FOB export sales and purchase tax under statutory despatch conditions were construed by reference to property passing and dealer status.

FOB sales were treated as sales in the course of export where the parties' conduct showed that property in the goods passed on shipment after crossing the customs barrier, so the sales tax demand under Article 286(1)(b) could not stand. For purchase tax under section 10(b) of the Bombay Sales Tax Act, the phrase "a person to whom he has sold the goods" was construed in light of sections 8(b) and 10(b) as referring to a registered dealer, because actual despatch by an unregistered person did not satisfy the statutory scheme. The sales tax relief was sustained, and the purchase tax liability was also sustained.

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Issues: (i) Whether sales made under FOB contracts were exempt from sales tax under Article 286(1)(b) of the Constitution on the footing that property in the goods passed only on shipment after crossing the customs barrier. (ii) Whether, for the purpose of purchase tax under section 10(b) of the Bombay Sales Tax Act, the words "a person to whom he has sold the goods" included only a registered dealer.

Issue (i): Whether sales made under FOB contracts were exempt from sales tax under Article 286(1)(b) of the Constitution on the footing that property in the goods passed only on shipment after crossing the customs barrier.

Analysis: The normal rule in FOB contracts is that property passes on shipment, unless the parties agree otherwise. On the surrounding circumstances, the bills of lading were retained by the sellers and payment was to be made on presentation of documents, which indicated that property was not intended to pass before shipment. The export-control condition requiring the goods to be the property of the licensee at the time of export did not show an intention to pass property before the customs frontier was crossed. The legal position was that the course of export, for constitutional purposes, begins when the goods cross the customs barrier, and if property passes after that point the sale is in the course of export.

Conclusion: The sales were exempt from sales tax under Article 286(1)(b) and the demand for sales tax could not be enforced.

Issue (ii): Whether, for the purpose of purchase tax under section 10(b) of the Bombay Sales Tax Act, the words "a person to whom he has sold the goods" included only a registered dealer.

Analysis: Sections 8(b) and 10(b) were read together to ascertain the legislative scheme. The certificate under section 8(b) required the goods to be intended for despatch outside the State by the purchaser or by a registered dealer to whom he sold them. Reading section 10(b) in that context, actual despatch by an unregistered person did not satisfy the statutory condition. The words "a person" were therefore construed consistently with the scheme as referring to a registered dealer.

Conclusion: The liability to purchase tax under section 10(b) was correctly upheld.

Final Conclusion: The appellate court's relief against sales tax was sustained, but the assessment to purchase tax was also sustained, and both appeals failed.

Ratio Decidendi: In FOB sales, property ordinarily passes on shipment unless a different intention is shown, and a statutory condition linked to despatch by a registered dealer must be construed in light of the legislative scheme so that purchase tax remains leviable when that condition is not fulfilled.

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