Satish Chandra, J. - The Judge Revisions Sales Tax, Agra had submitted this statement of the case for the opinion of this Court on the following question of law :-
'Whether on the facts and, in the circumstances of the case, sales worth Rs. 40,517.75 were sales in the course of export and, as such the assessee was entitled to claim exemption regarding them ?'
2. The assessee is a manufacturer of shoes at Agra. He entered into a contract with the State Trading Corporation of India for manufacture of certain varieties of shoes so that the Corporation could export them to foreign byers. The terms of the contract between the assessee and the State Trading Corporation were that the manufacturers shall allow foreign buyers inspection staff to come and inspect the goods. This was to be the preliminary inspection and the approval of the goods was provisional subject to the final acceptance and if any goods were rejected by them, entitled to recover the price which had already been paid by them to the assessee. The assessee was to submit his bills from time to time in the from prescribed by the buyer in duplicate Payment to the extent of 96.75% of the bills was to be made to him by the State Trading Corporation of India within ten days of the receipt of the bill. The balance 3.2% was to be released after adjustment of the claim that may arise in view of the rejection of certain goods by the foreign buyers.
3. On these facts, the Judge Revisions held that the turnover in respect of sales which ultimately were exported sales within the meaning of S. 5 of the Central Sales Tax Act.
4. This reference had been filed at the instance of the Commissioner, Sales-tax U.P. S. 5 of the Central Sales Tax, 1070 provides :-
'Where is a sale or purchase of goods said to take place in the course of import or export.
(1) A sale of purchase of goods shall be deemed to take place in the course of the export of the goods out of the territory of India only if the sale of purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India.
(2) A sale or purchase of goods shall be deemed to take place in the course of the import of the goods into the territory of India only if the sales or purchase either occasions such import or is effected by a transfer of documents of title to the goods before the goods have crossed the customs, frontiers of India.'
Explaining the significance of the expression 'Sale or purchase either occasions such export'., occurring in S. 5(1) a Division Bench of this Court in the Commissioner of Sales Tax, U.P. vs. Messrs, Nihal Shoe Factory, Agra, held that :
'The expression occasions in S. 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 sales between the Corporation and the foreign buyer and not by the contract of sale between the Corporation and the appellant.'
5. That was a case virtually identical on facts with the present case. In that case, the State Trading Corporation had entered into contract with buyers for the supply of shoes. In order to effectuate their contract, the Corporation entered into an agreement with the Agra Charm Kala Kendra. The Kendra, in its turn, entered into a third contract with the assessee. It was held that there was no privity of contract between the assessee and the foreign buyers and the sales made by the State Trading Corporation in favour of the foreign buyers alone were export sales. In view of this Division Bench authority, we have no hesitation in holding that the turnover in question was not of export sales and was hence not exempt from tax.
6. We, therefore, answer the question referred to us in the negative in favour of the Department and against the assessee. The Commissioner will be entitled to costs which are assessed at Rs. 200/- (Rupees Two hundred) only.