Madhya Pradesh High Court
Steel Authority Of India Ltd. vs Commissioner Of Sales Tax on 2 February, 1995
Equivalent citations: 1995(0)MPLJ966
Bench: Chief Justice, Rajeev Gupta
JUDGMENT U.L. Bhat, C.J.
1. The following questions have been referred by the Board of Revenue (Appellate Tribunal) at the instance of the assessee under Section 44(1) of the M. P. General Sales Tax Act, 1958 (for short, the Act):
"1. Whether under the facts and circumstances of the case, the sales amounting to Rs. 72,32,754.00 through the mediators were sales in the course of export out of the territory of India under Section 5(i) of the Central Sales Tax Act, 1956, and is exempted from sales tax?
2. Whether under the facts and circumstances of the case, the Board of Revenue is justified in holding that to constitute an export sale effected by transfer of documents of title to the goods after such goods have crossed the customs frontier of India, under the second limb of Section 5(i) of the Central Sales Tax Act, 1956, there should be only two parties, i.e. an Indian seller and a foreign buyer?"
2. The assessee is a public sector undertaking engaged in manufacture of pig iron and steel. The assessee sold steel worth Rs. 72,81,754.00 through Indian Export Houses and pleaded that the sales have been made in the course of export outside the territory of India and were entitled to exemption under Section 5(1) of the Central Sales Tax Act, 1956. First appeal preferred by the assessee was dismissed. Further appeal before the Tribunal was also dismissed. Hence this reference.
3. The assessing officer indicated in his order that detailed reasons have been given in the order under the State Act. That order is not before us: The First Appellate Authority indicated that the point has been decided by it against the assessee in the appeal filed under the State Act. That order also is not before us.
4. The Tribunal referred to the terms of the agreement between the assessee and the Indian buyer. The agreement did not refer to the name of the foreign buyer. Goods were to be put on the board by the assessee and loading charges were to be recovered by the assessee from the Indian buyer. Payment was to be made by the Indian buyer to the assessee after the goods were put on the board vessel and the Indian buyer was to export the goods on the strength of licence of the assessee. At the time of agreement, the Indian buyer had not located the foreign buyer. The Board of Revenue referred to the decision in Member, Board of Revenue, West Bengal v. M/s Swaika Oil Mills, 1978 VKN (ll)-l = AIR 1977 SC 2008 and opined that the facts in that case were similar to the facts of the present case. The Tribunal noticed that the bill of lading, though obtained by the assessee, was made in the name of the Indian buyer and came to the conclusion that the case is governed by the decision of the Supreme Court in Swaika Oil Mills case (supra) and the sale was not in the course of export earning exemption under Section 5(1) of the Central Sales Tax Act.
5. The view of the Assessing Authority was affirmed by the First Appellate Authority as also the Board of Revenue (Appellate Tribunal). The Board, at the instance of the assessee, has made a reference to this Court.
6. Section 5(1) of the Central Sales Tax Act, as it then stood, read as follows :
"As sale or purchase of goods shall be deemed to take place in the course of the export of the goods out of 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."
The deeming provisions shall apply in two cases, namely : (i) if the sale or purchase occasions in respect of goods out of the territory of India or, (ii) if the sale is effected by transfer of documents of title to the goods after they had crossed the customs frontiers of India. The transactions in the present case cannot be regarded as sales which occasion export of goods out of the territory of India on the basis of tests indicated by the Supreme Court in Mohd. Serajuddin v. The State of Orissa, AIR 1975 SC 1564 and in Member, Board of Revenue, West Bengal v. M/s Swaika Oil Mills, AIR 1977 SC 2008. In those cases, the second alternative contemplated in Section 5(1) was not considered.
7. The second alternative contemplated in Section 5(1) has been considered in a number of decisions of this Court. See Hindustan Steel Ltd., Bhilai Steel Plant v. The State of M. P. and others, (1982) 50 STC 287, Steel Authority of India, Bhilai v. Commissioner of Sales Tax, M. P., (1988) 71 STC 344 and Steel Authority of India v. Commissioner of Sales Tax, M.P., (1988) 71 STC 388. All these cases relate to the assessec in this case. In the first of these cases, it was held that the assessee did not enter into direct contract with foreign buyers in respect of sales and the assessee sold the goods to the export promoters and, therefore, the sale did not qualify for exemption as export sales under the first limb of Section 5(1) of the Act. The Court further held that the title in the goods passed not at the time of shipment, but later when the documents of title changed from the petitioner to the export promoters when the bill of lading was negotiated and payment was received. The first condition of the second limb of Section 5(1) that the sale should be effected by documents of title to the goods was satisfied. As regards the second condition in the second limb, namely transfer of documents of title after the goods crossed the customs frontiers of India, the Court held that the matter was not considered and decided by the First Appellate Authority and accordingly remanded the case. In the latter two cases, this Court held that the Board of Revenue was not justified in holding that the sales were not covered by the second part of Section 5(1) without giving a finding on the questions as to whether the sales were effected by transfer of documents of title to the goods and whether that was after the goods crossed the customs frontiers of India.
8. It is, therefore, clear that even where a sale does not fall within the first part of Section 5(1) of the Act, it can attract the second part of Section 5(1). The Statutory Authority and the Appellate Authority ought to have considered this aspect of the case. Decision on the question without finding whether the two necessary conditions contemplated in the second limb of Section 5(1) of the Act would not be sustainable. The consequence is that the Board of Revenue will have to rehear the appeal and decide the matter afresh.
9. In the result, we hold that the question whether the disputed sales were exempt from sales tax would rest on the finding to be recorded as to whether the sales were effected by transfer of documents of title to the goods after the goods crossed the customs frontier of India and without deciding this question, the Board of Revenue was not justified in holding that the sales did not constitute sales in the course of export of goods.
10. A copy of this order under the signature of the Registrar and seal of the High Court be transmitted to the Board of Revenue.