Export-linked sale and incidental business turnover: canteen sales taxable, but cotton yarn sales treated as in the course of export.

The amended definition of "business" under the Madras General Sales Tax Act brought within tax net sales incidental or ancillary to trade or manufacture, even without profit motive, so canteen sales of refreshments were taxable. Sales of cotton yarn were treated as sales in the course of export because the export was occasioned by the sale and the transaction was inseparably linked to shipment on f.o.b. terms, with goods specially packed, consigned for export and deliverable only against export documents; such sales were therefore exempt.

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Issues: (i) whether canteen sales of refreshments were taxable as transactions incidental or ancillary to the assessee's business after the enlargement of the definition of "business"; (ii) whether sales of cotton yarn were sales in the course of export and therefore exempt from tax.

Issue (i): whether canteen sales of refreshments were taxable as transactions incidental or ancillary to the assessee's business after the enlargement of the definition of "business".

Analysis: The definition of "business" in the Madras General Sales Tax Act, 1959, as amended in 1964, brought within its scope sales transactions incidental or ancillary to trade, commerce, manufacture, adventure or concern, even without profit motive. The earlier view that canteen sales were outside the business of running the mills could not survive the subsequent Supreme Court ruling holding such incidental sales taxable after the amendment.

Conclusion: The canteen sales were taxable and this issue was decided against the assessee.

Issue (ii): whether sales of cotton yarn were sales in the course of export and therefore exempt from tax.

Analysis: A sale is in the course of export when the export is occasioned by the sale and the two are so integrated that the bond cannot be broken without breaching the contractual obligation. On the facts, the yarn was packed specially for export, delivered to a common carrier, shipped on f.o.b. terms, and the documents showed the assessee as consignor with payment against delivery of documents. The goods were earmarked for export and could not be diverted to the local market. These features showed that the export was the result of the assessee's sale and was inextricably linked with it.

Conclusion: The cotton yarn sales were sales in the course of export and this issue was decided in favour of the assessee.

Final Conclusion: The assessment was sustained only on the canteen turnover, while the export turnover was held exempt, resulting in a partial success for the assessee.

Ratio Decidendi: Where the contract of sale itself obliges the seller to place goods on board for export and the property passes only upon delivery of export documents, the sale and export are integrated so that the transaction is a sale in the course of export.

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