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TMI Blog2015 (8) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... paper cartons). The appellant filed W.P. (C) No.25623/2005 which was dismissed by a learned Single Judge, from which the writ appeal is filed. Therein, the challenge was against Ext.P4 assessment order under the CST Act. The year of assessment shown is 2002-2003. In W.P.(C) No.37214/2009 the assessment years are 2005-2006 and 2006-2007 and Exts.P10, P11, P2 and P13 assessment orders are under challenge. In W.P.(C)No.19448/2010, the assessment year is 2007-2008 and Exts.P6 to P9 orders are under challenge. In W.P.(C) No.2934/2010, the assessment years are 2008- 2009 and 2009-2010 and Exts.P1 and P3 are under challenge. 3. The contentions raised by the appellant in all these cases are the same. The case pleaded is that the firm had effected inter-state sale of paper cartons to various exporters in the course of export outside the State. Exemption was claimed on the said turnover under Section 5(3) of the C.S.T. Act. The sales were supported by Form H declarations. The assessing authorities have rejected the claims and disallowed exemption. They have also held that the sales of packing materials are liable to tax at the rate of 1% if the sales are supported by C Form or D Form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter of export and no independent contract has been proved, for export of packing materials. 7. For easy reference, we extract below Section 5(3) of the CST Act: "5. When is a sale or purchase of goods said to take place in the course of import or export.- (1) and (2) xxxxxxxxxxxxx (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 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." It will also be necessary to refer to the definition of 'goods' in Section 2 (d) of the CST Act which reads as follows: "(d) "goods" includes all materials, articles, commodities and all other kinds of movable property, but does not include newspaper actionable claims, stocks, shares and securities." Section 5(3) of the Act has to be understood in the light of the decision of the Constitution Bench of the Apex Court in Azad Coach Builders' case (supra). It is clear from sub-section (3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se is needed for carrying on export trade. A sale of goods made to an export canalizing 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 States 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." Therein, it has been explained that a sale of goods made to an export canalizing agency such as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asioning the export' mean the factors, which were immediate cause of export. The words `to comply with the agreement or order' mean all transactions which are inextricably linked with the agreement or order occasioning that export. The expression `in relation to' are 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. 12. Going by the same, there are various elements to be proved to constitute a sale in the course of export. There must be an intention on the part of the buyer and the seller to export. There must be an obligation to export which may arise by reason of statute, contract between the parties, or from mutual understanding or agreement between them, or even from the nature of the transaction which links the sale to export. Importantly, it was held that there must exist such a bond between the contract of sale and the actual exportation, to occasion an export. Each link should be inextricably connected with the one immediately preceding it. Without it, a transaction sale cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in Azad Coach Builders Pvt. Ltd. (supra) as noted already, the various links will have to be established. 17. The decision of the Andhra Pradesh High Court in Standard Packings'case {(1995) 96 STC 151} considered only one aspect, i.e. whether 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, was for export. The transaction therein was sale of gunny bags for use as containers for goods meant for export. It was held that Section 5(3) is attracted. Therein also, the provision was considered on a different footing. 18. In Kusum Laminating & Packaging Industries' case {(1996) 101 STC 476}, the ultimate conclusion turned on a finding that in the said case there are facts on record to conclude that polythene bags were also exported, according to the contract between the exporter and foreign buyers. Exemption was claimed for the packing material, viz. polythene bags used for packing barytes powder. The Bench concluded that therein the identity of the goods was established with regard to the polythene bags sold by the assessee and the polythene bags in which the barium sulphate was packed an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king materials will get the colour as "goods exported", was not considered therein. Therefore, those decisions are distinguishable. 21. According to us, in the light of the interpretation placed by the Constitution Bench in Azad Coach Builders' case (supra), the issue will have to be considered by examining whether all the ingredients of Section 5(3) of the CST Act are satisfied. The important aspect pointed out by the Constitution Bench in the above decision is that there has to be an inextricable link between the local sales or purchase with the export of goods. For occasioning 'export', there must be a bond between the contract of sale and the actual exportation. Such a link, according to us, is absent as far as the sale of packing cartons by the appellant, to the exporters are concerned. It is also important to notice that there should be an intention on the part of both the buyer and the seller to export. The Constitution Bench specifically held that the word "occasion" in Section 5(3) of the CST Act means "to cause" or "to be the immediate cause of". 22. As we have already observed, the appellant will have to establish the identity of the goods sold with the goo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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