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(iii) to forfeit the deposit if any covered by the conditions contained in Cl. 14(ii).

According to the petitioners prior to the enactment of sub-s(3) of s. 5 of the Central Sales Tax Act, 1956, which was inserted on September 7, 1976 with retrospective effect from April 1, 1976 by the Amending Act (103 of 1976), the exemption from liability to tax under the Act in regard to a sale in the course of the export was and continues to be governed by s. 5(1) of the Act which runs thus "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". The aforesaid provision was examined by this Court in two leading cases, namely, Coffee Board Bangalore v. Joint Commercial Tax Officer, Madras & Anr. and Mohd. Serajuddin etc. v. State of Orissa and a certain interpretation had been accorded by this Court to the expression "in the course of export" and according to these decisions the last sale, immediately preceding the sale occasioning the export of goods out of India (hereinafter called the "penultimate sale"), however closely related to the final export, was held not to be the course of export but only for export and hence liable to tax and according to the petitioners it was with a view to remove the difficulties caused by these and other similar decisions that the Parliament enacted the new sub-s. (3) of s.5 and added a proviso to s.6(1) by the Amending Act (103 of 1976). The newly enacted provisions run thus "5(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 agreement or order for or in relation to such export."

It is true that the language employed in s.5 (3) is a little ambiguous or equivocal and there is no indication in express terms whether the "agreement" mentioned therein necessarily refers to the agreement with a foreign buyer or would include any binding or enforceable agreement to export with a local party and that is why counsel on either side have heavily relied upon the Statement of Objects and Reasons appended to the relevant Bill to show what was the legal po-

sition under s. 5(1) as interpreted by this Court in the Coffee Board's case and Mohd. Serajuddin's case (supra) before the proposed amendment and what was the lacuna or mischief that was sought to be remedied as also the object with which this provision came to be enacted. However, before applying the mischief rule initially enunciated in Heydon's case for arriving at the true construction we propose to examine the new provision rather closely with a view to see whether by implication any indication one way or the other is available from the language thereof. The material words which prescribe the two conditions on satisfying which the penultimate sale is to be regarded as a sale in the course of export are: "If such last sale or purchase (meaning the penultimate sale or purchase) took place after, and was for the purpose of complying with, the agreement or order for or in relation to such export." It is true that Parliament has not said "the agreement or order for or in relation to such sale occasioning the export", but has used the phrase "the agreement or order for or in relation to such export." But in our view two aspects emerge very clearly on a close scrutiny of this phrase which by implication show that the "agreement" spoken of there refers to the agreement with a foreign buyer and not an agreement with a local party containing a covenant to export.

Section 5(1) was construed by this Court in the context of two sales (though both were closely connected with the ultimate exportation of the goods out of India) rather very strictly in two cases, namely, the Coffee Board's case (supra) and Mohd. Serajuddin's case (supra). In the former case in regard to the very export auctions conducted by the Coffee Board for the avowed purpose of exporting the coffee through Registered Exporters (which are the subject-matter of the instant writ petitions) this Court negatived the claim that the sales of coffee at such auctions were made "in the course of export" within the meaning of s. 5(1) on the ground there were two sales, one by the Coffee Board to the intermediary (Registered Exporter) and the other by the intermediary to the importer and that the first sale was not "in the course of export" for the export began from the intermediary and ended with the importer and that the introduction of the intermediary (Registered Exporter) between the seller (Coffee Board) and the importing buyer broke the link. This Court laid down the test that there must be a single sale which itself caused the export and there was no room for two or more sales being "in the course of export". In other words, notwithstanding the compulsion to export arising from Cls. 26, 30 and 31 of the Auction Conditions the penultimate sale was held to be not in the course of export. The latter case (Mohd. Serajuddin's case (supra) was stronger than Coffee Board's case (supra) inasmuch as the penultimate sales (two contracts for sale of mineral ore entered into by Mohd. Serajuddin with State Trading Corporation) were so inextricably connected with the final sales (two corresponding contracts for sale of the identical goods entered into by S.T.C. with foreign buyers) that the former were to stand cancelled if the latter for any reason fell through and vice versa and further the penultimate sales were effected to implement the contracts with the foreign buyers and even then following the ratio of Coffee Board's case (supra) this Court held that the penultimate sales (Mohd. Serajuddin's contracts with S.T.C.) were not sales in the course of export. Negativing the contention that the contracts between Mohd. Serajuddin and the S. T. C. and the contracts between the S. T. C. and the foreign buyer formed integrated activities in the course of export, this Court took the view that the crucial words in s. 5(1) showed that only if a sale occasioned the export, it would be in the course of export and that the two sets of contracts were separate and independent and Mohd. Serajuddin was under no contractual obligation to the foreign buyer either directly or indirectly and that his rights and obligations were only against the S.T.C. It will thus appear clear that even when the S. T. C. had with it foreign buyer's contracts and Mohd. Serajuddin's contracts with S. T. C. had been entered into for the purpose of implementing such foreign buyer's contracts, this Court held that the sales between Mohd. Serajuddin and S. T. C. were not sales in the course of export. It was at this stage i. e. when s. 5(1) was interpreted by this Court in the aforesaid manner that the Parliament felt the necessity of enacting s. 5(3) for the purpose of giving relief in respect of penultimate sales that immediately precede the final (export) sales provided the former satisfy the conditions specified therein. The Statement of Objects and Reasons in this behalf runs thus:

"According to Section 5(1) of the Central Sales Tax Act, a sale of purchase of goods can qualify as a sale in the course of export of the goods out of the territory of India only if the sale or purchase has either occasioned such export or is by a transfer of docu-

ments of title to the goods after goods have crossed the customs frontiers of India. The Supreme Court has held (vide: Mohd. Serajuddin v. State of Orissa, 36 STC

136) that the sale by an Indian exporter from India to the foreign importer alone qualifies as a sale which has occasioned the export of the goods. According to the Export Control Orders, exports of certain goods can be made only by specified agencies such as the State Trading Corporations. In other cases also, manufacturers of goods, particularly in the small scale and medium sectors, have to depend upon some experienced export house for exporting the goods because special expertise is needed for carrying on export trade. A sale of goods made to an export canalising agency such as the State Trading Corporation or to an export house to enable such agency or export house to export those goods in compliance with an existing contract or order is inextricably connected with the export of the goods. Further, if such sales do not qualify as sales in the course of export, they would be liable to State sales tax and there would be a corresponding increase in the price of the goods. This would make our exports uncompetitive in the fiercely competitive international markets. It is, therefore, proposed to amend, with effect from the beginning of the current financial year, Section 5 of the Central Sales Tax Act to provide that the last sale or purchase of any goods preceding the sale or purchase occasioning 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 agreement or order, for, or in relation to, such export." (Emphasis supplied).