BEN GORM NILGIRI PLANTATIONS COMPANY, COONOOR AND ORS. versus SALES TAX OFFICER, SPECIAL CIRCLE, ERNAKULAM AND ORS.

Citation: [1964] 7 S.C.R. 706 · Decided: 10-04-1964 · Supreme Court of India · Bench: P.B. GAJENDRAGADKAR · Disposal: Dismissed
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Judgment (excerpt)

1964 
.April 10 
706 
SUPREME COURT REPORTS 
[1964] 
BEN GORM NILGIRI PLANTATIONS COMPANY, 
COONOOR AND ORS . 
v. 
SALES TAX OFFICER, SPECIAL CIRCLE, ERNAKU-
LAM AND ORS. 
[P. B. GAJENDRAGADKAR, C.J., K. N. WANCHOO, J. c. SHAH, 
N. RAJAGOPALA AYYANGAR AND S. M. S!KRI, JJ.) 
Sales Tax-Sale of tea to local agents of Foreign buyers-
Sales whether exempt under Art. 286(l)(b) of the Constitu-
tion-Constitution of India, Art. 286(1) (b)-Central Sales Tax 
Act, 1956, s. 5. 
The appellants were carrying on the business o'f growing 
and manufacturing tea in their estates. The sellers of tea 
were the appellants; the purchasers were local agents of 
Foreign buyers. The sales were by public auction at Fort 
Cochin. They were conducted by brokers of tea. The sales 
were in conformity with the provisions of Tea Act of 1953. 
The Sales-tax Officer assessed the appellants to pay sales tax 
on transactions of sale of tea chests at the auctions held at 
Fort Cochin in the years 1956-57 to 1958-59. Against the orders 
of assessment the appellants filed petitions before the High 
Court for writs of certiorari and for writs of prohibition re-
straining the Sales-tax Officer from proceeding with the collec-
tion of sales tax. The petitions were dismissed by the High 
Court. With special leave the appellants appealed to this 
c.,urt. 
It was the common case of all the appellants that the pur-
chases by the local agent of foreign buyers were with a view 
to export the goods to their principals abroad and that the 
goods were in fact exported out of India. 
It was contended on behalf of the appellants that the sales 
of tea were "in the course of export 0ut of the territory of 
India", and thus exempt from taxation under Art. 286(l)(b) 
of the Constitution.' 
Held: (per Gajendragadkar, C. J., Shah and Sikri, JJ.) 
(i) A transaction of sale which occasions export, or which is 
effected by a transfer of documents of title after the goods 
have crossed the customs frontiers, is exempt under Art. 
286(l)(b) of the Constitution from sales tax levied under any 
State· legislation. A transaction of sale which is a preliminary 
to expert of the commodity sold may be regarded as a sale 
for export, but is not necessarily to be regarded as one i'l the 
course of export, unless the sale occasions export. Etymologi-
eally the expression "in the course of expert'', contemplates 
an integral relation or bond between the sale and th~ export. 
In general where 4 sale is effected by the seller, and the 
seller is not connected with the export which actually takes 
place, it is a sale for export. Where the export is the result of 
·sale, the export being inextricably linked up with •ale so that 
the bond cannot be dissociated without a breach of the obliga-
tions arising by statute. contract of mutual understanding bet-
ween the parties arising from the nature of the transaction the 
sale is in the course of export. 
-
-
7 S.C.R. 
SUPREME COURT REPORTS 
707 
(ii) A sale in the course of export predicates a connection 
1964 
between the sale and export, the two activities being so in-
tegrated that the connection between the two cannot be volun-
. ~· q.,,,. . 
tarily interrupted, without a breach of the contract or the gz.P"'t"..:::: 
co"lpulsion arising from the nature of the transaction. In the 
alld1lithra 
present casr there was between the sale and the export no 
v. 
such bond as would justify the inference that the sale and the Baka Ta:c OJ!i<a 
export formed parts of a single transaction or that the sale 
Bp<eiol Oirck, ' 
and export were integrally connected. The appellants were Ernolwlam aw4 
not concerned with the actual exportation of the goods, and 
OU..ra 
the sales were intended to be complete without the export, 
and as such it cannot be said that the said sales occasioned 
export. The sales were rtherefore for export .and not in the 
course of export. Therefore the sales by the appellant to the 
agents of foreign buyers do not come with the purview of 
Art. 286(i)(b) of the Constitution. 
State of Travancore.Cochin v. Bombay Company Ltd. 
[1952] S.C.R. 1112, distinguished. 
State of Trav:incore-Cochin v. Shanmugha Vilas Cashew 
N "t Factory. [1954] S.C.R. 53, State 
of Madras v. Gurviah 
N'aidu and Company Ltd. A.LR. 1956 S.C. 158, State of Mysore 
v. Mysore Shipping and Manufacturing Co. Ltd. 13 S.T.C. 529 
and B.K. Wadear v. M/s. Daulatram Rameshwarlal fl951] 1 
S.C.R. · 924, relied on. 
M. R. K. Abdul Salem and Company v. Government of 
Mad
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