Report No. 61
Suggestions for amendment of section.- In the light of the above discussions, I suggest that section 5 of the Central Sales Tax Act, 1956 may be recast on the lines indicated below:-
Section 5, The following principles are formulated for determining when a sale or purchase of goods takes place in the course of the export of the goods out of or import of the goods into, the territory of India, namely:-
(1) A sale or purchase of goods shall be deemed to lake place in the course' of the export of the goods out of the territory of India, if and only if such sale or purchase, either-
(a) itself occasions such export, that is to say, itself is such as that it can be carried out only by initiating the process of export with the delivery of the goods to a common carrier for transportation to their foreign destination thereby ensuring that the goods are on their movement to such destination and there is no possibility of the goods being diverted to any transaction, use or purpose within India; or
(b) is effected by a transfer of documents of title to be goods after the goods have crossed the customs frontiers of India.
Explanation.-For the purposes of this clause.-
(i) goods delivered to a common carrier for transportation as aforesaid in pursuance of a contract of sale of the goods shall be deemed to be delivered in pursuance of the sale or purchase itself to which the contract relates although such sale or purchase is completed after such delivery;
(ii) a sale or purchase of goods which itself otherwise occasions the export of the goods within the meaning of sub-clause (a) shall not cease to be so merely because such sale or purchase is completed-
(a) within the State concerned before the delivery of the goods to a common carrier for transportation as aforesaid, or
(b) after the arrival of the goods at their foreign destination.
(2) The last sale or purchase of goods preceding the sale or purchase which occasions the export of the goods under clause (1)(a) or any other sale or purchase preceding such last sale or purchase shall not be deemed to be a sale or purchase taking place in the course of the export of the goods out of the territory of India even if such last or other sale or purchase
(i) is for the purpose of exporting the goods to implement any order already received or expected to be received from, or to implement any contract already entered or expected to be entered into, with any person for or in relation to the export of the goods, or
(ii) is an act preparatory to such export.
(3) In deciding whether a sale or purchase of goods occasions the export of such goods out of the territory of India, it shall be considered among other factors whether there is a privity of contract between the exporter and the foreign buyer for the sale or purchase of the goods.
(4) A sale or purchase of goods shall be deemed to take place in the course of the import of the goods into the territory of India, if and only if such sale or purchase either-
(a) itself occasions such import, that is to say, itself is such as that it can be carried out only by initiating the process of import with the delivery of the goods to a common carrier for transportation to their Indian destination thereby ensuring that the goods are on their movement to such destination and there is no possibility of the goods being diverted to any transaction, use or purpose outside India; or
(b) is effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India.
Explanation.-For the purpose of this clause,-
(i) goods delivered to a common carrier for transportation as aforesaid in pursuance of a contract of sale of the goods shall be deemed to be delivered in pursuance of the sale or purchase itself to which the contract relates although such sale or purchase is completed after such delivery;
(ii) a sale or purchase of goods which itself otherwise occasions the import of the goods within the meaning of sub-clause (a) shall not cease to be so merely because such sale or purchase is completed-
(a) within the foreign country concerned before the delivery of the goods to a common carrier for transportation aforesaid, or
(b) after the arrival of the goods at their destination in India.
(5) The last sale or purchase of goods succeeding the sale or purchase which occasions the import of the goods under clause (4)(a) or any other sale or purchase succeeding such last sale or purchase shall not be deemed to be a sale or purchase taking place in the course of the import of the goods into the territory of India even if such last or other sale or purchase is for the purpose of importing the goods to implement any order already received or expected to be received from, or to implement any contract already entered or expected to be entered into, with any person for or in relation to the import of the goods.
(6) In deciding whether a sale or purchase of goods occasions the import of such goods into the territory of India, it shall be considered among other factors whether there is a privity of contract between the importer and the foreign seller for the sale or purchase of the goods.
N.B.- (1) The above suggestions do not constitute a legislative draft strictly speaking, but section 5 may be redrafted on the basis of these suggestions. I have tried to make the language wide and comprehensive enough to cover all cases contemplated and yet exact and precise enough to exclude cases to which the section is not intended to apply.
(2) I have not omitted in the above suggestions the expression "occasions such export" and the expression "occasions such import" on the ground that these expressions received judicial recognition more than twenty years back and legislative recognition eighteen years back. But I have tried to explain these expressions to define comprehensively as well as precisely, as far as practicable, their scope and content-the necessity for such explanation being to remove the ambiguities of the word "occasions". S.P. Sen-Verma
New Delhi, the 20th May, 1974.
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