MURARILAL SARAWAGI ETC. versus THE STATE OF ANDHRA PRADESH

Citation: [1977] 2 S.C.R. 441 · Decided: 15-12-1976 · Supreme Court of India · Bench: A.N. RAY · Disposal: Appeal(s) allowed
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Judgment (excerpt)

441 
MURARILAL SARAWAGI ETC. 
v. 
THE STATE OF ANDHRA PRADESH 
December 15, 1976 
[A. N. R.AY, C.J. M. H. BEG AND JASWANT SINGH, JJ.] 
Andhra Pradesh General Sales ·Tax Act, 1957-ltem I, Second Schedule-
State Corporation entering into contract with local dealers on f.o.b. basis and 
exporting to foreign countries-If sale in the course of export-Last purchaser-
A 
B 
W~ ~ 
C 
Under item 1 in the Second Schedule to the Andhra Pradesh General Sales 
Tax Act 1957, manganese ore was liable to be taxed at the point of purchase by 
the last dealer who bought in the State. 
· 
The appellants sell manganese ore to the Mines and Minerals Trading Corpo-
ration which exports the ore to buyers in foreign countries. 
Their contention 
before the Sales Tax authorities that the sales of the ore to the .MMTC were 
complete within the State of Andhra Pradesh and that it was the MMTC which 
was the last purchaser liable to pay sales tax was rejected. 
On appeal the 
High Court held that the appellants' contracts with the MMTC were integrally 
connected with the contract entered into by the . MMTC with the foreign buyer 
and, as such, the appellants. were the last purchasers liable to pay the tax. 
The respondent State contended before this Court that since the 
property 
in the goods passed from the appellants to the MMTC on board the ship in 
view of the f.o.b. character of the contract, it was the appellants who, as the 
last purchasers, were liable to pay the tax and not the MMIC. 
Allowing the appeals, 
HELD ; The law is that it has to be found out whether the contracts bet-
ween the merchants and the Corporation are integrated contracts in the c0urse· 
of export or different contracts. If thev ore different, the last purchaser witliin 
the State is liable to pay the sales tax. [446G] 
(i) The tests for finding out the sale in the course of export are that there 
must be a single sale which itself causes the export or is in llhe progress or pro-
cess of export. There is no roo~ for two or more sales in the course of export. 
· The only sal-e which can be said to cause the export is the sale which itself 
results in the movement of the gooas from the exporter to the importer. 
[443E-F] 
D 
F 
(ii) State Corporations are often the only authorities allowed to 
export 
goods out of the country. 
These C?rpo~ations en.ter i1?to ~ontracts with foreign 
buyers for export and the Corporallons m turn give directions to the merchants 
G 
to place the goods on board a ship. 
These directions are not in the course of 
export because the export sale is an independent one between the Corporations 
and their foreign buyers. [444])-E] 
<iii) In f.o.b. contracts the sellers' duty is to place the ~oods free on board 
a ship named by the buyer but the mere mention of f.o.b. 
price 
or 
f.o.b .. 
delivery in a contract between the merchants and the trading corporations which 
export the goods under a separate contract with the foreign buyers to the · 
latter will not make the two contracts either integrated or the contract between · H 
the merchants and the Corporation an f o.b. contract. 
There cannot be two 
last ourchasers in the sale of the same goods within the same State. 
There 
cannot be two exporters in respect of the same goods. 
[ 444G & 445C] 
A 
B 
c 
D 
E 
F 
G 
H 
442 
SUPIU!MI! COURT REPORTS 
[1977] 2 S.C.R. 
(iv) In st~ng contracts. th~ contracts between the Corporation and the foreign 
buyers are . dtfferen_t and tt 1s the Corporation which enters into independent 
contracts with foreign ~uyers on _f.o.b. basis. 
Under the terms of the contract, 
the merc~ants are reqmred to bnng the goods f.o. b. to the ship nam~d by the 
Corporation. 
[444C] 
Mohd. Serajuddin .etc. v. State of Orissa [1975] Supp. S.C R. 
169, 
Coffee 
Board, Bang_aior.e v. Joint Commercial Tax Officer, Madras [1970] 3 S.C.R. 147 
afnldl Mids. Binam Bros. (P) Ltd. v. Union of India & Ors. (1974] 
; S.C.C. 459, 
o owe. 
National Tractors Hubli v. Commissioner of Commercial Taxes Bangalore 
[1971] 3 S.C.C. 143, no longer good law. 
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1221-122<' 
of 1974. 
(Appeals by Special Leave from the Judgment and Order dated 
26-2-1974 of the Andhra Pradesh High Court in Tax Revision Ca!es 
Nos. 5-10 of 1973). 
A. K. Sen, S. T. Desai, B. M. Bagaria and D. P. Mukherjee, for 
the appellants. 
P. P. Rao and T. V. S. N. Chari for the respondent. 
The Judgment of the Court was delivered by 
RAY, C.J. 
These six appeals are by special l
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