# 270· 7, MEMBER BOARD OF REVENUE, WEST BENGAL v. M/S. SWAIKA OIL MILLS August 4, -1977

- **Citation:** [1978] 1 S.C.R. 270
- **Court:** Supreme Court of India
- **Decided:** 1978
- **Case number:** Civil Appeal No. 1477 of 1972
- **Bench:** Y. V. Chandrachud, P. S. Kailasam
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/270-7-member-board-of-revenue-west-bengal-v-m-s-swaika-oil-mills-august-4-1977-7272
- **Pages:** 4

## Headnote

Constitution of India, Art. 286(l)((b)-Central Sales Tax Act, 1956, Section
5(1)-'ln the course of export", applicability-F.0.B. contract-Goods delivered
on foreign bound shiP- Use' of export-licence lent ro-exporter-1-Vhether Sa1e
exigible to sales tax.
'
___ -The Netherlands Selling Orgiinisation Ltd. bought linseed oil .. F.O.B. Calcutta
- price", from·. the respondent oil mills. The terms of the sale-contract provided
that the oil mills would deliver the goods on a ship bound for Indonesia~ and
lend the use of its export-licence to facilitate the export of the goods by the
Netherlands Organisation to a foreign buyer. The respondent claimed -exemption tram the payment of sales-tax on the ground that the sale was effected in
the course of the export of goods out of the Indian territory. The claim was
·rejected by the Revenue Authorities but was allowed by the High Court; in
a reference by the Board of Revenue. -
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---:_-- - --
.
Allowing the appeal and holding that the sale was exigible to sales-tax, the
Court.
HELD:- (lj Thef-e is no privity of contract bet\veen the respondents and the
foreign buyer. The export was occasioned by the contract of sale between the
Netherlands 'Organisation and their own buyer, and not by the contract of sale
between the respondents and the Netherlands Organisation. The two safes are
not part of one integral transaction. [272C, D]
- -
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(2) The circumstance that the contract between-the-~- re:~P-~nderits and the
Netherlands Organisation was in the F.0.D. form and that the payment of price
was to be made only after the goods ,vere put on board the ship by the respondentsr do not affect the fundamental position that there were two independent and
unconnected sales. In loading the goods on the ship, the respondents were acting
as mere carriers. The fact that the place of delivery is a foreign-bound ship cttnnot, by itself~ make a sale one in the course of export. [272H, 273A-BJ
_
Mohd. Serajuddin etc. v. State of Orissa [1975] Supp. SCR 169, applied.
(3) The bill of lading was made out in the name of the Netherlands Organisation which obtained a complete and indefeasible title to the goods purchased by
them from the respondents in India. The fact that the respondents were to lend
them the use of their export licence or that the respondents paid the custom5 duty
and the Port Commissioner's charges, does not mean that the
goods ·were
exported by, or at the instance of the respondents. (272 E-F, 273C]

## Text

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270·
7,
MEMBER BOARD OF REVENUE, WEST BENGAL
v.
M/S. SWAIKA OIL MILLS
August 4, -1977
(Y. V. CHANDRACHUD AND P. S. KAILASAM, JJ.J
Constitution of India, Art. 286(l)((b)-Central Sales Tax Act, 1956, Section
5(1)-'ln the course of export", applicability-F.0.B. contract-Goods delivered
on foreign bound shiP- Use' of export-licence lent ro-exporter-1-Vhether Sa1e
exigible to sales tax.
'
___ -The Netherlands Selling Orgiinisation Ltd. bought linseed oil .. F.O.B. Calcutta
- price", from·. the respondent oil mills. The terms of the sale-contract provided
that the oil mills would deliver the goods on a ship bound for Indonesia~ and
lend the use of its export-licence to facilitate the export of the goods by the
Netherlands Organisation to a foreign buyer. The respondent claimed -exemption tram the payment of sales-tax on the ground that the sale was effected in
the course of the export of goods out of the Indian territory. The claim was
·rejected by the Revenue Authorities but was allowed by the High Court; in
a reference by the Board of Revenue. -
-
---:_-- - --
.
Allowing the appeal and holding that the sale was exigible to sales-tax, the
Court.
HELD:- (lj Thef-e is no privity of contract bet\veen the respondents and the
foreign buyer. The export was occasioned by the contract of sale between the
Netherlands 'Organisation and their own buyer, and not by the contract of sale
between the respondents and the Netherlands Organisation. The two safes are
not part of one integral transaction. [272C, D]
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(2) The circumstance that the contract between-the-~- re:~P-~nderits and the
Netherlands Organisation was in the F.0.D. form and that the payment of price
was to be made only after the goods ,vere put on board the ship by the respondentsr do not affect the fundamental position that there were two independent and
unconnected sales. In loading the goods on the ship, the respondents were acting
as mere carriers. The fact that the place of delivery is a foreign-bound ship cttnnot, by itself~ make a sale one in the course of export. [272H, 273A-BJ
_
Mohd. Serajuddin etc. v. State of Orissa [1975] Supp. SCR 169, applied.
(3) The bill of lading was made out in the name of the Netherlands Organisation which obtained a complete and indefeasible title to the goods purchased by
them from the respondents in India. The fact that the respondents were to lend
them the use of their export licence or that the respondents paid the custom5 duty
and the Port Commissioner's charges, does not mean that the
goods ·were
exported by, or at the instance of the respondents. (272 E-F, 273C]
CIVIL APPELLATE JURISDICTION.:
Civil Appeal No. 1477
of
1972.
Appeal by Special Loave from the Judgment and Order dated
25-11-1970 of the Calcutta High Court in Sales Tax Reference No.
499 of 1967.
D. N. Mukherjee and G. S. Chatterjee for the Appellant.
Slzankar Ghosh and D. P. Mukherjee for the Respondent.
The Judgment of the Court was delivered by
CIIANDRACllUD, J.-Article 286(1) (b) of the Constitution pro-
, vides that no law of. State shall impose, or authorise the impositi<tn
of a tax on the sale or purchase of goods, where such sale or purchase
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MEMBER REVENUE BOARD v. 'swAIKA OIL MILLS (Chandrachud, J.) 271
takes place in the course of the-import of the g;;-Ods into, or export of
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the goods out of, the territory of India. By the s.xth Amendment to
the Constitution which came into force on September 11, 1956, an
amendment was made to clause (2) of Article 286, by which Parliament wa• given the power by law to formulate principles for determining when a sale or purchase of goods takes place in any of the ways
men)ioned in clause ( 1).,
Acting in pursuance of ibis power,
the
Parliament enacted Section 5(1) of the Central Sales Tax Act, 1956,
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providing- that a sale or purchase of goods shall be deemed to take
place in the course of the export of the goods out of the territory of
India only if the sale or purchase either occasions such export
o.·
is effected by a transfer of documents of title to the goods
af~r
the goods have crossed the customs frontiers of Inch.
The question which arises for our consideration in this
appeal c
is whether a sale effected by the respondents-Mis Swaika Oil MH!s- -
is a sale in the course of the export of goods out of the territory o1
India.
This question was answered against the respondents
by
too Revenue Authorities which held that the sale _was exigible to sales
tax. But, on a reference made to the Calcutta- High -- Court by the
Board of Revenue under section 21 ( 1) of the Bengal Finance
(Sales Tax) Act, 1941, the High Court set aside the assessment on
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the ground that the sale took place in the course of export of
the
goods.
By a letter dated September 10, 1952, the Netherlands
Selling
Organisation Ltd. confirmed having bought from tl1e respondents
a
certain quantity of linseed oil, "F.O.B. Calcutta price."
The main
terms of the contract of sak, which was made and concluded
in
Calcutta, are these . : .
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(a) The price of the goods was to be paid F.O.B. Calcutta against
the first presentation of 'Clean on board' Mate's receipt along
with
the relative G.R.I. forms in trip~icate;
(b) The insurance charges were to be paid by the purchasers;
( c) The purchasers were to send to the respondents their shipF
ping broker for arran<Tino hnnldM C'f the shipping space for the goods
to ~· l on board the ship by the respondents;
( d) The respondents were to mark the goods with the shipment
marks specified by the purchasers in the letter;
(e) Due to import restrictions in Indonesia, the responde~ts were
to ship not more than SDO imperial gallons of linseed oil; and finally,
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. (f) The "Export" was "to be made" under the export-licence of
the respondents.
Mr. Shankar Ghose, who appears on behalf of the respondents,
has raised a variety. of interesting points, which, in our opinion, have
lost their validity and ·relevance in view of a Constitution
Bench
decision of this Court in Mohd. Se'rajuddin etc. v. State of Orissa(I).
(1) [1975] Suppl. S.C.R. 169.
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272
SUPREME COURT REPORTS
[J 978] l S.C.R.
A catena of decisions bearing on the question as to when a sale can
be deemed to be in the course of export was examined elaborately ill
that case.
Applying the ratio of Serajuddin's case to the facts before us, we arn of the opinion that the High Court of Calcutta, which
did not have the benefit of that judgment, is wrong in holding that the
sa'fe effected by the. respondents in favour of the Netherfands Selling
Organisation i·s a sale in the course of export
Our reasons
for
saying so are these :
( 1) There was a direct, distinct and independent contract of
sale between the respondents on one hand and their buyers in India,
!he Netherlands Selling Organi'sation.
(2) The sale effected in pursuance of that contract is. wholly unconnected with the sale by the Netherlands Organization to their
foreign buyer.
The two sales are not a part of one integral transaction.
(3) Thne is no privity of contract between the respondents and
the foreign buyer.
They sold the goods in India, which the buyer
on his own account exported to Indonesia.
The foreign buyer was
undisclosed to the respondents and, indeed, there is nothing on the
record to show the ·terms of the contract between the. Netherlands
Organisation and their foreign buyer.
Respondents knew nothing
of these terms and their contract with the Netherlands Organization
did not st~nd or fall by the terms of that sale.
(4) The immediate cause of the movement of goods and the export was the contract between the Netherlands Organisation
and
their foreign buyer and not the sale between the respondents
and
the Netherlands Organisation.
The export was occasioned
by
the contract of sale between the Netherlands Organisation ancl their
own buyer and not by the contract of sale between the respondents
and the Netherlands Organisation.
(5) The bill of Jading was indisputably made out in the name of
the Netherlands Organisation which obtained a complete
and indefeasible title to the goods purchased by them from the respondents in
India.
( 6) There was no obligation either on the respondents or on the
Netherlands Organisation to export the goods out of India.
(7) Respondents put the goods sold by them to the Netherlands
Organisation on board the ship merely to facilitate the mtended export of goods by the Netherlands Organisation.
In loading
the
goods on the ship, respondents were acting as mere carriers, ~ince
they were under an obligation to do so under their contract
with
the Netherlands Organisation.
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(8) Neither of the two transactions created any mutual rights and
obligations as between the respondents and the person or persons for
whose benefit the export was made or intended.
(9) The circumstances that the contract between the respoodenls
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and the Netherlands Organisation was in the F.O.B. form and that the
payment of price was to be made only after the goods were put on
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MEMBER REVENUE BOARD v. SWAIKA OIL MILLS (Chandrachud, J.) 273
board the ship by the respondents, do not affect the fundamental position
that there were two distinct, independent and unconnected sales.
The
payment of price was made to depend on the fact of shipment for the
reason that under the terms of the contract, which the respondents entered into with the Netherlands Organisation, a duty was imposed upon
the former to put the goods on board the ship. The Netherlands Organisation, instead of accepting the delivery of goods in a factory or godown of the respondents, stipulated that the goods, on their behalf, be
put by the respondents on board the ship.
The fact that the place of
delivery is a foreign-bound ship cannot, by itself, make a sale one in
the cours.e of export.
(JO) The very agreement, which is the basis of the respondents'
claim for exemption from sales tax, hegins with the assertion : "We
herewith confirm having bought from you" the. goods mentioned
in
the letter.
The sale transaction was thus concluded between the
respondents and the Netherlands Organization in India.
Lastly,
(11) The fact that the. respondents were to lend to the Netherlends Organisation the use of their export licence or that' the respondents paid the customs duty and the Port. Commissioner's charges,
does not mean that the goods were exported by or at the instance of
-the respondents or that the sale effected by them in favbur of the
Netherlands Organisation occasioned the export.
If the respondents'
name was shown as the exporters, it was because they had obligingly
"lent the use of their export licence to facilitate the export of the goods
by the Netherlands Organization.
For these reasons, we set aside the judgment of the High Court and
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hold that the. sale in respect of which the respondmts claimed exempE
lion, is not a sale in the course of export and is, therefore, exigible to
sales tax.
The appeal is accordingly allowed with costs.
M.R.
Appeal allowed.