Case: Murarilal Sarawagi Etc Vs. The State Of Andhra Pradesh

These six appeals are by special leave from the judgment dt. 26th February, 1974 of the Andhra Pradesh High Courthe appellants contended before the Sales Tax authorities that their sale of manganese ore to the Mines and Minerals Trading Corporation, in short called the M.M.T.C., were complete within the state of Andhra Pradesh. The appellants, therefore, contended that they were not the last purchasers but the M.M.T.C. was the last purchaser within the State, and, therefore, the M.M.T.C. was liable to pay the tax3. The High Court came to the conclusion that the appellants were the last purchasers in the State. The High Court held that the contract between the appellants and the M.M.T.C. indicated that the appellants contract of sale occasioned the export and that the contract of the appellants with the M.M.T.C. was integrally connected with the contract entered into by the M.M.T.C. with their foreign buyer. In short, the High Court held that there existed a bond between the contracts of sale entered into by the appellants with the M.M.T.C. and the actual exportation of the goods. The High Court held that these contracts were intrinsically linked and connected and the sales effected were held to be sales in the course of export of manganese ore out of the territory of India.

Reasoning: 10. 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 chair 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 then delivery is made to the steamer. See Duni Chand Rataria vs. Bhuwalka Brothers Ltd. 1955 1 SCR 1071.   In F.O.B. contracts the sellers 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 mates 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 universal rule is that property and risk both pass on shipment as soon as the goods are over the ships rail and if it should be material, the property and risk in each part of the cargo will pass as it crosses the ships rail. The loading of the goods in an unconditional appropriation which passes the property. This is not because of any peculiarity of F.O.B. contracts but because in this type of contract the sellers 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 natural that they should thereafter be at the buyers risk13. This Court in Serajuddins case 1975 Supp. SCR 169 : 1975 CTR (SC) 139   has laid down that the mere mention of F.O.B. price or F.O.B. delivery in a contract between a merchant and the STC 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 STC on F.O.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 Serajuddins case 1975 Supp. SCR 169 : 1975 CTR (SC) 139   the decision in National Tractors, Hubli vs. Commissioner of Commercial Taxes, Bangalore 1971 3 SCC 143     is no longer good law14. In the National Tractors case 1971 3 SCC 143     which was a Three Judge Bench decision reliance was placed on the decision in B. K. Wadeyar vs. M/s. Daulatram Rameshwarlal 1961 1 SCR 924.   In Wadeyars case 1961 1 SCR 924     this Court said that the normal presumption attaching to F.O.B. contracts is that property in the goods passes only when they are put on board the ship. Wadeyars case 1961 1 SCR 924     was before the Central ST 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 port15. In the National Tractors case 1971 3 SCC 143     it was said that the purchase by the State Trading Corporation from the merchant was in the course of export by the STC to the foreign buyer and, therefore, the purchase by the merchant from the mine owner was the last purchase in the State. The basis of the decision is that these were integrated F.O.B. contracts in the course of export16. The decision in National Tractors 1971 3 SCC 143     was made no reference to the decision of this Court in Coffee Board case 1970 3 SCR 147.   The correct law is laid down by this Court in the Coffee Board case 1970 3 SCR 147     and Serajuddins case 1975 Supp. SCR 169 : 1975 CTR (SC) 139. 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.