Case: Coffee Board, Bangalore Vs. Joint Commercial Tax Officer, Madras &amp; Another

resulted was with the Director-General of Supplies.43. The heart of the matter lies in answering one question. Can two sales occasion an export? I find no difficulty in answering this question in the affirmative. Two sales can take place in the course of export if they are effected by a transfer of documents of title to the goods after the goods have crossed the customs frontier of India, and they both will be protected under Section 5 (1) of the Act. Therefore, it cannot be assumed that it is the intention of Section 5 (1) that only one sale can enjoy the protection of Section 5 (1). Accordingly, apart from any assumption, can two sales occasion the export. As I have said occasion does not necessarily mean to cause or to immediately cause; it also means to "bring about especially in an incidental or subsidiary manner". If the sale by the appellant brings about the export in an incidental or subsidiary manner it can be said to occasion the export. It was in view of these considerations that Shah J., speaking for the Court, had observed in Ben Gorm Nilgiri Plantations Co. v. Sales Tax Officer, (l964) 15 STC 753 at p. 759 = (AIR 1964 SC 1762 at p. 1755)."A sale in the course of export predicates a connection between the sale and export, the two activities being so integrated that the connection between the two cannot be voluntarily interrupted, without a breach of the contract or the compulsion arising from the nature of the transaction. In this sense to constitute a sale in the course of export it may be said that there must be an intention on the part of both the buyer and the seller to export, there must be an 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. A transaction of sale, which is a preliminary to export of the commodity sold may be regarded as a sale for export, but is not necessarily to be regarded as one in the course of export, unless the sale occasions export".44. In this passage Shah, J., clearly visualised that a transaction of sale which is preliminary to export may be regarded as in the course of export if the sale occasions the export. The test postulated may be that there must be ah integral relation or bond between the sale and export. Why Shah, J., held that the sales were not in the course of export was, to use his words :"that the tea chests are sold together with export rights imputes knowledge to the seller that the goods are purchased with the intention of exporting. But there is nothing in the transaction from which springs a bond between the sale and the intended export linking them up as part of the same transaction. ......There is no statutory obligation upon the purchaser to export the chests of tea purchased by him with the export rights. The export quota merely enables the purchaser to obtain export licence, which he may or may not obtain. There is nothing in law or in the contract between the parties or even in the nature of the transaction which prohibits diversion of the goods for internal consumption. The sellers have no concern with the actual export of the goods, once the goods are sold. They have no control over the goods. There is therefore no direct connection between the sale and export of the goods which would make them parts of an integrated transaction of sale in the course of export."45. The case, with respect, points out clearly what was lacking in the transaction. It is one way of laying down tests. If these incidents had not been missing the Court would have surely held the sale to be in course of export.46. It seems to me that this judgment is in effect overruling earlier decisions of this Court without saying so. The Calcutta High Court (Ray and Basu JJ.) reviewed the Supreme Court cases exhaustively in S. K Roy v. Addl. Member, Board of Revenue, 18 STC 379 = (AIR 1967 Cal 338 ) and came to the conclusion that the mere fact that there is no contract between the seller and the foreign buyer does not conclusively establish that a transaction cannot be one in the course of export. It may still be held to be such a transaction provided it is established that the contract between the seller and the third party occasions the export. Basu J., followed this decision in Serajuddin and Co. v. Commercial Tax Officer, (1969) 23 STC 258 (Cal).47. On the facts of this case the Coffee Board, the Sellers, have concern with the actual export of goods. They have made various provisions to see that the purchasers must export. Condition 26, quoted by the learned Chief Justice, clearly provides that the coffee shall be exported to stipulated or approved destinations and it shall not under any circumstances be diverted to another destination, sold or be disposed of or otherwise released in India. If the purchaser commits a default, apart from penalty, it is provided that unexported coffee may be seized. Thus the Coffee Board retains control over the goods. These conditions create a bond between the sale and eventual export. The possibility that in a particular case a purchaser might commit a breach of contract or law end not export does not change the nature of the transaction.48. I would accordingly allow the petition and declare that the sales held by the Coffee Board at the export auctions were in the course of export and exempt under Article 286 (1) (b) of the Constitution, read with Sec. 5 of the Central Sales Tax Act, 1956, and quash the impugned assessments in so far as they assess such sales.ORDER49.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]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) the sale must be a part and parcel of the export. Therefore either the sale must take place when the goods are already in the process of being exported which is established by their having already crossed the Customs frontiers, or the sale must occasion the export. The word occasion is used as a verb and means to cause or to be the immediate cause of . Read in this way the sale which is to be regarded as exempt is a sale which causes the export to take place or is the immediate cause of the export. The export results from the sale and is bound up with it. The word cause in the expression in the course of  means progress or process of  or shortly during. The phrase expanded with this meaning reads in the progress or process of export or during export. Therefore the export from India to a foreign destination must be established and the sale must be a link in the same export for which the sale is held. To establish export a person exporting and a person importing are necessary elements and the course of export is between them. Introduction of a third party dealing independently with the seller on the one hand and with the importer on the other breaks the link between the two for then there are two sales one to the intermediary and the other to the importer. The first sale is not in the course of export for the export begins from the intermediary and ends with the importer.Therefore the tests are that there must be a single sale which itself causes the export or is in the progress or process of export. There is no room for two or more sales in the course of export. The only sale which can be said to cause the export is the sale which itself results in the movement of the goods from the exporter to theobservations were not intended to give exemption to sales for export but to sales in the course of export. One of the indicia of a sale in the course of export is the compulsion to export because the sale which is protected must be itself inextricably bound up with the export. If this were not so a chain of sales each making a mere condition for terminal export, will be exempted and the distinction between a sale for export and a sale in the course of export will completely disappear. In the Ben Gorm Nilgiri Plantations case, (1964) 7 SCR 706   = (AIR 1964 SC 1752  ), even the purchases by agents of foreign importers were described as sales for export. No doubt it was said that the sale to the agents did not contain a compulsion to export to the principal but that was said so that the causal connection between the sale and the export could be established. The compulsion to export here is of a different character. It only compels persons who buy on their own to export in their own turn by entering into another agreement for sale. The first sale is, therefore, an independent sale. It is a sale for export. Even with the compulsion the sale may not result for Clauses 26, 30 and 31 visualize such happenings. It follows, therefore, that unless the sale is inextricably bound up with a particular export it cannot be said to be in its course. If no particular export is in sight the sale by the Coffee Board cannot go beyond the description on sale for export.For these reasons we are of opinion that the decision of the Madras High Court in the case cited above is correct. For the same reasons we are of opinion that this case does not fall within the ruling in Ben Gorm Nilgiri Plantations case. The petitioner cannot claim exemption from the tax and the department was right in demanding the tax. The petitions fail and will be dismissed with costs.