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PETITIONER: COMMISSIONER OF SALES TAX

       Vs.

RESPONDENT: LEATHER FACTS CO.

DATE OF JUDGMENT24/03/1987

BENCH: THAKKAR, M.P. (J) BENCH: THAKKAR, M.P. (J) RAY, B.C. (J)

CITATION:  1987 AIR 1343            1987 SCR  (2) 630  1987 SCC  (2) 380        JT 1987 (1)   807  1987 SCALE  (1)659

ACT:     Central  Sales Tax Act, 1956--Section  5(3)--Transaction of  sale/  purchase ’in course of export’--Not  exigible  to tax--Use  of  Form IlIA under Rule 12--A of U.P.  Sales  Tax Act, 1948 by trader--Whether State empowered to levy tax.     U.P. Sales Tax Act, 1948--Rule 12-A Form  III--A--Trader using  such Form--Whether liable to tax on transactions  ’in course of export.’

HEADNOTE:     The respondent, a dealer in hides and skins and  export- ing  the  same out of the territory of India,  entered  into transactions  failing within the purview of sub-section  (3) of  Section 5 of the Central Sales Tax Act, 1956  and  which could  not  be  taxed because of  constitutional  bar  under Article 286( 1 )(a) of the Constitution of India,  furnished Form III-A under Rule 12-A of the U.P. Sales Tax Act, as  an appropriate form to meet the situation was not devised under the U.P. Sales Tax Act, and sought a clarification from  the Commissioner,  Sales Tax, as to whether the firm was  liable to tax under Section 3-AAAA of the U.P. Sales Tax Act on the purchases  made  against Form III-A or H under  the  Central Sales  Tax Act, when such dressed hides and skins  were  ex- ported  beyond  the territory of  India.  The  Commissioner, Sales  Tax clarified and held that the purchases of  dressed hides  and  skins  made against Form H were  not  liable  to purchase tax under Section 3-AAAA of the U.P. Sales Tax  Act provided  the  same were exported outside the  territory  of India  and the conditions laid down in Section 5(3)  of  the Central  Sales Tax Act were satisfied, but if the  purchases were made against Form III-A and exported outside the terri- tory  of India, they shall be liable to purchase  tax  under Section 3-AAAA.     On appeal, the Sales Tax Tribunal held that the respond- ent was not liable to any purchase tax under Section  3-AAAA of  the  U.P.  Sales Tax Act  whether  they  were  purchased against or without Form III-A or H, as the same were export- ed  outside  the territory of India in compliance  with  the order  received from the foreign buyers and  those  transac- tions were exempted under Section 6 of the Central Sales Tax Act.

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631     A  Revision Petition filed before the High Court by  the appellant  Revenue,  contending  that the  decision  of  the Tribunal was bad in law was dismissed.     Disposing  of the appeal by the U.P. Sales Tax  authori- ties, this Court,     HELD:  1.1 The mere fact that Form III-A has been  given will  not  empower the State to collect or  levy  the  sales tax/purchase  tax in respect of a transaction in the  course of  export which satisfies the tests prescribed  by  Section 5(3)  of the Central Sales Tax Act. It would be  unconstitu- tional  in  view of the constitutional bar to  levy  tax  on sales in the course of export regardless of the fact whether an appropriate form is used or not. [633E-F]     1.2  The  transactions entered into  by  the  respondent which  are  such on which sales tax/purchase tax  cannot  be levied  on account of the constitutional bar read with  sub- section  (3)  of  Section 5 of the Central  Sales  Tax  Act, cannot become exigible to tax merely because a wrong form is used  (particularly when the appropriate form has  not  been devised by the rule making authority). [633F-G]     1.3  Liability for tax in respect of  such  transactions cannot  be  fastened  on the respondent for  the  very  good reason that the State has no power to collect or levy  sales tax/purchase  tax on such transactions. The U.P.  Sales  Tax authorities should have devised an appropriate form in  this behalf. They can do so even now (as has been done under  the Delhi  Sales Tax Act, by prescribing Form 49 to meet such  a situation). [633G-H; 634A]     1.4  For the future purposes instead of furnishing  Form III-A  under  rule 12-A of the U.P. Sales Tax Act,  the  re- spondent  will furnish a photostat copy of Form H under  the Central Sales Tax Act. [634B]     So  fas  as  the past transactions  are  concerned,  the respondent will not be liable provided the tests  prescribed under Section 5(3) of the Central Sales Tax Act, are  satis- fied. [634D]     Consolidated  Coffee  Ltd. v. Coffee  Board,  Bangalore, A.I.R. (Vol. 46) p. 164 refferred to.

JUDGMENT:     CIVIL APPELLATE JURISDICTION: Civil Appeal No. 350  (NT) of 1987. 632      From  the Judgment and Order dated 19.11. 1985  of  the Allahabad in S.T.R. No. 401 of 1985. S.C. Manchanda and Ashok K. Srivastava for the Appellant.     Raja Ram Agarwal, Ajay Kumar Jain, Pramod Dayal and A.D. Sanger for the Respondent. The Order of the Court was delivered by     THAKKAR,  J.  A transaction of sale  or  purchase  which takes  place  ’in the course of export’ falling  within  the purview  of  sub-section (3) of Section 51  of  the  Central Sales-tax Act. 1956 (hereinafter called the ’Act’) cannot be subjected  to  sales-tax by any State.  The  said  provision inter  alia provides that the last sale or purchase  of  any goods preceding the sale or purchase occasioning the  export of  those goods out of the territory of India shall also  be deemed to be in the course of such export. (i)  provided such last sale or purchase took place  ’after’ and    (ii) was for the purpose of complying with, the agreement or order for or in relation to such export

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Such a transaction cannot be subjected to sales tax/purchase tax  by  any State in view of the embargo  imposed  by  Art. 286(1) (a).1 The controversy centering around this  question has been set at rest in Consolidated Coffee Ltd. v .  Coffee Board, Bangalore, A.I.R. (Vol. 46) p. 164. Under the circum- stances, if the last sale in favour of the respondent who is a dealer in hides and skins and exports the same out of  the territory  of India has taken place (1) after  an  agreement was entered When  a sale or purchase of goods said to take place in  the course  of  import  or export --(1) X X X X (2) X  X  X  (3) Notwithstanding  anything contained m’  sub-section(1),  the last  sale  or purchase of any goods preceding the  sale  or purchase  occasioning the export of those goods out  of  the territory of India shall also be deemed to be in the  course of  such  export, if such last sale or purchase  took  place after and was for the purpose of complying with, the  agree- ment or order for or in relation to such export." 1. "286(1) (a) No law of a State shall impose, or  authorise the  imposition  of a tax on the sale or purchase  of  goods where such sale or purchase takes place-- (a) outside the State; or  (b) in the course of the import of the goods, or export  of the goods out, of the territory of India. 633 into  for  such  export or order for such  export  had  been accepted  by him. (2) last sale made in his favour  was  for the  purpose  of complying with  the  obligation  undertaken under the said agreement or order, the transaction reflected in such last sale or purchase cannot be lawfully taxed under the Sales Tax Act. It cannot be taxed because of the consti- tutional bar embodied in Article 286 (1) (a) of the  Consti- tution  of  India. The view taken by the High Court  in  the Judgment under appeal that such transactions are not  exigi- ble to sales tax/purchase tax under the U.P. Sales Tax  Act, is unexceptionable in the light of the aforesaid  provisions of the Constitution and sub-section (3) of Section 5 of  the Act  and  the  law declared by this  Court  in  Consolidated Coffee  Ltd. We, therefore, see no reason to interfere  with the order of the High Court.     It  is no doubt true that Form III-A under Rule 12-A  of the U.P. Sales Tax Act is not an appropriate form to use  in the  context of such a transaction of last sale or  purchase for the purpose of complying with an agreement or order  for export which has already come into existence. However, it is equally true that an appropriate form to meet the  situation in  relation  to such last sales which are not  exigible  to sales/  purchase  tax under the U.P. Sales  Tax  Act  having regard  to the constitutional bar and having regard  to  the provision  contained in sub-section (3) of Section 5 of  the Act has not been devised under the afore-said Rules. It  was under these circumstances that the respondent has  furnished to his vendors form III-A which is not appropriate except in regard  to  purchases made for sales of undressed  hides  as such within the State or in the course of inter-State trade. But  the mere fact that such a form has been given will  not empower the State to collect or levy the sales  tax/purchase tax  in  respect of a transaction in the  course  of  export which satisfies the aforesaid tests prescribed by Section  5 (3)  of the Central Sales Tax Act. It would  be  unconstitu- tional  in  view of the constitutional bar to  levy  tax  on sales in the course of export regardless of the fact whether an appropriate form is used or not. The transactions entered into  by him which are such on which sales tax/purchase  tax cannot  be levied on account of the constitutional bar  read

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with  sub-section (3) of Section 5 of the Central Sales  Tax Act  cannot  become exigible to tax merely because  a  wrong form is used (particularly when the appropriate form has not been  devised by the Rule making authority).  Liability  for tax  in respect of such transactions cannot be  fastened  on the  respondent for the very good reason that the State  has no  power to collect or levy sales tax/purchase tax on  such transactions.  The  U.P. Sales Tax authorities  should  have devised  an appropriate form in this behalf. They can do  so even now (as has 634 been done under the Delhi Sales Tax Act by prescribing  Form 49 to meet such a situation). Learned counsel for the appel- lant  submits  that till such a form is prescribed  the  re- spondent who claims to have entered into these  transactions in  the  course of export as defined by sub-section  (3)  of Section  5  of the Act may furnish to his vendor a  copy  of Form-H  as provided by the Central Sales Tax Act, 1956.  The respondent has no objection and is prepared to do so.  Under the  circumstances, for the future purposes instead of  fur- nishing  form  III-A  under  Rule  12-A  of  the  Sales  Tax Act, .the respondent will furnish a photostat copy of form H under  the  Central Sales Tax Act. Learned counsel  for  the respondent  states that if such a copy is furnished  to  the vendor  it will be accepted by the competent  authority  and the  vendor  will not be held liable for  payment  of  sales tax/purchase tax in respect of such transactions subject  to the  rider that respondent will be held liable in  case  the purchases  made  by him do not satisfy  the  conditions  and tests  prescribed  by sub-section (3) of Section  5  of  the Central  Sales  Tax Act and are not made in  the  course  of export  within the meaning of the said provision. So far  as the past transactions are concerned the respondent will  not be liable provided he satisfies the aforesaid tests and  the transactions of last sales made to him are in the course  of export  within  the  deeming clause of  sub-section  (3)  of Section 5 of the Act.     The appeal is disposed of accordingly. There will be  no order as to costs. N.P.  V                                         Appeal  dis- posed of. 635