RAJAGOPALA AYYANGAR, J.

This is a revision petition filed by the assessees against the order of the Sales Tax Appellate Tribunal.

The assessees are dealers, among others, in pepper having their head office at Bombay and a branch at Kozhikode. In respect of their turnover for the assessment year 1950-51 they submitted returns in form A-3 disclosing sales to the extent of Rs. 3, 94, 788-11-0 to the Deputy Commercial Tax Officer, Calicut, who was the assessing officer. Out of this figure they claimed exemption in respect of a turnover of Rs. 4, 054-1-

9. They also produced their ledger, day book, journals etc., to the assessing officer who checked up their accounts and substantially accepted their return and assessed them on a net turnover of Rs. 3, 93, 486-13-6 by his order dated 15th December, 195

1. Subsequently the Commercial Tax Officer, Malabar North, called for and examined the record of the assessment order passed by the Deputy Commercial Tax Officer under section 12(1)(i) of the Madras General Sales Tax Act and finding that certain sales effected by the assessees which had been disclosed in their accounts had been incorrectly treated as not liable to inclusion in their turnover, issued notice to the assessees on 28th February, 1953, why the assessment should not be rectified. After verifying the figures from the accounts which were called for, he added a sum of Rs. 5, 07, 753-9-0 to the assessable turnover and a demand for tax on this basis followed.

The assessees took this order in appeal before the Sales Tax Tribunal where they raised two points for its consideration. The first was that the Commercial Tax Officer had no jurisdiction to revise the assessment in the manner in which he had done and the second that on the merits the turnover of the sales which were included in their assessment by the Commercial Tax Officer was exempt from inclusion under Article 286(1)(b) of the Constitution as being sales "in the course of export." The Appellate Tribunal rejected both the contentions and confirmed the order passed by the Commercial Tax Officer. Hence the revision.Mr. Nambiar, learned counsel for the petitioners (assessees) raised the same two contentions before us as had been put forward before the Tribunal.

The first point relates to the jurisdiction of the Commercial Tax Officer under section 12(1) of the Act which is in these terms :

"12. (1) The Commercial Tax Officer may -

(i) suo motu, or

(ii) in cases in which an appeal does not lie to him under section 11, on application, call for and examine the record of any order passed or proceeding recorded under the provisions of this Act by any officer subordinate to him, for the purpose of satisfying himself as to the legality or propriety of such order, or as to the regularity of such proceeding, and may pass such order with respect thereto as he thinks fit." *

The argument urged on behalf of the petitioners is that on a proper construction of this provisions, the Commercial Tax Officer could not covert himself into an assessing authority and re-assess what is virtually an escaped turnover. Having regard to the facts of the present case, it is not necessary to define exhaustively the scope of the revisional power under section 12(1) of the Act or to consider whether it could enable the Commercial Tax Officer to assess an escaped turnover. We are making this reservation particularly in view of the fact that this question is awaiting consideration at the hands of a Full Bench in certain appeals which are pending (Since reported as The State of Madras v. Louis Dreyfus and Company Ltd. at page 318 supra). In the present case, the sales whose turnover was included in the petitioners turnover by the Commercial Tax Officer were all in the books of account produced by the assessees before the assessing officer. The assessees however had contended, when the matter was before him, that these sales were entitled to the constitutional exemption under Article 286(1)(b) of the Constitution and this had been accepted by him, without, however, formally so recording it in the assessment order. It was the legality and propriety of this exemption that was considered by the Revising Authority under section 12 and it is not therefore a case of an escaped turnover at all but a case where the propriety of an exemption which had been granted by the assessing authority was considered by the Commercial Tax Officer. If the question were viewed in this light - and this is the only manner in which it could be approached - we do not understand Mr. Nambiar to contest the jurisdiction of the Commercial Tax Officer. We are, therefore, of the opinion that in the present case the complaint that the Commercial Tax Officer really purported to exercise the powers of an assessing authority is not made out. We, therefore, have no hesitation in rejecting this objection to the assessment of the petitioners.The second point relates to the merits of the petitioners case in regard to the inclusion of this turnover of Rs. 5, 07, 753-9-0. Before adverting to the contentions raised it will be convenient to refer to the admitted facts in relation to the sales occasioning this turnover. The added turnover represents the sale price of 616 bags of black garbled pepper sold by the assessees under three contracts.

The first contract which is numbered as 80 was with M/s. Mulji Rattanshi and Co., of Bombay and was for five tons. It was entered into by the Head Office of the assessees at Bombay on 4th December, 1950. The price was 1120 sh. per cwt. C. and F. London the shipment to be during January, 195

1. The terms as regards payment were that it was to be in Indian currency with exchange at one shilling 6 1/16 d; 95% cash against shipping documents and the balance 5% to be adjusted after weighment of the goods in London. There was a special note that the shipping documents were to be in two lots each for 2 1/2 tons. This contract was signed in Bombay by the assessees as sellers and Mulji Rattanshi and Co., as buyers. This pepper was packed in 80 bags and marked as M.R.G., the initials of the buyers. The goods is relation to this contract were shipped in the vessel Clan Maclonnan of the Clan Line Steamers Ltd., from Cochin Port. Two bills of lading Nos. 42 and 43 were taken each for 2 1/2 tons dated 25th January, 1951 (40 bags) in the name of Messrs. Mulji Rattanshi and the goods were made deliverable to their order. The goods were loaded into the steamer on 25th January, 1951, and were made deliverable in London, freight to be paid at destination. The Bombay office of the assesses having received these bills of lading prepared a pro forma invoice and despatched on 1st February, 1951, the two documents to the buyers. In the invoice it was stated that the goods had been shipped from Cochin to London by the assessees "on account and risk of" the buyers. As the freight was payable at destination a deduction was made in the price for this item and the invoice made a claim for 95% of the agreed price which came to Rs. 69, 857-7-0. A cheque for the sum was issued by Mulji Rattanshi on 2nd February, 1951, and this was cleared by the assessees on the 3rd. The balance of 5% in respect of this contract was received by the assessees on 29th May, 1951, after weighment etc., in London.The second contract of sale was with the Mills Export Import Co., also a firm carrying on business in Bombay. This was dated 29th December, 1950, and the formal document recorded the Mills Export Import Co., as having purchased from the assessees for the formers clients in U.S.S.R. 25 tons of "black garbled pepper new crop." The shipment of the goods was to be in the first half of February by vessel to be named by the buyers. The price was fixed at Rs. 640 per cwt. F.O.B. Cochin excluding export duty and less 2 per cent. To the bills of lading were to be attached certificates as to weight and quality issued by the Indian Chamber of Commerce. The payment for these goods was to be by a letter of credit to be opened in favour of the buyers and payable against documents in Bombay. The buyers were to hand over the credit to the sellers after receipt. This contract was signed by the assessees office in Bombay as well as by the buyers. The 25 tons were packed in 400 bags and marked M.E.I.C.O. They were surveyed by the Travancore Chamber of Commerce. The representative of the buyers, one Mr. Fuss, was apparently present at the time of the survey and handed over to the assessees the freight to be paid to the shipping company. The goods were thereafter taken to Cochin Port and loaded on board the vessel M. S. Kieldrecht which sailed to Port Said for transhipment to Odessa which was the destination of the goods. The bill of lading dated 23rd February, 1951, was taken in this case also in the name of the buyers as consignor and consignee and the goods were deliverable to their order. As soon as the assessees received the bills of lading from their representatives from Malabar, they prepared a pro forma invoice for the 400 bags shipped from Cochin to Odessa by their representative Gandhi Sons Ltd., on account and risk of M/s. Mills Export Import Co., Bombay, and sent this along with the relevant bills of lading and certificates. The price was paid by the buyers on 7th March, 1951.The third and the last contract was dated 25th January, 1951, and was also with a firm in Bombay, viz., M/s. Virchand Panachand and Co., Ltd., Bombay. It covered a sale of 8 1/2 tons of pepper. The shipment was to be during February, 195

1. The price was at sh. 1, 200 per cwt. for 4 1/2 tons and sh. 1, 100 per cwt. for 4 1/2 tons "cost and freight Tunis". The payment was to be "cash against documents" in Indian currency and as usual it was signed by the buyers and sellers at Bombay. The goods were made up into two lots of 68 bags each and were marked V.P.S. being the initials of the buyers. They were loaded on board the vessel "President Harding" at Cochin and two bills of lading were taken on 9th February, 1951, in the name of the buyers and deliverable to their order at Tunis via Naples. The bills of lading together with a pro forma invoice were tendered to the buyers on 14th February, 1951, at Bombay and payment was received by the sellers on 15th February, 1951.

It is the total of the sale price received under these three contracts amounting to Rs. 5, 07, 753-9-0 which, it is contended, is not liable to tax by reason of Article 286(1)(b) of the Constitution which runs thus :-

"286. (1) 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 -

(a) outside the State; or

(b) in the course of the import of the goods into, or except of the goods out of, the territory of India." *

The argument of the learned counsel for the petitioners was that these three sales were "in the course of export" either as export sales or sales which occasioned export as defined by the Supreme Court in the First Travancore case or within the class of sales held to fall within the Article by the Second Travancore case inasmuch as the goods which were the subject of sale were actually exported outside the country; and as (1) the property in the goods would, on the terms of the contracts, which provided for payment against shipping documents, pass to the buyers at the earliest point only on the presentation of the shipping documents by which time the goods were already on the high seas on their way to their foreign destination; or (2) in any event by reason of the contracts of sale being on C. and F. or F.O.B. terms the title to the goods would remain with the sellers at least till the goods were put on board the ships and therefore till such time as they entered the export stream; or (3) because the transfer of property in the goods under the contracts took place by delivery of the bills of lading which covered their transport abroad.On the other hand, it was urged by the learned Assistant Government Pleader for the State that the sales in question were internal sales by the assessees who are local merchants to buyers with their head office at Bombay and possibly with local representative within this State; that the export was effected only by the buyers and not by the sellers and after the purchase by the former was complete with the result that so far as the assessees sales are concerned they have no export element in them and so were outside the constitutional exemption as interpreted by the Supreme Court in the Second Travancore case, viz., State of Travancore-Cochin v. S.V.C. Factory. In this context reliance was placed on the definition of "sale" introduced into the Madras General Sales Tax Act in 1948 by the Explanation (2) to section 2(h) of the enactment which reads :-

"Explanation (2) : Notwithstanding anything to the contrary in the Indian Sale of Goods Act, 1930, the sale or purchase of any goods shall be deemed, for the purposes of this Act, to have taken place in this State wherever the contract of sale or purchase might have been made,

(a) if the goods were actually in this State at the time when the contract of sale or purchase in respect thereof was made." *

The argument was that the liability to sales tax in respect of a transaction which would fall within the Explanation to section 2(h) of the General Sales Tax Act would be operative except in so far as it is overridden by the constitutional exemption in favour of "sales" in the course of export."

We are in agreement that the approach to the question should be as suggested by learned counsel for the State, namely, that Explanation 2 [to section 2(h)] would determine the locus of the sale for the purpose of liability to sales tax except to the extent such sales are taken out of the purview of tax liability by the Constitution.The first question that falls for consideration is whether the sales by the assessees are export sales or those which occasioned the export as explained by the Supreme Court in the First Travancore case, viz., State of Travancore-Cochin v. Bombay Co. Ltd., Alleppey. We are definitely of the opinion that they were not. The transaction dealt with by the Supreme Court related to sales of coir, lemon grass oil and tea and consisted of the export sales of those respective commodities to foreign buyers on either C.I.F. or F.O.B. terms. Their Lordships held that the sales occasioned the export in each case and fell within the scope of the exemption under Article 286(1)(b) having been put through by employing the machinery of export. The transaction was described as 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. The learned Chief Justice added : "such a sale cannot be dissociated from the export without which it cannot be effectuated and the sale and resultant export form parts of a single transaction ....... Assuming without deciding that the property in the goods 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 export and are exempt under Article 286(1)(b)".

What was characterised by the Supreme Court as an "export sale" was one in which the assessees figured as exporters, privity having been established between them and the foreign buyer, either through direct negotiation or dealing, or through the local representatives of the latter. That certainly does not obtain here. The assessees were in no sense the exporters of these goods. The position appears to be that the three merchants in Bombay who entered into their respective contracts with the assessees were themselves the purchasers whether their purchases were on their own behalf or on behalf of undisclosed foreign principles, between the latter of whom and the assessees there was no privity. Undoubtedly an export took place here. But in that transaction the assessees were not the sellers who exported or whose sales occasioned the export. A sale will occasion an export or there will be an export sale as understood by the Supreme Court only where the sale is to a foreign buyer with whom the local seller has privity and when as a direct result of such sale of goods are transported across the frontier.We have next to consider whether the sale was otherwise "in the course of export" as understood in the Second Travancore case. The actual decision related to the question whether purchase of goods by a dealer who bought them with a view to exporting them or to implement contracts for export already entered into, was a sale or purchase "in the course of export" within Article 286(1)(b) and the Court by a majority answered it in the negative. The argument advanced by the counsel for the State here is that in the present case also the export was by the Bombay buyers after their purchases were complete and that in consequence the sales by the assessees were not in the course of export. A close examination of the facts however clearly establishes that these three sales of the assessees are "sales in the course of export" falling within the constitutional exemption. The crucial question to be considered in this connection is whether the sellers continued to be the owners of the goods upto or beyond the time when the goods, so to speak, entered the export stream. In the majority judgment of the Court the position as regards transactions which fall within Article 286(1)(b) was thus explained :-

"What is exempted under the clause is the sale or the purchase of goods taking place in the course of the import of the goods into or export of the goods out of the territory of India. It is obvious that the words import into or export out of in this context do not mean the article or commodity imported or exported. The reference to the goods and to the territory of India make it clear that the words export out of and import into mean the exportation out of the country and importation into the country respectively. The word course etymologically denotes movement from one point to another, and the expression in the course of not only implies a period of time during which the movement is in progress but postulates also a connected relation ....... As clause (1)(b) is concerned only with exempting certain sales or purchase from taxation by the States in this country, it is sufficient to determine where the course of export begins or where the course of import ends. In this connection it is useful to remember that the power to make laws with respect to duties of customs including export duties and also with respect to import and export across customs frontiers and the definition of customs frontiers is vested exclusively in the Central Legislature and detailed provisions have been made in the Indian Sea Customs Act, 1878, for the levy of customs duties by the officers of the Central Government who are stationed along the customs frontiers as defined by the Central Government where, after appraising the goods exported or imported, the duties chargeable, if any, are computed and levied, and it is not until this process is completed, that the goods can be shipped for transportation or cleared by the consignee or his representatives as the case may be. It would seem, therefore, logical to hold that the course of the export out of or of the import into the territory of India does not commerce or terminate until the goods cross the customs frontier." *

In the light of the law as thus expounded, we have to consider whether the assessees have been able to establish that they remained the owners of the goods until after the goods had crossed the customs barrier for if the agreement of sale entered into by them took effect and became a completed sale, only thereafter as the goods started on the course of export at that stage the sale by them would be one "in the course of export" to which Article 286(1)(b) would apply. The following features of these contracts have to be considered : Contracts 1 and 2 which were for delivery in London and Tunis respectively were on C. and F. terms while contract No. 3 namely wherein the goods were shipped to Odessa the price was on F.O.B. terms. We shall consider these two sets of contracts separately. There are two stipulations in the C. and F. contracts to be noticed. Beyond the stipulation about the prices, there was also a condition regarding shipment and payment against documents. The learned Assistant Government Pleader relied on two other matters in these transactions : (1) that freight was deducted from the invoice though the price was fixed as inclusive of the freight and (2) the note in the invoices that the goods were to be on account and risk of the buyers. We shall advert to these in their proper places.

There cannot now be much controversy as regards the incidents of a C.I.F. or C. and F. contract. Referring to them Lord Wright said in Smithy and Co. v. Bailey and Co. 1940 (3) ALLER 60 :

"The initials indicate that the price is to include cost, insurance and freight. It is a type of contract which is more widely and more frequently in use than any other contract used for purposes of sea-borne commerce. An enormous number of transactions, in value amounting to untold sums, are carried out every year under C.I.F. contracts. The essential characteristics of this contract have often been described. The seller has to ship or acquire after that shipment the contract goods, as to which, if unascertained, he is generally required to give a notice of appropriation. On or after shipment he has to obtain proper bills of lading and proper policies of insurance. He fulfils his contract by transferring the bills of lading and the policies to the buyer. As a general rule, he does so only against payment of the price, less the freight, which the buyer has to pay. In the invoice which accompanies the tender of the documents on the prompt - that is the date fixed for payment - the freight is deducted, for this reason. In this course of business, the general property in the goods remains in the seller until he transfers the bills of lading." *

Incidentally it may be mentioned that this extract answers one of the points raised by the learned Assistant Government Pleader regarding the deduction of freight in the invoice prepared by the assessees. If the contract entered into by the assessees is a C. and F. contract - and this is not disputed by the State - in the absence of any express stipulation, the property in the goods would remain with the seller until the bills of lading are tendered to the buyer.

It is, however, contended on behalf of the State that the property in the goods passed to the buyers before the goods crossed the customs office at the Cochin Port. There is no dispute that at the time of the agreement of sale the contracted goods were unascertained and therefore under section 18 of the Sale of Goods Act the property in the goods would not be transferred to the buyers unless and until the goods were ascertained. It is urged that there was an ascertainment and an appropriation of the goods to the contract immediately the sellers packed the goods in gunny bags and marked them with the initials of the buyer for being consigned under the contract. For this purpose reliance is placed on section 23(1) of the Sale of Goods Act which is in these terms :-

"23. (1) Where there is a contract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be express or implied and may be given either before or after the appropriation is made." *

There can of course be no dispute that in the present case whatever appropriation there was by reason of packing the goods in the gunny bags and marking them with the buyers initials must be taken to have been by the sellers with the assent of the buyers for, as packing and marking were to be done by the sellers, the assent of the buyers might be implied and therefore this condition would be satisfied. But the question is : Was this appropriation unconditional In this context section 23 has to be read with the provisions enacted in section 25 of the Act which runs thus :

"25. (1) Where there is a contract for sale of specific goods or where the goods are subsequently appropriated to the contract, the seller may, by the terms of the contract or appropriation, reserve the right of disposal of the goods until certain conditions are fulfilled. In such a case notwithstanding the delivery of the goods to a buyer, or to a carrier or other bailee for the purpose of transmission to the buyer, the property in the goods does not pass to the buyer until the conditions imposed by the seller are fulfilled.

(2) Where goods are shipped and by the bill of lading the goods are deliverable to the order of the seller or his agent, the seller is prima facie deemed to reserve the right of disposal.

(3) Where the seller of goods draws on the buyer for the price and transmits the bill of exchange and bill of lading to the buyer together, to secure acceptance or payment of the bill of exchange, the buyer is bound to return the bill of lading if he does not honour the bill of exchange and if he wrongfully retains the bill of lading, the property in the goods does not pass to him." *

Did the sellers in the present case by the terms of the contract or appropriation reserve the right of the disposal in the goods until certain conditions were fulfilled In dealing with this a point made on behalf of the State might be noticed, viz., that the bills of lading were taken in the name of the buyers making the goods deliverable to their order. This feature would undoubtedly render sub-section (2) of section 25 unavailable to the assessee but there is abundant authority for the view that the taking of a bill of lading in the name of a buyer does not ipso jure negative a conditional appropriation or the reservation of a right of disposal. If authority is needed reference may be made to the decision in Moakes v. Nicolson (19 C.B. (N.S.) 290) and Kronprinsessan Margarett, the Parana 1921 (1) AC 486 at 514). In the latter case the bills of lading were taken in the consignees name and these were sent with an invoice and a sight draft for its amount through collecting agents of the consignors to be presented to the bank. The question was whether the property in the goods passed to the neutral sellers on shipment, or whether this occurred only on payment of the draft. Lord Summer, delivering the opinion of the Privy Council, said :-

"In these circumstances what can be inferred as to the passing of the general property What is there to show an intention to pass that property for anything less than payment, and what motive is there for such an intention The appellants, Messrs Lundgren and Rollven, have to show that it passed to them and passed, too, before the beginning of the voyage. If it did, then the consignors no longer owned the goods and had nothing to show against them except a draft of their own, which could not be enforced and a bill of lading, which would not entitle them to delivery of the goods, though its retention might seriously inconvenience the new owners, the consignees. Rights to stop in transitu or to exercise an unpaid vendors lien need hardly be discussed, for, on a question of intention in facts as to which there is a good deal of evidence, it would be artificial to assume that the consignors minds were actually determined to the contrary by consideration of legal remedies, of which it is not shown that they had any knowledge, let the legal presumption be what it will ......... Cases, in which it has been held that taking the bill of lading in the shippers own name negatives any unconditional appropriation to the buyer by the delivery of the goods on ship-board and indicates one conditional on the documents being taken up, can throw only an indirect light on the question here involved. Certainly no case was found, in which it was held that taking the bill of lading in the buyers name, while withholding delivery of it until presentation and taking up of the documents, would not be, as an appropriation, equally conditional." *

These considerations apart, this argument even if accepted, would not very much help the Government case. At best it would support a contention that the property in the goods passed when the goods were loaded on board the vessel and the bill of lading was taken. But by that time the goods, if they were liable to export duty would have paid those duties and been cleared out of the customs and entered the export stream and therefore would be "in the course of export." We are unable to uphold the contention of the learned Assistant Government Pleader that on the terms of this C. and F. contract there was an unconditional appropriation of the goods to the contract sufficient to pass property in them to the buyers on the goods being packed and marked with the buyers initials in the warehouse of the sellers at Kozhikode. Dealing with a notice of appropriation which had been given by a seller to a buyer under a C.I.F. contract and its effect on passing property, Lord Wright stated in Smyth and Co. v. Bailey and Co. 1940 (3) ALLER 60(H.L.)), already referred to, at page 65 :"I have already quoted the opinion of the Court of Appeal that the result of the appropriation was that the property in the 15, 444 quarters passes to the buyers under the Sale of Goods Act, 1893 ..... The notice of appropriation under an ordinary C.I.F. contract is not intended to pass, and does not pass, the property. Where, as here, the sale is of unascertained goods by description, there are, at that stage, no goods to which the contract can attach. The seller is free to appropriate to the contract any goods which answer the contract description. This he does not by the notice of appropriation which specifies and defines the goods to which the contract attaches. These thereupon he is bound to deliver and the buyer is bound to accept, subject to the terms of the contract. That, however, does not involve the passing of the property. The property cannot pass under a contract of sale until the goods are ascertained ..... but once they are ascertained, the property passes at the time when the parties intend it shall. As the parties seldom express any such intention, or perhaps ever think of it, the intention will generally be a matter of inference from the terms of the contract, the conduct of the parties, and the circumstance of the case".

"Then section 18 (corresponding to sections 20 to 24 of the Indian Sale of Goods Act) gives some general rules which are to apply unless a different intention appears. Of these rules, the Court of Appeal rely on rule 5(1) (corresponding to section 23 of the Indian Sale of Goods Act).

"The assent is generally inferred from the terms of the contract or the practice of the trade. Sub-rule (2) deals with the delivery of the goods to the carrier for transmission to the buyer without reserving the right of disposal and provides that in such a case there is deemed to be an unconditional appropriation. This latter sub-rule, which only deals with delivery to the carrier and not with actual notice of appropriation, is disregarded by the Court of Appeal. In such event, the carrier receives and holds the goods for the buyer, so that in law they are delivered to the buyer ....... However, the Court, I venture to think should not have disregarded the word unconditionally in sub-rule (1). I do not construe sub-rule (1) as limited to a case where there in an express term that the notice of appropriation is unconditional, or, on the other hand, to a case where the notice of appropriation is in terms conditional ...... In this case the facts knows to both parties would import that the appropriation was conditional. The bills of lading were held by the appellants. The contract provided for cash or (at sellers option) an acceptance of sellers draft against documents. That condition for the transfer of the documents had not been fulfilled. The bills of lading were symbols of the goods, and the appellants, by retaining them, retained as against the respondents title and control over the goods. All the respondents had at that stage was a contractual right to obtain control, and thereby become owners upon taking up the documents. It is impossible, in my opinion, to hold that the notice of appropriation was, even apart from the express reservation unconditional." *

In the present case there was no notice of appropriation as such but only an appropriation in fact. Even if this appropriation was with the assent of the buyer, it was certainly not unconditional because the seller had further duties in connection with the goods which included loading them on board the ship and obtaining proper bills of lading for conveyance of the goods to the contracted destination and the seller in his turn was entitled to payment in exchange for these shipping documents. In these circumstances, we are unable to hold that on the terms of this contract the property in the goods passed to the buyer when the goods were packed and marked in the godowns of the seller.

When did the property pass thereafter These goods were after being packed and marked transferred by rail from Calicut, where they were at the time of the agreement of sale, to Cochin. If at that stage, the railway receipts had been taken in the name or to the order of the buyers, the property in the goods might have passed to the buyers under the terms of section 23(2) of the Sale of Goods Act. But this could not obviously happen for two reasons. Firstly, it was part of the duty of the sellers to transport the goods upto the steamers waiting to receive them at the Cochin harbour. This part of their duty they could not discharge if the railway receipts were taken in the name of the buyers. Secondly, there was a term in the contracts under which they were entitled to be paid the price before the documents were handed over. In these circumstances, the delivery to the carrier during the course of the transport from Calicut to Cochin was not a delivery to an agent of the buyers but the goods were conveyed as the goods of the sellers who still remained their owners.

When the goods arrived at the railway station at Cochin and were taken delivery of by the sellers through their representatives and cleared through the customs, the goods still remained their property. They were then placed on board the ships and bills of lading were taken in the name of the buyers as consignor. This would be the earliest point of time when any contention could be raised that the property in the goods passed to the buyers. The bills of lading though taken in the name of the buyers were retained by the sellers and were deliverable only against payment. Two views are possible as to the inference to be drawn from the goods being consigned in the name of the buyers. 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. Vide also the passage from the judgment of Lord Sumner in the Parana already extracted.The learned Assistant Government Pleader invited our attention to the decision of a single Judge of the Calcutta High Court in Juggernath Augurwallah v. E. A. Smith 1906 (33) Cal 547) as deciding that in cases of this sort the property in the goods passes immediately after appropriation. That case was concerned with the title of the pledgee of goods from a buyer who had purchased unascertained goods for shipment abroad. Clause 13 of the agreement of sale provided for payment in these terms :-

"Cash on delivery of mates dock receipts or as provided for in clauses 8, 9 and 1

1. Should the said receipts or warrants be retained by the buyers for examination, they shall remain the property of the sellers and be held by the buyers in trust for and at the absolute disposal of the sellers, until payment has been made in cash in terms of this contract, and if payment be made by cheque, until such cheque has been cashed." *

The jute which was the subject-matter of the contract was packed in bales and having been marked with the buyers marks were to be placed alongside the steamer and mates receipts obtained. These were handed over to the buyers who applied to the Master of the vessel and obtained the relative bills of lading which they negotiated with a bank and appropriated the money to themselves. The question was whether the bank was entitled to the goods as against the sellers who had not been paid the price. The whole question in that case turned upon whether by clause 13 of the agreement the sellers intended to retain merely a special property in the goods in order to secure the price or had retained the right of disposal with the result that no property in the goods passed till they were paid. Sale, J., held that only a special property was retained the property in the goods having passed to the buyer by reason of an unconditional appropriation of the goods to the contract with the assent of the buyer. The appropriation is referred to by the learned Judge in these terms at page 554 :-

"In the present case it is shown that 1000 bales of jute bearing the contract mark were appropriated to the contract by the plaintiffs, that they were sent alongside the Uganda and shipped in due course at the request of the defendant firm and that the mates receipts granted in respect of the goods show that the goods so shipped were marked with the private mark of the defendant firm in red ink as required by their shipping instructions. These facts in my opinion afford abundant prima facie evidence that the goods in question were appropriated to the contract by the plaintiffs, and that such appropriation was assented to by the defendant firm." *

There was an appeal against this judgment which came up before a Special Bench whose judgment was reported in Juggernath Augurwallah v. E. A. Smith 1906 (34) Cal 173). The passage from the judgment of Sale, J., which we have extracted above was quoted with approval by Maclean, C.J., and was made the basis of the affirmance. This decision therefore cannot help the government in their contention that the property in the goods passed to the buyer before they reached the customs frontier at Cochin. Further in passing we might mention that under section 21 of the Sale of Goods Act if the seller has something to do for the goods for the purpose of putting them into a deliverable state the property in them does not pass until this is done. Under the contracts in the present case, as it was the duty of the sellers to load them on board the ships and take proper bills of lading covering their transport to the named destinations, until this duty was accomplished, the title in them would not pass unless there was any indication elsewhere in the contract pointing to a different intention.

The second contract for the delivery of the goods at Odessa and which is on F.O.B. terms stands on a very similar footing and even in that case the property in the goods would pass at the earliest only when the goods are put on board. We might mention that the Supreme Court in Commissioner of Income-tax v. Mysore Chromite Ltd., already referred to, dealt with cases of F.O.B. contracts also ant their decision holding that the property in the goods passed only in London when the documents were tendered any payment made against them would appear to be decisive against the Governments contention of the property passing at any stage earlier than the loading of the goods.Only one point remains to be dealt with and that is the reference in the invoice that the goods have been shipped "on account and at the risk of the buyers." It will be seen that this refers to the situation after the shipping and therefore to the extent to which it states that the risk attaches after shipment it contradicts the Governments case of the passing of the property at any earlier stage.

We therefore hold that the property in the goods did not pass to the buyer until the relevant bills of lading were presented to the buyers or in any event at least not until the goods were put on board the vessels at Cochin harbour. In this view as admittedly the goods were booked and had started on their journey to a foreign destination at the moment when the title in the goods passed to the buyer, there was "a sale in the course of export" entitling the assessees to the Constitution exemption under Article 286(1)(b) of the Constitution.

It is unnecessary to consider the further contention raised on behalf of the petitioners that as in the present case the transfer of property was effected only by the delivery of the bills of lading when the goods represented by them were already on the high seas, the transaction was clearly a sale in the course of export specifically referred to by the Supreme Court in the Second Travancore case.

In the result, the petitioners contention that the turnover totalling Rs. 5, 07, 753-9-0 being the sale price involved in the three contracts dealt with above was entitled to the constitutional exemption under Article 286(1)(b) of the Constitution was well-founded and the inclusion of this in their turnover was erroneous. The order of the Sales Tax Appellate Tribunal including this turnover in the assessment of the assessees is set aside. The petition is accordingly allowed with costs. Counsels fee Rs. 100.Petition allowed.