STATE OF KARNATAKA versus AZAD COACH BUILDERS PVT. LTD. ETC.

Citation: [2006] 2 S.C.R. 245 · Decided: 15-02-2006 · Supreme Court of India · Bench: ASHOK BHAN, S.H. KAPADIA · Disposal: Directions issued
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Judgment (excerpt)

i 
I 
STATE OF KARNATAKA 
A 
v. 
AZAD COACH BUILDERS PVT. LTD. ETC. 
FEBRUARY I5, 2006 
[ASHOK BHAN AND S.H. KAPADIA, JJ.] 
B 
Central Sales Tax Act, 1956: 
Section 5(3)-Words "in relation to such exports"-Connotation of-
Exporter manufacturing chassis-Giving it to bus-body builder-Body-builder C 
delivering the complete bus to exporter who then exports the same-Claim of 
assessee body-builder for benefit under Section 5(3)-Held, the point involved 
in this case is : whether the test of the "same goods" is the essence of Section 
5(3) or whether the test of the subject matter of the contract occasioning the 
· export is the principle behind Section 5(3)-/t is in this context that the words D 
'in relation to such exports" became crucial-Judgments of this Court in 
Sterling Foods* and Vijaylakshmi Cashew Company need reconsideration 
by a larger Bench-Papers be placed before Hon 'hie the Chief Justice of 
India for directions-Karnataka Sales Tax Act-Second Schedule-Entry 14-
"Bus" and "bus-body". 
*Sterling Foods v. State of Karnataka, (1986) 3 SCC 469 and 
**Vijaylakshmi Cashew Company & Ors. v. Dy. Commercial Tax Officer 
(1996) 1 sec 468, referred to. 
E 
K. Gopinathan Nair and Ors. v. State of Kera/a, (1997) 10 SCC 1, 
relied on. 
F 
Mohd. Serajuddin & Ors. v. State of Orissa, (1975) 2 SCC 47; 
Consolidated Coffee v. Coffee Board, (1980) 3 sec 358 and Satnam Overseas 
(Export) v. State of Haryana, (2003) 1 sec 561, cited. 
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 5616-5617 G 
of 2000. 
From the Final Order and Judgment and dated 8.2.2000 of Kamataka 
High Court in S.T.R.P. Nos. 4/1997 C/W 5/1998. 
245 
H 
246 
SUPREME COURT REPORTS 
[2006 I 2 S.C.R. 
A 
G.E. Vahanvati, S.G. (Amicus Curiae), Kavin Gulati, Sanjay R. Hegde, 
B 
Anil K. Mishra. A. Rohen Singh and Ms. Rashmi for the Appellant. 
Soli J. Sorabjee, Joseph Vellapalli, M.N. Shankeregowda, Vikas R, 
B.K. Choudhary, E.C. Vidya Sagar, E.R. Kumar. N. Prasad Pritesh Kappor, 
Sumit Goel and P.H. Parekh (for P.H. Parekh & Co.) for the Respondents. 
The Order of the Court was delivered: 
ORDER 
Manufacturers of buses, such as, TA TA and Ashok Leyland get orders 
C for export of buses. One such export order is annexed as "R-3" in the 
paperbook. These manufacturers manufacture chassis and they thereafter place 
orders on the assessee for building bus-bodies (See: annexure "R-5" in the 
paperbook). The name of the assessee in the present case is Azad Coach 
Builders Pvt. Ltd. The foreign buyers place an order on the exporter, namely, 
D TAT As for supply of "the complete bus/buses" giving specifications of the 
chassis and the bus-body. In some cases, the foreign buyers even indicate the 
source from which the exporter in India should get the "bus-body" constructed. 
After constructing the bus-body as per the specifications and after completing 
the bus in its entirety, the assessee (body-builder) delivers "the complete bus" 
to TAT Al Ashok Leyland who then exports the same to Sri Lanka for the 
E purposes of accounting. The exporter raises a bill for chassis on the assessee 
and instead of making entries in the accounts by first debiting the value of 
the chassis to the body-builder (assessee) and then deducting the amount of 
chassis from invoice of a complete bus, the exporter invoices the assessee 
only in respect of bus-body and not for the entire complete bus. It is not 
disputed that after getting the bus completed, nothing is done by the exporter 
F to change the identity of the bus, thus entitling the assessee of the benefit 
under section 5(3) of the Central Sales Tax Act, 1956 (hereinafter referred to 
as "the said Act"). 
According to the department, the contract given to the assessee by the 
G exporter is for the bus-body; that, "bus" and "bus-body" are different articles 
mentioned in entry l 4 to the second schedule to the Karnataka State Sales 
Tax Act; that, the bus-body is a separate saleable commodity different from 
chassis or from the complete bus and, therefore, according to the department, 
the assessee is not entitled to the benefit of section 5(3) of the said Act. 
According to the department, in order to attract section 5(3), the assessee 
H should have manufactured and sold the complete bus in order to constitute 
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STATE OF KARNATAKA '"AZAD COACH BUILDERS PVT. LTD. ETC. 
247 
penultimate sale under section 5(3) of the said Act. According to the A 
department, since the sale, is only for the bus-body
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