CONSOLIDATED COFFEE LIMITED M S P EXPORTS PRIVATE LIMITED T G M ASSADI AND SONS VERMA EXPORTS PRIVATE LIMITED Vs. COFFEE BOARD BANGALORE:COFFEE BOARD:STATE OF KARNATAKA:STATE OF KARNATAKA

JUDGEMENT

(1.) These writ petitions filed by Registered Exporters of Coffee under Art. 32 of the Constitution raise an important question of proper construction of S. 5 (3), a provision newly inserted in the Central Sales Tax Act 1956 by an Amending Act (103 of 1976) and the petitioners also seek to challenge the constitutional validity of a Circular dated February 7, 1977 issued by the Coffee Board, whereby it requires the Registered Exporters of Coffee to furnish contingency deposits or bank guarantees equal to the amount of sales tax in respect of the exempted sales under the said S. 5 (3) and pray for its cancellation or withdrawal and consequential reliefs.

(2.) The facts giving rise to the writ petitions being common and almost identical may be stated. The Coffee Board, Bangalore is a statutory corporation incorporated under S. 5 of the Coffee Act, 1942, an enactment passed to provide for the development of the Coffee Industry under the control of the Union. Sections 4 to 10 of the Act deal with the setting up of the Coffee Board on which all interests are represented and some Members of Parliament and Government Officers are nominated. The Board exercises powers and discharges functions assigned to it under the Act and the Coffee Rules framed thereunder. The Act compels the registration of all owners of coffee estates and licensing of curers and dealers and it also imposes control on the sale, export and re-import of coffee into India. In regard to sale it fixes prices for sale of coffee either wholesale or retail by registered owners and licensed curers for the purpose of sale in the Indian Market and the Coffee Board fixex internal sale quota for each estate owner and the owner has to observe this quota and also the price fixed and under S. 25 all coffee produced by a registered estate in excess of the quantities specified in the internal sale quota allotted to that estate, or when no internal sale quotas have been allotted to the estates, all the coffee produced by the estate has to be delivered to the Board for inclusion in the surplus pool by the owner of the estate or by the curing establishment receiving the coffee from the estate and under sub-sec. (6) in respect of coffee so delivered for inclusion in the surplus pool the registered owner retains no right except his right to receive payments referred to in S. 34. Section 26 (1) enjoins upon the Coffee Board to take all practical measures to market the coffee included in the surplus pool and all sales thereof have to be conducted by or through the Board. These sales include internal sales in India and outside India. We are concerned in these petitions with sales outside India. Under S. 20 of the Act no coffee (barring certain exceptions specified in the proviso) can be exported from India otherwise than by the Board or otherwise than under an authorisation granted by the Board in the prescribed manner and in the prescribed cases, while under S. 21 no coffee which has been exported from India shall be re-imported into India except under and in accordance with a permit granted by the Board. Section 47 provides that all contracts for the sale of coffee in so far as they are at variance with the provisions of this Act shall be void. It will thus appear clear that the Coffee Board exercises complete control - almost monopolistic - over the coffee trade in exercise of its statutory powers.

(3.) Export of coffee outside India is particularly controlled under the Act and the Rules by the Coffee Board. As stated earlier coffee can be exported either by the Coffee Board directly to parties outside India or the Coffee Board authorises other exporters to effect such exports. For effecting exports through other exporters the Coffee Board periodically conducts auctions known as "export auctions" and it follows a procedure in that behalf. To be able to bid at these auctions, exporters have to get themselves registered with the Board. The Board maintains a list of Registered Exporters and grants to each one of them a permit, which authorises him to take part in the "export auction". The conditions which are imposed by the permit (hereinafter called the 'permit conditions') require, inter alia, a security deposit and a standing deposit (which may be in cash or in the form of bank guarantee) from the Registered Exporters; such permit is liable to be withdrawn or cancelled by the Chief Coffee Marketing Officer, an executive appointed by the Central Government on the Board, at any time if it is found that a permit-holder has sold or has attempted to sell coffee bought by him at the "export auction" within the internal market without his written permission or if any of the other permit conditions are contravened. A specimen of the permit together with the conditions attaching to it has been annexed to each petition. The actual "export auctions" are conducted on the basis of "the Terms and Conditions of Sale of Coffee in the course of Export" framed by it and the Registered Exporters participate in such auctions on those terms and conditions. A specimen copy of these Auction Conditions has been annexed to each petition. Clause 3 thereof declares that all auctions and sales made thereat are subject to (i) the Auction conditions, (ii) the Permit conditions and (iii) such other rules or conditions as may be prescribed by the Chief Coffee Marketing Officer. Under C1. 4 only dealers who have registered themselves as Exporters of coffee with the Coffee Board and who hold a permit from the Chief coffee Marketing Officer in that behalf are permitted to participate in the auctions. Under C1. 11 no one is allowed to retract his bid when once the same has been entered in the Register of Bids. The highest bid is ordinarily accepted but the Sale Conducting Officer may not accept such bid if he has reason to believe that the same is not bona fide or genuine or the same is the outcome of concerted action on the part of the dealers or a section of them for the purpose of controlling or manipulating prices, etc. subject to his recording the reasons for such rejection in the Register of Bids. Clause 19 deals with weighment, delivery and payment of price and contains an overriding provision to the effect that the "property in the coffee sold shall not pass to the buyer until after he has paid the full price and the coffee sold to him is weighed and set apart for delivery to him". Clause 26 declares that it is an essential condition of the auction that the coffee sold thereat shall be exported to the destination stipulated in the catalogue of lots or to any other foreign country outside India as may be approved by the Chief Coffee Marketing Officer within three months or within such extended period as shall not exceed one year from the Notice of tender issued to the auction buyer (Registered Exporter) and that under no circumstances the coffee purchased at such auction shall be diverted to other destinations or sold or be disposed of or otherwise released in India. Clauses 30 and 31 provide for the consequences of default on the part of the buyer to export the coffee or to produce evidence thereof, he is liable to pay a penalty at the rates specified in C1. 30 and what is more under C1. 31 Chief Coffee Marketing Officer is entitled to seize and take possession of the unexported coffee and deal with it as if it were part and parcel of the Board's coffee in its surplus pool. Under Clause 32 it is provided that in the event of the buyer committing any default in respect of any of the terms and conditions of the "export auction" he shall be liable:(i) to be removed from the lost of the Registered Exporters, the permit granted to him being cancelled; (ii) to forfeit the deposit made by him at the time of obtaining the permit and (iii) to forfeit the deposit if any covered by the conditions contained in C1. 14 (ii).