TMI Blog1997 (8) TMI 459X X X X Extracts X X X X X X X X Extracts X X X X ..... t in Tanzania for which machineries were to be supplied was Rs. 7,71,786.50. A memorandum of commitment was entered into on August 4, 1977 at Dar-es-Salam between National Textile Corporation of Tanzania (TEXCO) and the Textile Machinery Manufacturers Association of India on behalf of the consortium of textile machinery manufacturers comprising of Lakshmi Machine Works Ltd. (LMW), NMM, TEXMACO, TEXTOOL, STAR, MMC and NSC. This was followed by an agreement dated April 29, 1977 between Textile Machinery Manufacturers other Association, Lakshmi Textiles Exports Limited and other companies mentioned earlier whereby Lakshmi Exports Limited (Lakshmi) was appointed as the leader of the consortium for finalising and entering into contract with TEXCO on behalf of consortium of 8 machinery manufacturers and Lakshmi for supply and services to be rendered for setting up a complete textile project in Dar-es-Salam United Republic of Tanzania . The members of the consortium by the said agreement undertook to supply equipment and services as set out in clause 6 of the agreement at f.o.b. prices mentioned therein. The equipment to be supplied by Star Textiles Engineering Works Ltd., one of the 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TMMA after negotiations had reached and understood with TEXCO, and consequently TMMA had made arrangements with the various members of consortium of Indian textile machinery manufacturers, for the supply of machinery and technical services to TEXCO, and that Lakshmi was the leader of the consortium and as such it would be prime contractor to enter into contract with TEXCO. Any alteration, amendment or modification or annulment of the agreement was made subject to prior approval in writing of TMMA and TEXCO. 6.. The agreement provides for the sale by Lakshmi to TEXCO of the machinery and services set out in detail in that agreement. Clause 23.1 of the agreement makes provision for assignment. Both TEXCO and Lakshmi were given right to assign their respective individual rights, in whole, or in part to any one or more parties subject to the assignor continuing to remain liable to other party to the contract jointly and severally with the assignee. 7.. On January 9, 1978 Star Textile Engineering Works Limited (STAR) entered into an agreement with Lakshmi Textile Exporters Ltd., pursuant to clause 19 of the agreement among TMMA, by which the 8 machinery suppliers who formed the cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otwithstanding what is stated in the parts of the contract sub-dispute shall be settled in accordance with the basis of award/settlement/order in such dispute with TEXCO, and such awards/settlement order passed shall be final and binding on STAR. 9. The agreement between STAR and Lakshmi clearly provides that property in the goods shall remain with STAR until the goods cross the customs frontier of India, after which the property will vest in TEXCO, and the benefits of the export are to be received by STAR. 10. These provisions in the agreement considered in the background of the formation of consortium of textile machinery suppliers, such consortium having been formed for the specific purpose of supply of machinery for the project in a foreign country, which project was to be completed with supplies for Indian machinery manufacturers can only lead one to conclude that the goods sold by STAR for the purpose of this project, were sold by it in the course of export. The property in the goods having remained with STAR till the goods crossed the customs frontier of India and thereafter in TEXCO. That fact that under the arrangement between STAR and Lakshmi embodied in the agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the consortium was for the specific purpose exporting Indian textile machinery to Tanzania for utilisation in cotton mill to be erected there. Having regard to the magnitude of the project, it was considered necessary to form a consortium which included 8 machinery manufacturers, STAR in one of those is mentioned in the very first commitment entered into by the Textile Machinery Manufacturers Association. The supplies made by STAR were solely for the purpose of fulfilling the collective obligation which was initially undertaken by the Textile Machinery Manufacturers Association and by arrangement among the members, embodied in the agreement between the leader of the consortium Lakshmi and TEXCO. The benefit of the exemption under section 5(3) of the Act has been given by the Parliament to those who engage in export so that the goods exported from this country can be competitive in the international market. If the essential tests laid down in section 5(3) of the Central Sales Tax Act are satisfied, the assessee would be entitled to receive the benefit. 15.. Counsel for the assessee rightly placed reliance on the recent decision of the apex Court in the case of C.T. Ltd. v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... toms frontier of India, after which the title was to vest not in Lakshmi but in TEXCO. All the export benefits were received by STAR and not by Lakshmi. The export documents were to be prepared by STAR. 17.. The arrangement between STAR and Lakshmi was therefore not one which involved sale of goods to Lakshmi. The export by STAR to TEXCO on account of Lakshmi was not the penultimate sale preceding any export sale by Lakshmi to TEXCO, but was the export sale. Consequently the sale effected by the assessee to STAR for the purpose of fulfilling the obligation under the export sale contract between STAR and Lakshmi, goods being exported to TEXCO qualified as penultimate sale, and is entitled to the benefit of section 5(3) of the Act. 18.. Though it may appear at the first sight that the concept of penultimate sale implies, the existence of one export sale preceded by another sale to the exporter and thus involving only two transactions there can be in existence in cases such as those examined by the apex Court in the case of C.T. Ltd. [1997] 104 STC 94, and in this case, the number of parties involved could be more than three, the foreign buyer, the exporter from India, and the sup ..... X X X X Extracts X X X X X X X X Extracts X X X X
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