Patna High Court
Commissioner Of Commercial Taxes vs Thakur Prasad Sao on 7 January, 1972
Equivalent citations: [1972]29STC551(PAT)
JUDGMENT
Shambhu Prasad Singh and Shiveshwar Prasad Sinha, JJ.
1. By its order dated the 6th April, 1967, this court under Section 25(3) of the Bihar Sales Tax Act, 1947, read with Section 9 of the Central Sales Tax Act, 1956, called upon the Tribunal to state in two cases the following question for the opinion of this court:
Whether on the facts and circumstances of this case the Tribunal was right in holding that the sales of iron ores were in the course of export out of the territory of India"and as such not liable to pay sales tax by virtue of Sub-clause (b) of Clause (1) of Article 286 of the Constitution.
In obedience to that order, the Commercial Taxes Tribunal, Bihar, has submitted the references. Tax Case No. 29 of 1966 relates to the assessment year 1957-58 and Tax Case No. 30 of 1966 relates to the assessment year 1958-59.
2. The assessee M/s. Thakur Prasad Sao are a firm dealing in iron ore, manganese ore and asbestos at Ranchi in Bihar. In their return for the assessment years 1957-58 and 1958-59 they showed sales worth Rs. 4,60,905.45 and Rs. 7,18,687.90 respectively of iron ore to the State Trading Corporation of India. Out of Rs. 4,60,905.45, sales worth Rs. 4,29,306.88 were on f.a.s. (free alongside ship) price basis and the rest on f.o.r. (free on rail) price basis. Out of Rs. 7,18,687.90 sales worth Rs. 6,94,806.77 were on f.a.s. price basis and the rest on f.o.r. price basis. The case of the assessee was that the sales of iron ores were in the course of export out of the country and, therefore, not liable to sales tax either under the Bihar Sales Tax Act or the Central Sales Tax Act in view of the provisions of Article 286(1)(b) of the Constitution. The assessing officer held that the nature of the transaction between the applicant and the buyer envisaged that the sales had been completed between the assessee and the buyer at K.P. Docks at Calcutta and, therefore, the sales were in the course of inter-State trade and commerce and the assessees were liable to pay a tax under the Central Sales Tax Act. The assessee appealed to the Appellate Assistant Commissioner of Sales Tax, Chotanagpur, who agreed with the assessing officer that the assessees were liable to pay sales tax under the Central Sales Tax Act. However, he gave some direction for checking up certain calculations. The assessee then moved the Deputy Commissioner of Sales Tax, Ranchi, in revision who also agreed with the assessing officer and the Appellate Assistant Commissioner and dismissed the revision. Thereafter, the assessee filed applications for revision before the Board of Revenue. On account of the change in law, these applications were transferred to the State Commercial Taxes Tribunal for disposal. The Tribunal held that the sales of iron ores worth Rs. 4,29,306.88 in the return for the assessment year 1957-58 and Rs. 6,64,806.77 in the return for the assessment year 1958-59 were in the course of export and, as such, should be exempted from taxation. The Tribunal, however, held that sales of iron ores worth Rs. 31,598.57 and Rs. 23,881.13 on f.o.r. price basis were liable to tax. The department then made applications before the Tribunal for references to this court. The applications were rejected. Thereafter, the department moved this court for calling for references and on those applications, the order dated 6th April, 1967, already referred to above, was passed.
3. The only question which arises for decision in these two references is, whether the sales of iron ores on f.a.s. price basis have rightly been held to be export out of the territory of India by the Tribunal and thus exempted from payment of sales tax. The Tribunal has considered in detail the terms of the contract between the parties and has held that according to them, the sales of iron ores on f.a.s. basis which has the same effect as sales on f.o.b. (free on board) basis were sales in export out of the territory of India. In support of its finding, the Tribunal has mainly relied on three facts, which are borne out by the terms of the contract. Firstly, that the goods were to be loaded by the seller, that is, the assessee on the ship ; secondly, that 95 per cent, of the price was to be paid only after the goods were loaded on the ship and, thirdly, that it was operate the buyer to return the goods and not to accept them if they were found to be below specification.
4. Mr. S. K. Jha, learned counsel for the department, has placed before us the contract between the assessee and the State Trading Corporation of India and submitted that the Tribunal is wrong in recording the aforesaid finding on the basis of the terms of the contract. In support of this contention, he has relied on a sentence in clause 10(d) of the contract that in all cases, in the railway receipt, the State Trading Corporation was to be the consignor. According to him, therefore, the title in the goods passed to the State Trading Corporation of India, the buyer, before they were consigned by rail from Ranchi to Calcutta. We do not find it possible to accept this contention of Mr. Jha. The State Trading Corporation of India was to be a consignor in the railway receipt because the railway wagons were to be provided by them and they had to make communications with the railway department for the purpose. Clause 10(d) stated that ores were to be moved to plots of the sellers or their agents in the port and the plot-holders could also be the consignees in the railway receipt. Clause 5 of the contract further shows that there were two rates of prices, Rs. 41, when the delivery was by direct shipment and Rs. 34.25, when it was by ex plot. The seller-assessee became entitled to 95 per cent. of the price only after the goods were loaded in the ship. Obviously, this clause of the contract has got a reference to deliveries by direct shipment. It is manifest, therefore, that the title in the goods passed to the buyer only after they had crossed the customs frontiers of India. According to Section 5 of the Central Sales Tax Act, 1956, a sale or purchase of the goods is to be deemed to take place in the course of export of the goods out of the territory of India, if the sale or purchase either occasions such export or is effected by transfer of documents of title to the goods after the goods have crossed the customs frontiers of India. The Tribunal has also held that in the instant cases, the sales occasioned the export.
5. In the case of Mohan Lal Moti Lal v. Assessing Authority, Bhatinda [1965] 16 S.T.C. 553, Dua, J. (as he then was) of the Punjab High Court has held that whether or not in a particular case the sale in question is in the course of export is essentially a question of fact and that no single test can be laid down which can serve as a straight jacket to fit every transaction. Each case has to be construed on its own peculiar facts and circumstances. On the facts of the instant case, we do not find it possible to hold that the Tribunal has committed mistake in holding that the sales in question were in the course of export.
6. In our opinion, the construction put by the Tribunal on the terms of the contract is correct. Even if two constructions of the terms of the contract were possible, one in favour of the assessee and another in favour of the department, the construction in favour of the assessee has to be accepted, and the construction put. by the Tribunal is in favour of the assessee. We would accordingly answer the question in the affirmative. The assessees shall be entitled to their costs. Hearing fee is assessed at Rs. 250 only.