1955 (4) TMI 25 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Jurisdiction of the Commercial Tax Officer under Section 12(1) of the Madras General Sales Tax Act.
2. Inclusion of turnover in the assessment under Article 286(1)(b) of the Constitution as sales "in the course of export."

Issue-wise Detailed Analysis:

1. Jurisdiction of the Commercial Tax Officer under Section 12(1) of the Madras General Sales Tax Act:

The assessees contended that the Commercial Tax Officer had no jurisdiction to revise the assessment as he did. Section 12(1) of the Act allows the Commercial Tax Officer to "suo motu or on application, call for and examine the record of any order passed or proceeding recorded under the provisions of this Act by any officer subordinate to him, for the purpose of satisfying himself as to the legality or propriety of such order, or as to the regularity of such proceeding, and may pass such order with respect thereto as he thinks fit."

The Court held that the Commercial Tax Officer did not convert himself into an assessing authority to re-assess an escaped turnover. Instead, he examined the legality and propriety of the exemption granted by the assessing officer. The sales were disclosed in the books of account, and the issue was the propriety of the exemption under Article 286(1)(b) of the Constitution. The Court found no merit in the objection that the Commercial Tax Officer acted beyond his jurisdiction.

2. Inclusion of Turnover in the Assessment under Article 286(1)(b) of the Constitution as Sales "in the Course of Export":

The second issue was whether the turnover of Rs. 5,07,753-9-0 was exempt from inclusion under Article 286(1)(b) of the Constitution as sales "in the course of export." The Court examined the facts of the three contracts in question:

- Contract 1: Sale of 5 tons of pepper to M/s. Mulji Rattanshi and Co., Bombay, shipped from Cochin to London.
- Contract 2: Sale of 25 tons of pepper to Mills Export Import Co., Bombay, shipped from Cochin to Odessa.
- Contract 3: Sale of 8 1/2 tons of pepper to M/s. Virchand Panachand and Co., Bombay, shipped from Cochin to Tunis.

The Court considered whether these sales were "in the course of export" as defined by the Supreme Court in the First and Second Travancore cases. The Court noted that for a sale to be in the course of export, the seller must remain the owner of the goods until they cross the customs frontier.

C. and F. Contracts:
The Court held that under C. and F. contracts, the seller retains property in the goods until the bills of lading are tendered to the buyer. The goods were packed, marked, transported to Cochin, and loaded on board ships. The property in the goods did not pass to the buyers until the bills of lading were presented, by which time the goods were already in the export stream.

F.O.B. Contracts:
For the F.O.B. contract, the property in the goods passed at the earliest when the goods were put on board the vessel. The Court referred to the Supreme Court's decision in Commissioner of Income-tax, Madras v. Mysore Chromite Ltd., which held that property in goods under an F.O.B. contract passes only when the documents are tendered and payment is made.

The Court concluded that the sales were "in the course of export" as the property in the goods passed to the buyers only after the goods had entered the export stream. Therefore, the turnover of Rs. 5,07,753-9-0 was entitled to the constitutional exemption under Article 286(1)(b).

Conclusion:
The Court allowed the petition, setting aside the order of the Sales Tax Appellate Tribunal that included the turnover in the assessment. The assessees' contention was found to be well-founded, and they were entitled to the constitutional exemption under Article 286(1)(b). The petition was allowed with costs, and counsel's fee was fixed at Rs. 100.