Case: M/s. National Tractors Vs. Commissioner of Commercial Taxes, Bangalore

the Deputy Commissioner of Commercial Taxes held that the last purchases had been made by the State Trading Corporation and not by the assessee and it was, therefore, the former that was liable to pay the tax. The Commissioner of Commercial Taxes revised suo motu the order of the Deputy Commissioner and restored that of the assessing authority. The assessee filed an appeal in case of each assessment to the High Court under Section 24 (1) of the Act. 3. The approach of the High Court was on these lines. There were two purchases, one by the the assessee from the mine owner and the other by the State Trading Corporation from it. If the purchase by the State Trading Corporation from the assessee was for the purpose of export then the former would be liable but if the purchase by the State Trading Corporation. was one in the course of export of goods out of the territories of India the last purchase would be that of the assessee from the mine owners and it would be the assessee on whom the incidence of tax would fall. The High Court relied largely on a decision of this Court in B. K. Wadeyar v. M/s. Daulatram Rameshwarlal, (1961) 1 SCR 924 = (AIR 1961 SC 311 ) and, after noticing Article 286 of the Constitution, as amended by the Constitution Sixth Amendment Act 1956 and Section 5 of the Central Sales Tax Act 1956 as also the conditions and nature of the contracts entered into between the parties, found that the transactions between the assessee and the State Trading Corporation were in the course of export and therefore the Corporation had no liability to pay the tax. Reliance was placed on the presumption in the case of F. O. B. contracts that property in the goods passed when they were put on board the ship in the absence of special circumstances pointing to the passing of the property at some other point of time. The following portion from the judgment of the High Court may be reproduced: "The only other circumstances specially relied upon by the appellant wire that at an earlier point of time when the goods were being transported by rail, the railway documents were made out in the name of STC and that the appellant had been enabled to borrow moneys from banks on the hypothecation or security of the goods themselves. The former circumstance, in our opinion, cannot be regarded as conclusive or decisive because even after the goods were discharged at the, railway station at Hubli the responsibility of transporting them by road to Karwar port and loading them in the ship beyond the customs barrier still remained with the appellant in terms of the contract between him and the STC. The fact that the appellant was enabled to hypothecate the goods is, if anything, a circumstance more against the appellants contention than in favour of it. The certification by the STC, on the strength of which such hypothecation of goods was made possible, does not indicate anything more than that wherever the assistance of the STC was necessary, it was made available to the appellant under the terms of the contract, for example, in the matter of arranging for railway wagons for transport from Hospet to Hubli. In any event these circumstances are quite equivocal and never so firm as to displace the normal presumption attaching to F. O. B. contracts to the effect that the title in the goods covered by such contracts passes to the buyer only when the goods are put on board ships." 4. In our judgment the crucial point that fell to be determined was whether the property passed to the State Trading Corporation pursuant to contracts entered into between the parties within the State of Mysore? If the property did not so pass to the Corporation the last purchaser would be the assessee. Admittedly the contracts entered into between the parties were F. O. B, and the normal rule in such contracts is that the property is intended to pass and does pass on the shipment of the goods. In other words in the absence of special agreements the property in the goods does not pass in case of such contracts until the goods are actually put on board the ship.The High Court has enumerated with care all the material conditions which were to be found in the contracts as also the manner in which the transportation of the goods took place apart from the payment of price and the arrangement about obtaining of advances by the assessee by hypothecation of goods. We are unable to find any infirmity in the approach and reasoning of the High Court on the question of passing of property in the goods in the light of the presumption which arises in the case of F. O. B. contracts. We would accordingly affirm the conclusion of the High Court that the assessee was the last purchaser of the iron ore within the State and was thus liable to pay tax in accordance with the provisions of the Act. 5. In one of the appeals a minor question arose relating to the imposition of tax in respect of sale of tyres and tubes by the assessee to the National Transport Hubli. It was argued before the High Court that the assessee was not a regular dealer in tyres and tubes and that there was no profit motive in selling those articles. The case of the assessee was that the supply of these tyres and tubes had been made to the transport contractors to ensure that the terms of the assessees contracts with the State Trading Corporation were fully and properly complied with.Before us the learned counsel for the State has quite rightly and properly agreed, in view of the comparatively small amount of tax involved, that the assessee would not be called upon to pay the tax on the sale of those tyres and tubes.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]We are unable to find any infirmity in the approach and reasoning of the High Court on the question of passing of property in the goods in the light of the presumption which arises in the case of F. O. B. contracts. We would accordingly affirm the conclusion of the High Court that the assessee was the last purchaser of the iron ore within the State and was thus liable to pay tax in accordance with the provisions of the Act5. In one of the appeals a minor question arose relating to the imposition of tax in respect of sale of tyres and tubes by the assessee to the National Transport Hubli. It was argued before the High Court that the assessee was not a regular dealer in tyres and tubes and that there was no profit motive in selling those articles. The case of the assessee was that the supply of these tyres and tubes had been made to the transport contractors to ensure that the terms of the assessees contracts with the State Trading Corporation were fully and properly complied with.Before us the learned counsel for the State has quite rightly and properly agreed, in view of the comparatively small amount of tax involved, that the assessee would not be called upon to pay the tax on the sale of those tyres and tubes.