TMI Blog1980 (4) TMI 290X X X X Extracts X X X X X X X X Extracts X X X X ..... cle 286(l)(b) of the Constitution. The Regional Assistant Commissioner allowed exemption in respect of sales of the value of Rs. 23,55,37,040. These sales were clearly sales in the course of export, as the petitioner directly entered into contracts with the foreign buyers. The remaining sales of the value of Rs. 4,57,87,911 were not granted exemption as they were in favour of the export promoters who entered into separate contracts with the foreign buyers. The Deputy Commissioner of Sales Tax in appeal also held that the sales effected in favour of export promoters who entered into separate contracts with the foreign buyers were not export sales and did not qualify for exemption. It is this finding which the petitioner challenges in this petition before us. 3.. It is not disputed before us that the petitioner did not enter into direct contracts with the foreign buyers in respect of sales of the value of Rs. 4,57,87,911 which were not granted exemption by the Regional Assistant Commissioner and the Deputy Commissioner of Sales Tax. The petitioner's contracts were with the export promoters or Indian exporters who entered into separate contracts with the foreign buyers. In these con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and shall forward the same to the seller along with a letter of authorisation from the Iron Steel Controller authorising the seller to effect shipment on behalf of the buyer against the subject export licence. Export licence together with the letter of authorisation should reach the seller within 10 (ten) days from the date of the contract. 11.. Title and risk.-Title with respect to each shipment/railment shall pass to the buyer when the seller has negotiated the documents and received the proceeds from the bank. Risk with respect to each shipment shall pass from the seller to the buyer when the materials have passed the ship's rail at the port of loading. Risk with respect to each railment shall pass from the seller to the buyer, when the materials are despatched from the seller's steel plant." 4.. The principles for determining when a sale takes place in the course of the export of the goods out of the territory of India have been laid down in section 5(1) of the Central Sales Tax Act, 1956. As provided therein, a sale or purchase of goods is deemed to take place in the course of the export of the goods out of the territory of India only when the sale or purchase either o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned counsel for the petitioner, however, argued that these sales also fall within the second limb of section 5(1) and it is this argument which we have now to examine. In other words, we have to see whether the sales in favour of the exporters were effected by transfer of documents of title to the goods after the goods had crossed the customs frontiers of India. 5.. We have already set out the relevant terms of the contract. The licence to export the goods was taken out by the export promoter in his name and along with it a letter of authorisation was issued by the Government of India permitting the petitioner to sell the goods to the export promoter against the export licence. The price of the goods sold to the export promoter was fixed on f.o.b. terms. The payment of the entire contracted quantity was to be made by the export promoter in US dollars or equivalent sterling pounds by opening a confirmed irrevocable and without recourse letter of credit in favour of the petitioner at an agreed scheduled bank in Calcutta for the full value of the goods calculated at the contracted price. The bill of lading was taken out in the name of the petitioner, a/c the export promoter. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Deputy Commissioner. It is very often said that property under a f.o.b. contract as a general rule passes on shipment; but as observed by Benjamin, "this is only true where the seller has not reserved a right of disposal. As the seller quite commonly does reserve a right of disposal, it is somewhat misleading to describe the rule that property may pass on shipment as a general rule. It is more accurate to state the general rule negatively, that property does not pass before shipment" (Benjamin, Sale of Goods, paragraph 1690, page 878). Under section 23(l) of the Sale of Goods Act, 1930, where there is a contract for the sale of unascertained or future goods by description, the property in the goods passes when the goods of that description and in a deliverable state are unconditionally appropriated. Section 23(2) provides that where, in pursuance of the contract, the seller delivers the goods to a carrier for the purpose of transmission to the buyer and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the contract. This provision must, however, be read with section 25(2), which says that where goods are shipped or delive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o transfer the ownership when the draft is accepted; but intends also to remain the owner until this has been done." In our opinion, therefore, although the petitioner's contract with the export promoter was on f.o.b. terms as the bill of lading was taken in the name of the petitioner and payment was obtained after endorsing the same in favour of the export promoter or his nominee by negotiating the same with the bank with whom an irrevocable letter of credit was opened by the export promoter, the property in the goods did not pass at the time of shipment, but passed later when the document of title, i.e., the bill of lading, was negotiated and payment was received. The specific provision made in condition No. 11 is also that the title with respect to each shipment shall pass to the buyer when the seller has negotiated the documents and received the proceeds from bank. Thus the provision in condition No. 11 as to the stage when the property passed to the buyer is quite consistent with the other terms and conditions of the contract. It is true that under condition No. 11 risk passed from the petitioner to the export promoter on shipment; but section 26 of the Sale of Goods Act, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed by transfer of documents of title from the petitioner to the export promoter when the bill of lading was negotiated by the bank and payment was made to the petitioner. The first condition is, therefore, satisfied. As regards the question whether the second condition is satisfied, the petitioner had filed statements showing as to when the goods were shipped and as to when the documents were negotiated and payments were received. It will appear from these statements that in most of the cases the gap between the date of sailing of the ship and the date of negotiation of the documents is considerable and it is quite likely that in most of the cases the documents were negotiated after the ship had crossed the customs frontiers. Having regard to the gap between the dates of sailing and the dates of negotiation, as disclosed in the statements, the Deputy Commissioner, in our opinion, should have given opportunity to the petitioner to prove definitely in respect of each shipment that the goods had crossed the customs frontiers before the date of negotiation of the documents, i.e., before the passing of the property. The Deputy Commissioner denied this opportunity to the petitioner i ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
