Report No. 61

8.8. Case Law.-

Some of the relevant cases on the subject are summarised below:-

In State of Kerala v. Cochin Coal Company Ltd., (1961) 2 SCR 219: AIR 1961 SC 408 (410), the question decided was, whether the sale of bunker coal was in the course of export. Bunker coal was stocked at Candle island in the State of Madras. It was sold to steamers calling at the port of Cochin in the State of Travancore-Cochin, and delivered there. The assessee contended, that no sales tax could be levied on these sales, since they were either sales "in the course of export" or "in the course of Inter-State trade", and therefore, exempt under which sales falling within the Explanation to Constitution, or under the Government notification under which sales falling within the Explanation to Article 286(1)(a) made during a particular period were exempted from liability to pay a tax.

It was held, that the delivery was for consumption within the State, and the sale fell within the Explanation of Article 286(1)(a), and though the sales were in the course of inter-State trade falling within Article 286(2) the tax was validated by the Sales tax Validation Act, 1956. It was also held, that the sales were not made "in the course of export", and did not fall under Article 286(1)(b), and that for Article 286(1)(b) to apply, it was not sufficient that the goods merely moved out of the territory of India, but it was also necessary that the goods should be intended to be transported to a destination beyond India.

A similar point was raised in Burmah Shell Oil Storage and Distributing Co. of India Ltd. v. Commercial Tax Officer, (1961) 1 SCR 902 (921, 923): AIR 1961 SC 315 (323, 324): 11 STC 764., where the sale was of aviation spirit to international aeroplanes, and an exemption from taxation was claimed on the ground that the sale was in the "course of export"'. The sales were however held to be excluded from the phrase "in the course of export", because there was no destination into which the aviation spirit could be said to be imported, the sale being for use in the course of the journey. Explaining the meaning of the word "export", Mr. Justice Hidayatullah said that the test in the case of exports was that the goods must have a foreign destination where they could be said to be imported.

"If the goods are exported and there is a sale or purchase in the course of that export, and the sale or purchase occasions the export to a foreign destination, exemption is earned. The crucial fact is the sending of the goods to a foreign destination-where they would be received as imports1. The two notions of export and import, thus, go in pairs."

"Applying these several tests to the cases on hand, it is quite plain that aviation spirit loaded on board an aircraft for consumption, though taken out of the country, is not exported, since it has no destination where it can be said to be imported, and so long as it does not satisfy this test, it cannot be said that the sale was in the course of export. Further, as has already been pointed out, the sale can hardly be said to occasion the export. The seller sells aviation spirit for the use of the aircraft, and the sale is not integrally connected with the taking out of aviation spirit. The sale is not even for the purpose of export, as explained above. It does not come within the course of export, which requires an even deeper relation. The sales, thus, do not come within Article 286(1)(b)."

These decisions were noted, in a different context, in the Report of the Law Commission on Khosla's case2. At that time, however, the question to be considered . by the Commission was a narrow one, namely, whether the proposition laid down in Khosla's case required to be modified.

1. Emphasis supplied.

2. 30th Report, paras. 104 and 106.