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TMI Blog1998 (3) TMI 643X X X X Extracts X X X X X X X X Extracts X X X X ..... lso submitted that purchase effected by the petitioners is inextricably connected with the export sales and it is exempt under article 286(1)(b) of the Constitution of India. The case before the assessing authority was that they are entitled to exemption under section 5(3) of the Central Sales Tax Act. That was not accepted by the assessing authority, Deputy Commissioner (Appeals) as well as the Kerala Sales Tax Appellate Tribunal. The order in appeal No. 265 of 1995 passed by the Kerala Sales Tax Appellate Tribunal is produced in T.R.C. No. 83 of 1996. Findings of the Tribunal are recorded in paragraph 4 of the order which is as follows: "Admittedly, the purchase effected by the appellant is the purchase of pepper, dry ginger, etc., within the State of Kerala which are taxable at the last purchase point. After the above purchase is complete, the appellant sold the same to exporters outside the State of Kerala. Exporters outside the State of Kerala exported the same. So, three transactions are involved in this case. One, a sale by a dealer in the Kerala to the appellant, i.e., the appellant's purchase in Kerala, secondly sale by the appellant to the exporters at Bombay (second tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods for export and, therefore, these purchases were inextricably connected with the export. These pepper and ginger were despatched to export companies outside the State and they have exported the same outside the territory of India. The bill of lading issued by the Shippers, certificate of export issued by the exporters, etc., show that the goods were actually exported. 4.. Petitioners relied on the decision of the Supreme Court of India in State of Travancore-Cochin v. Bombay Company Ltd., Alleppey [1952] 3 STC 434; AIR 1952 SC 366 wherein it was held by the Supreme Court that a sale by export involves a series of integrated activities commencing from the agreement of sale with a foreign buyer and ending with the delivery of the goods to a common carrier for transport out of the country by land or sea. Such a sale cannot be dissociated from the export without which it cannot be effectuated, and the sale and resultant export form parts of a single transaction. In the above case, assessees received export orders and in executing the sale for export, they made local purchases and according to the sales tax authorities the sales were completed before the goods were shipped and, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the course of export." In Ben Gorm Nilgiri Plantations Co. v. Sales Tax Officer [1964] 15 STC 753 (SC); AIR 1964 SC 1752 the appellants were sellers of tea and their purchasers were local agents of foreign buyers. The sales were by public auction. Apex court held that a transaction of sale which is a preliminary to export of the commodity sold may be regarded as a sale for export, but is not necessarily to be regarded as one in the course of export unless the sale occasions export. It was said that to occasion export there must exist such a bond between the contract of sale and the actual exportation that each link is inextricably connected with the one immediately preceding it. 7.. In Coffee Board, Bangalore v. Joint Commercial Tax Officer, Madras [1970] 25 STC 528; AIR 1971 SC 870 the Supreme Court held that there must be a single sale which itself causes the export and that there is no room for two or more sales in the course of export. In Binani Bros. (P) Ltd. v. Union of India [1974] 33 STC 254 (SC); AIR 1974 SC 1510 similar view was taken by the Supreme Court. In Murarilal Sarawagi v. State of Andhra Pradesh [1977] 39 STC 294 (SC); [1977] 1 SCC 639 it was held by the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , manufacturers of goods, particularly in the small-scale and medium sectors, have to depend upon some experienced export house for exporting the goods because special expertise is needed for carrying on export trade......... 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." In the Notes on Clauses published in the Gazette along with the Bill and Statement of Objects and Reasons, reasons for enacting section 5(3) and notes and reasons on clause 5(3) is as follows: "This clause seeks to insert with retrospective effect from 1st April, 1976, a new sub-section (3) in section 5. The new sub-section provides 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 sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all helpful to the petitioners. In the case considered by the Supreme Court, the assessee entered into a contract with the Japanese buyers for export sale of mineral ores and the Supreme Court held that the export sale has an entirely different legal concept and "sale" and "export" are so intertwined and intermixed that both begin and end together. After analysing the contract the Supreme Court held as follows: "A sale 'in the course of the export of the goods' and a sale 'within the State of Orissa' are two distinct events. A sale 'in the course of the export of the goods' cannot be a sale within the State of Orissa. The assessee entered into contracts with the Japanese buyers for 'export sale' of the mineral ores. An 'export sale' has an entirely different legal concept. In the 'export sale', the 'sale' and the 'export' are so intertwined and intermixed that both begin and end together. The various clauses of the contract entered into by the assessee and the Japanese buyers are wholly irrelevant and are of no consequence. Even if on the construction of the contract of 'export sale' the sale part of it is completed within the State it would still not be considered as legally com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale in the course of export. The Supreme Court before coming to such a decision, considered the following facts: "The manner in which the contract between the appellants and STC was executed reinforces our view. The tea export licence for the tea was that of the appellants. The invoice of the appellants showed the Iranian buyer against the column 'sold to', and no objection in this regard was raised by STC. The duty drawback benefit accrued entirely to the appellants. The bill of lading issued by the Irano-Hind Shipping Co. Ltd., showed the Iranian buyer's Teheran Bank as consignee of the tea shipped by the appellants." On these facts, the Supreme Court held as follows: "There is, therefore, nothing in the contract between the appellants and STC or in the manner of its execution that establishes that there was a transfer of the property in the tea by the appellants to STC before it was transferred to the Iranian buyer. Hence, the purchase of the tea by the appellants at the auctions in fulfilment of the export obligation to the Iranian buyer was the penultimate sale in the course of export and covered by the terms of section 5(3). It was, accordingly, exempt from the payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outside the territory of India. The claim of exemption by the revision petitioner under the cover of section 5(3) of the Central Sales Tax Act was ruled out. It was held that the sale occasioned the export is the sale by the Bombay dealer to the foreign buyer. Therefore, the purchase which preceded the export is the purchase made by the Bombay exporter. Hence the purchase made by the assessee was not the immediate preceding purchase which occasioned the export eligible for exemption under sub-section (3) of section 5 of the Central Sales Tax Act. This decision was also rendered on almost identical facts in this case. Special Leave Petition filed before the Supreme Court against the above judgment was dismissed in S.L.P. (Civil) No. 3656 of 1997. 15.. The learned Senior Advocate Shri Rajaram Agarwal appearing for the petitioners finally submitted that the petitioners were only commission agents or buying agents and they were only acting under the instructions of the exporters situated outside the Kerala State and, therefore, purchases effected in the sales is penultimate sales entitling exemption under section 5(3) of the Central Sales Tax Act. Petitioners relied on the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purchase of the goods and their despatch were parts of the same transaction and the movement of the goods from one State to another was occasioned by and was the result or the incident of the purchases. Therefore, the purchases were in the course of inter-State trade and the respondents were not liable to purchase tax under section 3-D of the U.P. Sales Tax Act, 1948. The court also held that if the commission agents had purchased the goods on behalf of the ex-U.P. principals in the first instance and thereafter in pursuance of subsequent instructions despatched the goods, the instructions to despatch the goods would be independent of the instructions to purchase. There would be a break between the purchase and the despatch of the goods and the purchase would not be an inter-State purchase. This will invariably depend upon finding of fact in each case. 18.. Whether the petitioner acted only as a commission agent or not and whether petitioner purchased the goods after getting export orders from the exporters for the exact quantity, nature of transaction, etc., are questions of fact to be decided from the entire facts of the case and materials available in the case. Here, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to show that goods were exported. 20.. The Supreme Court in Commissioner of Sales Tax v. Bishamber Singh Layaq Ram [1981] 47 STC 80 while considering the question whether the respondent in the case is a dealer or only a commission agent observed as follows: "The crucial test is whether the agent has any personal interest of his own when he enters into the transaction or whether that interest is limited to his commission agency charges and certain out of pocket expenses, and in the event of any loss his right to be indemnified by the principal. This principle was applied in the case of pakki arhat by Sir Lawrence Jenkins, C.J., in Bhagwandas Narotamdas v. Kanji Deoji [1906] ILR 30 Bom. 205 and approved of by the Judicial Committee in Bhagwandas Parasram v. Burjorji Ruttonji Bomanji (1917-18) LR 45 IA 29 and by this Court in Shivnarayan Kabra v. State of Madras [1967] 1 SCR 138." The Supreme Court also quoted with approval observations of Vivian Bose, J. in Kalyanji Kuwarji v. Tirkaram Sheolal AIR 1938 Nag. 254 as: "The test to my mind is this: does the commission agent when he sells have authority to sell in his own name? Has he authority in his own right to pass a valid title ..... X X X X Extracts X X X X X X X X Extracts X X X X
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