SOVEREIGN SPICES Vs. STATE OF KERALA

JUDGEMENT

(1.) QUESTION of law raised in all these tax revision cases are the same on similar set of facts. Therefore, as agreed by the Counsel appearing for the parties, all these cases are disposed of together.

(2.) PETITIONERS in these tax revision cases are doing business in spices like pepper and ginger etc. in Kerala State and they are registered dealers under the provisions of the Kerala General Sales Tax Act and Central Sales Tax Act. PETITIONERS purchased pepper, dry ginger etc. which is liable to tax at last purchase point in the Kerala State and after effecting purchase of pepper etc. the same was sold to exporters outside the State who, in turn, exported the goods to outside the country. PETITIONERS contended that they are entitled to exemption under S. 5 (3) of the Central Sales Tax Act as the purchase by them is the purchase preceding the export. They also submitted that purchase effected by the petitioners is inextricably connected with the export sales and it is exempt under Art. 286 (1) (b) of the Constitution of India. The case before the assessing authority was that they are entitled to exemption under S. 5 (3) of the C. S. T. Act That was not accepted by the assessing authority, Deputy Commissioner (Appeals) as well as the Kerala Sales Tax Appellate Tribunal. The order in Appeal No. "265/95 passed by the Kerala Sales Tax Appellate Tribunal is produced in T. R. C. No. 83/96. Finding of the Tribunal are recorded in Para. 4 of the order which is as follows:- " Admittedly, the purchase effected by the appellant is the purchase of pepper, dry ginger etc. within the State of Kerala which are taxable at the last purchase point. After the above purchase is complete, the appellant sold the same to exporters outside the State of Kerala. Exporters outside the State of Kerala exported the same. So, three transactions are involved in this case. One, a sale by a dealer in the Kerala to the appellant, ie. , the appellant's purchase in Kerala, secondly sale by the appellant to the exporters at Bombay (2nd transaction), third sale by exporter to foreign buyer (3rd transaction ). Sale by exporter to foreign buyer which directly occasions the export is covered by S. 5 (1) of the C. S. T. Act. Therefore, the second transaction, ie. , sale by the appellant or the purchase by the exporter which alone is covered by S. 5 (3) of the C. S. T. Act, as the words used in S. 5 (3) of the C. S. T. Act is that "the purchase or sale preceding the purchase or sales occasioning the export". The purchase by the Bombay exporter is not a purchase occasioning the export, but, the purchase preceding the purchase occasioning export. Therefore, it is clear that (third transaction ie.) purchase by the appellant (sale by a third party to the appellant) is not a purchase preceding the purchase occasioning export mentioned in S. 5 (3) of the C. S. T. Act, but sales by the appellant to Bombay exporters is the sale preceding the sales occasions the export (Bombay exporter's purchase is the purchase preceding the purchase occasioning the export ). The Hon'ble High Court of Andhra Pradesh, reported in 73 STC 135 in Bismillah & Co. v. State of Andhra Pradesh and Hon'ble High Court of Kerala in Deputy Commissioner (Law) v. Kepee Sons reported in KLT 1991 (1), page 271, have held in identical set of facts that the purchase effected by the appellant is not the purchase under S. 5 (3) of the C. S. T. Act. " According to the petitioner, decision of the Tribunal is in contravention of the provisions contained in Art. 286 (1) (b) of the Constitution of India as their purchases were inextricably connected with the export. It is also contended by the petitioners that the Tribunal is not justified in holding that purchases of pepper and ginger effected by the assessee are not the last purchases preceding the purchase occasioning the export contemplated under S. 5 (3) of the C. S. T. Act.

(3.) IN State of Travancore-Cochin & Ors. v. Shanmugha Vilas Cashewnut Factory, Quilon (AIR 1953 SC 333) after considering the decision in Bombay Company's case referred to earlier, the Supreme Court held that the phrase "integrated activities" used in Bombay Company's case is only to denote that "such a sale" ie. sale which occasions the export) "cannot be dissociated from the export without which it cannot be effectuated, and the sale and the resultant export form parts of a single transaction". It was also held that a purchase for export is not an activity so integrated with the export so as to be regarded as done "in the course of export. The Supreme Court clearly distinguished purchase in the course of export and purchase for export.