1. The applicant before us, a proprietary concern, is a registered dealer doing wholesale and retail business of selling separated parts of ship machinery and ferrous and non-ferrous metals. The applicant purchased a ship by name 'Jala Veera' from the Scindia Steam Navigation Company. On 9th March, 1954, the applicant entered into an agreement with Messrs Compania Naveira Heredia Limitada Costa Rica, to sell the said ship for a consideration of Rs. 4,52,547-10-6. At the time of the agreement, the ship sold was lying in the docks of the Bombay Port. Clause (1) of the agreement states that the steamer shall be accepted as and where she now lies. In clause (4), it is stated that the steamer shall be delivered as and where she lies in Bombay free from claims of other parties against the steamer. Clause (5) says that the vendors agree to allow the purchasers or their representatives to go on board the steamer at the port of delivery. Clause (6) is to the effect that the steamer shall be deemed ready for delivery as soon as the vendors receive Government of India's sanction for its transfer to the Costa Rican flag and as soon as the bill of sale is ready for delivery to the Westminster Bank Ltd., London. Clause (15) states that the agreement is subject to the vendors' obtaining a transfer of flag to the Costa Rican Registry from the Government of India and that in the event of transfer of flag not being granted the contract is to become null and void. Clause (16) states that the purchasers are to have liberty of placing a watchman aboard the vessel at their own expense upon the signing of the agreement. Clause (17) is to the effect that the purchasers are to have liberty to use the vessel for trading or for breaking up at their option. It appears that sometime before 15th April, 1954, the Government of India granted permission for sale of the ship and for transfer of the flag of the ship to the Costa Rican flag. On 15th April, 1954, the ship sailed out of Indian waters.
2. In the assessment of the applicant to sales tax for the period 1st April, 1953, to 31st March, 1954, the applicant claimed deduction of the aforesaid amount of Rs. 4,52,547-10-6 from his taxable turnover and was allowed deduction by the Sales Tax Officer on the ground that the sale took place outside the Indian Dominion. Purporting to act under section 31 of the Bombay Sales Tax Act, 1953, the Assistant Collector of Sales Tax, suo motu, issued a notice to the applicant, calling upon him to show cause why the said sale price of the ship of Rs. 4,52,547-10-6 should not be included in his taxable turnover. In response to the notice issued, the applicant appeared and contended that the said sale price was not liable to be included in his taxable turnover. The Assistant Collector overruled the contentions raised by the applicant and included the sale price in the applicant's taxable turnover. The applicant filed an appeal before the Additional Collector against the order of the Assistant Collector, but to no avail. The applicant then filed a revision before the Sales Tax Tribunal, and before the Tribunal, the contentions raised by the applicant were four-fold : (1) The Assistant Collector had no jurisdiction to issue notice under section 31, and therefore, the assessment was bad; (2) selling ship was not the business of the applicant, and therefore sale of the ship 'Jala Veera' by him was not effected by him in his capacity as the dealer, but was only a stray adventure, and, therefore, its sale price was not liable to be included in his taxable turnover; (3) that, at any rate, the sale was an export sale or in the alternative in the course of an export, and therefore was exempt from tax under Article 286(1)(b) of the Constitution of India; and (4) the sale was outside the State of Bombay, and therefore not liable to tax. None of these contentions succeeded before the Tribunal. On an application made by the applicant, the Tribunal has drawn up the statement of the case, and has referred to us the following five questions :
(1) Whether the Assistant Collector of Sales Tax (Admn.) had any jurisdiction to issue notice in Form XXIV either under section 30 or under section 31 and to revise the order of the Sales Tax Officer
(2) Whether in the circumstances of this case the Tribunal has rightly held that the sale in question was a part of the business of the applicant
(3) Whether the Tribunal was right in holding that the sale in question had taken place in the State of Bombay
(4) Whether the Tribunal was right in holding that the said sale was not in the course of export
(5) Whether on the facts and in the circumstances the applicants were liable to pay the tax on the sale in question
3. To appreciate the argument of Mr. Ganatra on the first question, it would be convenient to refer to certain provisions of the Act. The material part of section 31 provides that subject to such rules as may be prescribed and for reasons to be recorded in writing, the Collector may, upon application or of his own motion, revise any order passed under this Act or the Rules thereunder by a person appointed under section 3 to assist him and, subject as aforesaid the Tribunal may, upon application, revise any order passed by the Collector. Sub-section (1) of section 3 empowers the State Government to appoint any person to be a Collector of Sale Tax and such other persons to assist him as the State Government thinks fit. Sub-section (2) of section 3 provides that a person appointed under sub-section (1) shall, within the limits of the area specified to be within his jurisdiction, exercise such powers as may be conferred and perform such duties as may be imposed on him by or under this Act. In exercise of its power under section 45, the State Government made rules for carrying out the purposes of this Act. Chapter 11 thereof [i.e., The Bombay Sales Tax (Procedure) Rules, 1954] deals with appointment of Sales Tax Authorities. Sub-rule (1) of rule 3 occurring in this Chapter empowers the State Government to appoint Assistant Collector of Sales Tax, Sales Tax Officer and Inspector of Sales Tax, to assist the Collector. Sub-rule (2) provides that the Inspector of an area shall be subordinate to the Sales Tax Officer exercising jurisdiction therein. The Sales Tax Officer shall in any matter in which he has jurisdiction be subordinate to the Assistant Collector exercising jurisdiction in respect of that matter; and sub-rule (3) provides that all such Inspectors, Sales Tax Officers and Assistant Collectors shall be subordinate to the Collector and shall, in the exercise of their powers and in the discharge of their duties and functions under the provisions of the Act, or any rules made thereunder, follow such directions as the Collector may issue from time to time. Referring to the aforesaid provisions, Mr. Ganatra contends that the Collector no doubt has a power to revise of his own motion the orders made by Sales Tax Officers appointed by the State Government to assist him, but the Assistant Collector has no jurisdiction to exercise those powers inasmuch as no officer is appointed to assist him. The officers which are appointed under section 3, read with the rules, are the officers appointed to assist the Collector of Sales Tax only. The Advocate-General, on the other hand, places reliance oil section 44 of the Act, and the notification issued by the Collector on 18th May, 1953, delegating to all Assistant Collectors of Sales Tax his power exercisable by him under the various sections and rules mentioned in the notification, which included section 31 of the Act. Material part of section 44 is in the following terms :
'44. (1) Subject to such conditions and restrictions as the State Government may by general or special order impose, the Collector may, by order in writing, delegate any of his powers and duties under this Act to any persons appointed under section 3 to assist him.'
4. It is, however, contended by Mr. Ganatra that sub-section (1) of section 44 may empower the Collector to delegate any of his powers and duties to any person appointed under section 3 to assist him, but, in the absence of any specific mention in section 44 that the officers to whom the Collector has delegated his powers would have the same jurisdiction as the Collector has in these matters, those officers cannot exercise those powers. We are unable to accept this contention of Mr. Ganatra. The Legislature specifically empowers the Collector to delegate his powers, subject to certain restrictions mentioned in the section, to persons appointed to assist him. It is implicit in these provisions that the person to whom the powers are delegated would have jurisdiction co-extensive with the Collector save and except any restrictions placed upon the powers of the Collector by the State Government. It is not in dispute that the State Government has not placed any restrictions on the powers of the Collector to delegate his powers under section 31. The notification of 18th May, 1953, shows that the Collector also has not placed any limitation in exercise of those powers by the Assistant Collector in any manner. That being the position, in our opinion, the order made by the Assistant Collector revising the order of the Sales Tax Officer in exercise of his powers under section 31 of the Act was within his jurisdiction. The first question, therefore, referred to us will have to be answered in the affirmative.
5. To appreciate the contentions of Mr. Ganatra on the second question, it would be convenient to refer to certain provisions of the Act to which he referred us. A dealer is defined by sub-section (6) of section 2 of the Act to mean any person who carries on the business of selling goods in the State of Bombay. Sub-section (8) of section 2 provides that 'goods' means all kinds of movable property other than newspapers, actionable claims, stocks, shares and securities, and includes all materials, articles and commodities. Sub-section (13) of section 2 provides that 'sale' means a sale of goods made within the State of Bombay for cash or deferred payment. It is the contention of Mr. Ganatra that every seller of movable property is not a dealer within the meaning of the Act. To constitute a seller of movable property into a dealer, it must be established that he carries on business of selling those goods the sale in respect of which is sought to be included in his taxable turnover. A dealer may do business in certain commodities, but the sale of any other commodity than the commodities in which he deals is not a sale made by him in his business, and is therefore not liable to be taxed. The certificate of registration granted to the applicant shows that the applicant was carrying on business of selling, wholesale or retail, separated parts of the ship machinery, ferrous and non-ferrous metals. Selling ship was not the business of the applicant. The sale of ship in the instant case was, therefore, not liable to be taxed. The sale is only a solitary transaction, and it has not been shown that in any frequency the applicant has been selling ships. This solitary transaction is therefore just in the nature of an adventure not liable to tax. He referred us to decisions reported in State of M.P. v. Bengal Nagpur, Cotton Mills Ltd.  12 S.T.C. 333, Commissioner of Sales Tax, Madhya Pradesh, Nagpur v. Mohanlal Ramkisan Nathani, Raipur  6 S.T.C. 136, Girdharilal Jiwanlal v. Assistant Commissioner of Sales Tax (Appeals), Nagpur and Another  8 S.T.C. 732, Aryodaya Spinning and Weaving Company Limited v. State of Bombay  11 S.T.C. 141, State of Mysore v. Bangalore Woollen, Cotton and Silk Mills Company Limited  13 S.T.C. 106, State of Bombay v. Ahmedabad Education Society  7 S.T.C. 497, Steelage Industries Ltd. v. State of Bombay  8 S.T.C. 376 and Deputy Commissioner of Commercial Taxes, Coimbatore Division v. Sri Lakshmi Saraswathi Motor Service, Gudiyattam  5 S.T.C. 128. Mr. Ganatra particularly laid stress on the decision in State of M.P. v. Bengal Nagpur Cotton Mills Ltd.  12 S.T.C. 333.
6. Section 5 is a charging section, and it provides that subject to the provisions of section 8, every dealer whose turnover exceeds a certain specified limit, shall be liable to pay general tax at the rates specified in sub-section (1) of section 6, on his taxable turnover. Turnover has been defined in sub-section (20) of section 2, and it means the aggregate of amounts of sale price received or receivable by a dealer. Section 8 exempts certain sales specified in column 1 of Schedule I subject to the conditions and exceptions, if any, set out in the corresponding entry in column 2 thereof from the charge of the tax. Section 5 read with the definition of 'turnover' is wide enough to include sale of every kind of goods by a dealer save and except those exempted under section 8. But when the provisions of section 5 are read together with the definitions of 'turnover', 'dealer' and 'sale', in our view, the position that emerges is that the person who carries on business of selling goods is liable to pay sales tax on the aggregate of amounts of sale price received or receivable by him in his capacity as a person carrying on business minus deductions allowable therefrom under sections 7 and 8 of the Act. In other words, the sale price of such goods only as are sold by him in the course of his business can be included in the turnover of his business, and not the sale price of any kind of goods sold by him. The test, in our opinion, then is to ascertain whether in the circumstances and on the facts of the case it can be said that a particular sale is a sale in the course of business of a dealer. If the sale has a reasonable connection with the nature of the business carried on by a dealer, then the sale would be in the course of his business. If there is no such reasonable connection between the sale effected and the nature of the business carried on by the dealer, then the sale cannot be said to be in the course of the business of the dealer, and its sale proceeds cannot therefore be included in his turnover. Though a particular commodity at any prior point of time was not sold by the dealer in the course of his business, or the fact that he had not frequently sold a particular commodity would not necessarily be decisive in ascertaining whether a particular sale has been made in the course of business or not, though no doubt they would be relevant pieces of evidence and of assistance for determination of the issue. The decisions on which reliance has been placed by Mr. Ganatra, in our opinion, do not run counter to the view taken by us.
7. As already stated, Mr. Ganatra had laid great stress on certain observations in State of M.P. v. Bengal Nagpur Cotton Mills Ltd.  5 S.T.C. 128;
'The definition of 'dealer' read with the definition of 'sale' makes it clear that the transfer of property in the goods by one person to another should be in the course of the business of selling or supplying the goods. It follows from this that the sale of a commodity specified in the schedules is not subject to tax under the Act unless the sale is by a person carrying on the business of selling or supplying that commodity. For the imposition of tax under the Act on the sale transaction of a commodity, it is not sufficient that the sale is by a dealer carrying on the business of selling or supplying some commodity. The business of the dealer must be of selling or supplying the particular commodity sought to be taxed. Otherwise he cannot be regarded as a dealer in relation to that commodity, and if he is not so regarded, he is not liable to be taxed under the Act for any sale of the commodity effected by him.'
8. These observations read by themselves may appear to support the contention of Mr. Ganatra that if at any time prior to the particular sale a dealer did not deal in that commodity, the sale of that particular commodity would not amount to a sale in the course of the business. But the observations when read in the context of the facts of this case do not lead to such a conclusion. The facts of that case were that the assessee carrying on business of manufacturing textiles, supplied steel and cement on several occasions to the contractors who were constructing buildings for the assessee, and debited the price of the materials to the contractors' account, and the question was whether the assessee could be charged to sales tax on the price of the material supplied to the contractors. It has been held that the assessee was not a dealer carrying on business of selling and supplying steel and cement, and it was therefore not liable to sales tax. It is apparent that supplying steel and cement to the contractors, who were constructing buildings for the dealer had no rational or reasonable connection with the business activity of the dealer, of manufacturing textiles. It is only in this context that the observations have been made.
9. We would next turn to the decisions of this Court. The first is a decision in State of Bombay v. Ahmedabad Education Society  7 S.T.C. 497. The facts were that the Ahmedabad Education Society had as its objects the spread of education, the starting and taking over arts colleges and other similar objects. In furtherance of these objects the Society gave a contract to a contractor for construction of buildings for colleges, residential quarters for the staff and hostels for students. Realising that it would be cheaper and more economical to manufacture bricks for the construction of the buildings, the Society set up a brick factory and supplied the bricks manufactured there to their contractor. The bricks manufactured were more than necessary for its own purpose. Therefore, the Society sold the excess quantity to sister educational institutions. Similarly, the Society also imported steel on obtaining permission and sold it to its contractor for utilizing it in the construction of its buildings. The excess quantity of steel also was disposed of by selling it to such persons as minded by the Collector. The revenue sought to tax these sales in the hands of the Society. It was held that the Society was not liable to pay any tax on the sales inasmuch as the Society was not carrying on the business of selling and supplying goods, and therefore was not a dealer within the meaning of the Act. All that is stated in this decision is that the mere activity of selling would not constitute the business of selling and supplying, but what would constitute a particular transaction as transaction in business would be a person purchasing goods with the object of selling them, or a person producing the goods with the object of selling them. As we would presently show, one of the objects of the applicant in purchasing the ship was to break it and sell separated parts of the ship in the course of his business. In Steelage Industries Ltd. v. State of Bombay  8 S.T.C. 376, the assessee was a company carrying on business of manufacturing and selling steel furniture. Selling motor car was not one of its businesses. The assessee had purchased a motor car for the use of their managing director. After using the car for more than three years, the assessee sold the second-hand motor car. The cost of purchase and the proceeds of sale of the motor car were entered in the books of account of the company. On these facts, it was held that the sale was a casual sale having no connection with the business for which the dealer was registered or was liable to be registered. The business of the company was manufacturing and selling steel furniture, and the sale of secondhand motor car of their managing director had no connection at all with the nature of the business of the assessee company. It was only a casual sale. The facts in Girdharilal Jiwanlal v. Assistant Commissioner of Sales Tax (Appeals), Nagpur and Another  8 S.T.C. 732 were that the assessee was a registered dealer and was doing business in coal, machinery, cotton, cotton-seed, groundnut and cotton bales. A separate account was maintained by him of this business activity. He had also some agricultural lands of his own. The agricultural produce of his lands, he sold in the market, and the question arose, whether the sale proceeds of the agricultural produce could be included in the turnover of his business. It was hold that the assessee cultivating his lands himself was engaging himself in an activity of agriculture, and that was not the same thing as engaging himself in a business of selling and supplying agricultural produce, and therefore, the agricultural produce sold by him cannot be said to be the sale proceeds in his capacity as a dealer. The facts in Aryodaya Spinning and Weaving Company Limited v. State of Bombay  11 S.T.C. 141 are that the assessee carrying on the business of manufacturing cotton textiles and yarn, applied for registration as a dealer, stating that they were carrying on the business of selling yarn, cotton, waste stores etc. and they were accordingly registered as dealers. The question was whether the sales of some excess cotton and cotton waste by the assessee in the relevant period were liable to be charged to sales tax, and it was held that those sales were taxable. It was contended by Mr. Ganatra that this Court has held the sale taxable because the cotton waste had been frequently sold by the assessee, and therefore frequency of sale of that particular commodity is a necessary condition precedent for including the sale proceeds of the particular commodity in the turnover of the assessee. We are unable to accept this contention that the decision turned on this aspect of the case. On the other hand, the following observations in the judgment clearly support the view taken by us. At page 142, it has been observed :
'It is true that the normal business of the assessees was the business of manufacturing and selling cotton textiles and cotton yarn, but if the activity pursued by the assessees of selling cotton waste has a reasonable relation to the normal activity pursued by them, it must be regarded as an allied business activity. The normal business being manufacture of yarn and cloth, a subsidiary product resulted. This product was normally sold. In the circumstances, an intention to carry on business of selling the subsidiary product as a part or an incident of the business of the assessees may readily be inferred and the transaction of sale may be regarded as an activity in the course of the business of the assessees.'
10. The decisions of the other High Courts to which Mr. Ganatra referred were Deputy Commissioner of Commercial Taxes, Coimbatore Division v. Sri Lakshmi Saraswathi Motor Service, Gudiyattam  5 S.T.C. 128 and State of Mysore v. Bangalore Woollen, Cotton and Silk Mills, Company Ltd.  13 S.T.C. 106. Certain motor transport companies carrying on the only business of providing transport, sold the buses as and when they became unserviceable or useless. The question was whether the sale proceeds were liable to be included in the turnover of the companies, and it was held that by reason of these isolated transactions they could not be regarded as dealers in buses within the meaning of the Madras General Sales Tax Act. It is obvious that the sale of unserviceable motor cars had no reasonable connection with the business activity of the companies. In State of Mysore v. Bangalore Woollen, Cotton and Silk Mills, Company Ltd.  13 S.T.C. 106, the assessee was a woollen, cotton and silk mills. It sold certain unserviceable articles, and the sale proceeds received were of a considerable amount. On these faces, it was held that the mere fact that the sale was for a large sum of money in a mill of the magnitude of the assessee by itself could not be a criterion to say that it was an item of business activity carried on by the assessee.
11. The ratio that emerges from the consideration of all these cases is to ascertain in each case whether the sale in question was a business activity carried on by the assessee; in other words, whether the sale has any reasonable connection with the normal course of business of the assessee, and whether the intention of the assessee was to effect that sale in the course of his business.
12. Turning to the facts of this case, one of the business activities of the applicant before us was selling separated parts of the ship. The applicant purchased this ship from the Scindia Steam Navigation Company sometime in February, 1954, and at the time of the purchase the applicant reserved to himself an option of either using the ship for trading purposes or to break it up. Now breaking up and selling separated parts of the ship is his normal business activity. It is true that the applicant has neither used the ship for trading purposes nor has broken the ship and sold the separated parts thereof. But the agreement of sale between the applicant and the Costa Rica Company shows that the applicant had sold the ship to the Costa Rica Company, giving an option to the Costa Rica Company either to use the ship for trading purposes or to break it up. These circumstances clearly indicate that the applicant had purchased the ship in the course of his usual business activity of purchasing ship, breaking it up and selling separated parts thereof, though no doubt an option was also reserved by him to use the ship for trading purposes. It is true that the normal business activity of breaking up the ship and selling separated parts had not been followed by the applicant, but he has sold the ship leaving an option to the purchaser to break it up. The circumstances show that soon after the purchase of the ship, the applicant found a purchaser who possibly was in need of separated parts of the ship, and therefore instead of breaking up the ship and selling separated parts, he had sold the entire ship to the Costa Rica Company giving it an option to break it up. These being the circumstances of the case, in our opinion, the activity of the applicant selling the ship to the Costa Rica Company has a very close connection with and akin to the normal course of business of the company, and was, therefore, in the course of his business activity. The sale proceeds relating to the sale of the ship were therefore rightly included in the turnover of the applicant.
13. As regards the third question, Mr. Ganatra in the first instance argued that the Tribunal was in error in holding that the sale took place in the State of Bombay. According to Mr. Ganatra, the sale took place in London, inasmuch as the property in the ship passed from the applicant to the Costa Rica Company in London. It is not possible to allow Mr. Ganatra to urge this contention at this stage. The place where the property in goods passed from the seller to the buyer cannot be said to be purely a question of law. An inquiry into the facts is necessary. Mr. Ganatra further contended that we should call for a further statement of the case from the Tribunal on this aspect of the case. In our view, we would not be justified in calling for a further statement of the case from the Tribunal in this matter, inasmuch as this question was never agitated before the Tribunal. On the other hand, it was not challenged before the Tribunal that the title in the ship passed in Bombay docks, and on this footing, it had been argued that it was not a sale within the State of Bombay. That being the position, in our opinion, it is not possible to hold that the question as to whether the title in goods passed at London would be a question arising out of the order of the Tribunal. We therefore did not accede to the request of Mr. Ganatra to call for a further statement of the case in this matter.
14. In the second instance, it is the argument of Mr. Ganatra that even assuming that the sale took place in the Bombay docks it is not a sale in the State of Bombay, it is a sale in the territorial waters, the territorial waters are not included in the boundaries of the State of Bombay. Reliance was placed on the definition of 'territorial waters' occurring in clause (45) of section 2 of the Prohibition Act, and the absence of any such definition in the Sales Tax Act. The contention, in our opinion, has little force. It is true that in the Sales Tax Act, territorial waters have not been defined. But the presence or absence of a definition of a particular term in any enactment can hardly have any relevance in determining the boundaries of a State. Territorial waters have been defined in the Prohibition Act presumably because for the purposes of that Act, it was thought necessary to define that expression. When we turn to the definition, we find that it only fixes the limits of the territorial waters and nothing else. Territorial waters have not been defined in the Sales Tax Act presumably because it was not necessary to do so for the purposes of the Act. Nothing turns on the presence or absence of a definition. On the other hand, presence of the definition in the Prohibition Act itself indicates that the Bombay State had jurisdiction to enforce its laws on the territorial waters. Nothing has been shown to us by Mr. Ganatra to hold that the territorial waters adjoining a particular State do not form part of that State. On the other hand, the decision in A.M.S.S.V.M. & Co. v. State of Madras I.L.R. 1953 Mad. 1175 supports the view taken by the Tribunal that the territorial waters to a certain limit form part of the State to which the territorial waters adjoin. The contention of the applicant that the sale of the ship in the Bombay docks was not a sale within the State of Bombay should therefore fail.
15. As regards the fourth question, it is the contention of Mr. Ganatra that the sale falls within the exemption of Article 286(1)(b) of the Constitution of India. As it stood at the material time, it provided : 'No law of a State shall impose, or authorise the imposition of, a tax on the sale .... of goods where such sale .... takes place ...... (b) in the course of the ... export of the goods out of, the territory of India.' It is the argument of Mr. Ganatra that in the instant case, there is a privity of contract between an Indian seller and a foreign buyer of Costa Rica. By a term of the contract between the applicant and the buyer the contract would come into force as and when the Government of India grants permission to sell the ship and also grants permission to transfer the flag of the ship from Indian flag to Costa Rican flag. Government had granted the requisite permission both to sell the ship as well as for the transfer of the flag. The transfer of the flag had the result of giving a foreign destination to the ship. The ship was to sail for Costa Rica. The sale itself therefore has occasioned export and therefore it is a sale in the course of export of the ship within the meaning of Article 286(1)(b) of the Constitution, and therefore falls under the exemption granted by it.
16. Now the question as regards the interpretation of Article 286(1)(b) can no more be said to be at large. The article had been considered by their Lordships of the Supreme Court in various cases commencing from the year 1952 to 1960. The first is reported in State of Travancore-Cochin v. Bombay Company Ltd., Alleppey  3 S.T.C. 434. In this decision, their Lordships explained that 'a sale by export thus involves a series of integrated activities commencing from the agreement of sale with a foreign buyer and ending with the delivery of the goods to a common carrier for transport out of the country by land or sea. Such a sale cannot be dissociated from the export without which it cannot be effectuated, and the sale and resultant export form parts of a single transaction. Of these two integrated activities, which together constitute an export sale, whichever first occurs can well be regarded as taking place in the course of the other.' It is not necessary to refer to all the cases, but it would be sufficient to refer to only a few of them. The expression 'integrated activities' was later explained by their Lordships in State of Travancore-Cochin v. Shanmugha Vilas Cashew-nut Factory  4 S.T.C. 205 and the principle deducible from the majority decision can be summarised as follows : (1) a sale or purchase in the course of import or export within the meaning of clause (1)(b) of Article 286 includes a sale or purchase which itself occasions import or export; (2) a sale or purchase which takes place while the goods are on the high seas on their import or export journey; and (3) a sale that precedes an export or a purchase that immediately follows import does not fall within the exemption. The various decisions on this question were again reviewed by their Lordships in Burmah-Shell Oil Storage and Distributing Co. of India Ltd. v. Commercial Tax Officer  11 S.T.C. 764 and it has been summarised at page 780 of the report in the following terms :
'From the views here expressed, it follows that every sale or purchase preceding the export is not necessarily to be regarded as within the course of export. It must be inextricably bound up with the export, and a sale or purchase unconnected with the ultimate export as an integral part thereof is not within the exemption. It may thus be taken as settled that sales or purchases for the purpose of export are not protected, unless the sales or purchases themselves occasion the export and are an integral part of it.'
17. The meaning of the word 'export' however had not been considered by their Lordships in any of their previous decisions, and at page 781, after discussing the question, it has been observed :
'It means, therefore, that while all exports involve a taking out of the country, all goods taken out of the country cannot be said to be exported. The test is that the goods must have a foreign destination where they can be said to be imported. It matters not that there is no valuable consideration from the receiver at the destination end. If the goods are exported and there is sale or purchase in the course of that export and the sale or purchase occasions the export to a foreign destination, the exemption is earned.'
18. In the light of these aforesaid principles laid down by their Lordships the facts of this case will have to be approached. It cannot be said, and indeed it has not been urged, that the sale has taken place while the ship was on high seas. On the other hand, the contention is that the sale has occasioned export. Therefore, it will have to be seen whether, on the material on record, the sale effected by the applicant is inextricably connected with taking the ship from the shores of Bombay to Costa Rica as an integral part thereof. We have already reproduced the terms of the contract. There was an agreement between the applicant agreeing to sell the ship and the Costa Rica Company purchasing it at a price of Rs. 4,52,547. The contract was to take effect on the Government of India granting permission to the sale of the ship and to the transfer of the flag from Indian flag to Costa Rican flag. Sometime before 15th April, 1954, Government of India had granted permission to both these things. The transaction of sale was completed while the ship was in Bombay docks, and the delivery of the ship was taken on behalf of the purchasers by Messrs Madhavlal & Co. in the Bombay harbour. The ship thereafter on 15th April, 1954, sailed on the high seas. These being the facts of this case, in our opinion, it is not possible to say that the sale itself was so inextricably connected with the export as an integral part thereof, that the sale itself has occasioned export. On the other hand, the only inference that can be drawn from these facts is that the sale preceded the export and thereafter the applicant ceased to have any connection with the ship. The purchaser under the terms of the contract had option either to take the ship abroad or to break it up. In taking the ship abroad, the purchaser has only exercised his option, and the sale itself had no connection therewith. It is however the contention of Mr. Ganatra that the contract of sale provided that granting of permission by the Government of India to transfer the ship's flag was a condition precedent to the validity of the contract. The Government of India has granted that permission, and therefore, the necessary consequence is that foreign destination was given to the ship, and the ship was put in the stream of its export. Had Mr. Ganatra been able to show us that as a necessary consequence of the grant of permission by the Government of India to the transfer of the flag of the ship, it was obligatory on the purchaser to take the ship to Costa Rica, we might have been persuaded to hold that the sale was inextricably connected with the export of the ship and that the sale itself had occasioned export. To enable Mr. Ganatra to look into this matter, we adjourned the case and granted Mr. Ganatra two days' time. Mr. Ganatra has been unable to show us any provisions of law or any rules which would have the force of making it obligatory on the purchaser to take the ship from the Bombay docks to Costa Rica Port. The position then is that even though the Government of India granted permission for the transfer of the ship's flag, the purchaser was free to deal in any manner with the ship as envisaged in the contract. He could have either taken the ship at his sweet will as provided in the contract and could even have broken the ship in the Bombay docks. Taking the ship to Costa Rica by the purchaser, therefore, cannot in any manner be connected much less inextricably be connected with the sale. It is only the exercise of the option by the purchaser. This contention raised by Mr. Ganatra on behalf of the applicant also, in our opinion, should fail.
19. Before parting with the case, it may be stated that Mr. Ganatra requested that we should call for a further statement from the Tribunal on the question whether import duty had been paid by the Scindia Steam Navigation Company. It is his argument that if no import duty had been paid by the Scindia Steam Navigation Company, then it could not be said that the ship was in territorial waters. Consequently, the sale of the ship even though in the Bombay docks, would not be a sale of the ship within the State of Bombay. The question does not appear to have been raised before the Tribunal, and it therefore does not arise out of the order of the Tribunal and we do not think it necessary to ask for a further statement of the case on this question.
20. In the result, our answer to all the questions would be in the affirmative. The applicant to pay the costs of the respondent, quantified at Rs. 500.
21. Reference answered in the affirmative.