Report No. 61

3.54. A border line case.-

There are, no doubt, cases on the border-line. A Madras case is in point.1 In that case, the National Agricultural Marketing Federation, which had the exclusive right to export dried chillies to Ceylon, entered into contracts with various co-operative establishments in Colombo for supplying chillies. Thereafter, the Federation allotted quotas to various dealers in the State of Tamil Nadu for the supply of chillies, for which purpose it entered into separate contracts with those dealers. The contract entered into by the Federation with one of the dealers-the assessee-provided (besides other matters) that the assessee should despatch the goods to the importer in Colombo, for and on behalf of the Federation, on or before the stipulated date, from the port of Tuticorin.

It was held that the sale between the Federation and the assessee was not an export sale. The stipulation in the contract (between the assessee and the Federation) requiring the assessee to put the goods on board the ship, was only to fulfil the terms of the export sale between the Federation and the foreign importer, and did not mean that transaction was inextricably connected with the export sale. The export sale was the result of the contract between the importer in Ceylon and the Federation in India. Instead of the Federation taking delivery from the assessee, the assessee, on behalf of the Federation, put the goods on board the ship, but the sale between the Federation and the assessee did not occasion export.

1. Erattamuthu Nadar v. Joint Commercial Tax Officer, (1971) 28 STC 649 (651) (Mad).