N K SUBRAMANIAM Vs. STATE OF KERALA

JUDGEMENT

(1.) These tax revision cases arise out of a common order of the Sales Tax Appellate Tribunal, Trivandrum and although the petitioners are different, the same question is involved in both the revision cases.

(2.) The petitioners are dealers in coir yarn residing at Parur in the erstwhile Travancore - Cochin State. They effected sales of coir yarn to certain firms in Fort Cochin which was then part of Madras State. T.R.C. No. 12 of 1969 relates to the assessment year 1955-56 and T. R. C. No. 13 of 1969 relates to the assessment year 1954-55. When proceedings were initiated for levy of tax on the turnover relating to the sales to the firms in Fort Cochin, the assessee objected contending inter alia that the sales were in the course of inter State trade exempt under Art.286(1)(b) of the Constitution and no tax was exigible. This contention did not find favour with the assessing authority and tax was levied. The appeals filed by the petitioners before the Appellate Assistant Commissioner and the Sales Tax Appellate Tribunal were dismissed.

(3.) The contention raised for the petitioners is that the sales were in the course of inter State trade and commerce, having been effected by transporting goods from Travancore-Cochin State to Madras State in pursuance to prior contracts and that the sales are exempt under Art.286(1)(b) of the Constitution as inter State sales. As per a statement recorded on 27-10-1964 the transactions were effected in the following manner: "The dealer used to go to the Firms at Fort Cochin area and enter into written agreements with them to sell specified varieties of coir-yarn against samples shown to him and retained by the purchasing firms. The price per candy of coir will be fixed. The dealer then used to purchase coir from various manufacturers, transport the goods at his expense to the purchasing firms at Fort Cochin and when the goods arrived at Fort Cochin the dealer or his agent used to deliver the goods to the purchasers and receive an advance payment. After a week or two the coir will be dried, inspected and rehauked and its grade will be fixed. After final weighment and baling the invoice will be drawn and the balance due received." The Sales Tax Officer took the view that there was no prior contract of sale pursuant to which goods have moved inter State and hence the transaction is not exempt. The question that arises for consideration is whether the movement of the goods was incidental to the contract of sale and whether it has been occasioned by the said contract. The Supreme Court in Ben Gorm Nilgiri Plantations Co. v. Sales Tax Officer, Special Circle, Ernakulam (15 STC 753) has laid down that the sale in the course of export predicated connection between the sale and export, the two activities being so integrated that the connection between the two cannot be voluntarily interrupted without a breach of the contract or the compulsion arising from the nature of the transaction. To occasion export there must exist such a bond between the contract of sale and the actual exportation, that each link is inextricably connected with the one immediately preceding it. The principle thus is that the sales to be exigible to tax under the Act must be shown to have occasioned the movement of the goods or articles from one State to another. The movement must be the result of a covenant or incident of the contract of sale.