TMI Blog1957 (3) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... stitution against the respondent prohibiting him from taking any steps or directing any other officer to take any steps, proceedings or action against the petitioners pursuant to the said order and the said notice and from taking or doing or causing to be done any further acts in pursuance of the said order and the said notice. The petitioners have further prayed for the issue of a writ in the nature of mandamus or any appropriate writ or direction or order under Article 226 of the Constitution ordering the respondent to cancel the said order and the said notice and to accept the contention of the petitioners that the sales and purchases mentioned in the petition were immune from taxation and to revise the said order and the said notice on the footing of the immunity of the said sales and purchases from taxation. The facts giving rise to the petition, briefly stated, are as follows: The petitioners in the course of their business purchased cotton and castor oil for export and made declarations to the effect that the said goods were meant for export and were being purchased therefor. The petitioners state that at the time of the said purchases they gave to their vendors certificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kes place in the course of the import of the goods into, or export of the goods out of, the territory of India. They further state that under section 46 of the Sales Tax Act, 1953, it is expressly provided that "nothing in that Act or the rules made or deemed to have been made thereunder shall be deemed to impose or authorise the imposition of tax on any sale or purchase of any goods where such sale or purchase takes place in the course of the import of the goods into the territory of India, or the export of the goods out of such territory" and that the provisions of that Act and the said rules are liable to be read and construed accordingly. The petitioners contend that the sales effected by them and the purchases made by them are sales and purchases "in the course of the export of the said goods out of the territory of India" and that the said sales and purchases are exempt from sales tax and purchase tax respectively under the said Act. The question that I have to determine is whether the sales and purchases referred to by the petitioners are sales and purchases effected in the course of export of the said goods. Article 286 of the Constitution came up for consideration before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age 68 it has been further observed as follows: "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 barrier....... ......." In summing up their conclusions, at page 69 it is stated as under: "(1) Sales by export and purchases by import fall within the exemption under Article 286(1)(b). (2) Purchases in the State by the exporter for the purpose of export as well as sales in the State by the importer after the goods have crossed the customs frontier are not within the exemption. (3) Sales in the State by the exporter or importer by transfer of shipping documents while the goods are beyond the customs frontier are within the exemption, assuming that the State power of taxation extends to such transactions." Having regard to these observations, I have to consider whether on the facts of this case it could be said that the sales that had been effected by the petitioners have been sales in the course of export, i.e., whether the sales have taken place whilst the goods had crossed the customs barrier and were in the export stream. The petitioners th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rier, the property in the goods must pass to the exporter, otherwise it would not be legally possible to export the goods under the licence of the ex- porter. The bill of lading which has been tendered in this case itself shows that the goods are shipped not by the petitioners but by the ex- porters who have purchased the goods from the petitioner. The goods having been shipped by the buyers, the property in the goods must have passed to the buyers before the goods are so shipped by the buyers. Merely because the payment is deferred and has to be made against presentation of the documents, it cannot be said that the property in the goods has not passed. The customs procedure is set out at page 19 of the Hand Book of Export Trade Control. It is the exporter who is required to deliver personally or through his agent to the export department of the Custom House at the port of export the shipping bill and the export licence. It seems to me that the contention of the petitioners that the property in the goods passed after the goods entered the export stream is with- out any foundation. If the petitioners have done any acts for the purpose of exporting the goods under the licence of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tificate under clause(b) of section 8 has been furnished in respect of such goods when the purchasing dealer does not show to the satisfaction of the Collector that the goods have been despatched by him or by a person to whom he has sold the goods to an address outside the State of Bombay within a period of six months from the date of purchase by the dealer furnishing the certificate. He says that he had purchased these goods from a registered dealer and that he had furnished a certificate in respect of such goods to the registered dealer in Forms "J" and "K" as required by section 8(b) of the Bombay Sales Tax Act. He contends that the goods had been despatched by him to an address outside the State of Bombay within a period of six months from the date of purchase and that these goods are exempt from purchase tax. He further contends that the Sales Tax Officer has wrongly required the production of N Form before he would exempt these goods from the purchase tax, and that the action of the Sales Tax Officer is not warranted by law and is liable to be set aside. Rule 13(5) which re- quires a certificate in Form "N" to be submitted provides as under: "(5) Where a dealer holding an aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 11 of the Sales Tax Act, and they have also received the necessary authorisation under section 12A. On the 29th of September, 1956, a notice of demand was served upon them calling upon them to pay a sum of Rs. 25,448-9-9. The notice dealt with the period from 1st April, 1954, to 31st March, 1955. As the notice indicated, the assessees were liable to pay sales tax and purchase tax in respect of certain quantities of castor oil and cotton sold by the appellants to the firm of Godimotla Ghina Appalaraju. The matter came up before Mr. Justice K.T. Desai, and he took the view that the demand made was justified and dismissed the petition of the appellants, which had been filed to challenge this notice of demand. The question briefly is this: The sale with which we are concerned and which is sought to be taxed under the Sales Tax Act is a sale effected by the appellants with the firm of Godimotla Ghina Appalaraju (hereinafter referred to as "the exporters") under certain contracts, a speci- men of which has been annexed to the petition. The contention of the appellants is that the sale is exempted by the provisions of Article 286 of the Constitution, inasmuch as the sale was eff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and if the appropriation is not unconditional, then the property will only pass when the condition is satisfied. In the contract before us it seems to us that it is clear that there was no un- conditional appropriation of the goods by the appellants towards the contract. The appropriation was conditional upon the payment being made by the exporters on the presentation of the bills of lading, and, therefore, it is clear that the sellers wanted to keep the power of disposal over the goods till they had received the payment from the ex- porters. This fact is borne out rather emphatically by the circumstance that although the bills of lading were to be made out in the name of the exporters, the bills of lading were to be retained by the appellants, and the appellants would not part with the bills of lading till payment had been made to them by the exporters. Now, the Advocate-General has suggested two reasons why we should hold that the property had already passed in the goods before the goods crossed the customs barrier, and the first circumstance upon which considerable emphasis is laid by the Advocate-General is that the bills of lading in this case were taken out in the name of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is that the exporter who has obtained the necessary licence should be the owner of the property at the time of the export. This rule does not deal with the niceties of the time at which property passes. It deals particularly with the question that the goods which are on the high seas and which are being exported to a country outside India should be the goods of the exporter, who has obtained the necessary licence from the Government. This is admittedly the fact here. There is no doubt that the appellants agreed to sell the goods in question to the exporters so that the exporters should export them under their licence. It is equally true that the goods had become the property of the exporters. While we are concerned here with the point of time at which the goods became the property of the exporter, the Export Licence Rule is not concerned with that question at all. Therefore, although it may be true for the purpose of Export Control Order that the goods at the time of export were the property of the exporter, it may be equally true for the purpose of deciding the question under Article 286 that the goods became the property of the exporter only after they crossed the customs barrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of reading the proposition laid down by the Supreme Court. This proposition must be read in the context of the judgment, and as we have pointed out, what the Supreme Court has emphasised is a sale which is effected after the goods have crossed the customs barrier. It is that sale which comes within the exemption of Article 286 and it is that sale which cannot be subjected to a sales tax under a law passed by the State. Therefore, for the purpose of this proposition, the appellant must be looked upon as an ex- porter because he is transferring shipping documents for a price after the goods are beyond the customs barrier and in this sense the case of appellants does fall under this head. But there is a clear and direct authority of the Madras High Court in Gandhi Sons Ltd. v. The State of Madras[1955] 6 S.T.C. 694. In a very well considered judgment, the Madras High Court on almost identical facts came to the conclusion that a sale effected under those circumstances would be exempt from tax by reason of the provisions of Article 286 of the Constitution, and the facts there, if anything, were stronger than the facts before us. In that case there were three contracts, two C. F. and o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the bill of lading and the provisional invoice, until payment of the requisite percentage was made upon the bill of exchange. The bill of lading is the document of title to the goods and by this term the assessee company clearly reserved the right of disposal of the goods until the bill of exchange was paid." Therefore, the learned Judge clearly held that the property did not pass till the bill of exchange was paid and till then the assessee company, the seller, reserved the right of disposal of the goods. But what is pointed out by the Advocate-General and what is emphasised by the Advocate-General is that in this case the bill of lading was taken in the name of the sellers, the assessee company, and according to the Advocate-General it was because of this circumstance that the Supreme Court came to the conclusion that it did. Now, there is no indication whatever in this judgment that it was that factor that induced the Supreme Court to take the view that the property in the goods had not passed till the bill of exchange was paid. The point that the Supreme Court was emphasising was that the assessee company, the sellers, had reserved the right of disposal until the bill of exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re not shown to the satisfaction of the Collector to have been despatched by the purchasing dealer, or by a person to whom he has sold the goods, to an address outside the State of Bombay within a period of six months from the date of purchase by the dealer furnishing the certificate, the said dealer shall be liable to pay a purchase tax under clause (b) of section 10 on the purchase of such goods". Inasmuch as the seller of the appellants escapes sales tax by reason of certain representations made by the appellants, the scheme of this proviso is that if those representations did not turn out to be correct, then the appellants would pay the purchase tax in lieu of the sales tax which his seller would have paid but for the representation. But the ingenious argument that is put forward by Mr. Bhatt is that whereas under sub-clause (b) the certificate requires that the goods must be des- patched by the appellants or by a registered dealer to whom they sell the goods, when we look to the proviso (2) even though the goods might be sold by the appellants to a person who is not a registered dealer, so long as that person despatches the goods outside the State of Bombay, there is no liab ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
