Punjab-Haryana High Court
Nipha Exports Pvt. Limited vs State Of Haryana And Ors. on 30 January, 1997
Equivalent citations: (1997)117PLR150
Author: Iqbal Singh
Bench: Iqbal Singh
JUDGMENT G.S. Singhvi, J.
1. Levy of purchase-tax Under Section 9 of the Haryana General Sales Tax Act. 1973 on the goods purchased by the petitioner for the purpose of export out of country has been questioned in this writ petition. The petitioner has prayed for quashing the orders Annexure P-1 to P-3 passed respectively by the Assessing Authority Faridabad, Deputy Excise and Taxation Commissioner (Appeals), Rohtak Circle and the Sales Tax Tribunal, Haryana.
2. The Petitioner is a company registered under the Companies Act, 1956. Its registered office is at Calcutta and a branch office and factory at Faridabad in the State of Haryana, it is engaged in the manufacture and purchase of machinery and machinery parts exclusively for the purpose of export out of the territory of India.
3. During the assessment year 1973-74, the branch office of the petitioner purchased ginning machinery and spare components from registered dealers in the State of Haryana and despatched the same to its head office for export out of India in execution of the orders booked from the foreign buyers. The consignments were sent from Faridabad to Calcutta through train. It is said that no octroi was paid at Calcutta because under the local laws no octroi is payable on the goods which are exclusively meant for export.
4. After the petitioner had filed its return, the Assessing Authority issued a notice for levy of purchase tax. The petitioner produced records of the head office and the branch office and filed an affidavit of Mr. R.K. Sarawagi, Director of the Company, to show that the goods purchased at Faridabad were meant for export out of India. After hearing the representative of the petitioner, the Assessing Authority held that purchase tax amounting to Rs. 43,802.36 was payable by the petitioner. The appeal filed by the petitioner came to be dismissed by the Appellate Authority. The second appeal preferred by the petitioner has been dismissed by the Sales Tax Tribunal, Haryana.
5. Mr. B.K. Jhingan, learned counsel for the petitioner, argued that the respondent have no authority to levy purchase tax on the petitioner in respect of the goods which were purchased by it for the purpose of export out of the territory of India. The learned counsel relied on Section 5(1) of the Central Sales Tax Act, 1956 and the judgments of this Court in international Cotton (Waste) Corporation, Bombay v. The Assessing Authority, Bhatinda, and Ors., (1965) 16 S.T.C. 1045; New Rajasthan Mineral Syndicate v. State of Punjab and Ors., (1965) 16 S.T.C. 534; Janki Dass Bhagat Ram v. The Excise and Taxation Officer, Ludhiana, and Anr., (1965) 16 S.T.C. 542; State of Punjab v. International Cotton (Waste) Corporation, Bombay, and Ors., (1970) 25 S.T. C. 496 and of the apex Court English Electric Company of India Ltd. v. The Deputy Commercial Tax Officer and Ors., (1976) 38 S.T.C. 475.
6. Mr. H.S. Hooda,learned Advocate General, Haryana, argued that the levy of purchase tax Under Section 9 of the Haryana General Sales Tax Act, 1973, is fully justified in view of the fact that the goods purchased by the petitioner at Faridabad did not result in the export thereof. The learned Advocate General strongly relied on the observations made by the Supreme Court in Mohd. Rajuddin v. The State of Orissa, (1975) 36 S.T.C. 136. The learned Advocate General argued that the Assessing Authority had no jurisdiction to rely on the affidavit of Mr. R.K. Sarawagi and as the petitioner had not produced any material to show that it was a unit of M/s Nipha Exports Private Limited, Calcutta and no evidence was produced by the petitioner to establish any nexus between the agreement entered into by the Company at Calcutta and the purchase of goods by the petitioner at Faridabad, the provisions of Section 5 of the Central Sales Tax Act, 1956 cannot be invoked by the petitioner.
7. We have thoughtfully considered the rival submissions and have carefully perused the impugned orders.
8. At the outset, it must be mentioned that the statement made in para 1 of the writ petition to the effect that the petitioner is a company having its registered office at Calcutta and branch office at Faridabad has not been denied by the respondents. Rather, the respondents have stated that para 1 of the petition is not denied. Absence of denial of the assertions made in para 1 of the writ petition amounts to the admission thereof.
9. Article 286 of the Constitution of India and Section 5 of the Central Sales Tax Act, 1956, read as under;-
Article 286 of the Constitution:
"286. Restrictions as to imposition of tax on the sale or purchase of goods.-(1). No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place -
(a) outside the State; or
(b) in the course of the import of the goods into, or export of the goods out of, the territory of India. (2) Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in Clause (1). (3) Any law of a State shall, in so far as it imposes, or authorises the imposition of, -
(a) a tax on the sale or purchase of goods declared by Parliament by law to be of special importance in inter-State trade of commerce; or
(b) a tax on the sale or purchase of goods, being a tax of the nature referred to in Sub-clause (b), Sub-clause (c) or Sub-clause (d) of Clause (29-A) of Article 366.
be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax of Parliament may by law specify."
Section 5, Central Sales Tax Act, 1956:
"5. When is a sale or purchase of goods said to take place in the course of import or export - (1) A sale or purchase of goods shall be deemed to take place in the course of the export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India.
(2) A sale or purchase of goods shall be deemed to take place in the course of the import of the goods into the territory of India only if the sale or purchase either occasions such import or is effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India.
(3) Notwithstanding anything contained in Sub-section (1), the last sale or purchase of any goods preceding the sale or purchase occasioning the export of those goods out of the territory of India shall also be deemed to be in the course of such export, if such last sale or purchase took place after, and was for the purpose of complying with, the argument or order for in relation to such export."
10. On a cumulative reading of the above-quoted provisions, it becomes clear that the State is not authorised to impose tax on the sale or purchase of goods where such sale or purchase takes place in the course of export of the goods out of the territory of India. By virtue of Article 286(2) of the Constitution, the Parliament is entitled to formulate principles for determining when a sale or purchase of goods takes place in the course of export of goods out of the territory of India. In exercise of this power, the Parliament has enacted the Section 5 of the Central Sales Tax Act, 1956 which contains a deeming clause. As per Section 5(1), a sale or purchase of goods shall be deemed to take place in the course of the export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India.
11. In International Cotton (Waste) Corporation Bombay's case (supra), a learned Single Judge dealt with the provisions of Section 5(2)(a)(vi) of the Punjab General Sales Tax Act, 1948 in the context of the export of goods by the petitioner, which had its head office at Bombay and branch office Bathinda. The purchases were made at Bathinda and the goods were sent to Bombay for export. After considering the rival contentions, the learned Single Judge held:
"If a person carries on business at two places under the same name he will continue to have one entity and not two simply because he has business centres at two places. The respondents admitted, as is also clear from the impugned assessment order (copy annexure A), that the cotton purchased by the Bhatinda branch office was exported by the head office at Bombay to foreign countries. The Bhatinda branch office can be said to have purchased the cotton in the course of export out of the territory of India. It was, therefore, not proper for the Assessing Authority to hold that since the purchases of cotton were made by the branch office at Bhatinda and the cotton was then transferred to the head office at Bombay which in turn exported it outside India, the exemption claimed by the petitioners Under Section 5(2)(a)(vi) of the Act could not be granted. In view of the matter, the Assessing Authority should have allowed the exemption claimed by the petitioners from their gross turnover Under Section 5(2)(a)(vi) of the Act and the omission to do so invalidated the impugned order"
12. In New Rajashtan Mineral Syndicate's case (supra), a learned Single Judge observed as under:-
"The petitioner was engaged in the export of iron ore to Japan, but by reason of control on the commodity, the export had to be made through the State Trading Corporation, which in turn, for its facility, had appointed a broker. Under the agreement if the goods were rejected either at the port or by the foreign buyers the loss would fall on the petitioner and at no point of time the property in the goods passed to the broker or to the State Trading Corporation. On the question whether the sale was liable to sales tax :
Held, that the sale was a sale in the course of export and therefore exempt under the provisions of Article 286 of the Constitution and Section 5 of the Central Sales Tax Act, 1956."
13. In State of Punjab v. International Cotton (Waste) Corporation, Bombay, and Ors., (l970) 25 S.T.C. 496 (supra), a Division Bench affirmed the decision of the learned Suigle Judge in International Cotton (Waste) Corporation, Bombay v. The Assessing Authority, Bhatinda, and Ors., (1965) 16 S.T.C. 1045 (supra) and held that the assessee was entitled to deduct from its gross turn-over Under Section 5(2)(a)(vi) of the Punjab General Sales Tax, Act, 1948 the amount spent on the purchase of cotton.
14. In Mohd. Serajuddin's case (supra) their lordships interpreted Section 5 of the Central Sales Tax Act and Article 286(1)(b) of the Constitution of India and held as under;-
"(i) that the corporation alone agreed to sell the goods to the foreign buyer and was the exporter of the goods. There was no privity of contract between the appellant and the foreign buyer. The privity of contract was between the corporation and the foreign buyer. The immediate cause of the movement of goods and export was the contract between the foreign buyer who was the importer and the corporation who was the exporter and shipper of the goods. All relevant documents were in the name of the corporation whose contract of sale was the occasion of the export. The expression "occasions" in Section 5 of the Act means the immediate and direct cause and, but for the contract between the corporation and the foreign buyer, there was no occasion for export. Therefore, the export was occasioned by the contract of sale between the corporation and the foreign buyer and not by the contract of sale between the corporation and the appellant. The circumstances that the appellant send the goods directly to the corporation to facilitate the performance of the contract between the corporation and the foreign buyer on terms which were similar did not make the contract between the appellant and the corporation the immediate cause of the export. The appellant was under no contractual obligation to the foreign buyer either directly or indirectly. The rights of the appellant were against the corporation. Similarly the obligations of the appellant were to the corporation. The foreign buyer could not claim any right against the appellant nor did the appellant have any obligation to the foreign buyer. All acts done by the appellant were in performance of the appellant's obligation under the contract with the corporation and not in performance of the obligations of the corporation to the foreign buyer;
(ii) that there was no principal and agent relationship between the appellant and the corporation and in the absence of such relationship the agency of necessity did not arise. The relationship between the appellant and the corporation was between two principals and there was no aspect whatever of principal and agent;
(iii) that the mention of the f.o.b. price in the contracts between the appellant and the corporation did not render the contracts f.o.b. contracts with the foreign buyer. The shipment of the goods by the contract to which the appellant was not a party. The directions given by the corporation to the appellant to place the goods on board the ship were pursuant to the contract of sale between the appellant and the corporation. These directions were not in the course of export, because the export sale was an independent one between the corporation and the foreign buyer. The taking of the goods from the appellant's place to the ship was completely separate the transit pursuant to the export sale;
(iv) that the fact that the exports could be made only through the State Trading Corporation did not have the effect of making the appellant the exporter where there was direct contract between the corporation and the foreign buyer. Restriction on export that export could be made only through the State Trading Corporation was a reasonable restriction, and was valid;
(v) that the High Court was therefore right in holding that the sales of the appellant to the Corporation were exigible to tax because they were not sales in the course.
15. Having carefully gone through the various decisions relied upon by the learned counsel for the parties we are of the opinion that the view taken by the two learned Single Judges and the Division Bench of this Court directly applies to the facts of this case. The decision of the Supreme court in Mod. Serajuddin's case (supra) has no bearing on the facts of this case because in that case it was found by the apex Court that the appellant was under no contractual obligation to the foreign buyer either directly or indirectly and his rights were against the corporation. Their lordships also point out that obligations of the appellant were to the corporation and not qua the foreign buyer and all the acts done by the appellant were in performance of the appellant's obligations under the contract with the corporation and not in performance of the obligations of the corporation to the foreign buyer. The Court held that there was no principal and agent relationship between the appellant and the corporation.
16. The orders passed by the Assessing Authority, the Appellate Authority and the Tribunal which have been impugned in this writ petition, clearly show that the petitioner-company has its registered office at Calcutta and the branch office at Faridabad. It has also been proved by the petitioner that the goods purchased by the branch office were sent to the head office at Calcutta for the purpose of export and the same were, in fact, exported. The Assessing Authority recorded a categorical finding that the record produced by the assessee showed that the orders were received directly by the head office from the foreign countries and the goods were not exported directly by the Faridabad dealer. The Tribunal did not record a finding that the head office at Calcutta and the branch office at Faridabad were two different entities. Rather, it held that this aspect of the case was not very much relevant. The Tribunal further observed that the State has not come out with a case that the goods were sold by the branch office at Faridabad to the head office at Calcutta; and, in fact, the movement of the goods from Faridabad to Calcutta was made in the course of export of goods outside the' territory of India within the meaning of Section 5(1) of the Central Sales Tax Act as it stood before 1.4.1976. However, the Tribunal rejected the claim of the petitioner on the ground that the movement of gods from branch office at Faridabad to the head office being a movement preceding the one whicfsh caused movement of goods from Calcutta to outside India, cannot be regarded as taking place in the course of export of the goods out of the territory of India. In our considered opinion. The Tribunal and other adjudicating authorities have seriously erred in holding that the movement of the goods from Faridabad to Calcutta was not occasioned in the course of export out of the territory of India. In ; our opinion, the Tribunal has seriously erred in invoking the ratio of the decision of ' the apex Court in Mohd. Sera Juddin's Case (Supra) without applying mind to the background in which the observations were made by the Supreme Court.
17. For the reasons mentioned above, the writ petition is allowed. The orders Annexures P-1, P-2 and P-3 are declared illegal and the same are quashed. The parties are left to bear their own costs.