TMI Blog1969 (10) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... cate, with him), for the respondents. M.C. Setalvad, Senior Advocate (K.J. Chandran and B. Datta, Advocates, J.B. Dadachanji and Ravinder Narain, Advocates of J.B. Dadachanji and Co., and S.G. Sundaraswamy, Advocate, with him), for the petitioner. -------------------------------------------------- [The judgment of HIDAYATULLAH, C.J., MITTER, RAY and JAGANMOHAN REDDY, JJ., was delivered by HIDAYATULLAH, C.J. SIKRI, J., delivered a separate judgment.] HIDAYATULLAH, 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 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e prescribed. Every registered owner after dealing with the coffee for sale in Indian markets up to the internal quota fixed for him must hand over to the Board all surplus coffee to be included in the Board's surplus pool. Similarly, curing establishments are required to surrender to the Board all surplus coffee. Small producers may, however, be exempted from the operation of this condition. After the coffee is delivered to the Board, the control of the Board begins. The Board classifies 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued with the reserve price fixed by the Chief Coffee Marketing Officer in his discretion. Samples of coffee are available for prospective buyers. An auction in the usual way takes place but no one is allowed to retract a bid once made. The highest bid is ordinarily accepted but if there are reasons to believe that the highest or any particular bid is not bona fide or genuine or is the outcome of concerted action for the purpose of controlling or manipulating prices or for 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the petitioners is that the purchases at the export auctions are really sales by the Coffee Board in the course of export of coffee out of the territory of India since the sales themselves occasion the export of coffee and coffee so sold is not intended for use in India or for sale in the Indian markets. The case of the sales tax authorities is that these sales are not inextricably bound up with the export of coffee and that the sales must be treated as sales taking place 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 pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nised leaves freedom to acquire any kind of property except the one in relation to which there is a restrictive law. Thus it is that certain kinds of properties such as narcotic drugs, explosives, property in excess of ceiling placed by law, etc., cannot be acquired or held. This restriction curtails the general right and the curtailment must justify itself as a law in the public interest. Next we have articles 31, 31A and 31B. They occur in a section of Part III entitled "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der article 265 cannot be sought by a petition under article 32, I entirely agree. But if it is meant to convey that a taxing law which is opposed to fundamental rights must be tested only under article 265, I find it difficult to agree. Articles 31(1) and 265 speak of the same condition. A comparison of these two articles shows this: Article 31(1)-' No person shall be deprived of his property save by authority of law.' Article 265-' No tax shall 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), the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n such circumstances is not compelled to wait or go through the lengthy procedure of appeals, references, etc. He may move the Supreme Court for the enforcement of the fundamental rights so threatened. This, however, is not an absolute right. This court will limit the petitioner to establishing a breach of fundamental right. It will not allow a petitioner to use the provisions of article 32 to do duty as an appeal. A clear enough 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 pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r during their actual movement, as for instance, where the shipping documents are endorsed and delivered within the State by the seller to a local agent of the foreign buyer after the goods have been actually shipped, or where such documents are cleared on payment or on acceptance by the Indian buyer before the arrival of the goods within the State. This view, which lays undue stress on the etymology of the word 'course' 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 custo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt. On the other hand in B.K. Wadeyar v. Daulatram Rameshwarlal [1961] 1 S.C.R. 924; 11 S.T.C. 757., it was held that if property in the goods passed to the buyer after crossing of the customs frontier for export out of India the sale was in the course of export. This is because the course of export had already begun and therefore the sale followed the commencement of the export operation. Transactions of 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must always play their due part. We think it is possible to state some tests which can be applied in all cases. The phrase "sale in the course of export" comprises in itself three essentials: (i) that there must be a sale, (ii) that goods must actually be exported, and (iii) the sale must be a part and parcel of the export. Therefore either the sale must take place when the goods 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 whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that could be brought within the scope of the exemption. The test applied by the High Court is the test we have indicated and which has found approval in the two earlier cases of this court which have received legislative recognition. The question to ask is: does the sale to the registered exporter occasion the export which ultimately takes place? The answer is that on the rulings 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 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hase occasions such export". My reasons in coming to this conclusion are, in brief, as follows: In the Shorter Oxford Dictionary (Illustrated) the word "occasion" when used as a verb means: "To give occasion to (a person); to induce;......To be the occasion or cause of (something); to cause, bring about, esp. in an incidental or subsidiary manner." It is said that in 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (1)(b). In the course of discussion, apart from referring to a passage from the earlier judgment in which the word "occasion" is used, the word "occasion" is not mentioned again. No mention is made in this judgment of facts similar to those which are present in the present case. What happens when there is legal certainty that the goods are headed for a 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the movement resulted was with the Director-General of Supplies. The heart of the matter lies in answering one question. Can two sales occasion an export? I find no difficulty in answering this question in the affirmative. Two sales can take place in the course of export if they are effected by a transfer of documents of title to the goods after 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tests. If these incidents had not been missing the court would have surely held the sale to be in the course of export. It seems to me that this judgment is in effect overruling earlier decisions of this court without saying so. The Calcutta High Court (Ray and Basu, JJ.) reviewed the Supreme Court cases exhaustively in S.K. Roy v. Additional Member, Board of Revenue [1966] 18 S.T.C. 379., and came to the conclusion that the mere fact that there is no contract between the seller and the foreign buyer does not conclusively establish that a transaction cannot be one "in the course of export". It may still be held to be such a transaction provided it is established that the contract between the seller and the third party "occasions" the export. Basu, J., followed this decision in Serajuddin and Company v. Commercial Tax Officer [1969] 23 S.T.C. 258. On the facts of this case, the Coffee Board, the sellers, have concern with the actual export of goods. They have made various provisions to see that the purchasers must export. Condition No. 26, quoted by the learned Chief justice, clearly provides that the coffee shall be exported to stipulated or approved destinations and it shall ..... X X X X Extracts X X X X X X X X Extracts X X X X
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