TMI Blog1975 (4) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... ------------ The judgment of the Court was delivered by SARKARIA, J.- The common question of law that arises in these appeals by the same assessee is: Whether the sales in question made by the assessee were sales effected in the course of export of goods out of the territory of India and as such were exempt from imposition of sales tax under article 286(1)(b) of the Constitution. The relevant assessment years are 1957-58, 1958-59 and 1959-60. The assessee, the New Rajasthan Mineral Syndicate, is registered as a dealer under the Punjab General Sales Tax Act, 1948. It is not registered 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndla Port on the to pay R/Rs. and the sellers shall be held responsible for shortage and excess of weight, if any. 4.. The account shall be finally settled when the shipment is made and satisfactory report is received from the foreign buyers or the State Trading Corporation approves the material for foreign countries where iron is extracted out of it. * * * * Then there is a letter dated September 2, 1957, from N. Co. addressed to the assessee-firm. It reads as under: "We are in receipt of your letter and noted your comments regarding the price schedule mentioned in your agreement, referred to above, 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealer sold iron-ore in the course of inter-State trade and commerce. It is further evident that M/s. New Rajasthan Mineral Syndicate are not the direct exporters of iron-ore because they did not enter into contract with the foreign buyers. The inter-State tax is, therefore, leviable on the dealer, viz., M/s. New Rajasthan Mineral Syndicate." The learned single Judge of the High Court allowed the writ petitions and quashed the assessment orders holding that "the petitioner was engaged in the export of the iron-ore to Japan through the S.T.C. which, in turn, for its facility had appointed N. Co. a broker" and that "at no 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of documents of title to the goods after the goods had crossed the customs frontiers of India. If the answer to either of these questions is in the affirmative, the sales would be deemed to have taken place in the course of export of the goods out of the territory of India. If neither of these tests is satisfied the sales would be sales in the course of inter-State trade and taxable as such. Learned counsel for the appellant has pressed these points into argument: (1) The sales in question neither occasioned the export nor were they effected by transfer of documents of title after the goods had crossed the customs frontiers of India. 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 consti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , J.V. Gokal Co. (Pvt.) Ltd. v. Assistant Collector of Sales Tax (Inspection) [1960] 11 S.T.C. 186 (S.C.)., and Ben Gorm Nilgiri Plantations Co. v. Sales Tax Officer, Special Circle, Ernakulam [1964] 15 S.T.C. 753 (S.C.). Mr. Sharma further tried to distinguish the decision of this court in Coffee Board's case [1970] 25 S.T.C. 528 (S.C.); [1970] 3 S.C.R. 147., on the ground that there the auction sale by itself did not occasion the export. It is maintained that privity of contract between the indigenous seller and the foreign buyer is not an indispensable aspect to bring the sale within the ratio of Nilgiri Plantations' case [1964] 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 lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h should be adopted. The nature of entering into contracts through the channel of the Corporation raises in reality a presumption of the Corporation being an agent of the appellant in the integrated transaction." The clauses of the agreement executed between the assessee and the S.T.C. were similar to the terms of the agreement between the assessee and N. Co. in the present case. The price was expressed in U.S. dollars per long ton, f.o.b. ocean liner vessel, Calcutta. Under that agreement sampling and moisture determination had to be made at the time of unloading at the port of discharge by Far East Superintendence Company or 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ratio of the Coffee Board's case [1970] 25 S.T.C. 528 (S.C.); [1970] 3 S.C.R. 147., and Binani Brothers' case [1974] 33 S.T.C. 254 (S.C.); [1974] 1 S.C.C. 459., the learned Chief justice who delivered the opinion of the majority, negatived the contentions of the assessee in these terms: "The Coffee Board case [1970] 25 S.T.C. 528 (S.C.); [1970] 3 S.C.R. 147., as well as the case of Binani Bros.(1), clearly indicates that the distinction between sales for export and sales in the course of export is never to be lost sight of. The features which point with unerring accuracy to the contract between the appellant and the Corporation on the 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 ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the foreign buyer. The Corporation entered into independent contracts with the foreign buyers on f.o.b. basis. The appellants were required under the contracts between the appellants and the Corporation to bring the goods to the ship named by the Corporation. The shipment of the goods by the Corporation to the foreign buyer is the f.o.b. contract to which the appellants are not the parties. The course of export in the export stream is possible in direct contracts between the Indian seller and the foreign buyer. The Corporation purchased goods from the appellants in order to fulfil the contract with the foreign buyer. The only scope of 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 tran ..... X X X X Extracts X X X X X X X X Extracts X X X X
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