SARKARIA - (1.) THE common question of law that arises in these appeals by the same assessee, is whether the sales in question made by the assessee were sales effected in the course of export of goods out of the territory of India and as such were exempt from imposition of Sales-Tax under Art. 286 (1) (b), of the Constitution.
(2.) THE relevant assessment years are 1957-58, 1958-59 and 1959-l960. THE assessee, the New Rajasthan Mineral Syndicate is registered as a dealer under the Punjab General Sales Tax Act, 1948. It is not registered under the Central Sales Act, 1956, (for short called the Act). THE assessee carries on the business of quarry contractors. In the relevant years, it held a licence from the then Punjab State to quarry iron ore at Nizampur, District Mohindergarh. During the assessment year in question, the Sales-tax Officer assessed the assessee-firm to tax under Section 9 of the Act on a turnover of Rs. 3,18,757/6, Rs. 3,99,948/93 and Rs. 5 lakhs, respectively. The last assessment was made on the best judgment basis. To impugn these assessment orders, the assessee filed three writ petitions in the High Court of Punjab under Art. 226 of the Constitution. It was averred in the petitions that the export of iron-ore had been nationalised by the Central Government and no such export could be made by any private dealer like the assessee. The Government of India had authorised like the State Trading Corporation (to be hereinafter referred to as S.T.C.) as the sole authority for the purpose of exporting iron-ore to other countries, including Japan. The S.T.C. had further nominated Sri Narayan and Co. (to be called for short N and Co.,) to procure the iron-ore for the purpose of export. N and Co. accordingly entered into agreements with the assessee firm for procuring the iron-ore from the assessee. Excepting the quantity to be supplied, the basic terms of the agreements were the same. The material part of one such agreement, reads as follows: "Agreement made on this day, the 1/04/1957, between Messrs. Shri Narayan Company, Mine Owners Exporters and Importers 174 Mahatma Gandhi Road, Calcutta-7 hereinafter called Buyers and Messrs .Rajasthan Mineral Syndicate Maonda, Rajasthan hereinafter called Sellers, on the following terms and conditions: xxxxx Quantity:25,000 (twenty-five thousand) tons of Hamoitite Iron Ore of their Dhanota Dhancholi Mines Railway Station, Nizampur. Specification:x x x Price:Rs.14/8/- plus actual Rly. Freight Nizampur to Kendai Port, per ton 2240 Lbs. F.O.R.Kandi Port. Delivery:x x x Sampling and analysisThe sellers agree to stock the ore at the Railway: siding or sidings and the buyers have the right to reject any ore or cancel at any stage before the same is loaded into wagons, the Buyers have the option to appoint any good analytical and consulting Chemist and their findings shall be binding on both the buyers and sellers. Payment:Rs. 25,000/- .(Twenty-five thousand) will be arranged for payment to the sellers after the acceptance of Re. 1- (Rupee one) per ton for the aggregate quantity of 25,000 tons contract for supply. The balance amount shall be paid, to the sellers against actual weight of Iron Ore loaded by the sellers when Iron Ore is either weighed a Kandla Port or by draft weight of the ship at the time of shipment to the Foreign countries as per bargain by the Buyer or by the State Trading Corporation of India. xxxxx 3. The amount of Railway Freight shall be paid directly by the buyer at Kandla Port on the To pay R/Rs, and the sellers shall be held responsible for shortage and excess of weight if any. 4. The account shall be finally settled when the shipment is made and satisfactory report is received from the Foreign Buyers or the State Trading Corporation approves the material for foreign countries where Iron is extracted out of it. xxxxx
(3.) THEN there is a letter dated 2-9-1957 from N. and Co. addressed to the assessee-firm. It reads as under: "We are in receipt of your letter and noted your comments regarding the price schedule mentioned in your agreement referred to above which runs as under: Rs. 14/8/ plus actual railway freight from Nizampur to Kandla Port for ton of 2240 f.o.r. Kandla Port in this connection we have to clear our position as under: (1) It is clear to all and you, that the Government of India is dealing with foreign countries on Government level in the export as of iron ore; 2. The State Trading Corporation of India, New Delhi is the business organization on Government level and we work as the brokers: (3) Whatever term or terms they dictate to us we pass on to you; (4) Your iron ore is be shipped to Japan and you are solely responsible for the quantity and quality till the material is delivered to Japanese firms. 5. They test the material for extracting of iron, before they pass the pay order. As such we get approximately Re. 1/- (Rupee one) per ton, which is in fact our brokerage, otherwise in fact you are the sellers and Japanese Firm are the buyers, through State Trading Corporation. The following details will clear your doubt.Selling price to S.T.C. Rs. 47/per ton f.o.b. t Kandla Port; Our approximate price per ton; JUDGEMENT_555_4_1975Html1.htm Hope you are satisfied that the price fixed is in your interest Please continue railment without any hesitation." 6. Before the assessing authority, it was contended by the assessee that he was exporting the iron ore outside India and is not liable to tax under the Central Sales Tax Act,1956. He also produced copies of the agreement and other letters in support of his contention." It was further contended that no inter-State tax was leviable in view of the exemption in Section 5 (1) of the Act and Art. 286 (1) (b) of the Constitution as the sale was in the course of export if goods outside the territory of India; the sale having occasioned the export. The assessing authority negatived the assessee's claim to the, exemption, in these terms: "The dealer has no privity of contract between the foreign buyers and plea taken by him that he exported the goods outside the State of Punjab holds no ground. It appears to me that the State Trading Corporation of India enters into contract with the foreign buyers for the suppliers of iron ore. In order to meet their obligations, the State Trading Corporation of India appoints certain procuring agents such as M/s. Shri Narayan and Co., as intermediaries. These intermediaries enter into contract with the quarries who extract iron . ore charge their commission and pass on this iron ore to the State Trading Corporation. The agreement entered into between the New Rajasthan Mineral syndicate and M/s. Shri Narayan and Co. leaves no doubt that the former is the seller and the latter is the buyer. In view of the ambiguous position stipulated in the agreement, the dealer sold iron ore in the course of inter-State trade and commerce. It is further evident that M/s New Rajasthan Mineral Syndicate are not the direct exporters of iron ore because they did not enter into contract between the foreign buyers. The inter State tax is therefore, leviable on the dealer viz. M/s. Narayan Rajasthan Mineral Syndicate." ;