Skip to content


The State of Tamil Nadu Vs. S. Mohammad Yousuff Sahib and Co. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtChennai High Court
Decided On
Case NumberTax Case No. 120 of 1972 and Tax Case Miscellaneous Petition No. 220 of 1977 in Tax Case No. 120 of
Judge
Reported in[1978]42STC335(Mad)
AppellantThe State of Tamil Nadu
RespondentS. Mohammad Yousuff Sahib and Co.
Appellant AdvocateAdditional Government Pleader
Respondent AdvocateAzeez Basha, Adv.
DispositionPetition allowed
Cases ReferredState of Madras v. Davar
Excerpt:
- - however, a reading of the judgment of the supreme court in serajuddin's case air1975sc1564 as well as the judgment 89 l. [1970]1scr572 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......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's case : air1975sc1564 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.....
Judgment:

Ismail, J.

1. 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 perpieces range ment lb.2 (two) Superfine tanned 11/12 Rmsheep skins. 25/35/40 @ Sh. 19/6Pure red hairs. Export duty:Single tonnage. Your a/c.Guaranteed freefrom adulteration.Terms: The above price/prices is/are CIF/Far Eastern Ports less 3 1/2 per centdiscount.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.

2. 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.

3. The learned Additional Government Pleader very strenuously contends that after the decision of the Supreme Court in Mod. Serajuddin v. State of Orissa : AIR1975SC1564 , 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.

4. 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's case : AIR1975SC1564 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.

5. The case again came on for hearing on 19th January, 1978, on an application for review under Section 114 of the Civil Procedure Code, 1908. The order of the Court was pronounced by

Ismail, J.

6. 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 under Section 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 perpieces range ment lb.2 (two) Superfine tanned 11/12 Rm @ Sh. 19/6sheep skins. 25/35/40 Export duty:Pure red hairs. Your a/c.Single tonnage.Guaranteed freefrom adulteration.Terms : The above price/prices is/are CIF/Far Eastern Portsless 3 1/2 per centdiscount.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.

7. 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 Mod. Serajuddin v. State of Orissa : AIR1975SC1564 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 State of Madras v. Davar & Co. : [1970]1SCR572 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 under Section 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 : [1970]1SCR572 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.

8. 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 : [1970]1SCR572 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.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //