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TMI Blog2005 (2) TMI 814X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of sale on presentation of documents? (3) Whether the Tribunal was correct in law in holding that the said sale was covered by the latter part of section 5(1) of the Central Sales Tax Act, 1956, viz., a sale effected in the course of export by transfer of documents of title to the goods after the goods have crossed the customs frontiers of India? The reference relates to the assessment period from January 1, 1971 to December 31, 1971. Facts relevant for the purpose of this reference are that the respondent (hereinafter referred to as the assessee ) is in the business of manufacturing medicines and is a registered dealer under the Bombay Sales Tax Act, 1959 ( the BST Act , for short). On June 30, 1971 the assessee entered into a contract with M/s. A. Sevantilal Bros. (hereinafter referred to as the buyer ) for sale of 20 tonnes of Beta Ionone (hereinafter referred to as the goods ) at the rate of Rs. 67 per kilogram. By a letter dated July 16, 1971 the assessee informed the buyer that the goods would be delivered on board the ship on f.o.b. basis and that the clearing agents of the assessee would handle the consignment in the preparation of shipping documents. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hpande, learned advocate appearing on behalf of the applicant submitted that in the present case, the goods were ascertained and appropriated at the time when they were ready for transportation to the docks. As the bill of lading was not in the name of the assessee and the same was in the name of the buyer, he submitted that the title in the goods had passed when the goods were placed on board the vessel. Mr. Deshpande further submitted that as per the terms of the contract the responsibility of the assessee was only in respect of the quality of the goods and the schedule of delivery. Thus, according to the counsel for the applicant the responsibility of the assessee came to an end once the goods were put on board the vessel. The assessee had not reserved the right to divert the goods after they were placed on board the vessel. Thus, the assessee had no control over the goods once they were placed on board the vessel and, therefore, it was a case of a concluded contract within the State and the assessee was liable to pay sales tax under the BST Act. Mr. Deshpande further submitted that in f.o.b. contracts, the seller's duty is to place the goods free on board on a ship ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show that the assessee had retained the right to divert the goods and there is no express term in the contract to the effect that the property in goods shall pass only on presentation of documents and receipt of money. Accordingly, the counsel submitted that the question referred by the Tribunal be answered in favour of the Revenue and against the assessee. Mr. R.A. Harpale, Assistant Commissioner of Sales Tax, Bombay, assisted the court by submitting that in the present case once the goods were placed on board the vessel as per the terms of the contract, the sale was complete by appropriation and it could not be said that on presentation of documents of title for payment there was sale by transfer of documents of title as contemplated in the second limb of section 5 Here italicised.of the Central Sales Tax Act. In support of his contention, he relied upon the decisions of the apex court in the case of Ben Gorm Nilgiri Plantations Co. v. Sales Tax Officer [1964] 15 STC 753, Mod. Serajuddin v. State of Orissa [1975] 36 STC 136 and Murarilal Sarawagi v. State of Andhra Pradesh [1977] 39 STC 294. He also relied upon the decision of the Andhra Pradesh High Court in the case of Rajendr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment the goods were beyond the customs frontiers of India and, therefore, it must be held that on presentation of the documents of title on August 13, 1971 the sale was concluded by transfer of documents of title in the course of export, which is exempt from payment of sales tax under the BST Act. He submitted that the various decisions of the apex court and the High Court relied upon by the Revenue are distinguishable on facts because in all those cases, the sale effected by transfer of documents of title after the goods have crossed the customs frontiers of India was not an issue for consideration. Accordingly, Mr. Gaitonde submitted that in the light of the decision of the Madhya Pradesh High Court in Hindustan Steel Limited, Bhilai Steel Plant v. State of Madhya Pradesh [1982] 50 STC 287, decision of the Madras High Court in Deputy Commissioner (C.T.) v. Salem Magnesite (P.) Ltd. [1978] 42 STC 285 (Mad), and the decision of the apex court in the case of B.K. Wadeyar [1960] 11 STC 757, the questions raised in the reference be answered in favour of the assessee. We have carefully considered the rival submissions. The basic issue involved in this reference is, whether the sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saction related to sale of twenty tonnes of Beta Ionone. The terms set out therein specifically provide for the quantity, quality, price, mode of delivery and the terms of payment in respect of the goods agreed to be sold. Although the assessee agreed to deliver the goods on f.o.b. basis on board the vessel suggested by the buyer, it was specifically stated in the letter dated June 30, 1971 that the cost of onward shipment shall be on the buyer. In other words, the cost of transportation after the goods were placed on board the vessel was to be borne by the buyer, because, under the contract the obligation of the assessee came to an end once the goods were delivered on board the vessel. In the letter dated July 16, 1971, it was further clarified that the assessee would cover transit insurance of the goods only from the factory till the goods were put on board the vessel meaning thereby it was the responsibility of the buyer to take transit insurance from the time the goods were placed on board the vessel till it reaches the destination. These terms clearly show that the intention of the parties under the contract was that the property and the risk in the goods would vest in the buy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the goods were placed on board the vessel. All these obligations were under the terms of the contract in which there was no element of export. In other words, merely because the assessee helped the buyer in taking out the bill of lading and agreed to receive payment on presentation of bill of lading, it cannot be construed to mean that the property in goods would continue to vest in the assessee till the presentation of documents of title for payment. As stated earlier, from the terms of the contract it is evident that on delivery of goods on board the vessel, the property in goods vest in the buyer and not thereafter. The fact that the assessee delivered the goods on board the vessel in the f.o.b. form and received the payment of price only thereafter does not affect the fundamental position under the contract that on delivery of goods on board the vessel, the property in goods shall vest in the buyer. The apex court in the case of Murarilal Sarawagi v. State of Andhra Pradesh [1977] 39 STC 294 at 298 has observed thus: In f.o.b. contracts the seller's duty is to place the goods 'free on board' a ship to be named by the buyer. When the seller delivers the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the reference before us have to be answered in the light of the provisions of the CST Act and not by applying the ratio laid down by the apex court in the Daulatram Rameshwarlal case [1960] 11 STC 757, which was rendered before the enactment of the CST Act. The contention of the assessee that on presentation of documents of title for payment, sale was effected by transfer of documents of title is also without any merit. The assessee was the owner of the goods and the title in the goods always vested in the assessee. On preparation of the bill of lading in the name of the buyer, complete and indefeasible title in the goods vests in the buyer (see apex court decision in the case of Swaika Oil Mills [1977] 40 STC 367 at 369). It is not in dispute that in the bill of lading the buyer was shown as consignor and the foreign purchaser was shown as consignee. It is also not in dispute that the immediate cause for movement of the goods from the factory to the decks for export was not the contract between the assessee and the buyer, but the contract between the buyer and the foreign purchaser. Further, there is no evidence on record to show, that the assessee had retained the control ..... X X X X Extracts X X X X X X X X Extracts X X X X
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