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PETITIONER: MEMBER BOARD OF REVENUE, WEST BENGAL

       Vs.

RESPONDENT: M/S.  SWAIKA OIL MILLS

DATE OF JUDGMENT04/08/1977

BENCH: CHANDRACHUD, Y.V. BENCH: 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 effected  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

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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]

JUDGMENT: 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 thisappeal     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

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shipment marks specified by the purchasers in the letter; (e)  Due   to   import  restrictions   in   Indonesia,   the respondents were to shipnot 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.

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(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  en- tered  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. 274