FERRO ALLOYS CORPORATION LTD. ETC. versus UNION OF INDIA AND ORS.

Citation: [1998] SUPP. 3 S.C.R. 541 · Decided: 14-12-1998 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Appeal(s) allowed

Judgment (excerpt)

FERRO ALLOYS CORPORATION LTD. ETC. 
A 
v. 
UNION OF INDIA AND ORS. 
DECEMBER 14, 1998 
[S.P. BHARUCHA ANDS. RAJENDRA BABU, JJ.] 
B 
Central Sales Tax Act 1956-S.5-Sales in the course of E.xport-
Appellant entering into 'Off-take agreements to sell charge chrome prior to 
entering into charge chrome agreements' of sale to buyer abroad-Respondent 
authorities viewing transactions as intra-state sales under the off-take C 
agreements and subject to levy of sales tax under the Orissa Sales Tax Act-
High Court dismissing writ petitions filed by appellants-Held, the sales of 
charges chrome to the seller abroad were sales in the course of export 
occasioned by the charge chrome agreement; the sales were exempt from levy 
of sales tax. 
D 
The appellant was an 100% export oriented unit, manufacturing charge 
chrome. The appellant entered into an Off-take Agreement with R, a 
corporation having its registered office at Zug, Switzerland. The Off-take 
agreement, inter alia, recited the desire of the appellant to appoint Ras its 
exclusive purchaser worldwide for the re-sale of charge chrome produced by E 
the appellant at its new plant in Orissa. 
Pursuant to the Off-take Agreement, Charge Chrome Agreements 
were entered into from time to time and the latter stated that the appellant, 
the "sellers", had agreed to sell charge chrome to R, the "buyers", on the 
terms and conditions stated therein. The quantity specifications, price and F 
destination were stated. Under the standard terms and conditions annexed to 
the agreement, R was required to arrange for the issuance of a certificate 
pertaining to the discharge of the Charge Chrome at the discharging port. 
The mode of payment was also described. 
Until the assessment year 1990-91, the respondents accepted the G 
position that the sales made by the appellant were sales in the course of 
export and, therefore, exempt from the levy of sales tax. For the assessment 
years 1990-91 and 1991-92 the Respondents found that these sales were 
intra-state sales subject to the levy of tax under the Orissa Sales Tax Act. 
The Writ Petitions filed by the appellant thereagainst were dismissed. 
H 
541 
542 
SUPREME COURT REPORTS [1998] SUPP. 3 S.C.R. 
A 
The appellant contended that the sales effected by the appellant to R 
were sales in the course of export to R and that the charge Chrome 
Agreements, left no doubt in this behalf. The respondents contended that the 
sale to R was under the Off-take Agreement and that the Charge Chrome 
Agreements were only delivery orders thereunder. The export had been 
occasioned by reason of the agreements that were entered into between R and 
B the ultimate buyers, which agreements, clearly, preceded the Charge Chrome 
Agreements. 
Allowing the appeal, this Court 
HELD: 1.1. The High Court and the authorities below were in error 
C in concluding that the sales made by the appellant were not sales in the 
course of export and, therefore, not exempted from the levy of sales tax. 
(549-H; 550-A) 
1.2. The Off-take Agreement was no more than an agreement to sell. 
It was executed when the appellants were still in the course of constructing 
D the charge chrome plant and did not relate to a specified quantity of charge 
chrome nor was the price agreed to thereunder. The agreement did not even 
state with any precision how the price of the charge chrome was to be 
determined. [548-F-H] 
1.3. The provisions in the charge chrome Agreements indicated not 
E only that they were contracts of sale of the charge chrome but also that the 
sale thereunder was a sale to R abroad and, therefore, the export of the 
charge chrome was occasioned by the Charge Chrome Agreements. 
[549-F] 
1.4. R was not an intermediary in the sense that it was not the contract 
F of sale of the charge chrome by R to the ultimate buyer which occasioned 
the export. The charge chrome having been exported by the appellant to R 
abroad, R resold it to the ultimate buyers. [549-G) 
Md. Serajuddin v. The State of Orissa, [1975) 2 SCC 47, referred to 
G 
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 7816-17 of 
1995 Etc. 
From the Judgment and Order dated 19.5. 1995 of the Orissa High Court 
in O.J.C. No. 4756-57of1993. 
Harish N. Salve, Shanti Bhushan, T.L.V. Iyer, U.N. Bachawat, Jaideep 
H Gupta, Prag Tripathi, P.Kapur, Praveen kumar, Ms. Kirti Mishra, Raj iv Nanda, 
• • 
FERRO ALLOYS CORPN. LTD. v. U.0.1. [BHARUCHA, J.) 
543 
T.C.Sharma, B.K. Prasad, Y.P. Mahajan, Ms. Binu Tamta and D.S.

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