C.A. Vaidilaingam, J.
1. The common question that arises for consideration in these 43 writ petitions tiled by the various petitioners, is as to whether the sales of tea, in respect of which Sales Tax has been levied or sought to be levied, for the various years in question under the provisions of the General Sales Tax Act, 1125 -- (Act 11/1125) are sales in the course of export of the goods out of the territory of India and as such exempt from State taxation under Sub-clause (b) of Clause (1) of Article 286 of the Constitution.
2. According to the petitioners, the sales in question are so exempt and therefore, no bales Tax can be levied by the State whereas according to the Revenue, those sales do not come under Article 286(1)(b) and the State is entitled to levy and collect Sales Tax.
3. The petitioner in the 14 writ petitions, forming Group 'A' is the same namely, Ben Gorm Nilgiri Plantations Company, Coonoor and the said petitioner is represented by Mr. T.S. Venkiteswara Iyer, learned counsel.
4. The petitioner in the writ petitions to, Group 'A' challenges the orders of assessment made by the Sales Tax Officer, Special Circle, Ernakulam for the years 1956-57, 1957-58; 1958-59 as well as the assessments made for certain months in 1959 and 1960. The other grounds or attack made against the orders in question of the petitioner in the said group, will be adverted to by me when each of these petitions is taken up separately by me later in this judgment.
5. The petitioners in the 8 writ petitions coming under Group 'B' are represented by theirlearned counsel Mr. C.S. Venkiteswara Iyer. In this Group, there are two different petitioners. In O. P. Nos. 226/60, 227/60 and 106/61 the petitioner is common namely, Messrs. Terrace Nilgiri Tea Estate Co., Naduvattam, Nilgiris. The said petitioner challenges the orders of assessment made by the Sales Tax authorities at Mattancherry for 1957-58; 1958-59 as well as the provisional assessment for 1960-61. In the other 5 Original Petitions in this Group 'B' namely O. P. Nos. 1173/60, 1175/60, 1322/60, 1323/60 and 1324/60 the petitioner is the same viz. Singara Nilgiri Plantations Co. Kotagiri. The said petitioner attacks the order of assessment made by the Mattancherry Sales Tax Officer for the years 1956-57, 1957-58, 1958-59, as also the provisional assessment for 1960-61.
6. The petitioners in the 21 Original Petitions coming under Group 'C' are represented by their learned counsel Sri P.A. Krishna Iyer. In this group again, there are 5 different petitioners. In O. P. Nos. 242, 243, 247, 564 and 1146 of 1960, the petitioner is the Kodanad Tea Estates Company, Kotagiri. 'The said petitioner challenges the orders of assessment to Sales Tax made again by the Mattancherry Sales Tax Officer for the years 1956-57; 1957-58, 1958-59 and the provisional assessment for 1959-60 as also the provisional assessment for the first quarter 1960-61. In O. P. Nos. 248, 254 and 1016/60, the petitioner is Glenmorgan Tea Estates Company, Nilgiris. This petitioner again, challenges the assessment for the year 1958-59 as also the provisional assessments for the years 1959-60 and 1960-61. In O. P. Nos. 581, 582 and 583 of 1960 585 and 1040 of 1960, the petitioner, is Warwick Estates Syndicate, Kotagiri, who challenges the assessment orders for the years 1956-57, 1957-58 and 1958-59 as also the provisional assessments for 1959-60 and 1960-61. In O. P. Nos. 611, 612, 613, 129 and 1014 of 1960, the petitioner is Kairbetta Estates Syndicate, Nilgiris, who challenges the assessment orders for the years 1950-57, 1957-58, 1958-59 as also the provisional assessments for the years 1959-60 and 1960-61. In O. P. Nos. 614, 1107 and 1219 of 1960 the petitioner is Kesaria Nilgiri Plantations, Kotagiri who challenges the assessment for the years 1958-59 also the provisional assessment for 1959-60 and for the month of May, 1960.
7. I may also state at this stage that the State has not filed counter-affidavits in any of the 14 Original Petitions coming Under Group 'A'. Again, the State has not filed any counter-affidavit in the Original Petitions coming under Group 'B', excepting in O. P. Nos. 226 and 227, of 1960 and 106 of 1961 which, as I mentioned earlier, are the three Original Petitions filed by Messrs. Terrace Nigiri Tea Estate Co., Naduvattam, Nilgiris. Again, the State has not filed any counter-affidavit in the Original Petitions corning under Group 'C' excepting in O. P. Nos. 248 and 1016 of 1960, being two of the Original Petitions filed by Clenmorgan Tea Estates Company, Nilgiris and in O. P. No. 611 of 1960 which is one of the petitions filed by Kairbetta Estates Syndicate, Nilgiris.
8. The pattern of dealing adopted by all,the petitioners, in these writ petitions, is more or less the same and I will advert to a sample affidavit filed in one of the writ petitions, and refer to a counter-affidavit to show the stand taken by the State, and also advert to one of the orders, giving the reasons for rejecting the contentions of the petitioners and refusing to grant the exemption under Article 286(1)(b) of the Constitution.
9. In O. P. No. 179 of 1960 coming under Group 'A' Ben Gorm Nilgiri Plantations Company Coonoor which is tile petitioner states that the said company carries on the business of manufacturing tea in the Ben Gorm Estate situate in the Nilgiris. The company applies for and obtains from the Tea Board allotment of export quota rights on payment of the necessary licence tee. The manufactured tea is sent by rail to lorry to Messrs. T. Stanes and Co. who as the Warehouseman of the Company, receives the goods and keeps them in their godowns situate in the Willingdon Island, which till 1-11-1956, formed part of the Travancore-Cochin State. The tea brokers sell the tea by public auction at Fort Cochin, which again till 1-11-1956, formed part of the Malabar District in the then Madras State and which has become part of Kerala. The auction sales for foreign export are effected with the export quota-rights in respect of the tea so sold. At the auctions, purchases are made On behalf of foreign principals by their agents or intermediaries in Fort Cochin and on such purchase, the goods are delivered by Messrs. T. Stanes and Co. at the Willingdon Island. The goods are taken delivery of by the said agents of foreign principals for export of the said tea to their foreign principals under the export quota rights vested in them by virtue of the auction sale. The petitioner further states that the said agents have no right to divert the goods for local sales, inasmuch as the purchases are by the foreign principals, through the agents, and the sales are to be completed by export of the goods to such foreign principals.
10. The petitioner further adverts to the notices issued by the Sales Tax Department in respect of the said sales for purpose of assessment and the objections filed by the company.
11. According to the petitioner, the Sales Tax Officer has no jurisdiction to levy the tax on the turnover of sales with export quota rights inasmuch as those safes are liable to exemption under Article 286(1) (b) of the Constitution, being sales in the course of the export of goods out of the territory of India. The sales, according to the petitioner, again are sales to foreign principals, through their agents, together with export quota rights and are for purposes of export. The fact that the foreign buyers bought goods through their agents in Cochin and the further fact that the property in the goods has passed to them, does not affect the character of the sales as sales which occasioned the export. The petitioner further claims that the sale and the resultant export, form part of a single transaction, inasmuch as the transaction of sale to a foreign buyer, although represented by his agents in India, can only be completed by export. There has been only one sale in the state and that sale has occasioned the export.
12. The petitioner again refers to a certificate issued by the agent of the foreign principal in respect of the purchase made by him. That is Ext. P5 in that petition Ext. P5 purports to be a certificate issued by Messrs. Campbell and Co. (South India) Private Ltd. for tea purchased by them through Messrs. Forbes Ewart and Figgis (Pr.) Ltd., Cochin, Messrs. Forbes Ewart and Figgis (Pr.) Ltd. are the tea brokers, who according to the petitioner, has sold the tea m auction at Fort Cochin, Campbell and Co. (South India) Private Ltd., is according to the petitioner, the agent who has purchased, in the said auction, tea on behalf of the foreign principal. In the certificate, details of the sale number, the date of sale, lots purchased, the estate invoice number, grade of tea the weight and its value are given. In column 8, under the heading 'Name or ship if exported' the name of ship as Clan Macbride and names of certain other ships are given. In column 9 namely, 'Destination if delivered outside the Province' it is stated as United Kingdom and United States of America. There is a certificate in Ext. P5 as follows:--
''The deliveries of the above teas were taken by us from Messrs. T. Stanes and Co., Ltd., Godowns at Cochin.We certify the above figures to be correct and in accordance with our books. The above teas were purchased by us on behalf of Principals Overseas and outside the State, and have been disposed of as shown above.
Campbell and Co. (South India) Private Ltd.
Signature of Buyers'
It may be mentioned that Messrs. T. Stanes and Co. referred to in the above extract, is the Warehouseman in Willingdon Island who received the tea of the petitioners for purpose of keeping it in its godown, pending the auction by the broker and delivery to the purchaser namely, the agent of the foreign principal.
13. The petitioner relies upon Ext. P5 to show that the tea purchased in auction by the agent of the foreign principal has been immediately exported out of the territory of India.
14. The claim made by the petitioner for exemption of the turnover, represented by such sales, was negatived by the Sales Tax Officer, Special Circle, Ernakulam. So far as this aspect is concerned, the Sales Tax Officer is of the view that the sales in question will not come under Article 286(1)(b) of the Constitution. It is the view of the Sales Tax Officer that the purchasers are admittedly not outside India and that by no stretch of imagination can one treat the agents as outsiders, even if their agency status is conceded. The officer further states that even it the buyer himself goes over to the State purchases and takes delivery of the goods and then despatches the same, he becomes a resident-purchaser. The Officer further states that in this case, the sale in auction and the exportby the agent are distinct and different and aremade by different persons in terms of separatecontracts and therefore, in the end, he concludes by saying that the sales are not liablefor exemption under Article 286(1)(b) of the Constitution. It is not really necessary to statethe exact amount claimed by the petitioner asbeing comprised under those sales, becausethose questions do not now arise.
15. As I mentioned earlier, there is no counter-affidavit filed by the State in this Group 'A'.
16. As the pattern of the transaction in all the other writ petitions is substantially the same, it is not necessary for me to deal separately with the various matters mentioned in those petitions. Stated broadly, the various petitioners, in all these 43 writ petitions, are manufacturers or producers of tea in Coonoor, Kotagiri and Nilgiris. They have obtained export quota rights. Their tea is sent by road or rail to their respective warehouse-men at Willingdon Island, who keep the goods in their godowns. The tea broker at Fort Cochin, con- ducts a public auction for sale of these reas and that tea is purchased by the agents of foreign principals. After the purchase, those agents take delivery of the tea from the respective godowns in Willingdon Island and they issue a certificate similar to Ext. P. 5 referred to in O.P. No. 179 of 1960, and the tea is exported by those agents to foreign destinations. Under these circumstances, the petitioners claim the sales, in question, in which the goods are purchased by the agents of foreign principals and exported outside the territory of India as coming within the exemption provided under Article 286(1)(b) of the Constitution.
17. I shall also advert to the stand taken by the States by referring to one of their counter-affidavits filed in the six writ petitions already adverted to. In the counter-affidavit filed by the State in O. P. 226 of 1960, coming under Group 'B' the Assistant Secretary (Law), Agricultural Income Tax and Sales Tax Department States that the petitioner's contention that part of the turnover relates to sales in the course of export of goods made out of India and as such liable to be exempted under Article 286(1)(b) is untenable in law. According to the State, the sale along with export quota rights, does not by itself make it a sale in the course of export. The State further says that the sales took place by auction at Fort Cochin, the goods were all situated in Willingdon island in the then Travancore-Cochin State, the purchasers took delivery of the goods from the godowns in Travancore-Cochin and therefore, the sales have taken place in Travancore Cochin, thus attracting the provisions of the General Sales Tax Act -- Act 11 of 1125.
It is further averred by the State that the export of the goods was made by the purchasers, who took delivery of the goods and that was done in pursuance of the export licences obtained by the purchasers and the subsequent export of goods by the purchasers does not affect the character of the sales by the petitioner to the said purchasers, to the end, theState contends that the sales, in respect of which exemptions are sought to be claimed do not attract the provisions of Article 280(1)(b)of the Constitution.
18. At this stage, I may also state, that the learned Government Pleader brought to my notice that in the view taken by the Sales Tax Department in these cases, it was not thought necessary to investigate the question of tactas to whether the respective purchasers in the auction were the agents of foreign principals. But the learned Government Pleader has stated that these cases can be disposed of on the basis that the purchasers are made at the auction by agents of foreign principals; but even on the case set up by the various petitioners, it is the contention of the learned Government Pleader, that the sales are not exempt under Article 288(1)(b).
19. The warehouse-man, the tea broken the agent of the, foreign principal and the destination where the goods are exported, may, in some of these cases be different. All the learned counsel are agreed that the pattern of sales are more or less in form as mentioned in O. P. No. 179 of 1960.
20. Mr. T.S. Venkiteswara Iyer, learned counsel for the petitioners in the writ petitions in Group 'A' and whose contentions have been adopted by Mr. C.S. Venkiteswara Iyer, and Mr. P.A. Krishna Iyer, learned counsel for the petitioners in Groups 'B' and 'C' respectively, contended that under the provisions of the Tea Act, 1953 -- Central Act 29/1953, the various petitioners are entitled to obtain an export quota license and it is for the purpose of being exported that the tea is sent from Nilgiris to Willingdon Island. The tea broker sells the goods in public auction, along with the export quota rights, in respect of tea so sold. The purchases are made by agents on behalf of the foreign principals and the tea is exported by those agents in foreign ports. Therefore, the whole transaction from beginning to end is an Integral one and the sale to the foreign principals, through their agents, is a sale in the course of export out of the territory of India.
The learned counsel also urged that the sale, and the resultant export, form part of a single transaction and the sale occasions the export. There cannot be a sale without export and there cannot be a further sale by the agent, who purchases the tea, to his foreign principal. The fact that title to the goods may pass to the foreign buyer in the State, will not in any way detract from the sale being a sale in the course of export out of the territory of India and as such exempted under Article 286(1)(b). The view expressed by the officers, for negativing the claim made in respect of these sales, is according to the learned counsel, contrary to the various principles laid down by the decisions of the Supreme Court regarding the scope of Article 286(1)(b). The learned counsel also referred me to certain decisions of the Supreme Court in support of his contention that the sales in question are exempt under Article 286(1)(b).
21. On the other hand, the learned Government Pleader appearing for the State, in all these matters has in turn, contended that to no sense can these sales be considered to be sales in the course of export out of the territory of India. The fact that the purchasers at the auction are agents of foreign principals does not at all alter the situation. This is only a case of the buyer either by himself, or through his agent, purchasing goods within the State and arranging the export of the goods out of the territory of India on his own account and without any reference to the petitioners who are the sellers in these cases. The learned. Government Pleader also urged that none or these petitioners can be considered to have any part in the stream of export.
In fact, the learned Government Pleader urged that there is no question of even a stream of export occurring in this case, because the transaction, so far as the petitioners are concerned, is complete when once the purchases are made by the agents and delivery taken by them. The petitioners had nothing to do with the actual export of goods out of the territory of India and therefore, the petitioners' claims for exemption in all these cases, have been rightly rejected by the sales tax Department. The learned Government Pleader also urged that, even on the basis that the purchases had been made by the foreign principals themselves in the State and if they had later, exported the goods, the petitioners, certainly cannot claim any exemption under Article 286(1)(b). If so, the purchases by the agents of those foreign principals within the State, cannot place the petitioners in any higher or better position so far as Article 286(1)(b) is concerned.
22. The learned Govt. Pleader also referred me to more or less the same decisions of the Supreme Court on which the petitioners' counsel have placed reliance.
23. I will advert immediately to the various principles that have been laid down by the Supreme Court regarding the scope of Article 286(1)(b). Article 286(1)(b) and 286(2) as they now stand, after the Constitution (Sixth Amendment) Act, 1956, are as follows:
'Article 286(1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods, where such sale or purchase takes place.......................
(a) x x x or (b) in the course of the import of the goods into, or export of the goods out of the territory of India.
'(2) Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in Clause (1).'
The Constitution (Sixth Amendment) Act, 1956 was passed in consequence of the decision of the Supreme Court in Bengal Immunity Co. Ltd. v. State of Bihar, 1955-6 STC 446 : ((S) AIR 1955 SC 661). In pursuance of Clause (2)of Article 286 Parliament has passed the Central Sales Tax Act, 1956--Central Act 74/1956, formulating principles, among other matters, for determining when a sale or purchase of goods taken place in the course of import into Or export from India. As to when a sale or purchase can be deemed to take place in the course of the export of the goods out of the territory of India, in Section 5(1) of the Act, it is provided:
'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 it 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.'
Section 5(1) practically is based on the principles laid down by the decisions of the Supreme Court governing the matter. Therefore the point to be noted in Section 5(1) of the Central Act, is that the sale must occasion the export.
24. I will also refer to certain provisions in the Central Sales Tax ACT, 1125--Act XI/1125. Section 2(a) defining 'agricultural or horticultural produce' excludes tea and certain other articles,
''Dealer' is defined under Clause (d) of Section 2 as any person who carries on the business of buying or selling goods. 'Sale' under Section 2(j) with all its grammatical variations and cognate expressions, is defined, as meaning, among other things, every transfer of the property in goods by one person to another in the course of trade or business for cash or for deferred payment or other valuable consideration and includes also a transfer or property in goods involved in the execution of a works contract, but does not include a mortgage, hypothecation, charge or pledge.' It is not necessary to refer to the explanation to this clause, as in this case, there is no controversy that there was a sale to the agent, on behalf of the foreign principal and the property in the goods passed within the State.
The expression 'turnover' is defined in Section 2(k) as the aggregate amount for which goods are either bought by or sold by a dealer, whether for cash or for deferred payment or other valuable consideration, provided that the proceeds of the sale by a person of agricultural or horticultural produce grown by himself or grown on any land in which he Has an interest whether as owner, usufructuary mortgagee, tenant or otherwise, shall be excluded from his turnover. It is not necessary to refer to Sub-clauses (i) to (iv) of Section 2(k).
Section 26, which makes provision, for not levying tax in certain cases, in so far as it is material for the present purpose, omitting the other clauses, is as follows:
'Tax not leviable in certain cases -- (i) Notwithstanding anything contained in this Act--(a) a tax on the sale or purchase of goods shall not be imposed under this Act-
X X X X (ii) Where such sale or purchase takes place in the course of import of the goods into or export of the goods out of the territory of India.'
Notwithstanding the charging Section 3, Section 26(1)(a)(ii) referred to above, provides for exemption from taxation of sales or purchases taking place in the course of import of the goods into or export of the goods out of the territory of India. This is practically based upon the exemption granted under Article 286(1)(b).
25. As considerable reliance has beenplaced by the counsel for the petitioners onsome provisions of the Tea Act of 1953, it is desirable that I advert to some of the provisions of that Act. The Act itself is, as its preamble states for providing for the control bythe Union of the tea industry, of the cultivation of tea and export of tea from India andfor that purpose to establish a Tea Board andlevy a customs duty on tea exported fromIndia.
Section 3 which is the definition section, defines 'board' as the Tea Board constituted under Section 4:
'Broker' as a broker of tea;
'Dealer' as a dealer in tea;
'Export' as taking out of India by land, sea, or air to any place outside India other than a country or territory notified in this behalf by the Central Government;
'Export allotment' as the total quantity of tea that may be exported during any one financial year.
The Act also defines 'manufacturer' and 'owner'.
Section 4 provides for the establishment of a Board called the Tea Board and the functions of the Board are detailed in Section 10. Clause (f) of Sub-section (2) of Section 10, states that one of the duties of the Board is to regulate the sale and export of tea.
Section 17(1) provides that no tea shall be exported unless covered by a licence is issued by or on behalf of the Board. Section 18 prohibits consignment of tea by ship or otherwise for export without a valid export licence.
Section 19 gives power to the Central Government in consultation with the Board, to declare the export allotment of tea for each financial year.
Sub-section (1) of Section 20 declares the right of a tea estate to receive under the Act an export quota for each financial year.
Section 21 provides for the right to obtain export licences.
Section 33 provides for licensing of brokers, tea manufacturers etc.
26. The learned counsel for the petitioners relied very strongly upon the provisions of the Tea Act, referred to above, to show that the various petitioners have got export quota permits and the teas were auctioned by the brokers along with those export quota permits and the sales can be completed only by exports and it was so completed by export made by the agents to their foreign principals.
27. In my view, the fact that the petitioners may have export quota permits for each financial year under the Tea Act, has no bearing in considering the question as to whether the particular sales are covered by the exemption provided in Article 286(1)(b). By virtue of the export quota permits given to the various petitioners under the provisions of the Tea Act, the petitioners may be at perfect liberty to export the available quota out of the territory of India. But in this case, admittedly they do not claim to have made the export themselves.
28. The earliest decision that was referred to me, which I may call the first Travancore-Cochin case, is the decision reported in State Of Travancore-Cochin v. Bombay Co. Ltd., AIR 1952 SC 366. 'The learned Chief Justice of India (Patanjali Sastri, C. J.) who spoke for the Court', has considered the various view points that were urged before the Supreme Court as to the circumstances under which the exemption under Article 286(1)(b) comes into play. It will be seen from the judgment of the learned Chief Justice that the dealings in the cases before them followed more or less the same pattern and consisted of export sales of the respective commodities to foreign buyers on c.i.f. or f. o. b. terms as the case may be.The learned Chief Justice observes at page 367:
'We are clearly of opinion that the sales here in question, which occasioned the export in each case, fall within the scope of the exemption under Article 286(1)(b). Such sales must of necessity be put through, by transporting the goods by rail or ship or both Out of the territory of India, that is to say, by employing the machinery of export. A sale by export thus 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 resultant export form parts of a single transaction. Of these two integrated activities, which together constitute an export sale which ever first occurs can well be regarded as taking place in the course of the other.'
The learned Government Pleader placed considerable reliance on this observation of the learned Chief Justice in support of his contention that the various petitioners, who are the sellers, had nothing to do at all with the delivery of the goods to a common carrier for transport out of the country by land or sea.
29. On the other hand, the learned counsel for the petitioners relied on the same observations in support of their contention that in these cases, the sales conducted by way of auction, cannot be considered something distinct and different from the export which followed the purchase by the agents of the foreign principal. Therefore, they urged that these observations support their contention that thesales by way of auction, and the transport of those goods by the purchaser-agents of the foreign principals must be considered to be forming part of an integrated activity and therefore, the sale comes within the exemption under Article 288(1)(b).
30. The learned counsel for the petitioners also referred me to the observation of the learned Chief Justice occurring a little later in that judgment, that the sales will nevertheless be considered to have taken place in Recourse of export, even on the assumption that the property in the goods has passed to the foreign buyers within the State before the goods commenced their journey.
31. It is not possible for me to accept the contention of the learned counsel for the petitioners. In the case before the Supreme Court, the respondents themselves appear to have exported the goods under c.i.f. or f.o.b. terms and it is, when considering such a transaction, that, the learned Chief Justice was making the observations referred to above. Those observations, in my view, also indicate that the seller must figure as an exporter and must have a connection with the 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.
32. In the cases before me, the object of the sales may be for the goods being exported out of the territory of India. But even according to the petitioners, they had nothing to do with the expert which was made independently and without reference to any of the petitioners. No doubt, the department does not controvert the fact that the tea purchased in the various auctions, was as a matter of fact, exported by the respective agents to their foreign, principals. In my view, so far as the petitioner is concerned, the sale has become complete, when once the goods were purchased in auction by the agent and delivery was also taken by him. The fact that there is a subsequent export by the agent to the foreign principal cannot make the sale, by the petitioners in these cases as one made in the course of export of the goods out of the territory of India. None of the petitioners claim that those agents, when they exported the goods to their foreign principals were also acting as the seller's agents in the matter of export. The learned Chief Justice ultimately sums up the position at page 368 as follows:
'We accordingly hold that whatever else may or may not fall within Article 286(1)(b), sales and purchases which themselves occasion the export or the import of the goods, as the case may be, out of or into the territory or India come within the exemption and that is enough to dispose of these appeals.'
Therefore, in order to claim the benefit of the exemption under the said Article, the petitioners will have to establish that the sales themselves occasioned the export of the goods out of the territory of India. The petitioners have not been able to so satisfy me in these cases.
33. The next decision of the SupremeCourt is the one reported in State of Travancore-Cochin v. Vilas Cashewnut Factory, AIR 1953 SC 333 the 2nd Travancore-Cochin case. One of the questions that arose before the Supreme Court for decision in the said case, was as to whether the last purchase of goods made by the exporter, for the purpose of exporting them, to implement the orders already received from the foreign buyer or expected to be received subsequently in the course of business, and the first sale by the importer to fulfil orders pursuant to which the goods were imported or orders expected to be received after the import, were exempted under Article 286(1)(b). At page 336, the learned Chief Justice who again delivered the majority judgment in that case, reiterates the position that what is exempted under Article 286(1)(b) is a sale or purchase of goods taking place in the course of the import of goods into or export of the goods out of the territory of India.
The learned 'Chief Justice observes at page 336 as follows:
'It is obvious that the words 'import into and export out of in this context do not mean the article or commodity imported or exported. The reference to 'the goods' and to 'the territory of India' make it clear that the words 'export out of and 'import into' mean the exportation out of the country and importation into the country respectively. The word 'course' etymologically denotes movement from one point to another, and the expression 'in the course of' not only implies a period of time during which the movement is in progress but postulates' also a connected relation......
A sale in the course of export out of thecountry should similarly be understood in thecontext of Clause (1) (b) as meaning a sale taking place 'not only during the activities directed to the end of exportation of the goods out of the country but also as part of or connected with such activities. The time factor alone is not determinative. The previous decision proceeded on this view and emphasised the integral relation between the two where the contract of sale itself occasioned the export as the ground for holding that such a sale was one taking place in, the course of export.'
A contention was urged before the learned Judges that on the principle of connected or integrated activities as laid down, by the SupremeCourt, a purchase for the purpose of export must be regarded as covered by the exemption under Clause (1) (b). The learned Judges emphatically expressed their inability to accept that contention in the following words at page 336:--
'The phrase 'integrated activities' was used in the previous decision to denote that such as sale' (i.e., a sale which occasions the export) '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.
It is in that sense that the two activities-- the sale and the export -- were said to be integrated.
A purchase for the purpose of export like production or manufacture for export, is only an act preparatory to export and cannot, in our opinion be regarded as an act done 'in the course of the export of the goods out of the territory of India', any more than the other two activities can be so regarded.'
Adopting respectfully the principles laid down by their Lordships, it must be held that the sales in these cases in favour of the agents in public auction is distinct in character and quality from the export made by the agents of the goods purchased by them. It is not also correct to speak of a sale in favour of the agents of the foreign principals, for purposes of export, as an activity so integrated with the exportation so as to regard the sales as having been effected in the course of export.
34. The learned Government Pleader stressed that the cases on hand fall squarely within the second conclusion arrived at by the learned Judges and referred to at page 338. The learned Judges sum up their conclusions that purchases in the State by the exporter for the purpose of export, as well as sales in the State by an importer after the goods have crossed the customs of the frontier, are not within the exemption. No doubt, the learned counsel for the petitioners urged that the exporter, whom the learned Judges had in mind, is an exporter who can convey title to foreign buyers. In this case, admittedly, the sales in auction were in favour of the agents of the foreign principals. There cannot be a further sale by the agents to their principals. Therefore, there is a direct sale in favour of the principals themselves.
Even accepting all these contentions, in my view, if the petitioners' position cannot be improved by the foreign merchants themselves purchasing the goods within the State and exporting them later out of the territory of India without reference to the petitioners, the fact that the goods were sold not to the principals themselves but to their agents, will not in any way alter the legal position, so long as the petitioners have nothing to do with the exportation of the goods that followed the purchase. No doubt, the learned counsel for the petitioners, again urged that the object behind the exemption granted under Article 286(1)(b) is to safeguard the export-import trade, as it is very important for national economy and that the exemption grant-ed under Article 286(1)(b) should not be unduly curtailed. But the short answer to this is, as observed by the learned Chief Justice of India in the above decision at page 337 :--
'........It is no less true that the Statepower of taxation is essential for carrying on its administration, and it must be as much the constitutional purpose to protect the one as not unduly to curtail the ether...............
It is for the Court to interpret the true meaning and scope of those terms without assuming that the one constitutional purpose was regarded as more important than the other.
35. In Gandhi Sons Ltd. v. State of Madras, 1955-6 STC 694: ((S) AJR 1955 Mad 722) the Madras High Court had to consider the principles laid down by the Supreme Court in the two Travancore-Cochin, cases referred to earlier. Mr. Justice Rajiagopala Ayyangar (as he then was) delivering the judgment of the Bench observes at page 702 (of STC): (at pp. 724-725 of AIR) as follows:--
'.What was characterised by the Supreme Court as an 'export sale' was one in which the assessee figured as exporters, privity having been established between them and the foreign buyer, either through direct negotiation or dealing, or through the local representatives of the latter. That certainly does not obtain here. The assessees' were in no sense the exporters of these goods.
Undoubtedly, an export took place here. But in that transaction the assessees were not the sellers who exported or whose sales occasioned the export. A sale will occasion an export or 'there will be an export sale as understood by the Supreme Court only where the side is to a foreign buyer with whom the local seller has privity and when as a direct result of such sale the goods are transported across the frontier.'
These observations of the learned Judges clearly show that the assessees must have a dicert connection in the exportation of the goods and it is not enough that an exportation of the goods actually takes place in some manner or other but the assessees must be associated with the transaction of export.
36. The Supreme Court had again to consider the scope of Article 286(1)(b) in the decision reported in State of Madras v. Gurviah Naidu and Co.; Ltd. ((S) AIR 1956 SC 158). In thatcase, the evidence was that the respondents therein after securing orders for supply of skins to London buyers, used to go about purchasing the requisite kind and quality of skins for implementing orders. In a prosecution for nonpayment of tax, the defence set up was that the transactions were exempt under Article 286(1)(b). In dealing with that contention, the learned Acting Chief Justice observes at page 161:--
'Such purchases were, it is true, for the purpose of export, but such purchases did not themselves occasion the export and consequently did not fall within the exemption of Article 286(1)(b) of the Constitution as held by this Court in AIR 1952 SC 366. Nor did such purchases in the State by the exporter for the purpose of export come within, the ambit of Article 288(1)(b) as held by the decision of the majority of a 'Constitution Bench of this Court in AIR 1953 SC 333.'
37. In State of Mysore v. Mysore Spinning and ., AIR 1958 SC 1002, His Lordship Mr. Justice Vivian Bose had again to consider the earlier decisions of the SupremeCourt regarding Article 286(1)(b) . In the case before the Supreme Court, the exporter, after purchasing and taking delivery of the necessary goods, shipped them overseas. The Mills, who were the sellers of the goods in question to the exporter, claimed exemption for their sale under Article 286(1)(b). The learned judge heldp2 that it is only a sale that occasions the export that is exempt and that a sale to an exporter that preceded it is not, even if it was made 'with a view to' or 'for the purpose of export. I have already pointed out that in the cases before me, the sales of tea in favour of the agents of the foreign buyers may have been made 'with a view to' or 'for the purpose of export and that those sales themselves do not occasion the export.
38. The learned counsel for the petitioners relied upon an observation of his Lordship Mr. Justice Vivian Bose at page 1005 in the above decision to the effect that there were two sales in that case and both could not have occasioned the export and only the second of the two sales occasioned the export and the respondents therein were not parties to it either directly or through the exporters as their agents. The counsel contended that in the cases before me, there is no question of a second sale by the agents to their foreign principal which could be held to occasion the export. There is only one sale in this case by the petitioners to the agents and there has been an export in consequence of that sale.
39. There is no basis, in the observations of the learned Judge to enable such a contention to be raised. The learned Judge was dealing with a sale by the Mills in question to the exporter and a further sale by the exporter to the foreign merchants and the view of the learned Judge is that the sale which occasioned the export, was the sale by the exporter to the foreign merchants with which the Mills there had nothing to do and it is the further view of the learned Judge that the sale by the Mills to the exporter in that case did not occasion the export. In fact, in my view, these observations are directly against the contention raised by the petitioners in these cases.
40. The Supreme Court again has reiterated the same view on Article 286(1)(b) in their decision reported in Burmah Shell Oil Storage and Distributing Co. of India Ltd. v. Commercial Tax Officer, 1960-11 STC 764: (AIR 1961 SC 315). His Lordship Mr. Justice Hidayatullah, reviewing the earlier decisions of the Supreme Court in the first and second Travancore-Cochin cases, observes at page 780 (of STC); (at p. 323 of AIR) as follows:--
'From the views here expressed, it follows that every sale or purchase, preceding the export is not necessarily to be regarded as within, the course of export. It must be inextricably bound up with the export, and a sale or purchase unconnected with the ultimate export as an integral part thereof is not within the exemption. It may thus be taken as settled that sales or purchases for the purpose of export are not protected, unless the sales or purchases themselves occasion the export and arc an integral part of it. The views, expressed in these two cases were accepted and applied in (S) AIR 1956 SC 158; 'Kailash Nath v. State of U. P.; (S) AIR 1957 SC 790; AIR 1958 SC 1002 and Gordhandas Lalji v. B. Banerjee, AIR 1958 SC 1006.'
41. In the recent decision of the Supreme Court in Narasimham and Son v. State of Orissa, 1961-12 STC 282: (AIR 1961 SC 1344), Mr. Justice Venkalarajna Iyer explains the scope of Article 286(1)(b) as follows at page 285 (of STC): (at p. 1346 of AIR):--
'With reference to the analogous provision under Article 286(1)(b) prohibiting the imposition of tax on the sale or purchase of goods in the course of import or export, it has been held by this court that it is only a sale or purchase which occasions the export or import of the goods out of or into the territory of India or a sale in the State by the exporter or importer by transfer of shipping documents, while the 'goods are beyond the customs barrier, that is within the exemption, and that a sale which precedes such export or import or follows it is not exempted, vide AIR 1953 SC 333.
42. From a review of the various principles laid down by the decisions referred to above, I must hold that the contention of the learned counsel for the petitioners, in all these cases, that the sales in question, are sales which took place in the course of export of the goods out of the territory of India and as such exempt under Article 286(1)(b) of the Constitution, cannot be accepted. As pointed out earlier, the transaction of sale is complete and the petitioners have nothing to do with the actual export that took place and which was effected by the agent-purchasers to their foreign principals. None of the petitioners had anything to do with the actual export of the goods, and it must be held in the circumstances, that the sales in question have not themselves occasioned the export as an integral part of such sales. The object or the purpose of holding the auctions may be with a view to the tea being exported out of the territory of India. The sales must be considered as sales preceding the export which cannot he regarded as in the course of export. Even at the risk of repetition I have to state that the sales may have been for the purpose of export, but they are not protected, inasmuch as the sales themselves in my view, have not occasioned the export as an integral part.
43. Therefore, it follows that the orders of the respective Sales Tax Authorities, refusing to recognise the claims of these petitioners for exemption under Article 286(1)(b) of the Constitution, are correct. Now that I have decided the common question arising for decision in all these writ petitions, I will now proceed to consider the other points that are raised in each of these writ petitions individually and pass suitable orders.