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TMI Blog1971 (1) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... lity to sales tax on certain sales made by the appellant-assessee of tyres and tubes to a concern called the National Transports, Hubli. 2.. The salient facts, out of which the questions arise, are the following: The assessee is a dealer in iron ore. It purchases the same from mineowners in Hospet and sells them to the STC for being exported to foreign countries. Both the appellant and the STC are registered dealers under the Mysore Sales Tax Act. Under agreements or contracts governing or covering the sale of ore by the appellant to the STC, the ore is transported by rail from Hospet to Hubli and by road from Hubli to Karwar port where it is loaded into ships for onward transport to foreign countries to be delivered to buyers in those countries. All expenses of transportation from Hospet to the point the ore is loaded in ships are borne by the appellant in terms of the relevant agreements or contracts. The documents relating to transport by rail, such as way-bills, railway receipts, etc., are made out in the name of the STC; in the said documents, the ore is shown as consigned by the STC to self, i.e., both the consignor and the consignee are the STC. It is also admitted that r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or no controversy whatever. It is con- ceded, in our opinion, rightly, that the appellant-assessee did not sell the ore directly to foreign buyers, and that this is a case in which there are two distinct and different purchases, one by the appellant from the mine-owners and the other by the STC from the appellant. There is also no doubt that the contract of purchase by the STC from the appellant was f.o.b. contract. 6.. There is also no doubt as to the principles of law applicable to situations of this nature, the said principles having been settled by several rulings of the Supreme Court. Broadly stated, the principles are that a purchase or a sale made in this country for the purpose of export to foreign countries is liable to tax in this country, but that a purchase or a sale in the course of export of the goods out of the territory of India is not liable to tax and cannot be subjected to tax by State legislation. 7.. The question ultimately for consideration in these cases is- Whether the purchase by the STC from the appellant was only a purchase for the purpose of export and therefore the last purchase within this State liable to tax, in which case the appellant's purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the goods into, or export of the goods out of, the territory of India. (2) Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1). (3) Any law of a State shall, in so far as it imposes, or authorises the imposition of, a tax on the sale or purchase of goods declared by Parliament by law to be of special importance in inter-State trade or commerce, be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify." 11.. Pursuant to the article as amended, Parliament enacted the Central Sales Tax Act, 1956, the fifth section of which formulated the principles for determining when a sale or purchase of goods may be said to take place in any of the ways mentioned in clause (1) of article 286. The said section reads as follows: "(1) 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 or is effected by a transfer of documents of title to the goods after the goods have crossed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h actually takes place, it is a sale for export. Where the export is the result of sale, the export being inextricably linked up with the sale so that the bond cannot be dissociated without a breach of the obligation arising by statute, contract or mutual understanding between the parties arising from the nature of the transaction, the sale is in the course of export." 13.. Thereafter, their Lordships proceeded to deal with other decided cases pointing out the peculiar circumstances in each case which decided the question one way or the other. The case of Wadeyar [1960] 11 S.T.C. 757 (S.C.)., is one of them. This is what their Lordships say about that case at page 763 in Ben Gorm Nilgiri Plantations Company v. Sales Tax Officer [1964] 15 S.T.C. 753 (S.C.).: "One more judgment of this court may be noticed: B. K. Wadeyar v. M/s. Daulatram Rameshwarlal [1960] 11 S.T.C. 757 (S.C.). The assessees in that case sold goods to an Indian purchaser, who had agreed to sell them to a foreign buyer. The sales by the assessees 'were on f.o.b. contracts under which they continue to be owners' till the goods cross the customs barrier, and entered the export stream. It was held by this court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... One of the circumstances dealt with as possibly making a difference is the party in whose name the shipping documents are made out, and another the party who has taken out the export licence. In the present cases, there is no doubt whatever that all shipping documents were obtained by, and made out in the name of, the STC and that the export licence was taken out by the STC and not by the appellant. The shipping documents never came into the possession of the appellant. Prima facie, therefore, the normal presumption as to passing of property must be applied in these cases. The only other circumstances specially relied upon by the appellant were that at an earlier point of time when the goods were being transported by rail, the railway documents were made out in the name of the STC and that the appellant had been enabled to borrow moneys from banks on the hypothecation or security of the goods themselves. The former circumstance, in our opinion, cannot be regarded as conclusive or decisive because even after the goods were discharged at the railway station at Hubli the responsibility of transporting them by road to Karwar port and loading them in the ship beyond the customs barrier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We are not, however, persuaded that there is anything in that decision which makes it impossible to postulate a purchase in connection with an export or a purchase which may be said to occasion an export so as to be regarded as a purchase in the course of export. That we should read their Lordships' decision in the way indicated by the learned counsel for the appellant is sought to be further supported by reading the following passage in the judgment of their Lordships in the earlier case of the Bombay Company [1952] 3 S.T.C. 434 at p. 440 (S.C.).: "We accordingly hold that whatever else may or may not fall within article 286(1)(b), sales and purchases which themselves occasion the export or the import of the goods, as the case may be, out of or into the territory of India come within the exemption and that is enough to dispose of these appeals", emphasis being on the expression "as the case may be". 20.. The difficulty in the way of accepting this argument is twofold. 21.. Firstly, there is the direct decision in the case of Daulatram [1960] 11 S.T.C. 757 (S.C.). Although the point of incidence of the tax in that case was the point of sale, it should not be forgotten that in su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aged in with a profit-motive; if, as is now stated on behalf of the assessee, the sale of tyres and tubes to transport contractors was with a view to fulfil the contract for sale of ore to the STC, that very connection establishes a profit-motive. It must therefore be held that these sales were rightly subjected to tax. 25.. In the result, all the four appeals are dismissed. No costs. The assessee appealed to. the Supreme Court after obtaining special leave. S.-C. Agrawala, Advocate of Ramamurthi and Co., for the appellant. Somnath Iyer, Senior Advocate (S.K. Dholakia and S. P. Nayar, Advocates, with him), for the respondent. S.K. Venkataranga Iyengar and Vineet Kumar, Advocates, for the intervener. The judgment of the court was delivered by GROVER, J.-These appeals have been brought by special leave against a common judgment of the Mysore High Court. The facts are not in dispute. The assessee is a dealer in iron ore. It purchases iron ore from mine-owners in Hospet and sells them to the State Trading Corporation for export to foreign countries. The assessee and the State Trading Corporation are registered as dealers under the Mysore Sales Tax Act, 1957, hereinafter c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessing authority. The assessee filed an appeal in the case of each assessment to the High Court under section 24(1) of the Act. The approach of the High Court was on these lines. There were two purchases, one by the assessee from the mine-owners and the other by the State Trading Corporation from it. If the purchase by the State Trading Corporation from the assessee was for the purpose of export then the former would be liable but if the purchase by the State Trading Corporation was one in the course of export of goods out of the territories of India the last purchase would be that of the assessee from the mine-owners and it would be the assessee on whom the incidence of tax would fall. The High Court relied largely on a decision of this court in B. K. Wadeyar v. M/s. Daulatram Rameshwarlal [1960] 11 S.T.C. 757 (S.C.); [1961] 1 S.C.R. 924., and after noticing article 286 of the Constitution, as amended by the Constitution (Sixth Amendment) Act, 1956, and section 5 of the Central Sales Tax Act, 1956, as also the conditions and nature of the contracts entered into between the parties, found that the transactions between the assessee and the State Trading Corporation w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e goods. In other words, in the absence of special agreement the property in the goods does not pass in the case of such contracts until the goods are actually put on board the ship. The High Court has enumerated with care all the material conditions which were to be found in the contracts as also the manner in which the transportation of the goods took place apart from the payment of price and the arrangement about obtaining of advances by the assessee by hypothecation of goods. We are unable to find any infirmity in the approach and reasoning of the High Court on the question of passing of property in the goods in the light of the presumption which arises in the case of f.o.b. contracts. We would accordingly affirm the conclusion of the High Court that the assessee was the last purchaser of the iron ore within the State and was thus liable to pay tax in accordance with the provisions of the Act. In one of the appeals a minor question arose relating to the imposition of tax in respect of sale of tyres and tubes by the assessee to the National Transports, Hubli. It was argued before the High Court that the assessee was not a regular dealer in tyres and tubes and that there was no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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