Member Board of Revenue, West Bengal Vs.
M/S. Swaika Oil Mills [1977] INSC 160 (4 August 1977)
CHANDRACHUD, Y.V.
CHANDRACHUD, Y.V.
KAILASAM, P.S.
CITATION: 1977 AIR 2008 1978 SCR (1) 270 1977
SCC (4) 286
ACT:
Constitution of India, Art. 286(1)((b)-Central
Sales Tax Act, 1956, Section 5(1)-'In the course of export',
applicability-F.O.B. contract-Goods delivered on foreign bound ship- Use of
export-licence lent to exporter-Whether Sale exigible to sales tax.
HEADNOTE:
The Netherlands Selling Organisation Ltd.
bought linseed oil "F.O.B. Calcutta price", from the respondent oil
mills. The terms of the sale-contract provided that the oil mills would deliver
the goods on a ship bound for Indonesia, and lend the use of its export-licence
to facilitate the export of the goods by the Netherlands Organisation to a
foreign buyer. The respondent claimed exemption from the payment of sales-tax
on the ground that the sale was affected in the course of the export of goods
out of the Indian territory.
The claim was rejected by the Revenue
Authorities but was allowed by the High Court, in a reference by the Board of
Revenue.
Allowing the appeal and holding that the sale
was exigible to sales-tax, the Court.
HELD : (1) There is no privity of contract
between the respondents and the foreign buyer. The export was occasioned by the
contract of sale between the Netherlands Organisation and their own buyer, and
not by the contract of sale between the respondents and the Netherlands
Organisation. The two sales are not part of one integral transaction. [272C, D]
(2)The circumstance that the contract between the respondents and the
Netherlands Organisation was in the F.O.B. form and that the payment of price
was to be made only after the goods were put on board the ship by the respondents,
do not affect the. fundamental position that there were two independent and
unconnected sales. In loading the goods on the ship, the respondents were
acting as mere carriers. The fact that the place of delivery is a foreign-bound
ship cannot, by itself, make a sale one in the course of export. [272H, 273A-B]
Mohd. Serajuddin etc. v. State of Orissa [1975] Supp. SCR 169, applied.
(3)The bill of lading was made out in the
name of the Netherlands Organisation which. obtained a complete and indefeasible
title to the goods purchased by them from the respondents in India. The fact
that the respondents were to lend them the use of their export licence or that
the respondents paid the customs duty and the Port Commissioner's charges, does
not mean that the goods were exported, by, or at the instance of the
respondents. [272 E- F, 273C]
CIVIL APPELLATE JURISDICTION.: Civil Appeal
No. 14-77 of 1972.
Appeal by Special Leave from the Judgment and
Order dated 25-11-1970 of the Calcutta High Court in gales Tax Reference No.
499 of 1967.
D. N. Mukherjee and G. S. Chatterjee for the
Appellant.
Shankar Ghosh and D. P. Mukherjee for the
Respondent.
The Judgment of the Court was delivered by
CHANDRACHUD, J.-Article 286(1) (b) of the Constitution pro- vides that no law
of State shall impose, or authorise the imposition of a tax on the sale or
purchase of goods, where such sale or purchase 271 takes place in the course of
the import of the goods into, or export of the goods out of, the territory of
India. By the Sixth Amendment to the Constitution which came into force on
September 11, 1956, an amendment was made to clause (2) of Article 286, by
which Parliament was given the power by law to formulate principles for
determining when a sale or purchase of goods takes place in any of the ways
mentioned in clause (1). Acting in pursuance of this power, the Parliament
enacted Section 5(1) of the Central Sales Tax Act, 1956, providing that a sale
or purchase of goods shall be deemed to take place in the course of the export
of the goods out of the territory of India only if the sale or purchase either
occasions such export is effected by a transfer of documents of title to the
goods after the goods, have crossed the customs frontiers of India.
The, question which arises for out
consideration in this appeal is whether a sale effected by the respondents-M/s
Swaika Oil Mills is a sale in the course of the export of goods out of the
territory of India. This question was answered against the respondents by the
Revenue Authorities which held that the sale was exigible to sales tax. But, on
a reference made to the Calcutta High Court by the Board of Revenue under
section 21 (1) of the Bengal Finance (Sales Tax) Act, 1941, the High Court set
aside the assessment on the ground that the sale took place in the course of
export of the goods.
By a letter dated September 10, 1952, the
Netherlands Selling Organisation Ltd. confirmed having bought from the
respondents a certain quantity of linseed oil, "F.O.B. Calcutta
price." The main terms of the contract of sale, which was made and
concluded in Calcutta, are these :
The price of the goods was to be paid F.O.B.
Calcutta against the first presentation of 'Clean on board' Mate's receipt
along with the relative G.R.I. forms in triplicate;
(b) The insurance charges were to be paid by
the purchasers;
(c) The purchasers were to send to the
respondents their shipping broker for arranging booking of the shipping space
for the goods to put on board the ship by the respondents;
(d)The, respondents were to mark the goods
with the shipment marks specified by the purchasers in the letter;
(e) Due to import restrictions in Indonesia,
the respondents were to ship not more than 500 imperial gallons of linseed oil;
and finally, (f) The "Export" was
"to be made" under the export-licence of the respondents.
Mr. Shankar Ghose, who appears on behalf of
the respondents, has raised a variety of interesting points, which, in our
opinion, have lost their validity and relevance in view of a Constitution Bench
decision of this Court in Mohd. Serajuddin etc. v. State of Orissa(1).
(1) [1975] Suppl. S.C.R. 169.
272 A catena of decisions bearing on the
question as to when a sale can be deemed to. be in the course of export was
examined elaborately in that case. Applying the ratio of Serajuddin's case to
the facts before us, we are of the opinion that the, High Court of Calcutta,
which did not have the benefit of that judgment, is wrong in holding that the
sidle effected by the. respondents in favour of the Netherlands Selling
Organisation is a sale in the. course of export. Our reasons for saying so are
these :
(1)There was a direct, distinct and
independent contract of sale between the respondents on one hand and their
buyers in India, the Netherlands Selling Organisation.
(2)The sale effected in pursuance of that
contract is wholly unconnected with the sale by the Netherlands Organization to
their foreign buyer. The two sales are not a part of one integral transaction.
(3) There is no privity of contract between
the respondents and the foreign buyer. They sold the goods in India, which the
buyer on his own accountexported to Indonesia.
The foreign buyer was undisclosed to
therespondents and, indeed, there is nothing on the record to show the 'terms
of the contract between the Netherlands Organisation and their foreign buyer.
Respondents knew nothing of these terms and their contract with the Netherlands
Organization did not stand or fall by the terms of that sale.
(4) The immediate cause of the movement of
goods and the export was the contract between the Netherlands Organisation and
their foreign buyer and not the sale between the respondents and the
Netherlands Organisation. The export was occasioned by the contract of sale
between the Netherlands Organisation and their own buyer and not by the
contract of sale between the respondents and the Netherlands Organisation.
(5) The bill of lading was indisputably made
out in the name of the Netherlands Organisation which obtained a complete and
indefeasible title to the goods purchased by them from the respondents in
India.
(6)There was no obligation either on the
respondents or on the Netherlands Organisation to export the goods out of
India.
(7)Respondents put the goods sold by them to
the Netherlands Organisation on board the ship merely to facilitate the
intended export of goods by the Netherlands Organisation. In loading the goods
on the ship, respondents were acting as mere carriers, since they were under an
obligation to do, so under their contract with the Netherlands Organisation.
(8)Neither of the two transactions created
any mutual rights and obligations as between the respondents and the person or
persons whose benefit the export was made or intended.
(9) The circumstances that the contract
between the respondents and the Netherlands Organisation was in the F.O.B. form
and that the payment of price was to be made only after the goods were put on
273 board the ship by the respondents, do not affect the fundamental position
that there were two distinct, independent and unconnected sales. The payment of
price was made to depend on the fact of shipment for the reason that under the
terms of the contract, which the respondents entered into with the Netherlands
Organisation, a duty was imposed upon the former to put the goods on board the
ship.
The Netherlands Organisation, instead of
accepting the delivery of goods in a factory or godown of the respondents,
stipulated that the goods, on their behalf, be put by the respondents on board
the ship. The fact that the place of delivery is a foreign-bound ship cannot,
by itself, make a sale one in the course of export.
(10)The very agreement, which is the basis of
the respondents' claim for exemption from sales tax, begins with the assertion
: "We herewith confirm having bought from you" the, goods mentioned
in the letter. The sale transaction was thus concluded between the respondents
and the Netherlands Organization in India. Lastly, (11)The fact that the,
respondents were to lend to the Nether lends Organisation the use, of their
export licence or that the respondents paid the customs duty and the Port,
Commissioner's charges, does not mean that the goods were exported by or at the
instance of the respondents or that the sale effected by them in favour of the
Netherlands Organisation occasioned the export. If the respondents' name was
shown as the exporters, it was because they had obligingly lent the use of
their export licence to facilitate the export of the goods by the Netherlands
Organization.
For these reasons, we set aside the judgment
of the High, Court and hold that the, sale in respect of which the respondents
claimed exemption, is not a sale in the course of export and is, therefore,
exigible to sales tax.
The appeal is accordingly allowed with costs.
M.R.
Appeal allowed.
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