TMI Blog1962 (4) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... eamer shall be deemed ready for delivery as soon as the vendors receive Government of India's sanction for its transfer to the Costa Rican flag and as soon as the bill of sale is ready for delivery to the Westminster Bank Ltd., London. Clause (15) states that the agreement is subject to the vendors' obtaining a transfer of flag to the Costa Rican Registry from the Government of India and that in the event of transfer of flag not being granted the contract is to become null and void, Clause (16) states that the purchasers are to have liberty of placing a watchman aboard the vessel at their own expense upon the signing of the agreement. Clause (17) is to the effect that the purchasers are to have liberty to use the vessel for trading or for breaking up at their option. It appears that cometime before 15th April. 1954, the Government of India granted permission far sale of the ship and for transfer of the flag of the ship to the Costs Rican flag. On 15th April, 1954, the ship sailed out of Indian waters. In the assessment of the applicant to sales tax for the period 1st April, 1953, to 31st March, 1954, the applicant claimed deduction of the aforesaid amount of Rs. 4,52,547.10-6 fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not in the course of export? (5) Whether on the facts and in the circumstances the applicants were liable to pay the tax on the sale in question? To appreciate the argument of Mr. Ganatra on the first question, it would be convenient to refer to certain provisions of the Act. The material part of section 31 provides that subject to such rules as may be prescribed and for reasons to be recorded in writing, the Collector may, upon application or of his own motion, revise any order passed under this Act or the Rules thereunder by a person appointed under section 3 to assist him and, subject as aforesaid the Tribunal may, upon application, revise any order passed by the Collector. Sub-section (1) of section 3 empowers the State Government to appoint any person to be a Collector of Sales Tax and such other persons to assist him as the State Government thinks fit. Sub-section (2) of section 3 provides that a person appointed under subsection (1) shall, within the limits of the area specified to be within his jurisdiction, exercise such powers as may be conferred and perform such duties as may be imposed on him by or under this Act. In exercise of its power under section 45, the St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any specific mention in section 44 that the officers to whom the Collector has delegated his powers would have the same jurisdiction as the Collector has in these matters, those officers cannot exercise those powers. We are unable to accept this contention of Mr. Ganatra. The Legislature specifically empowers the Collector to delegate his powers, subject to certain restrictions mentioned in the section, to persons appointed to assist him. It is implicit in these provisions that the person to whom the powers are delegated would have jurisdiction coextensive with the Collector save and except any restrictions placed upon the powers of the Collector by the State Government. It is not in dispute that the State Government has not placed any restrictions on the powers of the Collector to delegate his powers under section 31. The notification of 18th May, 1953, shows that the Collector also has not placed any limitation in exercise of those powers by the Assistant Collector in any manner. That being the position, in our opinion, the order made by the Assistant Collector revising the order of the Sales Tax Officer in exercise of his powers under section 31 of the Act was within his jurisd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Education Society[1956] 7 S.T.C. 497., Steelage Industries Ltd. v. State of Bombay[1957] 8 S.T.C. 376. and Deputy Commissioner of Commercial Taxes, Coimbatore Division v. Sri Lakshmi Saraswathi Motor Service, Gudiyattam(1). Mr. Ganatra particularly laid stress on the decision in State of M.P. v. Bengal Nagpur Cotton Mills Ltd. [1961] 12 S.T.C. 333 at p. 335. Section 5 is a charging section, and it provides that subject to the provisions of section 8, every dealer whose turnover exceeds a certain specified limit. shall be liable to pay general tax at the rates specified in sub-section (1) of section 6, on his taxable turnover. Turnover has been defined in sub-section (20) of section 2, and it means the aggregate of amounts of sale price received or receivable by a dealer. Section 8, exempts certain sales specified in column 1 of Schedule I subject to the conditions and exceptions, if any, set out in the corresponding entry in column 2 thereof from the charge of the tax. Section 5 read with the definition of "turnover" is wide enough to include sale of every kind of goods by a dealer save and except those exempted under section 8. But when the provisions of section 5 are read togethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not sufficient that the sale is by a dealer carrying on the business of selling or supplying some commodity. The business of the dealer must be of selling or supplying the particular commodity sought to be taxed. Otherwise he cannot be regarded as a dealer in relation to that commodity, and if he is not so regarded, he is not liable to be taxed under the Act for any sale of the commodity effected by him." These observations read by themselves may appear to support the contention of Mr. Ganatra that if at any time prior to the particular sale a dealer did not deal in that commodity, the sale of that particular commodity would not amount to a sale in the course of the business. But the observations when read in the context of the facts of this case do not lead to such a conclusion. The facts of that case were that the assessee carrying on business of manufacturing textiles, supplied steel and cement on several occasions to the contractors who were constructing buildings for the assessee, and debited the price of the materials to the contractors' account, and the question was whether the assessee could be charged to sales tax on the price of the material supplied to the contractor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tries Ltd. v. State of Bombay[1957] 8 S.T.C. 376., the assessee was a company carrying on business of manufacturing and selling steel furniture. Selling motor car was not one of its businesses. The assessee had purchased a motor car for the use of their managing director. After using the car for more than three years, the assessee sold the second-hand motor car. The cost of purchase and the proceeds of sale of the motor car were entered in the books of account of the company. On these facts, it was held that the sale was a casual sale having no connection with the business for which the dealer was registered or was liable to be registered. The business of the company was manufacturing and selling steel furniture, and the sale of second hand motor car of their managing director had no connection at all with the nature of the business of the assessee company. It was only a casual sale. The facts in Girdharilal Jiwanlal v. Assistant Commissioner of Sales Tax (Appeals), Nagpur and Another [1957] 8 S.T.C. 732. were that the assessee was a registered dealer and was doing business in coal, machinery, cotton, cotton-seed, groundnut and cotton bales. A separate account was maintained by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an activity in the course of the business of the assessees." The decisions of the other High Courts to which Mr. Ganatra referred were Deputy Commissioner of Commercial Taxes, Coimbatore Division v. Sri Lakshmi Saraswathi Motor Service, Gudiyattam[1954] 5 S.T.C 128. and State of Mysore v. Bangalore Woollen, Cotton and Silk Mills, Company Ltd.[1962] 13 S.T.C. 106. Certain motor transport companies carrying on the only business of providing transport, sold the buses as and when they became unserviceable or useless. The question was whether the sale proceeds were liable to be included in the turnover of the companies, and it was held that by reason of these isolated transactions they could not be regarded as dealers in buses within the meaning of the Madras General Sales Tax Act. It is obvious that the sale of unserviceable motor cars had no reasonable connection with the business activity of the companies. In State of Mysore v. Bangalore Wollen, Cotton and Silk Mills, Company Ltd.[1962] 13 S.T.C. 106. the assessee was a woollen, cotton and silk mills. It sold certain unserviceable articles, and the sale proceeds received were of a considerable amount. On these facts, it was held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company has a very close connection with and akin to the normal course of business of the company, and was, therefore, in the course of his business activity. The sale proceeds relating to the sale of the ship were therefore rightly included in the turnover of the applicant. As regards the third question, Mr. Ganatra in the first instance argued that the Tribunal was in error in holding that the sale took place in the State of Bombay. According to Mr. Ganatra. the sale took place in London, inasmuch as the property in the ship passed from the applicant to the Costa Rica Company in London. It is not possible to allow Mr. Ganatra to urge this contention at this stage. The place where the properly in goods passed from the seller to the buyer cannot be said to be purely a question of law. An inquiry into the facts is necessary. Mr. Ganatra further contended that we should call for a further statement of the case from the Tribunal on this aspect of the case. In our view, we would not be justified in calling for a further statement of the case from the Tribunal in this matter, inasmuch as this question was never agitated before the Tribunal. On the other hand, it was not challenged befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ail. As regards the fourth question, it is the contention of Mr. Ganatra that the sale falls within the exemption of Article 286(1)(b) of the Constitution of India. As it stood at the material time, it provided: "No law of a State shall impose, or authorise the imposition of, a tax on the sale...of goods where such sale ... takes place...... (h) in the course of the ... export of the goods out of, the territory of India." It is the argument of Mr. Ganatra that in the instant case, there is a privity of contract between an Indian seller and a foreign buyer of Costa Rica. By a term of the contract between the applicant and the buyer the contract would come into force as and when the Government of India grants permission to sell the ship and also grants permission to transfer the flag of the ship from Indian flag to Costa Rican flag. Government had granted the requisite permission both to sell the ship as well as for the transfer of the flag. The transfer of the flag had the result of giving a foreign destination to the ship. The ship was to sail for Costa Rica. The sale itself therefore has occasioned export and therefore it is a sale in the course of export of the ship within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he exemption. It may thus be taken as settled that sales or purchases for the purpose of export are not protected. unless the sales or purchases themselves occasion the export and are an integral part of it." The meaning of the word "export" however had not been considered by their Lordships in any of their previous decisions, and at page 781, after discussing the question, it has been observed: "It means, therefore, that while all exports involve a taking out of the country, all goods taken out of the country cannot be said to be exported. The test is that the goods must have a foreign destination where they can be said to be imported. It matters not that there is no valuable consideration from the receiver at the destination end. If the goods are exported and there is sale or purchase in the course of that export and the sale or purchase occasions the export to a foreign destination, the exemption is earned." In the light of these aforesaid principles laid down by their Lordships the facts of this case will have to be approached, It cannot be said, and indeed it has not been urged, that the sale has taken place while the ship was on high seas. On the other hand, the contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... casioned export. To enable Mr. Ganatra to look into this matter. we adjourned the case and granted Mr. Ganatra two days' time. Mr. Ganatra has been unable to show us any provisions of law or any rules which would have the force of making it obligatory on the purchaser to take the ship from the Bombay docks to Costa Rica Port. The position then is that even though the Government of India granted permission for the transfer of the ship's flag, the purchaser was free to deal in any manner with the ship as envisaged in the contract. He could have either taken the ship at his sweet will as provided in the contract and could even have broken the ship in the Bombay docks. Taking the ship to Costa Rica by the purchaser, therefore, cannot in any manner be connected much less inextricably be connected with the sale. It is only the exercise of the option by the purchaser. This contention raised by Mr. Ganatra on behalf of the applicant also, in our opinion, should fail. Before parting with the case. it may be stated that Mr. Ganatra requested that we should call for a further statement from the Tribunal on the question whether import duty had been paid by the Scindia Steam Navigation Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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