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TMI Blog1977 (9) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... gn currencies. Further, the transit passengers before they are allowed to purchase, have to produce their passport and also to declare the flight number by which they are to travel. Prescribed statements have to be submitted to the Reserve Bank of India in respect of foreign exchange. The sales are also made as per regulations under the Export Control Order. Along with the application a bill showing a transaction of sale in U.S. Doller was also enclosed. By the application, the applicant prayed that the Commissioner should decide whether the transaction is that of a sale in course of export. The submission of the applicant was that it is a sale in the course of export and, therefore, exempt from the payment of tax. The appellant by letters dt. 18th Sep., 1975 and 19th Sep., 1975 supplied further information concerning the transactions. 3. The Dy. Commr. in his order has referred to the averments in the application and to the averments in the letter dt. 19th Sep., 1975. He has recorded the submission made by the Advocate of the appellant. He then observed that it is beyond his jurisdiction to decide whether the sale was a sale in the course of inter-State trade or commerce, or in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the Commissioner should determine whether the transaction is a sale in the course of export. However, the Dy. Commr. in his order observes that he has no jurisdiction to decide such a question. In para 12 he has specifically stated that the question which he is deciding by the order, is as to whether the transaction in question is a sale within the State of Maharashtra. Under sub-s. (e) of s. 52, the Commissioner has the jurisdiction to decide such a question. The Commissioner has decide this question and has held that the transaction is that of a sale within the State and therefore tax is payable. 7. For the purpose of deciding this question, the Dy. Commr. has considered the contentions made on behalf of the appellant to the effect that the transaction is a sale in the course of export. It would appear that the Dy. Commr. wanted to decide whether tax was payable in respect of the sale in question and whether it was a sale within the State. For the purposes of this decision, it appears, he considered the question whether the transaction is a sale in the course of export as contended on behalf of the appellant. Thus, this last aspect is the one which he has considered as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the course of export and, therefore, it is not a transaction of sale within the State and in respect of which any tax is payable. This is the question which was to be decided under sub-s. (e) of s. 52. Hence, it becomes essential to duly consider the question whether the transaction is a sale in the course of export. 9. Before proceeding to consider the relevant facts as they appear on the record in the present case and the law which govern the same, it would be helpful to very briefly note the course of judicial pronouncements, and the enactment of statutory provisions, relevant for the present purpose. This would help in achieving clarity in the proper appreciation of the various principles and tests laid down by the Supreme Court and observations contained in the numerous successive rulings. This is all the more essential, because it is necessary to guard against the error of picking out certain observations from a particular dictum of the Supreme Court and to try to apply it, almost in isolation, to the facts of the case in hand. 10. In The State of Travancore-Cochin And Others vs. The Bombay Company Ltd. (4). Alleppey, and Others, and In The State of Travancor-Cochin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Officer, Special Circle, Ernaculam, (9) there was a sale by auction to agents or intermediaries of the foreign buyers. The Supreme Court held that such a transaction did not occasion the export of the goods, and therefore they were sales not in the course of export. They were merely sales for purposes of export. 13. It must be noted that in Ben Gorm's (9) case the Supreme Court has set out the precise connotation of the term a sale which 'occasions the export.' The same cannot be lost sight and has to be clearly remembered when deciding this aspect of any transaction. The Supreme Court has laid down as follows: A sale in the course of export predicates a connection between the sale and export, the two activities being so integrated that the connection between the two cannot be voluntarily interrupted, without a breach of the contract or the compulsion arising from the nature of transaction. In this sense, 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 an obligation to export and there must be an actual export. Such an obligation has been further elucidated. The obligation may arise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court followed the test laid down by the Supreme Court. 17. In Commissioner of Commercial Taxes, Bihar Patna vs. The State Trading Corporation of India Limited (16) the Patna High Court considered a case where the sale was deemed to have been completed in the State of Bihar. However, there was an obligation under the contract for movement to stations outside the State of Bihar. This was therefore held to be a sale in the course of inter-State trade or commerce. In F.K. Haseeb and Co. vs. The State of Madras (17) the Madras High Court held that in finding out whether a particular transaction was in the course of inter-State trade, the place where the property passes is immaterial. 18. Then there is the oft quoted judgment of the Supreme Court in Binani Bros. (P) Ltd. and Another vs. Union of India And Others (18). The transactions considered by the Supreme Court were two. There were sales by the dealer to the D.G.S.D. There were also purchases made by the dealer from the foreign sellers. It was held that the latter category constituted a transaction occasioning the movement of the goods and therefore in the course of import. After considering the previous dicta (all referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract for sale of crude oil, there was a movement of the oil from Assam to Barauni. This was spelt out from a letter forming part of the correspondence between the parties. In view of this position it was held that the State of Assam was entitled to levy S.T. on the Oil and Natural Gas Commission. 23. In recent case Murarilal Sarawagi vs. The State of Andhra Pradesh (24) the Supreme Court again referred to the decisions laid down in the previous rulings. It was further observed as follows. The tests are that there cannot be a single sale which itself causes the export or in the course of or process of export. There is no room for two or more sales in the course of export. The only sale which can be said to cause the export is the sale which itself results in the movement of the goods from exporter to the importer. 24. From the rapid review of the dicta in the above said rulings, certain positions become clear. In most of the rulings the Court was called upon to consider two transactions. These were between three parties, one of which has been described as an agent or an intermediary. The Supreme Court laid down the tests as to what is a sale which occasions the movement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tests have been satisfied. It is this approach which will now be adopted. Thereafter the contentions raised on behalf of the Department, which are more in the nature of the singling out observations of the Supreme Court in a different context and trying to apply them as determinants in the present case, will be considered. 26. As stated at the out-set, the question for decision in the present appeal is as to whether the Dy. Commr. is right in holding that the transaction in question is a sale within the State of Maharashtra and is liable to tax. For deciding this question, it is obviously essential to consider the contention of the appellant that it is a sale in the course of export. If this is so, then it would follow that the sale is not a sale within the State and not taxable on that basis. It has therefore to be considered whether the transaction is a sale in the course of export. For this purpose, the crux is whether the sale has occasioned the movement of the goods out of the territory of India. The tests are elucidated in the Ben Gorm Nilgiri Plantations (9) case. Under the sale there has to be an obligation to export. Such an obligation may arise by reason of statut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ign currency only. If the sale is effected an invoice is prepared in which the name of the purchaser, details about the passport and the flight by which the passenger is to go out of the territory of India are to be noted. This sale is meant only for transit passenger An Aircraft halts at Bombay for a short period. In this interval the transit passengers visit the shop and purchase the goods. The goods are to be taken away by the purchaser en their Flight out of the country. The goods thus sold to the transit passengers cannot be diverted for any other purpose. The goods have therefore to be necessarily moved outside the territory of India. 29. These are the averments in the letters of the applicant. He has also produced the Government of India Ministry of Commerce Publication "Import Trade Control" Hand-book of Rules and Procedure. (Extract of the relevant rules is filed before the Dy. Commr. also). This hand book, as the foreword shows, is a supplement to the Red-Book and embodies the Procedure, Rules and Regulations, Form for submission of the applications, grant of licences, their utilisation and other matters relating to Import Trade Control. The provisions of the hand-book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s :- (i) Serial Number ; (ii) Number of the sale voucher ; (iii) Date of sale ; (iv) Name of the foreign purchaser ; (v) His/her Passport Number ; (vi) Description of the item sold and the material of which made ; (vii) Value in rupees ; (viii) Equivalent foreign exchange rendered ; (ix) Name of the bank in which foreign currency/traveller's cheques/crossed foreign bank drafts/personal cheques deposited ; (x) Date of deposit; and (xi) Remarks This register will be open to check by Government. (4) Application for replenishment licences against such sale will be made to the licensing authorities under whose jurisdiction the registered office of the applicant is situated. Applications will be made in the same form as is applicable in the case of other registered exporters. Such applications should be made in respect of sales made during a period of one month, two months or quarter and should reach the licensing authorities within a period of three months of the period during which sales were made. The applications should be accompanied by the following documents :- (i) Treasury Receipt for Rs. 50 ; (ii) Certified true copies of sale voucher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he following procedure is to be adopted by the authorised registered exporter dealer : (a) Registered and authorised dealer will be required to maintain printed, serially numbered voucher books. A specimen voucher is as to Annexure XII of s. III (b) Each sale voucher will be in triplicate showing details regarding the name and nationality of the tourist, his/her passport number, description of items sold, the sale value in foreign exchange and the rupee equivalent details thereof ; (c) The original sale voucher will be handed over to the tourist for his own use ; (d) The duplicate copy of the voucher will be sent by the dealer along with the application for replenishment licence at the time of its submission ; and (e) The triplicate copy will be retained by the dealer for his record. (3) The authorised dealer will be required to maintain a register containing the following particulars :- (1) Serial Number ; (2) Number of the sale voucher ; (3) Date of sale ; (4) Name of the foreign purchaser ; (5) His/her Passport Number ; (6) Description of the item sold and the material of which made ; (7) Value in rupees ; (8) Equivalent foreign exchange ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also stated. 34. Para 115 directs maintenance of a register containing all particulars about the voucher. This para further provides for an application for Replenishment Licence against sales made along with such application, a copy of each voucher has to be submitted. One copy has to be stitched on the Passport (vide prescribed Form of Voucher). 35. The appellant has also produced his file regarding Replenishment of Licence as per procedure outlined in the Hand Book of Rules and Procedure stated above. This shows that the Joint Chief Controller of Imports and Exports of Bombay has, on an application, issued an Order of Replenishment. The registration certificate under the Import Trade Control Act and containing the Licence No. 2791321 in favour of the present appellant was also produced. It may be noted here that it is an express stipulation in the Licence that the same is granted under a Government of India, Ministry of Commerce Order, issued under the Imports and Exports Control Act, 1947. Licences for the previous periods are also produced. 36. The position stated very briefly is, therefore, as follows. The Imports and Exports Control Act, 1947 (18 of 1947) came into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ft halting at the Airport is also stated. The rules and regulations in the Hand Book and the other concerned material was also produced before the Dy. Commr. But as para 8 of the Dy. Commr. 's order shows, he did not state the details thereof in his order, as in his view they were not relevant for his determination. The precise position thus is that in the determination proceedings, at the visit the averments detailed above were made. The Dy. Commr. has noted the same. He has not observed anywhere that the averments were not correct and should not be relied upon. 38. The above said exhaustive review of the procedure and requirements as per Orders issued under the concerned Act, clearly make out that a sale by the appellant has to be made in pursuance of the rules. The exhaustive study above said shows that the sale made by the appellant under such conditions necessarily requires a movements of the goods purchased out of the territory of India. There is, therefore, clearly an obligation arising by reason of rules and procedure enacted under the statute. The test laid down by the Supreme Court in Ben Gorm's(9) case is thus satisfied. The sale by the appellant, therefore, is one wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the country. The attempts are inferential process from the above observations. The conclusion that the movement has to be a known destination is however fallacious. This is not the import of the above said observations. In fact, the statute itself in s. 5 only uses the phraseology, 'export of the goods out of territory of India' and 'import of the goods into the territory of India'. The statute does not speak of any necessity of the goods to reach any foreign destination. 40. In fact, this aspect is made quite clear by the Supreme Court by making clear-cut observations on the matter in Burmah Shell's (7) case. The observations need to be reproduced in full : "Goods cannot be said to be exported if they are ordered by the health authorities to be destroyed by dumping them in the sea, and for that purpose are taken out of the territories of India and beyond the territorial waters and dumped in the open sea. Conversely, goods put on board a steamer bound for a foreign country but jettisoned, can still be said to have been exported, even though they do not reach their destination. In the first case, there is no export and in the other there is, though in either case the good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n observations which need to be reproduced : "Furthermore, we can hardly conceive of any case where a sale would take place before the movement of goods. Normally what happens is that there is a contract between the two parties in pursuance of which the goods move and when they are accepted and the price is paid, the sale takes place. There would, therefore, hardly be any case where a sale would take place even before the movement of the goods." 43. It would appear that in the numerous cases considered by the Supreme Court right from 3 S.T.C. 434, the sales in the course of export were sales which preceded the movement of the goods. It was, therefore, that the Supreme Court made the observations above stated. It, however, appears that even while the Supreme Court was making these observations in Dec., 1975, at about the same time came into existence a sale, which was a sale in the course of export; and this, though the movement of the goods took place after the sale took place. If the approach stated above for the solution of the problem is correct, then it would follow that in a case like the present, there is a sale which has taken place before the movement of the goods. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s out of the territory of India, only if the sale occasions such export. Similarly, a sale shall be deemed to take place in the course of the import of the goods into the territory of India, only if the sale occasions such import. The phraseology must be carefully kept in mind. In case of s. 3, very naturally the statute prescribes movement from one State to another State. In case of s. 5, however, the statute only says, 'export of the goods out of the territory of India'. The sale has to occasion such export. By such export is meant export out of the territory of India. The same is the case with sub-s. (2) of s. 5. The statute has not used the words 'export of the goods out of the territory of India, into the territory of a foreign country'. The difference in phraseology of the statute will necessarily have its own consequence. It is, therefore, fallacious to contend that in the case of a sale in the course of export also, the goods must reach a foreign destination and that at that foreign destination a concluded sale should take place. 45. Some general observations may now be made. As already discussed above, the question as to which are the tests that will be decisive for dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of export is the one means of obtaining foreign exchange, the Court should lean in favour of holding a sale to be a sale in the Court of export rather a sale within the country. 48. While the observations of the Supreme Court are of course binding, what is doubtful is whether in the light of the general observations reproduced above, the Tribunal could hold the view, that the tests laid down on the particular point by the Supreme Court should either be ignored or should be held to be not applicable. I am afraid this course would not be permissible. Fortunately, however, in the present case the decision is possible on application of the correct tests to be applied on the facts of the present case, as has been exhaustively discussed above. The decision, therefore, need not be founded on the general observations relied on by Shri Joshi, without due consideration to the tests outlined by the Supreme Court in certain rulings in respect of sales in the course of export. 49. The position which, therefore, emerges is as follows. In the light of the various considerations discussed above, it follows that the sale in question is a sale in the course of export. It is, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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