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TMI Blog2010 (9) TMI 879X X X X Extracts X X X X X X X X Extracts X X X X ..... ght result in cancellation of the export order. The assessee in this case has succeeded in showing that the sale of bus bodies have occasioned the export of goods. When the transaction between the assessee and the exporter and the transaction between the exporter and foreign buyer are inextricably connected with each other, in our view, the "same goods" theory has no application, assessee is entitled to exemption under section 5(3) of the CST Act, appeals stand dismissed - Civil Appeal Nos. 5616, 5617, 6594-6598 of 2000 - - - Dated:- 14-9-2010 - KAPADIA S.H., SUDERSHAN REDDY B., RADHAKRISHNAN K.S., SURINDER SINGH NIJJAR AND SWATANTER KUMAR JJ. Other Advocates: Nishanth Patil, Mihir Chatterjee, Rohit Sharma, Nalla Jung, Sanjay R. Hegde, Ramesh K. Mishra, Kratin Joshi, Ramesh S. Jadhav, Vikrant Yadav, Abhishek Malviya, M.N. shankargowda, E.C. Vidya Sagar, Nitin Meshram, Bramhjee Mishra, Preetesh Kapoor, E.R. Kumar, N. Prasad, Nitya Bagaria, Sumit Goel, Ms. Rukmini Bobde (for M/s. Parekh co.), Ms. Yashodhara Anand, R.K. Gautam and Sarva Mitter (for M/s. Mitter and Mitter co.). Goolam E. Vahanvati, Attorney General of Indial. Soli J. Sorabjee, Dhruv Mehta, S.K. Baga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the same commodities which were exported. The court held that in order to attract sub-section (3) of section 5 of the CST Act it is necessary that the goods which are purchased by an assessee for the purpose of complying with the agreement or order for or in relation to export, must be the same goods which are exported out of the territory of India. The court further held that the test which has to be applied for the purpose of determining whether a commodity subjected to processing retains its original character and identity is as to whether the processed commodity is regarded in the trade by those who deal in it as distinct in identity from the original commodity or it is regarded, commercially and in the trade, the same as the original commodity. In Vijayalaxmi Cashew Company v. Deputy Commercial Tax Officer [1996] 100 STC 571 (SC). [1996] 1 SCC 468, the question raised was whether the export of cashew kernels obtained out of raw cashew nuts would amount to export of those goods which had been purchased. The court held that, since the raw cashew nuts can be used for so many purposes and the process of extracting the kernels so elaborate, it cannot be said that the goods ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed exemption on sales of bus bodies as penultimate sales in the course of export made to their customers like Telco Bombay and others which was rejected by the assessing authority, treating the transactions as inter-State sales, on the ground that the "bus bodies" and "buses" are two different commodities and the bus bodies as such were not exported, but complete buses. The assessing authority held that the transactions could not amount to penultimate sale eligible for exemption under sub-section (3) of section 5 of the CST Act. Aggrieved by the assessment order dated March 21, 1995, the assessee approached the Joint Commissioner of Commercial Taxes (Appeals), Bangalore Division, under section 20(5) of the Karnataka Sales Tax Act, 1957. The appeal was rejected upholding the levy of tax by the assessing authority on the ground that the goods exported was different from the goods purchased and hence, the assessee was not entitled to exemption under section 5(3) of the CST Act. The matter was taken up in appeal before the Karnataka Appellate Tribunal and the appeal was rejected vide order dated August 14, 1996. Feeling aggrieved by the order passed by the Tribunal, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 5(3) of the CST Act is not available to the assessee. Learned counsel has, in support of his contentions, placed reliance on the Constitution Bench judgments of this court in Sterling Foods [1986] 63 STC 239 (SC). [1986] 3 SCC 469 and Vijayalaxmi [1996] 100 STC 571 (SC). [1996] 1 SCC 468. Reference was also made to the judgments of this court in Consolidated Coffee Ltd. [1980] 46 STC 164 (SC). [1980] 3 SCC 358, Mod. Serajuddin v. State of Orissa [1975] 36 STC 136 (SC). [1975] 2 SCC 47, Binani Brothers (P) Ltd. v. Union of India [1974] 33 STC 254 (SC). [1974] 1 SCC 459, Satnam Overseas (Export) through its Partner v. State of Haryana [2003] 130 STC107 (SC). [2003] 1 SCC 561 and Coffee Board, Bangalore v. Joint Commercial Tax Officer, Madras [1970] 25 STC 528 (SC). [1969] 3 SCC 349. Mr. P.S. Narasimha, the learned senior counsel appearing for respondent No. 2, submitted that the exemption under taxation law will have to be purposefully and widely construed. In that context, the learned senior counsel submitted that, under section 5(3) of the CST Act, those penultimate sales are also given exemptions, if such sale was for the purpose of complying with the agreement or order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." The relevant portions of section 5 are also extracted hereunder for easy reference: "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. . . . (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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iginal shrimps, prawns and lobsters. In Vijayalaxmi Cashew Company [1996] 100 STC 571 (SC). [1996] 1 SCC 468, we have already stated that the question was whether the purchase of raw goods made by the appellants after which the cashew kernels were extracted and exported to foreign countries could be subjected to the State Sales Tax Act. The court elaborately examined, in what manner the raw cashew nuts were processed. After getting the detailed report from the High Court as to how the edible kernels were extracted from raw cashew nuts and having examined minutely the whole process, the court came to the conclusion that the kernels were not the same goods as raw cashew nuts purchased by the dealers. What was exported were the edible kernels and what was purchased for the purpose of export were raw cashew nuts. The court noticed that since raw cashew nuts could be used for so many purposes and the process of extracting the kernels so elaborate, it could not be said that the goods (raw cashew nuts) purchased in the penultimate sale were the same goods (cashew nut kernels) which were sold for export. In this connection, it is useful to refer to the judgment of this court in Deputy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r [1997] 105 STC 580 (SC). [1997] 10 SCC 1 on which strong reliance was placed in the order of reference. The question raised was whether the purchase of African raw cashew nuts made by the assessees from CCI was in the course of import and, therefore immune from liability to tax under the Kerala General Sales Tax Act, 1963. The court rejected that contention observing that there was no direct and inseverable link between the transaction of sale and the import of goods on account of the nature of the understanding between the parties as also by reason of the canalizing scheme pertaining to the import of cashew nuts. In that case, the court was mainly concerned with the interpretation of sub-section (2) of section 5 of the CST Act. In the facts and circumstances of that case, the court observed that the transactions between the foreign exporter and the local users in India got transmitted through an independent canalizing import agency which entered into back to back contracts and there was no direct linkage or causal connection between the export by foreign exporter and the receipt of the imported goods in India by the local users and hence the integrity of the entire transaction g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ked with the agreement or order occasioning that export. The expression "in relation to" is words of comprehensiveness, which might both have a direct significance as well as an indirect significance, depending on the context in which it is used and they are not words of restrictive content and ought not be so construed. Therefore, the test to be applied is, whether there is an inseverable link between the local sale or purchase on export and if it is clear that the local sale or purchase between the parties is inextricably linked with the export of the goods, then a claim under section 5(3) for exemption from State sales tax is justified, in which case, the same goods theory has no application. The facts of this case clearly reveal that the transaction between the assessee and the exporter is inextricably connected with the export of the goods to Sri Lanka. The communication between the foreign buyer and the exporter reveals that the foreign buyer wanted the bus bodies to be manufactured by the assessee under the specifications stipulated by the foreign buyer. The bus bodies constructed and manufactured by the assessee could not be of any use in the local market, but were sp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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