Judgment

DAS GUPTA, J. : M/s. Daulatram Rameshwarlal, a firm registered under the Indian Partnership Act (referred to later in this judgment as "sellers") are registered dealers under S. 11 of the Bombay Sales Tax Act. In their return of turnover for the period from April 1, 1954, to March 31, 1955, they claimed exemption from Sales Tax in respect of sales of cotton of the total value of Rs. 68,493-2-6 and sales of castor oil of the total value of Rs. 6,47,509-1-6 on the ground that these sales were on FOB contracts, under which they continued to be the owners of the goods till the goods had crossed the customs barrier and thus entered the export stream, and so no tax was realisable on these sales in view of the provisions of Art. 286 (1) (b).

2. The Sales Tax Officer rejected this claim for exemption & assessed them to Sales Tax on a taxable turnover including these sales. He also assessed them to purchase tax under S. 10(b) of the Bombay Sales Tax Act on their purchase of castor oil which they later sold for the sum of Rs. 6,47,509-1-6 as mentioned above. The notice of demand for the total Sales Tax and the purchase tax assessed was served on the sellers on September 30, 1956. The sellers thereupon moved the Bombay High Court under Art. 226 of the Constitution for the issue of appropriate writs for quashing the order of assessment and the notice of demand and for prohibiting the Sales Tax Officer from taking any steps pursuant to the order or the notice. The learned Judge, who heard the petition rejected the sellers contention that the goods remained their property till these crossed the customs frontier and therefore held that the sellers were not entitled to the benefit of Art. 286(1)(b) of the Constitution. As regards the assessment to purchase tax also he rejected the sellers contention that the assessment in question was illegal. In this view the learned Judge dismissed the application under Art. 226.

3. Against this decision the sellers appealed. The learned Judges who heard the appeal held, disagreeing with the Trial Judge, that the goods remained the seller s property till the goods had been brought on board the ship and so the sales were exempted from tax under Art. 286(1)(b) of the Constitution. They however agreed with the Trial Judge that the sellers were liable to pay purchase tax under S. 10 (b) of the Bombay Sales Tax Act. Accordingly they directed the Sales Tax Officer not to enforce the demand for payment of sales tax with regard to the sale of cotton for Rs. 68,493-2-6 and sale of castor oil of the total value of Rs. 6,47,509-1-6.

4. The Sales Tax Officer has, on the strength of special leave granted by this Court, preferred the appeal which has been numbered as Civil Appeal No. 45 of 1959 against the appellant court s order directing him not to realise the sales tax in respect of sales of cotton and castor oil. Civil Appeal No. 46 of 1959 has been preferred by the sellers against the appellate court s judgment in so far as it upheld the assessment of purchase tax under S. 10 (b).

5. The only question for our decision in the appeal by the Sales Tax Officer is whether property in the goods passed on shipment or at some point of time before shipment. The law is now well settled that if the property in the goods passes to the buyer after they have for the purpose of export to a foreign country crossed the customs frontier the sale has taken place "in course of the export" out of the territory of India. If therefore in the present sales the property in the goods passed to the buyer on shipment, that is, after they had crossed the customs frontier the sales must be held to have taken place "in the course of export" and the exemption under Art. 286 (1) (b) will come into operation. The sellers case is that these were sales on FOB contracts. Though the learned Solicitor-General appearing on behalf of the Sales Tax Officer tried to convince us that these were not really FOB contract sales, it appears that the avermen