9911796707
TMI Blog1975 (11) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... orders cover the period from 1st April, 1967, to 31st March, 1968. The assessee in these orders is the petitioner, Manganese Ore (India) Limited, hereinafter referred to as the petitioner-company. 2.. The petitioner-company is a Government company and it was formed in pursuance of an agreement dated 8th June, 1962, between the President of India and the Central Provinces Manganese Ore Company Limited, incorporated in the United Kingdom, hereinafter referred to as the foreign company. The share capital of the petitioner-company is held by the Government of India, the Government of Maharashtra, the Government of Madhya Pradesh and the foreign company in the percentages of 17, 17, 17 and 49 respectively. The foreign company which held leases of manganese mines in India surrendered these leases and fresh leases were granted to the petitioner-company. The business of the petitioner-company is to extract manganese ore from its mines situated in Maharashtra and Madhya Pradesh and to sell the same. The petitioner-company is registered as a dealer both under the Central Sales Tax Act and the State Act in Madhya Pradesh. In the course of assessment, the petitioner-company contended that sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and B.I.S.C. (Ore) Ltd., London, as buyer. It was plainly not a case of two sales, one between the petitioner-company and the foreign company and the other between the foreign company and the foreign buyer. The transactions comprised of only sales between the petitioner-company and the foreign buyer. Even if an agent be included in the definition of dealer, that cannot change the legal position or give rise to two sales, one between the seller and his agent and the other between the agent and the buyer. The sale to be considered for taxation is only one whether it be taxed in the hands of the principal or his agent. Indeed, the learned Advocate-General, who appeared for the respondents, found great difficulty in supporting this part of the order of the Assistant Commissioner. On the admitted position that the sales covered by annexures Q and R were made by the petitioner-company through its agent to a foreign buyer on f.o.b. terms, it must be held that these sales occasioned the export of goods and were consequently made in the course of export under the first limb of section 5(1) of the Central Sales Tax Act: see State of Travancore-Cochin v. Bombay Co. Ltd. [1952] 3 S.T.C. 434 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d was Rs. 3.45 per dry long ton f.o.b. Trimming charges, export duty and sales tax, if any, were to be to the account of the buyers. The sellers were liable for the penalty payable by the buyers to the foreign buyers in Indian rupees at the same rate of exchange at which they were paid by the buyers. Delivery was to be made free on board by the sellers through their usual shipping agents and contractors. The buyers were to nominate vessels in consultation with the sellers and to furnish well in time to the sellers shipping formalities at the port of loading. All shipping documents including shipping bills, G.R.I. forms, bills of lading, master receipts and invoices were to be prepared by the sellers showing M.M.T.C. as shipper and customs clearance was also to be taken in the name of M.M.T.C. as shipper. The sellers were to load at an average rate of 850 long tons at Bombay and 1,500 long tons at Vizag, but if the foreign buyers required the loading on c.q.u.d. terms, the sellers undertook to load on that basis. If the port authorities required the sellers to work overtime which could not otherwise have been necessary to achieve the contracted rate of loading, the buyers were to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said agreements, sold the goods to the foreign buyers. So in each case there were two sales before the goods were exported, one by the petitioner-company to M.M.T.C., the exporter, and the second by M.M.T.C. to the foreign buyer. 9.. The Regional Assistant Commissioner came to the conclusion that the export of goods out of the territory of India was occasioned only by the sales by M.M.T.C. to the foreign buyers and, therefore, the sales by the petitioner-company to M.M.T.C. were not in the course of export and did not qualify for exemption. It is the correctness of this conclusion, which was canvassed before us. 10.. Section 5(1) of the Central Sales Tax Act, which lays down the principles for determining when a sale or purchase of goods can be said to take place in the course of export under article 286(1)(b) of the Constitution, has two limbs. The first limb of the section provides that if a sale or purchase occasions export of the goods out of the territory of India, it is deemed to be in the course of export. Under the second limb of the section, a sale or purchase which is effected by a transfer of documents of title to the goods after the goods have crossed the customs fron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escription of sale in the course of export, either the sale must take place when the goods are already in the process of being exported which is established by their having crossed the customs frontier or the sale must occasion the export; to occasion the export the sale must be one which causes the export to take place or is the immediate cause of the export; sale by a third party to the exporter is not a sale in the course of export; and the only sale which is in the course of export is between the exporter and the importer which without more results in export. The learned Chief Justice, in speaking for the majority of the court, laid down these tests applicable to all cases. He said: "We think it is possible to state some tests which can be applied in all cases ...... To establish export a person exporting and a person importing are necessary elements and the course of export is between them. Introduction of a third party dealing independently with the seller on the one hand and with the importer on the other breaks the link between the two, for then there are two sales one to the intermediary and the other to the importer. The first sale is not in the course of export for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in of purchase and sale, the seller does not 'in pursuance of the contract of sale' or as seller send forward or start the goods to the buyer at all except in the sense that he puts the goods safely on board, pays the charge of doing so, and, for the buyer's protection but not under a mandate to send, gives up possession of them to the ship only upon the terms of a reasonable and ordinary bill of lading or other contract of carriage. There his contractual liability as seller ceases, and delivery to the buyer is complete as far as he is concerned. In such a case the goods are not 'sent by the seller to the buyer', though they then begin a journey which will end in the buyer's hands. In law, as between buyer and seller, they are then and there delivered by the seller to the buyer, and thereafter it is by the buyer and his agent, the carrier, and not by the seller, that the goods are 'sent' to their destination." The petitioner under the agreements, annexures N, O and P, delivered the goods free on board a ship at Bombay or Vizag. The sales were then complete and the property in the goods passed from the petitioner to M.M.T.C. within the territory of India. It is true that under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the customs barrier of the foreign country and to end at a point in the importing country after the goods crossed the customs barrier: J.V. Gokal and Co. (P.) Ltd. v. Assistant Collector of Sales Tax [1960] 11 S.T.C. 186 (S.C.); [1960] 2 S.C.R. 852. In an f.o.b. contract property passes on shipment, i.e., after the goods cross the customs barrier but before they cross the customs frontier. Wadeyar's case [1960] 11 S.T.C. 757 (S.C.); [1961] 1 S.C.R. 924., was decided on the basis of the law as it then stood. The judgment, however, at certain places uses the expression "customs frontier" loosely to signify customs barrier. After the Constitution (Sixth Amendment) Act and the enactment of the Central Sales Tax Act, the law in this respect has changed. Section 5 of the Central Sales Tax Act uses the expression customs frontier and not customs barriers; customs frontier as used in this section cannot be equated to customs barrier: State of Madras v. Davar and Company [1969] 24 S.T.C. 481 (S.C.); [1970] 1 S.C.R. 572. The law now is that the course of export commences after the goods cross the customs frontier and a sale by transfer of documents of title to goods after that stage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplies. There was no possibility of these goods being diverted by the assessee for any other purpose." The facts in the second case were that the firm of Kotak & Co. was engaged in the supply of foreign cotton to textile mills in India on the basis of import licences issued to the mills authorising import of foreign cotton by them. The firm contacted the foreign supplier and on the latter agreeing to supply the quantity required by the mills, the firm entered into contract to supply the cotton. The goods were imported under the import licences of the mills and the bill of lading obtained by the foreign suppliers on shipment of the goods was also issued in the name of the mills. The price was fixed on c.i.f. terms and the payment was to be made by the mills against the document. On these facts it was held that the case was similar to the case of K.G. Khosla & Co. [1966] 17 S.T.C. 473 (S.C.); [1966] 3 S.C.R. 352., and the sale by the assessee to the mills was in the course of import. Apart from the distinction that both these cases relate to sales in the course of import under section 5(2) of the Central Sales Tax Act and not to sales in the course of export under section 5(1), the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Court affirmed; see [1975] 36 S.T.C. 139 (S.C.)]. A case which was relied upon on behalf of the petitioner is Commissioner of Commercial Taxes v. Thakur Prasad Sao [1972] 29 S.T.C. 551 (Pat.). In this case a dealer of Ranchi in Bihar sold iron-ore to the State Trading Corporation of India on f.a.s. basis, which has the same effect as sales on f.o.b. basis. The ore was delivered by the dealer by loading the same on board a ship at Calcutta. On these facts it was held that the title in the goods passed to the buyer only after the goods had crossed the customs frontier of India and the sales were in the course of export. With great respect we are unable to agree with this decision. It was wrongly assumed by the learned Judges that the title passed after crossing the customs frontier and the distinction between customs frontier and customs barrier was lost sight of. 16.. Learned counsel for the petitioner also contended that the territory of India did not include territorial waters and, therefore, property in the goods in these sales passed outside the territory of India within the meaning of section 5(1) of the Central Sales Tax Act when the goods were loaded on board a shi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contiguous zone, being a belt contiguous to the territorial sea, but not extending beyond twelve miles from the low-water mark or other selected straight baselines, the littoral State does not have sovereignty over this zone, but may exercise control therein for the purpose of enforcing compliance in its territory and territorial sea with certain of its laws and regulations." [Quoted from Starke, International Law, 7th Edition, page 213.] 18.. It is, therefore, clear that territory of a State includes national or internal waters and territorial waters. Over the former, which includes waters in ports and harbours, the State exercises as complete a sovereignty as over its own land territory. As regards the latter, i.e., territorial waters, the State has sovereignty subject to the right of innocent passage of foreign vessels and subject to the duty of the coastal State to warn passing vessels against known dangers of navigation. The limit of the territorial waters beyond three miles is not yet settled, but the current weight of State practice and consultations is in favour of six to twelve miles limit (Starke, 7th Edition, pages 215, 216). The President of India issued a proclamatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchased by them to M.M.T.C. Thus in these cases there were at least three sales before the goods moved out of the territory of India: (1) Sale by the petitioner-company to Indian buyers; (2) sale by the Indian buyers to M.M.T.C., the Indian exporter; and (3) sale by M.M.T.C. to the foreign importer. For the reasons already indicated while dealing with the case of sale under agreements N, O and P, we are of the opinion that the first and second sales did not occasion the export of the goods out of the territory of India and they were not sales in the course of export. The Assistant Commissioner in the assessment order has also held that actual export in the case of sales under annexures T and U has not been established as copies of bills of lading were not filed. Even if we were persuaded to hold that the goods were actually exported, we are clear that the sales did not occasion the export. The Assistant Commissioner was, therefore, right in holding that the sales under the agreements, annexures S, T and U, were not in the course of export. Outside sales 21.. It was next contended by the learned counsel for the petitioner that all the sales of manganese ore from the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antity of oriental mixture of manganese ore. The conditions as to quality, price, delivery and payment in this agreement are as follows: "Quality: The average quality of the ore to be supplied by sellers should be, without guarantee, 49.25 per cent manganese, 0.15 per cent phosphorus, 9 per cent silica and 7.5 per cent iron provided always that as such supplies are furnished by mixture of ores from the sellers' several mines the average quality of the samples taken from deliveries from each mine shall form the basis of settlement. Price: The basic price will be rupees one hundred and ten (Rs. 110) per metric tonne basis 49.25 per cent manganese, with scale pro rata, free on rail mine sidings, plus sales tax, if any. Delivery: Approximately in equal monthly instalments subject to availability of wagons. Buyers will be responsible to arrange with the railway for the supply of wagons necessary to take delivery of the ore at the sidings and in the quantities to be declared by the sellers' Managing Director in Nagpur. The sellers will load the component ore from their mines into the wagons which will be arranged for by the buyers who shall be the consignees, in the name of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... result into a mixture of the contracted grade. But the component ores were appropriated to the contract at the mines sidings by the sellers with the consent of the buyers when they were loaded in the wagons. The ore from the mines of Madhya Pradesh moved to the place of destination in another State as a result of a term or covenant in the contract of sale; and the ore was within Madhya Pradesh at the time of its appropriation to the contract of sale. 23.. But then it is said that sections 3(a), 4(2)(b) and 9(1) of the Central Sales Tax Act talk of goods which are the subject-matter of sale and the consignments of ore proceeding from Madhya Pradesh were not the goods sold but only components of the mixture, which was the subject- matter of sale and which came into existence only at the destination station. This argument of the learned counsel, which is the main argument, must now be examined. It is true that movement of goods from one State to another to which sections 3(a) and 9 of the Act refer in the context of a sale in the course of inter-State trade or commerce is the movement of goods, which are the subject-matter of sale. Similarly, "goods" in section 4(2)(b) of the Act, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1969 (Bombay High Court)., where it has been held in another context that mixture is different from its components. For the reasons already indicated, we are unable to agree with this view. 24.. In the case of despatches of ores to the ports of Bombay and Vizag to comply with the orders of buyers who wanted the goods for export, the petitioner was the consignor and its shipping agents were the consignees. In these cases the delivery was taken by the buyers either ex-plot or on board a ship. But here also, to comply with any particular order, the petitioner first decided what quantity of ore from each mine would be needed to make the mixture of the contracted quality. The ores from different mines were then railed to the port and the mixture resulted in the process of unloading. As the mixture is not a new commodity different and distinct from the components, the goods sold were the ores from different mines mixed in a particular proportion. These goods, i.e., the ores from different mines were appropriated to the contract of sale at the time of loading them in wagons at the mines sidings and the movement of goods from the mines sidings to the port was an incident of the contract o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are "at the time of their appropriation to the contract of sale by the seller or by the buyer, whether assent of the other party is prior or subsequent to such appropriation". It is to be noticed that section 4(2)(b) unlike section 23(1) of the Sale of Goods Act does not talk of unconditional appropriation with the assent of the other party or of passing of property. It is, therefore, not necessary for application of section 4(2)(b) that the goods should be unconditionally appropriated to the contract with the assent of the other party or that the property should have passed at the time of appropriation. It is sufficient for section 4(2)(b) if the goods are appropriated by the seller and the other party assents to it later. In the instant case, the seller appropriated the ore despatched from the mines in Madhya Pradesh at the mines sidings. In case of sales to purchasers under the agreements, annexures R-1 to R-6, the goods were so appropriated with the prior consent of the buyers. In case of sales to the buyers purchasing for export, the appropriation was assented to when the goods were accepted by the buyers at the port. It is immaterial that the buyers could reject the goods a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can- not be held that the petitioner was entitled to exemption under the proviso to section 7(1). 30.. The petitioner's learned counsel then contended that the Assistant Commissioner was wrong in holding that the turnover of inter-State sales to the extent of Rs. 1,37,54,720 was not supported by C forms. This argument raises a question of fact which can be more conveniently raised in appeal and cannot be properly decided in a writ petition. 31.. It was lastly contended that total sales to Bhilai Steel Plant taxed under the State Act aggregate to Rs. 7,15,316.15 as was contended by the purchasers, and the Assistant Commissioner has wrongly taken the total amount of these sales to be Rs. 7,54,578.41. The Assistant Commissioner has taken this figure from the final bill of the petitioner-company which was sent to the purchasers. It cannot be said that the total amount of these sales was determined by the Assistant Commissioner without any basis. The dispute raised by the petitioner can be more conveniently raised in appeal and cannot be properly decided in this petition. 32.. As a result of the above discussion, the petitioner succeeds to the extent of sales covered by the agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mines were issued by the Government in favour of the M.O.I.L. and the company entered into contracts with buyers in India and outside for selling the manganese ore extracted from the various mines situated in the States of Madhya Pradesh and Maharashtra. A close analysis of the contracts entered into by the appellant- company and the business carried on by it would manifestly reveal that the contracts may be divided into four separate and clear categories. Category-I are the contracts by which the manganese ore extracted by the appellant-company is sent directly to a foreign company known as M/s. Philips Brothers on f.o.b. terms. Another such contract was entered into by the appellant with B.I.S.C. (Ore) Ltd., London, for sale of oriental manganese ore f.o.b. Visakhapatnam. Copies of these contracts were filed before the High Court as annexures Q and R. The Regional Assistant Sales Tax Commissioner accepted the contention of the appellant that so far as the sales under these contracts were concerned, they occasioned export and were clearly exempt from the Central Sales Tax Act as they fell within the purview of section 5(1) of the said Act. We might also mention here that the mai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. Ram Bahadur Thakur & Company, Bombay, and other buyers which in turn sold the goods to the M.M.T.C. As regards these two categories, category-11 and category-III, the appellant advanced twofold contention before us. In the first place it was argued that as the goods were eventually exported by the buyers from India to foreign countries, therefore, the sales made by the appellant were not inter-State sales but sales which occasioned exports and, therefore, fell within section 5(1) of the Central Sales Tax Act. The High Court after consideration of various aspects of the matter overruled the contention of the appellant and held that as no export was involved so far as the sales made by the appellant to the buyers in India were concerned, therefore, section 5(1) had no application at all. This matter need not detain us further, because it is no longer res integra and is now completely concluded by a Constitution Bench decision of this Court in Md. Serajuddin v. State of Orissa [1975] 36 S.T.C. 136 (S.C.); (1975) 2 S.C.C. 47,, where Ray, C.J., speaking for the majority, observed as follows: "To establish export a person exporting and a person importing are necessary elements and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch for reconsidering Md. Serajuddin's case [1975] 36 S.T.C. 136 (S.C,); (1975) 2 S.C.C. 47,. We are, however, unable to agree with the prayer made by the learned counsel for the appellant because this court has given its decision recently and the doctrine of stare decisis is a very valuable principle of precedent which cannot be departed from unless there are extraordinary or special reasons to do so. We are unable to find any special reasons for reconsidering Md. Serajuddin's case [1975] 36 S.T.C. 136 (S.C,); (1975) 2 S.C.C. 47,, particularly when this court has laid down the rule, namely, that where the sale is in fact and in law a pure inter-State sale, it cannot be treated to be a sale occasioning export. This, therefore, disposes of the first plank of attack made by the appellant on the judgment of the Madhya Pradesh High Court so far as the sales contained in categories-II and III are concerned. Category-IV is in respect of contracts of sale, copies of which are annexures 1 to 7 before the High Court. These sales were admittedly made by the appellant in favour of the buyers within the territory of India but outside the State. It was, however, contended that as the goods purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al mixture which consisted of various kinds of rocks or manganese ore which were mixed together. What therefore was actually despatched, according to counsel for the appellant, was merely one of the constituents of the goods purported to be sold and not the goods which were ores purchased by the buyers. The High Court in its well- reasoned judgment has fully considered this aspect of the matter and has rightly pointed out that there is no mechanical or scientific process by which the continental mixture is made. According to the appellant itself the mixture comes into existence automatically by piling up manganese ore despatched from various States one after the other. In other words, the position is that suppose 1,000 tons of manganese ore is sent from Madhya Pradesh and another thousand tons from various mines from Maharashtra, when these ores are stocked at one place by being piled up one upon another they automatically produce continental mixture with various constituents, properties and percentages required. Mr. B. Sen appearing for the respondent submitted that what was actually sold was manganese ore of an average percentage and it was not right to say that actually one of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is only for sale of manganese ore. Although a certain percentage is mentioned but that percentage is derived automatically when the manganese ores are stocked together. In most of the other contracts which have been filed by the appellant, for instance, in another contract which has been entered into between the appellant and the M.M.T.C. on February 22, 1968, what is sold is "oriental grade manganese ore". Similarly in another contract between the appellant and M/s. Ram Bahadur Thakur & Company dated February 28, 1968, the property sold is about 25,000 metric tonnes of oriental mixture of manganese ore. In another contract which appears at page 147 of the paper book and which is between the appellant and the Universal Ferro and Allied Chemicals Ltd., Tumsar Road, what is sold is 12,000 metric tonnes of manganese ore. There was another stipulation as to delivery in respect of this contract as follows: "The sellers will load the component ores from their mines into the wagons which will be arranged for by the buyers who shall be the consignees, in the name of the sellers, who shall be the consignors, at such mines sidings and for such quantities as may be declared from time to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a specified period of few months. Learned counsel for the appellant placed great reliance on a judgment of the Bombay High Court, a certified copy of which has been filed in this court in Central Provinces Manganese Ore Company Ltd. v. State of Maharashtra Sales Tax References Nos. 17, 18, 19 and 20 of 1964 decided on April 7, 1969 (Bombay High Court). In the first place this judgment is not at all applicable to the facts of the present case, because the Bombay High Court was not dealing with a sale under the Central Sales Tax Act. The High Court was pre-eminently concerned with the provisions of the C.P. and Berar Sales Tax Act, 1947, and there is nothing to show that the provisions of that Act were in pari materia to the provisions of the Central Sales Tax Act. More than this, we do not want to say about the judgment of the Bombay High Court. Reliance was also placed by the appellant on a decision of this court in Commissioner of Sales Tax, Eastern Division, Nagpur v. Husenali Adam/i and Company [1959] 10 S.T.C. 297 (S.C.)., which also does not appear to be applicable to the facts of the present case, because the Supreme Court in that case was dealing with the question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y penalty for filing belated returns and recourse could not be taken to the provisions of the State Act on the subject. The High Court negatived this plea following two Division Bench judgments of the Madhya Pradesh High Court. The view taken by the High Court on this point is legally erroneous because this court in Khemka & Co. (Agencies) Pvt. Ltd. v. State of Maharashtra [1975] 35 S.T.C. 571 (S.C.); (1975) 2 S.C.C. 22. has pointed out that in the absence of any provision for penalty under the Central Sales Tax Act itself it is not open to the sales tax authorities to press into service the provisions of the State Sales Tax Act. In this connection, this court observed as follows: "It is only tax as well as penalty payable by a dealer under the Central Act which can be assessed, reassessed, collected and enforced in regard to payment. The words 'as if the tax or penalty payable by such a dealer under the Central Act is a tax or penalty payable under the general sales tax law of the State' have origin and root in the words 'payment of tax including any penalty payable by dealer under the Central Act'...... For the foregoing reasons we are of opinion that the provisions in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
