TaxTMI 
TaxTMI 
1960 (9) TMI 64
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....n 11 of the Bombay Sales Tax Act. In their return of turnover for the period from April 1, 1954, to March 31, 1955, they claimed exemption from sales tax in respect of sales of cotton of the total value of Rs. 68,493-2-6 and sales of castor oil of the total value of Rs. 6,47,509-1-6 on the ground that these sales were on FOB contracts, under which they continued to be the owners of the goods till the goods had crossed the customs barrier and thus entered the export stream, and so no tax was realisable on these sales in view of the provisions of Article 286(1)(b). The Sales Tax Officer rejected this claim for exemption and assessed them to sales tax on a taxable turnover including these sales. He also assessed them to purchase tax under section 10(b) of the Bombay Sales Tax Act on their purchase of castor oil which they later sold for the sum of Rs. 6,47,509-1-6 as mentioned above. The notice of demand for the total sales tax and the purchase tax assessed was served on the sellers on September 30, 1956. The sellers thereupon moved the Bombay High Court under Article 226 of the Constitution for the issue of appropriate writs for quashing the order of assessment and the noti....
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....le 286(1)(b) will come into operation. The sellers' case is that these were sales on FOB contracts. Though the learned Solicitor-General appearing on behalf of the Sales Tax Officer tried to convince us that these were not really FOB contract sales, it appears that the averment in paras. 11 and 13 of the writ petition that these sales were made on FOB basis were not denied in the counter-affidavit sworn by the Sales Tax Officer. It is also worth noticing that in the assessment order itself the Sales Tax Officer referred to these sales as sales on FOB basis. The specimen contract produced also used the words "FOB delivered". There can be no doubt therefore that these were sales under FOB contracts. The normal rule in FOB contracts is that the property is intended to pass and does pass on the shipment of the goods. In certain circumstances, e.g., if the seller takes the bill of lading to his own order and parts with it to a third person the property in the goods, it has been held, does not pass to the buyer even on shipment. We are not concerned here with the question whether the passing of property in the goods was postponed even after shipment. The correctness of the proposition th....
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.... a particular case this duty may fall on the sellers. The third circumstance on which reliance is placed on behalf of the Sales Tax Officer is that the Export (Control) Order, 1954, which was passed in the exercise of powers conferred by Import and Export (Control) Act, 1947, contained a provision in its clause 5(2) in these words: "It shall be deemed to be a condition of that licence..................that the goods for the export of which licence is granted shall be the property of the licensee at the time of the export." It has been strenuously contended by the learned Solicitor-General that it will be reasonable to think that the parties to the contract intended to comply with this condition and to agree as between themselves that the goods shall be the property of the licensee, that is, the buyer, at the time of the export. It is argued that the time of the export should be interpreted as the time when the customs frontier is crossed and that we must proceed on the basis that the buyers and the sellers intended that the goods shall be the buyer's property at the point of time when they crossed this frontier. We see however no justification for thinking that in this cl....
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.... has left the port, though it may in some contexts be more correct to say that it does not commence till the ship has passed beyond the territorial waters. We have therefore come to the conclusion that there is no circum- stance which would justify a conclusion that the parties came to a special agreement that though the sales were on FOB contracts property in the goods would pass to the buyer at some point of time before shipment. We think that the learned Judges who heard the appeal in the Bombay High Court were right in their conclusion that the goods remained the seller's property till the goods had been brought and loaded on board the ship and so the sales were exempted from tax under Article 286(1)(b) of the Constitution. In Civil Appeal No. 46 of 1959 the appellants' contention is that on a correct interpretation of the provisions of section 10(b) of the Bombay Sales Tax Act no purchase tax was leviable from them. Section 10(b) provides for the levy of a purchase tax on the turnover of purchase of goods specified in column 1 of Schedule B, at the rates, if any, specified against such goods in column 4 of the said Schedule, "where a certificate under claus....