G.K. Govinda Bhat, C.J.
1. This is an appeal by the assessee against the order of the Commissioner of Commercial Taxes, Mysore, dated 8th June, 1972, by which the exemption from tax under the Central Sales Tax Act, 1956 (hereinafter called the 'Act'), granted by the Deputy Commissioner of Commercial Taxes (Appeals), Dharwar, in respect of the turnover of Iron-ore sold by the assessee as per contract No. 43/63 to the Minerals and Metals Trading Corporation of India Ltd. (hereinafter referred to as M. M. T. C.) was disallowed.
2. The period of assessment is the year ended 31st March, 1965, during which the assessee sold iron-ore to the M. M. T. C. pursuant to contracts Nos. 43/63 and 14/64. The entire turnover relating to sales of iron-ore under the said contracts was exempted from tax under the Act by the Commercial Tax Office?: following the decision of the Supreme Court In State of Mysore v. Lakshminarasimhiah Setty and Sons  16 S.T.C. 231 (S.C.). After the Act was amended with retrospective effect by the Central Sales Tax (Amendment) Act, 1969, the Commercial Tax Officer passed an order under Rule 38 of the Mysore Sales Tax Rules, 1957, rectifying his earlier order and bringing to tax the turnover that had been exempted earlier.
3. The assessee appealed to the Deputy Commissioner of Commercial Taxes (Appeals), Dharwar, before whom it contended that the. sales were in the course of export out of the territory of India and, therefore, exempt from tax under Article 286(1)(b) of the Constitution and that in the alternative, as no tax was collected by the dealers the assessee was entitled to exemption in view of Section 10 of the Central Sales Tax (Amendment) Act, 1969. The Deputy Commissioner of Commercial Taxes agreed with the first contention and allowed the appeal. He, however, did not consider the second contention.
4. The Commissioner of Commercial Taxes after issue of a show cause notice revised the order of the Deputy Commissioner and held that the sales by the assessee pursuant to contract No,, 43/63 were not sales in the courier of export and, therefore, the relative turnover was liable to tax under the Act. Since there was dispute as to the exact amount of the turnover he directed the Commercial Tax Officer to examine whether the turnover amounted to only Rs. 8,96,825.88 as contended by the assessee and not Rs. 20,03,818.16 as shown in the show cause notice. The Commissioner did not examine the question whether the assessee had collected tax. Aggrieved by the order of the Commissioner, the assessee has preferred the above appeal.
5. Sri K. Srinivasan, learned counsel for the assessee, contended that the sales by the assessee pursuant to contract No. 43/63 with the M. M. T. C. were sales in the coarse of export out of the territory of India. In the alternative, he contended that the sales were not in the course of inter-State trade or commerce so as to attract the tax but were intra-State sales within the State of Mysore and, therefore, not eligible to tax under the Act.
6. The decision on the first question rests on the interpretation of the terms of contract No. 43/63. It is described as a f. o. r., contract. As per the contract the M. M, T. C. agreed to buy and the assessee agreed to sell 1,64,000 dry metric tonnes of iron-ore at Rs. 14.76 per metric tonne f. o. r. Papinaikanahalli. The assessee had to obtain the railway receipts in the name of M. M. T. C. and deliver to them, The ore had to be booked to Cuddalore in the State of Tamil Nadu or any other port mentioned by the M. M. T. C. In the instant case the ore was loaded in railway wagons at Papinaikanahalli in Mysore State and booked to Cuddalore destination. The contract provided that for obtaining payment the assessee had to present the R/R marked 'payment copy' with its invoice in triplicate made out on the basis of price for minimum iron content as per Articles (5) and (6) of the contract and on R/R weight. The M. M. T. C, agreed to pay 85 per cent of the price on the said basis against presentation of the documents. The balance 15 per cent was agreed to be paid on the final settlement of accounts and on final weight and analysis determined according to Clauses (1)(ii) and (2) of the contract. All charges for weighment at Cuddalore port were to be shared equally by the buyers and sellers. Charges for sampling and analysis at the time of shipment at Cuddalore were also to be shared equally by the parties. A clause in the agreement is to the effect that if any consignment on final analysis showed results not within the guaranteed specification the buyers had the right to reject the consignment or accept it at a reduced price. We set out here below the material portions of the appendix to the agreement:
7. Appendix to iron-ore f. o. r. purchases contract No. 43/63.
(1)(i) For purpose of provisional settlement of accounts the weight of the ore supplied by the seller shall be determined as follows. Railway receipt weight determined by weigh-bridge at the loading station or en route or at destination or on the basis of volume weight ratio fixed by the railways.
(ii) Final weight will be determined in accordance with the provision of the buyers' relevant sale contract and/or any other relevant agreement with its foreign buyers. The seller will be free to obtain from the buyers information, about the relevant provisions of the buyers' relevant sale contract. All charges for weighment at Cuddalore port shall be shared equally by the buyers and the sellers.
(2) Analysis determined in accordance with the relevant provisions of the buyers' relevant sale contract and/or any other agreement with its foreign buyers will be final. The seller will be free to obtain from the buyers information about the relevant sale contract. Charges for sampling and analysis at the time of shipment at Cuddalore shall be shared equally by the buyer and the seller.
(3) Payment shall be made as follows:
(i) 85 per cent payment against (a) certified copy of R/R marked 'payment copy' by the authorised representative of the buyers; (b) invoice in triplicate made out on the basis of price for minimum Fe content as per Articles (5) and (6) of the contract and on R/R weight.
(ii) The mode of payment shall be: (a) by cheque; or (b) by a local letter of credit, the charges for opening, operating, amending and/or extending such letters of credit shall be to sellers' account, such charges being recovered directly from the sellers by the bank. The method of payment shall be as determined by mutual agreement. The balance by cheque on final settlement of accounts on the basis of final weight and analysis determined according to Clauses (1)(ii) and (2) above.
(4) (i) Sales tax, if legally leviable on sales under this contract, shall be reimbursed by the buyers to the seller. The initial responsibility for paying the sales tax according to the procedure laid down in the relevant Sales Tax Acts and Rules thereunder will be that of the sellers....
(5) All railway receipts, if collected by the sellers, shall be promptly surrendered to the buyers' regional office concerned or to the buyers' representative at the loading station. In such cases any demurrage incurred on account of late receipt of R/Rs by the buyers shall be to the seller's account. On no account shall R/Rs be submitted through banks of the sellers. Certified copy of the R/R marked 'payment copy' shall be issued by the buyers' regional offices by buyers' authorised representative at loading station, as the case may be, to enable the sellers to obtain payment. If the railway receipt is obtained by the buyers themselves in such cases, the seller will be issued a certified copy of it marked 'payment copy' by the authorised representative Of the buyers to enable them to obtain payment.
(6) If for any reasons including inadequate availability of wagons the entire or any part of the contracted quantity cannot be moved to the ports within the delivery period specified in Article (7) the balance quantity shall be deemed as cancelled unless delivery period is extended.
(7) If any consignment under this contract on final analysis shows results not within the guaranteed specifications, the buyers shall have the right to reject the consignment or accept it at a reduced price arrived at on the basis of penalties/damages that may be imposed by the foreign buyers of the buyers and also to cancel the contract for the balance undelivered quantity and/or claim damages. In case the buyers agree to accept further deliveries the seller shall produce when required by the buyers, at seller's cost. The buyer shall accept such further deliveries only if the stack analysis report shows that the ore conforms to the guaranteed specifications....
8. Sri K. Srinivasan; the learned counsel for the assessee, relying on Clauses (1), (2) and (7) in the appendix to the agreement set out above urged that the sale in the instant case is directly linked with the sale by the M. M. T. C. to their foreign buyers and, consequently, the sale should be regarded as a sale in the course of export entitled to exemption under Article 286(1)(b) of the Constitution.
9. Clauses (1) and (2) of Article 286, after the same was amended by the Constitution (Sixth Amendment) Act, 1956, read thus:
286. (1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place-
(a) outside the State; or
(b) in the course of the import of 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).
10. Section 5(1) of the Act states as to when 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. That section reads:
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 the customs frontiers of India.
11. It would be seen from the above provision that only two classes of sales or purchases shall be deemed to take place in the course of the export 5 one class is where the sale or purchase occasions such export and the other is where the sale or purchase is effected by transfer of documents of title to the goods after the goods have crossed the customs frontiers of India. The same was the law even before the Sixth Amendment of the Constitution and the enactment of Section 5 of the Act as is seen from the decisions of the Supreme Court in State of Travancore-Cochin v. Bombay Co. Ltd. A.I.R. 1952 S.C. 366 and State of Travancore-Cochin v. S.V.C. Factory A.I.R. 1953 S.C. 333. In the first Travancore case A.I.R. 1952 S.C. 366, it was laid down that a sale by export 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. In the second Travancore case A.I.R. 1952 S.C. 366, it was laid down that sales by export and purchases by import and sales in the State by the exporter or importer by transfer of shipping documents while the goods are beyond the customs frontier are within the exemption under Article 286(1)(b); but that purchases in the State by the exporter for the purpose of export as well as sales in the State by the importer after the goods have crossed the customs frontier are not within the exemption. By enacting Section 5 in the Act, the Parliament gave legislative recognition of the exposition of law made by the Supreme Court earlier. A purchase by the exporter, however much linked to the exporter's contract with a foreign importer, is not entitled to the exemption from tax guaranteed under Article 286(1)(b). Such a sale or purchase is not in the course of export of the goods but a sale or purchase for export as laid down by the Supreme Court in Coffee Board v. Joint Commercial Tax Officer  25 S.T.C. 528 (S.C).
12. In the Coffee Board's case 8, the Supreme Court reviewed its earlier decisions relating to the interpretation of Article 286(1)(b) of the Constitution. Hidayatullah, C. J., delivering the majority judgment of the court said:
The phrase 'sale in the course of export' comprises in itself three essentials: (i) that there must be a sale, (ii) that the goods must actually be exported, and (iii) the sale must be a part and parcel of the export. Therefore either the sale must take place when the goods are already in the process of being exported which is established by their having already crossed the customs frontiers, or the sale must occasion the export. The word 'occasion' is used as a verb and means 'to cause' or 'to be the immediate cause of. Read in this way the sale which is to be regarded as exempt is a sale which causes the export to take place or is the immediate cause of the export. The export results from the sale and is bound up with it. The word 'course' in the expression 'in the course of means 'progress or process of, or shortly 'during'. The phrase expanded with this meaning reads 'in the progress or process of export' or 'during export'. Therefore the export from India to a foreign destination must be established and the sale must be a link in the same export for which the sale is held. To establish export a person exporting and a person importing are necessary elements and the course of export is between them. Introduction of a third party dealing independently with the seller on the one hand and with the importer on the other breaks the link between the two, for then there are two sales, one to the intermediary and the other to the importer. The first sale is not in the course of export for the export begins from the intermediary and ends with the importer.
Therefore the tests are that there must be a single sale which itself causes the export or is in the progress or process of export. There is no room for two or more sales in the course of export. The only sale which can be said to cause the export is the sale which itself results in the movement of the goods from the exporter to the importer.
The course of export may be established by agreement or by force of law. To be the former the agreement between the seller and the buyer must envisage an export out of India who then become exporter and importer respectively. By force of law a person selling the goods may be compelled to sell them only in an export sale but that too is not essentially different from the first. In either case there is a seller and a buyer who by reason of the sale also become exporter and importer respectively. Any other buyer who is not himself the importer buys for export even if export ultimately results. It is to bring out these results that Parliament has recognised only two cases of sale in the course of import: (a) where the sale is effected by a transfer of documents of title to goods after the goods have crossed the customs frontiers?, that is to say, the goods are already on the way to the importer and (b) when the sale Itself causes the export to take place, that is to say, the exporter and importer negotiate and complete a sale which without more would result in the export of the goods. No other sale can qualify for the exemption under Section 5(1) read with Article 286(1)(b).
13. It has been laid down and the law is settled that in order to establish an export, a person exporting and a person importing are necessary elements and the course of export is between them; introduction of a third party dealing independently with the seller on the one hand and with the importer on the other breaks the link between the two. Therefore there must be a single sale which itself causes export. There is no room for two or more sales in the course of export.
14. It is not disputed that the assessee's sales are not pursuant to any agreement of sale with any foreign importer. The sales are pursuant to a contract with the M. M. T. C. which alone had the licence to export ore out of India. There are two sales in the picture. The first is a sale by the assessee to the M. M. T. C. and the second sale is by the M. M. T. C. to the foreign importers. It is only the second sale by the M. M. T. C. that is entitled to exemption under Article 286(1)(b) of the Constitution.
15. Reference most be made to the decision in National Tractors v. Commissioner of Commercial Taxes  27 S.T.C. 271 (S.C.), on which the learned counsel for the assessee placed strong reliance. That case is clearly distinguishable from the facts in the instant case. There, the assessee entered into an agreement of sale with the State Trading Corporation for sale of iron-ore. Under the agreement ore was to be transported by rail from Hospet to Hubli and from there by road to Karwar port where it was to be loaded into ships for shipment to a foreign destination. All expenses from Hospet to the point where the ore was loaded into ships were to be borne by the assessee. The contract between the assessee and the State Trading Corporation was described as f. o. b, t. 95 per cent of the price was paid against the shipping documents and 5 per cent against the certificate of weight and analysis at the foreign port of discharge. This court held relying on the decision In B.K. Wadeyar v. Daulatram Rameshwarlal  11 S.T.C. 757 (S.C.), that the title to the goods remained with the assessee until they were put on board the ship at Karwar port and the title to the goods passed beyond the customs barrier. That case clearly fell within the second clause of sales or purchases specified in Sub-section (1) of Section 5 of the Act. In the instant case the contract is a f. o. r. contract. The R/R is taken in the name of the M. M. T. C. and payment is obtained against the 'payment copy' of the R/R presented with the invoice prepared on the basis of price stipulated in the contract. Section 23(1) of the Sale of Goods Act provides that the property in the goods passes to the buyer when the goods are unconditionally appropriated to the contract either by the seller with the assent of the buyer or by the buyer with the assent of the seller. Sub-section (2) of the said section provides that where, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee for the purpose of transmission to the buyer and does not reserve the right to disposal, he is deemed to have unconditionally appropriated the goods to the contract.
16. The assessee delivered the goods to the railways for the purpose of transmission to the M. M. T. C. at Cuddalore. The assessee did not reserve the right of disposal of the goods. Therefore, the assessee should be deemed to have unconditionally appropriated the goods to the contract when it loaded the iron-ore in railway wagons at Papinaikanahalli in Mysore State which was long before the ore was put into the export stream by the M. M. T. C.
17. It was strenuously urged by Sri E. Srinivasan that the payment of 15 per cent of the price of ore depended on the final settlement of accounts on the basis of final weight and analysis determined according to clauses (l)(ii) and (2) of the appendix to the contract and that the M. M. T. C. had the right to reject the consignment under Clause (7) and those conditions of the contract, could be effectuated only when the goods were exported. It is true that the final settlement of accounts between the parties is dependent upon the final weight and analysis obtained by the M. M.T. C. on their sales to foreign Importers. It is also true that there is a clause entitling the M. M. T. C. to reject the consignments if the final analysis showed results not within the guaranteed specification. It is not clear whether the final analysis referred to in Clause (7) is the analysis obtained at the port of discharge in a foreign country, or the analysis of the ore made at the port of shipment, viz., Cuddalore. We have earlier referred to a term in the contract that the charges for weighment and analysis shall be shared equally by the buyer and the seller. It appears to us that the analysis referred to and the stage at which the buyer had the right to reject the consignment is the stage of shipment of the ore at Cuddalore.
18. In our judgment, the sales by the assessee to the M. M. T. C. is not entitled to exemption from sales tax under Article 286(1)(b) of the Constitution and the view taken by the Commissioner is right.
19. The alternative contention advanced by the learned counsel for the assessee that the sales were not sales in the course of inter-State trade or commerce but intra-State sales does not merit serious consideration. Under the terms of the contract, the ore had to be loaded into railway wagons at Papinaikanahalli in Mysore State for transmission to the M. M, T. C. at Cuddalore in Tamil Nadu State and it further provided that the charges for weighment, sampling and analysis at Cuddalore shall be shared equally by the parties. The contract envisaged movement of the goods from Papinaikanahalli in Mysore State to Cuddalore in Tamil Nadu State. Therefore, the sale was an inter-State sale so as to attract tax under the Act.
20. As both the contentions urged on behalf of the assessee fail, this appeal fails and is dismissed with costs. Advocate's fee Rs. 100.