C.T. LTD. AND ANR. versus COMMERCIAL TAX OFFICER AND ORS.

Citation: [1996] SUPP. 8 S.C.R. 99 · Decided: 29-10-1996 · Supreme Court of India · Bench: A.M. AHMADI · Disposal: Appeal(s) allowed

Judgment (excerpt)

.... -
C.T. LTD. AND ANR. 
v. 
COMMERCIAL TAX OFFICER AND ORS. 
OCTOBER 29, 1996 
A 
[A.M. AHMADI, CJ., S.P. BHARUCHA AND S.C. SEN, JJ.] 
B 
Sales Tax: 
Central Sales Tax Act, 1956: Section 5(3)-Export of tea-Contract 
between appellant and State Trading Corporation for supply of Tea-
Purchase of tea by appellants from auction brokers-Sales tax imposed- C 
Claim for exemption from payment of sales tax-Rejected by Tribunal-
On appeal, held: the purchase of tea by the appellants at the auction in 
faljilment of the export obligation was the penultimate sale in the course 
of export-Hence exempt from payment of sales tax. 
The appellants, engaged in tea business, had a contract with the 
State Trading Corporation (S.T.C.) for supply of tea. This was in 
pursuance to a contract entered into between the S.T.C. and 
Government Trading Corporation of Iran. The appellants purchased 
tea from tea auctions for fulfilling the aforesaid contracts. The sales 
D 
tax authorities issued notices requiring the appellants to pay sales tax E 
upon the purchase of tea from the auction brokers. The appellants 
filed writ petition before the High Court for a declaration that sale of 
tea was exempted from payment of sales tax under Section 5(3) of the 
Central Sales Tax Act, 1956. On transfer of the case to the Taxation 
Tribunal, the Tribunal held that the sale of the tea by the auction 
brokers to the appellants were not exempt from the levy of sales tax F 
under Section 5(3) of the Act. Hence, the present appeal. 
The contention for the appellants was that under the terms of 
the contract between the appellants and S. T.C., the latter was merely 
the agent of the appellants and there was no sale of tea by the G 
appellants to S.T.C. thereunder. The sale of tea was by the appellants 
to the Iranian buyer. The purchase of tea by the appellants at the 
auction was, therefore, the penultimate sale in the course of export 
and, therefore, exempt from levy of sales tax under s.5 (3) of the Act. 
It was also contended that in the contract between S. T.C. and 
appellants, the appellants were referred to as the "Shipper" and H 
99 
100 
SUPREME COURT REPORTS [1996] SUPP. 8 S.C.R. 
A Iranian buyer as the "buyer". 
The contention of the respondent was that the export sale covered 
~._ 
by section 5(1) of the Act was the sale of the tea by S.T.C. to the 
Iranian buyer, the penultimate sale in the course of export was the 
B 
sale of the tea by the appellants to S. T.C. which was covered by the 
provisions of Section 5 (3); therefore, the purchase by the appellants 
of the tea at the auction was liable to sales tax. It was further contended 
that the Bill of Lading had been "ndorsed in favour of S.T.C. and 
that the property in the tea had passed to the S.T.C. It was also 
contended that all documents were required to be prepared by the 
c 
appellants marked "Ale STC" in all relevant places and these were to 
be forwarded to S.T.C. for nego~ation. 
Allowing the appeal, this Court 
HELD : I.I. The purchase of the tea by the appellants at the 
D auctions in fulfilment of the export obligation to the Iranian buyer 
was the penultimate sale in the course of export and covered by the 
terms of section 5(3) of the Central Sales Tax Act, 1956. Thus, it was 
exempt from payment of sales t~x. [107-H] 
E 
1.2. The manner in which the contract between the appellants 
and S. T.C. was executed does not indicate that there was a transfer of 
the property in the tea by the appellants to S. T.C. before it was 
transferred to the Iranian buyer,. There was indication to the contrary, 
particularly, the requirement that the appellants should prepare all 
documents required for negotiation and the "seller's official invoice .•. 
F should be in 5 copies". The requirement that the words "Ale STC" be 
used was only to enable the Iranian buyer to identify the tea as being 
sent in fulfilment of the obligation under the contract between S.T.C. 
and itself. [107-D, C] 
G 
1.3. The Tea Export License for the tea was that of the appellants. 
The invoice of the appellants showed the Iranian buyer against the 
...... 
column "Sold To", and no objection in this regard was raised by 
S.T.C. The duty draw back benefit accrued entirely to the appellants. 
The Bill of Lading issued by the Irano-Hind Shipping Co. Ltd. showed 
the Iranian buyer's Teheran bank as consignee of the tea shipped by 
H the appellants. (107-D-E] 
..... 
C.T. LTD. v. COMMERCIAL TAXOFFICER[BHARUCHA,J.) 
101 
1

Excerpt shown. Read the full judgment & AI analysis in Lexace.