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TMI Blog1960 (1) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... in dispute and they may be briefly stated : The petitioner is a private company within the meaning of the Companies Act, 1956, and has its registered office at Kasturi Buildings, Bombay-1. On March 24, 1954 and April 15, 1954, the petitioner entered into two contracts with the Government of India for selling to the latter two consignments of sugar - one of 9,500 Long Tons of sugar of Peruvian origin and the other of 25,000 Metric Tons of sugar of continental origin. To fulfil the terms of the contracts, the petitioner placed order with dealers in foreign countries. The following are the particulars relating to the first contract dated March 24, 1954, for the supply of 9,500 Long Tons of sugar : (i) 3rd April, 1954 Letter of Credit opened by the petitioner. (ii) 3rd May, 1954 S.S. Alba sails from Salaverry (Peru) carrying 9782.01688 Long Tons of sugar. (iii) 26th May, 1954 The petitioner delivered to its Bankers, the Central Bank of India Limited, Bombay, along with the invoice for Rs. 50,35,405-11-0 the Documents of Title (viz. the Bills of Lading duly endorsed in favour of the Government of India, Ministry of Food & Agriculture (Agriculture) to the above goods) together ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unloaded, taken delivery of, and cleared by the Government of India after paying the requisite customs duties to the authorities concerned. 4. For the assessment year 1954-55, i.e., April 1, 1954 to March 31, 1955, the petitioner was assessed to sales tax by the Sales Tax Officer, Licence Circle, Division 1, Bombay. In calculating the turn-over of the petitioner, the Sales Tax Officer deducted the price of the said two sales from the petitioner's turn-over. On January 31, 1958, the first respondent, the Assistant Collector of Sales Tax, issued a notice to the petitioner under Section 31 of the Act proposing to review the said assessment order passed by the Sales Tax Officer. In due course the petitioner filed objections and made his representations. The petitioner contended before the first respondent that the notice should have been issued, if at all, under Section 15 and not under Section 31 of the Act inasmuch as the sales had been disclosed to the Sales Tax Officer and the deduction of the same had been allowed by him. It was also pleaded that in any event the sales had taken place in the course of import and therefore they were not liable to sales tax. The first respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ........................................................................................................ (b) in the course of the import of goods into, or export of the goods out of, the territory of India." Under this Article, if the sales by the petitioner to the Government of India took place in the course of the import of the goods into the territory of India, the Bombay State would have no power to impose sales tax on the said sales. 9. What does the phrase "in the course of the import of the goods into the territory of India" convey? The crucial words of the phrase are "import" and "in the course of". The term "import" signifies etymologically "to bring in". To import goods into the territory of India therefore means to bring into the territory of India goods from abroad. The words "course" means "progress from point to point". The course of import, therefore, starts from one point and ends at another. It starts when the goods cross the customs barrier in foreign country and ends when they cross the customs barrier in the importing country. These words were subject of judicial scrutiny by this Court in State of Travancore-Cochin v. Shunmugha Vilas Cashew Nut Fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chin v. Shanmugha Vilas Cashew Nut Factory - (1954) SCR 53 extended the doctrine to a case of sale or a purchase of goods effected within the State by transfer of shipping documents while the goods were in the course of transit. The decision dealt with three types of purchases, viz., (i) purchases made in the local market; (ii) purchases made in the neighbouring districts of an adjacent State; and (iii) imports from Africa. The imports from Africa consisted of two groups - one group consisted of goods that were purchased when they were on the high seas and shipped from the African ports to Cochin or Quilon : we are not concerned with the other group. In the said case some commission agents at Bombay arranged for the purchase on behalf of the assessee, got delivery of the shipping documents at Bombay through a bank which advanced money against the shipping documents and collected the same from the assessees at destination. This Court, by a majority, held that, in respect of the purchases falling under the first group of imports, the commission agents acted merely as agents of the respondents therein and that the said purchases occasioned the import and therefore came within the exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prevent." The learned Judge also in his judgment elaborately considered the great hardship that would be caused to an Indian importer if he was not permitted to sell the goods which were on the high seas by delivery of shipping documents against payment. Though that case dealt with a different situation, we agree with the learned Judge's observations that an importer can, if he receives the shipping documents, transfer the property in the goods when they are on the high seas to a third party by delivering to him shipping documents against payment and such a sale is one made in the course of import. 11. The legal position vis-a-vis the import sale can be summarized thus; (1) The course of import of goods starts at a point when the goods cross the customs barrier of the foreign country and ends at a point in the importing country after the goods cross the customs barrier; (2) the sale which occasions the import is a sale in the course of import; (3) a purchase by an importer of goods when they are on the high seas by payment against shipping documents is also a purchase in the course of import and (4) a sale by an importer of goods, after the property in the goods passed to hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but also all rights created by the contract of carriage between the shipper and the shipowner. It is a key which in the hands of a rightful owner is intended to unlock the door of the warehouse, floating or fixed, in which the goods may chance to be." We have quoted the passage in extenso as it clearly and fully states the law on the subject. It is not disputed that the law in India is also similar to that in England. The delivery of the bill of lading while the goods are afloat is equivalent to the delivery of the goods themselves. The learned Counsel concedes that ordinarily that will be so, but contends that in the present case, the contract clearly indicates that the intention of the parties was that till actual delivery was made the property in the goods would not pass to the buyer. Both the contracts are similar in terms and they follow the standard terms prescribed by the Government. The main terms of the contracts may be summarized thus : The first clause defines the term "sellers" to mean the party selling the sugar and the term "the Government" to mean the President of India. Clause 2 prescribes that suitable gunny bags approved by the Government should be used for impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rders with foreign companies, engaged a steamer on charter terms, took delivery of the goods from the foreign firms and, when the goods were on the high seas, delivered the documents of title to the Central Government against payment and the said Government, taking the licence from the sellers, cleared the goods at the Bombay Harbour. 13. Let us now scrutinize the terms of the contract to ascertain whether they disclose any intention of the parties that notwithstanding the delivery of the bill of lading against payment the property in the goods should not pass to the Government. The circumstances under which the contracts were entered into between the parties indicate that both the parties were interested to see that property in the goods passed in the ordinary way when the shipping documents were handed over to the Government against payment. The sellers had to meet their liability to the foreign companies with whom they opened letters of credit and the Government must have been anxious to get the title to the goods so that the sellers might not divert the goods towards their other commitments or to other buyers for more tempting prices. Under the contract every safeguard fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following circumstances : (i) the seller himself chartered the ship; and (ii) the licence issued by the Government was made non-transferable. We do not see how these two facts indicate the contrary intention. If the seller himself chartered a steamer, when the goods he purchased were loaded in the ship, the property in the goods passed to him and therefore he was in a position to sell the same to the Government. The fact that the licence was non-transferable has no relation to the property in the goods passing to the Government. The licence issued by the Government is an exercise of the statutory power under the relevant Act. Whether the petitioner sold the goods to the Government or to a third party, he had to obtain a licence. Indeed in the present case, the licence was given to the seller with the express object of fulfilling the contracts with the Government and was issued several days after the contracts were executed, and indeed the Government took the licence from the seller and cleared the goods through their officer. 15. For all the foregoing reasons we hold that the property in the goods passed to the Government of India when the shipping documents were deliver ..... 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