1. Purchase of goods from auctions for export via an intermediary — Claim for sales tax exemption under Section 5(3) of the Central Sales Tax Act, 1956. (Para 3 , 4 )
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1996 Supreme(SC) 1779
1996(8) Supreme 121
SUPREME COURT OF INDIA
A.M. Ahmadi, C.J.I., S.P. Bharucha and S.C. Sen, JJ.
C.T. Ltd. & Anr. -Appellants
versus
Commercial Tax Officer & Ors. -Respondents
Civil Appeal No. 3279 of 1990
with
C.A. No. 1621/90, 1622/90
Decided on 29-10-1996
Counsel for the Parties :
For the Appellants : Raja Ram Aggarwal, Sr. Advocate with Ms. Radha Rangaswamy, Advocate.
For the Respondents : N.S. Hegde, and T. Ramachandran, Sr. Advocates, Dilip Sinha, D. Krishnan, J.R. Das, Advocates for M/s. Sinha & Das.
Important Points
The court held that where an intermediary acts as an agent rather than a buyer, no sale occurs between the supplier and the agent. Thus, the supplier's purchase of goods for export is the penultimate sale, exempt from sales tax under Section 5(3) of the Central Sales Tax Act, 1956.
Subject
Tax Law - Sales Tax
Act Referred
Headnote
Central Sales Tax Act, 1956-Section 5(3)-Claim of exemption from levy of sales tax under-STC entered into a contract with Government Trading Corporation of Iran for supply of unblended Tea-STC entered into a contract with appellants for tea-Appellants purchased from tea auctions the tea to be supplied-Tea Export licence for tea was that of appellants-Duty draw back benefit accrued entirely to appellants-No endorsement on Bill of Lading in favour of STC-Not a case of transfer of property in tea by appellants to STC before it was transferred to Iranian buyer-Purchase of tea by appellants at auctions in fulfilment of export obligation was penultimate sale in course of export covered by terms of Section 5(3)-It was exempt from payment of sales tax. (Paras 15 to 17)
Legal Category Hierarchy
Table of Contents
2. Whether the intermediary acted as an agent or a buyer — Determination of whether the auction purchase constituted the penultimate sale in the course of export. (Para 8 , 10 , 11 , 13 )
3. Analysis of contract terms, export licenses, and shipping documents indicates no transfer of property to the intermediary, establishing the intermediary's role as an agent. (Para 14 , 15 , 16 )
4. A purchase is exempt under Section 5(3) of the Central Sales Tax Act if it is the last sale preceding the sale occasioning the export. (Para 17 )
5. Appeals allowed — Tribunal order set aside — Rule in writ petitions made absolute. (Para 18 )
6. How is the legal relationship between a buyer and an agent determined in a commercial contract?
The court looks to the substance rather than the form. The use of terms like agent or buyer is not conclusive; the true relationship is gathered from the nature of the contract, its terms, and whether the party has a personal interest beyond commission or agency charges. (Para 9 )
7. What constitutes the penultimate sale for sales tax exemption under Section 5(3) of the Central Sales Tax Act, 1956?
The penultimate sale is the last sale or purchase of goods preceding the sale or purchase that occasions the export, provided such last sale took place after and for the purpose of complying with the export agreement or order. (Para 5 , 17 )
8. Does the use of an account identifier on shipping documents necessarily imply a transfer of title?
No. Markings such as A/c [Entity] may be used merely to identify goods for the fulfillment of a contract and do not constitute an endorsement or transfer of property unless the contract or other evidence clearly contemplates a sale. (Para 14 , 16 )
JUDGMENT
Bharucha, J.-These are appeals from the judgments and orders of the West Bengal Taxation Tribunal to which writ petitions filed in the Calcutta High Court by the appellants were transferred.
2. The position being common, the facts that are referred to are the facts of C.A. No. 1622 of 1990, where Hindustan Sheet Metal Limited is the appellant.
3. The State Trading Corporation entered into a contract with the Government Trading Corporation of Iran whereunder 550 metric tonnes (5% more or less) of unblended Assam tea were to be supplied. In turn, S.T.C. entered into a contract on 4th August, 1986, with the appellants for the tea, to which a copy of S.T.C. s contract with the Iranian buyer was annexed.
4. Pursuant to the contract between S.T.C. and the appellants, the appellants purchased from tea auctions the tea to be supplied under the aforesaid contracts. The deliveries of the tea were made to the Iranian buyer under the aforesaid contracts. In June, 1987, the appellants received letters from the auction brokers from whom the tea was purchased which stated that the auction brokers had received notices from the respondent Sales Tax authorities requiring the appellants to pay sales tax upon the purchases of tea from the auction brokers. The appellants filed the writ petition praying for a declaration that the sale of the tea by the auction brokers to the appellants was exempt from payment of sales tax under the provisions of Section 5(3) of the Central Sales Tax Act, 1956. The writ petition was transferred for hearing to the West Bengal Taxation Tribunal. The Tribunal, after hearing the parties, came to the conclusion that the sales of the tea by the auction brokers to the appellants were not exempt from the levy of sales tax under Section 5(3). Hence, the appeal.
5. Section 5, sub-sections (1) and (3) read thus:
"5. When 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.
xxx xxx xxx
(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.
6. Learned counsel for the appellants drew our attention to the averments of the appellants in the Special Leave Petition, which had also been made in the proceedings before the Tribunal, and were uncontroverted, to the effect that S.T.C. had introduced what was called the consortium approach in regard to the export of tea from India so as to avoid unhealthy competition between Indian exporters and to obtain the maximum business from Government organisations in foreign countries, like the Iranian buyer, the Government Trading Corporation of Iran. Thereunder, S.T.C. was to act as the agent of the tea exporters for securing orders on their behalf and it was to negotiate on the basis of the individual tea samples of and the prices indicated by each exporter. It was in pursuance of this approach that the contracts between S.T.C. and the Iranian buyer and the appellants and S.T.C. had been entered into; the Iranian buyer had inspected the appellants samples and accepted the appellants price.
7. Our attention was drawn by learned counsel to the contract between S.T.C. and the appellants, wherein the appellants were referred to as the shipper and the Iranian buyer as the buyer . The contract recited that S.T.C. had entrusted the appellants with "the obligation of supply and shipment of 5
