LR 385, 389. This interpretation was accepted by the High Court of Madhya Pradesh in Madhya Pradesh Pan Merchants Association, Santra Market, Nagpur v. State of Madhya Pradesh (Sales Tax Department) [1956] 7 STC 99, 102 (Nag) where it was observed: 'In our opinion, the word "vegetables" cannot be given the comprehensive meaning the term bears in natural history and has not been given that meaning in taxing statutes before. The term "vegetables" is to be understood as commonly understood denoting those classes of vegetable matter which are grown in kitchen gardens and are used for the table.'" In Indo International Industries v. Commissioner of Sales Tax, Uttar Pradesh [1981] 47 STC 359 (SC) the Supreme Court reiterated them in these words: "It is well-settled that in interpreting items in statutes like the Exci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat entry was not allowed to stand in that form by the legislature for reasons that are not far to seek. 21.. At this stage we will assume that there is a difference and distinction in entry No. 13a as it stood for the periods prior to 1st September, 1978, and thereafter effected by the two amending Acts of 1978 and 1982 and ascertain their import on that basis. 22.. We must at the very outset remember that the legislature made the amendments deliberately. We cannot ignore the deliberate amendments made to entry No. 13a either on the traditional rules of construction of statutes or the progressive rule of construction of statutes applied to taxation measures in recent times [vide K.P. Varghese v. Income-tax Officer, Ernakulam [1981] 131 ITR 597 (SC), State of Karnataka v. Hansa Corporation AIR 1981 SC 463, McDowell Company Limited v. Commercial Tax Officer [1985] 59 STC 277 (SC) and the Full Bench ruling of this Court in C. Arunachalam v. Commissioner of Income-tax ILR [1984] 2 Kar 1387 (FB)]. 23.. The amendments made in 1978 and 1982 Acts clearly make a distinction and difference between raw shrimps, prawns and lobsters caught from sea and shrimps, prawns and lobsters whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... originally enacted, we would have no hesitation in following these principles. But, as later pointed out by us that entry underwent a radical transformation for which reason, we must necessarily hold that the principles enunciated herein cannot be applied by us. 24-2. In this ruling the court has not referred to the period of assessment and the relevant entry of the Kerala Act that was in force. But, from the copy of the S.L.P. made available to us, it appears that the period of assessment was for the month of November, 1976, when the relevant entry in the Kerala Act stood thus (vide page 127 of Gangadharan on Law of Sales Tax in Kerala made available by Sri Iyer): -------------------------------------------------------------------------------- Sl. Description of the goods Point of levy Rate of tax No. -------------------------------------------------------------------------------- "............................. 65A. (i) Prawns, lobsters, frogs, frogAt the point of last 5 legs, cuttlefish and crab not falling purchase in the State under (ii) below or item 25H(viii). by a dealer who is liable to tax under section 5. (ii) Prawns, lobsters, frogs, froglegs, cuttlefish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nearest places cannot altogether be ruled out. Both these types of shrimps, prawns and lobsters were excluded from levy of purchase tax prior to 1st September, 1978. But, after 1st September, 1978, only frozen raw shrimps, prawns and lobsters are excluded from levy of purchase tax. 28.. The term "frozen" is derived from the word "freeze". The terms "frozen" and "freeze" are defined in the following dictionaries: "'freeze'..........to subject (food packages) to intense cold and solidification into a block like ice for preservation (patrons prepared and wrapped meats at home and froze them in their lockers...) 'frozen'................use of foods prepared for the table (-custard) (-fruit salad)." (vide Webster's Third New International Dictionary at pages 907 and 915 respectively). "'freeze.............to preserve (food) by means of very low temperatures: Meat from New Zealand is frozen and brought to England in special ships. Frozen foods have taken the place of tinned foods in many homes, frozen beans............." (vide Longman Dictionary of Contemporary English by Chief Editor, Paul Procter, page 449). What emerges from this is that shrimps, prawns and lobsters a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es the turnover of purchases or sales in the course of inter-State trade or commerce or in the course of export of the goods out of the territory of India or in the course of import of goods into the territory of India, which are regulated by the CST Act. But, that exclusion does not necessarily mean that entry No. 13a is automatically excluded from the same. The latter does not follow from the former. We see no merit in this contention of Sri Sarangan either. 35.. Learned counsel for the petitioners have contended that entry No. 13a was in conflict with the CST Act and in particular section 5(3) of that Act that had liberalised the rules governing "in the course of export" and thus trenches on the field reserved to Parliament for which reason, it was beyond the legislative competence of the State Legislature. 36.. The Act has been enacted by the State Legislature by virtue of the powers derived from article 246 and entry 54 of the State List. Entry 54, the scope of which has been explained by the Supreme Court in a large number of cases even before its amendment by the Constitution 46th Amendment, enabled the State Legislature to identify, classify or reclassify goods and subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the principles stated in these cases, it is necessary to examine this challenge of the petitioner. 41.. "Raw" shrimps, prawns and lobsters caught from the sea that undergo an elaborate processing and freezing in modern scientific plants made fit for preservation and transportation and ultimate sales in outstation places in and outside the country called as "frozen" are not one and the same and are decidedly different and separate and they can be so treated by the legislature. United States of America, the most affluent country in the world is one of the biggest buyers of frozen shrimps, prawns and lobsters apart from other advanced countries like Russia, France and others. Raw shrimps, prawns and lobsters are not consumed as such can hardly be doubted. But, that does not mean that when raw shrimps, prawns and lobsters are processed and frozen they can still be said to be raw shrimps, prawns and lobsters, that too when the legislature deliberately and consciously treats them so and classifies them separately. The fact that they are ultimately consumed by human beings has hardly any relevance for identification and classification, at any rate for purposes of taxation. The classif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogress or process of', or shortly 'during'. The phrase expanded with this meaning reads 'in the progress or process of export' or 'during export'. Therefore the export from India to a foreign destination must be established and the sale must be a link in the same export for which the sale is held. To establish 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, for then there are two sales one to the intermediary and the other to the importer. The first sale is not in the course of export for the export begins from the intermediary and ends with the importer. Therefore the tests are that there must be a single sale which itself causes the export or is in the progress or process of export. There is no room for two or more sales in the course of export. The only sale which can be said to cause the export is the sale which itself results in the movement of the goods from the exporter to the importer. The course of export may be established by agreement or by force of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the intermediary and ended with the importer and that the introduction of the intermediary (registered exporter) between the seller (Coffee Board) and the importing buyer broke the link. This court laid down the test that there must be a single sale which itself caused the export and there was no room for two or more sales being 'in the course of export'. In other words, notwithstanding the compulsion to export arising from clauses 26, 30 and 31 of the auction conditions the penultimate sale was held to be not in the course of export. The latter case [Mod. Serajuddin's case [1975] 36 STC 136 (SC)] was stronger than the Coffee Board's case [1970] 25 STC 528 (SC) inasmuch as the penultimate sales (two contracts for sale of mineral ore entered into by Mod. Serajuddin with the State Trading Corporation) were so inextricably connected with the final sales (two corresponding contracts for sale of the identical goods entered into by the STC with the foreign buyers) that the former were to stand cancelled if the latter for any reason fell through any vice versa and further the penultimate sales were effected to implement the contracts with the foreign buyers and even then following the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... special expertise is needed for carrying on export trade. A sale of goods made to an export canalising agency such as the State Trading Corporation or to an export house to enable such agency or export house to export those goods in compliance with an existing contract or order is inextricably connected with the export of the goods. Further, if such sales do not qualify as sales in the course of export, they would be liable to State sales tax and there would be a corresponding increase in the price of the goods. This would make our exports uncompetitive in the fiercely competitive international markets. It is, therefore, proposed to amend, with effect from the beginning of the current financial year, section 5 of the Central Sales Tax Act to provide that the last sale or purchase of any goods preceding the sale or purchase occasioning 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.' (Emphasis supplied) Two things become clear from this statement: first, the Mod. Serajuddin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s reached that the agreement with or order from a foreign buyer must be available or produced in order to attract section 5(3) of the Central Sales Tax Act, 1956." On the application of these principles, the petitioners have to prove that frozen shrimps, prawns and lobsters were purchased by them and have been exported in pursuance of a prior agreement to sell to claim exemption from payment of purchase tax, which is not the position as found by the ACCT in Writ Petition No. 27805 of 1982. We are of the view that this finding of the ACCT which is based on the correct application of the principles cannot be disturbed by us. What is true of the petitioner in Writ Petition No. 27805 of 1982 is also true of the other petitioners. 46.. As all the contentions urged for the petitioners fail, these writ petitions are liable to be dismissed. We, therefore, dismiss these writ petitions and discharge the rule issued in all these cases. But, in the circumstances of the cases, we direct the parties to bear their own costs. Writ petitions dismissed. Orders on the oral applications made by the petitioners for a certificate of fitness to appeal to the Supreme Court of India under articles ..... X X X X Extracts X X X X X X X X Extracts X X X X
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