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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 ..... exported as such and the goods exported are different. That, according to us, will take out the case of the appellant from the purview of Section 5(3) of the CST Act. The transaction, going by the provision, should be first one with the exporter and the foreign buyer and the next one is with the exporter and the penultimate seller like the appellant. That inextricable link is absent, going by the facts of this case. There is a contract or understanding between the exporter and another seller from whom the goods exported were purchased. As far as packing materials are concerned, the intention on the part of both buyer and seller to export, is absent. - As rightly pointed out by the learned Senior Government Pleader, the provisions of Section 5(3) of the CST Act will not come to the aid of the appellant for claiming exemption. - Decided against assessee. - W.A.Nos.588/2009 and W.P.(C) Nos.37214/2009, 19448/2010 and 2934/2013 - - - Dated:- 15-7-2015 - T.R. RAMACHANDRAN NAIR AND K.P. JYOTHINDRANATH, JJ. FOR THE APPELLANT : SRI.M.GOPIKRISHNAN NAMBIAR, SRI.P.GOPINATH, SRI.P.BENNY THOMAS, SRI.K.JOHN MATHAI AND SRI.KURYAN THOMAS FOR THE RESPONDENT : GOVERNMENT PLEADER SH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of complying with the export orders and it squarely falls within Section 5(3) of the CST Act. It is also pointed out that the sale is supported by Form H declarations. 5. Learned counsel for the appellant submitted that all the ingredients of Section 5(3) of Act are thus attracted on the facts of these cases. He also relied upon the following decisions: Moncompu Egg Store v. State of Kerala {(1981) 48 STC 518 - Kerala}, State of Tamil Nadu v. Catherene Traders and another {(1991) 81 STC 228 - Madras}, State of A.P. v. Standard Packings {(1995) 96 STC 151 - A.P.}, Kusum Laminating and Packaging Industries v. State of Tamil Nadu {(1996) 101 STC 476 - Madras) and Allappy Company Limited v. State of Kerala {(2012) 20 KTR 69 - Kerala). Our attention was also invited to the decision of the Constitution Bench of the Apex Court in State of Karnataka v. Azad Coach Builders Pvt. Ltd. and another {(2011) 19 KTR 73 - SC). 6. While opposing the contentions of the learned counsel for the appellant, learned Senior Government Pleader submitted that the sale of packing materials by the appellant/petitioner to exporters cannot get the benefit under Section 5(3) of the CST Act. Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 5(3) provides for exemption of sale to exporters only for the purchase made by the exporter against advance exports orders for export of goods. The petitioner has no case that the goods purchased by the exporter from the petitioner were goods which are exported as such. In other words, export orders produced by the petitioner from the buyers were for export of other goods by the exporter and the items sold by the petitioner was used for packing of such goods. Section 5(3) provides for exemption only on sale to exporter of goods which are exported by the exporter against prior orders for export. In other words, raw materials, packing materials, etc. purchased by the exporter are not separately covered by Section 5(3) of the Act which provides for exemption only for the goods exported. The learned Single Judge also noticed that it is only because of non availability of exemption for sale of packing material to exporters under Section 5(3) of the Act, the Government granted an incentive by way of reduction in rate of tax to suppliers of packing materials to exporters for packing goods for export. 9. For considering the legal point, it will be profitable and advantageous to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the goods out of the territory of India. In order to resist imposition of sales tax by the State, the assessee will have to establish the identity of the goods sold to be exported out of the territory of India. In order to fulfil an export obligation, if an exporter purchases goods and as a result of some processing the identity and character of the goods change then it will not be a case of export of the same goods. 11. The provision has been analysed in paragraphs 23 and 24 which we reproduce below: 23. When we analyse all these decisions in the light of the Statement of Objects and Reasons of the Amending Act 103 of 1976 and on the interpretation placed on Section 5(3) of the CST Act, the following principles emerge: - To constitute a sale in the course of export there must be an intention on the part of both the buyer and the seller to export; - There must be 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 between them, or even from the nature of the transaction which links the sale to export. - To occasion export there must e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consider the issue in the light of the interpretation placed by the Constitution Bench of the Apex Court in Azad Coach Builders Pvt. Ltd.'s case (supra), the moot question will be whether the sale by the appellant/petitioner will satisfy the tests laid down therein. 15. The decision of a Division Bench of this Court in Moncompu Egg Store's case {(1981) 48 STC 518) related to the interpretation of Section 5A(1)(c) of the KGST Act. Therein, the item sold in inter- State commerce was eggs. Eggs had to be sent with proper package. It was held by the Division Bench that there was a sale of packing materials attracting exception under Section 5A(1)(c) of the Act. The said section is attracted in case the goods so purchased are despatched to any place outside the State in the course of inter-State trade or commerce and the interpretation of the said provision was considered by the Division Bench therein. Of course, the learned counsel for the appellant relied upon the same to contend that the same will show that packing materials had to be used for the inter-State commerce. 16. The issue considered in Catherene Traders' case {(1991) 81 STC 228} by the Madras High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ags and labels were printed by the supplier-printing press in terms of the petitioner's orders, which were in conformity with export orders. So much so, the commodity even at the time of printing or manufacturing is earmarked for export after purchase. The petitioner attached the tags and labels to the products exported also. Therefore, it was held that the commodity purchased was for export by attachment to the coir products without any change whatsoever and so much so, the decision of the Constitution Bench in Azad Coach Builders' case (supra) will apply. 20. But as far as the facts herein is concerned, they have no parallel to the facts under which the said decision was rendered, obviously. What is clear from Section 5(3) of the CST Act is that the goods purchased and the goods exported should be the same. The argument of the learned counsel for the appellant is that in the orders of the foreign buyers, they have indicated that the goods should be sent as packed goods. But evidently, the exemption under Section 5(3) is in relation to the goods purchased . It should precede the sale or purchase occasioning the export of those goods. It cannot be said that the purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the exporter from other sources. What is described as sale by the appellant is only the packing cartons alone which were never exported as such and the goods exported are different. That, according to us, will take out the case of the appellant from the purview of Section 5(3) of the CST Act. The commitment of the exporter to the foreign buyer under their agreement is to export the goods covered by the orders of foreign buyers. Even if they should be in packed form, as we have already noticed, the appellant has not supplied those goods in the packed form, to the exporters for export. The transaction, going by the provision, should be first one with the exporter and the foreign buyer and the next one is with the exporter and the penultimate seller like the appellant. That inextricable link is absent, going by the facts of this case. There is a contract or understanding between the exporter and another seller from whom the goods exported were purchased. As far as packing materials are concerned, the intention on the part of both buyer and seller to export, is absent. 23. Therefore, we are unable to agree with the contentions raised by the learned counsel for the appellant. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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