TMI Blog2003 (4) TMI 532X X X X Extracts X X X X X X X X Extracts X X X X ..... ort and import, executed an agreement of contract for supply of railway wagons with the community of Yugoslavia railways, through its agent Rudnap Export and Import, Beogard, Yugoslavia. The STC transferred the entire order in terms of the agreement to various manufacturers in India for supply of the wagons direct to Rudnap Export and Import and the petitioner-company was one of such manufacturers. To make the contract effective, STC which was subsequently renamed as Projects and Equipment Corporation of India (PEC) entered into a contract which is like back to back contract separately with each of the manufacturers including the petitioner and the said contract dated September 18, 1971 formed an integral part of the original contract. All the rights and obligations of the STC devolved on the petitioner and other manufacturers. The company was also given right to enter into suitable contract for the purpose of assembly of wagons with the foreign agent Rudnap and Company. Accordingly the petitioner-company executed another assembly contract separately with Rudnap Export and Import on December 23, 1992 for carrying out the work of assembling parts and components of these into complet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The facts in that case and here are distinguishable. Here in the instant case, there is contractual obligation to the foreign buyer directly which was absent in the reported case relied on by the Board. Accordingly, the petitioner is entitled to be declared eligible for exemption under section 5(2)(a)(v) of the Bengal Finance (Sales Tax) Act, 1941 read with sub-section (1) of section 5 of the Central Sales Tax Act, 1956. The petitioner is also accordingly entitled to get the order of penalty quashed. Hence this application with the relief as stated. 3.. In the affidavit-in-opposition, contention of the respondent is that the back to back contracts were not binding contract but were supply-ensuring contract. The petitioner and other manufacturers were obliged to supply to the STC for fulfilment of an export order agreed upon between STC and Community of Yugoslavia Railways. The sale of the petitioner to the STC is a pre-export sale which has been recognised subsequently under section 5(3) of the Central Sales Tax Act which sub-section came into the statute book with effect from April 1, 1976. There was no room for two or more sales being in the course of export, at the relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India." 6.. We are to determine in the background of such enactments as above as to whether the impugned sale of the goods would come under section 5(2)(a)(v) of the Bengal Act read with sub-section (1) of section 5 of the Central Sales Tax Act and if the sale proceeds could not be included in the taxable turnover of the dealer in view of article 286(1)(b) of the Constitution of India. In other words, we are to consider whether under the facts and circumstances of this case, the West Bengal Commercial Taxes Appellate and Revisional Board is right in holding that the impugned sales effected under the impugned contract was not a sale in the course of export. 7.. The term "sale in the course of export" has been subjected to judicial pronouncements in a number of decisions. The "course" means progress or process of or shortly during the process of export or during export. It may be a single sale which causes the export or which is in the process of export. It also means sale which is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) of the Central Sales Tax Act, 1956 also discussed the position of law that obtained before the enactment of section 5(1) of the CST Act, 1956, how the section 5(1) after its enactment has been interpreted by the honourable Court and the necessity that gave rise to the enactment of a new provision, i.e., section 5(3) of the Act of 1956. At the initial stage, the term "in the course of export" in article 286(1)(b) of the Constitution of India was interpreted in the absence of any legislative guidance, judicially by the honourable Supreme Court in two decisions reported in [1952] 3 STC 434 and [1953] 4 STC 205 (State of Travancore-Cochin cases). Sale and resultant export as per the said decisions, must form part of a single transaction. In the first Travancore-Cochin case [1952] 3 STC 434 (SC), the contracts were directly between the respondents and their foreign buyers. There was no intermediary in-between them. The sale and export became integrated in one transaction. In that first case [1953] 3 STC 434 (State of Travancore-Cochin), the honourable Supreme Court observed that "a sale by export involves a series of integrated activities commencing from the agreement of sale with a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of export even when the STC had with it, the foreign buyer's contract and Mod. Serajuddin's contract with the STC had been entered into for the purpose of implementing such foreign buyer's contract. It was held that the two sets of contracts were separate and independent and Mod. Serajuddin was under no contractual obligation to the foreign buyer either directly or indirectly and that his right and obligation were only against STC. The two contracts cannot be said to constitute integrated activity in the course of export. It is held by the court in that case that the sale by an Indian exporter from India to the foreign importer alone qualifies as a sale which has occasioned the export of the goods. This principle enunciated in Serajuddin's case [1975] 36 STC 136 (SC) disqualifying as sales of export of goods by small manufacturers to STC or any export house to fulfil the existing contract between STC and foreign buyer will result in making such sales liable to State sales tax which will eventually lead to increase in the price of the goods which may have adverse consequence on our export. To obviate the same, section 5 of the Central Sales Tax Act was amended by introducing sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and STC as such that resulted in the movement of goods from India to Yugoslavia. It was the subsequent contract between the STC and petitioner and between the petitioner and agent of the importer that resulted in the movement of goods from India to Yugoslavia and STC is only export promoter or agent earning only margin money. He also referred that STC entrusted the letter of credit issued to the State Bank of India in the name of the petitioner to ensure prompt payment. It is his submission that the back to back contract of the STC with the petitioner is integrated with the main agreement, those coupled with the fact of a separate independent contract between the petitioner and the agent of the importer must be taken to be a factor quite distinguishable from Serajuddin's case [1975] 36 STC 136 (SC), where there was no contract of Serajuddin with the foreign buyer. Therefore he submits that there is, in the instant case, a direct contract between the petitioner-seller and the foreign buyer. His next submission is that even if there are two contracts those are closely being linked and may be taken as one integrated transaction that resulted in export. 11.. Learned State represe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advance payment. So on a clear reading of the main contract dated October 23, 1970 there remains no manner of any doubt that this contract alone led to the export of the goods out of the territory of India. In the assembly contract between the petitioner and the agent of the importer, it is specifically written that the same is executed for the purpose of realisation of the main contract made between STC and importer on October 23, 1970. It has also been mentioned that supervision of the assembly work and inspection of material supplied by the assembly factory shall be carried out strictly, according to the main contract dated October 23, 1970. The main contract of sale itself, as we see, provides for movement of the goods. Thus the movement in this case occurs under this contract. The terms of the contract of sale provides for the export. So in our considered opinion, the export here is inextricably linked up with the sale. Any breach in the matter of export after this contract would result in breach of the obligation arising under this contract, which contract as per the terms cannot be assigned as we see. Of course, there was a separate agreement subsequently which is an agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the course of export is sustainable in law. 13.. Coming to the point of penalty we find that for the nonsubmission of timely return, Commercial Tax Officer by order dated March 20, 1980 imposed penalty of Rs. 500. In appeal against that, by order dated November 16, 1982, Assistant Commissioner sent the matter for fresh assessment on remand after being impressed about the grounds for late filing of return. Assistant Commissioner directed the Commercial Tax Officer to rehear the penalty matter also. The petitioner stated in appeal before the Assistant Commissioner that petition for extension of time to file return was duly made before the Commercial Tax Officer. But even thereafter Commercial Tax Officer by order dated September 25, 1986, while making fresh assessment, imposed penalty of Rs. 22,500 since prior permission of Commercial Tax Officer was not taken. Against that order of reassessment, the petitioner preferred appeal before the Assistant Commissioner and Sri P.G. Goswami, Assistant Commissioner by order dated February 17, 1989 admitted the trouble and financial crisis through which the petitioner-company had been passing and admitted that the company was ultimately tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g for production of documents, accounts, registers, etc., from a dealer. Non-filing of timely return without just cause or submitting false return has been made penal subsequently in this Act of 1941. In the background of such provisions in the statute, admitted delay in filing return cannot but attract penalty. So we cannot set aside the decision to impose penalty for the late filing of return by the petitioner. The question that haunts us is the casual way the decision as to the amount of penalty has been taken at each step. It was enhanced to Rs. 22,500 from only Rs. 500 without assigning any reason. Nor do we find any rationale behind Assistant Commissioner's decision to fix the same at Rs. 10,000 when initial penalty amount was fixed at Rs. 500. In the context of the above, we could have sent the matter back to the Board for deciding the amount of penalty. But since the matter has been pending since 1980, we are inclined not to do that. Regard being had to the facts and admitted mitigating circumstances as stated above, we hold that imposition of an amount of token penalty of Rs. 1,000 would meet the ends of justice in this case. 14.. In the ultimate analysis, we sustain the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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