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TMI Blog1995 (2) TMI 414X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1959 ("the Bombay Act"), as also under the Central Sales Tax Act, 1956 ("the Central Act"). One M/s. Kamani Engineering Corporation Ltd. ("Kamani") entered into a contract with a foreign buyer in Iran for sale of standard galvanised steel wire ropes. For performing this contract Kamani entered into an agreement with Aluminium Industries Ltd., for purchase of these goods. Aluminium Industries Ltd., in turn entered into a written contract dated October 28, 1977, with the assessee for purchase of the very same goods in order to enable it to perform its contract with Kamani. Certain correspondence in this regard was exchanged between the assessee and Aluminium Industries Ltd., under letters dated January 5, 1978 and March 16, 1978. In furtherance of the said agreement, the assessee shipped the goods out of India under bill of lading No. PK 33 dated May 19, 1980, and raised an invoice No. 2062286 dated June 4, 1980 for Rs. 8,29,600 in the name of Aluminium Industries Ltd., Bombay. Since, according to the assessee, this sale was covered by section 5(1) of the Central Sales Tax Act, 1956, no sales tax was recovered by it in respect of the same. However, with a view to seeking statutor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... export falling under section 5(1) of the Central Sales Tax Act, 1956. It was contended that taking of the bill of lading under instructions from the buyer M/s. Associated Industries, in the name of Kamani Engineering Corporation, did not and could not alter the true character of the transaction. It was also pointed out that the payment of full consideration even before taking the goods on board was not a relevant circumstance in deciding the true nature of the transaction in view of the subsequent developments which necessitated such payment. According to Mr. Jetley, the sale by the assessee was a sale in the course of export and not an intra-State sale as held by the Tribunal. 4.. Miss Anklesaria, learned counsel for the Revenue, on the other hand, supports the order of the Tribunal. According to her, the finding of the Tribunal is based on the uncontroverted facts of the case and cannot be faulted with. In support of this submission, Miss Anklesaria drew our attention to the terms of the contract dated October 28, 1977, letters dated January 5, 1978 and March 16, 1978, and subsequent conduct of the parties to show that the sale was complete in Maharashtra and that it was not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shipping Co. certificate confirming sailing date of vessel. Do. DELIVERY: We request you to kindly supply minimum 100 KM by 10th December, 197 since Kamani are planning a shipment from Bombay of this quantity by 15th December, 1977. SHIPPING MARKS: The shipping marks shall be as follows: F O R T A V A N I R Tabriz II Project Contract No. MQ 9/12 Package No. Khorramshakr, Iran. INSPECTION AND SUPERVISION: Inspection of the material will be carried out by M/s. Iteng Engg. Pvt. Ltd., Bombay and/or the representative of the consultant M/s. Merz Quanta. In addition to this inspection by Export Inspection Agency must be carried out. TRANSFER OF PROPERTY IN GOODS: As a specific condition of this contract you shall be under an absolute obligation to export the abovementioned goods to TAVANIR (Iran Power Generation and Transmission Co., Brezil Avenue, Vanak, Teheran, Iran) by taking out the shipping documents in the name of Kamani Engineering Corporation Limited, Bombay as the shippers. However, you shall not transfer the documents until after the goods cross the customs frontiers of India as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevance. The contract between the assessee and Aluminium Industries, Aluminium Industries and Kamani Engineering and Kamani Engineering and the foreign buyer in Iran are three separate and independent contracts. It is Kamani Engineering who agreed to sell the goods to the foreign buyer. It was, therefore, the exporter of the goods. There was no privity of contract between the assessee and the foreign buyer. The privity of contract is between Kamani Engineering and the foreign buyer. Even Aluminium Industries was not a party to the contract with the foreign buyer. The immediate cause of movement of goods and export was the contract between the foreign buyer who was the importer and Kamani Engineering who was the exporter and shipper of the goods. All relevant documents were in the name of Kamani Engineering whose contract of sale had occasioned the export. It was made clear in the contract of sale between the assessee and Aluminium Industries that "All export benefits on the order will be to Kamani Engineering Corporations account". It was also obligatory on the assessee under the terms of the contract to take out shipping documents in the name of Kamani Engineering Corporation, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing on both the buyer and the seller. The clause in the contract regarding payment was as follows: "90 per cent payment against shipping documents as described in buyers' corresponding sale contract. Buyers will assign the relevant foreign letter of credit which is to be opened in their name by their foreign buyer, Messrs. Associated Metals and Minerals Corporation, on receipt from the sellers of a bank draft for difference between buyers' f.o.b. purchase value and f.o.b. sale value, that is, $ 1.00 (Rs. 4.75) per dry long ton for a bank guarantee from a scheduled bank guaranteeing that sellers will pay buyers immediately upon shipment/shipments the difference between buyers' f.o.b. purchase value as shown in this contract and buyers' f.o.b. sale value as shown in foreign letter of credit, that is $ 1.00 (Rs. 4.75) per dry long ton by bank draft for each shipment and the buyers will endorse the bills of lading and deliver the same to seller to negotiate against the abovementioned letter of credit. Balance after destinational weight and analysis on the basis of documents mentioned in S.T.C.'s corresponding sale contract with buyers. If the balance 10 per cent is insufficient to co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion the immediate cause of the export. The Corporation in regard to its contract with the foreign buyer entered into a contract with the appellant to procure the goods. Such contracts for procurement of goods for export are described in commercial parlance as back to back contracts. In export trade it is not unnatural to find a string of contracts for export of goods. It is only the contract which occasions the export of goods which will be entitled to exemption. The appellant was under no contractual obligation to the foreign buyer either directly or indirectly. The rights of the appellant were against the Corporation. Similarly the obligations of the appellant were to the Corporation. The foreign buyer could not claim any right against the appellant nor did the appellant have any obligation to the foreign buyer. All acts done by the appellant were in performance of the appellant's obligation under the contract with the Corporation and not in performance of the obligations of the Corporation to the foreign buyer." The Supreme Court accordingly held (at page 150): "The expression 'sale' in section 5 of the Act has the same meaning as in the Sale of Goods Act. String contracts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort sale is an independent one between the Corporation and the foreign buyer. The taking of the goods from the appellant's place to the ship is completely separate from the transit pursuant to the export sale." 8.. The above decision in Mod. Serajuddin's case [1975] 36 STC 136 (SC) was followed by the Supreme Court in State of Punjab v. New Rajasthan Mineral Syndicate [1975] 36 STC 378. In this case, the assessee carried on the business of quarry contractors and held a licence to quarry iron-ore. The Government of India had authorised the State Trading Corporation as the sole authority for the purpose of exporting iron-ore to foreign countries. The Corporation had nominated N Co. to procure iron-ore for the purpose of export. N Co., who were mere brokers entered into agreement with the assessee for procuring the iron-ore. The agreement between the assessee and N Co., for the sale of 25,000 tons of iron-ore at Rs. 14-8-0 per ton plus actual railway freight, inter alia, provided as follows: "The sellers agree to stock the ore at the railway siding or sidings and the buyers have the right to reject any ore or cancel at any stage before the same is loaded into wagons. The buyer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, the assessee was entitled to payment even before shipment, if the goods were weighed and approved by S.T.C. at Kandla Port." As the basic features of the case were found to be the same as those in Serajuddin's case [1975] 36 STC 136, the Supreme Court following its decision in that case, accepted the contention of the State and held that the sale by the assessee to the Corporation was not a sale in the course of export. 9.. Reference may also be made to another decision of the Supreme Court in Murarilal Sarawagi v. State of Andhra Pradesh [1977] 39 STC 294. The assessee in this case, who sold manganese ore to M.M.T.C. for export to foreign buyers, contended before the sales tax authorities that the sales of manganese ore to M.M.T.C. was complete within the State of Andhra Pradesh and therefore M.M.T.C. was the last purchaser within the State and the M.M.T.C. was liable to pay sales tax. The High Court came to the conclusion that the appellants (assessee) were the last purchasers within the State inasmuch as the contract entered into by the appellants with the M.M.T.C. was integrally connected with the contract entered into by the M.M.T.C. with their foreign buyers and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Sales Tax Act has undergone any change since the delivery of the above judgments by the Supreme Court. The only material change in regard to export sales that has taken place in the meantime is insertion of the definition of "crossing the customs frontiers of India" in clause (ab) of section 2 and the in Corporation of a new sub-section viz., sub-section (3) in section 5 by the Central Tax Act (Amendment) Act, 1976 (Act 103 of 1976) with effect from April 1, 1976, which provides that "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 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". Obviously, this sub-section does not apply in the instant case to the sale by the assessee to M/s. Aluminium Industries because admittedly that is not the last sale preceding the sale occasioning the export of those goods out of the territory of India. It is the sale by Aluminium Industries to Kamani ..... X X X X Extracts X X X X X X X X Extracts X X X X
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