PONNU SAW MILLS Vs. STATE OF TAMIL NADU

JUDGEMENT

(1.) THIS appeal has been preferred against the order of the Board of Revenue dated 2nd March, 1977. The assessees are dealers in senna leaves, country drugs, etc. The assessing officer determined the taxable turnover ar Rs. 50, 967. 52 under section 3(1) of the Madras General Sales Tax Act, 1959 (hereinafter referred to as the Act). He noticed that the assessees had purchased Nithyakalyani leaves and roots for an estimated value of Rs. 88, 943. 00 from agriculturists and exported the goods to foreign countries. He subjected this turnover to tax under section 7-A of the Act. On appeal, the Appellate Assistant Commissioner, Tirunelveli, relying on the decision of this Court in M. K. Kandaswami v. State of Tamil Nadu cancelled the assessment under section 7-A of the Act. THIS decision was reversed by the Supreme Court and the Supreme Court's judgment was reported as State of Tamil Nadu v. M. K. Kandaswami The Board took suo motu revision proceedings after the judgment of the Supreme Court was pronounced and after giving the assessees the necessary opportunity to show cause why the turnover should not be taxed, brought to tax the turnover under section 7-A(1)(c) of the Act. It is this order of the Board that is now the subject-matter of the present appeal. Section 7-A of the Act, in so far as it is material, runs as follows :

(2.) IN the present case, as seen from the order of the Board, clause (c) of sub-section (1) of section 7-A of the Act has been applied. Under that provision, if the goods were despatched to a place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce, then the assessee would be liable to purchase tax. There is yet another condition imposed under section 7-A of the Act, the said condition being the purchase of any goods in circumstances in which no tax is payable under section 3, 4 or 5 of the Act. IN the present case, the purchases having been effected from agriculturists, there is no tax liability in respect of the sales by the said agriculturists. Therefore, the first condition was fulfilled and the second condition, namely, despatch of the goods to a place outside INdia (sic) except as a direct result of sale or purchase in the course of inter-State trade or commerce, has also been, in the Board's view, fulfilled. The point in dispute is whether this order of the Board is correct.

(3.) THE learned counsel for the assessees drew our attention to a decision of the Supreme Court in Burmah Shell Co. Ltd. v. Commercial Tax Officer In that case, the assessees dealt with petroleum and petroleum products at Calcutta. THEre was a supply depot at Dum Dum Airport from which aviation spirit was sold and delivered to aircraft proceeding abroad. THE question was whether those supplies to the aircraft which proceeded to foreign countries were liable to sales tax under the Bengal Motor Spirit Sales Taxation Act, 1941. THE appellant-assessees contended that such sales were made in the course of export of such aviation spirit out of the territory of India, that they took place outside the State of West Bengal, that inasmuch as aviation spirit was delivered for consumption outside West Bengal, the sales could not fall within the explanation to clause (1)(a) of article 286 (as it stood at the relevant point of time) and that unless they could be said to become "explanation sales", the power to tax did not exist. THE Supreme Court held that in order to excluded powers of taxation of the State of West Bengal, the assessees must be able to point out some other State where the goods could be said to have been delivered as a direct result of the sale for the purpose of consumption in that other State and, as the appellant-assessees had not done so, they could not invoke the explanation. THE aviation spirit loaded on board an aircraft for consumption, though taken out of India, was not exported since it had no destination, where it could be said to be imported.