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TMI Blog2006 (2) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... : annexure "R-5" in the paperbook). The name of the assessee in the present case is Azad Coach Builders Pvt. Ltd. The foreign buyers place an order on the exporter, namely, TATAs for supply of "the complete bus/buses" giving specifications of the chassis and the bus-body. In some cases, the foreign buyers even indicate the source from which the exporter in India should get the "bus-body" constructed. After constructing the bus-body as per the specifications and after completing the bus in its entirety, the assessee (body-builder) delivers "the complete bus" to TATA/Ashok Leyland who then exports the same to Sri Lanka for the purposes of accounting. The exporter raises a bill for chassis on the assessee and instead of making entries in the accounts by first debiting the value of the chassis to the body-builder (assessee) and then deducting the amount of chassis from invoice of a complete bus, the exporter invoices the assessee only in respect of bus-body and not for the entire complete bus. It is not disputed that after getting the bus completed, nothing is done by the exporter to change the identity of the bus, thus entitling the assessee of the benefit under Section 5(3) of the Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he agreement and the sale must relate to the same subject-matter. According to the department, "bus-body" is composite item capable of being sold in the market as goods and the transfer of property in goods between the bus-body manufacturer (assessee) and its purchaser (TATA) is confined only to the bus-body and not to the complete bus. According to the department, the words "in relation to export" as found in Section 5(3) do not, in any manner, control the first part of the said section which uses the expression "in goods" and the expression "those goods". According to the department, the above two expressions have been used out of abundant caution and that the expression "in relation to export" does not expand the scope of Section 5(3) to include the goods other than those which are ultimately exported. According to the department, Section 5(3) was introduced in the said Act only to get over the decision of this court in the case of Mohd. Serajuddin others v. State of Orissa reported in (1975) 2 SCC 47, in which case this court while construing Section 5(1) held that even in relation to the same goods which were sold by the assessee to the State Trading Corporation (STC) for ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penultimate sale, the goods sold must be for export, the goods must be exported by the buyer (TATA), the buyer should have a pre-existing export order and the sale must have been effected for complying with or in relation to the export order. According to the assessee, the aforestated last condition is the principal element under Section 5(3). However, the sale will not come under Section 5(3) if the buyer- (TATA) subjects the goods to process after the sale and before its export if such process results in a change in the identity of the goods. It is pointed out that in the present case, the chassis are moved under customs bond for body building and export to the premises of the assessee; that, the assessee delivers the completed bus, which is moved under the bond directly to the port and exported to Sri Lanka. Consequently, the chain never breaks. Hence, the transaction in question, according to the assessee, is entitled to the benefit of Section 5(3). According to the assessee, the expression "in relation to" in Section 5(3) is of a wide import. It contemplates two subject matters connected with each other. Thus, in relation to export of a motor vehicle constructed with bus-body, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt to the words "in relation to such exports" occurring in Section 5(3). There cannot be a bus without the bus-body. The subject matter of the inter-State movement and the subject matter of the export is a "bus" and not a "bus-body". It cannot be denied that the sale of the bus-body by the assessee to the exporter is in the course of export of the bus to Sri Lanka. What is delivered to the exporter by the assessee is a complete bus. It is true that for accounting purpose, there is a bifurcation between the bus-body and a complete bus. Supposing, TATA/Ashok Leyland would have given chassis free of cost to the assessee calling upon the assessee to construct the bus-body on the chassis which construction/fitment was to be done as per the specifications by the exporter. In such a case, would it not amount to a transaction in the course of export or in relation to export of the buses? It is in this light, we find merit in the argument advanced on behalf of the assessee that due weightage has not been given to the words "in relation to such exports" occurring in Section 5(3). For example, in the case of computers, we now have a concept of, what is called as, "firmware" under which a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r agent for importing the goods on their behalf from foreign countries. The goods imported had to be the property of the licence-holder at the time of clearance from the customs and it was on the basis of the actual user licence that the goods were imported by the respondent-assessee and, therefore, it was held on the facts of that case that there was an integral connection or inextricable link between the first sale following the import and the actual import provided by an obligation to import arising from contract or mutual understanding or nature of the transaction which linked the sale to import which could not, without committing a breach of contract or mutual understanding be diverted elsewhere. As we will presently see no such conclusion is possible on the facts of these appeals and in the light of the salient features emerging on the record of these cases. On the contrary the decisions of the Constitution Benches of this Court in Mohd. Serajuddin v. State of Orissa - (1975) 2 SCC 47 and in Binani Bros. (P) Ltd. v. Union of India - (1974) 1 SCC 459 get squarely attracted. The other decision on which strong reliance was placed by the learned senior counsel for the appellants ..... X X X X Extracts X X X X X X X X Extracts X X X X
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