TMI Blog1955 (4) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... x Officer under section 12(1)(i) of the Madras General Sales Tax Act and finding that certain sales effected by the assessees which had been disclosed in their accounts had been incorrectly treated as not liable to inclusion in their turnover, issued notice to the assessees on 28th February, 1953, why the assessment should not be rectified. After verifying the figures from the accounts which were called for, he added a sum of Rs. 5,07,753-9-0 to the assessable turnover and a demand for tax on this basis followed. The assessees took this order in appeal before the Sales Tax Tribunal where they raised two points for its consideration. The first was that the Commercial Tax Officer had no jurisdiction to revise the assessment in the manner in which he had done and the second that on the merits the turnover of the sales which were included in their assess- ment by the Commercial Tax Officer was exempt from inclusion under Article 286(1)(b) of the Constitution as being sales "in the course of export." The Appellate Tribunal rejected both the contentions and confirmed the order passed by the Commercial Tax Officer. Hence the revision. Mr. Nambiar, learned counsel for the petitioners ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Nambiar to contest the jurisdiction of the Commercial Tax Officer. We are, therefore, of the opinion that in the present case the complaint that the Commercial Tax Officer really purported to exercise the powers of an assessing authority is not made out. We, therefore, have no hesitation in rejecting this objection to the assessment of the peti- tioners. The second point relates to the merits of the petitioners' case in regard to the inclusion of this turnover of Rs. 5,07,753-9-0. Before adverting to the contentions raised it will be convenient to refer to the admitted facts in relation to the sales occasioning this turnover. The added turnover represents the sale price of 616 bags of black garbled pepper sold by the assessees under three contracts. The first contract which is numbered as 80 was with M/s. Mulji Rattanshi and Co., of Bombay and was for five tons. It was entered into by the Head Office of the assessees at Bombay on 4th December, 1950. The price was 1120 sh. per cwt. C. and F. London the shipment to be during January, 1951. The terms as regards payment were that it was to be in Indian currency with exchange at one shilling 6 1/16 d; 95% cash against shipping do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellers after receipt. This contract was signed by the assessees' office in Bombay as well as by the buyers. The 25 tons were packed in 400 bags and marked M.E.I.C.O. They were surveyed by the Travancore Chamber of Commerce. The representative of the buyers, one Mr. Fuss, was apparently present at the time of the survey and handed over to the assessees the freight to be paid to the shipping company. The goods were thereafter taken to Cochin Port and loaded on board the vessel M. S. Kieldrecht which sailed to Port Said for transhipment to Odessa which was the destination of the goods. The bill of lading dated 23rd February, 1951, was taken in this case also in the name of the buyers as consignor and consignee and the goods were deliverable to their order. As soon as the assessees received the bills of lading from their representatives from Malabar, they prepared a pro forma invoice for the 400 bags shipped from Cochin to Odessa by their representative Gandhi Sons Ltd., on account and risk of M/s. Mills Export Import Co., Bombay, and sent this along with the relevant bills of lading and certificates. The price was paid by the buyers on 7th March, 1951. The third and the last contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore till such time as they entered the export stream; or (3) because the transfer of property in the goods under the contracts took place by delivery of the bills of lading which covered their transport abroad. On the other hand, it was urged by the learned Assistant Govern- ment Pleader for the State that the sales in question were internal sales by the assessees who are local merchants to buyers with then head office at Bombay and possibly with local representatives within this (1) [1952] 3 S.T.C. 434; (1952) S.C.J. 527. (2) [1953] 4 S.T.C. 205; (1953) S.C.J. 471. State; that the export was effected only by the buyers and not by the sellers and after the purchase by the former was complete with the result that so far as the assessee's sales are concerned they have no export element in them and so were outside the constitutional exemp- tion as interpreted by the Supreme Court in the Second Travancore case, viz., State of Travancore-Cochin v. S.V.C. Factory(1). In this context reliance was placed on the definition of "sale " introduced into the Madras General Sales Tax Act in 1948 by Explanation (2) to section 2(h) of the enactment which reads: "Explanation (2): Notwithstandi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d their journey as found by the Sales Tax Authorities, the sales must neverthe- less be regarded as having taken place in the course of export and are exempt under Article 286(1)(b)." What was characterised by the Supreme Court as an "export sale " was one in which the assessees figured as exporters, privity having been established between them and the foreign buyer, either through direct negotiation or dealing, or through the local representatives of the latter. That certainly does not obtain here. The assessees were in no sense the exporters of these goods. The position appears to be that the three merchants in Bombay who entered into their respective contracts with the assessees were themselves the purchasers whether their purchases were on their own behalf or on behalf of undisclosed foreign principals, between the latter of whom and the assessees there was no privity. Undoubtedly an export took place here. But in that transaction the assessees were not the sellers who exported or whose sales occasioned the export. A sale will occasion an export or there will be an export sale as understood by the Supreme Court only where the sale is to a foreign buyer with whom the local sel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l to remember that the power to make laws with respect to duties of customs including export duties and also with respect to import and export across customs frontiers and the definition of customs frontiers is vested exclusively in the Central Legislature and detailed provisions have been made in the Indian Sea Customs Act, 1878, for the levy of customs duties by the officers of the Central Government who are stationed along the customs frontiers as defined by the Central Government where, after appraising the goods exported or imported, the duties chargeable, if any, are computed and levied, and it is not until this process is completed, that the goods can be shipped for transportation or cleared by the consignee or his represent- atives as the case may be. It would seem, therefore, logical to hold that the course of the export out of or of the import into the territory of India does not commence or terminate until the goods cross the customs frontier." In the light of the law as thus expounded, we have to consider whether the assessees have been able to establish that they remained the owners of the goods until after the goods had crossed the customs barrier for if the agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he bills of lading." Incidentally it may be mentioned that this extract answers one of the points raised by the learned Assistant Government Pleader regard- ing the deduction of freight in the invoice prepared by the assessees. If the contract entered into by the assessees is a C. and F. contract-and this is not disputed by the State-in the absence of any express stipu- lation, the property in the goods would remain with the seller until the bills of lading are tendered to the buyer. It is, however, contended on behalf of the State that the property in the goods passed to the buyers before the goods crossed the customs office at the Cochin Port. There is no dispute that at the time of the agreement of sale the contracted goods were unascertained and therefore under section 18 of the Sale of Goods Act the property in the goods would not be transferred to the buyers unless and until the goods were ascertained. It is urged that there was an ascertainment and an appropriation of the goods to the contract immediately the sellers (1) [1940] 3 All E.R. 60. packed the goods in gunny bags and marked them with the initials of the buyer for being consigned under the contract. For this pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fulfilled? In dealing with this a point made on behalf of the State might be noticed, viz., that the bills of lading were taken in the name of the buyers making the goods deliverable to their order. Page No: 705 This feature would undoubtedly render sub-section (2) of section 25 unavailable to the assessee but there is abundant authority for the view that the taking of a bill of lading in the name of a buyer does not ipso jure negative a conditional appropriation or the reservation of a right of disposal. If authority is needed reference may be made to the deci- sion in Moakes v. Nicolson(1), and Kronprinsessan Margarett, the Parana(2). In the latter case the bills of lading were taken in the con- signee's name and these were sent with an invoice and a sight draft for its amount through collecting agents of the consignors to be presented to the bank. The question was whether the property in the goods passed to the neutral sellers on shipment, or whether this occurred only on payment of the draft. Lord Sumner, delivering the opinion of the Privy Council, said: "In these circumstances what can be inferred as to the passing of the general property? What is there to show an intention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellers at Kozhikode. Dealing with a notice of appropriation which had been given by a seller to a buyer under a C.I.F. contract and its effect on passing property, Lord Wright stated in Smyth and Co. v. Bailey and Co.(1), already referred to, at page 65: "I have already quoted the opinion of the Court of Appeal that the result of the appropriation was that the property in the 15,444 quarters passed to the buyers under the Sale of Goods Act, 1893......The notice of appropriation under an ordinary C.I.F. contract is not intended to pass, and does not pass, the property. Where, as here, the sale is of unascertained goods by description, there are, at that stage, no goods to which the contract can attach. The seller is free to appropriate to the contract any goods which answer the contract description. This he does by the notice of appropriation which specifies and defines the goods to which the contract attaches. These thereupon he is bound to deliver and the buyer is bound to accept, subject to the terms of the contract. That, however, does not involve the passing of the property. The property cannot pass under a contract of sale until the goods are ascertained ...... but once they a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appropriation in fact. Even if this appropriation was with the assent of the buyer, it was certainly not unconditional because the seller had further duties in connection with the goods which included loading them on board the ship and obtaining proper bills of lading for conveyance of the goods to the contracted destination and the seller in his turn was entitled to payment in exchange for these shipping docu- ments. In these circumstances, we are unable to hold that on the terms of this contract the property in the goods passed to the buyer when the goods were packed and marked in the godowns of the seller. When did the property pass thereafter? These goods were after being packed and marked transferred by rail from Calicut, where they were at the time of the agreement of sale, to Cochin. If at that stage, the railway receipts had been taken in the name or to the order of the buyers, the property in the goods might have passed to the buyers under the terms of section 23 (2) of the Sale of Goods Act. But this could not obviously happen for two reasons. Firstly, it was part of the duty of the sellers to transport the goods upto the steamers waiting to receive them at the Cochin har ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f mate's dock receipts or as provided for in clauses 8, 9 and 11. Should the said receipts or warrants be retained by the buyers for examination, they shall remain the property of the sellers and be held by the buyers in trust for and at the absolute dis- posal of the sellers, until payment has been made in cash in terms of this contract, and if payment be made by cheque, until such cheque has been cashed." The jute which was the subject-matter of the contract was packed in bales and having been marked with the buyer's marks were to be placed alongside the steamer and mate's receipts obtained. These were handed over to the buyers who applied to the Master of the vessel and obtained the relative bills of lading which they negotiated with a bank and appropriated the money to themselves. The question was whether the bank was entitled to the goods as against the sellers who had not been paid the price. The whole question in that case turned upon whether by clause 13 of the agreement the sellers intended to retain merely a special property in the goods in order to secure the price or had retained the right of disposal with the result that no property in the goods passed till they were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .(1), already referred to, dealt with cases of F.O.B. contracts also and their decision holding that the property in the goods passed only in London when the docu- ments were tendered and payment made against them would appear to be decisive against the Government's contention of the property passing at any stage earlier than the loading of the goods. Only one point remains to be dealt with and that is the reference in the invoice that the goods have been shipped "on account and at the risk of the buyers." it will be seen that this refers to the situation after the shipping and therefore to the extent to which it states that the risk attaches after shipment it contradicts the Government's case of the passing of the property at any earlier stage. We therefore hold that the property in the goods did not pass to the buyer until the relevant bills of lading were presented to the buyers or in any event at least not until the goods were put on board the vessels at Cochin harbour. In this view as admittedly the goods were booked and had started on their journey to a foreign destination at the moment when the title in the goods passed to the buyer, there was "a sale in the course of expo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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