B.P. Colabawalla, J.
1. Rule. By consent of parties made returnable forthwith and heard finally.
The present Writ Petition has been filed under Article 226 of the Constitution of India challenging the order of revision dated 25th May 2011 passed by Respondent No.3 and the consequent demand notice of the same date, demanding an amount of Rs.2,16,98,270/- under the Bombay Sales Tax Act, 1959 (BST Act). The challenge has also been laid to the order of Maharashtra Sales Tax Tribunal (MSTT) in Appeal No.224 of 2011 confirming the aforesaid demand of sales tax.
2. At the outset, Mr. Ankhad, the learned AGP appearing on behalf of the Respondents raised a preliminary objection to the maintainability of the Writ Petition on the ground that the Petitioner had not exhausted the alternate remedies under the BST Act. He submitted that the alternate remedy available to the Petitioner was filing a Reference Application against the final order of the MSTT under section 61 of the BST Act. This remedy had admittedly not been exhausted by the Petitioner, and hence the Writ Petition deserved to be dismissed, is the submission of Mr. Ankhad. We have rejected this argument for the reasons set out later in this judgment.
3. The short but very interesting question that has arisen for consideration before us is the interpretation of Section 5 of the Central Sales Tax Act, 1956 (CST Act) and in particular sub-section 3 thereof. Section 5(3) interalia provides that 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 in relation to such export. In the facts of the present case under a purchase order/agreement dated 5th March 2004 M/s. Crown Corporation Pvt Ltd (hereinafter referred to as âM/s. Crownâ) required the Petitioner to supply Submarine Navy Batteries of the type and specifications more particularly set out therein. On 25th May 2004 the Algerian Navy placed a purchase order on M/s. Crown, for the supply of Submarine Navy Batteries. On 14th September 2004, the Petitioner sold and supplied Submarine Navy Batteries to M/s. Crown, who in turn exported the same to the Algerian Navy. The ARE -1 was prepared by the Petitioner on 14th September 2004 showing the Petitioner as the seller, M/s. Crown as the purchaser, and the Algerian Navy as the consignee. In these circumstances, the Petitioner contends that the sale effected by them of Submarine Navy Batteries to M/s. Crown, is exempt from the levy of sales tax under the BST Act by virtue of the provisions of Section 5(3) of the CST Act. On the other hand, the Respondents contend that since the purchase order placed by M/s. Crown on the Petitioner on 5th March, 2004 was before the date when the Algerian Navy placed the purchase order on M/s.Crown (i.e. on 22nd May, 2004), the sale by the Petitioners to M/s. Crown did not take place after, and for the purpose of complying with, the agreement or order of the Algerian Navy (i.e. on 22nd May, 2004). It was therefore not âfor or in relation to such exportâ as contemplated under the provisions of section 5(3) of the CST Act. It is in this light that we are called upon to decide the interpretation of the said provision. After adverting to the facts, we will analyze the provisions of the CST Act in some depth, later in this judgment.
4. The brief and undisputed facts are that, the Petitioner is a company incorporated under the Companies Act 1956 and inter-alia engaged in the manufacturing of Submarine Navy Batteries. M/s. Crown placed a purchase order in the form of an agreement dated 5th March 2004 on the Petitioner for the supply of Submarine Navy Batteries. The said agreement inter-alia provided that M/s. Crown had signed a contract with MDN, Algeria for export of batteries as per the specifications mentioned therein and that M/s. Crown has informed the Petitioner that the batteries covered under the said agreement were ultimately to be supplied for use by the said MDN, Algeria. For the sake of convenience, the relevant portions of the said agreement are reproduced hereunder:-
âWHEREAS
1. The Buyer had signed a contract with MDN, Algeria (hereinafter referred to as the âEnd Userâ) for the export of 1 set of Type I batteries consisting of 240 cells + 10 spare cells (specifications as per Annexure I attached herewith) hereinafter referred to as the Batteries suitable for Kilo Class Submarines.
2. The Buyer has informed the Supplier that the Batteries covered under this Agreement are ultimately to be supplied for the use by the End User and that payment for the same will be made through the Buyer's Bankers in India.
3. In view of the aforesaid Agreement between the CCPL and EIL, the Supplier has agreed to supply the Batteries to the Buyer for export to the End User, on the terms and conditions contained herein.â
âTHIS DEED WITNESSETH AS FOLLOWS:
11. DESPATCH AND TRANSPORT:
As soon as the batter is available for dispatch, the supplier shall inform the Buyer of the following details:
a. The size of the lot (tonnage, volume)
b. The particulars of the lot(number of package, weight and volume per package.
c. Nature of the packaging and dimensions.
d. Number of the contract or clauses.
The Buyer shall arrange to make available, suitable containers at the factory and also nominate a vessel bound for Algeria within 15 days of such information. The supplier shall thereafter put the goods on F O B Mumbai. For this purpose, the Buyer shall arrange payment of sea freight and insurance and furnish necessary documents for Supplier's clearing agents in time.â
(emphasis supplied)
5. The technical conditions of the said purchase order / agreement further provided that the Petitioner shall supply following information in English as well as the French language.
â18. TECHNICAL CONDITIONS
The Supplier shall supply the following in English and French along with the battery.
18.1 The labels as well as the stamp of the manufacturing date (name of the factory as well as the week and year of manufacture) for all cells.
18.2 Type of battery, voltage and ampere hours for all cells.
18.3 The instructions for the preservation of the goods against humidity, heat and direct effect of atmosphere on the battery.
18.4 The mode of preservation and exploitation according to the instructions of the supplier for the battery.
18.5 The supplier should put in each case, a copy of the packing list with a mention of the content of the goods in French language.
In each label the following will be indicated.
. Number of Agreement/contract.
. Number as well as the weight of the cases in accordance with the delivery challan.â
(emphasis supplied)
6. Thereafter, on 25th May, 2004 the Algerian Navy placed a purchase order on M/s. Crown for the supply of Submarine Navy Batteries. As per the said purchase order / agreement dated 5th March 2004, the Petitioner, on 14th September, 2004 sold and supplied the Submarine Navy Batteries to M/s. Crown. Since the Submarine Navy Batteries were exported directly from the Petitioners factory, the Petitioner prepared ARE -1 showing the Petitioner as the seller, M/s. Crown as the purchaser, and the Algerian Navy as the consignee. It is not in dispute before us that the said Submarine Navy Batteries have in fact been exported out of India.
7. Pursuant to the aforesaid export, on 20th March, 2006 M/s. Crown issued to the Petitioner Form 'N-14-B' inter-alia certifying that pursuant to the purchase order dated 5th March 2004, the Petitioner had sold and supplied vide their Bill Nos.1 to 14 dated 14th September 2004, the said Submarine Navy Batteries for a consideration of Rs.11,12,21,500/-. It was further certified that the same had been sold by the said M/s.Crown in the course of export out of the territory of India, to the Algerian Navy pursuant to the purchase order dated 22nd May 2004. Accordingly, it was certified that said goods purchased from the Petitioner were for the purpose of complying with the agreement or order of the Algerian Navy dated 22nd May, 2004.
8. Accordingly, the sale by the Petitioner to M/s. Crown worth Rs.11,12,21,500/- was claimed as penultimate sale for export, and hence exempt from tax under section 5(3) of the CST Act. In fact, for the year 2003-04 the said sale was treated as an export sale not liable to sales tax under the BST Act in the assessment order passed on 31st May, 2006.
9. Thereafter, under section 62 of the BST Act, the Petitioner received a notice for rectification of the order dated 31st May 2006, on the ground that there was no pre-existing purchase order between M/s. Crown and the Algerian Navy, before the purchase order was placed by M/s. Crown on the Petitioner. In other words, it was the contention of the Revenue that since the purchase order placed by M/s. Crown on the Petitioner for the supply of Submarine Navy Batteries preceded the purchase order placed by Algerian Navy on M/s. Crown, the conditions of section 5(3) of the CST Act were not satisfied and the sale allowed on the strength of Form N-14-B was sought to be disallowed and appropriate tax, penalty and interest was sought to be levied on the transaction.
10. In reply to the said notice, the Petitioner by their letter dated 26th May 2008 objected to the notice for rectification and inter-alia contended that their case was covered by the judgment of the Supreme Court in the case of Consolidated Coffee v/s Coffee Board reported in (1980) 3 SCC 358.
11. Respondent No.2 passed his rectification order on 31st May 2008 inter-alia holding that the judgment of the Supreme Court in the case of Consolidated Coffee (supra) was not applicable. In view thereof, the 2nd Respondent held that the sale by the Petitioner to M/s. Crown was liable to be taxed under the BST Act and called upon the Petitioner to pay an amount of Rs.1,82,75,256/- and issued a demand notice accordingly.
12. Being aggrieved by the said rectification order and demand notice, the Petitioner filed Writ Petition No.6136 of 2008 before this court inter-alia seeking quashing of the rectification order and the notice of demand.
13. This court, by its order dated 24th September 2008 set aside the rectification order and remanded the matter back to the Assessing Authority for passing of a fresh order after giving a reasonable opportunity to the Petitioner of being heard in the matter. This court, in paragraphs 4, 5 and 6 observed as follows:
â4. In our opinion, this is a most unsatisfactory manner of dealing with the matters by a quasi-judicial authority. When a binding precedent is brought to the notice of the authority, least that is expected of the authority that the authority shall apply its mind to the applicability of the binding precedent and if the same is not applicable, indicate reasons why according to them, the same is not applicable.
5. In our opinion, therefore, the order impugned in this petition will have to be set aside. In our opinion, therefore, following order would meet the ends of justice.
6. The order impugned in this petition and the demand notice pursuant to that order are set aside. The proceedings are remitted back to the Deputy Commissioner of Sales Tax for de-novo consideration and decision in accordance with law.â
14. Pursuant to the above order, Respondent No.3 issued a notice dated 14th September 2009 seeking to revise the assessment order. The Petitioner made its representations against the said notice and also filed written submissions. The petitioner once again contended that its case was covered by the judgment of the Supreme Court in the case of Consolidated Coffee (supra). The Petitioner therefore, contended that the Revision was not maintainable. Vide his order dated 25th May 2011, Respondent No.3 confirmed the demand of sales tax under BST Act inter-alia holding that the judgment of the Supreme Court in Consolidated Coffee (supra) was not applicable. Respondent No.3 in its revision order, inter-alia, placed reliance on the judgments of the Supreme Court in the case of Saraf Trading Corporation Etc. Etc. v/s State of Kerala reported in 2011 (38) VST 1 (SC): (2011) 2 SCC 344; and The State of Karnataka Vs. Azad Coach Builders (P) Ltd reported in 2010 (36) VST 1 (SC): (2010) 9 SCC 524 and held that the Petitioner had failed to prove the inextricable link between the sale made to M/s. Crown and the subsequent export by M/s. Crown to the Algerian Navy. In view thereof, Respondent No.3 held that the sale by the Petitioner of the Submarine Navy Batteries to M/s. Crown was liable to be taxed under the BST Act and a demand was raised for Rs.2,16,98,270/- including tax, interest and penalty.
15. Being aggrieved by the revision order dated 25th May 2011, the Petitioner filed an Appeal before the MSTT challenging the validity of the said order. The MSTT, vide its order dated 22nd November 2012, dismissed the Appeal filed by the Petitioner and confirmed the demand raised by Respondent No.3. Being aggrieved by the revision order dated 25th May 2011 passed by Respondent No.3 and the Appeal order dated 22nd November 2012 passed by the MSTT, this Writ Petition has been filed.
16. Before touching the merits of the matter, we shall first deal with the preliminary objection raised by Mr Ankhad on the issue of availability of an alternate remedy. As set out earlier, Mr Ankhad submitted that in the present case, an alternate remedy is available to the Petitioner against the final order passed by the MSTT dated 22nd November 2012, by filing a Reference Application under section 61 of the BST Act. As the Petitioner had not exhausted this alternate remedy, this Writ Petition should not be entertained and deserves dismissal, is the submission.
17. On the other hand, Mr Sridharan, the learned Senior Counsel appearing on behalf of the Petitioner, submitted that in the undisputed facts of the present case, there was a complete lack of jurisdiction on the part of Respondent No.3 in levying sales tax on the sale of Submarine Navy Batteries by the Petitioner to M/s Crown, inasmuch as the said sale was a penultimate sale covered under section 5(3) of the CST Act. He submitted that the levy of the said sales tax was contrary to, and in the teeth of Article 286 of the Constitution of India read with section 5 of the CST Act, and therefore not within the competence of the taxing authority under the BST Act. Additionally, he submitted that the order of Respondent No.3 as well as that of the MSTT were ex-facie contrary to a binding judgment of the Supreme Court in the case of Consolidated Coffee (supra) and therefore, no useful purpose would be served in relegating the Petitioner to make an application to the MSTT to refer the matter to the High Court under section 61 of the BST Act, when this Court could decide the very same question in this Writ Petition, and more so when the facts were undisputed.
18. To understand this controversy, it is necessary to analyze Article 286 of the Constitution of India. It reads as under:-
â286. Restrictions as to imposition of tax on the sale or purchase of goods.â
(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 placeâ
(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,â
(a) a tax on the sale or purchase of goods declared by Parliament by law to be of special importance in inter-State trade or 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 as Parliament may by law specify.â
19. An analysis of the said provisions reveal that under Article 286(1) (b) of the Constitution of India, no law of a State shall impose, or authorise the imposition of sales tax on the sale or purchase of goods when such sale or purchase takes place in the course of import or export of goods. Article 286(1) prohibits imposition of sales tax on import and export by the State Government. Article 286(2) authorises Parliament to formulate principles for determining when a sale is in the course of import/export. The CST Act has been enacted by Parliament pursuant to Article 286(2) of the Constitution of India. Section 5 in its current form reads as under:-
5. When is a sale or purchase of goods said to take place in the course of import or export.â
(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 agreement or order for or in relation to such export.
(4) The provisions of sub-section (3) shall not apply to any sale or purchase of goods unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner a declaration duly filled and signed by the exported to whom the goods are sold in a prescribed form obtained from the prescribed authority.
(5) Notwithstanding anything contained in sub-section (1), if any designated Indian carrier purchases Aviation Turbine Fuel for the purposes of its international flight, such purchase shall be deemed to take place in the course of the export of goods out of the territory of India.
Explanation.âFor the purposes of this sub-section, âdesignated Indian carrierâ means any carrier which the Central Government may, by notification in the Official Gazette, specify in this behalf.â
20. For the purposes of this Writ Petition, we are concerned with sections 5(1) and 5(3). Under section 5 of the CST Act the sale or purchase of goods is deemed to be in the course of export of goods out of the territory of India if:-
(i) 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 as set out in section 5(1); or
(ii) 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, 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 as set out in section 5(3).
Therefore, under Article 286 of the Constitution read with section 5 of the CST Act, the court has to examine whether any tax is being imposed by the State Legislature on the sale or purchase of goods being imported into, or exported out of the territory of India. If it does so, then the same would be in the teeth of Article 286.
21. After analyzing the aforesaid provisions, in the peculiar facts of the present case, we find that the submission of Mr Sridharan is well founded. The issue involved, questions the very power and competence of the authorities under the BST Act to levy sales tax thereunder. It is trite law that the availability of an alternate remedy is not a bar to the entertainment of a writ petition but is in fact a matter of discretion. In the ordinary course, this Court would refuse to issue a high prerogative writ when an alternate remedy is available to the Petitioner. The limits or constraints in issuing high prerogative writs when alternate remedies are available, are self imposed by the courts and there is no absolute bar in exercising the writ jurisdiction merely because an alternate remedy is available, if the facts and circumstances so warrant. The question raised in this Writ Petition is pristinely a legal one viz. the interpretation of section 5(3) of the CST Act and whether the authorities under the BST Act had the power and jurisdiction to tax the sale of Submarine Navy Batteries by the Petitioner to M/s Crown. In this scenario, we are of the view that the question raised is a fundamental one going to the root of the matter and therefore, we do not think it fit or necessary to put the Petitioner through the mill of statutory appeals / reference in the hierarchy under the BST Act. We are of the view that this is a fit case where despite there being an alternate remedy available to the Petitioner, we should exercise our discretion in entertaining the Writ Petition on merits. More so, when the facts are undisputed. In this view of the matter, the preliminary objection raised by Mr. Ankhad regarding the maintainability of this Writ Petition is rejected.
22. Having dealt with the preliminary objection, we now turn our attention to the merits of the matter. The short question that needs to be addressed by us in this Writ Petition is whether the sale of Submarine Navy Batteries by the Petitioner to M/s Crown would fall within the purview of section 5(3) of the CST Act, being the penultimate sale to the one that actually occasioned the export of the Submarine Navy Batteries.
23. Mr Sridharan submitted that in the present case, the purchase order / agreement dated 5th March 2004 was placed by M/s Crown on the Petitioner for the supply of Submarine Navy Batteries. This purchase order / agreement could never be construed as a âsaleâ as contemplated under section 2(g) read with section 5(3) of the CST Act. He submitted that at the highest, the said purchase order could be construed as an âagreement to sellâ and could not be construed as a âsaleâ as contemplated under section 5(3) of the CST Act. He submitted that in the present case, the Algerian Navy placed a purchase order on M/s Crown on 22nd May 2004 for the supply of Submarine Navy Batteries and thereafter the Petitioner sold and supplied to M/s Crown the said Submarine Navy Batteries as more particularly set out in their invoices dated 14th September, 2004. In light of these facts, he submitted that the sale effected by the Petitioner to M/s Crown, was after the date of the purchase order placed by the Algerian Navy on M/s. Crown and for the purpose of complying with the same. The said sale therefore was a deemed sale in the course of the export of the goods out of the territory of India and squarely fell within the provisions of section 5(3) of the CST
Act, is the submission. This being the case, the submission was that the authorities under the BST Act could not have construed the said sale as a local sale within the State and taxed accordingly. In this regard, Mr Sridharan also placed heavy reliance on the judgment of the Supreme Court in the case of Consolidated Coffee (supra).
24. On the other hand, Mr Ankhad submitted that for the Petitioner to claim the benefit under section 5(3) of the CST Act, the Petitioner has to establish the inextricable link between the sale effected by the Petitioner to M/s Crown on the one hand, and the sale made by M/s Crown to the Algerian Navy, on the other. He submitted that in the facts of the present case, this link could not be established because the purchase order placed by M/s Crown on the Petitioner was before the purchase order placed by the Algerian Navy on M/s Crown. In other words, he submitted that at the time when the purchase order was placed by M/s Crown on the Petitioner, there was no purchase order placed by the Algerian Navy on M/s Crown and therefore, the sale of the Submarine Navy Batteries by the Petitioner to M/s Crown did not fulfill the conditions laid down in section 5(3) of the CST Act. He submitted that the âlast saleâ referred to in section 5(3) of the CST Act, in the facts of the present case, would be the purchase order/agreement dated 5th March, 2004 placed by M/s Crown on the Petitioner, and not when the batteries were supplied by the Petitioner to M/s Crown. This was done under the Petitioners invoices dated 14th September 2004. For all the aforesaid reasons, Mr Ankhad submitted that this Writ Petition was devoid of any merit and ought to be dismissed.
25. With the help of learned counsel, we have perused the Writ Petition and the annexures thereto as well as the orders impugned therein. As noted earlier, the CST Act was enacted pursuant to Article 286(2) of the Constitution of India for formulating the principles as to when a sale or purchase of goods takes place in the course of inter-state trade, or outside a State, or in the course of import into or export out of the territory of India.
26. Section 5(1) of the CST Act stipulates that 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. As the section originally stood prior to its amendment in 1976 and thereafter in 2005, the sale by an Indian exporter from India to the foreign importer, alone qualified as the sale which had occasioned the export of the goods. According to the Export Control Order, exports of certain goods could be made only by specified agencies such as State Trading Corporations. In other cases also, manufacturers of goods, particularly the small and medium scale, had to depend upon some export houses for exporting their goods because special expertise was needed for carrying on the export trade. A sale of goods made to an export canalizing agency such as State Trading Corporations or to an export house, in compliance with an existing contract or order, was inextricably connected with export of the goods. At the same time, since such a sale did not qualify as sales in the course of export, they were liable to State Sales Tax which corresponded in the increase in the price of the goods and made exports out of India uncompetitive in the fiercely competitive international markets. To tackle this problem, section 5 was amended by the Central Sales Tax (Amendment Bill, 1976) by inserting sub-section (3) therein 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. This is the legislative intent in inserting sub-section 3 to section 5 of the CST Act.
27. The word âsaleâ also has been defined in the Central Sales Tax Act under section 2(g) which reads as under:-
â2(g) 'sale' with its grammatical variations and cognate expressions, means any transfer of property in goods by one person to another for cash or deferred payment or for any other valuable consideration and includes -
(i) a transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration;
(ii) a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract;
(iii) a delivery of goods on hire-purchase or any system of payment of instalments;
(iv) a transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration;
(v) a supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration;
(vi) a supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, but does not include a mortgage or hypothecation of or a charge or pledge on goods;â
As defined under section 2(g), a sale means any transfer of property in goods by one person to another for cash or deferred payment or for any other valuable consideration and also includes transfers as set out in clauses (i) to (vi) of section 2(g). In view thereof, the words âlast saleâ appearing in section 5(3) of the CST Act will have to be construed keeping in mind the definition of the word âsaleâ in section 2(g).
28. Keeping in mind the provisions of section 5(3) and section 2(g), we have to decide whether the purchase order/agreement dated 5th March 2004 placed by M/s Crown on the Petitioner would be a âsaleâ as contemplated under section 5(3) r/w section 2(g) as contended by the Revenue, or whether selling and supplying the Submarine Navy Batteries to M/s Crown on 14th September 2004 would fall within the word âsaleâ as contemplated under the said provisions. To our mind, it is clear that the purchase order/agreement dated 5th March 2004 between the Petitioner and M/s Crown can never be construed as a âsaleâ as contemplated under the provisions of section 5(3) of the CST Act. As set out earlier, section 2(g) defines the word âsaleâ to mean any transfer of property in goods by one person to another for cash or deferred payment or for any other valuable consideration and includes transfers as more particularly set out in clauses (i) to (vi) of the said section. We do not find that the purchase order / agreement dated 5th March 2004 can by any stretch of the imagination fall within the definition of the word âsaleâ in section 2(g). This is for the simple reason that the word âsaleâ contemplates inter alia transfer of the goods or a transfer of the right to use any goods for any purpose or delivery or supply of goods [See. Section 2(g), Clauses (i), (iii), (iv), (v), (vi)] by one person to another. In the peculiar facts of this case and after carefully perusing the purchase order/agreement dated 5th March 2004 between the Petitioner and M/s Crown, we are of the view that there was no âsaleâ of the Submarine Navy Batteries by virtue of the said purchase order/agreement. In the facts of the present case, there was no transfer of goods as contemplated under Section 2(g) of the CST Act. On a perusal of the said agreement and its various clauses, at the highest, it can be said that the same amounts to an âagreement to sellâ, that maybe performed at a future date by the Petitioner. It is this performance that translates into a âsaleâ of the Submarine Navy Batteries.
29. In the facts of the present case, we find that in performance of the purchase order / agreement dated 5th March 2004, the Petitioner sold and supplied the Submarine Navy Batteries to M/s Crown on 14th September 2004. This sale was after the date when the Algerian Navy placed its purchase order on M/s Crown. The purchase order placed by the Algerian Navy on M/s Crown was dated 22nd May 2004. In this view of the matter, we find that the sale of the Submarine Navy Batteries by the Petitioner to M/s Crown was the âlast sale preceding the sale occasioning the exportâ as contemplated under section 5(3) and the same took place after, and for the purpose of complying with the purchase order dated 25th May 2004, placed by the Algerian Navy on M/s Crown. In view thereof, the sale of Submarine Navy Batteries by the Petitioner to M/s Crown on 14th September 2004 were deemed to be in the course of export as contemplated under section 5(3) of the CST Act and therefore, could not be taxed as a local sale under the provisions of the BST Act.
30. In this regard, the reliance placed by Mr Sridharan on the judgment of the Supreme Court in the case of Consolidated Coffee Ltd. And another v/s Coffee Board, Bangalore, reported in (1980) 3 SCC 358 is well founded. The provisions of section 5(3) came up for consideration before the Supreme Court in the said case. Whilst interpreting the word âsaleâ the Supreme Court held as under:-
â19. Having come to the conclusion that on proper construction the expression âthe agreementâ occurring in Section 5(3) refers to the agreement with a foreign buyer and does not include any agreement with a local party containing a covenant to export, the next question that arises for our consideration is as to when does the penultimate sale (the sale of coffee at export auctions conducted by the Coffee Board to registered exporters) takes place i.e. becomes complete by the passing of the property in the coffee sold thereat to the registered exporters? The determination of the point of time at which the property in the coffee passes to the registered exporters becomes necessary because before that the agreement with or order from a foreign buyer in respect of those goods must come into existence to implement which the penultimate sale must have taken place. We have indicated earlier the rival contentions of the parties on this issue. But before addressing ourselves to those rival contentions we shall dispose of a small contention that was put forward by Mr Venugopal, counsel for the State of Karnataka that the word âsaleâ occurring in the phrase âif such last sale or purchase took place afterâ in Section 5(3) means the agreement to sell and not sale in the sense of a transfer of property in goods by one person to another and the argument has been that since the word âsaleâ in the aforesaid phrase means an agreement to sell such agreement to sell in case of export auctions conducted by the Coffee Board takes place or becomes complete at the fall of the hammer when the bid of the highest bidder gets accepted and the regular contract containing the covenant to export is invariably entered into by the registered exporter with the Coffee Board at a later stage and, therefore, even the covenant to export to be found in the contract with the Coffee Board can never be regarded as having come into existence before the agreement to sell becomes complete and consequently the penultimate sale to the registered exporter would not qualify for the exemption. In support of the contention that the word âsaleâ means an agreement to sell counsel relied upon Section 4 of the Sale of Goods Act, 1930 wherein a contract of sale of goods is defined as contract wherein the seller either transfers or agrees to transfer the property in goods to the buyer for a price and also upon a decision of this Court in Balabhagas Hulaschand v. State of Orissa[(1976) 2 SCC 44 : 1978 SCC (Tax) 164 : (1976) 2 SCR 939 : 37 STC 207] a case under Central Sales Tax Act, 1956, where this Court has taken the view that for purposes of Section 3(a) and Section 4(2) (a) and (a) the word âsaleâ includes an agreement to sell and, therefore, in Section 5(3) also the word âsaleâ should be construed as agreement to sell. It is not possible to accept this contention for more than one reason. In the first place the definitions of âsaleâ and âagreement to sellâ in the Sale of Goods Act, 1930 would not apply to the expression âsaleâ occurring in the Central Sales Tax Act, 1956 wherein the expression âsaleâ has been defined in Section 2(g) for the purpose of that Act and under Section 2(g) of the Central Sales Tax Act âsaleâ means any transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable consideration, and includes a transfer of goods on the hire-purchase or other system of payment by instalments, but does not include a mortgage or hypothecation of or a charge or pledge on goods. In other words, wherever the word âsaleâ occurs in the Central Sales Tax Act, 1956 it is this definition given in Section 2(g) that will be applicable and therefore the word âsaleâ in Section 5(3) must mean transfer of the goods by one person to another for cash or for deferred payment or for any other valuable considerations; it cannot mean âagreement to sellâ. Moreover, there is nothing in the context of Section 5( 3 ) to suggest that the word âsaleâ occurring therein should be understood differently. In Balabhagas Hulaschand case this Court in the context of the question as to when a sale could be said to take place in the course of inter-State trade or commerce gave an extended meaning to the word âsaleâ as defined in Section 2(g) and as used in Sections 3(a) and 4(2) (a) and (b) of Central Sales Tax Act, 1956 and what was said by this Court was that the word âsaleâ as used in Section 3 (a) and Section 4(2) (a) and (b) was wide enough to include not only a concluded contract of sale but also an agreement of sale provided that the latter stipulated that there was a transfer of property or movement of goods; the ratio of that decision will be inapplicable to Section 5(3) which deals with the question as to when a penultimate sale shall also be deemed to be in the course of export and there is nothing therein to suggest that the word âsaleâ should have any such extended meaning; on the contrary, the context suggests that the word âsaleâ in the phrase âif such last sale or purchase takes place after'â refers to a completed sale i.e. a sale as defined in Section 2( g ) of the Act. The contention urged by counsel must, therefore, be rejected.
31. Having regard to the above discussion it is clear to us that in the penultimate sales (sales of coffee effected to registered exporters at export auctions conducted by the Coffee Board) the property in the coffee sold thereat passes to the buyer immediately upon payment of full price, weighment and setting apart of coffee for delivery to the buyer under clauses 19 and 20 of the Auction Conditions and it would be at this stage i.e. just before this stage is reached that the agreement with or order from a foreign buyer must be available or produced in order to attract Section 5(3) of the Central Sales Tax Act, 1956. (emphasis supplied)
The Supreme Court, in unequivocal terms, has held that the word âsaleâ appearing in section 5(3) cannot be construed to mean an âagreement to sellâ and that the said word refers to a completed sale, meaning thereby a âsaleâ as defined in section 2(g) of the CST Act. We find that this judgment of the Supreme Court squarely applies to the facts of the present case. We may hasten to add that merely because a document is styled as an âagreement to sellâ would not necessarily mean that there was no sale. The said document would have to be examined in the light of the definition of the word âsaleâ and if it is found that there was a transfer of goods as contemplated under Section 2(g), then notwithstanding the fact that the document is styled as an âagreement to sellâ the same would be construed as a âsaleâ. This obviously would depend on the facts of each case. In the peculiar facts of the present case, we find that the purchase order/agreement dated 5th March 2004 between the Petitioner and M/s Crown did not result in a âsaleâ as there was no transfer of the goods by virtue thereof as contemplated under Section 2(g) of the CST Act.
31. Furthermore, in the present case, the said purchase order/agreement made a reference that the sale of the said Submarine Navy Batteries was for the purpose of export to the Algerian Navy. It is for this reason that the technical conditions of the said purchase order provided that many of the instructions were to be printed not only in English but also in French. Thereafter, the Algerian Navy placed a purchase order on M/s Crown. To fulfill this order placed by the Algerian Navy on M/s Crown, the Petitioner sold and supplied the Submarine Navy Batteries to M/s Crown on 14th September 2004. After perusing and construing the purchase orders dated 5th March 2004 and 22nd May 2004 as well as other documents referred to in the petition we are of the opinion that there was an inextricable link between the contract of sale by the Petitioner to M/s Crown on the one hand and the actual export by M/s Crown to the Algerian Navy on the other. In this view of the matter, the inescapable conclusion is that the sale of Submarine Navy Batteries by the Petitioner to M/s Crown on 14th September 2004 was in the course of export and covered by the provisions of section 5(3) of the CST Act. This being the position, we find that taxing the said sale as a local sale under the provisions of the BST Act was wholly without jurisdiction and contrary to law.
32. Before concluding, it is necessary to deal with the two judgments relied upon by Mr Ankhad and also by the MSTT in the impugned order. These two judgements of the Supreme Court are in the case of State of Karnataka Vs. Azad Coach Builders (P) Ltd reported in 2010 (36) VST 1 (SC): (2010) 9 SCC 524; and Saraf Trading Corporation Etc. Etc. v/s State of Kerala reported in 2011 (38) VST 1 (SC): (2011) 2 SCC 344.
33. In the case of Azad Coach Builders Pvt.Ltd. (supra), the facts were that the Assessee viz. Azad Coach Builders was requested to build âbus bodiesâ by the exporters viz. TELCO, in accordance with the specifications provided by the foreign buyer viz. Lanka Ashok Leyland Ltd., Columbo. In one of the communications received from the said foreign buyer, it was stipulated that the steel and aluminum panels of the bus bodies be built by the Assessee are as per the specifications provided by them, since the customers in Sri Lanka preferred them. The Assessee accordingly manufactured the bus bodies in accordance with the specifications stipulated by the foreign buyer and mounted the same on chassis made available by the exporter making the complete bus ready for export. The Assessee claimed exemption on sales of âbus bodiesâ as a penultimate sale in the course of export made to their customers viz. TELCO. This was rejected by the Assessing Authority on the ground that âbus bodiesâ and âbusâ were two different goods and the âbus bodiesâ as such were not exported, but the complete bus. The conclusions of the Assessing Authority were upheld by the Joint Commissioner of Sales Tax (Appeals) as well as the Karnataka Sales Tax Appellate Tribunal. The Assessee therefore approached the Karnataka High Court, who after examining the agreement between the exporter and the foreign buyer and also the order placed by the exporter on the Assessee, came to the conclusion that the bus bodies supplied by the Assessee were in the course of export and therefore exemption could be claimed under section 5(3) of the CST Act. Aggrieved by the order of the High Court, the State of Karnataka preferred Appeals to the Supreme Court. A two judge Bench of the Supreme Court felt that the judgments in the case of Sterling Foods, reported in 1986 (3) SCC 349 and Vijaymala Cashew Co., reported in (1996) 1 SCC 468 needed a fresh look in light of the later judgment in the case of K. Gopikrishnan Nair, reported in 1997 (10) SCC 1. The matter was therefore referred to a Larger Bench and accordingly came up before the Constitutional Bench of the Supreme Court. It was the contention of the Revenue that the goods supplied by the Assessee and the goods actually exported to the foreign buyer were not âbus bodiesâ but buses itself and hence, the benefit of the exemption under section 5(3) of the CST Act was not available to the Assessee. It is whilst deciding this issue that the Supreme Court, after examining the rival contentions as well as the statements and objects and reasons of the Amending Act 103 of 1976 by which section 5(3) of the CST Act was added, held as under:-
â26. When we analyze all these decisions in the light of the Statement of Objects and Reasons of the amending Act 103 of 1976 and on the interpretation placed on Section 5(3) of the CST Act, the following principles emerge:
To constitute a sale in the course of export there must be an intention on the part of both the buyer and the seller to export. There must be obligation to export, and there must be an actual export. The obligation may arise by reason of statute, contract between the parties, or from mutual understanding or agreement between them, or even from the nature of the transaction which links the sale to export. To occasion export there must exist such a bond between the contract of sale and the actual exportation, that each link is inextricably connected with the one immediately preceding it, without which a transaction sale cannot be called a sale in the course of export of goods out of the territory of India.
27 [Ed.: Para 27 corrected vide Official Corrigendum No. F.3/Ed.B.J./120/2010 dated 25-10-2010.].
The phrase âsale in the course of exportâ comprises in itself three essentials: (i) that there must be a sale; (ii) that goods must actually be exported; and (iii) that the sale must be a part and parcel of the export. The word âoccasionâ is used as a verb and means âto causeâ or âto be the immediate cause ofâ. Therefore, the words âoccasioning the exportâ mean the factors, which were the immediate cause of export. The words âto comply with the agreement or orderâ mean all transactions which are inextricably linked with the agreement or order occasioning that export. The expression âin relation toâ are words of comprehensiveness, which might both have a direct significance as well as an indirect significance, depending on the context in which it is used and they are not words of restrictive content and ought not be so construed. Therefore, the test to be applied is, whether there is an inseverable link between the local sale or purchase and export and if it is clear that the local sale or purchase between the parties is inextricably linked with the export of the goods, then a claim under Section 5(3) for exemption from State sales tax is justified, in which case, the same goods theory has no application.
28. The facts of this case clearly reveal that the transaction between the assessee and the exporter is inextricably connected with the export of the goods to Sri Lanka. The communication between the foreign buyer and the exporter reveals that the foreign buyer wanted the bus bodies to be manufactured by the assessee under the specifications stipulated by the foreign buyer. The bus bodies constructed and manufactured by the assessee could not be of any use in the local market, but were specifically manufactured to suit the specifications and requirements of the foreign buyer. In the purchase order placed on the assessee by the exporter, it is specifically indicated that the bus bodies have to be manufactured in accordance with the specifications provided by the foreign buyer, failure to do so might result in cancellation of the export order. The assessee in this case has succeeded in showing that the sale of bus bodies have occasioned the export of goods. When the transaction between the assessee and the exporter and the transaction between the exporter and foreign buyer are inextricably connected with each other, in our view, the âsame goodsâ theory has no application.
34. Placing reliance on this judgment, Mr Ankhad contended that in the present case, there is no inextricable link between the sale of Submarine Navy Batteries by the Petitioner to M/s Crown on the one hand and the export of those Submarine Navy Batteries by M/s Crown to Algerian Navy on the other. This contention is primarily based on the ground that M/s Crown had placed a purchase order / agreement for the supply of said Submarine Navy Batteries before the purchase order was placed by the Algerian Navy on M/s Crown. We do not agree. In the present case, though it is true that the purchase order / agreement dated 5th March 2004 between the Petitioner and M/s Crown was before the date when the Algerian Navy placed their purchase order on M/s Crown, the sale in fact was effected by the Petitioner to M/s Crown after the date of the said purchase order placed by the Algerian Navy on M/s Crown, and for the purpose of complying with the same. The clauses in the purchase order / agreement dated 5th March, 2004 between the Petitioner and M/s Crown also indicate that the Submarine Navy Batteries were for the purposes of export to the Algerian Navy. Furthermore, the ARE-1 showed the Petitioner as the seller, M/s Crown as the buyer and the Algerian Navy as the consignee. These facts are undisputed. In this view of the matter, it can hardly be argued that there was no inextricable link between the local sale by the Petitioner to M/s Crown and the export of those very goods thereafter to the Algerian Navy.
35. Similarly, in the case of Saraf Trading Corporation (supra) the facts were that the Assessee was an exporter of tea and had purchased the same from different planters directly in an open auction and thereafter exported the same to foreign countries. The Assessee being the exporter of the tea claimed exemption on the ground that the purchase was exempted under the CST Act. The same was found to be genuine by the Assessing Authority and was allowed in full. In addition to the aforesaid, the Assessee also made a claim for refund of tax collected from them by the different planters who were the sellers of the tea. The said claim of refund was rejected by the Assessing Authority. It was held that the assessee could not claim a refund under section 44 of the Kerala General Sales Tax Act, 1963 since they had not paid the tax to the Department but it was the sellers who had in fact paid the tax. Being aggrieved by the order of the Assessing Authority, the same was challenged before the Deputy Commissioner (Appeals) as well as the Kerala Sales Tax Appellate Tribunal without any success. The matter was finally carried to the Hon'ble Supreme Court and it is in these facts that the Supreme Court, after analyzing the provisions of section 5(3) of the CST Act and noting the findings given in Azad Coach Builders Pvt.Ltd. (supra), held that there had to be an inextricable link between local sales and purchase, and if it was clear that the local sale or purchase between the parties was inextricably linked with the export of the goods, then only the claim for exemption under section 5(3) of the CST Act was justified. Applying the test laid down in Azad Coach Builders Pvt. Ltd. to the facts before it, the Supreme Court observed as follows:-
â15. It is true that in the present case, there is no agreement available on record to indicate that the aforesaid purchase was made for the purpose of export. In the absence of the said document, it is not possible for us to specifically state as to whether it was clear that the sale or purchase between the parties i.e. the dealer and the purchaser was inextricably linked with the export of goods. It is only when a claim is established, the claim under Section 5(3) of the Central Sales Tax would be justified. At the time of auction-sale when the appellant purchased the tea from the dealer, there is nothing on record to show that a definite stand was taken by the purchaser that the aforesaid purchase of tea is for the purpose of occasioning an export for which an agreement has been entered into. Since no such claim was made at that stage, so therefore sales tax was realised which was paid to the Government by the dealer. Despite the said fact, there is a clear finding recorded by the assessing authority himself that the export documents were verified by him with the accounts from which it is indicated that the entire exports were effected pursuant to the prior contract or prior orders of the foreign buyers and that the export sales are supported by bills of lading, export invoices and such other valid documents.â
(emphasis supplied)
36. We fail to see how this judgment is of any assistance to the Revenue. In the facts before us we have already held that there was an inextricable link between the local sale by the Petitioner to M/s Crown, and the export of those very goods thereafter to the Algerian Navy. In Saraf Trading Corpn (supra), the Supreme Court, on facts held that it was not possible to specifically state as to whether it was clear that the sale or purchase between the parties i.e. the dealer and the purchaser was inextricably linked with the export of the goods. Such is not the case before us. Therefore, this judgment is also of no assistance to the Revenue and is clearly distinguishable on facts.
37. In view of our findings in this judgment, we are of the view that the order of revision dated 25th May 2011 passed by Respondent No.3 as well as the order of the MSTT dated 22nd November 2012 passed in Appeal No.224 of 2011 cannot be sustained. Rule is accordingly made absolute and the Writ Petition is granted in terms of prayer clauses (a) and
(b). There shall be no order as to costs.