Report No. 30

87. Kailash Nath's case.-

Kailash Nath v. State of U.P., AIR 1957 SC 790 (791, 793), paras. 2 and 11: 8 STC 358., was also a case in which an exemption in respect of export was claimed. The U.P. Government had issued a notification under section 4 of the U.P. Sales Tax Act,1 exempting sales of cotton cloth or yarn manufactured in U.P. with a view to export such cloth or yarn outside the territories of India, on the condition that the cloth, etc., is actually exported and proof of actual export furnished.

The assessee sold quantities of cotton cloth to customers known as indentors; the indentors printed the cloth with hand-made apparatus, and exported them overseas as hand-printed cloth. The modus operandi was, that the indentor, after receiving the order for supply of hand-printed cloth from foreign merchants, obtained an export licence which permitted him to.export the cotton piece-goods to be manufactured by a textile mill.

The mill, after getting the order from the indentor, manufactured to cloth intended for export, and delivered it to the indentor. The indentor paid the excise duty, and removed the goods to his place of business. He, then, printed the cloth by hand-printing, and exported it. The sales during 1953-54 by the assessee were held to be within the notification. The argument that the commodity manufactured had changed was rejected,2 because the cloth exported was the same. The only thing that varied was the colour, which had been changed by printing and processing.

Govinda Menon J., dealing with the nature of the transaction and its liability to sales tax, said.-

"The essential pre-requisite is that the sale must be made with a view to export4 as the emphasis is on the word "sale" and its time and purpose and not the manufacture of the cloth at a particular time for a particular purpose. Three conditions are necessary to be fulfilled in order to attract the exemption under the notification. They are-(1) the cloth must be manufactured in U.P., (2) the sale should be on or after 1st December, 1949 with a view to export; and (3) there should be actual export of such cloth."

1. U.P. Sales Tax Act, 1948 (U.P. Act 15 of 1948).

2. The Second Travancore case (Cashewnuts) was distinguished on this point.

3. Kailash Nath v. State of U.P., AIR 1957 SC 790 (793): 8 STC 358.

4. We have employed the distinguishing phrase "with a view to export".