Case: C.T. Ltd., &amp; Anr Vs. Commercial Tax Officer &amp; Ors

2. The position being common, the facts that are referred to are the facts of CA No. 1622 of 1990, where Hindustan Sheet Metal Limited is the appellant3. The State Trading Corporation entered into a contract with the Government Trading Corporation of Iran whereunder 550 metric tonnes (5% more or less) of unblended Assam tea were to be supplied. In turn, STC entered into a contract on 4-8-1986, with the appellants for the tea, to which a copy of STCs contract with the Iranian buyer was annexed4. Pursuant to the contract between STC and the appellants, the appellants purchased from tea auctions the tea to be supplied under the aforesaid contracts. The deliveries of the tea were made to the Iranian buyer under the aforesaid contracts. In June 1987, the appellants received letters from the auction brokers from whom the tea was purchased which stated that the auction brokers had received notices from the respondent Sales Tax authorities requiring the appellants to pay sales tax upon the purchases of tea from the auction brokers. The appellants filed the writ petition praying for a declaration that the sale of the tea by the auction brokers to the appellants was exempt from payment of sales tax under the provisions of Section 5(3) ofthe Central Sales Tax Act, 1956. The writ petition was transferred for hearing to the West Bengal Taxation Tribunal. The Tribunal, after hearing the parties, came to the conclusion that the sales of the tea by the auction brokers to the appellants were not exempt from the levy of sales tax under Section 5(3). Hence, the appeal

Reasoning:
15. In our view, no term in the contract between the appellants and STC clearly contemplates a sale, that is, the transfer of property in tea from the appellants to STC. Such indication as there is to the contrary, particularly the requirement that the appellants should prepare all documents required for negotiation and the "sellers official invoice ... should be in 5 copies". The requirement that the words "A/c STC" be used was only to enable the Iranian buyer to identify the tea as being sent in fulfilment of the obligation under the contract between STC and itself16. The manner in which the contract between the appellants and STC was executed reinforces our view. The Tea Export Licence for the tea was that of the appellants. The invoice of the appellants showed the Iranian buyer against the column "Sold To", and no objection in this regard was raised by STC. The duty drawback benefit accrued entirely to the appellants. The Bill of Lading issued by the Irano-Hind Shipping Co. Ltd. showed the Iranian buyers Tehran bank as consignee of the tea shipped by the appellants17. Certainly, there is no endorsement on the Bill of Lading in favour of STC that would suggest transference to it of title in the tea. The typing of the words "A/c. The State Trading Corporation of India" below the name and address of the appellants against the column shipper does not constitute an endorsement. There was no endorsement upon the Bill of Lading signed by or on behalf of the Tehran bank, which is the consignee, or the Iranian buyer18. There is, therefore, nothing in the contract between the appellants and STC or in the manner of its execution that establishes that there was a transfer of the property in tea by the appellants to STC before it was transferred to the Iranian buyer. Hence, the purchase of the tea by the appellants at the auctions in fulfilment of the export obligation to the Iranian buyer was the penultimate sale in the course of export and covered by the terms of Section 5(3). It was, accordingly, exempt from the payment of sales tax