S. Erattamuthu Nadar and Others vs Joint Commercial Tax Officer

Veeraswami, C.J.—This is a petition to quash the provisional assessment made on the petitioner for 1969-70. In the first instance, a

provisional assessment was made on a taxable turnover of Rs. 4,858.39. This was done on the basis of the return submitted by the assessee for

1968-69 in form A-l. But it was found by the Joint Commercial Tax Officer, Tuticorin II, that the assessee had sold chillies for Rs. 93,990 to the

National Agricultural Marketing Federation at Tuticorin during September, 1969. Accordingly, the provisional assessment was revised by re-fixing

the turnover as Rs. 98,848. A notice was issued to the assessee calling for his objections against the provisional assessment so proposed. The

assessee claimed that the sales were export sales or sales which occasioned the export and as such they were not liable to tax. The Joint

Commercial Tax Officer, however, found that the National Agricultural Marketing Federation entered into contracts with various co-operative

establishments in Colombo for supplying chillies, that the quality, price and other terms were agreed between them and thereafter the Federation

allotted quotas to various dealers in this State for the supply of chillies and for which purpose it entered into separate contracts with those dealers.

A sample of the contract so entered into by the National Agricultural Marketing Federation with the assessee shows this. The Government of India

in the Ministry of Foreign Trade and Supply have in their public notice No. 8-E.T.C. (P.N.)/1969 dated 16th August, 1969, vested in the buyers

like the National Agricultural Marketing Federation the exclusive right for the export of dried chillies to Ceylon. The buyer entered into agreement

to supply chillies for the months concerned to the co-operative wholesale establishment at Colombo. In order to fulfil this commitment, the

Federation desired to enter into agreement with the seller, the assessee, for the purchase of chillies, and it accordingly entered into such agreement.

The terms of the sale are these : The seller (the assessee) shall sell and the buyer shall purchase quantities of chillies of the quality and description

mentioned thereafter, at the price set out in the agreement. The description of the goods, the quality thereof and the quantity are set out, The price

shall be at a certain rate per so much kilograms, and shall be inclusive of 1 per cent, commission on the C.I.F. value for the buyer, that is to say,

the Federation. Further provisions as to packing are found. Then we have this that the seller, the assessee, shall despatch the goods to the importer

in Colombo for and on behalf of the buyer on or before the stipulated date, from the port of Tuticorin. The Federation, which entered into contract

with the foreign buyer, should collect the payment of the price or other charges from him. Out of the price received by the Federation, the seller,

the assessee, should be paid 100 per cent, of the price against the documents specified after deducting the following : Amounts, if any, claimed by

the importer on account of the quality and quantity of the goods, any claim arising out of it, bank collection charges, if any, buyer''s commission,

customs and port dues, etc., if any, paid by the buyer and the amounts, if any, due to the buyer on account of the goods or any such bills pending

recovery. One of the terms of the agreement provides for a list of documents which should be produced. Insurance of the goods has been

stipulated. There is a default clause. There are two arbitration clauses in the agreement. One of them is to the effect that the seller shall furnish a

bank guarantee equivalent to 50 per cent, of the C.I.F. value of the goods agreed to be supplied as security for the due performance of the

obligation under the agreement on or before the stipulated date, and that time should be the essence of the contract. The second arbitration clause

relates to the arbitration agreement between the Federation and the foreign importer. The clause provides that in the event of the Federation being

held liable to pay any amount to the foreign importer by an award under the agreement which they had entered into, the assessee should accept

and discharge the liability so arising as if it had been assessed against the seller.

The question is whether the sales of chillies by the assessee to the Federation can be regarded as export sales or sales which occasioned export.

It is strenuously contended before us that the terms obliging the assessee to put the goods on board and claim payment in the manner mentioned

above were so inextricably connected with the export that the sales should be regarded as export sales or sales which occasioned the export. We

are not able to accept this contention. As we mentioned, the export was as a result of a contract between the foreign importer and the Federation

and the assessee had nothing to do with that contract. In order to fulfil the terms of the export sale between the foreign importer and the

Federation, it had been stipulated as between the Federation and the assessee in the contract between them that the latter should put the goods on

board the ship as per the specification thereof, and that if, as a result of faulty delivery or fault in the quality, the Federation is made liable by an

award as between the foreign importer and the Federation, then the assessee should accept the liability to such an award. That does not mean, in

our opinion, that the terms relating to them are inextricably connected with the export sale, which is what has been entered into between the foreign

importer and the Federation. It seems to us that what the contract between the assessee and the Federation means is that instead of the Federation

taking delivery from the assessee, the latter should straightaway, on behalf of the Federation, put the goods on board the ship. But that does not

make the sale as between the Federation and the assessee an export sale or a sale that occasioned export. Counsel for the assessee invited our

attention to Ben Gorm Nilgiri Plantations Co., Coonoor v. The Sales Tax Officer, Special Circle, Ernakulam [1964] 15 S.T.C. 756 (S.C.) and the

Coffee Board v. Joint Commercial Tax Officer, Madras, and Anr. [1970] 25 S.T.C. 528 (S.C.) from which he read out observations as to what is

meant by an export sale which occasioned export. The actual decision in either of those cases is not in favour of the assessee. Nor do we think that

the observations help him in the light of the view we take of the facts in this case.

The petition is dismissed with costs. Counsel''s fee Rs. 50.

Following this decision, the other writ petitions, which are of the same pattern, are also dismissed with costs; counsel''s fee in each Rs. 50.