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1966 Supreme(MP) 160
High Court Of Madhya Pradesh
P. V. Dixit, C. J. and R. J. Bhave, J.
KANHIRAM RAMGOPAL - Appellant
Versus
COMMISSIONER OF SALES TAX - Respondents
Misc. Civil Case 309 Of 1965
Decided On : 12/23/1966
K.K.DUBEY, R.K.Tankha
Purchase of goods for export is not exempt from purchase tax unless the purchase occasions the export.
Headnote:
PURCHASE TAX - EXEMPTION - EXPORT OF GOODS - PURCHASE OF HEMP JUTE FOR EXPORT - WHETHER EXEMPT FROM PURCHASE TAX - M. P. GENERAL SALES TAX ACT, 1958, SECTIONS 7, 50(1)(III) - CENTRAL SALES TAX ACT, 1956, SECTION 5(1).
Fact of the Case:
The assessee, a registered dealer, purchased hemp jute worth Rs. 11,42,629.10 from agriculturists and unregistered dealers during the assessment period from 21st October 1960 to 8th November 1961. The hemp jute was not resold in Madhya Pradesh but was sent to Calcutta. The Sales Tax Officer held that the assessee was liable to pay purchase tax under Section 7 of the M. P. General Sales Tax Act, 1958. The assessee contended that the purchase tax was not attracted as the purchases were made in the course of export of hemp jute outside the territory of India and were exempt from purchase tax under Section 50(1)(iii) of the Act.
Finding of the Court:
The Tribunal held that the purchases were not exempt under Section 50(1)(iii) of the Act as there was no obligation on the assessee to export the goods purchased and that the assessee was free to sell the hemp jute within the State or in the course of inter-State trade or commerce.
Issues: Whether the purchases of hemp jute were exempt from purchase tax under Section 50(1)(iii) of the M. P. General Sales Tax Act, 1958.
Ratio Decidendi: The purchase tax in question is being imposed on the transactions entered into between the assessee and the vendors from whom the assessee purchased the hemp. The latter part of Section 5(1) of the Central Sales Tax Act, 1956, is, therefore, not attracted in this case. The contention of the petitioner-assessee is that it had purchased the hemp in question in order to satisfy an agreement entered into with Hindley and Co. Ltt. an outside purchaser. In support, an agreement dated the 9th September 1960 has been filed by the assesgee. The purchases, therefore, are said to be in the course of export to the foregin buyer. On the finding of the Tribunal it is evident that the necessary link between the two transactions, namely, the agreement of the assessee to supply certain quantity of hemp to the foreign buyer and the purchases actually made by the assessee from the local agriculturists or unregistered dealers is not established. On this finding, the only answer possible is that the purchases were not made in the course of export o the articles outside the Indian territory.
Final Decision: The purchases made by the assessee were not exempt under Section 50(1)(iii) of the M. P. General Sales Tax Act, 1958 and that they were liable to purchase tax under Section 7 of that Act.
( 1 ) THE Sales Tax Tribunal (Board of Revenue) has made this reference under section 44 (1) of the Madhya Pradesh General Sales Tax Act, 1958, (hereinafter referred to as the Act) at the instance of the assessee. The question referred to us for decision is -"whether on the facts and in the circumstances of the case the purchases of hemp jute were not exempt under Section 50 (1) (iii) of the m. P. General Sales Tax Act, 1958, and were liable to purchase tax under section 7 of the said Act?"
( 2 ) THE assessee-firm is a registered dealer having its head-office at Seoni and a branch-office at Calcutta. The assessee deals in various articles including jute. During the assessment period from 21st October 1960 to 8th Novemer 1961, the assessee purchased hemp worth Rs. 11,42,629. 10 from agriculturists and unregistered dealers. No sales tax was payable under Section 6 of the Act on these sales by the agriculturists and unregistered dealers. The hemp urchased by the assessee was not resold in the State of Madhya Pradesh, but was sent to Calcutta. The Sales Tax Officer, Bala-ghat, held that the assessee was liable to pay purchase-tax under Section 7 of the Act. In appeal before the Appellate Assistant Commissioner of Sales Tax, Jabalpur, the assessee contended that purchase-tax was not attracted as the despatch of hemp to Calcutta was in the course of inter-State trade or commerce. The appellate authority negatived this contention. In second appeal before the Tribunal, the ground about inter-State trade was given up; but a new ground was pressed, namely, that the purchase-tax was not attracted as the purchases were made in the course of export of hemp outside the territory of India and that the purchases were exempt from purchase-tax under Section 50 (1) (iii) of the Act.
( 3 ) THE Tribunal repelled this contention. It held that" the test is whether there was any obligation on the appellant or whether the appellant was compelled to export the goods purchased by any contract or mutual understanding or any provision of law and he could not help exporting without a breach of them. In the instant case this has not been proved. The appellant was free to sell within the State the hemp jute purchased by him or to sell it in the course of inter-State trade or commerce or to dispose it of otherwise. It is another matter that ultimately the hemp jute purchased by him was exported outside the territories of India. According to the decision of the Supreme Court such a purchase can only be said to be purchase made for export Ben gorm Niligiri Plantations Co. Conoor (Nilgiris) etc v. Sales Tax Officer, ernakulam, 1964-15 STC 753: (AIR 1964 SC 1752 ). There is no link from the time and the point of purchase to the time and the point from which it was exported out of the territories of India to show that the purchase was in the course of export outside the territories of India".
( 4 ) IT is not disputed before us that if the transactions are not covered by Section 50 (1) (iii), purchase-tax under Section 7 will be attracted. That the despatch of hemp to the assessee's branch at Calcutta did not involve an inter-State transaction is apparent and the point was properly not pressed. The only question that remains to be decided is whether the transactions are covered by Section 50 (1) (iii) of the Act. That Section provides -
"50. (1) Notwithstanding anything contained in this Act, a tax on the sale or purchase of goods shall not be imposed under this Act - (i) ***** (ii) ***** (iii) where such sale or purchase takes place in the course of import of the goods into, or export of the goods out of the territories of India. (2) For the purpose of this section, whether a sale or purchase takes place - (i) ***** (ii) ***** (iii) in the course of the import of goods into the territory of India or the export of goods out of such territory; shall be determined in accordance with the principles specified in Sections 3, 4 and 5 of the Central Sales tax Act,
