MINERAL AND METAL TRADING CORPORATION versus R. C. MISHRA AND ORS.

Citation: [1993] 3 S.C.R. 12 · Decided: 07-04-1993 · Supreme Court of India · Bench: M.N. VENKATACHALIAH · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
MINERAL AND METAL TRADING CORPORATION 
B 
v. 
R. C. MISHRA AND ORS. 
APRIL 7, 1~93 
[B.P.JEEVANREDDYANDN. VENKATACHALA,.J.J.] 
/11co111e tax Act. 19611 Tax credit Certificate (£.\ports) Scheme 
1965: 
c 
Section 280ZC/Paragrap'1 9-Tax credit Scl1eme-Objectire-
prol'idi11g additional i11ce111ire to exporter-System r~f barter-Rea! 
exporter-Who is. 
The Second Respondent (Ferro Alloys Corporation), manuf'ac-
D turer-exporter offerro-maganese and chrome concentrates, entered 
into a numher of agreements with foreign hu:rers for sale of the said 
commodity. The export was routed through the appellant (1\1.1\J.T.C.) 
to bring it .within the system of private barter introduced h)· the 
Government of India with a \'iew to encourage exports. The main 
objective of barter system was to provide a mechanism which would 
E 
result in increased export of particular commodities which were 
·ordinarily difficult to sell abroad where the selling countries were not 
ahle to get a foot-hold. This objective was sought to be achie\·ed by 
linking them to exports of an equirnlent or lesser value of essential 
commodities which in any event had to be imported. As for as 
purchase and sale contracts were concerned, M.l\1.T.C. insisted that 
F there should be one contract of sale between the local supplier and the 
M.M.T.C. and another contract of sale b)' the M.M. T .C. to the foreign 
buyer on principal to principal basis. 
It was agreed that Ferro Alloys should intimate the foreign buyer 
G to enter into a direct contract with M.1\1.T.C. treating it as the seller .. 
Also, the G.R.I. form prescribed by the Resene Bank of India under 
the Rules framed under FERA was to be signed byl\1.!Vl.T.C.showing 
it as the exporter and seller. Letters of credit was opened in the name 
~
of M.M.T.C. which was to be assigned to Ferro Alloys so that Ferro-
H Alloys could receive the payment directly for the goods supplied to 
12 
... 
M. M.T. C. i:. R.C. MISRA 
13 
J\.1.1\1.T.C. The shipping documents also showed M.M.T.C. as the A 
exporter. 
The transactions were gone through. Dispute arose between the 
parties when the question of issuance of Tax Credit Certificate u/s 
280ZC of the Income tax arose as to who could be said to have exported 
B 
the goods and received the sale proceeds in the shape of foreign 
exchange. The matter was taken in appeal before the Government of 
India. It held that M.M.T.C. was the exporter for the purpose of 
S.280ZC. Ferro Alloys challenged the said order. before the High 
Court b.)· way of a Writ Petition. The High Court allowed the Writ 
Petition, and held that the real exporter was Ferro Alloys which C 
earned and receiYed the foreign exchange and M.M.T.C. got only its 
commission of 2% and nothing more. Aggrie,·ed by the judgment of 
the High Court, M.M.T.C. preferred the present appeal. 
Allowing the appeal, this Court, 
D 
HELD: 1. The entire export was done through M.M.T.C. in 
accordance with the S)'Stem of barter. There is no half-way house; 
either it is not barter system or it is in accordance with the S)'Stem of 
barter. This is an undisputed fact as are the several statutory docu-
ments made out in the name of M.M.T.C. Thus M.M.T.C. is the E 
exporter for the purpose of Section 280ZC of the Income tax Act, 1961. 
The entire S)'Stem of barter and the several documents executed in 
that behalfincludingthose required by statutory provisions cannot be 
explained awa)· as mere "external appearances". Ferro-alloys cannot 
come to M.M.T.C. when it is profitable to it and disavow it when it is 
F 
not profitable to it. It cannot haYe it both ways. The title to goods 
passed to l\'l.M.T.C by virtue of the several documents executed 
he tween the parties. Indeed, that \Vas the fulcrum of the entire scheme 
of Barter. (19-E-F). 
G 
2. This Court is not com'inced with the alternative reasoning of 
the High Court - that even if it is viewed that the title to the goods 
passed to M.M.T.C., even so - Ferro-allors must be held to be the real 
=-
exporter, in view of the objective underlying Section 280ZC. If 
M.M.T.C. has acquired the title to the goods and is the exporter for 
all other purposes, it is equally the exporter for the purpose of Section H 
14 
SllPREME COURT REPORTS 
(1993) 3 S.C.R. 
A 280ZC. There can be no dichotom}· of the nature propounded by the 
High Court. (19-H, 20-A). 
B 
c 
D 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 372 of 
1979. 
From the Judgment and Order dated 25.5.1978 of the Delhi Hig

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