Rajiv Sharma, J.
1. A challenge has been laid to the orders passed by the Financial Commissioner (Revenue) in case No. 122/82. 123/82 (Revision) dated 15.10.1998. The brief facts necessary for the adjudication of this petition are that the petitioner-company is incorporated under the Companies Act. It is carrying on the business of manufacture and sale of Indian made foreign liquor, beer, break-fast food and food products etc. The assessing authority had passed the assessment order for the assessment year 1968-69. The assessing authority had allowed exemption under Section 41(A)(ii) of the H.P. General Sales Tax Act, 1968 for the sales of goods made in the course of export out of the territory of India. The assessing authority passed an order for the assessment year 1969-70 (Remand case) on 19.1.1976. The company preferred an appeal before the appellate authority. The appellate authority passed the order on 22.4.1977.
2. Thereafter on remand, fresh order was passed by the assessing authority' on 19.5.1978. The assessing authority had allowed the tax free sale under the head 'inter-state sale'. The assessing authority passed an order for the assessment year 1970-71 on 14.7.1976. The company preferred an appeal against this assessment order. The matter was remanded back by the appellate authority to the assessing authority vide order dated 21.6.1977. Fresh order was passed on remand by the assessing authority on 13.12.1978. The assessing authority had granted deductions in the sale effected in the course of export out of India. The assessing authority passed an order for the assessment year 1971-72 on 13.12.1978. The assessing authority held that the sales to Nepal, Sikkim and Bhutan were inter-state sales relying upon Textool Company Ltd. v. State of Tamil Nadu 1978, 42 STC. Thus no rebate was allowed. The company preferred an appeal before the appellate authority and the appellate authority vide order dated 30.1.1980 allowed the rebate.
3. The Excise and Taxation Commissioner took a suo motu action under Section 31 of the H.P. General Sales Tax Act, 1968 read with Section 9 of the Central Sales Tax Act, 1956 for the year 1968-69. The Excise and Taxation Commissioner vide order dated 26.6.1982 held that every transaction of sales effected in Sikkim and Bhutan by the Company was deemed to have been effected by Sh. B.R. Dutta for all intents and purposes and he further held that every transaction of sale by the company constitutes an inter-state sale from Solan to Howrah for the purpose of taxation, even though the goods moved directly to Sikkim and Bhutan via Howrah. He also held that the Canteen Stores Department was bound to issue 'C' forms and not the 'D' forms for effecting purchases to run its business. He remanded the case to the assessing authority with direction to determine the exact amount of sales to Sikkim and Bhutan through Sh. B.R. Dutta and treat them inter-state sales to Howrah for the purpose of taxation and also to work out the amount of sales made to Canteen Stores Department and the company be afforded an opportunity to furnish 'C' forms for the said amount within two months as the Canteen Stores Department was not entitled to use 'D' forms. The petitioner feeling aggrieved by the orders dated 26.6.1982 preferred a revision before the Financial Commissioner (Revenue). The Financial Commissioner (Revenue) upheld the order of the Excise and Taxation Commissioner vide order dated 15.10.1998. The Financial Commissioner (Revenue) had quoted in verbatim the agreement entered between Sh. B.R. Dutta and the petitioner-company to come to the conclusion that the sales effected by the company were not towards the export but they were inter-state sales. He also reiterated that the Canteen Stores Department was liable to submit 'C' forms instead of 'D' forms.
4. Mr. K.D. Sood, Advocate had strenuously argued that the Company had made exports to Nepal, Bhutan and Sikkim after completing all the codal formalities. He had drawn specific attention of the Court to Annexure P-13, copy of permit for export dated 29.6.1971, copy of export inbond, copy of form L-36, L-37, letter dated 1.2.1972, form L-38 and copies of invoices. He had also contended that it is evident from the endorsement made in the invoices that the exports were effected to three countries, namely, Sikkim, Bhutan and Nepal and the Financial Commissioner (Revenue) had come to a wrong conclusion that the sales were inter-state sales. He further contended that the Canteen Stores Department was liable to be issued only forms 'D' and not forms 'C'.
5. Mr. R.M. Bisht, the Deputy Advocate General had supported the orders passed by the Excise and Taxation Commission and the order passed by the Financial Commissioner (Revenue). He had further contended that it is evident from the various conditions of the agreement entered between the petitioner-company and Sh. B.R. Dutta that the goods were exported via Howrah and it was an inter-state sale and was not liable to any exemption under the H.P. General Sales Tax Act, 1968.
6. We have heard the learned Counsel for the parties and have perused the record carefully.
It will be apt to take note of Section 41 of the H.P. General Sales Tax Act, 1968 before we embark upon to go into the submissions made by the learned Counsel for the parties. Section 41 of the H.P. General Sales Tax Act, 1968 reads thus:
41. Notwithstanding anything contained in this Act:
(a) a tax on the sale or purchase of goods shall not be imposed under this Act-
(i) Where such sale or purchase takes place outside the Union territory of Himachal Pradesh; or
(ii) Where such sale or purchase takes place in course of import of the goods into, or export of the goods out of, the territory of India;
(iii) Tax on the sale or purchase of any goods shall not be imposed where such sale or purchase takes place in the course of Inter-State trade or commerce except in so far as Parliament may by law otherwise provide.
7. The words which have fallen for consideration before this Court having bearing on the out come of this petition are 'sale in the course of export.' The interpretation/construction of these words is no more res integra in view of the authoritative pronouncement of their Lordships of the Hon'ble Supreme Court in Coffee Board, Bangalore v. Joint Commercial Tax Officer, Madras and Anr. 1970 (25) STC 525. Their Lordships have held that there are three essential components of 'sale' in the course of export...(i) there must be a sale (ii) that goods must actually be exported and (iii) the sale must be a part and parcel of the export. Their Lordships have held as under:
The phrase 'sale in the course of export' comprises in itself three essentials: (i) that there must be a sale (ii) that goods must actually, be exported and (iii) the sale must be a part and parcel of the export. Therefore either the sale must take place when the goods are already in the process of being exported which is established by their having already crossed the Customs frontiers, or the sale must occasion the export. The word 'occasion' is used as a verb and means 'to cause' or 'to be the immediate cause of. Read in this way the sale which is to be regarded as exempt is a sale which causes the export to take place or is the immediate cause of the export. The export results from the sale and is bound up with it. The word 'cause' 'in the expression' in the course of means 'progress or process of or 'shortly during'. The phrase expanded with this meaning reads 'in the progress or process of export' or 'during export'. Therefore the export from India to a foreign destination must be established and the sale must be a link in the same export for which the sale is held. To establish export a person exporting and a person importing are necessary elements and the course of export is between them. Introduction of a third party dealing independently with the seller on the one hand and with the importer on the other breaks the link between the two for then there are two sales one to the intermediary and the other to the importer. The first sale is not in the course of export for the export begins from the intermediary and ends with the importer.
Therefore the tests are that there must be a single sale which itself causes the export or is in the progress or process of export. There is no room for two or more sales in the course of export. The only sale which can be said to cause the export is the sale which itself results in the movement of the goods from the exporter to the importer.
The course of export may be established by agreement or by force of law. To be the former the agreement between the seller and the buyer must envisage an export out of India who then become exporter and importer respectively. By force of law a person selling the goods may be compelled to sell them only in an export sale but that too is not essentially different from the first. In either case there is a seller and a buyer who by reason of the sale also become exporter and importer respectively. Any other buyer who is not himself the importer buys for export even if export ultimately results. It is to bring out these results that Parliament has recognised only two cases of sale in the course of import: (a) where the sale is effected by a transfer of documents of title to goods after the goods have crossed the Customs frontiers that is to say the goods are already on the way to the importer and (b) when the sale itself causes the export to take place that is to say the exporter and importer negotiate and complete a sale which without more would result in the export of the goods. No other sale can qualify for the exemption under Section 5(1) read with Article 286(1)(b).
8. Their Lordships of the Hon'ble Supreme Court had again occasion to interpret the expression 'sales in the course of export' in Mohd. Serajuddin etc. v. The State of Orissa : AIR1975SC1564 . Their Lordships after referring to Coffee Board case (supra) have succinctly explained the expression as under:
In the Coffee Board case : [1970]3SCR147 (supra) the phrase 'sale in the course of export' was held to comprise of three essentials. First, there must be a sale. Second, goods must actually be exported. Third, the sale must be a part and parcel of the export. The propositions laid down in the Coffee Board case (supra) are these: The sale which is to be regarded as exempt is a sale which causes the export to take place or is the immediate cause of the export. To establish export a person exporting and a person importing are necessary elements and the course of export is between them. Introduction of a third party dealing independently with the seller on the one hand and with the importer on the other breaks the link between the two for then there are two sales one to the intermediary and the other to the importer. The first sale is not in the course of export because the export commences with the intermediary. The tests are that there must be a single sale which itself causes the export or is in the progress or process of export. There is no room for two or more sales in the course of export. The only sale which can be said to cause the export is the sale which itself results in the movement of the goods from the exporter to the importer.
9. Their Lordships of the Hon'ble Supreme Court have also dealt with the principal and agent relationship in Mohd. Serajuddin etc. v. The State of Orissa (supra). Lordships have held as under:
It has now been held by this Court in Glass Chatons & Users' Association v. Union of India : [1962]1SCR862 , Dava Son of Bhimii Gohil v. Joint Chief Controller of Imports & Exports, : [1963]2SCR73 and Daruka & Company v. The Union of India : [1974]1SCR570 that the system of canalisation of exports or imports to the State Trading Corporation is constitutionally valid. The broad reasons for the system of canalisation are control of foreign exchange and prevention of abuse of foreign exchange. Counsel for Minerals and Metals Trading Company which became the successor to the Corporation did not contend that the Corporation is an agency. Agency is created by actual authority given by principal to the agent or principal's ratification of contract entered into by the agent on his behalf but without his authority. Agency arises by an ostensible authority conferred by the principal on the agent or by an implication of law in cases of necessity. On behalf of the appellant it was said that the Corporation is an agent of necessity because the Corporation is a special agency to carry out certain public policies. The appellant contends that it is the exporter and the foreign buyer is the importer and the contract is said to be processed through the agency of the Corporation. Agency of necessity arises where the persons authorised to act as an agent for another without any regard to the consent of the principal act in certain circumstances and the law creates an agency of necessity. A wife become an agent of necessity. In other cases agency of necessity is often applied where after the parties have created a contractual relationship, the law, in view of some emergency, confers upon one party authority to act for another, or allows an agent to exceed the authority which has been conferred upon him. In the present case, there is no principal and agent relationship between the appellant and the Corporation and in the absence of such relationship the agency of necessity does not arise. Other instances of agency of necessity are where the master of a ship is entitled in the case of accident to enter into a contract which binds the owner of the cargo, notwithstanding that it transcends his express authority if it is bona fide made in the best interests of the owners concerned. The same power is possessed by a land carrier in respect of perishable goods. In the present case, the relationship between the appellant and the Corporation is between two principals and there is no aspect whatever of principal and agency. Further, this question of agency was never raised before the Sales Tax authorities.
10. In the present case also, it is evident from the agreement entered between the parties that there was a relationship of principal and agent. The agent was appointed as is evident from Annexure P-12 as the sole selling agent of the company in Sikkim and Bhutan and not in the State of West Bengal.
11. It is in this back drop of the law laid down by the Supreme Court, the Court has to determine whether the sales made by the petitioner company were in the course of export or they were inter-state sales. It is evident from the language employed in Section 41 of the H.R General Sales Tax Act, 1968 that a tax on the sale or purchase of goods shall not be imposed where such sale or purchase takes place in the course of export of the goods out side the territory of India. It is evident from Annexure P-13 that the Sikkirn Government had issued permit for the import of Indian made foreign liquor on 29.6.1971. The Executive Officer, Excise Department of the Sikkim Government had permitted the import to Jigmay Namgyal of Gangtok Sikkim as per law. The validity of this import permit was extended up to 11.2.1972 vide communication dated 11.1.1972. The company had also duly filled in export inbond form. The copy of specimen of this form is Annexure P-14. Mr. K.D. Sood had submitted that since the original export permit inbond is not with the petitioner, the petition has filed this form to support that such form was duly submitted to the revenue. Similarly Mr. K.D. Sood had drawn the attention of this Court to forms L-36, L-37 and L-38. He had strongly relied upon communication dated 1st February, 1972 (Annexure P-17). It is stipulated in communication dated 1st February, 1972 to revalidate the form L-38 as the, importer had permit No. 2/EX (ABK).
12. Now, we have to see the endorsements made on the invoices placed on record by the petitioner-company. It is clear from the endorsement made in Annexure P-20 at the bottom that the goods were despatched to Gangtok and the documents were sent to M/s. B.R. Dutta from Solan Brewery. It is also evident from the endorsement made in Annexure P-21 that the goods were sent from Solan to Siliguri and Mr. M.B. Mathur Attache (Political Officer) in Sikkim had also signed the same. Even from the invoices filed by the respondent-State, it is evident that the office of Political Officer in Sikkim had signed the documents and the goods were delivered to the nearest railway head for their further export to Sikkim and Bhutan. The Excise and Taxation Commissioner has also made the following observations in his order dated 26.6.1982 :
Therefore, every transaction of sale effected by the company constitutes an inter-state sale from Solan to Howrah for the purpose of taxation, even though the goods move directly to Sikkim and Bhutan via Howrah.
13. We have also gone through the agreement placed on record entered Between the petitioner-company and one Sh. B.R. Dutta. The Excise and Taxation Commissioner and the Financial Commissioner (Revenue) have quoted the terms and conditions of the agreement in verbatim and had come to a conclusion that the sales effected by the petitioner-company were not export, but they were inter-state sales and liable to be taxed. The Excise and Taxation Commissioner as well as the Financial Commissioner (Revenue) have not taken into consideration the essential ingredients how a sale in the course of export has to be construed. There was no sale by the petitioner-company to Mr. B.R. Dutta. These goods were actually exported to Sikkim, Bhutan and Nepal and the sale was integral part and parcel of the export. The role of Mr. B.R. Dutta was only of an agent and he cannot be termed as a purchaser. He at the most facilitated the process of export since there is no direct access by train to Nepal, Bhutan and Sikkim.
14. Now, the Court has to consider whether the forms 'C' were required to be issued by the Canteen Stores Department or not. We are convinced that the forms 'C and not forms 'D' were required to be issued and as a matter of fact the Excise and Taxation Commissioner had permitted the petitioner-company an opportunity to furnish forms 'C'.
The upshot of the above discussion is that:
(i) the company has made exports to Nepal, Bhutan and Sikkim after completing all the codal formalities. There were importer and exporter, who supplied the goods. There was no inter-state sale as has been held in the impugned orders;
(ii) the relationship of the petitioner-company with Mr. B.R. Dutta was of principal and agent and no sale has taken place in the State of West Bengal. The role of Mr. B.R. Dutta was to facilitate/canalize the export;
(iii) the bare perusal of the Annexures as discussed above i.e. Annexures P-13 to P-21 suggest that the export was made by the petitioner-company;
(iv) the findings recorded by the Excise and Taxation Commissioner and upheld by the Financial Commissioner (Revenue) holding that there was inter-state sale are quashed and set aside;
(v) the orders passed by the assessing authority granting exemption to the petitioner are upheld; and
(vi) the sale to Canteen Stores Department is to be regulated on the basis of 'C' form.
15. Consequently, the writ petition is partly allowed as per observations made herein-above. Annexure P-2 dated 15.10.1998 is quashed and set aside to the extent whereby it has been held that the sales were inter-state sales and liable to be taxed. The petitioner-company is held entitled to the exemption for the assessment years 1968-69, 1969-70, 1970-71 and 1971-72. The findings recorded with regard to the supply of forms 'C' as directed by the Excise and Taxation Commissioner to the petitioner-company are upheld. There shall be no order as to costs.