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TMI Blog2016 (8) TMI 400X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of sandalwood (ineligible for export) to sandalwood flakes, chips, dust (eligible for export) – benefit of exemption not available. Burden of proof – Held that: - The burden is entirely on the assessee to establish the link in transactions relating to sale or purchase of goods and the export; that the penultimate sale is inextricably connected with the export of goods by the exporter to the foreign buyer. The appellants have not substantiated the position to tilt the balance in their favour. Appeal dismissed – decided against appellant. - W.A.Nos. 2246, 2249 & 2253 of 2006 - - - Dated:- 29-7-2016 - P.R. RAMACHANDRA MENON AND ANIL K. NARENDRAN, JJ. FOR THE APPELLANT : SRI.ANTONY DOMINIC, SRI.ANIL D. NAIR FOR THE RESPONDENT : GOVT.PLEADER SRI GEORGEKUTTY MATHEW JUDGMENT P.R. Ramachandra Menon, J. Whether the 'penultimate sale' of sandal wood by the Forest Department prior to the export of sandal wood flakes, chips/dust by the appellant (after conversion, making it an exportable commodity in view of the fact that sandal wood is a restricted item, which cannot, as such, be exported) will come within the purview of Section 5(3) of the CST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by this Court, the goods have been released on furnishing 'Bank Guarantee. 6. As evident from the prayers in the writ petition, the main relief sought for was to direct the concerned respondent to release the goods purchased vide Ext.P3, without collecting sales tax, based on the claim for exemption under Section 5(3) of the CST Act. The claim was resisted by the Department/State, mainly pointing out that the petitioner was not entitled to have the benefit of Section 5(3) of the CST Act. It was contended that the Forest Department, who had effected the sale, was never told at any point of time that the purchase of sandal wood was for export, pursuant to an order placed by a foreign buyer and that it was to give effect to such export obligation. It was further pointed out that the goods sold to the assessee was only 'sandal wood'; whereas the goods exported pursuant to the export order were 'sandal wood dust, flakes/chips' and hence that, there was no identity in the goods. It is further pointed out that the terms and conditions of sale were clearly stipulated in Exts.P1 notification /P2 conditions and it was with 'open eyes', that the petitioner had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered by a Division Bench of this Court, in the light of the observations of the Apex Court in 'paragraphs 27 and 28' of the Constitution Bench decision and accordingly, the common verdict passed by this Court on 07.12.2006 was set aside and the matter was remanded for fresh consideration. It is accordingly, that these appeals have been listed before the Court and have been heard in detail. 9. 'Sandalwood', admittedly is a restricted item and the same cannot be exported, except in the prescribed manner and form as permitted by the Director General of Foreign Trade. There is also no dispute to the fact that the commodity notified to be sold by the Forest Department as per Ext.P1 notification was sandalwood, which was purchased by the petitioner, as the successful bidder. The export order obtained by the petitioner and the export effected was in respect of the sandalwood dust, chips/flakes alone. The contention of the Department/State is that both are entirely different commodities and were having different uses, which could never be regarded as the same goods, to have extended the benefit of Section 5(3) of the CST Act. It is also pointed out that, after purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with reference to the observations in 'paragraphs 27 and 28' of the verdict in [(2010)9 SCC 524 ] ( cited supra ), it is necessary to make a reference to the context of legislation, the line of decisions as to the scope of the provision, the circumstance which necessitated the reference and the answer given by the Constitution Bench in this regard, though the discussion herein could be limited to the minimum/necessary extent. 12. As observed by the Supreme Court, the penultimate sale before the export was actually taxable prior to insertion of sub-section (3) to Section 5 of the CST Act. The position in this regard was made clear by the Apex Court as per the decision in (1975)2 SCC 47 ( Mohd. Serajuddin vs. State of Orissa) to the effect that the sale, which was not liable to tax under the State Sales Tax Act was only the actual sale by the exporter, and that the benefit of export sale did not extend to the penultimate sale to the Indian Exporter for the purpose of export. It was to overcome the said difficulty, that the Act was amended, introducing sub-section (3) to Section 5, with intent to promote export, to the requisite extent. The scope of the amending Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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, without which a transaction sale cannot be called a sale in the course of export of goods out of the territory of India. Paragraph 27 (corrected vide Official Corrigendum No.F.3/Ed.B.J/120/2010 dated 25.10.2010) reads as follows: 27. The phrase 'sale in the course of export' comprises in itself three essentials : (i) that there must be a sale: (ii) that goods must actually be exported and (iii) that the sale must be a part and parcel of the export. The word 'occasion' is used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... might 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.. 15. The Bench observed that the assessee Azad Coach Builders Pvt. Ltd manufactured the bus bodies and fitted them to chasis supplied by the exporter(Tata) and that such bodies manufactured were in accordance with the specifications provided by the foreign buyer, which could not have been used in the local market, by virtue of the situations/requirements in the country to which it was to be exported (Sri Lanka) and the different situation prevailing in India. The Bench observed that the assessee had succeeded in the said case, to substantiate that sale of the bus bodies had occasioned the export of goods. It was accordingly that a positive declaration was made that transaction between the assessee and the exporter was inextricably connected with the export of the goods to Sri Lanka. When th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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