1 str-9.02.sxw IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION SALE TAX REFERENCE NO. 9 OF 2002 M/s.Deepmani. ... Appellant. V/s. The State of Maharashtra. .... Respondent. P.C.Joshi for the applicant. V.A.Sonpal, `A’ Panel Counsel for the respondent. CORAM : V.C.DAGA AND R.M.SAVANT, JJ. DATED : 21st January 2010. JUDGMENT : (Per V.C.Daga, J.) Heard Mr.Joshi, learned counsel for the applicant and Mr.Sonpal, learned counsel for the respondent. 2. This reference under section 51 of the Bombay Sales Tax Act, 1959 (“BST Act” for short) is made by the Sales Tax Appellate Tribunal to seek decision of this Court on the following substantial questions of law: 1. Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the transactions were not sales in the course of export within the ambit of section 5 of the Central Sales Tax Act, 1956? 2 str-9.02.sxw 2. Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in confirming the penalty levied under section 36(2)(c) Explanation (1) of the Bombay Sales Tax Act, 1959? The Facts : 3. The applicant is a dealer registered under the BST Act. The applicant is acting as an authorised dealer to promote and market the products of M/s.R.K.Machine Tools Pvt.Limited, Ludhiana. The Sales Tax Officer (48), `A’ Ward, Unit IV, Mumbai vide his order dated 27th March, 1985 assessed the applicant for the period 1st April, 1983 to 31st March, 1984 levying sales tax under the BST Act on the transaction of sale which, according to the applicant, did not attract sales tax since it occasioned export out of the territory of India. 4. Aggrieved by the aforesaid order of assessment, the applicant preferred first appeal before the Assistant Commissioner (Appeals), Bombay City Division, Bombay, which, according to the applicant, was dismissed without considering the legal contentions raised leading to sale of goods which occasioned export out of country. 5. Aggrieved by the aforesaid order, the applicant preferred second appeal before the Deputy Commissioner (Appeals), Bombay, who was pleased to accept the contention raised by the applicant. However, instead of deciding the 3 str-9.02.sxw appeal by himself, he remanded the appeal to the Assistant Commissioner with direction to decide it in accordance with the directions issued by him treating the transactions of sale as covered by section 5 of the Central Sales Tax Act, 1957 (“CST Act” for short). 6. The aforesaid order was revised by the Deputy Commissioner of Sales Tax (Admn.) whereunder the assessment order passed by the Sales Tax Officer was restored. 7. Aggrieved by the aforesaid order, passed under section 57 of the BST Act by the Deputy Commissioner of Sales Tax (Admn.), the applicant invoked appellate jurisdiction of the Maharashtra Sale Tax Tribunal (“Tribunal” for short). None of the contentions raised by the applicant found favour with the Tribunal. It held that the transactions were not covered by section 5 of the CST Act as such they were sales within the State of Maharashtra liable to be taxed as such. The Tribunal also confirmed the penalty under section 36(2)(c) read with Explanation-1 of the BST Act. 8. Not satisfied with the aforesaid judgment, the applicant prayed for Reference under section 61(1) of the BST Act. Accordingly, the Tribunal was pleased to refer two questions extracted in the opening part of the judgment to seek opinion of this Court. 4 str-9.02.sxw Rival Submissions : 9. Mr.Joshi, learned counsel appearing for the applicant has taken us through the provision of section 5 of the CST Act, which reads as under: “5. Remission of duty on goods found deficient in quantity.- (1) The Central Government may, by rules made under this section, provide for remission of duty of excise leviable on any excisable goods which due to any natural cause are found to be deficient in quantity. (2) Any rules made under sub-section (1) may, having regard to the nature of the excisable goods or of processing or of curing thereof, the period of their storage or transit and other relevant considerations, fix the limit or limits of percentage beyond which no such remission shall be allowed: Provided that different limit or limits of percentage may be fixed for different varieties of the same excisable goods or for different areas or for different seasons. Mr.Joshi urged that the Tribunal has committed error in treating the subject sale transactions as `local sales’ and not `sales in the course of export’. He further submits that the delivery of goods had taken place at Airport for being exported out of India. There was no possibility of goods coming back to India since goods were sold to foreign buyers only for being taken out of India. That the sale 5 str-9.02.sxw price was received in foreign currency. Under these circumstances, the goods have crossed customs frontiers as such subject sales ought to have been treated as sales in the course of export. He placed reliance on the judgment of the Apex Court in the case of The State of Travancore- Cochin v. The Bombay Company Ltd. Alleppey, 3 STC 434. 10. Mr.Joshi also placed reliance on the judgment of this Court in the case of Abdulgafar A. Nadiadwala v. Asst.C.I.T., (2004) 267 ITR 438 affirmed by the Apex Court in C.I.T. v. B.Suresh 313 ITR 149 contending that the said judgment though deals with the provisions of the Income Tax Act under section 80HHC and the explanation thereto, however, the said judgment would be applicable to the facts of the present case with full force. He submits that both the enactments i.e CST Act and the Income Tax Act are parliamentary enactments providing for non-liability of tax by the State Legislature to a person earning foreign exchange arising from export. According to him, both enactments are, therefore, pari materia in relation to the same person viz. the exporter. 11. Mr.Joshi submits that for the purposes of applicability of the principle of pari materia, it is not necessary that the entire subject matter in the two enactments should be identical before any provisions in one statute can be held to be pari materia with similar provisions in the other. In other words, submissions; so long as both the statutes deal with the same subject 6 str-9.02.sxw matter, or form part of the same system, the principle of pari materia would be applicable. The Income Tax Act, 1961 provides for certain deductions under section 80HHC in respect of profits retained for export business whereas the Central Sales Tax Act, 1956 provide for principles to determine the nature of the transaction of sale to be either in the course of inter-State trade or commerce (section 3) or in the course of export or import (section 5). He, thus, submits that both these sections have their origin in the Constitutional embargo engrafted under Article 286 of the Constitution of India on the power of the State Legislature to levy tax on the export or import transactions. 12. Mr.Joshi further highlights that sub-section (3) of section 80HHC of the Income Tax Act provides for the computation of profit from the export business, whether manufactured or otherwise. It also defines the term “export turnover”. Explanation (aa) under the said section 80HHC stipulates that the export out of India will not include a transaction by way of sale or otherwise in a shop etc., which does not involve clearance at any Customs Stations as defined in the Custom Act, 1962. In order to bring home his contention, he submits that the sale in the case in hand was not a sale in the shop. He submits that this Court in the case of Abdulgafar A. Nadiadwala (supra), after considering the meaning of the words “goods” and “merchandise” and the text of the provisions of section 80HHC and the Explanation thereunder, held that the export proceeds were synonymous to the expression “sale proceeds” 7 str-9.02.sxw and, therefore, the amount received by the assessee as consideration in the transaction in question was export proceeds and, therefore, was eligible to the deduction provided under section 80HHC. 13. According to Mr.Joshi, this Court, in the course of its judgment at page 503 of the Report has referred to the provisions of the BST Act and Customs Act for the purpose of determining the meaning of the term “goods”. That at page 509 of the Report this Court held that if the goods are taken from India to outside India it amounted to export and the object of section 80HHC was to grant an incentive to foreign exchange earners. That after referring to the provisions of the Customs Act, this Court referred to the Delhi High Court judgment in the case of C.I.T. v. Sriram Piston Rings Ltd., 181 ITR 230; wherein the Delhi High Court referred to the approval by the Company Law Board under the Companies Act that has to be followed by the Income Tax Department which cannot take a contrary view, to the one under the Companies Act. 14. Mr.Joshi further submits that after interpreting the meaning of the term ‘goods’ this Court at page 513 referred to the definitions under the Sale of Goods Act, Trade and Merchandise Marks Act and Indian Contract Act. That this Court further referred to the Supreme Court judgment in the case of C.S.T. v. Madhya Pradesh Electricity Board, 25 STC 188 for finding out the meaning of the term “moveable property” and the Copy Right Act, 8 str-9.02.sxw 1957 in regard to the signals transmitted from satellite. He, thus, submits that two wings of the Government cannot take two different views of the same transaction. The two wings referred to in the judgment in Abdulgafar A. Nadiadwala (supra) are Customs Department and Income Tax Department which are part of the same Ministry. 15. Mr.Joshi further urged that this Court at page 516 in the case of Abdulgafar A. Nadiadwala (supra) also observed that when the article or goods are physically exported, they must have been the subject of customs clearance. Following the principle that no material or things or goods can cross the customs borders unless they go through the gamut of custom clearance. As in the case of the present applicant, in that case also the Revenue could not dispute the factual position. He submits that in the case in hand, the first Appellate Authority on two occasions specifically referred to the particulars mentioned in the cash memos issued in due course of business. To examine that aspect of the matter, this Court had directed the Respondent to produce in the Court the record of the assessment proceedings along with the record of the First Appellate Authority. On the last occasion, the respondent has informed this Court that the records were not traceable. In view of the above factual position, and in view of the findings of fact on record by the First Appellate Authority on two occasions, this Court should decide the Reference on the basis of the said findings of fact not disputed by the respondent. 9 str-9.02.sxw 16. Mr.Joshi reverting back to the judgment of this Court in the case of Abdulgafar A. Nadiadwala (supra), submits that this Court has observed, on the basis of the view taken by the Allahabad High Court, that if it is to be treated as export out of India the transaction should involve clearance at customs station. If the goods were required to be cleared by the customs, either by the purchaser or the seller, it would be considered as export out of India, for the purpose of eligibility of deduction under section 80HHC. The aforesaid judgment of this Court in the case of Abdulgafar A. Nadiadwala having been affirmed by the Supreme Court in the case of C.I.T. v. B.Suresh (supra), which also considered the S.L.P. filed by the Union of India against the judgment of this Court, this Court is bound by the said judgment. 17. Mr.Joshi submits that factual scenario in the case in hand is the same and that the cases decided in relation to the interpretation of section 80HHC vis-a-vis the transaction of sale to the foreign tourists at the counter against foreign exchange as consideration would apply with full force. According to him, it is on record that the goods selected by the foreign going foreign tourists moved from the shop of the assessee to the International Airport since goods were delivered for onward journey by the applicant to such tourists while they were checking-in for their foreign going flights, from where 10 str-9.02.sxw goods cannot come back nor can goods come out of the airport. Each such foreign buyer obtained custom clearance for the items so delivered by the applicants, and then boarded the plane. 18. Mr.Joshi submits that it is well settled that when the words have acquired a particular meaning flowing from the authoritative construction given by the superior Courts, then they are presumed to have been used by the Legislature in the same sense that was assigned to by the Courts. Reliance is placed on Kesheji Ravji v. C.I.T. 183 ITR 1 SC; Gandhi v. C.W.T. 184 ITR 34 SC; and Sunandadevi v. C.W.T., 204 ITR 842. The relevant extracts of pages 71 and 72 from the Publication Maxwell on the Interpretation of Statutes 12th Edition is produced on record to show that the construction that have been placed on the statutes having similar scope can be referred to in case the Parliament uses the same language that was used in another Act of Parliament referring to the same subject. 19. Mr.Joshi also pressed into service the latest 12th Edition of 2010 of yet another publication on “Principles of Statutory Interpretation” by Justice G.P. Singh (at p. 298); wherein the principle of pari materia and the application of other statutes’ interpretation are discussed. The learned Author while concluding the topic has observed (at p. 302) that the application of uniformity has been applied for the purpose of avoiding any apparent contradiction between the series of statutes dealing with 11 str-9.02.sxw the same subject and permitted the raising of a presumption in the absence of any contrary intention specified in the Act and the same meaning had to be given while interpreting the later statute. 20. According to Mr.Joshi, the same view was taken by this court in the case of Leuko Plast (India) Ltd v. state of Goa and others, (1988) 71 STC 180. That the said principle was also followed by the Apex court in the case of Commissioner of central Excise, Coimbatore v. Jawahar Mills Ltd, 2001 (132) ELT 3 (SC). In that case the Apex court relied upon the decision under Income Tax and Sales Tax while interpreting the rule under the central excise Act. 21. On the above premise, Mr.Joshi prayed that all the transactions of the applicant to foreign going foreign tourists against the payment in US Dollars or other foreign currency should be treated as transactions of exports, especially, when the goods selected by the foreign going foreign tourists moved from the shop in Colaba to the International Airport and were personally handed over to the tourists concerned while they were checking-in at the counter in departure lounge as such subject sales are squarely covered by the first limb of section 5(1) of the CST Act, 1956. He, thus, submits that the Reference needs to be answered in favour of the applicant. 12 str-9.02.sxw Per contra : 22. Per contra, Mr.Sonpal, learned counsel for the respondent- State submits that the transaction in question can at the most be said to be sale for export and not sale in the course of export. That the sale has taken place in India under a reasonable belief that the purchaser will take it out of country. Taking out of country is after the sale is completed in India. According to him, agreement of sale is entered into in India. Delivery was agreed to be given in India before the customs area at International Airport. Money is received in India and the seller had no control over the goods once the goods are delivered before the customs area before checking in, as such the sale of goods was in India and delivery thereof was also in India. According to Mr.Sonpal, it hardly matters whether the delivery was given at counter or outside the customs area at Airport. In both cases, the chances of goods coming back in India from where the same is delivered could not be ruled out. The sale is complete when payment is received and goods delivered outside customs area or station where movement of goods is not controlled by any authorities. 23. According to Mr.Sonpal, by delivery of goods at Air Port does not ipso facto prove that the goods have reached foreign destination. All that can be said is that the goods have been delivered to the foreigner in India. The delivery at Air Port is for ensuring safe delivery and not to ensure its export. 13 str-9.02.sxw 24. Mr.Sonpal submits that prior to 1st January, 1997, it was compulsory for every exporter to obtain an exporters' code number from the Reserve Bank of India before engaging in export. The Customs Authorities could not have allowed to export goods from India unless a valid IEC (Importer-Exporter code number) number is held. There are no averments that the assessee dealer was holding registration or IEC number. According to him under section 69 of the Customs Act the goods can only be exported under the shipping bill or a bill of export. No such document is brought on record by the petitioners. 25. Mr.Sonpal urged that the sale was complete in all respect before the goods were taken to Airport. That there is no link between the sale and the export of the goods. Therefore, it can not be assumed that the sales were in course of export. It is not possible to say that the sale was not complete unless goods were exported. That the sale was complete before the goods have begun to travel foreign destination. There was no link between sale and export. Sale stood concluded independent of export obligation. 26. In the submission of Mr.Sonpal, the sales tax is payable on sale of goods. The sale is transfer of property in goods from one person to another for consideration. Essential element is transfer of property. Rules for transfer of property are contained in Chapter III of the Sale of Goods Act, 1930. As per sub-section (3) of section 20 unless contrary intention appears, the rules contained in section 20 to 24 are applicable for asserting the 14 str-9.02.sxw intention of the parties as to the time at which the property in goods is to pass to the buyer. Admittedly, in the present case, according to Mr.Sonpal, there is no contract to the contrary to indicate when the goods would pass to the buyer as such, according to section 20 read with section 19(3), where there is an unconditional contract for sale in respect of specific goods, the property in goods passes to the buyer when the contract is made, if the goods are in a deliverable state and it is immaterial whether the time of payment of the price or the time of delivery of the goods or both are postponed. Admittedly, the goods were in a deliverable state and the payment was made before delivery of goods as such unequivocal conclusion can be drawn that the sale was complete in a shop. In other words, the sale having been completed prior to export, the sale is exigible to local sales tax. Reliance is placed on the judgment of this Court in case of Narang Hotels and Resorts Pvt.Ltd., Bombay v. State of Maharashtra, (2004) 135 STC 289 in support of the submission made. Mr.Sonpal, thus, urged that the Reference may, accordingly, be answered in favour of the Revenue and against the Assessee. Issue : 27. The core question involved in the present case is: whether the sale of goods was voluntary constituting sale in the course of export within the meaning of section 5(1) of the Central Sales Tax Act, 1963? 15 str-9.02.sxw Consideration : 28. Having heard rival parties, the issue in question is no more res integra. The same can be answered on the basis of various reported judgments of the Apex Court as well as of this Court. 29. The decisions of the Apex Court dealing with this question are to be found in the reported judgment of this Court in the case of Narang Hotels and Resorts Pvt.Ltd. v. State of Maharashtra, (2004) 135 STC 289; wherein this Court had an occasion to deal with a similar question relating to supply of eatables and goods for consumption on board during the period during which aircraft is foreign going aircraft. Few of them are being referred herein. 30. In Burmah-Shell Oil Storage and Distributing Co. of India Ltd. v. Commercial Tax Officer (1961) 1 SCR 902, the Apex Court observed : "While all exports involve a taking out of the country, all goods taken out of the country cannot be said to be exported. The test is that the goods must have a foreign destination where they can be said to be imported. It matters not that there is no valuable consideration from the receiver at the destination end. If the goods are exported and there is sale or purchase in the course of that export and the sale or purchase occasions the export to a foreign destination, the exemption is earned. 16 str-9.02.sxw Purchases made by philanthropists of goods in the course of export to foreign countries to alleviate distress there, may still be exempted, even though the sending of the goods was not a commercial venture but a charitable one. The crucial fact is the sending of the goods to a foreign destination where they would be received as imports." 31. In the case of State of Kerala v. Cochin Coal Company Ltd., the Apex Court held that the concept of export in Article 286(1)(b) of the Constitution postulates the existence of two termini as those between which the goods are intended to move or between which they are intended to be transported, and not a mere movement of goods out of the country without any intention of their being landed in specie in some foreign port. 32. The principal decision of the Apex Court on interpretation of Section 5(1) of the CST Act are Ben Gorm Nilgiri Plantations Co., Coonoor v. Sales Tax Officer, Special Circle, Ernakulam (1964) 7 SCR 706, Coffee Board, Bangalore v. Joint Commercial Tax Officer, Madras, (1970) 3 SCR 147; the recent decision in Binani Bros. (P.) Ltd. v. Union of India, (1974) 2 SCR 619 and Mod, Serajuddin v. State of Orissa, AIR 1975 SC 1564. 33. In the Ben Gorm Nilgiri Plantations case (supra) the appellants were sellers of tea and their 17 str-9.02.sxw purchasers were local agents of foreign buyers. The sales were by public auction. The Apex Court held that a transaction of sale which is a preliminary to export of the commodity sold could be regarded as a sale for export, but not necessarily be regarded as one in the course of export, unless the sale occasions export. On facts, the Apex Court found that the sales by the appellants were intended to be complete without the export and as such it could not be said that the sales had occasioned export. The sales were held for export and not in the course of export. 34. In the Coffee Board, Bangalore v. Joint Commercial Tax Officer, Madras, AIR 1971 SC 870 the Apex Court held that the phrase "SALE IN THE COURSE OF EXPORT" authorises not only a sale and an actual export but that the sale must be a part and parcel of the export. The word "occasion" in the context of sale or