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Commissioner of Sales Tax Vs. Ganeshi Lal and Sons - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAllahabad High Court
Decided On
Case NumberS.T.R. Nos. 852, 883, 884 and 892 of 1978
Judge
Reported in[1982]49STC253(All)
AppellantCommissioner of Sales Tax
RespondentGaneshi Lal and Sons
Appellant AdvocateStanding Counsel
Respondent AdvocateR. Bharti, ;R.R. Agarwal and ;V.P. Misra, Advs.
DispositionRevision allowed
Cases ReferredIn J. V. Gokal & Co. (Private) Ltd. v. Assistant Collector of Sales Tax
Excerpt:
- - in revision it was held that in the printed vouchers maintained under export promotion scheme details like name and nationality of the tourist, passport number, deseription of goods sold, sale and value of foreign exchange and their rupee equivalent, details of foreign currency, seaport or airport of embarkation, date of tourist departure, etc. these facts show very clearly not only the intention of the parties to export, but also an obligation on their part to do so. of these two integrated activities which together constitute an export sale, whichever first occurs can well be regarded as taking place in the course of the other......ar-4, an understanding between the assessee-company and the buyers to export the goods outside the indian territory can safely be assumed.6. this, according to the learned counsel, established that where sale was prohibited in india it was a circumstance to establish link between sale and export and therefore it should be assumed that sale was 'in the course of export'. the learned counsel maintained that because of the prohibition of sale it was not a transaction without 'more' therefore the revising authority was justified in accepting the assessee's contention. reliance was also placed on the following observation in state of bihar v. tata engineering & locomotive co. ltd. [1971] 27 stc 127 (sc):the expression 'in the course of appearing in article 286(1)(b) came up for consideration.....
Judgment:

R.M. Sahai, J.

1. In these four revisions filed under Section 11(6) of the U.P. Sales Tax Act by the Commissioner of Sales Tax, against orders passed by the Additional Judge (Revisions) of Varanasi and Agra, there is practically no dispute on facts that sale was made by the assessee to foreign tourists visiting this country of jewels, precious stones and pearls against foreign exchange under export promotion scheme on printed vouchers on condition that the article shall not be sold in India.

2. It was claimed by the assessee that these sales were in the course of export and therefore no sales tax was leviable on it. The appellate authority of Varanasi accepted this contention. In revision it was held that in the printed vouchers maintained under export promotion scheme details like name and nationality of the tourist, passport number, deseription of goods sold, sale and value of foreign exchange and their rupee equivalent, details of foreign currency, seaport or airport of embarkation, date of tourist departure, etc., were required to be entered. It also required to bear the signature and seal of the customs besides signature of the tourist and exporter. The purchaser is totally prohibited from selling or disposing off these things in any part of the country. From these, the intention on the part of the buyer and seller to an export obligation and contract giving rise to export was found established.

3. In order to appreciate the view taken by the revising authority it is necessary to quote Section 5 of the Central Sales Tax Act, 1956, which reads as under :

5. When is a sale or purchase of goods said to take place in the course of import or export.-(1) A sale or 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 or 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 sale 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.

4. The phrase 'in the course of export' in fact has been borrowed from Article 286 of the Constitution of India. Before enactment of the Central Sales Tax Act it came up for consideration in a number of cases before the Honourable Supreme Court. In Ben Gorm Nilgiri Plantations Co. v. Sales Tax Officer [1964] 15 STC 753 at 759 (SC), various decisions were reviewed and it was held :

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 the transaction. In this sense to constitute a sale in the course of export it may be said that 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. The obligation may arise by reason of statute, contract between the parties, or from mutual understanding or agreement between them, or even from the nature of the transaction which links the sale to export. A transaction of sale which is a preliminary to export of the commodity sold may be regarded as a sale for export, but is not necessarily to be regarded as one in the course of export, unless the sale occasions export. And to occasion export there must exist such a bond between the contract of sale and the actual exportation, that each link is inextricably connected with the one immediately preceding it. Without such a bond, a transaction of sale cannot be called a sale in the course of export of goods out of the territory of India. There are a variety of transactions in which the sale of a commodity is followed by export thereof. At one end are transactions in which there is a sale of goods in India and the purchaser, immediate or remote, exports the goods out of India for foreign consumption. For instance, the foreign purchaser either by himself or through his agent purchases goods within the territory of India and exports the goods and even if the seller has the knowledge that the goods are intended by the purchaser to be exported, such a transaction is not in the course of export for the seller does not export the goods, and it is not his concern as to how the purchaser deals with the goods. Such a transaction without more cannot be regarded as one in the course of export because etymologically 'in the course of export' contemplates an integral relation or bond between the sale and the export.

5. This passage has been relied on by the learned counsel for both parties. The learned counsel for the assessee emphasised on the observation, 'such a transaction without more cannot be regarded as one in the course of export' and urged the ratio of this case did not apply as there was 'more' in this case which resulted in making the sale 'in the course of export'. The learned counsel argued that in National Carbon Co. v. Commissioner of Sales Tax [1969] 23 STC 388 (FB) it was held by a Full Bench of this Court :

From what has been stated above, it is clear that the destination of the goods shown in form AR-4 was a place in Nepal and the route by which the goods were intended to be exported was also indicated. The name of the buyers mentioned in that form also is that of the dealer of Nepal. These facts show very clearly not only the intention of the parties to export, but also an obligation on their part to do so. As the assessee-company was to claim rebate of the excise duty and that rebate was admissible only if goods were actually exported outside India in accordance with the declaration contained in form AR-4, an understanding between the assessee-company and the buyers to export the goods outside the Indian territory can safely be assumed.

6. This, according to the learned counsel, established that where sale was prohibited in India it was a circumstance to establish link between sale and export and therefore it should be assumed that sale was 'in the course of export'. The learned counsel maintained that because of the prohibition of sale it was not a transaction without 'more' therefore the revising authority was justified in accepting the assessee's contention. Reliance was also placed on the following observation in State of Bihar v. Tata Engineering & Locomotive Co. Ltd. [1971] 27 STC 127 (SC):

The expression 'in the course of appearing in Article 286(1)(b) came up for consideration in State of Travancore-Cochin v. Bombay Co. Ltd. [1952] SCR 1112. Therein this court held that whatever else may or may not fall within Article 286(1)(b) of the Constitution, sales and purchases which themselves occasion the export or import of the goods as the case may be out of or into the territory of India come within the exemption. In that case this court further observed that a sale by export involves a series of integrated activities commencing from the agreement of sale with a foreign buyer and ending with the delivery of the goods to a common carrier for transport out of the country by land or sea. Such a sale cannot be dissociated from the export without which it cannot be effectuated and the sale and the resultant export form parts of a single transaction. Of these two integrated activities which together constitute an export sale, whichever first occurs can well be regarded as taking place in the course of the other. Even in cases where the property in the goods passed to the foreign buyers and the sales were thus completed within the State before the goods commenced their journey from the State, the sales must be regarded as having taken place in the course of the export and therefore exempt under Article 286(1)(b). The same exposition of the law is true of Clause (2) of Article 286 as it stood prior to its amendment on 11th September, 1956.

7. It was also urged that passing oftitle in the Indian territory was immaterial. Whether the title passed in the Indian territory or foreign territory, according to the learned counsel, did not make any difference as for deciding whether the sale was in the course of export, what had to be seen was whether the sale had occasioned the export. Attention was drawn to Commissioner of Sales Tax v. Dhampur Sugar Mills Ltd. [1970] 26 STC 65, where the sale was held to be in the course of export although the delivery of goods was made to foreign buyers within the Indian territory. In this connection the learned counsel relied on the following observation in Union of India v. K. G. Khosla and Co. Ltd. 1979 UPTC 751 (SC) that a sale which occasions movement of goods from one State to another is a sale in the course of inter-State trade, no matter in which State the property in the goods passes.

8. In Coffee Board, Bangalore v. Joint Commercial Tax Officer [1970] 25 STC 528 (SC) it was held :

The phrase 'sale in the course of export' comprises in itself three essentials : (i) that there must be a sale, (ii) that goods must actually be exported, and (iii) the sale must be a part and parcel of the export. Therefore either the sale must take place when the goods are already in the process of being exported which is established by their having already crossed the customs frontiers, or the sale must occasion the export. The word 'occasion' is used as a verb and means 'to cause' or 'to be the immediate cause of. Read in this way the sale which is to be regarded as exempt is a sale which causes the export to take place or is the immediate cause of the export. The export results from the sale and is bound up with it. The word 'course' in the expression 'in the course of means 'progress or process of, or shortly 'during'. The phrase expanded with this meaning reads 'in the progress or process of export' or 'during export'. Therefore the export from India to a foreign destination must be establised and the sale must be a link in the same export for which the sale is held.

9. The question therefore is whether the three essential ingredients which go to make a sale in the course of export are established in this case and the sale can be said to be in the course of export. From the language of Section 5 it is clear that it is a sale in the course of export only which is exempt, and not a sale for export. When can a sale be said to be in the course of export or for export depends on variety of circumstances. 'Export' means taking out something out of the country across the customs barrier. The word 'course' means 'sequence', 'process' or 'a pattern in which anything moves'. The sequence or movement should be preceded by sale and must result in export to attract Section 5. The exemption is contemplated of only that sale which occasions the export. The sale, the movement and the export must result in crossing of goods outside the country and must run in a channel. They must be connected with each other and interlinked, then only it can be said to be in the course of export. In J. V. Gokal & Co. (Private) Ltd. v. Assistant Collector of Sales Tax [1960] 11 STC 186 (SC), the Supreme Court while considering the phrase 'in the course of import' observed :

The course of the import of the goods may be said to begin when the goods enter their import journey, i. e., when they cross the customs barrier of the foreign country and end when they cross the customs barrier of the importing country.

10. The decision in National Carbon Co. [1969] 23 STC 388 (FB) and Dhampur Sugar Mills [1970] 26 STC 65 cannot be of any assistance. They were cases relating to export to Nepal and Mahe, erstwhile French territory, where there was no mode of transport and therefore the goods had to be handed over in the Indian territory.

11. In the instant case, it is true that the buyer is foreigner, the purchases have been made against foreign currency and there is total prohibition on sale of goods in India. But do these give rise to sale which can be said to be in the course of export. What is meant by sale in the course of export has been explained above. The making of sale in pursuance of export promotion scheme or in accordance with terms and conditions mentioned therein do not make a sale in the course of export. The sale may have been made with intention that goods sold shall be taken out of India. And the goods may ultimately cross the Indian border. But these by themselves do not result in a sale in the course of export. It is the sale which must occasion the export. Can it be said the sale occasioned export No, because all the stages of sale, namely, agreement, settlement, price and delivery have been travelled. The sale is complete in all respects. Title to the goods passes immediately. The seller retains no control over it. There is no link between agreement to sell and export. They do not form part of the same transaction. The sale is independent of export. The three ingredients which go to make a sale in the course of export do not remain interlinked with each other. In a sale which is in the course of export or import it must form part of the same transaction. The prohibition to sell in India or the checking of goods at customs barrier have nothing to do with the sale. These were conditions of sale. Their breach does not affect the sale. It may land the purchaser in difficulty but that has nothing to do with the seller. He is out of picture. Penal action under the Gold Control Act does not make the sale for export a sale in the course of export. There is no bond between contract of sale and actual exportation. The sale by the assessee therefore cannot be considered to be in the course of export. These were sales made for export. They fell in the illustration given in Nil giri Plantation's case [1964] 15 STC 753 at 759 (SC) which has been quoted earlier in the judgment.

12. In the result these revisions succeed and are allowed. The question of law raised by the Commissioner of Sales Tax is decided by saying that the sale made by the assessee to foreign tourists of jewels, precious stones, ornaments, etc., under export promotion scheme was not in the course of export. The Commissioner of Sales Tax shall be entitled to its costs. A copy of the order shall be sent to the Tribunal to take action under Section 11(8) of the Act.


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