ORDER
Jagadisan, J.
1. The petitioner is a business firm of partnership at Panipet, North Arcot district, dealing in hides and skins. It also does business as tanners converting raw hides and skins into dressed goods and selling them. The firm is a licensed dealer and tanner under the Madras General Sales Tax Act exigible to tax under that Act. For the year 1955-56 the firm submitted a return of nil turnover to the Deputy Commercial Tax Officer, Arcot. The officer scrutinised the firm's accounts and assessed the firm on a net turnover of Rs. 4,92,191-3-9. This turnover included the purchase value of raw skins and hides in the State, sales value of tanned skins sold inside the State and the sales value of waste materials like javvu, mudi etc. On appeal by the firm, the Commercial Tax Officer, Vellore, reduced the net turnover to Rs. 4,57,295-6-3. There was a further appeal to the Sales Tax Appellate Tribunal by the assessee which ended in a confirmation of the assessment of the taxing authorities, subject to a slight modification in regard to the licence fee with which we are not now concerned.
2. The assessee's opening stock of raw hides and skins at the commencement of the assessment year 1955-56, was of the value of Rs. 32,051. This stock of goods was purchased by the assessee during the year 1954-55 and having remained unsold or untanned was brought forward as the opening stock for the year 1955-56. The assessee contended before the Appellate Tribunal that the value of the opening stock should not be included in the sales turnover of the tanned stock which admittedly came out of the untanned opening stock. We shall advert to the details of this contention a little later. The Tribunal rejected this contention. It was further contended before the Tribunal on behalf of the petitioner that two items of transactions of sale put through Gordon Woodroffe and Co., Ltd., and Dharamsee Parpia of the turnover value of Rs. 74,282-0-9 and Rs. 4,268-10-6 respectively were exempt from taxation as they constituted export sales or sales in the course of export, hit by the provisions of Article 286 of the Constitution. This contention was also rejected by the Tribunal.
3. In this revision petition, the petitioner urged the following three grounds: The sale of tanned hides and skins resulting from the opening stock of the raw hides and skins at the commencement of the year 1955-56 should not be included in the sales turnover of the tanned hides and skins during the year 1955-56 ; (2) the sale of tanned hides and skins through the Gordon Woodroffe and Co. for the amount of Rs. 74,266-0-9 was a sale in the course of export and was therefore exempt from taxation; and (3) that the sale of tanned hides and skins of the value of Rs. 4,268-10-6 effected through Dharamsee Parpia, Madras, was an export sale in favour of Sriven Bros. (Eastern) Ltd., London, not exigible to tax.
4. We shall now examine the tenability of the first contention. The assessee-firm was a licensed dealer and tanner both in the years 1954-55 and 1955-56. The opening stock of raw hides and skins of the year J955-56 was admittedly purchased by the firm during the year 1954-55 from unlicensed dealers. Hides and skins, tanned or untanned, raw or dressed, are subject to levy of sales tax at a single point in a series of sales by successive dealers, and this single point of taxation is to be prescribed by the rules under the Act. The relevant statutory provision in the year 1955-56 was Section 5(vi) of the Act which was in these terms :
The sale of hides and skins, whether tanned or untanned shall be liable to tax under Section 3, Sub-section (1), only at such single point in the series of sales by successive dealers as may be prescribed.
5. Madras Act I of 1957 amended the said provision and introduced Section 5-A, Clause (4), in these terms :
The sale of hides and skins, whether in a raw or dressed state, shall be liable to tax only at such single point in the series of sales by successive dealers as may be prescribed but at the rate of two per cent, on the turnover at that point.
6. The general charging section, Section 3 of the Act, while exempting a dealer whose total turnover in any year is less than Rs. 10,000, from assessment to tax does not confine the assessment to a single point but permits, by necessary implication, a multipoint assessment. But the proviso to Section 3(2) of the Act enacts that in respect of the same transaction of sale, the buyer or the seller, but not both, shall be taxed. The commodity of hides and skins has always been subject to a single point assessment under the Act. Rule 16 of the Turnover and Assessment Rules, as it stood in the year 1954-55, was as follows :
1. In the case of hides and skins the tax payable under Section 3(1) shall be levied in accordance with the provisions of this rule.
2. No tax shall be levied on the sale of untanned hides or skins by a licensed dealer in hides or skins except at the stage at which such hides or skins are sold to a tanner in the State or are sold for export outside the State-
(i) in the case of all untanned hides or skins sold to a tanner in the State, the tax shall be levied from the tanner on the amount for which the hides or skins are bought by him;
(ii) in the case of all untanned hides or skins which are not sold to a tanner in the State, but are exported outside the State, the tax shall be levied from the dealer who was the last dealer not exempt from taxation under Section 3(3) who buys them in the State on the amount for which they were bought by him.
3. Sales by licensed dealers of hides or skins which have been tanned within the State shall be exempt from taxation provided that the hides or skins have been tanned in a tannery which has paid the tax leviable under the Act. If such hides or skins have been tanned in a tannery which is exempt from taxation under Section 3(3), the sale of such hides or skins shall be liable to taxation as under the next sub-rule below dealing with hides or skins tanned outside the State.
4...
5. Sale of hides or skins by dealers other than licensed dealers in hides or skins shall, subject to the provisions of Section 3, be liable to taxation on each occasion of sale.
7. Rule 16(5) was challenged as being ultra vires on the ground that it ran counter to the substantive enactment which permitted only a single point assessment on hides or skins. This Court upheld that contention in Syed Mohamed's case, [1952] 3 S.T.C. 367 which was affirmed by the Supreme Court in V. M. Syed Mohamed v. State of Andhra [1957] S.C.R. 1117. The State of Madras deleted Clause (5) of Rule 16 by G.O. 450, Revenue, dated 26th February, 1954. During the year 1954-55, Clauses (1) to (4) of Rule 16 were in operation. Rule 16 was amended by G. O. No. 2733, Revenue, dated 3rd September, 1955, with retrospective effect from 1st April, 1955, and the substituted rule is as follows:
1. In the case of untanned hides and/or skins the tax under Section 3(1) shall be levied from the dealer who is the last purchaser in the State not exempt from taxation under Section 3(3) on the amount for which they are bought by him.
2. (i) In the case of hides or skins which have been tanned outside the State the tax under Section 3(1) shall be levied from the dealer who in the State is the first dealer in such hides or skins not exempt from taxation under Section 3(3) on the amount for which they are sold by him;
(ii) In the case of tanned hides or skins which have been tanned within the State, the tax under Section 3(1) shall be levied from a person who is the first dealer in such hides or skins not exempt from taxation under Section 3(3) on the amount for which they are sold by him.
Provided that, if he proves that the tax has already been levied under Sub-rule (1) on the untanned hides and skins out of which the tanned hides and skins had been produced, he shall not be so liable.
3. The burden of proving that a transaction is not liable to taxation under this rule shall be on the dealer.
8. In 1957 by G.O. No. 1433, dated 30th March, 1957, the rule was further amended and the amended rule is as follows :
1. In the case of raw hides and/or skins the tax under Section 5-A (iv) shall be levied from the dealer who is the last purchaser in the State not exempt from taxation under Section 3(3) on the amount for which they are bought by him.
2. (i) In the case of hides and skins which have been dressed outside the State the tax under Section 5-A(iv) shall be levied from the dealer who in the State is the first dealer in such hides or skins not exempt from taxation under Section 3(3) on the amount for which they are sold by him.
(ii) In the case of dressed hides or skins which have been dressed within the State, the tax under Section 5-A(iv) shall be levied from a person who is the first dealer in such hides or skins not exempt from taxation under Section 3(3) on the amount for which they are sold by him:
Provided that, if he proves that the tax has already been levied under Sub-rule (1) on the raw hides and skins out of which the dressed hides and skins had been produced, he shall not be so liable.
3. The burden of proving that a transaction is not liable to taxation under this rule shall be on the dealer.
9. We are now concerned with Rule 16 as it stood on 1st April, 1955, by the amendment brought in by the G.O. dated 3rd September, 1955.
10. The assessee's sale of tanned hides or skins in the year 1955-56 falls squarely within rule i6(2)(ii), there being no dispute that the tanning of the hides or skins was done within the State, and that the petitioner was the first dealer of such tanned hides or skins. It will be open to the assessee to claim the benefit of the proviso, if a tax had already been levied under Sub-rule (1) of Rule 16 on the untanned hides and skins out of which the tanned hides and skins were produced. It is admitted by the petitioner that the firm's purchase turnover of the untanned hides and skins did not suffer tax either during the year 1955-56 or in the previous year 1954-55. The contention urged on behalf of the petitioner is that under Rule 16 as it stood in the year 1954-55 prior to the amendment dated 3rd September, 1955, with retrospective effect from 1st April, 1955, the firm's purchase turnover of untanned hides and skins was liable to assessment under Rule 16(2)(i) as the purchase was by a tanner in the State of untanned skins or hides, and that the State having omitted to assess cannot deprive the firm of the advantage or benefit of the proviso to Clause (2) of Rule 16 under the amended rule. The Appellate Tribunal took the view that the proviso applied only to a case where the purchases themselves were made in the year in which the sales were effected. It is not necessary for us to examine the correctness of this view as we are of opinion that the petitioner could not have been subjected to assessment under Rule 16(2)(ii) as it stood prior to the amendment in 1955. Rule 16(2) of the old rule clearly governed the sale of untanned hides or skins by a licensed dealer. If a licensed dealer sold untanned hides or skins to a tanner in the State, the tax was to be levied from the tanner on the amount for which he bought them. Admittedly the petitioner purchased untanned skins and hides in the year 1954-55 only from persons other than licensed dealers.
11. In Hajee Abdul Shukoor and Co. v. State of Madras [1955] 6 S.T.C. 352 a Full Bench of this Court considering Rule 16 as it stood before 1955 held that purchases of untanned hides and skins by tanners from persons other than licensed dealers are not within the rule. It further held that in computing the purchase turnover of a licensed tanner only the sales to him from licensed dealers could be included. The question of law which was referred to the Full Bench was in these terms : 'Whether a licensed tanner, who purchased untanned hides and skins from an unlicensed dealer is liable to be taxed on his turnover under Rule 16(2) or under any other provision of the Madras General Sales Tax Act and the rules framed thereunder.' The answer to the question was in these terms at page 367 :
Our answer to the question referred to us therefore is that in computing the purchase turnover of a licensed tanner only the sales to him from licensed dealers could be included.
12. At page 364 Rajagopala Ayyangar, J., delivering the judgment of the Full Bench recorded the conclusion of the Full Bench as follows :
The conclusion we have reached as a result of the above discussion is that (i) the charging provision, Section 3, is subject, in the case of transactions in hides/and skins, to the terms of Section 5(vi) under which a single point of taxation in a series of sales has to be fixed by the Rules; (2) Rule 4(2) is not the fixation of a single point within Section 5(vi) but is merely designed to determine whether it is the buyer or the seller that shall be liable to be taxed ; (3) the single point is fixed and the liability to tax is established only under Rule 16; and (4) that under Rule i6(2)(i) it is only the sale of untanned hides and skins by a licensed dealer to a licensed tanner who tans the same that gives rise to a tax liability and that purchases of untanned hides and skins by tanners from persons other than licensed dealers are not within the taxing provisions.
13. This decision was followed by a Division Bench of this Court in Munuswami Mudaliar and Co. v. State of Madras [1956] 7 S.T.C. 1. In that case the assessees were licensed tanners and dealers in hides and skins. They purchased raw hides and skins outside the State and did not therefore pay tax on the purchase price under Rule 16(2) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939. The Sales Tax Authorities held that when these goods were tanned in the assessees' tannery and were sold by them as tanned hides and skins they were bound to pay sales tax on their sale turnover on the ground that they had not paid sales tax at the stage of their purchase. It was held that the sales turnover of the assessees was not liable to tax under the provisions of the Madras General Sales Tax Act and the rules framed thereunder as the Act directs the rules to prescribe a single point for taxation and unless the rule prescribes such a single point no tax liability can accrue. The actual decision in the case cannot any longer be of interest in view of the amendment of Rule 16 in 1955. The amended rule has omitted reference to purchase from licensed dealer and the present position therefore is that all purchases whether from licensed or from unlicensed dealer come within the ambit of the amended rule.
14. This view of the Madras High Court has been followed by a Full Bench of the Andhra Pradesh High Court in State of Andhra Pradesh v. M.A. Abdul Bari and Co. [1958] 9 S.T.C. 231 The following two questions were referred to and considered by the Full Bench: '(1) Whether a licensed tanner is liable to pay sales tax on the amount for which hides and skins were bought by him from the unlicensed dealer ; (2) Whether a licensed dealer who purchases the said goods for export outside the State from an unlicensed dealer is liable to tax on the amount for which the said goods were bought by him.' Both the questions were answered in the negative. At page 245, Subba Rao, C.J., as he then was, has summarised the position thus :
Section 3 is the charging section. Section 5 exempts certain commodities from taxation under Section 3(1) and gives some concession in regard to other commodities by providing single point taxation instead of multi-point taxation under Section 3(1). One of such commodities is hides and skins. Under Rule 5(e) of the Madras General Sales Tax Rules, the accrual of the concession is conditioned by the taking of a licence. If the licence is not taken or renewed, the concession is withdrawn. Rule 4(2) of the Madras General Sales Tax (Turnover and Assessment) Rules says nothing more than that, in the case of the said commodity, the amount for which the goods are bought by the dealer is the turnover on which tax is leviable. It does not either in express terms or by necessary implication localise the stage or the transaction in regard to which the tax becomes exigible. That is expressly done by Rules 15 and 16, which provide for the levy and collection of taxes. They indicate beyond any reasonable doubt that the levy of sales tax is on the turnover representing the price for which a licensed tanner or exporter purchases from a licensed dealer. Rule 16, therefore, fixes the stage and levies the tax, where there are a series of transactions between licensed dealers, on the last licensed dealer whether he is a tanner or exporter.
15. Mr. M. R. M. Abdul Karim, learned counsel for the petitioner, however urged that the decision of this Court in Abdul Shukoor's case, [1955] 6 S.T.C. 352 and the Full Bench decision of the Andhra Pradesh High Court can no longer be considered to be good law in view of the decision of the Supreme Court in State of Madras v. Noor Mohammed and Co. [1960] 11 S.T.C. 570 It is therefore necessary to consider the scope of the Supreme Court decision, and to ascertain the ratio of that decision. The assessee in that case was a partnership firm carrying on tannery business at Chromepet near the City of Madras. It did not take out a licence for the assessment year 1952-53. It was assessed to/sales tax of Rs. 10,584 on a turnover of Rs. 6,77,373-4-4. The firm filed a writ petition under Article 226 of the Constitution to quash the assessment order on the ground that it was illegal. This contention was accepted by this Court in the decision in M.A. Noor Mohammed and Co. v. State of Madras [1956] 7 S.T.C. 792. The contention of the assessee was that under Section 5(vi) of the Act, the liability to pay sales tax in respect of hides and skins could only be at a single point, that the rule limiting the operation of this mode of taxation to licensed dealers was ultra vires, and that therefore Rule 16(5) of the Madras General Sales Tax (Turnover and Assessment) Rules was void and inoperative. It was this contention which found favour in this Court that was repelled by the Supreme Court. The Supreme Court held that there was no inconsistency between Rule 16(5) of the Turnover and Assessment Rules and Section 5(vi) of the Act. We have already extracted Clause (5) of Rule 16 which permitted taxation on each occasion of sale in respect of sales of hides and skins by dealers other than licensed dealers. The learned Judges of the Supreme Court held that all that Rule 16(5) did was to emphasise the consequence of non-observance of the conditions which Sections 5(vi) and 6-A of the Act have in clear terms prescribed. The substance of the decision of the Supreme Court is that the benefit of a single point assessment was available only to licensed dealers or tanners as prescribed by the rules, and that the unlicensed dealers and tanners came under the general charging section of the Act, inevitably, by reason of the non-obtaining of the licence. We are unable to see how this decision of the Supreme Court which does not of course expressly refer to the decision of the Full Bench in Shukoor's case, [1955] 6 S.T.C. 352 can be said to have overruled it by necessary implication. We are clearly of opinion that the authority of the Full Bench of this Court in Shukoor's case, [1955] 6 S.T.C. 352 is not in any way undermined or shaken by the decision of the Supreme Court in Noor Mohammed's case, [1960] 11 S.T.C. 570.
16. The petitioner's purchase turnover of raw hides and skins during the year 1954-55 in respect of the opening stock of the year 1955-56 was not within the ambit of Rule 16 as it was in 1954-55. The petitioner could not have been assessed on such turnover and there was no omission on the part of the State to assess the firm in that year. The petitioner cannot claim the benefit of the proviso to Rule 16(2) as it was neither in fact assessed to tax on the purchase turnover of the raw hides and skins ; nor in law was it liable to be so assessed under the Act or the rules.
17. The learned counsel for the petitioner contended that the petitioner came within the general charging section of the Act, if Rule 16 was not applicable in the year 1954-55, and that Section 3(1) of the Act read with Rule 4 of the Turnover and Assessment Rules subjected the petitioner to tax assessment on the purchase turnover of the raw hides and skins and the State having failed to make such assessment cannot invoke Rule 16 in the year 1955-56 to assess it to tax on the sale turnover of the tanned goods which included raw hides and skins purchased in the previous year. It is quite obvious that the petitioner cannot invoke Rule 4 of the Turnover and Assessment Rules as that rule does not provide the fixation of a single point within Section 5(vi) of the Act, as it stood or within Section 5-A(iv) as it now stands. That rule is merely designed to determine whether it is the buyer or the seller that shall be liable to be taxed. This view received support from the decision of the Full Bench of this Court in Abdul Shukoor's case, [1955] 6 S.T.C. 352 and State of Andhra Pradesh v. M.A. Abdul Bari and Co. [1958] 9 S.T.C. 231 The petitioner was a licensed tanner and dealer even in 1954-55. The charging section, Section 3 of the Act, was subject to Section 5(vi) which is mandatory and renders sale of hides and skins liable to tax under Section 3(1) only at a single point in the series of sales by successive dealers as may be prescribed. Rule 16 of the Turnover and Assessment Rules is the only rule which prescribes such single point. A dealer in skins and hides must therefore be governed only by Rule 16 and if it so happens that he is outside the scope of that rule the charging section, Section 3, will not enable any tax to be levied. In other words, in respect of hides and skins the fixation of a single point in a series of transactions was a condition precedent or an essential sine qua non for the accrual of the tax liability. This is the principle laid down by the Division Bench of this Court in Munuswami Mudaliar's case, [1956] 7 S.T.C. 1. This principle does not run counter to the decision of the Supreme Court in Noor Mohammed's case, [1960] 11 S.T.C. 570 as what all the Supreme Court said in that decision was that Rule 16(5) which exposed an unlicensed dealer to multiple points of taxation was not ultra vires. The Act is quite explicit that subject to such restrictions and conditions as may be prescribed by the rules the sale of hides and skins shall be liable to tax only at such single point as may be prescribed. In the absence of fixation of a point in the series of sales by successive dealers, the assessee cannot contend that the charge should be only at the purchase point. The decision of the Supreme Court in Noor Mohammed's case, [1960] 11 S.T.C. 570 does not help the assessee to advance this contention.
18. We wish to add that if an assessee comes within the ambit of the taxing enactment and the rules framed thereunder in any particular year, he cannot plead immunity from assessment on the basis of the prior taxing law which is no longer in operation, or on the hypothesis or supposition of tax liability that might have been imposed but was not in fact imposed. Having considered the contention of the learned counsel for the petitioner in all its aspects we have no hesitation in holding that there is no warrant for exemption of the purchase value of the opening stock of hides and skins in computing the sales turnover of the tanned hides and skins in 1955-56.
19. We have now to deal with the question whether the sales to Gordon Woodroffe and to Dharamsee Parpia are sales which are outside the Madras General Sales Tax Act by reason of Article 286 of the Constitution. The Constitution prohibits a State from imposing a tax on the sale or purchase of goods where such sale or purchase takes place in the course of the import of the goods into or export of the goods out of the territory of India. A sale by a dealer in the State to a foreign buyer outside the Indian territory is a sale which occasions an export and may be called a direct export sale. No State law can impose a tax on such export sales. A sale in the course of export is something different from a direct export sale as such a sale need not be to a foreign buyer but can be made by a dealer in the State so as to pass the property in the goods sold after exportation.
20. In State of Travancore-Cochin v. Bombay Co. Ltd. : [1952]1SCR1112 known as First Travancore case, the Supreme Court elucidated the meaning of Article 286 of the Constitution imposing a ban on the States to enact laws in respect of sales in the course of export. At page 1118, Patanjali Sastri, C.J., observed thus :
A sale by export thus involves a series of integrated activities commencing from the agreement of sale with a foreign buyer and ending with the delivery of the goods to a common carrier for transport out of the country by land or sea. Such a sale cannot be dissociated from the export without which it cannot be effectuated, and the sale and the resultant export form parts of a single transaction. Of these two integrated activities, which together constitute an export sale, whichever first occurs can well be regarded as taking place in the course of the other. Assuming without deciding that the property in the goods in the present cases passed to the foreign buyers and the sales were thus completed within the State before the goods commenced their journey as found by the Sales Tax Authorities, the sales must, nevertheless, be regarded as having taken place in the course of the export and are, therefore, exempt under Article 286(1)(b). That clause indeed, assumes that the sale had taken place within the limits of the State and exempts it if it took place in the course of the export of the goods concerned.
21. Again at page 1120 :
We accordingly hold that whatever else may or may not fall within Article 286(1)(b), sales and purchases which themselves occasion the export or the import of the goods, as the case may be, out of or into the territory of India come within the exemption and that is enough to dispose of these appeals.
22. In State of Travancore-Cochin v. Shanmugha Vilas Cashew-nut Factory : [1954]1SCR53 known as the Second Travancore case, the Supreme Court had again occasion to consider Article 286 of the Constitution. The majority judgment of the Court points out that a purchase for export by a dealer in the State cannot be called a sale in the course of export. A purchase for the purpose of export by a dealer in the State from another dealer in the State is only a home transaction and it is only where the goods are sold to a buyer abroad, the sale occasions an export transaction. Their Lordships of the Supreme Court point out that it is entrance of the articles into the export stream that marks the start of the process of exportation and that the course of export or of the import into the territory of India does not commence or terminate until the goods cross the customs barrier.
23. Section 5 of the Central Sales Tax Act, 1956, enacted in pursuance of the power conferred by amended Clause (2) of Article 286 lays down the principles for determining when a sale or purchase takes place in the course of import or export. Section 5(1) : '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 or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India.' Sub-section (2) relates to import and need not be set out.
24. The two relevant criteria therefore that mark a transaction hit by Article 286 are : (i) where a sale or purchase occasions an import into or an export out of the territory of India, and (ii) where a sale or purchase takes place after the goods have crossed the customs barriers of India by transfer of shipping documents. In Wadeyar v. Daulatram Rameshwarlal [1960] 11 S.T.C. 757 the Supreme Court held as follows:
If, in respect of a sale, the property in the goods passes to the buyer after the goods have, for the purpose of export to a foreign country, crossed the customs frontier, the sale is said to have taken place 'in the course of export' and is therefore exempt from taxation under Article 286(1)(b) of the Constitution.
In the case of a FOB contract, in the absence of special agreement, the property in the goods does not pass until the goods are actually put on board.
25. In the light of the above principles we have to consider the nature of the two transactions, the first in favour of Gordon Woodroffe and Co. and the second in favour of Dharamsee Parpia. It must be mentioned even at the outset that the petitioner was not directly a party to these two transactions but acted only through its representative, Kovai Tanned Leather Co., Madras. Kovai Tanned Leather Co. acted as agent of the petitioner on commission basis and was not itself the owner of the goods sold. The ledger page of the petitioner in the accounts of the Kovai Tanned Leather Co. (a copy of which was produced before us) clearly shows that the petitioner was treated as the owner of the goods, the value of the goods being credited to its account, and all expenses like freight, insurance, baling charges, godown charges, commission being debited to its account. This relationship between Kovai Tanned Leather Co. and the petitioner, of agent and principal, cannot be disputed. The sale to Dharamsee Parpia for an amount of Rs. 4,268-10-6 was really an export sale in favour of Sriven Brothers (Eastern) Ltd. Dharamsee Parpia merely acted as the agent of the London company. The contract which is in the official contract form No. IV is dated 16th March, 1956, and is between Kovai Tanned Leather Co. and Sriven Brothers (Eastern) Ltd. On 17th March, 1956, Dharamsee Parpia wrote to Kovai Tanned Leather Co. as follows: 'We acknowledge receipt of your acceptance of date for the following goods sold to Messrs Sriven Brothers (Eastern) Ltd., London, S.E.I., which we confirm in all respects'. Dharamsee Parpia styled Messrs Sriven Brothers (Eastern) Ltd. as their principals. There is no mistaking the fact that this is a clear instance of a direct export sale between the foreign buyer, Messrs Sriven Brothers (Eastern) Ltd. and the local dealer, the petitioner acting through its representative Kovai Tanned Leather Co. The Tribunal has refused to accept this transaction as an export sale on the ground that Kovai Tanned Leather Co. delivered the goods to the exporter and thereafter the exporter obtained the bills of lading, and that the sale became complete in Madras State before shipment. Where there is privity of contract between the foreign buyer and the seller in the taxing territory and the concluded sale between them occasions the export even if the property in the goods sold passes within the territory the transaction is nevertheless one in respect of which Article 286 imposes a ban on the State to levy tax. Patanjali Sastri, C.J., in State of Travancore-Cochin v. Bombay Co. Ltd. : [1952]1SCR1112 has referred to this aspect of the matter in the following words :
Assuming without deciding that the property in the goods in the present cases passed to the foreign buyers and the sales were thus completed within the State before the goods commenced their journey as found by the Sales Tax Authorities, the sales must, nevertheless, be regarded as having taken place in the course of the export and are, therefore, exempt under Article 286(1)(b).
26. We are unable to agree with the reasoning of the Appellate Tribunal and we hold that the transaction of the petitioner with Dharamsee Parpia is not liable to assessment of sales tax.
27. What remains for consideration is the transaction of the petitioner with or through Gordon Woodroffe and Co. The relevant terms of the contract have been extracted in the judgment of the Appellate Tribunal. It is in the form of a letter by Gordon Woodroffe and Co. to Messrs Kovai Tanned Leather and Co. It begins with the words : 'We confirm buying from you for resale the following subject to U. K. import licence and conditions of U. K. CIF...' The important terms are : (i) Landed weights to be accepted, (ii) Payment on presentation of documents in order, (iii) It is understood that the above goods are for resale in U.K. (iv) Seller (petitioner) to be responsible for selection and quality of the goods at destination where inspection and acceptance thereof will be made by our agents or the ultimate buyers irrespective of any inspection or re-assortment, (v) We (Gordon Woodroffe and Co.) have a charge or lien on all your goods and credit balance with us for all moneys advanced by us including expenses incurred, claims and interest thereon, (vi) Insurance through G.W. and Company (M) Ltd. The bill of lading in regard to the consignment was no doubt obtained in the name of Gordon Woodroffe and Co. But an important feature which is to be noted is that the petitioner gets an advance of about 80 or 90 per cent, of the price of the goods sold at the time of the delivery of the goods in the godown of Gordon Woodroffe but obtains the balance only after presentation of the shipping documents. Before the Tribunal the manager of the hides and skins department of Gordon Woodroffe and Co. was examined as a witness. He deposed as follows:
Messrs Gordon Woodroffe arrange for the shipment of the goods, as the agents of Kovai Leather Manufacturing Co. We take the bills of lading, sometimes in our names, and sometimes in the name of Kovai Leather Manufacturing Co. But I am not sure what happened in 1955-56. When the goods are delivered in our godown, we advance about 80 or 90 per cent, of the price to Kovai Leather Trading Co. on the security of the goods.
28. To a question put by the Tribunal the answer was as follows : 'We (i.e., Gordon Woodroffe) become owners of the goods after the goods are shipped. After the bills of lading are received, we (i.e., Gordon Woodroffe) become owners of the goods.... We make entries in our purchase account only after shipment when we receive the bills of lading from the steamer agents.
29. The terms of the contract read along with the evidence of the manager of Gordon Woodroffe show that the property in the goods passes only beyond the customs frontier and not before. Neither the fact of delivery of the goods by Kovai Tanned Leather Co. in the godown of Gordon Woodroffe and Co., nor the fact of the bill of lading having been taken in the name of Gordon Woodroffe would have the effect of passing the property within the State. The advance received by the petitioner is treated as a loan and not as part payment of the price. Indeed the consigned goods constitute security in favour of Gordon Woodroffe and Co. for the amount of the loan advanced. This can only mean that the property in the goods remained with the petitioner till the goods were put on board the ship. The Appellate Tribunal took the view that because Gordon Woodroffe and Co. themselves transported the goods through the customs barrier and placed them on board the ship and obtained the bill of lading, there could be no question of the property in the goods passing to the buyer after the goods had passed through the customs barrier. We are unable to appreciate the soundness of this reasoning. The purchase was made by Gordon Woodroffe either for an undisclosed foreign principal, or for the purpose of resale in the foreign territory. The real question for consideration is whether the sale is in the course of export. It cannot be presumed that Gordon Woodroffe became the owner of the goods, by reason of the delivery in their godowns within the customs frontier or by reason of the bill of lading having been obtained in their name. As pointed out by this Court in Gandhi Sons Ltd. v. Slate of Madras [1955] 6 S.T.C. 694 two views are possible as to the inference to be drawn from the goods being consigned in the name of the buyer. ' One is that the seller reserves the jus disponendi in himself till the documents are presented to the buyer and the payment is made. That is the case which is provided by Section 25(3) of the Sale of Goods Act. The other is that the property passes immediately and the seller retains possession of the bills only for the purpose of claiming a lien on the goods to secure payment of the price, he having parted with the property in them. That the first of the above alternatives is the normal rule would appear to be favoured by the judgment of the Supreme Court in Commissioner of Income-tax, Madras v. Mysore Chromite Ltd. : [1955]27ITR128(SC) . A proper interpretation of the terms of the contract in the present case leads us to the conclusion that the property in the goods forming the subject-matter of the contract between the petitioner acting through Kovai Tanned Leather Co., and Gordon Woodroffe and Co., passed only beyond the customs frontier and that the transaction is one in the course of export.
30. The learned Government Pleader strongly relied upon the decision of this Court in Haji Abdul Gaffoor Sahib and Co. v. State of Madras [1958] 9 S.T.C. 208. In that case, it was held that where certain contracts for the sale of goods specifically provided that the property in the goods sold would pass to the vendees only after delivery of the shipping documents, property in the goods passed only after the goods crossed the customs barrier and got into the stream of export and, such sales were therefore sales in the course of export within the meaning of Article 286(1)(b) of the Constitution and were exempt from taxation. One of the items of sale which formed the subject-matter of consideration in that case was a sale through Gordon Woodroffe and Co., Madras. That contract provided for ' payment on presentation of the shipping documents in order.' Dealing with this at page 211, Rajagopalan, Offg. Chief Justice, observed:
The specific recital in the contracts with Gordon Woodroffe and Co., Ltd., was that payment was to be on presentation of the shipping documents which clearly implied that the property in the goods passed to Gordon Woodroffe and Co., Ltd., as the buyers only after the presentation of the shipping documents. In both cases the property in the goods sold passed to the buyers only after the goods crossed the customs barrier and got into the stream of export. Thus they were sales in the course of export. The assessee's claim that these two items of turnover of Rs.... were exempt from tax liability will have to be upheld.
31. To this extent the decision clearly supports the contention of the learned counsel for the assessee in this case. But the learned Government Pleader relied upon other observations in the case which related to a contract entered into with Rallis India Ltd. The contract with Rallis specifically recited as follows : 'We (Rallis) have confirmed having bought from you today the undermentioned goods.' Prima facie it was a purchase by Rallis from the assessee in that case. It was pointed out by the Division Bench that there was no privity of contract at any time between the assessee and the persons abroad to whom the goods were ultimately sold by Rallis, that the sale was completed at Madras by delivery of the goods sold at Madras, and that the other terms and conditions in the contract will have to be understood as special terms of bargain between the parties not in any way derogating from the passing of the property in the goods with the assessee to Rallis within the State. We must point out that everything depends upon the terms of a particular contract of sale, and the Court can infer whether it is an export sale or a sale in the course of export only from those terms. If on ultimate analysis of the terms of the contract it were to be found that the sale was between a foreign buyer and a local seller which is really a sale which occasions an export or a sale in respect of which the property in the goods passes only beyond the customs barrier, which means that the sale is in the course of export transaction it will be clearly beyond the State taxing power. We hold that the sale of the petitioner to Gordon Woodroffe and Co. of the value of Rs. 74,284-0-9 is a sale in the course of export and not assessable to sales tax.
32. The revision petition is therefore partly allowed. As the parties have succeeded and failed in part, there will be no order as to costs.