2009 (10) TMI 496 - HC - VAT and Sales Tax

Court rules foreign sales as exports under Central Sales Tax Act, rejecting disallowance of export sale deduction.

M/s United Oil Mill Machinery and Spare (P) Ltd., Ballabgarh Versus State of Haryana

The court held in favor of the petitioner, ruling that the sales made to foreign buyers were in the course of export out of India under Section 5 of the ... Sale in the course of export- An Egyptian Firm ordered a machinery to a Calcutta firm but calcutta firm could not process the order and referred the name of the assessee. The revenue treated it a sale between the assessee and the calcutta firm. Tribunal also did not treat it as a sale in the course of export. On the basis of correspondence between these three firms, the court exempted the sale treating it in the course of export. Issues Involved:1. Whether the insertion of Sub Section 3 in Section 5 of the Central Sales Tax Act was declaratory in nature and if so, whether the Tribunal was justified in rejecting the petitioner's claim of exemption of the sales, as being in the course of export out of the territory of IndiaRs.2. Whether the Tribunal was justified in holding that the sales made by the petitioner to foreign buyers could not be said to be in the course of export out of the territory of India within the meaning of Section 5 of the Central Sales Tax ActRs.Issue-wise Detailed Analysis:Issue 1: Declaratory Nature of Sub Section 3 in Section 5 of the Central Sales Tax ActThe court did not delve into this issue as the resolution of Issue 2 rendered it unnecessary. Therefore, no detailed analysis was provided on this point.Issue 2: Justification of Tribunal's Decision on Sales in the Course of ExportThe petitioner, a registered dealer, claimed an export sale deduction of Rs. 7,95,000 for the assessment year 1975-76 under the Central Sales Tax Act, 1956, for sales made to an Egyptian firm. The Assessing Authority disallowed the deduction, stating the goods were exported through an agent (Calcutta Firm). This decision was upheld by the Joint Excise and Taxation Commissioner (Appeals) and the Tribunal, which concluded that the sales were not direct exports but through the Calcutta Firm.The petitioner argued that the transaction was a direct export sale between the petitioner and the Egyptian Firm, supported by shipping documents and correspondence. The respondent contended that there was no direct export sale, but rather an export through the Calcutta Firm.The court analyzed the material on record and concluded that the transaction was a direct export sale. The court noted that the Calcutta Firm merely facilitated the initial contact and acted as a guarantor for payment, but the property in goods was never transferred to the Calcutta Firm. The court referred to the relevant provisions of the Indian Contract Act and Section 5(1) of the Central Sales Tax Act, which define when a sale is considered to be in the course of export.The court found that the letters exchanged between the petitioner and the Egyptian Firm established a valid contract of export sale. The export bill and challan dated 05.11.1975, along with other shipping documents, demonstrated that the goods were directly exported by the petitioner to the Egyptian Firm. The court emphasized that the movement of goods was occasioned by the contract between the petitioner and the Egyptian Firm, satisfying the test laid down by the Supreme Court in previous cases.The court distinguished the present case from the case of Mohd. Serajuddin v. The State of Orissa, where separate contracts existed between the parties involved. In the present case, there was a direct contract between the petitioner and the Egyptian Firm, and the Calcutta Firm did not act as an export agency.The court concluded that the Tribunal's finding that there was no direct sale in the course of export was perverse and not based on a correct appreciation of the facts. Therefore, the court decided Issue 2 in favor of the petitioner, holding that the sales made by the petitioner to foreign buyers were in the course of export out of the territory of India within the meaning of Section 5 of the Central Sales Tax Act.Conclusion:The reference was answered in favor of the petitioner-assessee and against the revenue authorities, with the court holding that the Tribunal was not justified in disallowing the petitioner's claim of export sale deduction.