Judgment

CHANDRACHUD, J. - Article 286 (1) (b) of the Constitution provides that 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 in the course of the import of the goods into, or export of the goods out of, the territory of India. By the sixth Amendment to the Constitution which came into force on September 11, 1956, an amendment was made to Cl. (2) of Art. 286, by which Parliament was given the power by law to formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in Cl. (1). Acting in pursuance of this power, the Parliament enacted S. 5 (1) of the Central Sales Tax Act, 1956, providing that 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.

2. The question which arises for our consideration in this appeal is whether a sale effected by the respondents - M/s. Swaika Oil Mills - is a sale in the course of the export of goods out of the territory of India. This question was answered against the respondents by the Revenue Authorities which held that the sale was exigible to sales tax. But, on a reference made to the Calcutta High Court by the Board of Revenue under S. 21 (1) of the Bengal Finance (Sales Tax) Act, 1941, the High Court set aside the assessment on the ground that the sale took place in the course of export of the goods.

3. By a letter dated September 10, 1952, the Netherlands Selling Organisation Ltd. confirmed having bought from the respondents a certain quantity of linseed oil. "F. O. B. Calcutta price". The main terms of the contract of sale, which was made and concluded in Calcutta, are these :

(a) The price of the goods was to be paid F. O. B. Calcutta against the first presentation of Clean on board Mates receipt along with the relative G. R. I. forms in triplicate;

(b) The insurance charges were to be paid by the purchasers;

(c) The purchasers were to send to the respondents their shipping broker for arranging booking of the shipping space for the goods to be put on board the ship by the respondents;

(d) The respondents were to mark the goods with the shipment marks specified by the purchasers in the letter;

(e) Due to import restrictions in Indonesia, the respondents were to ship not more than 500 imperial gallons of linseed oil; and finally,

(f) The "Export" was "to be made" under the export-licence of the respondents.

4. Mr. Shankar Ghose, who appears on behalf of the respondents, has raised a variety of interesting points, which, in our opinion, have lost their validity and relevance in view of a Constitution Bench decision of this Court in Mohd. Serajuddin v. State of Orissa, 1975 Supp SCR 169. A catena of decisions bearing on the question as to when a sale can be deemed to be in the course of export was examined elaborately in that case. Applying the ratio of Serajudins case to the facts before us, we are of the opinion that the High Court of Calcutta, which did not have the benefit of that judgment, is wrong in holding that the sale effected by the respondents in favour of the Netherlands Selling Organisation is a sale in the course of export. Our reasons for saying so are these :

(1) There was a direct, distinct and independent contract of sale between the respondents on one hand and their buyers in India, the Netherlands Selling Organisation

(2) The sale effected in pursuance of that contract is wholly unconnected with the sale by the Netherlands Organisation to their foreign buyer. The two sales are not a part of one integral transaction.

(3) There is no privity of contract between the respondents and the foreign buyer. They sold the goods in India, which the buyer on his own account exported to Indonesia. T