VIJAYALAXMI CASHEW COMPANY Vs. DEPUTY COMMERCIAL TAX OFFICER

JUDGEMENT

(1.) The central Sales Tax Act, 1956 (for short 'the Act') was amended by insertion of Ss. (3 of Section 5 by Act No. 103 of 1976 with effect from 1/4/1976. The said Section 5 (3 reads as under:

(2.) The common contention of the appellants in this batch of appeals is that the judgment of this court in the case of State of Travancore-Cochin v. Shanmugha Vilas Cashew Nut Factory deals with Article 286 of the Constitution and does not conclude the questions raised in these cases. It has been contended in the first place that cashew bought and sold by theappellants in the course of export trade is not different from cashew kernels. It has further been contended that the judgment in Shanmugha Vilas case was based on peculiar findings of facts made in that case. Moreover, the perception of the court in this type of controversy has changed as will be evident from later decisions of this court. Lastly, it was contended that sub- section (3 of Section 5 of the Act did not fall for consideration by this court in Shanmugha Vilas case. Therefore, in any way, that decision cannot cast any light on the controversy raised in this case. It has been contended that cashew cannot be regarded as a commodity different from the cashew kernels. The last sale or purchase of cashew in this case took place before the sale or purchase occasioning the export of cashew kernels out of the territory of India and, therefore, should also be deemed to be in the course of the export trade. There may be some processing of the cashew purchased by the dealers before the cashew nuts were sold but that will not make the goods which were sold, in any way different from the goods that were purchased. Both were cashew or cashew nuts.

(3.) In our view, the distinction sought to be drawn between the provisions of Ss. (3 of Section 5 of the Act and Article 286 (1 of the Constitution is misconceived. Under Article 286 (1, the court has to examine whether any tax is being imposed by the State Legislature on the sale or purchase of goods "in the course of the import of the goods into or export of the goods out of the territory of India". In order to resist imposition of sales tax by the State, the assessee will have to establish the identity of the goods purchased with the goods to be exported out of the territory of India. In order to fulfil an export obligation, if an exporter purchases goods and as a result of some processing, the identity and character of the goods change, then it will not be a case of export of the same goods. There is no dispute that every change does not bring into existence new goods nor can it be said that however small the change may be due to the processing, the identity of the goods will be completely lost. It is a question of fact and degree. But the point to note is that the issue before the Supreme court in Shanmugha Vilas case and the issue that has been raised in the present case are the same. Therefore, it will be wrong to distinguish the judgment of the Supreme court in Shanmugha Vilas case as confined to Article 286 of the Constitution. We are unable to uphold the argument that this judgment does not throw any light on the interpretation of Ss. (3 of Section 5 of the Act. The controversy raised in both the cases is about the identity of the goods purchased and the identity of the goods sold. In the case before us, the penultimate sale is in question. The Supreme court considered only the case of the actual export sale or the last sale in course of export under Article 286 of the Constitution. But here, we have a case of a sale which took place immediately before the actual sale for export. In the case of Mohd. Serajuddin v. State of orissa it was held that under Article 286, the sale which was not liable to tax under the State Sales Tax Act was only the actualsale by the exporter, but the benefit of export sale did not extend to the penultimate sale to the Indian exporter for the purpose of export. This led to insertion of Ss. (3 of Section 5 of the central Sales Tax Act, with effect from 1/4/1976 whereby the last sale or purchase of any goods preceding the sale or purchase occasioning the export of the goods were also granted exemption from the State levy. But in order to claim protection of Ss. (3 of Section 5, the assessee will have to establish that the last sale or purchase before the sale or purchase occasioning export were of those goods which were exported. The deeming section expands the concept of export sales to include the penultimate sale or purchase of goods preceding sale or purchase occasioning the export. But the penultimate sale or purchase of goods must be of those goods which were actually exported.