TMI Blog1971 (1) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... o.b. contracts. We would accordingly affirm the conclusion of the High Court that the assessee was the last purchaser of the iron ore within the State and was thus liable to pay tax in accordance with the provisions of the Act. - Civil Appeal No. 801, 796, 797, 798 of 1967, - - - Dated:- 15-1-1971 - SHAH J.C., HEGDE K.S. AND GROVER A.N. JJ. -------------------------------------------------- The judgment of the court was delivered by NARAYANA PAI, J.- These four appeals under section 24(1) of the Mysore Sales Tax Act, 1957, are by the same assessee, the National Tractors, and relate to assessments to sales tax for four periods, viz., the two half -years of the year 1957-58 and the two subsequent years 1958-59 and 1959-60. The years concerned are Deepavali to Deepavali. There is a common question arising in all these four cases relating to the liability to sales tax of certain purchases of iron ore by the assessee-appellant subsequently sold to the State Trading Corporation of India (hereinafter referred to as the STC). There is another question which arises in only one of the cases, viz., Sales Tax Appeal No. 6 of 1966, and relates to the liability to sales ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... point of the last purchase liable to tax within the State-vide section 5(3) and the Third Schedule. 4.. Now in these cases, there are two purchases, one by the appellant from the mine-owners and the other by the STC from the appellant. The third may be left out of account for our purpose because it is a sale by the STC and a purchase by a foreign buyer. The question in regard to the said two purchases was whether the last purchase liable to tax within the State contemplated by section 5(3) of the Act was the purchase by the appellant from the mine-owners or the purchase by the STC from the appellant. The assessing authority, the Commercial Tax Officer, I Circle, Hubli, held that the last purchase liable to tax within the State was the purchase made by the appellant and imposed tax. Upon appeal, the Deputy Commissioner of Commercial Taxes took the view that the last purchase liable to tax within the State was that made by the STC. In exercise of the suo motu powers of revision, the Commissioner of Commercial Taxes has set aside the order of the Deputy Commissioner and restored that of the original assessing authority. The assessee appeals. 5.. Upon facts, there is little or no c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds into the said territory. The general principles are found stated at pages 759 and 760 of the report. 10.. The earliest cases dealing with this topic were those reported in State of Travancore-Cochin v. Bombay Company Limited [1952] 3 S.T.C. 434 (S.C.)., and State of Travancore- Cochin v. Shanmugha Vilas Cashew-nut Factory [1953] 4 S.T.C. 205 (S.C.)., in which their Lordships discussed the position as under article 286 of the Constitution and formulated certain principles. With a view to give effect to those principles and to clarify the position further, article 286 of the Constitution was amended by the Constitution (Sixth) Amendment Act of 1956. By the said amendment, the explanation appended to clause (1) of article 286 and the whole of clauses (2) and (3) of that article were deleted and new clauses substituted for clauses (2) and (3). The said article as amended reads as follows: "286. Restrictions as to imposition of tax on the sale or purchase of goods- (1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place- (a) outside the State; or (b) in the course of the import of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deals with the goods. Such a transaction without more cannot be regarded as one in the course of export because etymologically 'in the course of export' contemplates an integral relation or bond between the sale and the export. At the other end is a transaction under a contract of sale with a foreign buyer under which the goods may under the contract be delivered by the seller to a common carrier for transporting them to the purchaser. Such a sale would indisputably be one for export, whether the contract and delivery to the common carrier are effected directly or through agents. But in-between lie a variety of transactions in which the question whether the sale is one for export or is one in the course of export, i.e., it is a transaction which has occasioned the export, may have to be determined on a correct appraisal of all the facts. No single test can be laid as decisive for determining that question. Each case must depend upon its facts. But that is not to say that the distinction between transactions which may be called sales for export and sales in the course of export is not real. In general where the sale is effected by the seller, and he is not connected with the export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he exporter was on a f.o.b. contract and therefore the property in the goods passed after they had crossed the customs frontiers and were thus in the export stream, the sale was held to be so inextricably connected with the export as to be regarded as a Sale in the course of export and therefore immune from sales tax. 15.. Such being the clear decision by the Supreme Court, the application thereof to the facts of the present cases appears inevitably to lead to the conclusion that the transaction between the appellant and the STC was a transaction in the course of export and therefore immune from sales tax. 16.. Much of the discussion in the orders of the lower authorities in these cases is devoted to the question relating to the point of time when the property in the goods passed from the appellant to the STC. But the direct decision of the Supreme Court in B. K. Wadeyar v. M/s. Daulatram Rameshwarlal [1960] 11 S.T.C. 757 (S.C.)., is that in f.o.b. contracts, the normal presumption is that the property in the goods passes when they are put on board the ship unless, of course, special circumstances pointing to the passing of property at some other point of time are clearly made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lause (t) of section 2 of the Mysore Sales Tax Act, 1957, a sale or purchase of specific or ascertained goods must be deemed to take place inside this State if the goods are within the State at the time the contract for sale or purchase is made. The point to note, however, is that the said explanation creates a fiction in order to make a transaction liable to tax within the State. If, however, the situation in a given case is that the transaction in question is so inextricably bound up with the export of goods out of the territory of India as to be regarded as a transaction in the course of export, State legislation would be incompetent to impose tax on it. 19.. The next argument is that according to the principles stated by the Supreme Court in State of Travancore-Cochin v. Shanmugha Vilas Cashew-nut Factory [1953] 4 S.T.C. 205 at p. 217 (S.C.)., one can think only of sales in connection with an export and purchase in connection with an import, but that to speak of a purchase in connection with an export is a contradiction in terms. It is no doubt true that while summing up their conclusions at page 217 of the report, their Lordships referred to sales by export and purchases by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or doubt, in our opinion, that a purchase may occasion an export and a sale may occasion an import. 23.. For these reasons, we are convinced that the decision in Wadeyar's case [1960] 11 S.T.C. 757 (S.C.)., fully and directly applies to the facts of the present case. The decision of the Commissioner of Commercial Taxes in revision must therefore be upheld. 24.. The question relating to the imposition of tax in respect of sales of tyres and tubes by the assessee to the National Transports, Hubli, does not call for much discussion. That they were transactions in the nature of sales is a matter of admission. The only point argued was that the assessee was not a regular dealer in tyres and tubes and that in selling the said articles to the National Transports, the assessee did not entertain any profit-motive. It is stated that the supplies of tyres and tubes were made to transport contractors to see that the terms of-the assessee's contracts with the STC were fully and properly complied with. This statement of reason, in our opinion, is sufficient-to invest the transactions in question with a profit-motive. It cannot be denied that the assessee's dealings in ore with the STC were e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge. The assessee was, however, enabled by means of an arrangement between the State Trading Corporation and the State Bank and other banks to raise advances on the security of the ore to be adjusted against payment of price by the State Trading Corporation at the point of time mentioned in the contracts. The contracts between the assessee and the State Trading Corporation were described as "f.o.b.t." The letter "t" stood for the word "trim" which had reference to the quality of the ore answering to specification contained in the contracts. Under section 5(3) read with the Third Schedule of the Act tax was payable on iron ore at the point of last purchase within the State. For the two half-yearly periods of 1957-58 and the two subsequent years 1958-59 and 1959-60 the assessing authority held that the assessee was liable to tax being the last purchaser within the State. On appeal the Deputy Commissioner of Commercial Taxes held that the last purchases had been made by the State Trading Corporation and not by the assessee and it was, therefore, the former that was liable to pay the tax. The Commissioner of Commercial Taxes revised suo motu the order of the Deputy Commissioner and re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if anything, a circumstance more against the appellant's contention than in favour of it. The certification by the STC on the strength of which such hypothecation of goods was made possible, does not indicate anything more than that wherever the assistance of the STC was necessary, it was made available to the appellant under the terms of the contract,-for example, in the matter of arranging for railway wagons for transport from Hospet to Hubli. In any event, these circumstances are quite equivocal and never so firm as to displace the normal presumption attaching to f.o.b. contracts to the effect that the title in the goods covered by such contracts passes to the buyer only when the goods are put on board ships." In our judgment the crucial point that fell to be determined was whether the property passed to the State Trading Corporation pursuant to contracts entered into between the parties within the State of Mysore. If the property did not so pass to the Corporation the last purchaser would be the assessee. Admittedly the contracts entered into between the parties were f.o.b. and the normal rule in such contracts is that the property is intended to pass and does pass on the shi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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