TMI Blog2014 (8) TMI 860X X X X Extracts X X X X X X X X Extracts X X X X ..... be taxed as a local sale under the provisions of the BST Act. Section 5 was amended by the Central Sales Tax (Amendment Bill, 1976) by inserting sub-section (3) therein to provide that the last sale or purchase of any goods preceding the sale or purchase occasioning export of those goods out of the territory of India shall also be deemed to be in the course of such export, if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for, or in relation to, such export. When the transaction between the assessee and the exporter and the transaction between the exporter and foreign buyer are inextricably connected with each other, in our view, the "same goods" theory has no application. The clauses in the purchase order / agreement dated 5th March, 2004 between the Petitioner and M/s Crown also indicate that the Submarine Navy Batteries were for the purposes of export to the Algerian Navy. Furthermore, the ARE-1 showed the Petitioner as the seller, M/s Crown as the buyer and the Algerian Navy as the consignee. These facts are undisputed. In this view of the matter, it can hardly be argued that there was no inextricable lin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with, the agreement or order in relation to such export. In the facts of the present case under a purchase order/agreement dated 5th March 2004 M/s. Crown Corporation Pvt Ltd (hereinafter referred to as M/s. Crown ) required the Petitioner to supply Submarine Navy Batteries of the type and specifications more particularly set out therein. On 25th May 2004 the Algerian Navy placed a purchase order on M/s. Crown, for the supply of Submarine Navy Batteries. On 14th September 2004, the Petitioner sold and supplied Submarine Navy Batteries to M/s. Crown, who in turn exported the same to the Algerian Navy. The ARE -1 was prepared by the Petitioner on 14th September 2004 showing the Petitioner as the seller, M/s. Crown as the purchaser, and the Algerian Navy as the consignee. In these circumstances, the Petitioner contends that the sale effected by them of Submarine Navy Batteries to M/s. Crown, is exempt from the levy of sales tax under the BST Act by virtue of the provisions of Section 5(3) of the CST Act. On the other hand, the Respondents contend that since the purchase order placed by M/s. Crown on the Petitioner on 5th March, 2004 was before the date when the Algerian Navy placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... package. c. Nature of the packaging and dimensions. d. Number of the contract or clauses. The Buyer shall arrange to make available, suitable containers at the factory and also nominate a vessel bound for Algeria within 15 days of such information. The supplier shall thereafter put the goods on F O B Mumbai. For this purpose, the Buyer shall arrange payment of sea freight and insurance and furnish necessary documents for Supplier's clearing agents in time. (emphasis supplied) 5. The technical conditions of the said purchase order / agreement further provided that the Petitioner shall supply following information in English as well as the French language. 18. TECHNICAL CONDITIONS The Supplier shall supply the following in English and French along with the battery. 18.1 The labels as well as the stamp of the manufacturing date (name of the factory as well as the week and year of manufacture) for all cells. 18.2 Type of battery, voltage and ampere hours for all cells. 18.3 The instructions for the preservation of the goods against humidity, heat and direct effect of atmosphere on the battery. 18.4 The mode of preservation and exploitation accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order was placed by M/s. Crown on the Petitioner. In other words, it was the contention of the Revenue that since the purchase order placed by M/s. Crown on the Petitioner for the supply of Submarine Navy Batteries preceded the purchase order placed by Algerian Navy on M/s. Crown, the conditions of section 5(3) of the CST Act were not satisfied and the sale allowed on the strength of Form N-14-B was sought to be disallowed and appropriate tax, penalty and interest was sought to be levied on the transaction. 10. In reply to the said notice, the Petitioner by their letter dated 26th May 2008 objected to the notice for rectification and inter-alia contended that their case was covered by the judgment of the Supreme Court in the case of Consolidated Coffee v/s Coffee Board reported in (1980) 3 SCC 358. 11. Respondent No.2 passed his rectification order on 31st May 2008 inter-alia holding that the judgment of the Supreme Court in the case of Consolidated Coffee (supra) was not applicable. In view thereof, the 2nd Respondent held that the sale by the Petitioner to M/s. Crown was liable to be taxed under the BST Act and called upon the Petitioner to pay an amount of ₹ 1,82,75, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10) 9 SCC 524 and held that the Petitioner had failed to prove the inextricable link between the sale made to M/s. Crown and the subsequent export by M/s. Crown to the Algerian Navy. In view thereof, Respondent No.3 held that the sale by the Petitioner of the Submarine Navy Batteries to M/s. Crown was liable to be taxed under the BST Act and a demand was raised for ₹ 2,16,98,270/- including tax, interest and penalty. 15. Being aggrieved by the revision order dated 25th May 2011, the Petitioner filed an Appeal before the MSTT challenging the validity of the said order. The MSTT, vide its order dated 22nd November 2012, dismissed the Appeal filed by the Petitioner and confirmed the demand raised by Respondent No.3. Being aggrieved by the revision order dated 25th May 2011 passed by Respondent No.3 and the Appeal order dated 22nd November 2012 passed by the MSTT, this Writ Petition has been filed. 16. Before touching the merits of the matter, we shall first deal with the preliminary objection raised by Mr Ankhad on the issue of availability of an alternate remedy. As set out earlier, Mr Ankhad submitted that in the present case, an alternate remedy is available to the Peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x of the nature referred to in sub-clause (b), sub-clause (c) or sub-clause (d) of clause (29-A) of Article 366, be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify. 19. An analysis of the said provisions reveal that under Article 286(1) (b) of the Constitution of India, no law of a State shall impose, or authorise the imposition of sales tax on the sale or purchase of goods when such sale or purchase takes place in the course of import or export of goods. Article 286(1) prohibits imposition of sales tax on import and export by the State Government. Article 286(2) authorises Parliament to formulate principles for determining when a sale is in the course of import/export. The CST Act has been enacted by Parliament pursuant to Article 286(2) of the Constitution of India. Section 5 in its current form reads as under:- 5. When is a sale or purchase of goods said to take place in the course of import or export.-(1) A sale or purchase of goods shall be deemed to take place in the course of the export of the goods out of the territory of India only if the sale or purchase either occ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n relation to such export as set out in section 5(3). Therefore, under Article 286 of the Constitution read with section 5 of the CST Act, the court has to examine whether any tax is being imposed by the State Legislature on the sale or purchase of goods being imported into, or exported out of the territory of India. If it does so, then the same would be in the teeth of Article 286. 21. After analyzing the aforesaid provisions, in the peculiar facts of the present case, we find that the submission of Mr Sridharan is well founded. The issue involved, questions the very power and competence of the authorities under the BST Act to levy sales tax thereunder. It is trite law that the availability of an alternate remedy is not a bar to the entertainment of a writ petition but is in fact a matter of discretion. In the ordinary course, this Court would refuse to issue a high prerogative writ when an alternate remedy is available to the Petitioner. The limits or constraints in issuing high prerogative writs when alternate remedies are available, are self imposed by the courts and there is no absolute bar in exercising the writ jurisdiction merely because an alternate remedy is availab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Algerian Navy on M/s. Crown and for the purpose of complying with the same. The said sale therefore was a deemed sale in the course of the export of the goods out of the territory of India and squarely fell within the provisions of section 5(3) of the CST Act, is the submission. This being the case, the submission was that the authorities under the BST Act could not have construed the said sale as a local sale within the State and taxed accordingly. In this regard, Mr Sridharan also placed heavy reliance on the judgment of the Supreme Court in the case of Consolidated Coffee (supra). 24. On the other hand, Mr Ankhad submitted that for the Petitioner to claim the benefit under section 5(3) of the CST Act, the Petitioner has to establish the inextricable link between the sale effected by the Petitioner to M/s Crown on the one hand, and the sale made by M/s Crown to the Algerian Navy, on the other. He submitted that in the facts of the present case, this link could not be established because the purchase order placed by M/s Crown on the Petitioner was before the purchase order placed by the Algerian Navy on M/s Crown. In other words, he submitted that at the time when the purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , since such a sale did not qualify as sales in the course of export, they were liable to State Sales Tax which corresponded in the increase in the price of the goods and made exports out of India uncompetitive in the fiercely competitive international markets. To tackle this problem, section 5 was amended by the Central Sales Tax (Amendment Bill, 1976) by inserting sub-section (3) therein to provide that the last sale or purchase of any goods preceding the sale or purchase occasioning export of those goods out of the territory of India shall also be deemed to be in the course of such export, if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for, or in relation to, such export. This is the legislative intent in inserting sub-section 3 to section 5 of the CST Act. 27. The word sale also has been defined in the Central Sales Tax Act under section 2(g) which reads as under :- 2(g) 'sale' with its grammatical variations and cognate expressions, means any transfer of property in goods by one person to another for cash or deferred payment or for any other valuable consideration and includes - (i) a transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in clauses (i) to (vi) of the said section. We do not find that the purchase order / agreement dated 5th March 2004 can by any stretch of the imagination fall within the definition of the word sale in section 2(g). This is for the simple reason that the word sale contemplates inter alia transfer of the goods or a transfer of the right to use any goods for any purpose or delivery or supply of goods [See.Section 2(g), Clauses (i), (iii), (iv), (v), (vi)] by one person to another. In the peculiar facts of this case and after carefully perusing the purchase order/agreement dated 5th March 2004 between the Petitioner and M/s Crown, we are of the view that there was no sale of the Submarine Navy Batteries by virtue of the said purchase order/agreement. In the facts of the present case, there was no transfer of goods as contemplated under Section 2(g) of the CST Act. On a perusal of the said agreement and its various clauses, at the highest, it can be said that the same amounts to an agreement to sell , that maybe performed at a future date by the Petitioner. It is this performance that translates into a sale of the Submarine Navy Batteries. 29. In the facts of the present ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... val contentions we shall dispose of a small contention that was put forward by Mr Venugopal, counsel for the State of Karnataka that the word sale occurring in the phrase if such last sale or purchase took place after in Section 5(3) means the agreement to sell and not sale in the sense of a transfer of property in goods by one person to another and the argument has been that since the word sale in the aforesaid phrase means an agreement to sell such agreement to sell in case of export auctions conducted by the Coffee Board takes place or becomes complete at the fall of the hammer when the bid of the highest bidder gets accepted and the regular contract containing the covenant to export is invariably entered into by the registered exporter with the Coffee Board at a later stage and, therefore, even the covenant to export to be found in the contract with the Coffee Board can never be regarded as having come into existence before the agreement to sell becomes complete and consequently the penultimate sale to the registered exporter would not qualify for the exemption. In support of the contention that the word sale means an agreement to sell counsel relied upon Section 4 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e latter stipulated that there was a transfer of property or movement of goods; the ratio of that decision will be inapplicable to Section 5(3) which deals with the question as to when a penultimate sale shall also be deemed to be in the course of export and there is nothing therein to suggest that the word sale should have any such extended meaning; on the contrary, the context suggests that the word sale in the phrase if such last sale or purchase takes place after' refers to a completed sale i.e. a sale as defined in Section 2(g) of the Act. The contention urged by counsel must, therefore, be rejected. 31. Having regard to the above discussion it is clear to us that in the penultimate sales (sales of coffee effected to registered exporters at export auctions conducted by the Coffee Board) the property in the coffee sold thereat passes to the buyer immediately upon payment of full price, weigh-ment and setting apart of coffee for delivery to the buyer under clauses 19 and 20 of the Auction Conditions and it would be at this stage i.e. just before this stage is reached that the agreement with or order from a foreign buyer must be available or produced in order to attr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the CST Act. This being the position, we find that taxing the said sale as a local sale under the provisions of the BST Act was wholly without jurisdiction and contrary to law. 32. Before concluding, it is necessary to deal with the two judgments relied upon by Mr Ankhad and also by the MSTT in the impugned order. These two judgements of the Supreme Court are in the case of State of Karnataka Vs. Azad Coach Builders (P) Ltd reported in 2010 (36) VST 1 (SC): (2010) 9 SCC 524; and Saraf Trading Corporation Etc. Etc. v/s State of Kerala reported in 2011 (38) VST 1 (SC): (2011) 2 SCC 344. 33. In the case of Azad Coach Builders Pvt.Ltd. (supra), the facts were that the Assessee viz. Azad Coach Builders was requested to build bus bodies by the exporters viz. TELCO, in accordance with the specifications provided by the foreign buyer viz. Lanka Ashok Leyland Ltd., Columbo. In one of the communications received from the said foreign buyer, it was stipulated that the steel and aluminum panels of the bus bodies be built by the Assessee are as per the specifications provided by them, since the customers in Sri Lanka preferred them. The Assessee accordingly manufactured the bus bodi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e buyer and the seller to export. There must be obligation to export, and there must be an actual export. The obligation may arise by reason of statute, contract between the parties, or from mutual understanding or agreement between them, or even from the nature of the transaction which links the sale to export. To occasion export there must exist such a bond between the contract of sale and the actual exportation, that each link is inextricably connected with the one immediately preceding it, without which a transaction sale cannot be called a sale in the course of export of goods out of the territory of India. 27 [Ed.: Para 27 corrected vide Official Corrigendum No. F.3/Ed.B.J./120/2010 dated 25-10-2010.]. The phrase sale in the course of export comprises in itself three essentials: (i) that there must be a sale; (ii) that goods must actually be exported; and (iii) that the sale must be a part and parcel of the export. The word occasion is used as a verb and means to cause or to be the immediate cause of . Therefore, the words occasioning the export mean the factors, which were the immediate cause of export. The words to comply with the agreement or order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries before the purchase order was placed by the Algerian Navy on M/s Crown. We do not agree. In the present case, though it is true that the purchase order / agreement dated 5th March 2004 between the Petitioner and M/s Crown was before the date when the Algerian Navy placed their purchase order on M/s Crown, the sale in fact was effected by the Petitioner to M/s Crown after the date of the said purchase order placed by the Algerian Navy on M/s Crown, and for the purpose of complying with the same. The clauses in the purchase order / agreement dated 5th March, 2004 between the Petitioner and M/s Crown also indicate that the Submarine Navy Batteries were for the purposes of export to the Algerian Navy. Furthermore, the ARE-1 showed the Petitioner as the seller, M/s Crown as the buyer and the Algerian Navy as the consignee. These facts are undisputed. In this view of the matter, it can hardly be argued that there was no inextricable link between the local sale by the Petitioner to M/s Crown and the export of those very goods thereafter to the Algerian Navy. 35. Similarly, in the case of Saraf Trading Corporation (supra) the facts were that the Assessee was an exporter of tea and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for which an agreement has been entered into. Since no such claim was made at that stage, so therefore sales tax was realised which was paid to the Government by the dealer. Despite the said fact, there is a clear finding recorded by the assessing authority himself that the export documents were verified by him with the accounts from which it is indicated that the entire exports were effected pursuant to the prior contract or prior orders of the foreign buyers and that the export sales are supported by bills of lading, export invoices and such other valid documents. (emphasis supplied) 36. We fail to see how this judgement is of any assistance to the Revenue. In the facts before us we have already held that there was an inextricable link between the local sale by the Petitioner to M/s Crown, and the export of those very goods thereafter to the Algerian Navy. In Saraf Trading Corpn (supra), the Supreme Court, on facts held that it was not possible to specifically state as to whether it was clear that the sale or purchase between the parties i.e. the dealer and the purchaser was inextricably linked with the export of the goods. Such is not the case before us. Therefore, this j ..... X X X X Extracts X X X X X X X X Extracts X X X X
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