Report No. 30
68. East India case.- The next case which may be referred to is East India Tobacco Co. v. State of Andhra Pradesh, (1963) 1 SCR 404: AIR 1962 SC 1733. In this case, the Appellants were doing business in the export of tobacco. They first entered into contracts with their customers abroad for sale of tobacco. Thereafter they purchased the requisite quantities of goods (tobacco) in the local markets and then they exported them to their foreign purchasers in performance of their contracts with them.
The purchases made by the Appellants were sought to be assessed to sales tax. The Appellants contended that these purchases made in the local markets were protected under Article 286(1)(b). On these facts, the Supreme Court observed (p. 1236, para. 9):-
It may be assumed for the purpose of the present discussion that the purchases made by the Appellants on which the tax is sought to be imposed were made for the purpose of executing specific orders which they had received from their foreign customers. The question is whether even so the sales in question took place in the course of export for the purpose of Article 286(1)(b). In support of their contention that they did, the Appellants rely on the following observations in (I Travancore case)-
"A sale by export thus involves a series of Integrated activities commencing from the agreement of sale with a foreign buyer and ending with delivery of goods to a common carrier for transport out of the country by land or sea. Such a sale cannot be dissociated from the export without which it cannot be effectuated and the sale and the resultant export form parts of a single transaction. Of these two integrated activities, which together constitute an export sale, whichever first occurs can well be regarded as taking place in the course of the other".
"Now the contention is that the agreement entered into with the foreign purchasers for sale of Virginia tobacco, the purchase of the same locally by the Appellants for performing the contract and their subsequent export to the foreign purchasers must all be held to form one integrated transaction of sale in the course of export."
"Now the observations quoted above were made in refutation of the contention that the expression 'sale in the course of export or import' meant only a sale which takes place while the goods are actually in movement, in the course of export or import, as for example, when shipping documents are endorsed and delivered when the goods are in transit. This Court held that it was too narrow an interpretation to put on the words in question and that a sale which actually occasions the export or import would fall within Article 286(1)(b). The question whether sales which precede export are sales in the course of export within Article 286(1)(b) arose directly for decision in the II Travancore case."
69. The Supreme Court also referred to two more cases, (State of Madras v. Gurviah Naidu, &. Co. Ltd., AIR 1956 SC 158 and State of Mysore v. Mysore Spinning & Manufacturing Co., AIR 1958 SC 1002 with approval and concluded (p. 1337, para. 14):-
"On these authorities the Law must be taken to be well-settled that it is only the sale under which the export is made (emphasis supplied by me) that is protected by Article 286(1)(b) and that a purchase which precedes such a sale does not fall within the purview though it is made for the purpose of, or with a view to export."