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TMI Blog1993 (4) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... 65. The second respondent is the manufacturer-exporter of ferro-manganese and chrome concentrates. During the year 1964-65 (from February 28, 1965, to June 5, 1965 ), the second respondent entered into a number of agreements with the foreign buyers for the sale of the aforesaid two commodities. The export was routed through the M.M.T.C., the appellant herein, to bring it within the system of private barter introduced by the Government of India with a view to encourage exports. It would be appropriate to notice the essential features of the barter system in vogue during the relevant period at this stage. The main objective behind the system was to provide a mechanism which would result in increased export of particular commodities which wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e bartering firm/local supplier to import the approved commodity under its approval barter and thus be in a position to recoup the losses incurred by it in arranging the supply of - or in supplying, as the case may be of export commodities to the M.M.T.C. It was agreed and understood that Ferro-Alloys should intimate the foreign buyer to enter into a direct contract with the M.M.T.C. treating it as the seller. It was also agreed that the G.R.I. Form prescribed by the Reserve Bank of India under the Rules framed under the Foreign Exchange Regulation Act ( for accounting for the receipt of foreign exchange ) was to be signed by the M.M.T.C. showing it as the exporter and seller vis-a-vis the foreign buyer. Letters of credit were also to be op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o can be said to have exported the goods and received the sale proceeds in the shape of foreign exchange ? The matter was taken in appeal before the Government of India under paragraph 9 of the Tax Credit Certificate (Exports) Scheme, 1965. On an elaborate consideration of the bartering scheme and the several documents which came into existence in connection with the transactions between the parties, the Government of India held that the M.M.T.C. must be held to be the exporter for the purpose of section 280ZC and not Ferro-Alloys. This order was challenged by Ferro-Alloys by way of a writ petition in the High Court. The High Court allowed the writ petition on the following reasoning (at page 764 of 114 ITR ) : " While the terms of the sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the exporters' banker as the banker concerned. " In other words, the High Court's approach was that while for external appearances, the Corporation was given out as the exporter, Ferro-Alloys was the real exporter for all purposes and it was Ferro-Alloys which earned and received the foreign exchange. The M.M.T.C. got only its commission of 2% and nothing more. Alternatively, held the High Court, even if it is held that the documents executed between the parties had the legal effect of transferring title in the goods to and in favour of the Corporation, even so Ferro-Alloys must be deemed to be the real exporter for the purposes of section 280ZC having regard to the objective underlying the said section, viz., providing an additional ince ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porter declaring that he is the seller/consignor of goods and a further undertaking that they will deliver to the bank mentioned in the said Form, the foreign exchange resulting from the export of the goods mentioned therein. It was signed by the M.M.T.C. Letters of credit were opened in the name of the M.M.T.C. All this was done as required by the system of barter. Ferro-Alloys availed of this system presumably because it was to its advantage. In fact, it appears that it was not able to sell the said goods otherwise. Be that as it may, whether by choice or for lack of alternative, it chose to route its goods through M.M.T.C. Is it open to Ferro-Alloys now to say that all this must be ignored in the name of " external appearances " and it m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uted between the parties. May be so. The fact yet remains that the entire export was done through the M.M.T.C. in accordance with the system of barter. There is no half-way house ; either it is the barter system or it is not. This is an undisputed fact as are the several statutory documents made out in the name of the M.M.T.C., referred to hereinbefore. On a consideration of all the relevant facts and circumstances, we are of the opinion that the M.M.T.C. must be held to be the exporter for the purpose of section 280ZC. The entire system of barter and the several documents executed in that behalf including those required by statutory provisions cannot be explained away as mere "external appearances". Ferro-Alloys cannot come to the M.M.T.C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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