2005 (2) TMI 814 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the sale was effected by the transfer of documents of title to the goods after the goods crossed the customs frontiers of India.
2. Whether a letter dated July 16, 1971, altered or modified any material terms of the original contract of sale dated June 30, 1971.
3. Whether the sale was covered by the latter part of section 5(1) of the Central Sales Tax Act, 1956.

Detailed Analysis:

Issue 1: Transfer of Documents of Title
The court examined whether the sale was completed by the transfer of documents of title to the goods after they had crossed the customs frontiers of India, as per section 5(1) of the Central Sales Tax Act, 1956. The assessee argued that the sale was completed on August 13, 1971, when the shipping documents were presented to the buyer's bankers, and by that time, the ship had crossed the customs frontiers of India. However, the Sales Tax Officer and the Assistant Commissioner of Sales Tax (Appeals) held that the transaction was a local sale. The Tribunal initially remanded the case for further consideration but eventually ruled in favor of the assessee. The court, however, found that the property and risk in the goods passed to the buyer as soon as the goods were placed on board the vessel, making it a local sale and not a sale in the course of export.

Issue 2: Modification of Contract Terms
The court considered whether the letter dated July 16, 1971, from the assessee to the buyer modified any material terms of the original contract dated June 30, 1971. The letter stated that the goods would be delivered on a free on board (f.o.b.) basis and that the assessee would receive payment upon presenting the bill of lading and other relevant documents. The court found that this letter did not alter the original terms of the contract, which specified that the cost of onward shipment would be borne by the buyer and that the property and risk in the goods would pass to the buyer once the goods were placed on board the vessel.

Issue 3: Applicability of Section 5(1) of CST Act
The court analyzed whether the sale was covered by the latter part of section 5(1) of the CST Act, which pertains to sales effected by the transfer of documents of title after the goods have crossed the customs frontiers of India. The court found that the sale was complete when the goods were delivered on board the vessel, not when the documents of title were transferred. The court cited multiple precedents, including the apex court's decisions in Ben Gorm Nilgiri Plantations Co. v. Sales Tax Officer and Murarilal Sarawagi v. State of Andhra Pradesh, to support its conclusion. The court also distinguished this case from others where the ownership of goods passed only upon the seller handing over the bill of lading after the goods had left the shores of India.

Conclusion:
The court held that the sale was not effected by the transfer of documents of title after the goods had crossed the customs frontiers of India. Instead, the sale was complete when the goods were delivered on board the vessel, making it a local sale subject to sales tax under the Bombay Sales Tax Act, 1959. Consequently, all three questions were answered in the negative, in favor of the Revenue and against the assessee. The reference was disposed of with no order as to costs.

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