Export-linked sale on f.a.s. terms treated as exempt from sales tax under the Central Sales Tax Act.

Sales of iron ore on f.a.s. terms were treated as sales in the course of export and therefore not liable to sales tax. The contract required the seller to load the goods on the ship, made most of the price payable only after loading, and allowed rejection of non-conforming goods, showing that the sale was linked with export and that title passed only after the goods crossed the customs frontiers of India. Applying section 5 of the Central Sales Tax Act, 1956, the court accepted the Tribunal's construction and preferred the interpretation favourable to the assessee where two views were possible.

---

---

Issues: Whether the sales of iron ore on f.a.s. basis were sales in the course of export out of the territory of India and therefore not liable to sales tax.

Analysis: The contract showed that the goods were to be loaded by the seller on the ship, that the bulk of the price became payable only after loading, and that the buyer could reject goods not according to specification. These terms indicated that the sale was linked with export and that title passed only after the goods had crossed the customs frontiers of India. The statutory test under section 5 of the Central Sales Tax Act, 1956, was whether the sale occasioned the export or was effected by transfer of documents of title after the goods crossed the customs frontiers. On the facts, the construction adopted by the Tribunal was held to be correct, and where two constructions were possible, the one favouring the assessee was preferred.

Conclusion: The sales were held to be in the course of export and exempt from sales tax, in favour of the assessee.

---