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TMI Blog1975 (4) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under the Central Sales Tax Act, 1956 (for short, called the Act). The assessee carries on the business of quarry contractors. In the relevant years, it held a licence from the then Punjab State to quarry iron-ore at Nizampur, District Mohindergarh. During the assessment years in question, the Sales Tax Officer assessed the assessee-firm to tax under section 9 of the Act on a turnover of Rs. 3,18,757.6, Rs. 3,99,948.93 and Rs. 5 lakhs, respectively. The last assessment was made on the best judgment basis. To impugn these assessment orders, the assessee filed three writ petitions in the High Court of Punjab under article 226 of the Constitution. It was averred in the petitions that the export of iron-ore had been nationalised by the Central Government and no such export could be made by any private dealer like the assessee. The Government of India had authorised the State Trading Corporation (to be hereinafter referred to as S.T.C.) as the sole authority for the purpose of exporting iron-ore to other countries, including Japan. The S.T.C. had further nominated Sri Narayan & Co. (to be called for short, N. & Co.) to procure the iron-ore for the purpose of export. N. & Co. accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, which runs as under: Rs. 14-8-0 plus actual railway freight from Nizampur to Kandla Port per ton of 2,240 lbs. f.o.r. Kandla Port. In this connection we have to clear our position as under: 1.. It is clear to all and you, that the Government of India is dealing with foreign countries on Government level in the export of iron-ore; 2.. The State Trading Corporation of India, New Delhi, is the business organization on Government level and we work as the brokers; 3. Whatever term or terms they dictate to us we pass on to you; 4.. Your iron-ore is to be shipped to Japan and you are solely responsible for the quantity and quality till the material is delivered to Japanese firms; 5.. They test the material for extracting of iron, before they pass the pay orders; 6.. As such we get approximately Re. 1 (Rupee one) per ton, which is in fact our brokerage, otherwise in fact you are the sellers and Japanese firms are the buyers, through the State Trading Corporation. The following details will clear your doubt. Selling price to S.T.C. Rs. 47 per ton f.o.b.t. Kandla Port: Our approximate price per ton: 1. Cost of iron-ore payable to you Rs. 14-8-0 2. Railway freight-Nizampur to Kan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... point of time the property in goods passed either to N. & Co. or to S.T.C.". The Letters Patent Bench of the High Court dismissed the appeal preferred by the revenue. Mehr Singh, C.J., who delivered the opinion of the Bench, observed: "These facts prove beyond controversy that the sale of iron-ore by the assessee-firm to the Japanese buyers through the State Trading Corporation and with the aid of the nominee of that Corporation leading to export of the iron-ore from the country, and this export, is a single unbroken transaction or activity. Between the sale or supply of iron-ore, its transportation to the port of shipment, its shipment at that port, and its export to Japan, there intervenes no independent transaction not directly connected with the export of iron-ore from this country to Japan. No completed and independent transaction of sale occurs between the assessee-firm and any other party before the iron-ore leaves the port of this country. The whole is one and the same transaction... The intervention of the State Trading Corporation or its nominee, Shri Narayan & Company, is not as buyers of iron- ore from the assessee-firm, but merely as intermediaries facilitating the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia. These sales, at best, could be said to be for export and not in the course of export; (2) The sales in question did not occasion the export because: (a) the movement of the goods was the result of the agreement between the assessee and N. & Co., and was not caused by any agreement entered into by the assessee with the foreign buyer, and (b) there was no privity of contract between the assessee and the foreign buyer. (3) There Is no room for two or more sales "in the course of export" within the contemplation of article 286(1)(b). That constitutional provision is not attracted in the present case because there have been more than one sale, namely, one by the assessee in favour of N. & Co./S.T.C. and another by the S.T.C. in favour of the foreign buyer. Reference has been made to this court's decisions in Coffee Board, Bangalore v. Joint Commercial Tax Officer, Madras [1970] 25 S.T.C. 528 (S.C.); [1970] 3 S.C.R. 147., Binani Bros. v. Union of India [1974] 33 S.T.C. 254 (S.C.); [1974] 1 S.C.C. 459., Dalmia Cement (Bharat) Ltd. v. Commissioner of Commercial Taxes, Bangalore [1974] 34 S.T.C. 553., and Sales Tax Officer, Jodhpur v. M/s. Shiv Ratan G. Mohatta [1965] 16 S.T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15 S.T.C. 753 (S.C.). As factual premises for his contentions, Mr. Sharma relied on these facts which are apparent from the agreement between the assessee and N. & Co. and the said letter dated September 2, 1957: (a) The iron-ore was meant for export. (b) The assessee was a licensee from the Government authorised to quarry the ore. (c) The Government of India had appointed S.T.C. as the only authority competent to export iron-ore out of India. (d) The goods were liable to be rejected even by the foreign Importer and any shortage or loss according to the agreement had to be recovered from the assessee. (e) N. & Co. were merely brokers nominated by S.T.C. They were entitled only to brokerage. (f) The bulk of the price was to be paid against actual weight of the ore sold by the assessee when either it was weighed at Kandla or weighed on ship. (g) The documents of title to the goods were prepared after the ore was tested at the port and thereafter the price was collected by N. & Co. from the S.T.C. and passed on to the assessee. Towards the fag end of the arguments, It was brought to our notice that these very points which are in issue before us were pendin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... U.S. Consultants and their certificate was to be final and binding on both the buyer and the seller. Final weights as ascertained by Far East Superintendence Co. Ltd. or U.S. Consultants at the port of discharge was to be final and binding on both parties. The terms as to payment were these: "90% against shipping documents as described in buyers' corresponding sale contract. Buyers will assign the relevant foreign letter of credit which is to be opened in their name by their foreign buyer, Messrs. Associated Metals and Minerals Corporation on receipt from the sellers of a bank draft for difference between buyers' f.o.b. purchase value and f.o.b. sale value, i.e., $ 1.00 (Rs. 4.75) per dry long ton for a bank guarantee from a scheduled bank guaranteeing that sellers will pay buyers' f.o.b. purchase value as shown in the contract and buyers' f.o.b. sale value as shown in the foreign letter of credit and the buyers will endorse the bills of lading and deliver the same to sellers to negotiate against the abovementioned letter of credit. Balance after destinational weight and analysis on the basis of documents mentioned in the Corporation's corresponding sale contract with buyers. If th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one hand and the contract between the Corporation and the foreign buyer on the other as two separate and independent contracts of sale within the ruling in the Coffee Board case [1970] 25 S.T.C. 528 (S.C.); [1970] 3 S.C.R. 147., and the Binani Brothers case(1), are these: The Corporation entered on the scene and entered into a direct contract with the foreign buyer to export the goods. The Corporation alone agreed to sell the goods to the foreign buyer. The Corporation was the exporter of the goods. There was no privity of contract between the appellant and the foreign buyer. The privity of contract is between the Corporation and the foreign buyer. The immediate cause of the movement of goods and export was the contract between the foreign buyer who was the importer and the Corporation who was the exporter and shipper of the goods. All relevant documents were in the name of the Corporation whose contract of sale was the occasion of the export. The expression 'occasions' in section 5 of the Act means the immediate and direct cause. But for the contract between the Corporation and the foreign buyer there was no occasion for export. Therefore, the export was occasioned by the contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the deeming provision in the Act is to find out the contract of sale which is the direct cause or which occasions the export...... The directions given by the Corporation to the appellant to place the goods on board the ship are pursuant to the contract of sale between the appellant and the Corporation. These directions are not in the course of export, because the export sale is an independent one between the Corporation and the foreign buyer. The taking of the goods from the appellant's place to the ship is completely separate from the transit pursuant to the export sale. The fact that the exports can be made only through the State Trading Corporation does not have the effect of making the appellants the exporters where there is direct contract between the Corporation and the foreign buyer." The above observations, reproduced in extenso, furnish a complete and effective answer to all the arguments advanced on behalf of the assessee, in the instant case, to support the judgment of the High Court. Indeed the factual premises on which Mr. Sharma's contentions are based are weaker and less favourable to the assessee than those in Serajuddin's case [1975] 36 S.T.C. 136 (S.C.). Here ..... X X X X Extracts X X X X X X X X Extracts X X X X
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