1. The assessees are dealers in arecanuts. For the assessment year 1958-59, they returned a turnover of Rs. 76,698 and claimed exemption on a turnover of Rs. 76,521. On an examination of the accounts of the assessees, it was found that the claim to exemption was made in respect of two consignments of arecanuts received from Penang under import licence. The assessing authority took the view that the sales were after the import of the goods and declined to grant the exemption asked for. It was further held that the amounts paid towards customs duty should also be computed as part of the sale consideration and accordingly there was a recomputation of the turnover, which was fixed by the assessing authority at Rs. 1,32,905.
2. An appeal was taken to the Appellate Assistant Commissioner and the claim was put forward that the sales were in the course of import, the taxation of which is prohibited by the Constitution. The course of the transaction was examined by the appellate authority and it was found to be of the following kind. The assessees imported from Penang two consignments of betel-nuts under an import licence. Before the goods were landed at the Madras port, the assessees entered into a contract with a purchaser for the sale of these goods. According to the terms of the contract, the buyer had to make the arrangements for retiring the documents from the bank and for clearing the goods. The other contracting party paid the value to the bank, received the documents from bank and cleared the goods from the customs through clearing agents. On this material, the appellate authority took the view that there was a transfer of documents of title to the buyer which would make the transaction a sale in the course of import. The appeal was allowed and the assessing authority was directed to delete the turnover in dispute from the assessment.
3. The Board commenced proceedings under Section 34 of the Act of 1959 and issued a notice to the assessees to show cause why the order of the appellate authority should not be set aside and that of the assessing authority restored. The grounds upon which the assessees were called upon to show cause against the revision were that there was only an agreement to sell and not a completed sale and that the sale was concluded only after the clearance of the goods. It was also pointed gut by the Board that the payment to the Indian Bank and the receipt of the documents from the Indian Bank were only on behalf of the assessees. It was also stated that the bills of entry were filed only in the name of the assessees, the importers, and that the goods had been cleared by the clearing agent as the agent of the assessees, and the customs duty had also been paid in the name and on behalf of the assessees only. On this material, the Board was of the opinion that the sales were not in the course of import.
4. The assessees objected to the proposed revision, contending that even at the time of the export of the goods from Penang, they had instructed the foreign seller to affix mark 'sovereign' on the packages in question. This mark, according to the assessees, is the one which the ultimate buyer used in respect of the goods he dealt in, and that for this reason it should be deemed that there had been an appropriation of the goods to the contract of sale which the assessees had entered into even at the time the goods were exported from the foreign territory. It was also urged that the bill of sale or whatever passed as the document of title, issued by the foreign seller in favour of the assessees, was taken delivery of by the ultimate purchaser on payment of the price, which was payable to the foreign seller, and that for this reason also the sale must be deemed to be in the course of import.
5. The Board rejected these contentions. Notwithstanding that the 'sovereign' mark was affixed to the goods, there could not be any appropriation of the goods to a contract of sale which came into existence only after the goods had been loaded on board at Penang. In so far as the bill of lading and other documents of title went to show, including the documents relating to the clearance of goods and the payment of customs charges, they were all in the name of the assessees only. That would completely nullify the argument that the goods were the goods of the ultimate purchaser even at the time of the export from the foreign territory. Having regard to all the circumstances, the Board was led to the conclusion that the transfer of property from the assessees to the other contracting party took place both in fact and in law only after the clearance of the goods, which would make the sale a sale in this State.
6. The assessees appeal from this order, and Mr. R. S. Venkatachari, learned counsel for the assessees, once again presses the very same arguments that he had put forward before the Board. He claims that the assessees imported the goods under valid licences issued under the Import Control Order. In the contract which the assessees entered info with the ultimate buyer, one of the conditions was that the buyer should make all necessary arrangements in connection with the shipment and clearance of the goods and also retirement of the documents from the bank on behalf of the sellers. A letter proceeding from one Srinivasulu, a clearing and forwarding agent, was produced to establish that the duty and other charges were received from the ultimate purchaser for the consignments in question. This Srinivasulu also claimed that he acted as a clearing agent only on behalf of the ultimate buyer. Learned counsel further contended that the very fact that the mark of the ultimate buyer, the 'sovereign' mark, was affixed to the goods by the Penang exporter, amounted to the appropriation of the goods to the contract which the assessees had entered into with the ultimate buyer and insisted that the property in the goods had passed to the ultimate buyer even at Penang. Of course, he reiterated the further contention that even otherwise the sale took place in the course of import for the reason that the ultimate buyer met the demand draft issued against the assessees by the Penang exporter and thereafter made arrangements for the clearance of the goods from the customs. The question is how far these contentions are tenable.
7. On the claim that the property in the goods passed to the ultimate buyer even at Penang, the argument of the learned counsel cannot possibly be accepted. The mere affixing of the 'sovereign' mark has no significance whatsoever. The goods were imported by the assessees under cover of licence and up to the stage of import, they cannot be heard to say that the right of import itself had been transferred to the ultimate buyer. The acceptance of the contention of the learned counsel would virtually lead to that position. It is not his case that there was any privity of contract between the Penang exporter and the ultimate buyer or that the Penang exporter was told that he would have to look for the recovery of the amount, that is, the value of the goods supplied, to the ultimate buyer. It is undeniable that it was the assessees who placed the order upon the Penang exporter. The letter of that exporter addressed to the assessees is in these terms :
We have pleasure to inform you that we have for confirmation of your esteemed order....The abovesaid 146 bags have been shipped to Madras per 's. s. Rajula' sailed on even date and the relevant documents for...have been negotiated through the Indian Bank Limited, which please honour on presentation.
8. This letter is dated 27th August, 1958. The alleged contract with the ultimate buyer is not before us. But it is seen from the order of the Board that it was only after the arrival of the ship at the Madras port that the assessees instructed the Indian Bank Limited to accept the payment from the ultimate buyer Yellamanda Chetti. From what has been stated to us during the course of the arguments, it appears that the assessees informed the Indian Bank that they had sold the goods to Yellamanda Chetti, the ultimate buyer, and advised the bank to receive payment against the draft issued by the Penang exporter from this ultimate buyer. There is no doubt therefore that this advice issued to the bank was subsequent to the date on which the goods were either exported from Penang or the ship carrying them reached the Madras harbour. From these facts, it should necessarily follow that by no stretch of imagination could it be said that the property in the goods passed to the ultimate buyer by the process of appropriation of the goods even at the time when the Penang dealer placed the goods on board the ship. An appropriation can only be to a contract and it is impossible to conceive of a position where the Penang dealer could have appropriated the goods to a contract to which he was not a party or of the existence of which he was wholly unaware. The putting of a specific mark upon the goods could at that time have been only for the purpose of identification of the goods and could have no greater significence.
9. We are also wholly unable to accept the contention that the direction which the assessees issued to the ultimate buyer to meet the draft issued by the Penang dealer and retire the documents from the bank leads to a transfer of property in the goods to that ultimate buyer. Mr. R.S. Venkatachari does not contend that the documents of title were transferred to the ultimate buyer by suitable endorsements. Even the contract between the assessees and the ultimate buyer only stated that the latter should make all the necessary arrangements in connection with the shipment and clearance of the goods and also retirement of the documents from the bank 'on behalf of the sellers'. In the absence of any transfer of documents of title in favour of the buyer all the acts up to and including the stage of the clearance were performed by the buyer only on behalf of the sellers. Mr. Venkatachari argues that in the letter which the assessees wrote to the bank, the assessees stated that since they had sold the consignment to Yellamanda Chetti, the bank should look to him alone for payment and that they had no further concern with the goods, and this apparently is relied upon to show that Yellamanda Chetti stood substituted in the place of the assessees in relation to the contract between the assessees and the Penang dealer. We are unable to appreciate this contention. A mere disclaimer of that nature would not absolve the assessees from the liability under the contract with the Penang dealer. The title to the goods continued to vest in the assessees alone, so long as the documents of title in respect of the goods were not validly transferred. Nor is it contended by the learned counsel that the bill of entry which was filed with the customs authori* ties showed Yellamanda Chetti as the person who had become the owner of the goods. On the other hand, this bill of entry filed only in the name of the assessees was clear evidence that there had been no transfer of the property in the goods by endorsement of the bill of lading. It is true, according to the letter issued by the clearing agent Srinivasulu, that the money required for payment of the customs duty or the clearr ing charges was paid by Yellamanda Chetti. But that, according to the contract, was clearly only on behalf of the assessees and not by virtue of any title to the goods which had passed to Yellamanda Chetti. On facts, we are clearly of the opinion that the property in the goods could not and did not pass by any means known to law to the ultimate buyer at any stage prior to the actual clearance for home consumption.
10. Mr. Venkatachari has referred to Narayanaswami Chetti v. Soundararajan and Company : AIR1958Mad43 . We are really unable to see what support this decision lends to the arguments of the learned counsel. That was a case where the question whether the sellers had committed a breach of contract and were liable to pay damages arose. Part of the headnote reads:
The seller who had purchased the goods from the foreign merchant was in a position to know the date of the shipment and in fact as that involved compliance with the Exchange Control Regulations, by opening a letter of credit, he had presumably obtained this facility with the aid of a duplicate of the import control licence which he held; the seller had an import control licence while the buyer did not have any, in the absence of any express term in the contract, the Court would be justified in importing a term that the buyer shall be permitted to avail himself of the import licence held by the seller. It is well settled that it is the duty of the seller on c.i.f. terms to tender documents within a reasonable time after shipment and in the present case, after the contract, as the goods were then afloat. Normally the duty of a buyer on c.i.f. terms is to pay the price on tender of documents. If the obligation of the seller was to have tendered the documents promptly and with reasonable despatch after he was in a position to so tender, the duty of the buyer to pay before the arrival of the goods cannot be construed as a stipulation that the payment would be made even before the tender of the documents....
11. On the facts of the case, the learned Judges held that there was a breach of the contract by the seller and he was liable to pay damages. To our minds, while this case no doubt outlines the principles governing the contract between the seller and the buyer in relation to a contract on c.i.f. terms, it certainly does not aid in deciding when the property in the goods passed to the buyer.
12. The next case relied upon is Milkhiram (India) Private Limited v. State of Bombay  14 S.T.C. 18. That was a case where the assessee-company entered into a contract with the Government of India for sale of large quantities of Cuban sugar. After the sugar had been shipped by the foreign exporters, the bill of lading was received by the assessee and the assessee submitted a bill for payment of the c.i.f. value accompanied with a complete set of documents. After the arrival of the goods, they were inspected and weighed and were thereafter delivered to the Government by the assessee. After this, the final bill for the balance price was presented and paid. The contention was raised on these facts that the sale took place when the goods were on the high seas. The learned Judges, after considering the terms of the contract and the circumstances, held that the contract was for the sale of goods ex docks after they had been cleared through the customs barrier and the sale was not therefore exempt as a sale in the course of import. We are really unable to appreciate the extent to which this case helps the contentions of the assessees. The decision of the Supreme Court in Gokal and Company v. Assistant Collector of Sales Tax  11 S.T.C. 186 was distinguished by the learned Judges. In Gokal's case  11 S.T.C. 186, the terms of the contract did not evidence an intention contrary to the passing of the property on the transfer of shipping documents after endorsement. But in the above Bombay decision, it was held that there was a contrary intention indicated by some of the terms of the contract relating to inspection and weighment of the goods, the satisfaction to the buyer that the goods conformed to the specified standards, etc., thereby showing that the entire responsibility of bringing the goods was on the seller, and the seller had also to clear the goods across the customs barrier of the importing country. The facts in the case before us are in nowise different, for not only was there no transfer of documents of title but there is clear indication in the contract that all the incidents relevant to the import of the goods had to be under-taken by the buyer only on behalf of the sellers and not in exercise of any right which had passed to him.
13. On a consideration of the material that is available here, we are fully satisfied that the property in the goods did not pass to the ultimate buyer till after the clearance of the goods; such clearance was effected only on behalf of the assessees. In the face of the admitted position that there was no transfer of the documents of title, which alone could give an indefeasible right to the buyer to the goods, and in the light of the admission that the bill of entry was filed only in the name of the assessees, the inference is irresistible that the assessees were the owners of the goods till the goods were cleared from the customs, and it was only the subsequent delivery to the buyer that operated to transfer title to the goods.
14. It follows that the order of the Board is correct. The appeal fails and is dismissed with costs. Counsel's fee Rs. 100