TMI Blog1991 (6) TMI 234X X X X Extracts X X X X X X X X Extracts X X X X ..... s were under circumstances in which no tax under section 5 of the Act was leviable. (2) After purchase, the assessee sold the goods within the State of Karnataka to Kalbhavi, and (3) Kalbhavi exported the goods to places outside India for the purpose of complying with the agreement or order in relation to those exports. Thus, by virtue of section 5(3) of the CST Act read with article 286 of the Constitution the sale by the assessee to Kalbhavi was not taxable and similarly, the export sales effected by Kalbhavi were also not taxable under the Act. In those circumstances, the State proceeded to levy purchase tax under section 6 of the Act, on the purchases made by the assessee. Whether section 6 is attracted to these purchases, is the question for consideration. Section 6 of the Act reads: "Levy of purchase tax under certain circumstances.-Subject to the provisions of sub-section (5) of section 5 every dealer who in the course of his business purchases any taxable goods in circumstances in which no tax under section 5 is leviable on the sale price of such goods, and (i) either consumes such goods in the manufacture of other goods for sale or otherwise (or consumes, otherwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly by Kalbhavi; article 286 prohibits the imposition of tax on a sale, which "takes place" in the course of the export of the goods "out of the territory of India"; to that extent only section 5(3) of the CST Act governs the fact situation and prevents the State from imposing the sales tax on the sale effected by the assessee to Khalbhavi; but article 286 does not in any manner declares the situs of the actual sale as having taken place outside the State, nor section 5(3) declares such sale as having occurred outside the State; purpose of article 286 of the Constitution read with section 5(3) is a bar to the State from taxing these penultimate sales also; that purpose does not extend to confer any other status on these transactions. In fact the location of sale is relevant for the purposes of article 286 of the Constitution and this is identified by applying section 4 of the CST Act. If section 4 of the CST Act is applied, there is no doubt that, the goods were inside the State at the time of assessees' sales to Kalbhavi and by virtue of section 4(2) of the CST Act, the said sales are to be deemed to take place inside the State. A harmonious construction of article 286(1)(a) and (b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the meaning of subsection (1) of section 5 of the Central Sales Tax Act, 1956. Therefore as per section 9(1) of the Haryana Act, when the dealer purchases goods and uses them in the State in the manufacture of any other goods, purchase tax on the initial purchase is attracted, (a) when the said dealer disposes of the manufactured goods in any manner otherwise than by way of sale in the State (i.e., if he sells them in local sales in the State, purchase tax is not attracted) or (b) the tax is leviable.........when the dealer despatches the manufactured goods to a place outside the State in any manner otherwise than (i) by way of inter-State sale or (ii) in the course of export within the meaning of section 5(1) of the CST Act. Thus rendering of local sales, exempted the prior purchases made in the State. Despatching the manufactured goods to a place outside the State attracted the levy under section 9(1); however, this despatch should not fall within any one of the two categories of sales, viz., (i) despatch by way of inter-State sale; or (ii) despatch in the course of export within the meaning of section 5(1) of the CST Act. 7.. Despatch in the course of export, as deemed under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of export outside India within the meaning of section 5(1) of the Central Sales Tax Act. They are only 'penultimate' sales; they may be deemed to be 'export sales' because of the fiction created under section 5(3) of the Central Sales Tax Act but that is not enough to escape from the clutches of the charge in section 9(1)." Thereafter at page 93, it was held: "...........For the purposes of this argument we shall assume that the sales made by the assessees were 'penultimate sales' which would fall within the purview of section 5(3) of the Central Sales Tax Act. The argument on behalf of the Revenue, which was found favour with the High Court, is that section 9(1) exempts only sales made in the course of export within the meaning of section 5(1) of the Central Sales Tax Act but not those under section 5(3) of the said Act. After careful consideration we think that this argument was rightly accepted by the High Court. In the first place there is no dispute before us that section 5(3) covers a category of cases which would not otherwise have come within the purview of section 5(1), as explained in Mod. Serajuddin's case [1975] 36 STC 136 (SC). The language of section 9( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 9(1). It would be a local sale or inter-State sale. The only third possibility is that the assessee sold the goods to a dealer outside India and exported the goods in pursuance of that sale in which event it would be a sale within the meaning of section 5(1) of the Central Sales Tax Act. We think Shri Agarwal is right in saying that any sale effected by the assessees in the circumstances, which have been set out by us earlier, must fall in one of three categories. We are unable to conceive of a fourth category of sale, which could be neither a local sale nor an inter-State sale nor an export sale. Shri Gupta, on behalf of the State, contended that the goods might have been directly moved by the assessee to a port for shipment abroad in pursuance of an export contract entered into by the dealer who purchased from the assessee. Even in such a case if the transport of goods from the assessees' place of business to the port is in pursuance of the terms of the sale, the movement of the goods would be occasioned by the sale made by the assessee and would be an inter-State sale. If, on the other hand, the goods were sent to the port by the assessee subsequent to and independent of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principle stated in section 5(3) is to regard the sales effected by the assessee as a sale in the course of export; but this principle does not convert the action of the assessee as an act of despatching the goods to a place outside the State. 13.. Section 6 uses the word "despatch" deliberately. Full effect should be given to its meaning. The question is, whether the assessee despatches the goods to a place outside the State, when he sells them locally to an exporter (Kalbhavi). No exercise is required to say that, factually, the assessee delivers the goods to Kalbhavi within the State and therefore that is not an act of despatching the goods to a place outside the State. The word "despatches" is also spelled as "dispatch"; the meaning is "to send off or away with promptness". 14.. P.P.M. Thangiah Nadu v. State of Tamil Nadu [1980] 46 STC 67 is a decision of the Madras High Court rendered on 19th November, 1979. The assessee therein purchased senna leaves from unregistered dealers and exported them, during the year 1969-70. The sale transaction under which assessee purchased the goods were not taxable under the main provision of the Tamil Nadu General Sales Tax Act; hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "........But, in the present case, clause (c) of sub-section (1) of section 7-A of the Act contemplates only one State. The expression used is 'despatches them to a place outside the State'. The word 'State' has been defined under the Act as meaning the State of Tamil Nadu. Therefore, as soon as it is found that there was a despatch to a place outside the State of Tamil Nadu, clause (c) of sub-section (1) of section 7-A of the Act would be satisfied. We have already seen that the exception is only in favour of a transaction in the course of inter-State trade or commerce. This is not such a sale. The result is that the present transaction would fall within the scope of section 7-A of the Act and, therefore, it was rightly brought to tax under the said provision." 16.. In the said case, the goods were despatched by the assessee, after purchasing the same, unlike the case before us. In the case before us, the despatch is done by Kalbhavi and not by the assessee; thus there is a difference in the fact situation. However, the Bench has not referred to its decision rendered three days earlier, in P.P.M. Thangiah Nadar's case, [1980] 46 STC 67 obviously because, in the said case, secti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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