Letter of credit financing and export sales: bank negotiation of documents did not make the sale complete in Madras.

Export sales financed through a general letter of credit are not completed in the seller's province merely because banks negotiate shipping documents and facilitate payment. The issuing bank is not the buyer's agent, and the intermediary bank's negotiation of bills is treated as acceptance under the credit rather than payment on behalf of the buyer. On these facts, the drawer's liability on the bills of exchange continued, the price was not received in Madras, and property in the goods did not pass there. The sales were therefore not exigible to tax under the Madras General Sales Tax Act, 1939, and the export turnover could not validly be included in assessment.

---

---

Issues: Whether the export sales were completed within the Province of Madras so as to attract tax under the Madras General Sales Tax Act, 1939.

Analysis: The sale transactions were carried out through general letters of credit and the banks merely facilitated payment and negotiation of documents. The issuing bank did not act as agent of the buyer, and the intermediary bank, by negotiating the bills, accepted the offer under the credit rather than paying on behalf of the buyer. The liability of the drawer on the bills of exchange continued, and the price was therefore not received in Madras. On the facts, the property in the goods did not pass to the buyer within the Province.

Conclusion: The export sales were not completed within the Province of Madras and were not exigible to sales tax; the issue is answered in favour of the assessees.

Final Conclusion: The assessment could not validly include the disputed export turnover, and the trial court's decree for refund was restored.

Ratio Decidendi: In a foreign sale financed through a general letter of credit, the mere negotiation of shipping documents by banks does not make the bank the buyer's agent or cause the price and property in the goods to pass within the seller's province.

---