M.L. Joshi, Actg. C.J.
1. Under these three writ petitions under Article 226 of the Constitution of India, each of the petitioner prays for issuance of a writ in the nature of prohibition, certiorari, mandamus or any other appropriate writ, order or direction for restraining the respondents from assessing or reassessing the tax on the petitioner Companies, turn over in pursuance of the impugned notices.
2. The relevant facts, out of which these three writ petitions arise, are like this : The petitioners, three Companies, are private Companies of Sri Gamganrgar with head offices at Bombay According to the writ allegations, their main business is to buy cotton in Rajasthah and in Punjab and to export the same outside the territory of India through their head offices. They purchased cotton from the local dealers, which was partly sold within Rajasthan, partly sold in the course of inter-State trade, partly outside Rajasthan and a part of it was exported out of India after ginning cotton and pressing them into bales. The dispute in all these writ petitions relates to cotton purchased by the petitioner Companies from the local dealers in Rajasthan and exported out of India through their head offices. All these writ petitions relate to the accounting years 1961-62 and 1962-63. In the original assessment orders under the Rajasthan Saks Tax Act (hereinafter called the RST Act), cotton purchased by these three Companies from local dealers and exported through their head offices outside India, no purchase tax was levied on the representation of these Companies before the Assessing Authority that cotton sold by the local dealers to them and purchased by them were actually exported out of India and so were purchases made in the course of export, and, therefore, they were not liable to purchase tax It may be pointed out here that exemption from purchase tax was sought by these Companies under first proviso to Section 5 of the RST Act read with Section 5 of the Central Sales Tax Act (hereinafter called the CST Act), simply on the ground that purchases made by the petitioner Companies were in the course of export. It was on such representations made by the petitioner Companies that the Assessing Authority, in its original assessment orders, did not levy purchase tax on cotton purchased by the petitioner Companies from local dealers and actually exported it out of India In this connection, it is pertinent to notice the relevant notifications. The first notification relevant in this case issued by the Government is dated March 28, 1960, which has been issued Under Section 4(2) of the RST Act. According to this notification, sale of the cotton to registered dealers was exempt if it was intended to be sold by such dealers in the course of export cut of India, provided such dealer made declaration in the form set-out in the notification. The next relevant notification is dated March 26, 1962, which came to be issued in the exercise of the powres conferred by Section 5A of the RST Act, in which 11 items of goods including the cotton were specified for the purpose of levy of purchase tax Under Section 5A of the R.S.T Act. The third relevant notification is of March 23, 1963. By this notification the first notification dated March 28, 1960, granting exemption to sale of cotton for purposes of export, was cancelled in respect of 9 items of goods including cotton Thus, the net result of these three notifications was that sales of cotton made by the local dealers to exporters remained exempt from levy of sales-tax from March 28, 1960 to March 23, 1963. The purchases made by the exporters of cotton from the local dealers in Rajasthan remained liable to purchase tax Under Section 5A of the RST Act from the date of the second notification dated March 26, 1962 to the date of the third notification dated March 23, 1963.
3. Since no purchase tax was levied by the Assessing Authority on the ground of purchase of cotton by these Companies from local dealers in Rajasthan for exporting the same outside India and in the opinion of the Assessing Authority, namely, non petitioner No. 2, purchase price of cotton purchased by the petitioner Companies from local dealers in Rajasthan ought to have been subjected to purchase tax in view of notification dated March 26, 1962 and Section 5A of the RST Act, the Assessing Authority, non-petitioner No 2, issued notice Under Section 12(1) of the RST Act some time in the year 1968 for reopening the assessment as business of the petitioner Companies had escaped assessment to tax. These notices, which were issued by the Commercial Taxes Officer (hereinafter called the CTO), were, later on, withdrawn and fresh notices were issued by non-petitioner No 2, namely, the CTO, Sri Ganganagar, on November 18, 1968, under the direction of the Deputy Commissioner (Administration), Commercial Taxes, Jodhpur, as provided by the proviso to Section 12(1) to show cause why the assessee be not reassessed as directed by the Deputy Commissioner (Administration). The petitioner Companies have challenged the fresh notice dated November 18, 1968, issued by respondent No. 2 under the direction of the Deputy Commissioner (Administration).
4. The respondents have filed replies in all these writ petitions. Their contention is that although sale of cotton by local dealers to the petitioner Companies made on declaration by the petitioner Companies that they were purchasing cotton for export out of India are exemp from tax under notification dated March 28, 1960, purchases made by these Companies on or after March 26, 1962, when the Givernment Notification dated 26 3-1962 was issued, are liable to purchase tax till March 23, 1963 The exemption from tax on sale was cancelled by notification dated March 23, 1963. The contention of the non-petitioners is that purchase of cotton made by the petitioner Companies from local dealers were not purchases in the course of export but were only for the purpose of export and do not, therefore, fall within the definition of 'sale' and 'purchase' in the course of export outside the territory of India, as given Under Section 5 of the CST Act.
5. The main ground, on which notices dated November 18, 1968 are challenged in all these three writ petitions, is that the purchases made by the petitioner Companies from the local dealears of Rajasthan and subsequently export out of India are purchases in the course of export within the meaning of first proviso to Section 5 of the RST Act read with Section 5 of the CST Act and Article 286 of the Constitution of India. This is the only point which was argued before us in the three writ petitions. The petitions are, therefore, disposed of by a common judgment.
6. The sole question, which calls for determination in these petitions is as to where the purchases in question made by the petitioner Companies from the local dealers of the Rajasthan and subsequently exported out of India, are purchases in the course of export within the meaning of first proviso to Section 5 of the RST Act read with Section 5 of the CST Act & Article 286 of the Constitution of India The answer to this question turns upon the meaning in the course of export of the goods out of the territory of India, as occurring in Section 5 of the CST Article 286 of the Constitution of India. The question as to the meaning sale in course of export came to be considered in Ben Gorm Nilgiri Plantations Conoor Nilgiris etc v. Sals Tax Officer Special Circle Ernakulam etc. : 7SCR706 . by sheir Loidchips of the Supreme Court. In that case, the Supreme Court has elaborately discussed the distinction between 'sale for export', and the 'sale in the course of export'. According to the Supreme Court, a transaction of sale which occasions export or which is effected by a transfer of document of title after the goods have crossed the customs frontiers, is exempt from sales-tax leviable under any such State legislation To constitute a sale in the course of export of goods out of the territory of India common intention of the parties to the transaction to export the goods followed by actual export of the goods to a foreign destination is necessary. But intention to export and actual exportation are not sufficient to constitute a sale in the course of export, for the simple reason that for sale by expire 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. A sale in the course of export predicates a connection between the sale and export to be so integrated that the connection between the two cannot be voluntarily interrupted without breach of the contract or 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 obligation on the part of both, the buyer and the seller to export. There must be an obligation of export and there must be an actual export An 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 commodity sold, may be regarded as a sale for export, but it has not necessarily to be regarded as one in the course of export unless the sale occasions export. 'To occasion export' presupposes existing of such bond between the contract of sale and until exportation that such link is inextricably connected with the one immediately preceding it. Without such a bond, a transaction of sale cannot be called sale in the course of export of goods out of the territory of India Etmylogically, the expression 'in the course of export' contemplates an integral relation or bond between the sale and the export, At the other end is a transaction under a contract of sale with a foreign buyer under which the goods may, under the contract, be delivered by the seller to a common carrier for transporting them to the purchaser. Such a sale would indisputably be one for export, whether the contract and delivery to the common carrier are effected directly or through agents. Where there are two sales, first under which goods are procured for sale, and property in the goods passes within the territory of India, and in the second, by the buyer to the foreign party resulting in export, the first cannot be regarded as sale in the course of export for sale in the course of export must be directly and Integra' by connected with the export. It cannot also be predicted that every sale which result in export, it would be regarded as sale in the course of export. This dictum, as laid down in the able mentioned decision of the Supreme Court, although relates to sale in course of export, equally applies to cases of purchase in course of export.
7. We may further notice a few cases to elucidate the point. In Coffee Board Bangalore v. Joint Commercial Tax Officer. Madras and Anr. A.I.R. 1971 Supreme Court 870 the Coffee Board framed rules for sale of coffee to registered sale exporters The facts of the Coffee Board case : 3SCR147 ever like this. The Coffee Board framed rules for sale & export of Coffee to registered exporters. Only dealers of Coffee with Coffee Board and who held permits from the Chief Coffee Marketing Officer in that behalf, were permitted to participate at the auction. After the bid, the price would be paid in accordance with the conditions One of the conditions called 'export guarantee' provided that it was an essential condition of the auction under which coffee is sold, that the coffee shall be exported to the destination stipulated for the year to any other foreign country outside India as may be approved by the Chief Coffee Marketing Officer and that it shall not in any circumstances be diverted to another destination, for being sold or disposed of or otherwise released in India. Another condition provided was that 'if the buyer be or neglects to export the coffee within the prescribed time, he should be liable to pay a penalty'. Yet another condition provided in the agreement was that if the buyer made any default in export of coffee, it would be lawful for the Chief Coffee Marketing Officer, without reference to buyer, to seize the inextricably unexported coffee and deal with the same as if it was a part and parcel of the coffee held by the Board in their whole stock. The contention of the Coffee Board in that case was that the auctions were in the course of export because the sales themselves occasioned the export of coffee. The Supreme Court held that the expression 'sale in the course of export' signifies not only sale and actual export but the sale must be a part and parcel of the export. The word 'occasion' in the context of sale or purchase was held to mean to cause export or put the immediate cause of export. The introduction of intermediaries between the seller and the importing buyer was held to break the link, as there was one sale to the intermediary and the another to the importer. The first sale was not in the course of export because the export began from intermediary and ended with the importers. The ratio in the above case is that there must be a single sale which itself causes the export and there is no room for two or more sales in the ceruse export. In the Coffee Board's case : 3SCR147 the salts wore not held to be in the course of export as the introduction of an intermediary between the seller and the importing buyer was held to break the link. There was one sale to the intermediary and another to the importer. The first sale was not in the course of export because the export began from the intermediary and ended with the importer. According to the law laid down in this case the sales, which is to be regarded as exempt, is the sale which causes the export to take place or the immediate cause of export. To establish export, a person exporting and a person importing are necessary elements and the course of export is between them. Introduction of third party dealing independently with the seller on the one hand, and with the importer on the other, breaks the link between the two for then there are two sales, one to the intermediary and the other to the importeis. The first sale is not in the course of export because the export commences with the intermediary. The real tests are that there must be a single sale which itself causes the export or in the progress of process of export There is no room for two or more sales in the course of export. The only sale which can be stated to cause the export is the sale which itself remits in the movement of the goods from the exporters to the importer The next case is Binani Bros (P) Ltd v. Union of India and Ors. : 2SCR619 . In this case, the ratio laid down is that to constitute sale in course of export, it should be seer, whether there were two independent transactions or only one transaction, which occasioned the movement of the goods in the course of export. In Mohd. Serajuddin etc v. State of Orissa : 1965CriLJ544 , it has been laid down that a transaction of sale which is a preliminary to export of the commodities 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 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. Where sale in effected by the seller and the seller is not connected with the export, which actually takes place, it is sale for export and not in the course of export. Where, however, the export is the result of sale, the export being inextricably linked with sale so that bond cannot be disassociated without a breach of the obligations arising by statute, contract or mutual under standing between the parties arising from the nature of the transaction, the sale is in the course of export. The real test, according to this decision, is that a sale or purchase of goods shall be deemed to take place in the course of export of the goods only if sale or purchase occasions such export. The sale or purchase of goods shall be deemed to take place in the course of export of the goods only if sale or purchase occasions such export The next case is East India Tobacco Company v. State of Andhra Pradesh and Anr. (1962) 18 STC 529. In this case it was held that it is only the sale under which the export is made that is protected by Article 286(1)(b) of the Constitution. A purchase which precedes such a sale does not fall within its purview though it is made for the purpose of, or with a view to export.
8. In the light of the decisions discussed above, it has to be determined whether purchases of cotton made by the petitioner Companies from local dealers were purchases in the course of export or purchases for the purposes of export. The purchases of the cotton were made by the three petitioner Companies from the local dealers in Rajasthan and exported out of India through their head offices But these purchases did not, by themselves, occasion the export as they could have been diverted by the purchasers to other places inside the territories of India The transaction of purchase and sale was not inextricably linked with the export of the cotton to the foreign countries so as to attract Article 286 of the Constitution of India. The sales made by the local dealers to the petitioner Companies and the purchase made by the petitioner Companies did not, by themselves, occasion export outside India as neither there was any contract nor statutory provision binding the petitioner Companies to export the cotton bales purchased from the local dealers. Nor there was any binding agreement between the local dealers and the petitioners (purchasers) to export the cotton purchased by them outside the territory of India. Indeed the purchases made by the foreign Company, that has occasioned export and not the purchases by the petitioner Companies. Such purchases, in our opinion, were for the purpose of export and not in course of export. Accordingly, the petitioner Companies are not exempt from the purchase tax. In order to gain the exemption, the petitioner Companies had to show that the purchase made by them had directly occasioned the export to the foreign buyers, which has, undoubtedly, not happened in these cases. It has been argued by the learned Counsel for the petitioner Companies that there was agreement between the petitioner Companies head offices and the foreign buyers to supply cotton purchased from local dealers to the foreign importers. Such agreements, by themselves, cannot amount to purchase in course of export. There were two independent transactions: the first was the purchase from the local Dealers, and the second was the purchase by the foreign buyers. The purchases made from the local dealers did not occasion export. On the other hand, it is the purchases made by the foreign buyers and the sales effected by the petitioner Companies which occasioned export so the purchases made by the petitioner Companies were not in course of export but for the purpose of export. Accordingly, the petitioners cannot claim exemption under the RSL or the CST Act The impugned notices, therefore, cannot be impeached as invalid.
9. No other point has been urged before us.
10. In the result, the petitions are dismissed Looking to the facts & circumstances of the case, we leave the parties to bear their own costs.