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TMI Blog1968 (4) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the benefit of Article 286(1) (b) of the Constitution. In the second of the two references which is Misc. Sales Tax Case No. 137 of 1964 decided on the 20th January, 1967(2), by another Bench, of which one of us was a party, the view taken was that if the goods which were meant for export were delivered at Nepalganj to the purchaser and there was the possibility of the goods being sold at Nepalganj in India then unless that possibility could be excluded it would be impossible to hold that the sales in question had occasioned the export. There is no decision of the Supreme Court dealing with a case where there is no common carrier at all operating between the two countries and the delivery necessarily has to be given to the purchaser within the territory of India. This is a difficulty which will arise time and again when goods from India are actually exported to Nepal but delivery has to be given to the purchaser at the last rail head which happens to be situated in India. The present case is again an instance where this very difficulty arises. There would also appear to be some kind of conflict between the aforesaid two decisions given by two Benches and of this Court, even t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co., Coonoor v. The Sales Tax Officer, Special Circle, Ernakulam(1), where three conditions were laid down for entitling an assessee to the benefit of the constitutional exemption. On an interpretation of the words "occasions the export", used in section 5 of the Central Sales Tax Act, the Supreme Court held that this meant that: (1) there must be an intention to export; (2) there should be an obligation to export; and finally (3) there must be an actual export. In the case before us it is clear that the assessee intended that the goods should be exported. It is also clear that the goods were actually exported. The only point about which there is considerable dispute is whether there was an obligation to export. On this question reliance is placed on behalf of the department on the findings given by the Sales Tax Authorities. On the other hand, Mr. Brij Lal Gupta, appearing for the assessee, has contended vehemently that these findings were given without regard to the nature of the contract between the parties and that the terms of any alleged contract between the parties were not really examined and adjudicated upon by the Sales Tax Authorities. He contends that it was assumed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for hearing before the Full Bench. Ashoke Gupta, B.L. Gupta and S.R. Gupta, for the petitioner. The Standing Counsel, for the respondent. JUDGMENT The judgment of the Court was delivered by GULATI, J.-This is a reference under section 11(1) of the U.P. Sales Tax Act, 1948 (hereinafter referred to as "the Act") soliciting the opinion of this Court on the following question of law: "Whether in the facts and circumstances of the case, the applicant is entitled to claim benefit of Article 286(1)(b) for sales in the course of export outside India even though the actual delivery of the goods was taken by the purchasers inside India." This reference came up for hearing before a Division Bench of this Court constituted by the Honourable Mr. justice S.C. Manchanda and the Honourable Mr. Justice M.H. Beg. The Division Bench noticed that two cases involving somewhat similar question had already been decided by two different Benches of this Court and the decisions in the two cases were somewhat conflicting even though the facts in the two cases were different. It is for this reason that the instant case has been referred to the Full Bench. The facts of the case, as set out in the st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horities to mean that the purchasers after taking physical delivery of the goods within the Indian territory were free to resell the goods in the Indian territory itself. One more fact which is not in dispute may be mentioned here. It is common ground that there is no rail link between India and Nepal. The assessee-company consigned the goods to the railway terminus near Nepal border from where the goods were transported into Nepal territory by other means of transport. Yet another fact which has been mentioned in the statement of the case but to which due importance does not appear to have been given is the fact that the goods which were the subjectmatter of sales to Nepal dealers were excisable goods liable to excise duty under the Central Excise Act. These goods were despatched under Form AR-4 (wrongly mentioned in the statement of the case as AR-1) as prescribed in the Central Excise Manual. Form AR-4 has been prescribed for the purpose of rule 12 of the Central Excise Rules to enable the manufacturers of excisable goods to claim rebate of or exemption from the excise duty in respect of the excisable goods which are exported outside India. Form AR-1 prescribes an application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and is known as the first Travancore-Cochin case. In that case the Supreme Court was dealing with a set of cases involving export sales to foreign buyers on c.i.f. or f.o.b. terms. The question was whether the sales of that type were sales "in the course of the export of the goods out of the territory of India" within the meaning of Article 286(1)(b) of the Constitution. The Sales Tax Authorities rejected the claim of the assessees as in their view the sales were completed before the goods were shipped and could not, therefore, be considered to have taken place in the course of the export. After examining the rival contentions, the Court observed at page 438: "We are clearly of opinion that the sales here in question, which occasioned the export in each case, fall within the scope of the exemption under Article 286(1)(b). Such sales must of necessity be put through by transporting the goods by rail or ship or both out of the territory of India, that is to say, by employing the machinery of export. A sale by export thus involves a series of integrated activities commencing from the agreement of sale with a foreign buyer and ending with the delivery of the goods to a common carrier f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose of export by a dealer in the State from another dealer in the State is only a home transaction and it is only where the goods were sold to a buyer abroad that the sale can be said to have occasioned an export." The next case in the series of cases of this nature is the case of Ben Gorm Nilgiri Plantations Co. v. Sales Tax Officer[1964] 15 S.T.C 753.This also was a case of sale for export as distinguished from export sales and was concerned with the export of tea from India. In the State of Kerala, trade in tea is controlled and is carried on through certain definite channels. The manufacturers of tea are granted from the Tea Board allotment of export quota rights. The tea is then sent to a warehouse where it is auctioned. At the auction sale certain agents and intermediaries of foreign buyers bid for purchasing tea. The chests of tea are delivered to the buyers at the warehouse. The agents or intermediaries of the foreign buyers then obtain licence from the Government for the export of tea and thereafter the tea is exported outside the territory of India. The question was whether the sale by auction to the agents or intermediaries of the foreign buyers was a sale in the cours ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xportation of the goods must be a part of the contract of sale or must be a necessary incidence thereof. (ii) A sale can be said to occasion an export only, (a) if there is a common intention of both the seller and the buyer to export, (b) there is an obligation to export, and (c) there is an actual export. (iii) The obligation to export may arise from statute, from contract or from the nature of the transaction. In other words, the obligation may be implicit or explicit. (iv) The bond between the sale and the export should be such as cannot be broken without a breach of the obligation. From a perusal of the facts of the instant case it is clear that all these tests are satisfied. That there was a common intention of both the buyer and the seller to export cannot be doubted. The buyers are all foreign buyers belonging to Nepal. They placed orders for the supply of the goods direct with the assessee-company. There was no intermediary. The goods were to be supplied in Nepal and the assessee-company did arrange for the supply of the goods in Nepal. The goods were booked and put on rail at Calcutta, for their ultimate destination in Nepal, by the assessee-company. The documents o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). In such circumstances it is impossible to hold that the purchasers after taking delivery of the goods at the railway terminus were not under an obligation to take the goods across the Indian border or that they were free to sell them in the Indian territory itself. The contrary inference drawn by the Sales Tax Authorities was unwarranted. As has already been observed, the change in the mode of transport from the railway terminus to the Nepal territory was unavoidable due to nonexistence of railway link between Nepal and India and must have been foreseen and agreed upon between the parties. In these circumstances the buyers could not have broken the link between the sale and the export without committing a breach of the contract or the understanding arising from the nature of the transaction. A somewhat similar case came up before the Patna High Court in 1963. The case is that of Dulichand Hardwari Mull v. State of Bihar and Another A.I.R. 1963 Pat. 359; [1968] 22 S.T.C. 255. In that case also the assessee had exported certain articles to Nepal which were taken delivery of by the purchasers at the railway terminus in the Indian territory and were then transported by them into th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P., Lucknow(2), (3) M/s. Gobind Sugar Mills v. The Judge, Sales Tax (Revisions), and AnotherSpecial Appeal No. 105 of 1967 decided on 26-9-1967 by S.N. Dwivedi and Gangeshwar Prasad, JJ.; printed at page 404 infra. In the first a view similar to what we have said above was taken. The last two cases are distinguishable as in those cases there was nothing to show either that the goods had crossed the border of India or there was any obligation to export. In the end it would be useful to reiterate that where an export sale has all the three essential requisites enumerated above, it would qualify for exemption under Article 286(1)(b) and it would not be necessary to exclude any imaginary possibility of diversion of the goods from the export channel because such a diversion would entail a breach of the obligation to export. In a given case if there is an interruption in the movement of the goods during the course of export and the goods are not exported, the exemption contemplated by Article 286(1)(b) would not be available regardless of whether the interruption is by accident or by design for the simple reason that there would in fact be no export. As a result of the above discussion, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... U.P. Government interpreting Article 286(1)(b) of the Constitution, considered that it was essential to enquire whether the goods were exported outside India and for that purpose customs receipts, if any, would be relevant in order to show that goods which had moved from the U.P. dealer were the very goods which had crossed the border and had gone into Nepal for consumption there. He, therefore, remanded the case with a direction that if the assessee established this fact to the satisfaction of the Sales Tax Officer then sales of Rs. 25,569 would qualify for the exemption. This time it was the Commissioner of Sales Tax who was aggrieved and he took up the matter in revision. The Judge (Revisions) was of the view that the circular of the U.P. Government dated 26th February, 1961, and the circular dated 9th January, 1962, issued by the Commissioner of Sales Tax to all Sales Tax Officers, had no relevance to the transactions which had taken place before 9th January, 1961, and according to him, the legal position was that as delivery of goods had taken place at the railhead which happened to be in U.P. the sales stood completed, and, therefore, there could be no question of the sale o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransport out of the country by land or sea. Such a sale cannot be dissociated from the export without which it cannot be effectuated, and the sale and resultant export form parts of a single transaction. Of these two integrated activities, which together constitute an export sale, whichever first occurs can well be regarded as taking place in the course of the other. Assuming without deciding that the property in the goods in the present cases passed to the foreign buyers and the sales were thus completed within the State before the goods commenced their journey as found by the Sales Tax Authorities, the sales must, nevertheless, be regarded as having taken place in the course of the export and are, therefore, exempt under Article 286(1)(b). That clause, indeed, assumes that the sale has taken place within the limits of the State and exempts it if it takes place in the course of the export of the goods concerned." In The State of Travancore-Cochin v. Shanmugha Vilas Cashew-nut Factory[1953] 4 S.T.C. 205., the Supreme Court reiterated that if a sale or purchase takes place either generally or by reason of the Explanation then if it takes place in the course of import or export no S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other end is a transaction under a contract of sale with a foreign buyer under which the goods may under the contract be delivered by the seller to a common carrier for transporting them to the purchaser. Such a sale would indisputably be one for export, whether the contract and delivery to the common carrier are effected directly or through agents. But in between lie a variety of transactions in which the question whether the sale is one for export or is one in the course of export, i.e., it is a transaction which has occasioned the export, may have to be determined on a correct appraisal of all the facts. No single test can be laid as decisive for determining that question. Each case must depend upon its facts." It is manifest that the single factor which the Judge (Revisions) has taken to be conclusive, i.e., delivery by the common carrier at the railhead terminus in Nepalganj, for holding that the sale was not in the course of export was clearly erroneous. As pointed out by the Supreme Court, the matter is a complex one. Numerous other factors required to be taken into consideration, viz., the agreement for sale, if any, and the terms thereof; whether any obligation was impose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... French territory. He has given an opportunity to the appellant to produce evidence, regarding transport of the sugar to Mahe, before the Sales Tax Officer. Feeling aggrieved with this order, the appellant filed a writ petition in this Court. The petition was heard by brother Pathak. He agreed with the Judge (Revisions) and dismissed the petition. This appeal is against his judgment. The Judge (Revisions) has found that it is not proved that the sugar was actually carried to the French territory. This finding is not challenged before us. But it is maintained that the law does not require such proof. It is enough to show that there was a contract for sale between the appellant and the Mahe dealers and that in performance of that contract the appellant handed over the sugar to the railway, which is a common carrier, for delivery to the Mahe dealers. It is not possible to accept this argument. We think that in the circumstances of this case it is necessary for the appellant to prove that the sugar was actually taken over from the Mahe railway station to a place inside the French territory. This case is governed directly by section 5 of the Central Sales Tax Act, 1956. Section 5 eluc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e export of the goods out of the territory of India. Whatever be its meaning, it does not benefit the appellant. The sold goods must cross the customs barrier of India, whichever meaning is preferred. Counsel for the appellant tried to make some capital out of certain remarks in the judgments of the Supreme Court in The Bombay Co.(1) and Nilgiri Plantations(3) cases. In the first case Patanjali Sastri, C.J., said: "Such sales must of necessity be put through by transporting the goods by rail or ship or both out of the territory of India, that is to say by employing the machinery of export. A sale by export thus involves a series of integrated activities commencing from the agreement of sale with a foreign buyer and ending with the delivery of the goods to a common carrier for transport out of the country by land or sea. Such a sale cannot be dissociated from the export without which it cannot be effectuated, and the sale and the resultant export form Parts of a single transaction[1952] S.C.R. 1112 at p. 1118; 3 S.T.C. 434 at p. 438.." It is claimed that according to the intermediate sentence in this passage a seller should show, inter alia, that he has delivered the sold goods to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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