TaxTMI 
TaxTMI 
TaxTMI 
2016 (8) TMI 400
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.... the rescue of the appellant in the given set of facts and circumstances, is the further point to be analysed. 2. W.A.No.2253 of 2006 is treated as the lead case. 3. Heard Mr. K. Kumar, the learned counsel appearing for the appellant and Mr. S.Sudhish Kumar, Sr. Government Pleader (Taxes) appearing for the State/Department at length. 4. Appellant is a dealer having obtained registration both under the KGST and the CST Acts, who has also obtained export licence, based on which, he is engaged in the export of different sandal wood items, to satisfy the requirements of foreign buyers. The third respondent/Forest Department issued Ext..P1 notification for sale of 'sandal wood', subject to the specific terms and conditions as set forth in Ext.P2. The petitioner participated in the auction and came to be the successful bidder, upon which, the auction was confirmed on his name, as per Ext.P3 proceedings dated 06.01.2005, showing the particulars as to the amount to be satisfied, including the sale tax payable @ 12% in conformity with Ext.P1 Notification/Ext.P2 conditions. 5. On receipt of Ext.P3, the petitioner submitted Ext.P4 request, seeking to release the goods on furnishin....
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....t (W.A.Nos.94 to 96 of 2000)in respect of the case projected by the appellant/petitioner whereas the law declared by the Supreme Court in Sterling Foods vs. State of Karnataka [(1986) 3 SCC 469] and Vijayalaxmi Cashew Co. vs. CTO [(1996) 1 SCC 468] were pressed into service from the part of the Department. After hearing both the sides, the learned Single Judge declined interference and the writ petition was dismissed, which was the subject matter of challenge in W.A.No.2253 of 2006. During the course of hearing before the Division Bench, it was pointed out that the decision rendered in Sterling Foods' case and Vijayalaxmi Cashews' case were doubted by the Apex Court in State of Karnataka vs. Azad Coach Builders (P). Ltd [(2006 )3 SCC 338] and that the matter was referred to a larger Bench. The Bench observed that, until a final decision was rendered by the Apex Court, pursuant to the Reference order in [(2006 )3 SCC 338], the decision in Sterling's case and Vijayalaxmi Cashews' case would govern the field, as the binding precedents under Article 141 of the Constitution of India. It was accordingly, that the contentions raised by the appellant were turned down, affir....
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....said process definitely involves a 'manufacturing process' and as such, the 'end product' exported is entirely different from the product, which was procured/purchased from the Forest Department. This being the position, it stands outside the purview of the situation envisaged under Section 5(3) of the CST Act and hence no relief is liable to be extended. 10. Section 5(3) of the C.S.T. Act reads as follows: "5. When is a sale or purchase of goods said to take place in the course of import or export-(1) A sale or purchase of goods shall be deemed to take place in the course of the export of the goods out of the territory of India only if 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. ***** *** *** (3) Notwithstanding anything contained in subsection (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, ....
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.... by itself could not be a ground to deny the benefit, if it was otherwise liable to be exempted in terms of Section 5(3). Later, in Sterling Foods vs. State of Karnataka ((1986) 3 SCC 469), a question was raised as to whether the assessee was entitled to exemption from tax under Section 5(3) of the CST Act in respect of purchase of shrimps, prawns and lobsters and the goods exported. A 'three member Bench' of the Apex Court held that the goods sought to be exported and those procured for the purpose of export outside the territory of India must be the same. The position was reiterated in Vijayalaxmi Cashews' case(cited supra); where the question considered was whether the cashew kernels exported could be reckoned as the same goods, as the raw cashew nuts were purchased for preparing the kernels to be exported and in turn to have the benefit of exemption from tax under section 5(3) of the Act. After an in-depth analysis, the Apex Court observed that, it could not be said that the raw cashew nuts purchased in the penultimate sale were the same goods( cashew nut kernels) which were sold to the exporter and as such, tax liability could not be avoided. These two decisions ha....
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....as well as an indirect significance, depending on the context in which it is used and they are not words of restrictive content and ought not be so construed. Therefore, the test to be applied is, whether there is an in-severable link between the local sale or purchase on export and if it is clear that the local sale or purchase between the parties is inextricably linked with the export of the goods, then a claim under Section 5 (3) for exemption from State Sales Tax is justified, in which case, the same goods theory has no application." 14. The Apex Court made it clear that the test to be applied is, to see whether there is an inseverable link between the local sale or purchase and export and if it is found that it is inextricably linked together, then a claim under Section 5(3) for exemption from State sales tax would be justified and under such circumstance, the "same goods theory" will be having no application. The said declaration of law was applied to the given set of facts and circumstances in the case considered by the Supreme Court, as discernible from paragraph 28, which is extracted below: "28. The facts of this case clearly reveal that the transaction between the ass....
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....th the export of goods by the exporter to the foreign buyer. It is worthwhile to note that a submission was made by the learned counsel appearing for the 2nd respondent in the said case, that any penultimate sale made in furtherance of export, irrespective of the nature of goods, would also be covered, but the Bench observed that it was too tall a proposition to be accepted. The Bench made it clear that, it all depends on the question as to whether the sale or purchase was 'inextricably connected' with the export of goods and not a remote connection as tried to be projected by the counsel. In the words of Supreme Court, the connection between the penultimate sale and the export of goods should not be casual, accidental or fortuitous, but real, intimate and interlinked; which depends upon the nature of the agreement the exporter has with the foreign buyer and the local manufacturer, the integrated nature of the transactions and the nexus between the penultimate sale and the export sale. 17. Testing the given facts and circumstances in the instant case, in the light of the test/law laid down by the Constitution Bench of the Apex Court as above, as to the scope of Section 5 (....