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

2. The petitioner is a statutorily constituted body and functions underthe Coffee Act, 1942 (VII of l942). This Act was passed to provide for the development under the Control of the Union of the Coffee Industry. Its main function is to constitute a Coffee Board. Previously there was an Ordinance intituled the Indian Coffee Market Expansion Ordinance, 1940 (13 of 1940). A Board called the Indian Coffee Market Expansion Board was constituted under the Ordinance. The same Board now continues under the name Coffee Board. On this Board, all interests are represented and some members of Parliament and Officers of Government have also places Sections 4 to 10 of the Act are concerned with the setting up of the Board. As nothing turns upon the constitution of the Board, it is not necessary to give the gist of those sections here. The Act imposes duties of Customs and Excise - the former on all coffee produced in India and exported from India and the latter on coffee released by the Board for sale in India from its surplus pool. The Act compels the registration of all owners of coffee Estates and licensing of curers and dealers. The Act next imposes a control on the sale, export and re-import of coffee into India. In respect of sale, it fixes prices for sale of coffee either wholesale or retail by registered owners and licensed curers for the purpose of sale in the Indian Market. The Board fixes internal sale quota for each Estate owner and the owner has to observe this quota and also the price fixed. The registered owner may not sell coffee unless it has been cured by a licensed establishment or it is sold uncured under a special licence. The Act next prohibits the export of coffee from India otherwise than by the Board or under the authorization granted by the Board. To this restriction, there are a few minor exceptions such as coffee in specified quantities may be exported by taking on board ships or aircrafts intended for consumption of the crew and the passengers or carried by a passenger for his own use or exported for special purposes specified by the Central Government. The Government is authorised to specify the total quantity of coffee to be exported during any year. Coffee once exported cannot be re-imported into India except under a permit. The registered owners are required to furnish periodical returns and to furnish such information as may be prescribed. Every registered owner after dealing with the coffee for sale in Indian markets up to the internal quota fixed for him must hand over to the Board all surplus coffee to be included in the Boards Surplus Pool. Similarly, curing establishments are required to surrender to the Board all surplus coffee. Small producers may, however, be exempted from the operation of this condition. After the coffee is delivered to the Board, the control of the Board begins. The Board classifies the coffee and assesses its value based on its quantity, kind and quality. Once the coffee is delivered to the Board, the registered owner or the licensed curer has no rights over the coffee except to receive its price in accordance with Section 34 of the Act.

Reasoning:
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.