R.N. Misra, J. - (1.)THESE are three applications by Jeypore Sugar Company Limited for quashing the orders of assessment made under the Central Sales Tax Act of 1956 (hereafter referred to as the Act). The relevant periods are 1970 -71, 1971 -72 and 1972 -73. The Petitioner is a registered dealer under the Act within the jurisdiction of the Sales. Tax Officer, Koraput -II Circle. For the first year, assessment has been completed under Rule 12(8) of the Central Sales Tax (Orissa) Rules, 1957 (hereafter referred to as the Rules) while the other two are regular assessments under Rule 12(4) of the Rules.
(2.)EVER since its formation, the Petitioner was engaged in manufacture of sugar and sugar products and from 1958 it also started manufacturing ferro -manganese. The Company started exporting ferro -manganese to different countries on its own. Around 1967, the Government of India in furtherance of its policy of canalising the export of minerals and mineral products took a policy decision that all export of such commodities should be canalised through the Minerals and Metals Trading Corporation of India (hereafter referred to as the M.M.T.C.). The Petitioner exported ferro -manganese to several foreign countries during the years 1967 -68, 1969 -70 and 1970 -71, contracts for which had been finalised at the instance of the Petitioner but the goods meant for export was canalised through the M.M.T.C. In respect of the assessments for those years, Petitioner claimed that the turnover representing the export sales were exempt from sales tax under the provisions of the Act and Petitioner's contention, after due scrutiny, had been accepted. Subsequently the opposite party -Sales Tax Officer issued notice under Rule 12(8) of the Rules and proceeded to assess the turnover relating to export which at the time of regular assessment, he had accepted as exempt from tax. The Petitioner pleaded that the original decision was correct and there was no escapement of the turnover which could be brought to the net of the taxation. The Sales Tax Officer, however, overruled the objection and proceeded to make assessment under Rule 12(8) of the Rules and imposed penalty of Rupees one lakh. For the two subsequent years, as already indicated, the Sales Tax Officer completed assessment under Rule 12(4) of the Rules and included the turnover representing the export sale and raised additional demand. These three applications are directed against the three respective orders and the Petitioner prays for issue of a writ of certiorari quashing each of the demands. During these three years, export of Petitioner's ferro -manganese had been made to Japan and Rumania. There is basis for Petitioner's contention that the contracts had been negotiated by it but there is no dispute that ultimate export was made under the contracts entered into between the M.M.T.C. and the foreign buyers. There were back to back contracts between the M.M.T.C. and the Petitioner. There is material on record to link the two contracts i. e. the contract between the Assessee and the M.M.T.C. and the corresponding contract between the M.M.T.C. and the foreign buyer. Between the Assessee and the M.M.T.C.'s was agreed under Clause 14 that the said contract shall be deemed to be cancelled either wholly or partially without any claim for compensation if for any reason whatsoever the corresponding foreign contract was cancelled. In the matter of payment of price to the Assessee for its goods, it was agreed that the sale price realised from the overseas buyers against M.M.T.C.'s corresponding sale contract with a deduction of Rs. 5/ - per metric ton being the service charges of the M.M.T.C. would be the price. Several correspondences between the M.M.T.C. and the Assessee have been produced in support of the contention that the M.M.T.C was only a name lender to satisfy the policy decision of the Government of India and the true seller was indeed the Assessee. Though there appear to be two sales, one between the Assessee and the M.M.T.C. and the other between the M.M.T.C. and the foreign buyer, there was indeed one sale the true vendor being the Assessee and the buyer, the foreign purchaser."
We do not think Assessee can succeed in getting the demands annulled by raising such a plea. In the case of Mod. Serajuddin v. The State of Orissa, (1975) 36 S.T.C. 136, the Supreme Court considered a case where the facts were not very much different. The Supreme Court found that the Assessee there had entered into negotiations with the foreign purchasers and had settled all the conditions of the contract and thereafter the S.T.C. had entered into an F.O.B. contract with the Assessee and with the foreign buyer on identical terms. All the necessary steps including the payment of customs duty for shipment and export had been done by the Assessee. On this basis, it was contended that the sale by the Assessee to the S.T.C. and the export by the S.T.C. to the foreign buyer constituted an integrated transaction. It had next been contended that the export could not be made except by the S.T.C. which could not have diverted the goods to a buyer in India without violating export and import control order. It was further canvassed that even if the Assessee did not have any contract with the foreign buyer and that privity was essential, the rigid rule or privity of contract should be relaxed in consideration of equity and justice and a realistic approach should be adopted. The nature of entering into contracts through the channel of the S.T.C. raised in reality a presumption of the S.T.C. being an agent of the Assessee in the integrated transaction. The learned Chief Justice speak into for the majority of the Court constituting the Constitution Bench negatived these contentions and clearly held that it was the S.T.C. alone which had agreed to sell the goods to the foreign buyer and was the exporter of the goods. There was no privity of contract between the Assessee and the foreign buyer and such privity was between the S.T.C. and the foreign buyer. All acts done by the Assessee were in performance of the Assessee's obligation under the contract with the S.T.C. and not in performance of the obligations of the S.T.C. to the foreign buyer. The alleged relationship of principal and agent between the Assessee and the S.T.C. was negatived and it was clearly found that the relationship was of a buyer and a purchaser. The special terms which have been relied upon by Counsel for the Petitioner were also taken up and were found to be in conformity with the decision of the Court that the Assessee was not a party to the export. This decision of the Supreme Court has been approved by several cases of the Supreme Court in recent past. Several High Courts have also applied the ratio of the case to facts similar to those before us. We may refer to the case of State of Tamilnadu v. Visweswardas Gokuldass, (1975) 36 S.T.C. 479, where Assessees were dealers in non -ferrous metals and had with them an import licence for importing a substantial quantity of zinc. The distribution of imported zinc was controlled and was to be done under the directions of the Controller of Nonferrous Metals. On 13th of September, 1964, the Controller directed the importers to sell the zinc that would be imported by them to M/s. India Metal and Metallurgical Corporation and advised the importers to contact the said corporation to ascertain their requirements as regards the quantity and specification of the materials and the programme of delivery. Thereafter the linked customer placed purchase order and paid a portion of the price. The importers then placed an order with the foreign seller for the goods. The importers endorsed the bill of lading in favour of the linked customer who cleared the goods. The Sales Tax authorities included in the taxable turnover the price which represented the sale value of the zinc imported by the importers. The importers contended that the sale in favour of the linked customer was made in course of import within the meaning of Section 5(2) of the Central Sales Tax Act and, therefore, the price could not be included in the taxable turnover. The Madras High Court observed:

In the case on hand, as already noticed, the linked customer had no concern with the foreign seller. It placed an order only with the importers. The importers in their turn, though for the purpose of complying with the contract placed with them, placed an order with the foreign seller and it is the second order placed by the importers with the foreign seller that occasioned the movement of the goods. The interposition of the importers between the linked customer and the foreign seller had broken the link between the sale and the movement of goods in the import stream. We have, therefore, to hold that the sale by the importers to the linked customer did not occasion the import and that, therefore, it would not come within the purview of the first part of Section 5(2) of the Central Sales Tax Act.

Similar view had been expressed in the case of Krishnados Kikani v. The State of Tamilnadu, (1976) 38 S.T.C. 223, by the same Court. In the case of Manganese Ore (India) Ltd. v. The Regional Assistant Commissioner of Sales Tax, Jabalpur, (1976) 37 S.T.C. 489, the Supreme Court observed that where an intermediary is involved between the Assessee and the foreign buyer, the sale by the Assessee to the intermediary would not occasion any export and, therefore, would not fall within the purview of Section 5(1) of the Central Sales Tax Act. A Bench of Allahabad High Court in the case of Commissioner of Sales Tax v. Nihal Shoe Factory, (1976) 37 S.T.C. 154, has also taken the view against the present contention. We would accordingly hold that the Petitioner is not entitled to contend that it was the real exporter notwithstanding the fact that the M.M.T.C. intervened between it and the foreign buyer and under the export contracts, M.M.T.C. appeared as the exporter. The main contention, therefore falls and the assessments in all the three orders, therefore, must be sustained.

(3.)IN the very first year relating to O.J.C. No. 576 of 1974, there is a dispute over imposition of penalty under Rule 12(8). Assessee had disclosed its turnover before the Assessing Officer and had claimed that the sale was exempt from taxation under Section 5(2) of the Act. The Assessing Officer relying on the past records and after applying his mind had come to hold that the turnover representing the alleged export was exempt from assessment to tax. The question was indeed contentious until it was directly disposed of by the. Supreme Court in Md. Serajuddin's case. In these circumstances, we do not think there is any justification for imposition of any penalty at all. Penalty after all is connected with contumacy and since there was no contumacy in the conduct of the Petitioner, there was no occasion to direct it to be visited with penalty. We accordingly delete the imposition of penalty in the very first assessment.