TaxTMI 
TaxTMI 
TaxTMI 
2014 (8) TMI 860
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....had not exhausted the alternate remedies under the BST Act. He submitted that the alternate remedy available to the Petitioner was filing a Reference Application against the final order of the MSTT under section 61 of the BST Act. This remedy had admittedly not been exhausted by the Petitioner, and hence the Writ Petition deserved to be dismissed, is the submission of Mr. Ankhad. We have rejected this argument for the reasons set out later in this judgment. 3. The short but very interesting question that has arisen for consideration before us is the interpretation of Section 5 of the Central Sales Tax Act, 1956 (CST Act) and in particular sub-section 3 thereof. Section 5(3) interalia provides that notwithstanding anything contained in sub-section (1), the last sale or purchase of any goods, preceding the sale or purchase occasioning the export of those goods out of the territory of India, shall also be deemed to be in the course of such export, if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order in relation to such export. In the facts of the present case under a purchase order/agreement dated 5th March 2004 M/s. Crown ....
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....er had signed a contract with MDN, Algeria (hereinafter referred to as the "End User") for the export of 1 set of Type I batteries consisting of 240 cells + 10 spare cells (specifications as per Annexure I attached herewith) hereinafter referred to as the Batteries suitable for Kilo Class Submarines. 2. The Buyer has informed the Supplier that the Batteries covered under this Agreement are ultimately to be supplied for the use by the End User and that payment for the same will be made through the Buyer's Bankers in India. 3. In view of the aforesaid Agreement between the CCPL and EIL, the Supplier has agreed to supply the Batteries to the Buyer for export to the End User, on the terms and conditions contained herein." "THIS DEED WITNESSETH AS FOLLOWS: 11. DESPATCH AND TRANSPORT: As soon as the batter is available for dispatch, the supplier shall inform the Buyer of the following details: a. The size of the lot (tonnage, volume) b. The particulars of the lot(number of package, weight and volume per package. c. Nature of the packaging and dimensions. d. Number of the contract or clauses. The Buyer shall arrange to make available, suitable containers at the factory and a....
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....ertified that the same had been sold by the said M/s.Crown in the course of export out of the territory of India, to the Algerian Navy pursuant to the purchase order dated 22nd May 2004. Accordingly, it was certified that said goods purchased from the Petitioner were for the purpose of complying with the agreement or order of the Algerian Navy dated 22nd May, 2004. 8. Accordingly, the sale by the Petitioner to M/s. Crown worth Rs. 11,12,21,500/- was claimed as penultimate sale for export, and hence exempt from tax under section 5(3) of the CST Act. In fact, for the year 2003-04 the said sale was treated as an export sale not liable to sales tax under the BST Act in the assessment order passed on 31st May, 2006. 9. Thereafter, under section 62 of the BST Act, the Petitioner received a notice for rectification of the order dated 31st May 2006, on the ground that there was no pre-existing purchase order between M/s. Crown and the Algerian Navy, before the purchase order was placed by M/s. Crown on the Petitioner. In other words, it was the contention of the Revenue that since the purchase order placed by M/s. Crown on the Petitioner for the supply of Submarine Navy Batteries precede....
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.... order, Respondent No.3 issued a notice dated 14th September 2009 seeking to revise the assessment order. The Petitioner made its representations against the said notice and also filed written submissions. The petitioner once again contended that its case was covered by the judgment of the Supreme Court in the case of Consolidated Coffee (supra). The Petitioner therefore, contended that the Revision was not maintainable. Vide his order dated 25th May 2011, Respondent No.3 confirmed the demand of sales tax under BST Act inter-alia holding that the judgment of the Supreme Court in Consolidated Coffee (supra) was not applicable. Respondent No.3 in its revision order, inter-alia, placed reliance on the judgments of the Supreme Court in the case of Saraf Trading Corporation Etc. Etc. v/s State of Kerala reported in 2011 (38) VST 1 (SC): (2011) 2 SCC 344; and The State of Karnataka Vs. Azad Coach Builders (P) Ltd reported in 2010 (36) VST 1 (SC): (2010) 9 SCC 524 and held that the Petitioner had failed to prove the inextricable link between the sale made to M/s. Crown and the subsequent export by M/s. Crown to the Algerian Navy. In view thereof, Respondent No.3 held that the sale by the ....
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....isputed. 18. To understand this controversy, it is necessary to analyze Article 286 of the Constitution of India. It reads as under:- "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- (a) outside the State; or (b) in the course of the import of the goods into, or export of the goods out of, the territory of India. (2) Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1). (3) Any law of a State shall, in so far as it imposes, or authorises the imposition of,- (a) a tax on the sale or purchase of goods declared by Parliament by law to be of special importance in inter-State trade or commerce; or (b) a tax on the sale or purchase of goods, being a tax of the nature referred to in sub-clause (b), sub-clause (c) or sub-clause (d) of clause (29-A) of Article 366, be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify." 1....
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.... Explanation.-For the purposes of this sub-section, "designated Indian carrier" means any carrier which the Central Government may, by notification in the Official Gazette, specify in this behalf." 20. For the purposes of this Writ Petition, we are concerned with sections 5(1) & 5(3). Under section 5 of the CST Act the sale or purchase of goods is deemed to be in the course of export of goods out of the territory of India if:- (i) the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India as set out in section 5(1); or (ii) the last sale or purchase of any goods preceding the sale or purchase occasioning the export of those goods out of the territory of India, if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for or in relation to such export as set out in section 5(3). Therefore, under Article 286 of the Constitution read with section 5 of the CST Act, the court has to examine whether any tax is being imposed by the State Legislature on the sale or purchase of goods being imported into, or exported o....
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....h March 2004 was placed by M/s Crown on the Petitioner for the supply of Submarine Navy Batteries. This purchase order / agreement could never be construed as a "sale" as contemplated under section 2(g) read with section 5(3) of the CST Act. He submitted that at the highest, the said purchase order could be construed as an "agreement to sell" and could not be construed as a "sale" as contemplated under section 5(3) of the CST Act. He submitted that in the present case, the Algerian Navy placed a purchase order on M/s Crown on 22nd May 2004 for the supply of Submarine Navy Batteries and thereafter the Petitioner sold and supplied to M/s Crown the said Submarine Navy Batteries as more particularly set out in their invoices dated 14th September, 2004. In light of these facts, he submitted that the sale effected by the Petitioner to M/s Crown, was after the date of the purchase order placed by the Algerian Navy on M/s. Crown and for the purpose of complying with the same. The said sale therefore was a deemed sale in the course of the export of the goods out of the territory of India and squarely fell within the provisions of section 5(3) of the CST Act, is the submission. This being th....
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....le to the goods after the goods have crossed the customs frontiers of India. As the section originally stood prior to its amendment in 1976 and thereafter in 2005, the sale by an Indian exporter from India to the foreign importer, alone qualified as the sale which had occasioned the export of the goods. According to the Export Control Order, exports of certain goods could be made only by specified agencies such as State Trading Corporations. In other cases also, manufacturers of goods, particularly the small and medium scale, had to depend upon some export houses for exporting their goods because special expertise was needed for carrying on the export trade. A sale of goods made to an export canalizing agency such as State Trading Corporations or to an export house, in compliance with an existing contract or order, was inextricably connected with export of the goods. At the same time, since such a sale did not qualify as sales in the course of export, they were liable to State Sales Tax which corresponded in the increase in the price of the goods and made exports out of India uncompetitive in the fiercely competitive international markets. To tackle this problem, section 5 was amen....
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....3) and section 2(g), we have to decide whether the purchase order/agreement dated 5th March 2004 placed by M/s Crown on the Petitioner would be a "sale" as contemplated under section 5(3) r/w section 2(g) as contended by the Revenue, or whether selling and supplying the Submarine Navy Batteries to M/s Crown on 14th September 2004 would fall within the word "sale" as contemplated under the said provisions. To our mind, it is clear that the purchase order/agreement dated 5th March 2004 between the Petitioner and M/s Crown can never be construed as a "sale" as contemplated under the provisions of section 5(3) of the CST Act. As set out earlier, section 2(g) defines the word "sale" to mean any transfer of property in goods by one person to another for cash or deferred payment or for any other valuable consideration and includes transfers as more particularly set out in clauses (i) to (vi) of the said section. We do not find that the purchase order / agreement dated 5th March 2004 can by any stretch of the imagination fall within the definition of the word "sale" in section 2(g). This is for the simple reason that the word "sale" contemplates inter alia transfer of the goods or a transf....
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....ers to the agreement with a foreign buyer and does not include any agreement with a local party containing a covenant to export, the next question that arises for our consideration is as to when does the penultimate sale (the sale of coffee at export auctions conducted by the Coffee Board to registered exporters) takes place i.e. becomes complete by the passing of the property in the coffee sold thereat to the registered exporters? The determination of the point of time at which the property in the coffee passes to the registered exporters becomes necessary because before that the agreement with or order from a foreign buyer in respect of those goods must come into existence to implement which the penultimate sale must have taken place. We have indicated earlier the rival contentions of the parties on this issue. But before addressing ourselves to those rival contentions we shall dispose of a small contention that was put forward by Mr Venugopal, counsel for the State of Karnataka that the word "sale" occurring in the phrase "if such last sale or purchase took place after" in Section 5(3) means the agreement to sell and not sale in the sense of a transfer of property in goods by on....
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....e" in Section 5(3) must mean transfer of the goods by one person to another for cash or for deferred payment or for any other valuable considerations; it cannot mean "agreement to sell". Moreover, there is nothing in the context of Section 5(3) to suggest that the word "sale" occurring therein should be understood differently. In Balabhagas Hulaschand case this Court in the context of the question as to when a sale could be said to take place in the course of inter-State trade or commerce gave an extended meaning to the word "sale" as defined in Section 2(g) and as used in Sections 3(a) and 4(2) (a) and (b) of Central Sales Tax Act, 1956 and what was said by this Court was that the word "sale" as used in Section 3 (a) and Section 4(2) (a) and (b) was wide enough to include not only a concluded contract of sale but also an agreement of sale provided that the latter stipulated that there was a transfer of property or movement of goods; the ratio of that decision will be inapplicable to Section 5(3) which deals with the question as to when a penultimate sale shall also be deemed to be in the course of export and there is nothing therein to suggest that the word "sale" should have any ....
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....e to be printed not only in English but also in French. Thereafter, the Algerian Navy placed a purchase order on M/s Crown. To fulfill this order placed by the Algerian Navy on M/s Crown, the Petitioner sold & supplied the Submarine Navy Batteries to M/s Crown on 14th September 2004. After perusing and construing the purchase orders dated 5th March 2004 and 22nd May 2004 as well as other documents referred to in the petition we are of the opinion that there was an inextricable link between the contract of sale by the Petitioner to M/s Crown on the one hand and the actual export by M/s Crown to the Algerian Navy on the other. In this view of the matter, the inescapable conclusion is that the sale of Submarine Navy Batteries by the Petitioner to M/s Crown on 14th September 2004 was in the course of export and covered by the provisions of section 5(3) of the CST Act. This being the position, we find that taxing the said sale as a local sale under the provisions of the BST Act was wholly without jurisdiction and contrary to law. 32. Before concluding, it is necessary to deal with the two judgments relied upon by Mr Ankhad and also by the MSTT in the impugned order. These two judgement....
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....reme Court. It was the contention of the Revenue that the goods supplied by the Assessee and the goods actually exported to the foreign buyer were not "bus bodies" but buses itself and hence, the benefit of the exemption under section 5(3) of the CST Act was not available to the Assessee. It is whilst deciding this issue that the Supreme Court, after examining the rival contentions as well as the statements and objects and reasons of the Amending Act 103 of 1976 by which section 5(3) of the CST Act was added, held as under :- "26. When we analyze all these decisions in the light of the Statement of Objects and Reasons of the amending Act 103 of 1976 and on the interpretation placed on Section 5(3) of the CST Act, the following principles emerge: To constitute a sale in the course of export there must be an intention on the part of both the buyer and the seller to export. There must be obligation to export, and there must be an actual export. The 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. To occasion export there must e....
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.... so might result in cancellation of the export order. The assessee in this case has succeeded in showing that the sale of bus bodies have occasioned the export of goods. When the transaction between the assessee and the exporter and the transaction between the exporter and foreign buyer are inextricably connected with each other, in our view, the "same goods" theory has no application. 34. Placing reliance on this judgement, Mr Ankhad contended that in the present case, there is no inextricable link between the sale of Submarine Navy Batteries by the Petitioner to M/s Crown on the one hand and the export of those Submarine Navy Batteries by M/s Crown to Algerian Navy on the other. This contention is primarily based on the ground that M/s Crown had placed a purchase order / agreement for the supply of said Submarine Navy Batteries before the purchase order was placed by the Algerian Navy on M/s Crown. We do not agree. In the present case, though it is true that the purchase order / agreement dated 5th March 2004 between the Petitioner and M/s Crown was before the date when the Algerian Navy placed their purchase order on M/s Crown, the sale in fact was effected by the Petitioner to....
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....t. Ltd. to the facts before it, the Supreme Court observed as follows:- "15. It is true that in the present case, there is no agreement available on record to indicate that the aforesaid purchase was made for the purpose of export. In the absence of the said document, it is not possible for us to specifically state as to whether it was clear that the sale or purchase between the parties i.e. the dealer and the purchaser was inextricably linked with the export of goods. It is only when a claim is established, the claim under Section 5(3) of the Central Sales Tax would be justified. At the time of auction-sale when the appellant purchased the tea from the dealer, there is nothing on record to show that a definite stand was taken by the purchaser that the aforesaid purchase of tea is for the purpose of occasioning an export for which an agreement has been entered into. Since no such claim was made at that stage, so therefore sales tax was realised which was paid to the Government by the dealer. Despite the said fact, there is a clear finding recorded by the assessing authority himself that the export documents were verified by him with the accounts from which it is indicated that the....