9911796707
TMI Blog1986 (12) TMI 357X X X X Extracts X X X X X X X X Extracts X X X X ..... the Kerala General Sales Tax Act. He is a cashew dealer. The Revenue is the respondent in both the revisions. Common questions arose for consideration for these two years. They were disposed of by a common order by the Sales Tax Appellate Tribunal, Additional Bench, Ernakulam, in T.A. Nos. 713 and 1020 of 1975 by order dated 11th March, 1985. Briefly stated, the point in dispute is regarding the tenability of the claim of exemption put forward by the assessee/revision-petitioner on the turnover of "African nuts" for these two years. The assessing authority held that the turnover of African nuts, which were purchased by the assessee from M/s. Cashew Corporation of India Ltd., were only local purchases and not purchases "in the course of import" within the meaning of section 5(2) of the Central Sales Tax Act. The appeals filed by the assessee, before the Deputy Commissioner of Agricultural Income-tax and Sales Tax (Appeals), Quilon, were dismissed. The Appellate Tribunal confirmed the aforesaid decisions. The assessee has come up in revisions. 2.. At the outset, it should be stated that the order passed by the Appellate Tribunal in T.A. Nos. 713 and 1020 of 1975 dated 11th March, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been stated in detail in the appellate order, though the Tribunal has stated that they perused all these documents. 5.. In order to understand as to whether the exemption claimed by the assessee is tenable, we shall first advert to section 5(1) and 5(2) of the Central Sales Tax Act, 1956. "Section 5. When is a sale or purchase of goods said to take place in the course of import or export.-(1) A sale or purchase of goods shall 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) A sale or purchase of goods shall be deemed to take place in the course of the import of the goods into the territory of India only if the sale or purchase either occasions such import or is effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India." In this case, we are concerned with section 5(2). Article 286(1)(b) of the Constitution prohibits a State from imposing or authorising the imposition of a tax o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort form parts of a single transaction'. It is in that sense that the two activities-the sale and the export-were said to be integrated. A purchase for the purpose of export, like production or manufacture for export, is only an act preparatory to export and cannot, in our opinion, be regarded as an act done 'in the course of the export of the goods out of the territory of India', any more than the other two activities can be so regarded." In Ben Gorm Nilgiri Plantations Company [1964] 15 STC 753 (SC) at page 759, the Supreme Court held: "A sale in the course of export predicates a connection between the sale and export, the two activities being so integrated that the connection between the two cannot be voluntarily interrupted, without a breach of the contract or the compulsion arising from the nature of the transaction. In this sense to constitute a sale in the course of export it may be said that there must be an intention on the part of both the buyer and the 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 betw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts and the Corporation are integrated contracts in the course of export or they are different. If they are different contracts, as they are in the present case, the last purchaser within the State is the M.M.T.C." The Supreme Court has likewise dealt with the question as to when a sale can be considered to be one "in the course of import", in a series of decisions referred to earlier in this judgment. In the latest decision, reported as Deputy Commissioner of Agricultural Income-tax and Sales Tax v. Indian Explosives Ltd. [1985] 60 STC 310 (SC) at page 313, the court observed: ".........in order that the sale should be one in the course of import, it must occasion the import and to occasion the import there must be integral connection or inextricable link between the first sale following the import and the actual import provided by an obligation to import arising from statute, contract or mutual understanding or nature of the transaction which links the sale to import which cannot, without committing a breach of statute or contract or mutual understanding, be snapped." It is in the light of the above principles laid down by the Supreme Court, we have to examine the rival con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onclusion as to whether the purchases are "in the course of import", the Appellate Tribunal should bear in mind section 5(2) of the Central Sales Tax Act, as interpreted by the various decisions of the Supreme Court of India and apply the same to the facts of the case. The Tribunal has also to apply the relevant provisions of the Import Control Act and the Import Control Order, 1955, to understand the nature of the transaction. In such circumstances, we are of opinion that the ultimate conclusion to be arrived at is one of law. We reject the contention of the counsel for the Revenue to the contrary. 9.. We have seen that 7 sets of documents were available before the Appellate Tribunal (para 4 supra). From 1st September, 1970, import of raw cashewnuts was canalised through the Cashew Corporation of India Limited. The provisions of the Import Control Order are relevant to determine the nature of the transaction. On a perusal of the order of the Tribunal, we find that the Appellate Tribunal has not addressed itself to the provisions of the Import Control Act and the Import Control Order, 1955. It is also evident that the Appellate Tribunal referred to seven sets of documents produce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase, "occasions such import" in section 5(2) of the Central Sales Tax Act, must have the same meaning as the expression "occasions the movement of goods" occurring in section 3(a) of the Central Sales Tax Act. (See Tata Iron and Steel Co. v. S.R. Sarkar [1960] 11 STC 655 (SC), Khosla and Co. v. Deputy Commissioner of Commercial Taxes [1966] 17 STC 473 (SC) at page 487). As in the case of interState sales, section 3(a) of the Central Sales Tax Act would cover sales, other than those covered by section 3(b) of the Act, in which the movement of goods from one State to another is the result of a covenant or incident of the contract of sale, in the case of import sales, it would be a sale in the course of import of the goods, if the movement of the goods from the foreign country was the result of a contract of sale or an incident of such contract. It is not necessary that the sale by the importer to the purchaser should precede the import. (Khosla and Co. v. Deputy Commissioner of Commercial Taxes [1966] 17 STC 473 (SC) at page 489). On a close perusal of the decisions of the Supreme Court, in Ben Gorm Nilgiri Plantations Company [1964] 15 STC 753 (SC), Mod. Serajuddin [1975] 36 ST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C 75 (Cal) at page 88. The learned Judge, after referring to the decision of the Supreme Court in Khosla's case [1966] 17 STC 473 (SC), observed as follows: "The test that has to be applied is that the sale must be in the course of import. It is not enough that the sale is for the purpose of import. The importation must be as a result of the sale and must be occasioned by the sale in respect of which exemption is being sought for. The act of importation and the sale in question must form an integrated transaction. How a particular sale and importation should be considered to have formed an integrated transaction depends upon the facts and circumstances of each case. No one test or combination of tests can be decisive in all cases. The fact that there are two different contracts-one a contract of purchase from the foreign seller and another a contract of sale to a buyer in India-may provide good indication of the fact that the sale in question was in the course of importation. Again, in my opinion, the fact that for effecting the sale the goods were imported or prior to the importation there was specification by the buyer or use of the actual user's licence of the buyer are not de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal has dealt with the above salient aspects. The order of the Appellate Tribunal is accordingly infirm. It is not in accordance with law. The contentions raised before the Tribunal should have been evaluated and adjudicated with reference to the facts, circumstances, the relevant evidence and the principles of law applicable thereto in a proper perspective. It has not been done. The Appellate Tribunal has not considered the essential or vital aspect that arose for consideration before it, with due care to all material facts and records. The crucial question was not approached from a proper perspective. The Tribunal was obliged to focus its attention on section 5(2) of the Central Sales Tax Act, as explained in the various Supreme Court decisions, referred to above, as also the Import Control Act and the Import Control Order, 1955, and then evaluate the facts and circumstances in the case. It failed to do so. It is a serious infirmity or error. In these circumstances, we are of the view that the findings arrived at by the Appellate Tribunal that the purchases made by the assessee from the Cashew Corporation are not in the course of import and so the exemption claimed by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the high seas. The authenticity or the contents were not doubted. The assessee had no opportunity to substantiate the contents of the letter of the Cashew Corporation dated 4th November, 1970. Prima facie, we are of the view that before the letter of a responsible Corporation, like Cashew Corporation of India, is discarded, the authorities should inform the assessee about the same and may elicit further supporting materials to prove the contents of the letter dated 4th November, 1970. That has not been done. Now that we have held that the Appellate Tribunal has not considered the applicability of the first limb under section 5(2) of the Central Sales Tax Act fairly or in accordance with law and so the matter requires a remit, we hold that with regard to the applicability of the second limb of section 5(2) of the Act, the Appellate Tribunal will afford a chance to the assessee to substantiate the contents of the letter of the Cashew Corporation dated 4th November, 1970, or require the assessee to produce more clinching material to precisely prove that the Corporation transferred the documents of title to the goods before the goods crossed the customs frontiers of India. On this as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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