TMI Blog2000 (2) TMI 808X X X X Extracts X X X X X X X X Extracts X X X X ..... ed direct export sales without invoking the provisions of the Act? (4) Whether, on the facts and in the circumstances of the case, the order passed by the Tribunal is valid and sustainable in law? 3.. The assessee is a private limited company and is a manufacturer and seller of bus bodies. The bus bodies are mounted on the chassis supplied by the customers according to their specifications. When the foreign buyers place orders on the petitioner's customers for "bus body" and "chassis" the petitioner's customers in turn place order on the petitioner for bus bodies and supply chassis on which the bus bodies are mounted. The petitioner's customers then export the "bus bodies" and "chassis" to their foreign customers. 4.. At the time of assessment, it was found by the assessing authority that the customers have the export order for buses and not its bodies and accordingly buses had been exported. The claim of the petitioner for exemption on the penultimate sale of bus bodies in the course of exports which was duly supported by form H was rejected treating these transactions as inter-State sales. According to the assessing authority "bus body" and "chassis" were two different co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chase took place after, and was for the purpose of complying with, the agreement or order for or in relation to such export." 8.. The Statement of Objects and Reasons is stated in the Bill are as under: "According to section 5(1) of the Central Sales Tax Act, a sale or purchase of goods can qualify as a sale in the course of export of the goods out of the territory of India only if the sale or purchase has either occasioned such export or is by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India. The Supreme Court has held (vide Mod. Serajuddin v. State of Orissa [1975] 36 STC 136) that the sale by an Indian exporter from India to the foreign importer alone qualifies as a sale which has occasioned the export of the goods. According to the Export Control Orders, exports of certain goods can be made only by specified agencies such as the State Trading Corporation. In other cases also, manufacturers of goods, particularly in the small-scale and medium sectors, have to depend upon some experienced export house for exporting the goods because special expertise is needed for carrying on export trade. A sale of goods made to an exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such export; (e) the word "those goods" in the section also contemplates that the last sale or purchase of any goods must be one which occasions the export of those goods. The word "those goods" therefore refers to actual export of those goods for which the order was placed. If the order placed is for different goods, than the goods exported, the exemption granted under section 5(3) would not be available; (f) Section 5(3) also contemplates that the agreement or order must be for or in relation to such export. The word "in relation to" has created an inextricate link between the purchase and export of the goods. 11.. The entire controversy has arisen because of the decision of the apex Court in Mod. Serajuddin v. State of Orissa [1975] 36 STC 136, where on the interpretation of section 5(1) it was held that it is only the actual exporter who is entitled for the exemption. 12.. It was to mitigate the difficulties of the manufacturers and traders who are selling their goods to the exporters, that section 5(3) had come into existence. 13.. The controversy in the present matter therefore has to be examined with reference to interpretation of the word "those goods" used in se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er during the course of construction. It was only when the complete bus with body fitted to the chassis was delivered to the customer the property in the bus body passed to the customer. It was considered to be a sale. 21.. Principles laid out in Patnaik and Company v. State of Orissa [1965] 16 STC 364 (SC) were followed in Consolidated Coffee Ltd. v. Coffee Board, Bangalore [1980] 46 STC 164 (SC), wherein it was observed that: "..........................sub-section (3) of section 5 formulates a principle inasmuch as it lays down a general guiding rule applicable to all penultimate sales that satisfy the two conditions specified therein and not any specific direction governing any particular or specific transaction of a penultimate sale. In other words the content of the provision shows that it lays down a principle. In fact, while addressing arguments on proper construction of section 5(3), the counsel for the three States strenuously contended that the said provision should not be construed as being applicable only to the export auctions conducted by the Coffee Board and the terms and conditions governing them because it applies to variety of parties including the small manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foreign buyer. As a matter of pure construction it appears to us clear, therefore, that by necessary implication the expression 'the agreement' occurring in the relevant phrase means or refers to the agreement with a foreign buyer and not an agreement or any agreement with a local party containing the covenant to export." 22.. In Commissioner, Sales Tax v. Girdhari Lal Football Maker [1987] 65 STC 287 (All.) orders were placed for football and volleyball. The assessee was not manufacturing bladders. The word "bladders" was not specifically mentioned in the order placed. There were certain orders for the supply of football and volleyball with bladders having trade mark of bladders. It was found that the orders were for export of football and volleyball including bladders and the order placed by the exporter to the assessee were for the purpose of complying with the agreement or order. The benefit of section 5(3) was given. Similarly in Munjal Rubber Industries v. Commissioner of Trade Tax [1999] 115 STC 116 (All.) and [1999] 115 STC 118 (All.) exemption was given to rubber bladder used in football. The export order was of football. 23.. Madras High Court in the case of Ram Bhadu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Central Excise Tariff in which it is mentioned that building a body or fabrication or mounting or fitting of structures or equipment on the chassis shall amount to "manufacture" of a motor vehicle. Different rate of duty has been given for the bodies. 29.. In respect of Azad Coach Builders Pvt. Ltd., orders from the foreign buyer to the exporter were for complete bus giving the specification of the chassis and the body. In the case of S.M. Kannappa Automobile Pvt. Ltd., even in the orders of the foreign buyers the source from which "bus body" is to be constructed as mentioned in the order of the foreign buyer. The manner in which the order is placed by the foreign buyer makes hardly any difference. The fact remains that the complete bus has been exported by the exporter on the basis of the order of the foreign buyer. "Complete bus" has two components immediately, "chassis" and the "body". The exporters being the manufacturer of "chassis" have considered it proper to get the "body" constructed from the body builders like the petitioners. 30.. For the purpose of accounting the exporter could have raised bill of chassis made by the exporter in favour of the body builder and bill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the exporter it has resulted in a different article mainly the "bus" in the hands of the petitioners themselves. The petitioners are the manufacturers of the "bus" as per chapter note 3 in Chapter 87 of Central Excise Tariff. According to the said Chapter, building body or fabrication or mounting or fitting of structures or equipment on the chassis amounts to "manufacture" of a motor vehicle falling under the head 87.01 to 87.05. 31.. The manner in which the orders have been placed by the foreign buyer hardly makes any difference because, the object of the foreign buyer is to purchase the "complete bus". "Complete bus" consists of the "chassis" and the "body". The chassis is manufactured and supplied by the exporter. The foreign buyer could have placed two separate orders one for the supply of chassis and the other for the body. But he thought it proper to place the composite order of the "bus" giving specification of the "chassis" as well as the "body" to be constructed thereon. After the order was placed by the exporter on the petitioner and body was constructed over the chassis supplied, "complete bus" has come into existence which has been exported by the exporter directly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of exemption to penultimate sales was obviously with a view to promote the exports but limiting the exemption to certain types of penultimate sales that satisfy the two specified conditions displays an anxiety not to diminish the States' revenues beyond a certain limit. The section in any case gives no indication that one public interest is to be preferred to the other and, therefore, in our view, the matter must again depend upon the proper construction of the language employed. On construction we are of the view that by implication the expression 'the agreement' occurring in section 5(3) refers to the agreement with a foreign buyer." 34.. The object of section 5(3) is to encourage exports and for that purpose penultimate sales have been exempted. On proper construction of provisions of section 5(3) it has to be seen whether all the conditions as contemplated are fulfilled or not. It can never be contemplated that Legislature have excluded those goods where two articles constitute another article without any manufacture or processing. While interpreting the exemption clause reasonable interpretation has to be taken and not to deny the exemption which is not contemplated by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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