TMI Blog1994 (7) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... ules. The assessee contravened the said declaration and, as such, the proviso to section 5(2)(A)(a)(ii) of the Act was attracted. - Civil Appeal No. 1811-1815 of 1977, & 501 of 1979, - - - Dated:- 18-7-1994 - KULDIP SINGH AND ANAND A.S. DR. JJ. B.A. Mohanty, Ms. Meena Chakraborty and R.K. Mehta, Advocates, for the appellant. Harish N. Salve, Senior Advocate (Ms. Meenakshi Grover and S.R. Grover, Advocates, with him), for the respondent. -------------------------------------------------- The judgment of the Court was delivered by KULDIP SINGH, J.- The Sales Tax Tribunal, Orissa, referred the following questions under section 24(1) of the Orissa Sales Tax Act, 1947 ("the Act") for the opinion of the High Court of Orissa, Cuttack: "(1) Whether, on the facts and in the circumstances of the case, the Tribunal is correct in holding that there has been no contravention of the declaration given under rule 27(2) of the Orissa Sales Tax Rules thus attracting the proviso to section 5(2)(A)(a)(ii) of the Orissa Sales Tax Act. (2) Whether, in the facts and circumstances of the case, the learned Tribunal, having held that there was no contravention of section 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of the relevant sales to the taxable turnover of the respondent and issued a demand for payment of the tax. The respondent filed an appeal before the first appellate authority which was dismissed. Aggrieved by the order of the first appellate authority, the respondent filed a second appeal before the Sales Tax Tribunal. It was contended before the Tribunal that the goods were resold in Orissa and the transaction with the Japanese buyers being sale in the course of export, it was not liable to tax by virtue of article 286(1)(b) of the Constitution of India. The Tribunal came to the conclusion that the sale by the respondent in favour of the Japanese buyers, was within the State of Orissa and, as such there was no violation of the terms of the declarations. The Tribunal, however, did not agree with the other contention that the transactions were in the course of export and, therefore, not exigible to sales tax. The Tribunal rejected the second contention. The net result was that the assessee was not found liable on account of violation of the undertaking in the declarations but the assessee's sale in favour of the Japanese buyers was found liable to tax. As the accounts had t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) of clause (A) of sub-section (2) of section 5 of the Act, shall, on demand, produce a copy of the relevant cash receipt or bill according as the sale is a cash sale, or a sale on credit, and a declaration in form XXXIV duly filled up and signed by the purchasing dealer or by such responsible persons as may be authorised in writing in this behalf by the purchasing dealer." It would be useful to have before us article 286(1)(b) of the Constitution of India and section 5(1) of the Central Sales Tax Act, 1956, which are as under: "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 purchase of goods where such sale or purchase takes place- (i)......................... (b) in the course of the import of the goods into, or export of the goods out of, the territory of India. (2)..................... (3)....................... Section 5(1): A sale or purchase of goods shall be deemed to take place in the course of export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods were not meant for resale within the State of Orissa. According to the learned counsel the declaration was deliberately given to avoid the tax liability. The High Court analysed the various terms of the contract under which the assessee effected the sale in favour of the Japanese buyers. The High Court concurred with the findings of the Tribunal that the sale to the Japanese buyers was effected at Paradeep (a port within the State of Orissa). The High Court reached the said finding on the following reasoning: "Assessee claims that it effected sales in favour of the Japanese buyers at Paradeep. The terms of the contract under which sales are said to have taken place are available on the record and it is stated that more or less the contracts are of a uniform pattern. At the time of hearing the parties have, therefore, referred to us a contract dated 1st June, 1965, which has been printed in the paper book. An analysis of the terms of the contract may now be made. Article 6 provides for analysis of the ore at the loading port. Article 10 provides that each shipment shall be deemed as delivered when it is loaded on board the vessel and trimmed. Under article 12, Paradeep is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the High Court that the sale effected by the assessee in favour of the Japanese buyers is the sale in the course of the export of the goods out of the territory of India and, as such, is not exigible to sales tax. As stated above the learned counsel for the State of Orissa has also not questioned the findings of the High Court on this point. We are, however, of the view that the High Court fell into patent error in holding that sale to the Japanese buyers was made within the State of Orissa. A sale "in the course of the export of the goods" and a sale "within the State of Orissa" are two distinct events. A sale "in the course of the export of the goods" cannot be a sale within the State of Orissa. The assessee entered into contracts with the Japanese buyers for "export sale" of the mineral ores. An "export sale" has an entirely different legal concept. In the "export sale", the "sale" and the "export" are so intertwined and intermixed that both begin and end together. The various clauses of the contract entered into by the assessee and the Japanese buyers are wholly irrelevant and are of no consequence. Even if on the construction of the contract of "export sale" the sale pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 which the sale is held." In Mod. Serajuddin v. State of Orissa [1975] 36 STC 136; [1975] 2 SCC 47, this Court examined the earlier judgments on the interpretation of article 286(1)(b) of the Constitution of India. It would be useful to refer the following observations of the Bench in the said case: "The expression 'in the course' implies not only a period of time during which the movement is in progress but postulates a connected relation. Sale in the course of export out of the territory of India means sale taking place not only during the activities directed to the end of exportation of the goods out of the country but also as part of or connected with such activities." It is, therefore, clear that the export sale envisaged under article 286(1)(b) of the Constitution of India continues to be in the process of completion till the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X
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