1968 (4) TMI 71 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Interpretation of Article 286(1)(b) of the Constitution.
2. Determination of whether sales to Nepal dealers constitute "sales in the course of export."
3. Examination of the obligation to export under the terms of the sales contract.
4. Analysis of the precedent cases and their applicability to the current case.
5. Determination of the relationship between the sale and the actual export of goods.

Issue-wise Detailed Analysis:

1. Interpretation of Article 286(1)(b) of the Constitution:
The core issue revolves around the interpretation of Article 286(1)(b) of the Constitution, which exempts sales that occur "in the course of export" from state sales tax. The Court had to determine whether the sales to Nepal dealers, where delivery was taken within India, qualify for this exemption. The Court referenced the Supreme Court's interpretation in various cases, emphasizing that the sale must "occasion the export" or be "effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India."

2. Determination of whether sales to Nepal dealers constitute "sales in the course of export":
The Court examined whether the sales to Nepal dealers, where delivery occurred at the last railway station in India, could be considered as sales in the course of export. The Court noted that the goods were packed and dispatched from Calcutta to U.P., and then sent by rail to the last railway station for Nepal. The documents of title were sent to purchasers in Nepal through banks. The Court concluded that these sales qualified as sales in the course of export because the goods were intended for export, and the delivery to the purchasers was part of the integrated export process.

3. Examination of the obligation to export under the terms of the sales contract:
The Court scrutinized whether there was an obligation to export the goods under the sales contract. The Court noted that the goods were excisable and were dispatched under Form AR-4, indicating an intention to export. The Court emphasized that the obligation to export could arise from the nature of the transaction and the mutual understanding between the parties. The Court found that the nature of the transaction and the use of Form AR-4 created an obligation to export the goods to Nepal.

4. Analysis of the precedent cases and their applicability to the current case:
The Court analyzed several precedent cases, including the first and second Travancore-Cochin cases, Ben Gorm Nilgiri Plantations Co. v. Sales Tax Officer, and others. The Court highlighted that these cases established the principles that a sale in the course of export must involve an intention to export, an obligation to export, and an actual export. The Court found that the facts of the current case aligned with these principles, as the goods were intended for export, there was an obligation to export, and the goods were actually exported to Nepal.

5. Determination of the relationship between the sale and the actual export of goods:
The Court emphasized the need for a direct and immediate link between the sale and the export of goods. The Court noted that the goods were dispatched with the intention of export, and the delivery to the purchasers at the railway terminus was part of the integrated export process. The Court concluded that the bond between the sale and the export was such that the sale occasioned the export, and the exemption under Article 286(1)(b) was applicable.

Conclusion:
The Court held that the assessee was entitled to claim the benefit of Article 286(1)(b) of the Constitution for sales in the course of export outside India, even though the actual delivery of the goods was taken by the purchasers inside India. The Court emphasized that the integrated activities of the sale and export formed a single transaction, and the obligation to export was evident from the nature of the transaction and the use of Form AR-4. The Court answered the reference in the affirmative and awarded costs to the assessee.