Gulati, J. - This is a reference under section 11(3) of the U.P. Sales Tax Act at the instance of the Commissioner of Sales-tax, Lucknow.
2. The assessee is engaged in the business of manufacture and sale of shoes. During the assessment year 1962-63 the assessee claimed exemption from sales-tax on the turnover of Rs. 20.907/- on the ground that those sales represented sales made during the course of export of goods from India, as defined in section 5 of the Central Sales Tax Act. This claim of the assessee was rejected by the Sales Tax Officer on the ground that the turnover in question represented local sales in favour of a company called the Agra Charma Kala Kandra. On appeal the claim of the assessee was allowed and the revision of the State was dismissed by the Revising Authority. The Commissioner is aggrieved and at his instance the following question of law has been referred to us :-
'Whether on the facts and the circumstances of the case sales worth Rs. 20,907/- were sales in the course of export and as such the assessee was entitled to claim exemption regarding them ?'
3. Briefly stated the facts are that the State Trading Corporation of India, New Delhi entered into contracts with a Russian firm and certain other foreign buyers for the supply of shoes. The State Trading Corporation (hereinafter referred to as the S.T.C.) entered into a contract with Agra Charm Kala Kendra for the supply of shoes for export under the contract. The Agra Charm Kala Kendra (hereinafter referred to as the Kendra) in turn, enterned into an agreement with the assessee entered into between it and the S.T.C. In the agreement it was provided that the assesses shall export directly consignments of shoes to the foregin buyers, under the same terms and conditions as prevailed between the S.T.C. and the Kendra. The relevant terms of the agreement are that a preliminary inspection of the shoes will be made in India and the final inspection will be made by the foreign buyers at the destination when the shipment arrives there. Shoes found of sub-standard quality or not confirming with the guarantee were to be rejected and the foreign buyers could claim refund of the price in respect of such shoes as also all incidental expenses. The damages so claimed as also the expenses shall be borne by the assessee-company. The assessee will receive payment from the Kendra of the price payable by the foreign buyers at the destination minus the overriding commission and expenses, of the Kendra. From the facts, it is clear that there were in facts three sales one by the State Trading Corporation to the foreign buyers, the second by the Kendra to the State Trading Corporation and the last by the assessee company in favour of the Kendra. It is true that the contract of sale between the Kendra and the assessee company was analogous to the contract between the State Trading Corporation and the Kendra. In other words, the assessee company had to supply goods on the same terms and conditions upon which the Kendra undertook to supply the goods to the State Trading Corporation. It is true that under the agreement between the assessee the assessee and the Kendra, the latter has been described as the agent entitled only to charge over-riding commission but the fact remains that the assessee supplied shoes to Kendra under a contract of sale. The fact that the assessee was responsible for transporting the goods to the part and placing them on the ship does not alter the position. Even if one was to assume that there was no sale between the assessee and the Kendra, two sales still remain-one between the S.T.C. and the foreign buyers and the other between the Kendra and the S.T.C. There is no privity of contract between the assessee and the foreign buyers. The exporter is the S.T.C. and the sales made by the S.T.C. in favour of the foreign buyers alone are the export sales. The transaction between the assessee and the Kendra represent local sale. Similarly, the sale by the Kendra in favour of the S.T.C. is also a local sale as distinguished from an export sale. Large number of authorities have been cited at the Bar in support of the view that in fact there was only one integrated sale as a result of which the goods were exported from India to foreign countries. The S.T.C. and the Kendra were merely intermediaries. But it is not necessary to notice these decisions because the latest decision of the Supreme Court in Mohammad Serajuddin vs. The State of Orissa (36 S.T.C.136) covers the case completely. There also the S.T.C. entered into a contract with foreign buyers for the supply of certain goods and the S.T.C. in turn entered into an agreement for the supply of identical goods with the appellant Mohd. Serajuddin. The appellant was under an obligation to supply the goods f.o.b. The Supreme Court held that there was no privity of contract between the assessee and the foreign buyers. The immediate cause of the movement of goods and export was the contract between the foreign buyer who was the importer and the corporation who was the exporter and shipper of the goods. All relevant documents were in the name of the Corporation whose contract of sale was the occasion of the export. The expression occasions in section 5 of the Act means the immediate and direct cause and, but for the contract between the Corporation and the foreign buyer, there was no occasion for export. Therefore, the export was occasioned by the contract of sale between the corporation and the foreign buyer and not by the contract of sale between the corporation and the appellant.
4. Precisely, the same situation prevails in the instant case. Here also the real exporter is the State Trading Corporation and the contract of sale between the State Trading Corporation and the foreign buyer occasioned the export of goods. The other two preceding sales are local sales.
5. We accordingly answer the question in the negative in favour of the Department and against the assessee. The Department is entitled to costs which we assess at Rs. 100/-.