1. The only question in this sales tax revision is whether a turnover of Rs. 4,29,642.18 is entitled to exemption from the Central Sales Tax Act on the score that the sales comprised therein were sales in the course of export and hence not subject to tax under that Act.
2. The assessee is a company called Seshasayee Paper and Boards Ltd. It has a factory engaged in the manufacture of paper and allied products in Pallipalayam, Erode, in the State of Tamil Nadu. Its registered office is also at Pallipalayam, Erode. A firm of exporters called International Markets, New Delhi, were acting as agents of certain commercial houses in Iran. During the relevant year this firm entered into as many as six transactions with the assessee-company under which the assessee-company was to sell paper at prices f.o.b. Madras but deliverable at Cochin Port for being carried by sea to parties in Iran. The goods were actually transported from the assessee's factory to Cochin Port in Kerala State. The assessing authority as well as the appellate authorities rejected the assessee's claim that the sales were in the course of export. The assessee-company did not take up the stand that if their claim for exemption on the score of the transactions being export sales should be negatived and the sales should be treated as one in the course of inter-State trade, the appropriate taxing State should not be Tamil Nadu, but Kerala. In this revision also no such contention has been urged on the assessee's behalf. The one and the only point for consideration is whether, on the facts, the sales in question can be regarded as sales in the course of export.
3. All the six items of transaction entered into by International Markets with the assessee-company follow more or less the same pattern. International Markets place orders for the purchase of paper of a certain quantity with the assessee. They then open an irrevocable letter of credit with their bank at New Delhi. The assessee is to make out an invoice for the goods at prices f.o.b. Madras. The assessee is to deliver the consignment to be shipped at Cochin Port. The assessee has to obtain the bill of lading and other documents of title in the name of International Markets. The assessee is then to send the documents of title to International Markets through the branch of the Delhi bank at Madras. The payment of the price and other dues are to be made by International Markets only on receipt by them of documents of title from their bank.
4. These arrangements were the common characteristics in all the six items of sales comprising the turnover of Rs. 4,29,642.18 now in question in this revision. The Tribunal has recorded a finding, agreeing with the assessing authority and the Appellate Assistant Commissioner, that the sales cannot be regarded as sales in the course of export, although the sales were undoubtedly meant for export to parties in Iran. The Tribunal found that the contracts of sale were only between the assessee, on the one hand, and International Markets, on the other. There were in turn, separate and independent sale contracts between International Markets and the Iranian buyers. The Tribunal found, on a consideration of the documentary evidence in the case, that the property in the goods passed from the assessee-company to International Markets when the assessee delivered the goods to the steamer agents at the Port of Cochin in Kerala State. They also found that the delivery of the goods to the shipping agents for being carried by sea to the Iranian purchasers was not made by the assessee on its own account, but was done for and on behalf of International Markets. The bills of lading were made out as the goods of International Markets. The assessee only acted for and on behalf of International Markets when it obtained the bill of lading. The Tribunal, accordingly, found that while the sale by the assessee was to International Markets the transaction concluded with the transport of goods up to Port Cochin. The Tribunal further held that the delivery by the assessee to the shipping agents for being carried by sea from India to Iran was done only as agents of International Markets. The Tribunal pointed out that this was a different transaction and gave the assessee a different role to play distinct from that of a seller of goods.
5. On the facts, as interpreted by the Tribunal, we have no doubt that the sales could not be regarded as sales in the course of export. Under section 5(1) of the Central Sales Tax Act a sale of goods shall be deemed to take place in the course of export of goods out of the territory of India, if the sale occasions such export. In the present case, the sale occasioned the transport of goods from Tamil Nadu State to Kerala State, but that was all the movement the sale entailed. It did not occasion the very export of goods from India to Iran. When the assessee undertook the responsibility of shipping the goods to Iran, it did so, not in the role of a seller of the goods, but in the role of a forwarding agent acting for and at the behest of International Markets. The bill of lading clearly declared that the assessee was acting only for and on behalf of International Markets, in consigning the goods for shipment. Over and above these considerations, was the utter absence of any contract, or even contact, between the assessee and the Iranian concerns. It would, therefore, be opposed to facts to say that what occasioned the export of goods out of India were sales by the assessee to International Markets. The truth is that it was International Markets which put the goods on board the ship after the goods passed into their title. This was so, although the hand which actually delivered the goods to the ship was that of the assessee-company. We are, therefore, satisfied that these sales could, by no means, be regarded as sales in the course of export.
6. Mr. Varadarajan, the learned counsel for the assessee, did not labour his arguments on this part of the case. He, however, contended that these sales, although they did not occasion the export of goods outside India, must nevertheless be regarded as sales in the course of export, since they answer the second part of the definition in section 5(1) of the Central Sales Tax Act under which a sale would be a sale in the course of export if such a sale is effected by transfer of documents of title to the goods after the goods had crossed the customs frontiers of India. The attempt of the learned counsel was to make out that in the present case there was a transfer of documents of title to the goods after the goods had left the Indian customs frontiers on their way to Iran.
7. There are two cardinal objections to accepting the submissions made by the learned counsel for the assessee. The first is that on a fair understanding of the terms of the bargain between the assessee and International Markets, we are already in a position to come to the conclusion that since the sale had already occurred and only thereafter the goods of the purchaser were shipped from India to a place abroad, what we have then is the factual local sale. With such a factual local sale it would not be open to the assessee to argue that it must nevertheless be regarded as a sale in the course of export, merely for the reason that it can be pushed into the second part of section 5(1) and somehow treated as a sale by transfer of shipping documents while the goods were on the high seas. In other words, if the sale is only a factual local sale, the second part of section 5(1) cannot have any application at all.
8. The learned counsel submitted that it is enough that a transaction is capable of being brought within the words of the statutory fiction in section 5(1) and if those words aptly applied to the transaction, then whatever may be the factual position the fiction must be inexorably applied and the assessment must follow on the application of such fiction. We do not accept the underlying notion in the learned counsel's argument that while defining an export sale, Parliament had worked wholly on fictions, completely divorced from factual basis of any kind. On the contrary section 5(1) provides for two types of fact situations in which and subject to the existence of which alone a sale may be regarded as taking place in the course of export. The fact situations are clear-cut. One is where the sale occasions the movement of goods from India to a place abroad. The other is where there is a transfer of documents of title after the goods had crossed Indian customs frontiers. No other fact, situations are contemplated. The expression which the section uses is 'only', so far as the second limb of section 5(1) is concerned, the significance of this expression is that only if there is a sale effected by a transfer of documents of title to the goods after the goods had crossed the customs frontiers of India that such a sale shall be deemed to take place in the course of export. This expression 'only' shows that if factually it is found that a given transaction is a local sale, then that finding, by the same token, rules out the applicability of the fiction in the second part, or for that matter, even in the first part of section 5(1) of the Act.'
9. Taxation Even on the merits of the argument, we are unable to see how, in the events that happened, it could be said that there has been a transfer of documents of title to the goods which would bring the transaction within the meaning of the second part of section 5(1) of the Act. It may be that the ship carrying the goods in question had already left the shores of India and had crossed the customs frontiers by the time the assessee had transferred the documents of title to the bank for being delivered over to International Markets at New Delhi. The act of making out documents of title, such for instance, as the invoice or even a bill of lading, cannot be regarded as a transfer of title, much less can the act of delivery of those documents by the assessee to the local branch of the Delhi bank be regarded in any sense as a transfer of documents of title to the goods. The concept of transfer of title to the goods by transfer of documents of title always presupposes that there has been already a transfer of goods from the seller to the buyer and the buyer who is the holder of the documents of title thereafter himself transfers the title to the goods by a mere act of transfer of the documents of title either by endorsement or by some other means of transfer known to law.
10. In the present case, the stage of transfer of title to the goods has not yet come. The parties are still at the stage when the documents in the name of somebody other than the original owner of the goods are to be made out, namely, the seller. At that point of time, no question whatever would arise of any transfer of title to the goods. The documents themselves are yet to come into being and the moment they come into being, the seller simply can deliver to the purchaser. At that stage, no question arises of the owner of the documents of title to the goods purporting to effect a transfer to any other party. In this view also the contention put forward by the learned counsel for the assessee must be rejected.
11. The arguments based on the second part of section 5(1) of the Act were elaborated by the learned counsel fully only at this stage of revision before us, and the Tribunal had not the opportunity to address themselves to this problem. Nevertheless, for the reasons which we have stated above and for the additional reasons which we have given on this part of the case put forward by the assessee's learned counsel, we agree with the conclusion reached by the Tribunal.
12. The learned counsel referred in the course of his argument to a decision of a Bench of this Court in Deputy Commissioner (CT), Coimbatore v. Salem Magnesite (P.) Ltd.  42 STC 285. This decision, however, is basically different on facts. In that case, a local agent of a foreign concern entered into a transaction of purchase for certain goods from a dealer in calcined magnesite in Salem. The terms of the contract in regard to the supply of these goods were rendered in writing or, at any rate, could be ascertained by an examination of two letters between the parties. One of the terms of the bargain between the parties clearly was to the following effect :
'The ownership in the goods will pass to us on your handling over the bills of lading by negotiation through bank after the goods have left the shores of India.'
13. It was observed in the course of the judgment of this Court that the assessing authorities did not dispute this term in the contract. The question before the court was whether the sale by the Salem dealer which was completed by an act of export of the goods in question by the dealer himself putting the goods on board the ship, could be regarded as a sale in the course of export. The Bench held, relying on the particular clause to which we have made reference, that the ownership of the goods continued to remain throughout with the seller and passed to the buyer only after the ship crossed the customs frontiers of India and hence on this understanding of the facts of the case, the learned Judges held that the sale was one in the course of export. As distinguished from the facts in that case, what we have here is the very opposite kind of transaction. Far from there being any term in the contract between the parties that the title to the goods should be retained with the seller until the goods crossed the customs frontiers, the consignment of paper was made out by the assessee for and on behalf of International Markets. The bill of lading also was made out on the same basis. There was no clear-cut finding as to the terms of the contract in the present case. While it was stated by the assessee that the bargain with International Markets was struck purely on an oral basis by telephonic conversation, it was not stated whether even the oral contract of sale contained any agreement similar to the one which was emphasised by the learned Judges in the case cited. We, therefore, do not get the slightest assistance from the said decision.
14. The revision petition is accordingly dismissed. The order of the Tribunal is sustained. The Government will have its costs. Counsel's fee is fixed at Rs. 250.