(1.) THE point that arises before this Full Bench in these two cases is as follows : " Whether the State of Kerala is, or is not, entitled to levy sales tax under the Kerala General Sales Tax Act, 1963, on the purchases of raw cashewnuts made by the petitioners, out of which cashew kernel is extracted, and exported to foreign countries, in view of the provisions of section 5 (3) of the Central Sales Tax Act, 1956; and, whether the export of the cashew kernel obtained out of the cashewnut with shell purchased by the petitioners, would amount to export of 'those goods' which had been purchased. "
(2.) THESE two matters have been referred to a Full Bench by a Division Bench consisting of one of us (Paripoornan, J.) and Nayar, J. , by a common order. It is pointed out in the referring order that the decision of the Division Bench of this Court in State of Kerala v. Sankaran Nair [1986] 63 STC 225 requires reconsideration inasmuch as it has overlooked two earlier Division Bench decisions of this Court. It is also stated that a new trend has been set by the Supreme Court in a catena of recent cases - in particular - Deputy Commissioner of Sales Tax v. Pio Food Packers [1980] 46 STC 63; AIR 1980 SC 1227, Sterling Foods v. State of Karnataka [1986] 63 STC 239 and other cases. The question also arises whether the decision of S. R. Das, J. (as he then was) in State of Travancore-Cochin v. Shanmugha Vilas Cashew-nut Factory [1953] 4 STC 205 (SC) holds the field in view of the trend in the recent decisions of the Supreme Court above referred to.
(3.) WE heard counsel on both sides at length. Counsel for the petitioners (assessees) and counsel for the Revenue submitted their rival pleas and brought to our notice a few decisions to substantiate their pleas. In this judgment, we are dealing with all such decisions placed before us as focussed by the respective counsel in respect of their pleas. The various aspects arising in this case are discussed in this judgment only from that angle. It is the case of the petitioners that the State cannot levy any sales tax on the purchases of cashewnut with shell in view of the provisions contained in section 5 (3) of the Central Sales Tax Act, 1956 read with article 286 (1) (b) of the Constitution of India. It will be necessary to briefly refer to the history of the export sales. In the cases decided by the Supreme Court before 1956, and in fact as per the majority view in Shanmugha Vilas Cashew-nut Factory's case [1953] 4 STC 205 (SC), the prohibition contained in article 286 (1) (b) restricting the power of the State to levy sales tax was applicable only to the particular export sale or import sale and did not extend, in the case of the export sale, to the penultimate sale of the goods to the exporter for the purpose of the export. It did not also extend, in the case of import sales, to the subsequent sale by the Indian importer, and therefore, the State could levy sales tax on the penultimate or subsequent sales. However, the Supreme Court in Shanmugha Vilas Cashew-nut Factory's case [1953] 4 STC 205 - S. R. Das, J. (as he then was) - took a different view and held that the prohibition restricting the State's power to levy sales tax extended also to the penultimate sale to the Indian exporter and this was what was intended by article 286 (1) (b) and such an interpretation would promote export trade. The learned Judge, however, held on facts, that the cashewnut with shell purchased by the exporter and the cashew kernel which was extracted and exported were commercially different goods and, therefore, on facts, the levy of sales tax by the State on the purchases by the exporter, was valid.
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