Case Note & Summary
The State of Orissa filed the present appeals before the Supreme Court against the full Bench judgment of the High Court of Orissa dated May 11, 1976, rendered on a reference under Section 24(1) of the Orissa Sales Tax Act, 1947. The respondent, Minerals and Metals Trading Corporation of India Limited, a government company within the meaning of Section 617 of the Companies Act, 1956, was a registered dealer under the Orissa Sales Tax Act. During the years 1966-67, 1967-68 and the quarters ending June, September and December 1968, the respondent purchased mineral ores from registered mine owners in Orissa and furnished declarations under Rule 27 of the Orissa Sales Tax Rules, 1947, stating that the ores would be resold within the State of Orissa. The Sales Tax Officer found that the respondent had sold the mineral ores in the course of export to Japanese buyers with whom it had pre-existing export contracts. Concluding that the declarations were violated, the Sales Tax Officer added the relevant sales to the taxable turnover of the respondent and raised a tax demand. The respondent's first appeal was dismissed. The Sales Tax Tribunal, on second appeal, held that the sale to the Japanese buyers was within the State of Orissa and therefore there was no contravention of the declarations, but rejected the contention that the transactions were in the course of export and thus held the sale liable to tax. The Tribunal remanded the matter for re-verification of accounts. At the instance of both the Revenue and the assessee, the Tribunal referred three questions to the High Court: whether the Tribunal was correct in holding no contravention of the declaration attracting the proviso to Section 5(2)(A)(a)(ii); whether the Tribunal acted within jurisdiction in remanding the appeal; and whether the sale by the assessee to the Japanese buyer came within Article 286(1)(b) of the Constitution read with Section 5 of the Central Sales Tax Act. The High Court answered the first question in favour of the assessee, holding no contravention and that the proviso was not attracted. On the second question, it held that the sales to the Japanese buyer were covered by the embargo under Article 286(1)(b) of the Constitution read with Section 5 of the Central Sales Tax Act and were not exigible to Orissa sales tax. The third question was held not to survive. In the Supreme Court, the State did not challenge the finding that the sale to the Japanese buyers was in the course of export, but argued that what was sought to be taxed was the purchase by the assessee from the mine owners and that the assessee had deliberately furnished incorrect declarations knowing the goods were meant for export. The High Court had analyzed the contract terms and concurred with the Tribunal that the sale was effected at Paradeep, a port within Orissa, as title and risk passed when the ore was loaded on board the vessel. Relying on the decision of this Court in Md. Serajuddin & Ors. v. State of Orissa, the High Court held that the sales were in the course of export and thus protected. The provided text of the Supreme Court judgment does not include the final operative order, but it discusses the statutory scheme of single point taxation, the declaration mechanism under Rule 27(2), and the constitutional immunity for export sales under Article 286(1)(b).
Headnote
A) Sales Tax - Export Sales - Constitutional Immunity - Article 286(1)(b) of Constitution of India read with Section 5 of Central Sales Tax Act, 1956 - Sale by assessee to Japanese buyer at Paradeep port within Orissa held in course of export and thus not exigible to Orissa Sales Tax. High Court analyzed contract terms regarding title and risk passing at loading and followed Md. Serajuddin. Held export immunity applies. B) Sales Tax - Declaration and Contravention - Section 5(2)(A)(a)(ii) of Orissa Sales Tax Act, 1947 and Rule 27(2) of Orissa Sales Tax Rules, 1947 - Declaration given for resale within State not contravened when goods sold locally to foreign buyer in course of export. Tribunal and High Court found sale within Orissa and hence no violation; proviso not attracted. C) Sales Tax - Tribunal Jurisdiction and Remand - Section 24(1) of Orissa Sales Tax Act, 1947 - Tribunal had remanded for re-verification after holding no contravention but taxability of export sale. High Court answered that remaining question does not survive.
Issue of Consideration
Whether there was contravention of declaration under Rule 27(2) of Orissa Sales Tax Rules attracting proviso to Section 5(2)(A)(a)(ii) of Orissa Sales Tax Act; whether Tribunal had jurisdiction to remand appeal; whether sale by assessee to Japanese buyer falls within Article 286(1)(b) of Constitution read with Section 5 of Central Sales Tax Act
Law Points
- Sale in course of export protected by Article 286(1)(b) of Constitution read with Section 5 of Central Sales Tax Act
- 1956
- sale to foreign buyer at Indian port for export is within state but still in course of export
- declaration under Rule 27(2) of Orissa Sales Tax Rules not contravened if local sale is part of export transaction
- single point tax scheme defers tax to resale but export resale is immune
