TaxTMI 
TaxTMI 
1969 (10) TMI 58
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....DAYATULLAH, C.J.-These are petitions under article 32 of the Constitution by the Coffee Board, Bangalore, directed against the joint Commercial Tax Officer, Madras, and the State of Tamil Nadu questioning the demand of sales tax on certain transactions of sales which the Board claims are sales in the course of export of coffee out of India and thus not liable to sales tax. A preliminary objection was taken at the hearing that the petitions do not lie since no question of a fundamental right is involved. We shall deal with the preliminary objection later as the main petition and the preliminary objection are inter-linked. But before we mention the points in controversy it is necessary to state the fact's more fully. The petitioner is a statutorily constituted body and functions under the Coffee Act, 1942 (7 of 1942). This Act was passed to provide for the development under the control of the Union of the coffee industry. Its main function is to constitute a "Coffee Board". Previously there was an Ordinance intituled the Indian Coffee Market Expansion Ordinance, 1940 (13 of 1940). A Board called the Indian Coffee Market Expansion Board was constituted under the Ordinance. The s....
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....lassifies the coffee and assesses its value based on its quantity, kind and quality. Once the coffee is delivered to the Board, the registered owner or the licensed curer has no rights over the coffee except to receive its price in accordance with section 34 of the Act. We are not concerned in this petition with any internal sales. The Board has elected to make monthly returns and in these petitions taxes on sales made in March and April, 1969, are challenged. Provisional assessments have been made and demand for taxes held due after allowing credit for taxes already paid, has been made by the respondents under the Madras General Sales Tax Act, 1959. Of these, certain sales are claimed to be exempted from sales tax under the Madras Act by reason of those being in the course of export of coffee out of India. The taxing authorities held that those sales took place within Tamil Nadu State and were thus liable to sales tax under the Tamil Nadu Act. The point of difference arises thus: The Coffee Board follows a procedure for selling coffee which is to be exported out of India. Coffee for export is specially screened and selected. It is then exposed in auctions specially held for ....
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....other improper purposes or that the bidder is not likely to fulfil his contract or is otherwise undesirable the bid may be rejected. After the bidding comes to an end and the bids have been accepted, the payment of price takes place in a particular way. We are not concerned with other provisions dealing with failure to fulfil the obligation as to payment of price, etc., objections to quality and so on. We are concerned with condition No. 26 which is headed "Export Guarantee." This condition is vital in the consideration of the questions involved in this case and may be quoted: "26. It is an essential condition of this auction that the coffee sold thereat shall be exported to the destination stipulated in the catalogue of lots, or to any other foreign country outside India as may be approved by the Chief Coffee Marketing Officer, within three months from the date of notice of tender issued by the agent and that it shall not under any circumstances be diverted to another destination, sold, or be disposed of, or otherwise released in India. The aforesaid period may, on application by the buyer, be extended by the Chief Coffee Marketing Officer in his discretion if he is satisfie....
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....lace within the State of TamilNadu which are liable to sales tax under the Madras General Sales Tax Act. The dispute is confined to this aspect of the matter on merits. The preliminary objection to which we referred earlier is only this that the petitions do not show a breach of a fundamental right. The petitioners only claim the benefit of the exemptions incorporated in the Constitution or the statute dealing with the levy and collection of sales tax, and their grievance can be investigated and righted by taking recourse to the appellate, revisional and other remedies under the relevant statute. We shall begin by considering the preliminary objection. The preliminary objection consists of two parts. The first part questions the standing of the petitioner to move this court for the enforcement of its so-called fundamental rights. It is argued that the petitioner being a corporation, has no right to move this court for the enforcement of fundamental right to hold, acquire and dispose of property since this right is available only to individuals who are citizens and a corporation is not a citizen. Reliance is placed upon State Trading Corporation of India Ltd. v. Commercial Tax....
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....titled "Rights to Property". The first of these three articles deals with compulsory acquisition of property. The second and third deal with saving of laws providing for acquisition of estates, etc., and validation of certain Acts and Regulations declared void by courts. Two fundamental concepts in article 31 are (a) that no person shall be deprived of his property save by authority of law, and (b) no property shall be compulsorily acquired or requisitioned save for a public purpose and save by authority of law which itself fixes the amount of compensation or specifies the principles on which compensation is to be determined and given and the manner thereof. Other provisions either restrict or amplify the operation of these two fundamental concepts. In Smt. Ujjam Bai's case Smt. Ujjam Bai v. State of Uttar Pradesh [1963] 1 S.C.R. 778., the question was whether assessment of sales tax under a valid Act was open to challenge under article 32 on the ground of misconstruction of the Act or a notification under it. It was held that the answer was in the negative. That case has given some trouble in view of the different opinions expressed in it. It is therefore necessary to state sim....
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....be levied or collected except by authority of law.' The Chapter on fundamental rights hardly stands in need of support from article 265. If the law is void under that Chapter, and property is seized to recover a tax which is void, I do not see why article 32 cannot be invoked.........It is not possible to circumscribe article 32 by making the remedy depend only upon article 265." The position was summed up thus: "From this, it is clear that laws which do not offend Part III and are not otherwise ultra vires are protected from any challenge whether under article 265 or under the Chapter on fundamental rights. Where the laws are ultra vires but do not per se offend fundamental rights (to distinguish the two kinds of defects), they are capable of a challenge under article 265, and the executive action under article 32. Where they are intra vires otherwise but void being opposed to fundamental rights, they can be challenged under article 265 and also article 32." Das, J., (Sarkar, J., concurring) put the same thing differently. He observed that "if a quasi-judicial authority acts without jurisdiction or wrongly assumes jurisdiction by committing an error as to a collateral ....
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....nough case as laid down in Ujjam Bai's case [1963] 1 S.C.R. 778., analysed by us here, must be made out. A threat to property unbacked by a valid law or a want of jurisdiction or a breach of the principles of natural justice must be clearly made out, to entitle one to the assistance of this court. If that is successfully done then the provisions for other remedies do not stand in the way. We accordingly allowed the petitioner to raise the point of jurisdiction before us. We are concerned in these petitions with the exemption granted by article 286(1)(b) of the Constitution which reads: "286. Restrictions as to imposition of tax on the sale or purchase of goods.-(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...... (b) in the course of the import of the goods into, or export of the goods out of, the territory of India." Before the Sixth Amendment, the Constitution did not contain any definition of the phrase "in the course of export". By that amendment Parliament has been given the power to indicate the principles on which that phrase is to be construed. In section 5(1) of ....
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....and formulates a mechanical test for the application of clause (b), places, in our opinion, too narrow a construction upon that clause, in so far as it seeks to limit its operation only to sales and purchases effected during the transit of the goods, and would, if accepted, rob the exemption of much of its usefulness." In State of Travancore-Cochin v. Shanmugha Vilas Cashew-nut Factory [1954] S.C.R. 53; 4 S.T.C. 205., it was again emphasised that sales and purchases which themselves occasion the export of the goods came within the exemption of article 286(1)(b). Purchases in the State by the exporter for purposes of export were not within the exemption but sales in the State by the exporter by transfer of shipping documents while the goods were beyond the customs barrier were held exempted. It was pointed out that the word "course" denoted movement from one point to another and the expression "in the course of" implied not only a period of time during which the movement was in progress but postulated also a connected relation. An act preparatory to export could not be regarded as done in the course of the export of the goods. It was like a purchase for production or manufactu....
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.... the type of the one in Wadeyar's case [1961] 1 S.C.R. 924; 11 S.T.C. 757., do not cause difficulty. There the course of export is quite clear and it is easy to see that the sale is integrally connected with export. Difficulty is likely to be felt when the sale is not so apparently connected. In K.G. Khosla and Co. v. Deputy Commissioner of Commercial Taxes [1966] 17 S.T.C. 473., the phrase "in the course of import" was considered. It was held that in section 3 of the Central Sales Tax Act the phrases "occasions the movement of goods from one State to another" and "occasions the import" mean the same thing. The movement, it was pointed out, must be the result of an agreement or an incident of the contract of sale, although it was not necessary that the sale should precede the import. A more direct authority is in Ben Gorm Nilgiri Plantations Co. v. Sales Tax Officer [1964] 7 S.C.R. 706; 15 S.T.C. 753. In that case sales of the tea chests at auctions held at Fort Cochin were claimed to be exempt from the levy of sales tax by virtue of article 286(1)(b). The Tea Act, like the Coffee Act, was passed to control tea industry. Under it also an export allotment for each yea....
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....oods are already in the process of being exported which is established by their having already crossed the customs frontiers, or the sale must occasion the export. The word "occasion" is used as a verb and means "to cause" or "to be the immediate cause of ". Read in this way the sale which is to be regarded as exempt is a sale which causes the export to take place or is the immediate cause of the export. The export results from the sale and is bound up with it. The word "course " in the expression "in the course of" means "progress or process of", or shortly "during". The phrase expanded with this meaning reads "in the progress or process of export" or "during export ". Therefore the export from India to a foreign destination must be established and the sale must be a link in the same export for which the sale is held. To establish export a person exporting and a person importing are necessary elements and the course of export is between them. Introduction of a 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 importer. ....
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....ings it must be an integral part of the precise export before it can be said to have occasioned that particular export. Here there are two independent sales involved in the export programme. The first is a sale between the Coffee Board as seller to the export promoter. Then there is the sale by the export promoter to a foreign buyer. Of the latter sale, the Coffee Board does not have any inkling when the first sale takes place. The Coffee Board's sale is not in any way related to the second sale. Therefore, the first sale has no connection with the second sale which is in the course of export, that is to say, movement of goods between an exporter and an importer. Mr. Setalvad tried to argue that the first sale by the Coffee Board included in it a compulsion to export and he relied upon the observations of Shah, J., in Ben Gorm Nilgiri Plantations' case [1964] 7 S.C.R. 706; 15 S.T.C. 753. These observations were not intended to give exemption to sales for export but to sales in the course of export. One of the indicia of a sale in the course of export is the compulsion to export because the sale which is protected must be itself inextricably bound up with the export. If this were....
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.... the context the word "occasion" means "to cause or to be the immediate cause." When a word bears two meanings the context must determine which is the appropriate meaning to be adopted. What then is the context with which we are dealing? The context is the export trade and its undoubted economic importance to this country. Further, each country is more and more organising the export trade and directing its flow in particular directions. The course of export is not the same that it was before the intervention of Governments or their agencies. Moreover the idea underlying article 286(1)(a) was to restrict the powers of the State to levy taxes on sales or purchases in the course of export so that the export trade may not be hampered. As observed by Patanjali Sastri, C.J., in State of Travancore-Cochin v. Bombay Co. Ltd. [1952] S.C.R. 1112, 1119; 3 S.T.C. 434, 440., "lest similar reasoning should lead to the imposition of such cumulative burden on the export-import trade of this country which is of great importance to the nation's economy, the Constituent Assembly may well have thought it necessary to exempt in terms sales by export and purchases by import from sales tax by insertin....
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.... foreign destination and will not be diverted to the domestic market was not considered as the question did not arise. In State of Mysore v. Mysore Spinning and Manufacturing Co. A.I.R. 1958 S.C. 1002; 9 S.T.C. 188., the facts are somewhat closer to the present case, but it does not appear that there was legal compulsion to export and that the mills, who sold the cloth for sale, could compel the purchasers to export. The general observa- tions therein must be read in the light of facts. With respect, I think, it is erroneous to assume that Parliament by using the word "occasion" must be deemed to have used it in the same sense as Patanjali Sastri, C.J., did. It is an ordinary dictionary word and not a technical word. He was using it to describe the transactions in those cases, and the narrower meaning was apposite. Even there he guarded himself by saying "whatever else may or may not fall within article 286(1)(b)." It should also be noted that Patanjah Sastri, C.J., had also qualified the word "occasion" by adding the words "by themselves". These words do not exist in the Act. Similar expression occuring in sections 3 and 5(2) of the Act has been interpreted by this ....
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....fter the goods have crossed the customs frontiers of India, and they both will be protected under section 5(1) of the Act. Therefore, it cannot be assumed that it is the intention of section 5(1) that only one sale can enjoy the protection of section 5(1). Accordingly, apart from any assumption, can two sales occasion the export. It was in view of these considerations that Shah, J., immediately cause (sic); it also means to "bring about especially in an incidental or subsidiary manner". If the sale by the appellant brings about the export in an incidental or subsidiary manner it can be said to occasion the export. It was in view of these considerations that Shah, J., speaking for the court, had observed in Ben Gorm Nilgiri Plantations Co. v. Sales Tax Officer [1964] 15 S.T.C. 753, 759.: "A sale in the course of export predicates a connection between the sale and export, the two activities being so integrated that the connection between the two cannot be voluntarily interrupted, without a breach of the contract or the 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 intention on ....