Case: Ben Gorm Nilgiri Plantations Company, Coonoor And Ors Vs. Sales Tax Officer, Special Circle, Ernakulam And Ors

circumstances : (1) that it was not part of the contract between the assessees and their buyers that the goods shall only be exported and not sold in the local market. In other words, it was urged that in the absence of such a specific term of contract it would have been open to the buyers to have diverted the goods from being exported and to have sold them locally. This was so far as the contractual relationship between the assessee-sellers and the buyers from them under the sale was concerned. (2) Dealing next with the effect of the provisions of the Tea Act, 1953 and the rules framed thereunder on the sales effected by the assessees the submission was that S. 21 and other provisions of the Tea Act, 1953 merely enabled an export to be effected and did not require the goods in regard to which they were issued to be exported. In other words, it was stressed that the Tea Act did not impose any obligation on the quota holder or his transferee to export the goods covered by the quota and that consequently the buyer-even after taking a transfer of the export quota rights along with his purchase was not compelled by law to export and was not precluded from failing to export and was selling the goods locally. On this reasoning the argument was that here was a purchase under which the purchaser was free to export or not to export and the mere fact that he chose to export would not render the sale to him one which occasioned the export or one in the course of export. 34. We consider that these arguments do not sufficiently take into account the actualities of the situation, but proceed on investing on formal requirements a significance which is not warranted. 35. When learned Counsel says that there was no term in the contract between the seller and the buyer that the goods purchased were not to be sold locally but have to be exported, he is right only in the sense that it is not any express term of the contract. But could it be said that that was not implicit common understanding on which the entire transaction was concluded. The buyer was not interested in the purchase except on terms of the export quota rights being transferred to him and that was why the transfer of the export right was affected or contracted to be effected as part and parcel of the sale of the goods. Again, the buyer was an agent, who as we have stated earlier was not free to deal with the tea purchased by effecting a local sale, but was under an obligation to his foreign principal to export the goods purchased to a foreign destination. It was with such a buyer that the assessee entered into the transaction of sale. On these facts we are satisfied that it was part of the understanding between the seller and the buyer, inferable from all the circumstances attendant on the transaction that the buyer was bound to export. Pausing here, we would add that, we understand that importance is attached in this context to the need of a term in the sale contract laying an obligation on the part of the buyer to export only for the purpose of demonstrating the intimate connection between the sale and the support for establishing that it was the sale that occasioned the export. If we are right, then what is of significance is the real and common intention of the two parties to the transaction-whether they contemplated the goods purchased being sold locally, or whether they intended the goods sold being only exported and not whether there is such a term in the contract between the parties. 36. Coming next to the contention that the Tea Act does not compel export of goods covered by the quotas granted we might mention that no evidence was led as to the prices prevailing in the local market as compared to that in the foreign countries where the principals of the resident buyers resided, which would have disclosed whether a local sale of the tea bought ostensibly for export was in a commercial sense within the bounds of possibility, though if one went by the rationale underlying the provisions of the Tea Act and in particular Ss. 17, 21 and 22, one gets the impression that export quota rights were considered to have a considerable value in the market which would be some indication that a buyer with an export quota would never sell in the local market. Thus it might be that even though the statute does not in terms prohibit internal sale of tea purchased alongwith export quota rights, this could be explained by the circumstance that the right to export tea is considered a privilege which secures economic advantages to the exporter and hence there was no need for any statutory compulsion to do so. We are making this observation because Parliament and the Central Government are keen on promoting exports and in the case of some commodities like sugar where the external price is lower than the local price, the regulations framed in that behalf require exports to be effected under compulsion. We consider, therefore, that the absence of a compulsive provision in the Tea Act requiring export of the quantity allotted to the estates, is not very material and that Parliament might well have left it optional with the estate owners to export seeing that economic factors provided the requisite compulsion. 37. If there was a contract or understanding between the buyer and seller by which the latter was to export the goods bought, it is conceded the sale of the assessee did occasion the export and in our view on the facts established, we consider this condition satisfied. 38. We would, therefore, allow the appeals and set aside the assessment in so far as they included the sales involved in these appeals. ORDER

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

Explanation:
0[ds]We are not concerned to decide whether there was evidence in that case on which the High Court could come to the conclusion that the sale occasioned the export. But Mr. Setalvad relied upon the observation in support of the proposition that in all cases where there is a contract for purchase of goods in the taxing territory, between a local merchant and a foreign buyer Acting through his agent, and the goods are after purchasing the same exported by the agent, transaction must be deemed to be one in the course of export. We are unable to accept the contention. We do not read the judgment as laying down any such proposition, and none such is legitimately deducible. The second transaction in favour of Gordon Woodroffe and Co. was found to be one in which property in the goods passed beyond the customs frontier. Such a transaction would indisputably be a sale in the course of export17. In our view the transaction of sale in the present case did not occasion the export of the goods, even though the appellants knew that the buyers in offering the bids for chests of tea and the export quotas were acting on behalf of foreign principals, and that the buyers intended to export the goods. There was between the sale and the export no such bond as would justify the inference that the sale and the export formed parts of a singe transaction or that the sale and export were integrally connected . The appellants were not concerned with the actual exportation of the goods, and the sales were intended to be complete without the export, and as such it cannot be said that the said sales occasioned export. The sales were therefore for export, and not in the course of export.