ion No 38 of 1959
Petition under article 32 of the Constitution ofIndia for enforcement of Fundamental Rights
Purshottam Tricumdas and 1
N Shroff for the Petitioner
A V Viswanatha Sastri R Ganapathi Iyer and R H Dhebar for the respondents
N A Palkhivala and I N Shroff for Interveners Nos
1 to 3 The Bombay Chamber of Commerce  Industry Bombay and others
C K Daphtary Solicitor General of India and TM Sen for intervener No 4 Attorney General for India
January 25
The material facts are not in dispute and they may be briefly stated The petitioner is a private company within the meaning of the and has its registered office at Kasturi Buildings Bombay 1 on March 24 1954 and April 15 1954 into two contracts with the Government of India for selling to the latter two consignements of sugar one of 9500 Long Tons of sugar of Peruvian orgin and the other of 25000 metrice Tons of sugar of continental origin
To fulfil the terms of the contracts the petitioner placed order with dealers in foreign countries
The following are the particulars relating to the first contract dated 854 March 24 1954 for the supply of 9500 Long Tons of sugar i 3rd April Letter of Credit opened by the petitioner
ii 3rd May 1954 section section Alba sails from Salaverry Peru carrying 978201688 Long Tons of sugar
iii 26th May 1954 The petitioner delivered to its Bankers the Central Bank ofIndia Limited Bombay along with the invoice for Rs 5035 405 11 0 the Documents of Title viz the Bills of Lading duly endorsed in favour of the Government of India
 Ministry of Food  Agriculture Agriculture to the above goods together with other papers such as Certificates and instructed the said Bankers to present the same to the Government of India and to collect the said amount of Rs 5035405 11 0 from the Deputy Accountant General Food  RehabilitationNew Delhi   iv 7th June 1954 Payment made to petitioner s Bankers by the Government ofIndia against delivery of Invoice and Bills of Lading
v 26 th June 1954 Date of arrival of section section Alba at Bombay harbour
The corresponding details pertaining to the second contract are as follows Vessel Vessel vassel section section Eleni section section section section Inger Stathatos Giovanni Marie Amendola I II
1 9910 858 9919 7158 4464 3I5 Total 24292 8888 Tons Tons
Tons ii 56th 56th 156th Letter of Credit opened June 954
June 1954
June 1954 by petitioner
iii 10th 31st July 31st July Date of Sailing of vessel July 954 1954
1954 855 Vessel Vessel Vessel section section Eleni section section section section Inger Stathatos Giovanni Marie Amendola 1V 22nd 12th August16th AugustJuly 1954
1954 1954
The petitioner delivered to its Bankers the Bank of Baroda Limited Bombay along with its invoices for Rs 50435o1 8 o Rs 22 69800 13 0 Rs 5038 997 14 o respectively the Documents of Title viz the Bills of Lacling duly endorsed in favour of the Government of India Ministry of Food  Agriculture Agriculture to the above goods together with other papers such as Certificates and instructed the said Bankers to present the same to the Government of India and collect the said amounts of Rs 5043 501 8 0 Rs 2269 800 13 o and Rs 5038 997 14 0 from the Deputy Accountant General Food  Rehabilitation New Delhi
      V26th 18th August 19th August Payment made to the July 1954
petitioner s Bankers by the Government of India against delivery of Invoices and Bills of Lading
V112th 3rd Septem 9th Septem August 1954
Date of arrival of Vessel at Bombay Harbour
The foregoing particulars disclose that some weeks before the vessel arrived at the Bombay harbour ie when the vessels were on the high seas the Government of India received the documents of title including bills of lading pertaining to the sugar purchased by them and paid the price to the petitioner
Indeed after the goods reached the port they were unloaded taken delivery of and cleared by the Government of 109 856 India after paying the requisite customs duties to the authorities concerned
For the assessment year 1954 55 ie April 1 1954 to March 31 1955 the petitioner was assessed to sales tax by the Sales Tax Officer Licence Circle Division 1 Bombay
In calculating the turn over of the petitioner the Sales Tax Officer deducted the price of the said two sales from the petitioner s turn over
On January 31 1958 the first respondent the Assistant Collector of Sales Tax issued a notice to the petitioner under section 31 of the Act proposing to review the said assessment order passed by the Sales Tax Officer
In due course the petitioner filed objections and made his representations
The petitioner contended before the first respondent that the notice should have been issued if at all under section 15 and not under section 31 of the Act inasmuch as the sales had been disclosed to the Sales Tax Officer and the deduction of the same had been allowed by him
it was also pleaded that in any event the sales had taken place in the course of import and therefore they were not liable to sales tax
The first respondent rejected both the contentions and held that sales tax was payable in respect of the said two transactions
He reassessed the petitioner to a total amount of sales tax and general tax of Rs1022850 12 0 less Rs 315 3 0 already paid by the petitioner ie a sum of Rs 1022535 9 0 and directed the second respondent the Sales Tax Officer to issue a notice of demand for the said amount
Pursuant to that order the second respondent issued a notice dated February 14 1959
The petitioner has filed the present petition for the issue of a writ of certiorari cancelling the demand notice issued by the second respondent
The learned Solicitor General intervened on behalf of the Union Government and Mr Palkbivala intervened for interveners 1 to 3 and both of them supported the petitioner
Mr Purshottam Tricumdas appearing for the petitioner raised before us the following contentions 1 Under article 2861b of the Constitution as it stood before the Constitution Sixth Amendment Act 1956 the sales in question were not liable to sales tax inasmuch as they took place in the course of import of the 857 goods into the territory of India 2 the said sales were exempted from sales tax by the Bombay State under the explanation to article 2861 of the Constitution as the goods were delivered for the purpose of consumption in States other than Bombay 3 the sales were effected outside the State of Bombay ie New Delhi and therefore they were also exempted under article 2861a of the Constitution and 4 the first respondent could have only interfered with the earlier order of assessment under section 15 of the Act within three years from the end of the assessment year 1954 55 ie March 31 1955 and that the said period having elapsed he had no power to interfere in revision under section 31 of the Act
The first point is the most substantial one in the case and if the petitioner succeeds on that point no other question would arise for consideration
The first question turns upon the interpretation of article 2861b of the Constitution before it was amended by the Constitution Sixth Amendment Act 1956
The said Article read  1 No law of a State shall impose or authorise the imposition of a tax on the sale or purchase of goods where such sale or purchase takes place b in the course of the import of goods into or export of the goods out of the territory of India
 Under this Article if the sales by the petitioner to the Government of India took place in the course of the import
of the goods into the territory of India the Bombay State would have no power to impose sales tax on the said sales
What does the phrase in the course of the import of the goods into the territory of India  convey  The crucial words of the phrase are  import  and  in the course of 
The term import signifies etymologically  to bring in 
To import goods into the territory of India therefore means to bring into the territory of India goods from abroad
The words  course  means it progress from point to point 
The course of import therefore starts from one point and ends at another
It starts when the goods cross the customs barrier in foreign country and ends when they cross the customs 858 barrier in the importing country
These words were subject of judicial scrutiny by this Court in State of Travancore Cochin vs Shunmugha Vilas Cashew Nut Factory1
Construing these words Patanjali Sastri CJ observed at p 62 The word  course  etymologically denotes movement from one point to another and the expression  in the course of  not only implies a period of time during which the movement is in progress but postulates also a connected relation
 As regards the limits of the course the learned Chief Justice observed at p 68  It would seem therefore logical to hold that the course or the export out of or of the import into the territory of India does not commence or terminate until the goods cross the customs barrier
 Das J as he then was in his dissenting judgment practically agreed with Patanjali Sastri C J on the interpretation of the said words
The learned Judge expressed his view at p 92 thus The word  course  conveys to my mind the idea of a gradual and continuous flow an advance a journey a passage or progress from one place to another
Etymologically it means and implies motion a forward movement
The phrase  in the course of  clearly has reference to a period of time during which the movement is in progress
Therefore the words in the course of the import of the goods into and the export of the goods out of the territory of India  obviously cover the period of time during which the goods are on their import or export journey 
We respectfully agree with the aforesaid observations of the learned Judges
The course of the import of the goods may be said to begin when the goods enter their import journey ie when they cross the customs barrier of the foreign country and end when they cross the customs barrier of the importing country
The next question is when can it be said that a sale takes place in the course of import journey  This Court in State of Travancore Cochin vs The Bombay Co Ltd 2 held that a sale which occasioned 1  2  859 the export was a sale that took place in the course of export of the goods
If A a merchant in India sells his goods to a merchant in London and puts through the transaction by transporting the goods by a ship to London the said sale which occasioned the export is exempted under article 2861b of the Constitution from the levy of sales tax
The same principle applies to a converse case of goods which occasioned the import of the goods into India
This Court again in State of Travancore Cochin vs Shanmugha Vilas Cashew Nut Factory 1 extended the doctrine to a case of sale or a purchase of goods effected within the State by transfer of shipping documents while the goods were in the course of transit
The decision dealt with three types of purchases viz i purchases made in the local market ii purchases made in the
neighbouring districts of an adjacent State and iii imports from Africa
The imports from Africa consisted of two groups one group consisted of goods that were purchased when they were on the high seas and shipped from the African ports to Cochin or Quilon  we are not concerned with the other group
In the said case some commission agents at Bombay arranged for the purchase on behalf of the assessee got delivery of the shipping documents at Bombay through a bank which advanced money against the shipping documents and collected the same from the assessees at destination
This Court by a majority held that in respect of the purchases falling under the first group of imports the commission agents acted merely as agents of the respondents therein and that the said purchases occasioned the import and therefore came within the exemption
That was not a case where the goods were sold by an importer in India to a third party when the goods were on the high seas
It was a case where a party in Cochin purchased goods which were on the high seas through his agent at Bombay and the agent paid the price through a bank against the shipping documents
But the learned Judge Patanjali Sastri C J expressing the majority view considered the scope of the exemption in all its aspects and summarized the conclusions thus at p 69 1  860  Our conclusions may be summed up as follows 1 Sales by export and purchases by import fall within the exemption under article 2861b 2 Purchases in the State by the exporter for the purpose of export as well as sales in the State by the importer after the goods have crossed the customs barrier are not within the exemption
3 Sales in the State by the exporter or importer by transfer of shipping documents while the goods are beyond the customs barrier are within the exemption assuming that the State power of taxation extends to such transactions
 Das J as he then was in his dissenting judgment agreed with Patanjali Sastri C J on the third conclusion with which we are now concerned  The learned Judge put forward his view at p 94 thus  Such sales or purchases by delivery of shipping documents while the goods are on the high seas on their import journey were and
are well recognized species of transactions done every day on a large scale in big commercial towns like Bombay and Calcutta and are indeed the necessary and concomitant incidents of foreign trade
To hold that these sales or purchases do not take place  in the course of  import or export but are to be regarded as purely ordinary local or home transactions distinct from foreign trade is to ignore the realities of the situation
Such a construction will permit the imposition of tax by a State over and above the customs duty or export duty levied by Parliament
Such double taxation on the same lot of goods will increase the price of the goods and in the case of export may prevent the exporters from competing in the world market and in the case of import will put a greater burden on the consumers
This will eventually hamper and prejudically affect our foreign trade and will bring about precisely that calamity which it is the intention and purpose of our Constitution to prevent
 The learned Judge also in his judgment elaborately considered the great hardship that would be caused to an Indian importer if he was not permitted to sell the goods which were on the high sear by delivery of 861 shipping documents against payment
Though that case dealt with a different situation we agree with the learned Judge s observations that an importer can if he receives the shipping documents transfer the property in the goods when they are on the high seas to a third party by delivering to him shipping documents against payment and such a sale is one made in the course of import
The legal position vis a vis the import
sale can be summarized thus 1 The course of import of goods starts at a point when the goods cross the customs barrier of the foreign country and ends at a point in the importing country after the goods cross the customs barrier 2 the sale which occasions the import is a sale in the course of import 3 a purchase by an importer of goods when they are on the high seas by payment against shipping documents is also a purchase in the course of import and 4 a sale by an importer of goods after the property in the goods passed to him either after the receipt of the documents of title against payment or otherwise to a third party by a similar process is also a sale in the course of import
The next question is whether the sales by the petitioner to the Government of India are sales in the course of import
From the facts narrated supra it is seen that the petitioner pursuant to the earlier contracts entered into with the Government of India delivered the shipping documents including the bill of lading to the Government against payment when the goods were on the high seas
In view of the foregoing discussion it should be held that the sales fall under the fourth principle and therefore they were sales that took place in the course of import of the goods into India
A bill of lading is  a writing signed on behalf of the owner of the ship in which goods are embarked acknowledging the receipt of the goods and undertaking to deliver them at the end of the voyage subject to such conditions as may be mentioned in the bill of lading 
It is well settled in commercial world that a bill of lading represents the goods and the transfer of it operates as a transfer of the goods
The legal effect of the transfer of a bill of 862 lading has been enunciated by Bowen LJ in Sanders Brothers vs Madan  Co 1 thus at p 341 The law as to the indorsement of bills of lading is as clear as in my opinion the practice of all European merchants is thoroughly understood
A cargo at sea while in the hands of the carrier is necessarily incapable of physical delivery
During this period of transit and voyage the bill of lading by the law merchant is universally recognised as its symbol and the indorsement and delivery of the bill of lading operates as a symbolical delivery of cargo
Property in the goods passes by such indorsement and delivery of the bill of lading whenever it is the intention of the parties that the property should pass just as under similar circumstances the property would pass by an actual delivery of the goods
And for the purpose of passing such property in the goods and completing the title of the indorsee to full possession thereof the bill of lading until complete delivery of the cargo has been made on shore to some one rightfully claiming under it remains in force as a symbol and carries with it not only the full ownership of the goods but also all rights created by the contract of carriage between the shipper and the shipowner
It is a key which in the hands of a rightfull owner is intended to unlock the door of the warehouse floating or fixed in which the goods may chance to be
 We have quoted the passage in extenso as it clearly and fully states the law on the subject
It is not disputed that the law in India is also similar to that in England
The delivery of the bill of lading while the goods are afloat is equivalent to the delivery of the goods themselves
The learned counsel concedes that ordinarily that will be so but contends that in the present case the contract clearly indicates that the intention of the parties was that till actual delivery was made the property in the goods would not pass to the buyer
Both the contracts are similar in terms and they follow the standard terms pres cribed by the Government
The main terms of the contracts may be summarized thus 1 863 The first clause defines the term sellers to mean the party selling the sugar and the term the Government to mean the President of India
Clause 2 prescribes that suitable gunny bags approved by the Government should be used for importing sugar
Clause 3 provides for inspection of quality weight and packing of sugar by the Government at the time of shipment
Clause 4 says that sugar shall be shipped to particular ports
Clause 5 compels the sellers to engage steamers on charter terms empowers the Government to take delivery of the goods at the port of discharge from the ship s rail and imposes the burden on the sellers to meet the expenses of stevedoring lighterage where necessary hiring of cranes dock dues and pilotage
Clause 6 deals with the mode of payment for supplies made under that clause the sellers are to submit a bill for full payment of cost and freight value to the Government in the Ministry of Food and Agriculture New Delhi duly supported by a complete set of clean on board bills of lading consisting of three negotiable and three non negotiable copies a certificate of origin of sugar a certificate of quality weight and packing a certificate from the ship owners that the freight has been paid in full and that the ship owners retain no lien whatsoever on the cargo on that account
Under clause 6 c letter of credit shall be opened by the sellers at their cost and the Government of India agree to arrange for the foreign exchange as necessary to the extent of the cost and freight value of the quantity of sugar purchased on the production of an import licence which will be issued on application to the proper authority on their prescribed form
Clause 8 confers on the Government a right in the event of the sellers  failure to supply the sugar in accordance with the terms of the contract to recover any sum as liquidated damages andor by way of penalty upto a prescribed amount
Clause 9 authorizes the Government in the event of the sellers failing to observe or perform any provisions of the contract to terminate the contract forthwith
Clause II under the heading Force Majeure confers on the Government in case delivery in whole or in part is prevented or delayed directly 110 864 or indirectly by any cause of Force Majeure war strikes rebellion insurrection political disturbances civil commotion fire or flood on account of plague or other epidemics the right to cancel the contract for the quantities so prevented or delayed
After the sellers entered into the contracts they obtained the requisite licences from the Government opened letters of credit placed orders with foreign companies engaged a steamer on charter terms took delivery of the goods from the foreign firms and when the goods were on the high seas delivered the documents of title to the Central Government against payment and the said Government taking the licence from the sellers cleared the goods at the Bombay harbour
Let us now scrutinize the terms of the contract to ascertain whether they disclose any intention of the parties that notwithstanding the delivery of the bill of lading against payment the property in the goods should not pass to the Government
The circumstances under which the contracts were entered into between the parties indicate that both the parties were interested to see that property in the goods passed in the ordinary way when the shipping documents were handed over to the Government against payment
The sellers had to meet their liability to the foreign companies with whom they opened letters of credit and the Government must have been anxious to get the title to the goods so that the sellers might not divert the goods towards their other commitments or to other buyers for more tempting prices
Under the contract every safeguard for securing the goods of agreed specifications was provided for in the earlier clauses and therefore there was no reason for postponing the passing of the property in the goods to the buyer till the goods were actually delivered in the port
The sellers on their side would have been anxious that the property should pass when the goods were on the high seas for otherwise they would be compelled to pay sales tax
Nor are the clauses of the contracts relied upon by the respondents inconsistent with the property in the goods passing in accordance with the mercantile usage
The liability undertaken by the sellers to meet the expenses relating 865 to stevedorage lighterage where necessary hiring of cranes dock dues and pilotage at the time of delivery of the goods on which reliance is placed to indicate a contrary intention in our view has nothing to do with the question raised for that liability can rest with the sellers even after the property in the goods has passed to the buyers nor clauses 9 to 11 on which strong reliance is placed by the learned counsel are inconsistent with the property in the goods passing to the buyer they could legitimately be made applicable to a point of time when the property in the goods has not passed to the buyer
If the sellers fail to observe the performance of any provisions of the contracts before the property in the goods passed to the buyer under clause 9 of the contracts the buyer can cancel the contract
So too under cl
II if any contemplated mishap takes place on the high seas by force majeure the seller shall send a cablegram to that effect and the buyer is empowered to cancel the whole of the contract or a part of it
This also applies to a point of time before the property in the goods has passed to the buyer
If on the other hand the seller delivers the shipping documents against payment and thereafter if he does not deliver the goods at the port the buyer may have other remedies for the recovery of damages etc
But that right is not covered by either cl
9 or el
II of the contract
A scrutiny of all the terms of the contract does not indicate the intention that the property in the goods shall not pass to the buyer notwithstanding delivery of shipping documents against payment
Apart from the terms of the contract reliance is also placed by the learned counsel for the respondents on the following circumstances i the seller himself chartered the ship and ii the licence issued by the Government was made non transferable
We do not see how these two facts indicate the contrary intention
If the seller himself chartered a steamer
when the goods he purchased were loaded in the ship the property in the goods passed to him and therefore he was in a position to sell the same to the Government
The fact that the licence was non transferable has no relation to the property in the goods passing 866 to the Government
The licence issued by the Govern ment is an exercise of the statutory power under the relevant Act
Whether the petitioner sold the goods to the Government or to a third party he had to obtain a licence
Indeed in the present case the licence was given to the seller with the express object of fulfilling the contracts with the Government and was issued several days after the contracts were executed and indeed the Government took the licence from the seller and cleared the goods through their officer
For all the foregoing reasons we hold that the property in the goods passed to the Government of India when the shipping documents were delivered to them against payment
It follows that the sale of the goods by the petitioner to the Government of India took place when the goods were on the high seas
That being so the sales in question must be held to have taken place in the course of the import into India and therefore they would be exempted from sales tax under article 2861b of the Constitution
In this view no other question would arise for consideration
ln the result the order of the Assistant Collector of Sales Tax is set aside and that of the Sales Tax Officer is restored
The respondents will pay the costs of the petitioner
Petition allowed


Summary:
The petitioner was detained by an order of the Central Government under section 3 of the 
The Advisory Board which considered the petitioner s case in accordance with the provisions of the Act did not recommend that the order of detention should be withdrawn
The allegations against the petitioner were that he was carrying on propaganda of hatred and contempt against the Government of India and the State of Jammu and Kashmir by sending for publication in a widely published foreign Newspaper false one sided and misleading information about the administration of the State and the condition of India in general and the said State in particular
The petitioner s contentions inter alia were that being a member of the Commonwealth Pakistan where the newspaper was published was not a Foreign State and could not therfore be regarded as a Foreign power that the principles of natural justice where violated by the Advisory Board in considering the respondent s case in his absence and that materials placed before the Advisory Board were not supplied to him
Held that on a correct interpretation of the expression foreign affairs  appearing in Item 9 List 1 Seventh Schedule of the Constitution and the words the relations of India with foreign powers in section 3 Of the Act Pakistan must be regarded as a foreign power although that country might be a member of the Commonwealth like India
Under article 367 3 a country might not be regarded as a Foreign State for the purposes of the Constitution but that country might be a foreign power for other purposes
The Commonwealth is an Association of Nations each having a sovereign status independent of the other in its internal and foreign affairs
The provisions of section 10 of the Act did not offend against the principles of natural justice and the procedure adopted by the Advisory Board in the present case was not in Contravention thereof