Sales to Foreign Tourists Not Exempt from Sales Tax: Link to Export Process Required

The court held that the sales made by the assessee to foreign tourists under an export promotion scheme were not considered as being "in the course of export." Despite the intention for export and the goods ultimately leaving India, the necessary elements connecting the sale to the export process were found lacking. Therefore, the sales were not exempt from sales tax under the U.P. Sales Tax Act. The revisions filed by the Commissioner of Sales Tax were allowed, emphasizing the importance of establishing a direct link between the sale and the subsequent exportation for a transaction to qualify as being "in the course of export."

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Issues:
Interpretation of the phrase "in the course of export" under the U.P. Sales Tax Act.

Detailed Analysis:
The judgment involved 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. The dispute revolved around sales made by the assessee to foreign tourists of jewels, precious stones, and pearls against foreign exchange under an export promotion scheme on printed vouchers with the condition that the articles shall not be sold in India. The appellate authority of Varanasi accepted the assessee's contention that these sales were in the course of export and thus not liable for sales tax. However, the revising authority analyzed the details required in the printed vouchers under the export promotion scheme and found that the intention to fulfill an export obligation and contract was established by both the buyer and seller. The revising authority then delved into the interpretation of the phrase "in the course of export" as per section 5 of the Central Sales Tax Act, 1956. The judgment highlighted the necessity of a connection between the sale and export, emphasizing the obligation to export, mutual understanding, or agreement between the parties, or the nature of the transaction linking the sale to export.

The judgment referred to various legal precedents to interpret the phrase "in the course of export." It cited the Supreme Court's decision in Ben Gorm, Nilgiri Plantations Co. v. Sales Tax Officer, emphasizing the need for a bond between the contract of sale and actual exportation. The judgment also discussed the relevance of the destination of goods, the intention of the parties to export, and the obligation to do so in determining whether a sale is in the course of export. The judgment further analyzed the passing of title in Indian territory, emphasizing that for a sale to be considered in the course of export, it must occasion the export, irrespective of where the title passes.

Moreover, the judgment discussed the essential ingredients of a sale in the course of export, including the necessity for the sale to cause the export and be a part of the export process. It differentiated between a sale for export and a sale in the course of export, highlighting that the sale, movement, and export must result in the goods crossing outside the country in a connected and interlinked manner. The judgment also addressed the argument that the prohibition on selling in India or checking goods at the customs barrier does not affect the nature of the sale, emphasizing that the sale must occasion the export to qualify as in the course of export.

Ultimately, the judgment concluded that the sales made by the assessee to foreign tourists under the export promotion scheme were not in the course of export, thereby allowing the revisions filed by the Commissioner of Sales Tax. The judgment highlighted that despite the sales being intended for export and ultimately crossing the Indian border, the essential elements linking the sale to the export process were not established, leading to the decision that the sales were not exempt from sales tax under the U.P. Sales Tax Act.

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