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Judgment
Ismail, J.—What is in dispute in this tax revision case is a turnover of Rs. 37,669.18 representing the sales effected by the respondent herein
in favour of one V. Srinivas and Company, Madras. The contract that was entered into between the parties as extracted by the Tribunal in its
order is as follows :
We have pleasure in accepting your offer to deliver the following goods in Far Eastern Ports at your account and risk.
No. of bales/ Description Agg. wt. and Assort- Price per
pieces range ment lb.
2 (two) Superfine tanned 11/12 Rm
sheep skins. 25/35/40 @ Sh. 19/6
Pure red hairs. Export duty:
Single tonnage. Your a/c.
Guaranteed free
from adulteration.
Terms: The above price/prices is/are CIF/Far Eastern Ports less 3 1/2 per cent
discount.
Brokerage: 1 1/2 per cent N. P. per lb.
Shipment: Within 2 months.
Property in the goods passes after shipment: Payment: Against presentation of documents after shipment 90 days D/P. on continent.
Note: Shipment if effected by us shall be at your expense but it is understood that in effecting shipment, we are acting strictly as your shipping
agents. It is understood that the terms and conditions contained in official contract No. 6 issued by Leather Importers Factors and Merchants
Association of London (of which you have knowledge and notice) shall apply to this transaction. Sales tax, if any, levied will be borne by you and
will be for your account.
Thus, this contract makes it clear that the property in the goods passes after the goods were shipped and the documents were obtained and the
purchaser was liable to pay the value only on presentation of the documents. In this set up, the Sales Tax Appellate Tribunal, relying on the
decision of this court in Hap Abdul Gaffoor Sahib & Co. v. State of Madras [1958] 9 S.T.C. 208, held that since the property in the goods
passed after the goods had entered the export stream, the sales constituted sales in the course of export and, therefore, the turnover was not liable
to be included in the total turnover of the assessee. It is the correctness of this conclusion of the Tribunal that is challenged by the State in the form
of the present tax revision petition.
The learned Additional Government Pleader very strenuously contends that after the decision of the Supreme Court in Serajuddin and Others
Vs. The State of Orissa, , which was followed by a Full Bench of this Court in Deputy Commissioner (C. T.), Coimbatore v. Vasantha Mills Ltd.,
Coimbatore 89 L.W. 561, overruling the earlier decision of this Court in Stale of Tamil Nadu v. Cauvery Spinning and Weaving Mills Ltd. [1974]
33 S.T.C. 506, the conclusion of the Tribunal is erroneous and the Tribunal should have held that the amount of Rs. 37,669.18 is a taxable
turnover. We are of the opinion that this contention is not correct.
Section 5 of the Central Sales Tax Act, 1956, deals with the question when a sale or purchase of goods is said to take place in the course of
import or export. Sub-section (1) of Section 5 provides that a sale or purchase of goods shall be deemed to take place in the course of 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 the customs frontiers of India. Thus, Section 5(1) deals with two alternative cases : (i) where the sale or
purchase occasions the export itself ; and (ii) where the sale or purchase is effected by transfer of documents of title to the goods after the goods
had crossed the customs frontiers of India. However, a reading of the judgment of the Supreme Court in Serajuddin and Others Vs. The State of
Orissa, as well as the judgment 89 L.W. 561 of the Full Bench of this Court referred to above does not show that the cases dealt with in those
decisions fell within the scope of the second alternative of Section 5(1). Those cases were dealing with the first alternative only, namely, the sale or
purchase occasioning the export and they did not deal with the second alternative contained in Section 5(1). In such a situation, the second
alternative as contained in Section 5(1) still continued to be governed by the decision relied on by the Tribunal and, therefore, the Tribunal cannot
be said to have committed any error of law because, in this particular case, the contract between the parties expressly provided for the property in
the goods passing after shipment and the payment being made on presentation of documents after shipment and that necessarily involves the sales
being effected by transfer of documents of title after the goods had crossed the customs frontiers. In these circumstances, the tax revision case fails
and is dismissed with costs. Counsel''s fee Rs. 250.
The case again came on for hearing on 19th January, 1978, on an application for review u/s 114 of the Civil Procedure Code, 1908. The order
of the Court was pronounced by
Ismail, J.
This is a petition to review our order See page 335 supra dated 23rd September, 1976. That order was passed on a revision petition preferred
by the State u/s 38 of the Tamil Nadu Act 1 of 1959 against the order of the Sales Tax Appellate Tribunal dated 29th November, 1971. That was
concerned with a turnover of Rs. 37,669.18 representing the sales effected by the respondent herein in favour of one V. Srinivas and Company,
Madras. The contract that was entered into between the parties as extracted by the Tribunal in its order which, in turn, we have extracted in our
order dated 23rd September, 1976, is as follows :
We have pleasure in accepting your offer to deliver the following goods in Far Eastern Ports at your account and risk.
No. of bales/ Description Agg. wt. and Assort- Price per
pieces range ment lb.
2 (two) Superfine tanned 11/12 Rm @ Sh. 19/6
sheep skins. 25/35/40 Export duty:
Pure red hairs. Your a/c.
Single tonnage.
Guaranteed free
from adulteration.
Terms : The above price/prices is/are CIF/Far Eastern Portsless 3 1/2 per cent
discount.
Brokerage : 1 1/2 per cent N. P. per lb.
Shipment: Within 2 months.
Property in the goods passes after shipment : Payment : Against presentation of documents after shipment 90 days D/P. on continent.
Note : Shipment if effected by us shall be at your expense but it is understood that in effecting shipment, we are acting strictly as your shipping
agents. It is understood that terms and conditions contained in official contract No. 6 issued by Leather Importers Factors and Merchants
Association of London (of which you have knowledge and notice) shall apply to this transaction. Sales tax, if any, levied will be borne by you and
will be for your account.
On the basis of the above contract, we held that the contract made it clear that the property in the goods passed after the goods were shipped
and the documents were obtained and the purchaser was liable to pay the value only on presentation of the documents and that in that set up the
Sales Tax Appellate Tribunal rightly relying upon the decision of this court in Haji Abdul Gaffoor Sahib and Company v. State of Madras [1958] 9
S.T.C. 208. held that since the property in the goods passed after the goods had entered the export stream, the sales constituted sales in the
course of export and, therefore, the turnover was not liable to be included in the total turnover of the assessee. While dealing so, we also held that
the decision of the Supreme Court in Serajuddin and Others Vs. The State of Orissa, did not touch the second limb of Section 5(1), namely,
where the sale or purchase is effected by transfer of documents of title to the goods after the goods had crossed the customs frontiers of India. For
coming to this conclusion, we took the expression ""customs frontiers"" to mean the actual ""customs barrier"" and not the technical expression of
customs frontiers"". However in this review petition filed by the State, it is contended that the decision of the Supreme Court in The State of
Madras Vs. Davar and Co. etc., clearly shows that the expression ""customs frontiers"" in Section 5(2) of the Central Sales Tax Act, 1956, did not
mean ""customs barrier"" ; and that it had to be construed in accordance with Notification No. S. R. 0. 1683 dated 6th August, 1955, issued by the
Central Government u/s 3A of the Sea Customs Act, 1878, read with the Proclamation of the President of India dated 22nd March, 1956 and that
consequently the expression ""customs frontiers"" meant the boundaries of the territory including the territorial waters of India. This decision was not
brought to the notice, when we passed the order sought to be reviewed now. On the basis of this decision, it will follow that mere shipping of the
goods, after the goods have gone through the customs barriers, will not constitute the goods having crossed the ""customs frontiers"" because the
customs frontiers"" will take in the boundaries of the territory including the territorial waters also. Therefore, on the face of it our order dated 23rd
September, 1976, is erroneous, since it had not considered the decision The State of Madras Vs. Davar and Co. etc., of the Supreme Court
referred to above. Hence, this petition for review is liable to be allowed and our order dated 23rd September, 1976, is liable to be set aside and it
is accordingly so done.
Now the question for consideration is, whether the Tribunal was right in holding that the turnover in question was not liable to be included in the
taxable turnover. There is no evidence whatever to show that the property in the goods in the present case passed after the goods crossed the
customs frontiers of India, as construed by the Supreme Court in the decision The State of Madras Vs. Davar and Co. etc., referred to above.
Once the assessee was not able to prove that the property in the goods passed after the goods crossed the customs frontiers of India, it must
necessarily follow that the turnover was liable to be included in the taxable turnover. Accordingly we allow T. C. No. 120 of 1972 and hold that
the turnover of Rs. 37,669.18 representing the sales effected by the respondent herein in favour of V. Srinivas & Company was liable to be
included in the taxable turnover. There will be no order as to costs.