MOHD. SERAJUDDIN ETC. versus STATE OF ORISSA

Citation: [1975] SUPP. 1 S.C.R. 169 · Decided: 16-04-1975 · Supreme Court of India · Bench: A.N. RAY · Disposal: Dismissed

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Judgment (excerpt)

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169 
MOHD. SERAJUDDIN ETC. 
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STATE OF ORISSA 
April 16, 1975 
[A. N. RAY, C. J. Ff. R. KHANNA, K. K. MATHEW, M. H. BE& 
ANDY. V. ClIANDRACHUD, JJ.J 
Constitution-Article 286(1)-Section S of Central Sales Tax Act-Meaning 
of in the course of export-Agency of necessity-F.O.B. Contract. 
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The appellants entered into two contracts with the State Trading Corpora-
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tion. The S.T.C. entered into identical contracts with the foreign buyers for 
sale of the identical goods purchased by the S.T.C. from the appellant. 
The 
clauses as to shipment, sampling, analysis, weigbment, payment are identical in 
both the contracts. 
There is a special clause in each one of the contracts 
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providing that if the corresponding contract of S.T.C. with the foreign buyer 
shall stand cancelled for any reason, the contract of the S.T.C. with the appel-
h1nt will also stand cancelled. 
Likewise, there is a special clause in the con-
tract between the S.T.C. and the foreign buyer that if for any reason the 
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contract between S.T.C. and. the appellant stands cancelled the contract between 
S.T.C. and the foreign buyer will stand cancelled. The letter of credit opened 
by the foreign buyer was to be endorsed in favour of the appellant. 
The 
prices mentioned in both the contracts are the same with a difference of one 
dollar per ton. 
The appellants contended that the contracts were in the course of export 
and, thr.refore, not taxable. The High Court came to the conclusion that the 
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saJe by the appellants to the S.T.C. was not in the course of 1export' and 
was 
theTefore, exigible to tax under the Central Sales Tax Act. 
In appeal the appellants contended before this Court: 
1. The contract between the appellant 
and the S.T.C. is inextricably 
bound up with the export. The sale between the appellant and the 
S.T.C. and the export by Corporation to foreign buyer constituted 
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one integrated transaction. 
2. The S.T.C. has been interposed by the Statute between the appellant 
and the foreign buyer for a limited purpose. The inextricable link 
is not broken by the S.T.C. 
The S.T.C. could not have diverted 
the goods to a buyer in India without violating Export and Imuort 
Control Order. 
3. The ~ontract betwee~ the appellant and the S.T.C. being on f.o.b. 
basis the P.roperty in the goods passed only on shipment when the 
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goo~s are in the stream of export. There is no sale in the taxable 
terntory. 
4. Eve:r;i if it. is held that, the appellant did not have any contract with 
th~ .foreurn buyer and that the privity is essential the rigid rule of 
prn:1ty of contrast .should be relaxed in consideration of equity and 
J usttce and a reahshc approach should be adopted. 
The respondent contended that the sale by the appellant to the S T C 
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a sale for export but not a sale in the course of export. 
· 
· 
· was 
There can be only one sa1e in .the course of exp-0rt. 
HELD by C. J. (for himself and Mathew, Beg, Chandrachud, JJ). 
the 
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iesi
0
o~~~ngrs!nJr~h~~cf ~~e~ci~Y:r~e, f~~r~0!~:c~o~i~f: dhd_ctly ~:een 
the Indian seller and the foreign buyer. 
[17SH] 
rme iary . 
een 
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170 
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SUPREME COURT REPORTS 
[1975] SUPP. S.C.R. 
2. In the Coffee Board case this Court held that the introduction of an int~r­
mediary between the seller and the importing buyer breaks the link. This Court 
has held that there must be a single sale which itself causes the exoort and 
there is no room for two or more sales in the course of export. 
[173FG&H] 
3. The contention that the contract between the appellunt and the s:r.c. 
anci the contract between the S.T.C. and the foreign' buyer formed integrated 
activities in the course of export is unsound. The crucial words in section 5 of the 
Central Sales Tax Act are that a sale or purchase of ·goods shall be deemed to 
take place in the course of the export of the goods only if the sale or purchase 
occasions such export. There are two separate and independent contract"S of sale 
one between the appellant and the S.T.C. and th~ other between the S.T.C. and 
the foreign buyers within the meaning of ruling in the Coffee Board case and the 
Benam Brother's case. (!80FGH] 
4. The word ''occasion" in section S means the immediate and direct cause. 
(181BJ 
S. The appellant was under no contractual obligation to the foreign buyer 
either directly or indirectly. The rights of the appellant were against the S.T.C. 
Similarly, obligations of the appellant were to the S.T.C

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