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TMI Blog1998 (12) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... ears 1990-91 and 1991-92 the respondents found that these sales were intra-State sales subject to the levy of tax under the Orissa Sales Tax Act. The writ petitions filed by the appellants thereagainst were dismissed. 2.The appellants are an export oriented unit set up pursuant to the resolution of the Government of India dated 31-12-1980. That resolution decided to give 100% export oriented units certain concessions to enable them to meet the rigours of foreign demands in terms of pricing, quality, precision, etc. According to the resolution, "(a) 100% export oriented unit would imply an industrial unit offering for exports its entire production, excluding permitted levels of rejects". A unit approved by the Board set up under the resolution was required to undertake to manufacture in bond and export its entire production for a period of 10 years and the finished products were exempt from excise and other central levies. Only rejects, upto 5% or such other percentage as the Board might fix, were allowed to be sold in the domestic tariff area. The application of the appellants that its charge chrome project be approved as a 100% export oriented unit was granted by the Government o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es hereto ............" It was acknowledged that the market for which the charge chrome was earmarked was primarily Japan and any balance would be earmarked for consumers in the rest of world. For long term contracts with major consumers the appellants would have the right to participate in negotiations so as to enable them to plan their production programme and delivery schedule. Clause 3 stated, "The price for charge chrome to be sold and purchased hereunder shall be that agreed between Facor and Richco from time to time based on prevailing international prices as established by the major producer exporters of charge chrome (taking into account the quality of the charge chrome) for those areas to which the charge chrome shall be destined......" It also stated, "The prices to be established shall be on a F.O.B.S.T. Indian Port basis C+F or CIF Discharge Port basis as required by Richco from time to time and shall be expressed in dollars or if the parties so agree in any other currency". The appellants were required to pay to Richco a discount at the agreed rate on all charge chrome purchased by Richco. It was to be allowed by the appellants on each shipment and be paid in dollars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertificate". The payment would be made by confirmed irrevocable letter of credit in favour of appellants as therein set out. Clause 4 of the standard terms stated : Should any consignments shipped under this contract fall"(a) below the contractual specifications, the buyers reserve the right to reject and revert the material to the sellers or to accept such consignment or consignments at reduced price as may be mutually agreed to between the buyers and sellers. The buyers shall pay all customs duties as well as any other(b) duties and taxes payable in Japan at the time of or by reason of the importation." Risk in respect of goods was stated to pass to Richco "from the time when the goods shall have effectively passed the ship's rail at the port of shipment". Title in respect of the charge chrome would pass to Richco from the appellants "when the sellers have received the proceeds of the goods from the negotiating bank, without recourse to the sellers". 5.Documents are placed on record which show how the Off-Take and Charge Chrome Agreements were worked. All that need be referred to is the shipping bills, which shows that it was the appellants who were the exporters because no e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould make reference to the judgment of this Court upon which both sides have relied, namely, the Constitution Bench judgment in Md. Serajuddin and Ors. v. The State of Orissa, (1975) 2 SCC 47. This was the judgment that occasioned the amendment of Section 5 so as to introduce sub-section (3) therein. Analysing earlier decisions of this Court, various principles were laid down in Serajuddin's case to ascertain which was the sale which occasioned the import. It was said that the sale which was to be regarded as exempt was the sale which caused the export to take place or was the immediate cause of the export. To establish an export, a person exporting and a person importing were necessary elements and the course of export was between them. The introduction of a third party dealing independently with the seller on the one hand and with the importer on the other broke the link between the two for then there were two sales, one to the intermediary and the other to the importer. The first sale was not in the course of export because the export commenced with the intermediary. The expression "sale" in Section 5 of the Central Sales Tax Act had the same meaning as in the Sale of Goods Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of the charge chrome that was produced at the plant during the run-up and throughout the contract period. Richco undertook to purchase the same, at regular intervals in each year, equal to the export minimum. The price was to be that which was agreed between the appellants and Richco from time to time "based on prevailing international prices as established by the major exporter producers of charge chrome (taking into account the quality of charge chrome) for those areas to which the charge chrome shall be destined." The agreement, therefore, did not relate to a specified quantity of charge chrome nor was the price agreed to thereunder. The agreement did not even state with any precision how the price of the charge chrome was to be determined. The agreement, therefore, was no more than an agreement to sell. 14.Even so, there are clear indications in the Off-Take Agreement that the sales that were to be effected pursuant thereto were sales to Richco abroad. Richco was to be the exclusive purchaser of the charge chrome "world-wide". The entire quantity of charge chrome that the appellants were required to export by reason of their obligations as an 100% export oriented u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of export and, therefore, not exempt from the levy of sales tax. 18.We may now, having decided the issue on merits, take notice of an affidavit filed in this Court on behalf of the Union of India. The affidavit supports the stand of the appellants. It annexes letters written by the Union of India on 6th November, 1995 and 29th April, 1998 to the respondents. The letters state that since the appellant's charge chrome plant was Customs bonded, it was not possible for the appellants to make any domestic sale thereof without the approval of the competent authority and the Customs and Central Excise authorities had certified that the appellants had not sold any quantity of charge chrome in India. In view thereof, and keeping in view the fact that all export sales were exempt from the payment of State and Central Sale Tax, the respondents were requested to ensure that the production and export programme of the appellants' plant was not adversely affected. The respondents did not reply to the said two letters, nor to the affidavit on behalf of the Union of India. 19.The appeals are allowed. The judgment and order under appeal is set aside. The writ petitions filed by the appellants ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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