MURARILAL SARAWAGI ETC. v. THE STATE OF ANDHRA PRADESH
Citation: [1977] 2 S.C.R. 441; 1976 INSC 331
Court: Supreme Court of India
Bench: A.N. RAY , M. HAMEEDULLAH BEG, JASWANT SINGH
Judgment date:
Case summary
1976 INSC 331. Supreme Court of India judgment dated 1976-12-15. MURARILAL SARAWAGI ETC. v. THE STATE OF ANDHRA PRADESH. Read the judgment and case details...
Judgment text
444 SUPREME COURT REPORTS (1977] 2 S. C. R. MURARILAL SARAWAGI ETC. v. THE STATE OF ANDHRA PRADESH December 15, 1976 [A. N. R. AY, C. J. M. H. BEG AND JASWANT SINGH, JJ. ] Andhra Pradesh General Sales ·Tax Act, 1957-ltem I, Second Schedule- State Corporation entering into contract with local dealers on f. o. b. basis and exporting to foreign countries-If sale in the course of export-Last purchaser- W~ ~ Under item 1 in the Second Schedule to the Andhra Pradesh General Sales Tax Act 1957, manganese ore was liable to be taxed at the point of purchase by the last dealer who bought in the State. · The appellants sell manganese ore to the Mines and Minerals Trading Corporation which exports the ore to buyers in foreign countries. Their contention before the Sales Tax authorities that the sales of the ore to the . MMTC were complete within the State of Andhra Pradesh and that it was the MMTC which was the last purchaser liable to pay sales tax was rejected.
On appeal the High Court held that the appellants' contracts with the MMTC were integrally connected with the contract entered into by the . MMTC with the foreign buyer and, as such, the appellants. were the last purchasers liable to pay the tax. The respondent State contended before this Court that since the property in the goods passed from the appellants to the MMTC on board the ship in view of the f. o. b. character of the contract, it was the appellants who, as the last purchasers, were liable to pay the tax and not the MMIC. Allowing the appeals, HELD ; The law is that it has to be found out whether the contracts between the merchants and the Corporation are integrated contracts in the c0urse· of export or different contracts. If thev ore different, the last purchaser witliin the State is liable to pay the sales tax.
[446G] (i) The tests for finding out the sale in the course of export are that there must be a single sale which itself causes the export or is in llhe progress or process of export. There is no roo~ for two or more sales in the course of export. · The only sal-e which can be said to cause the export is the sale which itself results in the movement of the gooas from the exporter to the importer. [443E-F] (ii) State Corporations are often the only authorities allowed to export goods out of the country. These C? rpo~ations en. ter i1? to ~ontracts with foreign buyers for export and the Corporallons m turn give directions to the merchants to place the goods on board a ship. These directions are not in the course of export because the export sale is an independent one between the Corporations and their foreign buyers. [444])-E] tated here that counsel for the State did not dispute that ID.
e decision in Serajuddin' s case (supra) applied to one of the six contracts but he disputed the application of the ruling in Serajuddin's case to the other five contr! lcts. The reasons given by counsel for the State are these. Only one contract was referred to in the High Court. The case of the appellants has all along been that the Sales Tax Appellate authorities considered on;y one contract. The High Court also considered only one contract. In the special leave peti-tion the appellants assailed the assumption made by the High Court to the effect that all contracts between the appellants ·and tlie M. M. T. C. were similar. "' (1) [1975] Supp. S. C. R. 169. (2) [1970] 3 S. C. R. 147 .. (3) [1974] l s. c. c. 459 .. Counsel for the State put in the forefront the contention that the M. M. T. C. could not be the last purchaser of goods within the S'. ate of Andhra Pradesh because property in. the goods passed from the appellants to the M. M. T. C. on board the ship.
In aid of that contention reliance was placed on F. O. B. character of the contract between the appellant and the M. M. T. C. The position is identical in all the six contracts. This Court in Serajuddin's case (supra) pointed out that mention of F. O. B. price in the contracts between the manganese merchants and the S. T. C. did not render these contracts F. O. B. contracts with the foreign buyers from the S. T. C. The reason is simple. The contracts between the S. T. C. and the foreign buyers are different contracts and it is the S. T. C. which entered into independent contracts· with their foreign· buyers on F. O. B. basis. Under the contracts between the manganese merchants and the S. T. C. the merchants were required to bring the goods F. 0. B. to the ship named by the S. T. C.
It has to be appreciatt:d that quite often merchants dealing in goods which are exported out of our country entgr into what is called string contracts for purchase of the goods from the factory or the mines for sale to exporters for sale to foreign buyers. The Trading Corporations are often the only" authorities allowed to export out of our country. These Corporations enter into direct contracts with their foreign buyers for export. The directions given by the Corporations to the merchants to place the goods on board the ship are pursuant to the contracts of sale between the merchants and the Corporation. These directions are not in the course of export, because the export sale is an independent one between the Corporation and their foreign buyers. The taking of the goods from the merchants' place to the ship is completely separate from the transit pursuant to the export sale (See Scrajuddin's case at pp. 184-185).
· In string contracts or chain contracts delivery is made by the original seller and eo instanti it is delivered in implement under each separate contract in the chain. In chain or string contracts starting between the mills or mines or factories and their immediate buyer and ending with the ultimate buyer through several intermediaries + · not only does the mill give and its immediate buyer take actual delivery but eo instanti each middleman gives and takes actual delivery This process of delivery of possession goes all along the chain at the same moment when delivery is made to the steamer. See Duni Chand Ra. taria v. Bhuwalka. Brothers Ltd. (1). . In F. O. B. contracts the seller's duty is to place the goods "free on board" a ship to be named by the buyer. When the seller delivers the goods for loading on board he normally obtains a mate's receipt which he transmits to the buyer and the buyer exchanges this for the proper bill of lading. In this sort of F. O. B.
contract the almost uni-versal rule is that property and risk both pass on shipment as soon as the goods are over the ship's rail and if it should be material, the property and risk in each part of the cargo will pass as it crosses the (1) (1955] l S. C. R. 1071. MURARILAL SARAWAGI V. ANDHRA PRADESH (Ray, C. J. ) 445 ship's rail. The loading of the ·goods is an unconditional appropria- . tiou- which passes the property. This is not because of any peculia-rity of F. O. B. contracts but because in this type of contract the seller's duty is to deliver the goods F. O. B. Once they are on board the seller has delivered them to the buyer and it is naturar that they should thereafter be at the buyer's risk. Now a days a party which has contracted to sell goods to foreign buyer may itself buy the . goods F. O. B. Indian port from Indian seller in ord_er to fulfill F. 0. B. contract with a foreign buyer. This Court in Serajuddin's case (supra) has laid down that the mere mention of F. O. B.
price or F. 0. B. delivery in contract between a merchant and the S. T. C. which exports the goods under a separate contract with the foreign buyer to the latter will not make the two contracts either integrated or the contract· between the merchant and the . S. T. C. an F. 0. B. contract. There cannot be two· last purchasers in the sale of same goods within the same State. Similarly, there cannot be two exporters in respect of the same goods. After the decision of the Constitution Bench in Serajuddin's case (supra) the decision in National Tractors Hubli v. Commissioner of Commercial Taxes Bangalore(1) is no longer good law. In the National Tractors case (supra) which was a three Judge Bench decision reliance was placed on the decision in B. K. Wadeyar v. M/s. Daulatram Rameshwarla/(2). In Wadeyar's case (supra) this . Court said that the normal presumption attaching. to F. O. B. contracts · is that prope;rty in the goods passes only when they are put on board the ship.
Wadeyar's case (supra) was before the Central Saies Tax Act 1956. Further the Bill of Lading, the export licence and the export clause all showed that the export did not commence till the ship left the port. In the National Tractors case (supra) it was said that the purchase by the State Trading Corporation from the merchant was in the course of export by the S. T. C. to the foreign buyer and, therefore, the purchase by the merchant from the mine-owner W[\S the last purchase in the State. The basis of the decision is that these were integrated F. O. B. contracts in the course of export. · The decision in National Tractors case (supra) made no reference to the decision of this Court in Coffee Board case (supra). The correct law is laid down by this Court in the Coffee Board case and Serajuddin's . case (supra). The law is this. It has to be found out whether the contracts between the merchants and the Corporation are integrated . contracts in the course of export or they are different.
If they are different contracts, . as they are in the present case, the last purchaser within the State is the M. M. T. C. · For the foregoing reasons the appeals are accepted. The judgment ·of the High Court is set aside. The parties will pay and bear their -costs. P. B. R. Appeals allowed. . (1) [1971] 3 S. C. R. 143. ,(2) [1961] l S. C. R. 924.
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