JUDGMENT : ( 1. ) THIS petition under Articles 226 and 227 of the Constitution calls into question two assessment orders passed on 27th July 1971 by the regional Commissioner of Sales Tax, Jabalpur. One of the orders is under the Central Sales Tax Act, 1956, and the other under the Madhya Pradesh general Sales Tax Act, 1959. Both the orders cover the period from 1st April 1967 to 31st March 1968. The assessee in these orders is the petitioner, manganese Ore (India) Limited, hereinafter referred to as the petitioner company. ( 2. ) THE petitioner company is a Government company and it was formed in pursuance of an agreement dated 8th June 1962 between the President of india and the Central Provinces Manganese Ore Company Limited, incorporated in the United Kingdom, hereinafter referred to as the foreign company. The share capital of the petitioner company is held by the Government of India, the Government of Maharashtra, the Government of Madhya Pradesh and the foreign company in the percentages of 17, 17, 17 and 49 respectively. The foreign company which held leases of Manganese Mines in india surrendered these leases and fresh leases were granted to the petitioner company. The business of the petitioner company is to extract manganese ore from its mines situated in Maharashtra and Madhya Pradesh and to sell the same. The petitioner company is registered as a dealer both under the central Sales Tax Act and the State Act in Madhya Pradesh. In the course of assessment the petitioner company contended that sales of the total value of rs. 1,46,10,853/- were made in the course of export and were wholly exempt from taxation. It was also contended that certain sales were outside sales and were not liable to be taxed in Madhya Pradesh as inter-state sales. These contentions and some other contentions to which we shall later refer, in so far as they were negatived by the Regional Assistant Commissioner, have been reiterated before us. We shall, hereinafter deal with these contentions one by one. Sales in the course of export : ( 3. These contentions and some other contentions to which we shall later refer, in so far as they were negatived by the Regional Assistant Commissioner, have been reiterated before us. We shall, hereinafter deal with these contentions one by one. Sales in the course of export : ( 3. ) ONE of the sales which the petitioner company claimed to be an export sale was made directly to a foreign purchaser, M/s. Philips Brothers on f. o. b. terms and this was accepted to be a sale in the course of export by the assistant Commissioner and, therefore, no question regarding it arises before us. The remaining sales alleged to be in the course of export will be considered hereinafter. ( 4. ) FIRST come the sales made in execution of agreements Annexures Q and R. These agreements were entered into between the foreign company acting as agent of the petitioner company and B. I. S. C. (Ore) Ltd. , London for sale of oriental manganese ore free on board Visakhapatnam. The Assistant Commissioner accepted that the foreign company acted as agent of the petitioner company and the sales were made to a foreign buyer and the goods were exported. But curiously enough the Assistant Commissioner held that as an agent is a dealer under the State Act, sales made through the foreign company cannot be taken to be sales made by the petitioner company and the sales will be treated as sales made in the course of interstate trade and commerce. In the return (para 14) this part of the order of the Assistant Commissioner is supported on the reasoning that "the sales to the foreign buyers by the foreign company as the agent of the petitioner on commission basis cannot be equated with the sales by the petitioner there being no contract or agreement between the petitioner and foreign buyers". The reasoning of the Assistant Commissioner and the stand taken up in the return both proceed upon a complete misconception. It is not disputed that the foreign company in entering into agreements with the foreign buyer merely acted as agent of the petitioner company on commission basis ; therefore, parties to the sales were the petitioner company as seller and B. I. S. C. (Ore) Ltd. London, as buyer. It is not disputed that the foreign company in entering into agreements with the foreign buyer merely acted as agent of the petitioner company on commission basis ; therefore, parties to the sales were the petitioner company as seller and B. I. S. C. (Ore) Ltd. London, as buyer. It was plainly not a case of two sales, one between the petitioner company and the foreign company and the other between the foreign company and the foreign buyer. The transactions comprised of only sales between the petitioner company and the foreign buyer. Even if an agent be included in the definition of dealer, that cannot change the legal position or give rise to two sales, one between the seller and his agent and the other between the agent and the buyer. The sale to be considered for taxation is only one whether it be taxed in the hands of the principal or his agent. Indeed, the learned Advocate general, who appeared for the respondents, found great difficulty in supporting this part of the order of the Assistant Commissioner. On the admitted position that the sales covered by Annexures Q and R were made by the petitioner company through its agent to a foreign buyer on f. o. b. terms, it must be held that these sales occasioned the export of goods and were consequently made in the course of export under the first limb of section 5 (1) of the Central Sales tax Act ; see-The State of Travencore Cochin v. The Bombay Company Limited ( (1952) SCR 1112.)The Assistant Commissioner was patently in error in not exempting these sales from tax under Article 286 (b) of the Constitution. ( 5. ) THE second category of sales alleged to be export sales were made by the petitioner company in pursuance of agreements Annexures N, O and P. The buyer in all the three agreements is the Minerals and Metals Trading corporation of India Limited, another Government Company, hereinafter referred to as MMTC. ( 6. ) AN agreement was reached between the foreign company, the pet tioner company, MMTC and the Government of India for canalization of export of manganese ore from India. The agreement was embodied in a memorandum of 9th July 1965, the relevant clauses of which read as follows: "d. Exports of MOIL ore. ( 6. ) AN agreement was reached between the foreign company, the pet tioner company, MMTC and the Government of India for canalization of export of manganese ore from India. The agreement was embodied in a memorandum of 9th July 1965, the relevant clauses of which read as follows: "d. Exports of MOIL ore. (a) all sales in the U. K. and to the three traditional customers of MOIL ore in the usa (US Steel Corporation, Bethlehem Steel Corporation, and E. J. Lavino and Company), shall be done only by MOIL (Through CPMO, so long as their present arrangement with cpmo continues), keeping MMTC informed. (b) All sales in the following countries in Europe shall be done by MOIL only (through cpmo, so long their present arrangements with CPMO continue) keeping MMTC informed. (c) All other sales abroad, then covered under (a) and (b) above, shall be done by mmtc, keeping informed MOIL (and CPMO, so long their present arrangements with cpmo continue.)" (N. B. MOIL refers to petitioner company and CPMO refers to foreign company.)In pursuance of this arrangement, Schedule I to the Export (Control) Order, 1962, was amended by inserting manganese ore in the Schedule and export instructions were issued by the Chief Controller of Imports and Exports for canalization of exports of manganese ore through the petitioner company and mmtc. Thus, during the period relevant for our purposes manganese ore could be exported only by the petitioner Company and MMTC. ( 7. ) IT will be convenient now to deal with the salient features of the agreements Annexures N, O and P. The sellers and buyers named in all these agreements are respectively the petitioner company and MMTC. By Annexure N the petitioner company as sellers agreed to sell Indian Manganese Ore of given specifications free on board Bombay or Vizag at buyers option. The price fixed was Rs. 3. 45 per dry long ton f. o. b. Trimming charges, export duty, and sales tax, if any, were to be to the account of the buyers. The sellers were liable for the penalty payable by the buyers to the foreign buyers in Indian Rupees at the same rate of exchange at which they were paid by the buyers. Delivery was to be made free on board by the sellers through their usual shipping agents and contractors. The sellers were liable for the penalty payable by the buyers to the foreign buyers in Indian Rupees at the same rate of exchange at which they were paid by the buyers. Delivery was to be made free on board by the sellers through their usual shipping agents and contractors. The buyers were to nominate vessels in consultation with the sellers and to furnish well in time to the sellers shipping formalities at the port of loading. All shipping documents including shipping bills, G. R. I. forms, bills of lading, Master receipts and invoices were to be prepared by the sellers showing MMTC as shipper and customs clearance was also to be taken in the name of MMTC as shipper. The sellers were to load at an average rate of 850 long tons at Bombay and 1500 long tons at vizag but if the foreign buyers required the loading on C Q D terms, the sellers undertook to load on that basis. If port authorities required the sellers to work overtime which could not otherwise have been necessary to achieve the contracted rate of loading, the buyers were to reimburse the sellers over time expenditure actually incurred upto Rs. 1,000/ -. Sampling analysis and moisture determination were to be done both at the time of shipment and at the port of discharge ; the former, which was to be taken as provisional, was to be done on sellers account and the latter on buyers account. Weight as per weight certificate issued by the port authorities was to be taken as provisional and the cost of ascertaining the weight was to be on the sellers. Outturn weight as declared at the port of discharge by an essayed to be mutually agreed was to be taken as final and its cost was to be on the account of the buyers. Both the parties had the right to be represented at such operations at the loading and discharging ports at their respective cost. Outturn weight as declared at the port of discharge by an essayed to be mutually agreed was to be taken as final and its cost was to be on the account of the buyers. Both the parties had the right to be represented at such operations at the loading and discharging ports at their respective cost. Payment to the extent of 95% was to be made within a week on presentation of provisional invoice based on minimum manganese content and on the bill of lading weight and the payment was to be adjusted within 10 days on the presentation by the sellers of the following documents: (1) Full set of clean on board bill of lading made out to mmtc as shipper ; (2) provisional commercial invoice in triplicate based on provisional sampling assaying results and on dry weight; (3) certificate in triplicate of sampling, assaying and moisture determination at the port of ship ment showing the material to conform to the contracted quality ; (4) port trust weight certificate issued by the port authorities at the port of shipment ; and (5) certificate of origin. The final settlement of payment was to be made with in 14 days from the date of submission of documents based on the dry weight analysis and moisture content determined at the port of discharge. The conditions in Annexure O are almost similar to Annexure N. The price mentioned in Annexure O is inclusive of export duty which was to be on sellers account. It was provided that the execution of the agreement was dependent on the grant of necessary export permit. As regards Annexure P, it is also similar to Annexures N and O. Export, duty in this agreement is to be on account of the sellers. The price mentioned in this agreement is in terms of United States currency and agreed rate of conversion into Indian currency is also mentioned. ( 8. ) ANOTHER important fact which requires to be mentioned is that mmtc, who were the buyers under the aforesaid agreements, sold the goods to the foreign buyers. So in each case there were two sales before the goods were exported, one by the petitioner company to MMTC, the exporter, and the second by MMTC to the foreign buyer. ( 9. ) ANOTHER important fact which requires to be mentioned is that mmtc, who were the buyers under the aforesaid agreements, sold the goods to the foreign buyers. So in each case there were two sales before the goods were exported, one by the petitioner company to MMTC, the exporter, and the second by MMTC to the foreign buyer. ( 9. ) THE Regional Assistant Commissioner came to the conclusion that the export of goods out of the territory of India was occasioned only by the sales by MMTC to the foreign buyers and, therefore, the sales by the petitioner company to MMTC were not in the course of export and did not qualify for exemption. It is the correctness of this conclusion which was canvassed before us. ( 10. ) SECTION 5 (1) of the Central Sales Tax Act, which lays down the principles for determining when a sale or purchase of goods can be said to take place in the course of export under Article 286 (1) (b) of the Constitution, has two limbs. The first limb of the section provides that if a sale or purchase occasions export of the goods out of the territory of India it is deemed to be in the course of export. Under the second limb of the section, a sale or purchase which is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India is also deemed to be in the course of export. The two principles enacted by Parliament in section 5 (1)exhaust the categories of sales or purchases in the course of export. There fore, a sale cannot qualify for exemption as a sale in the course of export, unless it falls within the first limb of the section or within its second limb. Learned counsel for the petitioner has not relied before us on the second limb of the section and reliance has been only placed on the first limb of the section. The question, therefore, is whether the sales of manganese ore made by the petitioner company to MMTC in execution of agreements Annexures N, O and P occasioned the export of the goods sold out of the territory of India. The question, therefore, is whether the sales of manganese ore made by the petitioner company to MMTC in execution of agreements Annexures N, O and P occasioned the export of the goods sold out of the territory of India. The tests as to when a sale occasions export have been laid down by the supreme Court in Ben Gorm Nilgiri Plantations Company, Coonoor and others v. Sales Tax Officer, Special circle, Ernakulam and others- ( (1964) 7 SCR 706) and Coffee Board, bangalore v. C. T O. (1970) 3 SC R1477.) In the former case it was observed that there must be an intention on the part of both the buyer and the seller to export, there must be an obligation to export, there must be an actual export and there must exist such a bond between the contract of sale and the actual exportation that each link is inextricably connected with the one immediately preceding it. It was also observed that when there are two sales leading to export, one between an Indian seller and exporter in which property passes within the territory of india and the other between the exporter and a foreign buyer, the first sale cannot be regarded as a sale in the course of export because it is not directly and integrally connected with the export. In the words of their Lordships : "it may be regarded as therefore settled law that where there are two sales leading to export the first under which goods are procured for sale and the property in the goods passes within the territory of India, and the second by the buyer to a foreign party resulting in export-the first cannot be regarded as a sale in the course of export, for a sale in the course of export must be directly and integrally connected with the export. " In the Coffee Board case same principles were reiterated. " In the Coffee Board case same principles were reiterated. It was held that for a sale to fall within the description of sale in the course of export, either the sale must take place when the goods are already in the process of being exported which is established by their having crossed the customs frontier or the sale must occasion the export ; to occasion the export the sale must be one which causes the export to take place or is the immediate cause of the export; sale by a third party to the exporter is not a sale in the course of export ; and the only sale which is in the course of export is between the exporter and the importer which without more results in export. The learned Chief Justice, in speaking for the majority of the Court laid down these tests applicable to all cases. He said : "we think it is possible to state some tests which can be applied in all cases. " *** *** *** "to establish export a person exporting and a person importing are necessary elements and the course of export is between them. Introduction of a third party dealing independently with the seller on the one hand and with the importer on the other breaks the link between the two for them there are two sales one to intermediary and the other to the importer. The first sale is not in the course of export for the export begins from the intermediary and ends with the importer. Therefore the tests are that there must be a single sale which itself causes the export or is in the progress or process of export. There is no room for two or more sales in the course of export. The only sale which can be said to cause the export is the sale which itself results in the movement of the goods from the exporter to the importer. The course of export may be established by agreement or by force of law. To be the former the agreement between the seller and the buyer must envisage an export out of India who then become exporter and importer respectively. By force of law a person selling the goods may be compelled to sell them only in an export sale but that too is not essentially different from the first. To be the former the agreement between the seller and the buyer must envisage an export out of India who then become exporter and importer respectively. By force of law a person selling the goods may be compelled to sell them only in an export sale but that too is not essentially different from the first. In either case there is a seller and a buyer who by reason of the sale also become exporter and importer respectively. Any other buyer who is not himself the importer buys for export even if export ultimately results. It is to bring out these results that Parliament has recognised only two cases of sale in the course of import: (a) where the sale is effected by a transfer of documents of title to goods after the goods have crossed the customs frontier that is to say the goods are already on the way to the importer and (b)when the sale itself causes the export to take place that is to say the exporter and importer negotiate and complete a sale which without more would result in the export of the goods. No other sale can qualify for the exemption under section 5 (1) read with Article 286 (1) (b ). " ( 11. ) EXAMINED in the light of these principles it is clear that the sales by the petitioner to MMTC under the agreements Annexures N, O and P cannot be held to be sales which occasioned the export of the goods. These agree ments are typical f. o. b. contracts in which property in the goods passes on shipment ; National Tractors, Hubli v. I. T. Commissioner. ( AIR 1971 SC 2277 , p. 2279) The true nature of an f. o. b. contract was stated by Hamilton, L. J. , in Wimble Sons and Company v, Rosenberg and Sons. These agree ments are typical f. o. b. contracts in which property in the goods passes on shipment ; National Tractors, Hubli v. I. T. Commissioner. ( AIR 1971 SC 2277 , p. 2279) The true nature of an f. o. b. contract was stated by Hamilton, L. J. , in Wimble Sons and Company v, Rosenberg and Sons. ( (1913) 3 K. B. 743) as follows : "it is well settled that, on an ordinary f. o. b. contract, when "free on board" does not merely condition the constituent elements in the price but expresses the sellers obligations additional to the bare bargain of purchase and sale, the seller does not "in pursuance of the contract of sale" or as seller send, forward or start the goods to the buyer at all except in the sense that he puts the goods safely on board, pays the charge of doing so, and, for the buyers protection but not under a mandate to send, gives up possession of them to the ship only upon the terms of a reasonable and ordinary bill of lading or other contract of carriage. There his contractual liability as seller ceases, and delivery to the buyer is complete as far as he is concerned. In such a case the goods are not "sent by the seller to the buyer," though they then begin a journey which will end in the buyers hands. In law, as between buyer and seller, they are then and there delivered by the seller to the buyer, and thereafter it is by the buyer and his agent, the carrier, and not by the seller, that the goods are "sent" to their destination. " ( 12. ) THE petitioner under the agreements Annexures N, O and P delivered the goods free on board a ship at Bombay or Vizag. The sales were then complete and the property in the goods passed from the petitioner to MMTC within the territory of India. It is true that under the agreements sampling analysis and moisture determination done at the port of discharge and the outturn weight as declared at that place were to be taken as final, whereas these operations at the port of loading were to be taken as provisional. It is true that under the agreements sampling analysis and moisture determination done at the port of discharge and the outturn weight as declared at that place were to be taken as final, whereas these operations at the port of loading were to be taken as provisional. But this condition in the agreement did not prevent the completion of sale at the port of loading and was only relevant for final settlement of the price. All shipping documents were made showing MMTC as shipper and customs clearance was also taken in the name of MMTC. All obligations of the petitioner company were complete after loading the goods on board a ship and after delivering the shipping documents to MMTC. The movement of the goods thereafter, from India to a foreign country took place not under these sales but under the sales between mmtc and the foreign buyer. The sales to MMTC were not inextricably connected with the export, they were not the immediate cause of the export and they exhausted themselves, except as regards payment of price, after the goods were loaded on board a ship within the territory of India. For these reasons, it cannot be held that these sales occasioned the export within section 5 (1) of the Central Sales Tax Act and were sales in the course of export. B. K. Wadeyar v. M/s Daulatram Rameshwarlal ( 1961 1 SCR 924 .) It was a case of an f. o. b. sale to an exporter prior to the constitution (Sixth Amendment) Act, 1956. It was contended by the sellers that as "they continued to be the owners of the goods till the goods had crossed the customs barrier and thus entered the export stream" (p. 926) the sales were not liable to tax in view of the provisions of article 286 (1) (b ). This contention was accepted because the law, as it was understood before the Constitution (Sixth Amendment) Act, was that the course of export out of the territory of India commenced after the goods crossed the customs barrier and that sales by transfer of shipping documents after the goods crossed the customs barrier were within the exemption being sales in the course of export; See State of Travancore-Cochin and others v. Shaumugha Vilas cashewnut Factory and other ( 1954 SCR 53 , pp. 687697) The course of import was then similarly understood to start at a point when the goods crossed the customs barrier of the foreign country and to end at a point in the importing country after the goods crossed the customs barrier ; J. V. Gokal and Company (Private) Limited v. Assistant Collector of Sales Tax. ( (1960) 2 SCR 852 .) In an f. o. b. contract property passes on shipment i. e. after the goods cross the customs barrier but before they cross the customs frontier. Wadeyars case was decided on the basis of the law as it then stood. The judgment, however, at certain places uses the expression "customs frontier" loosely to signify customs barrier. After the Constitution (Sixth Amendment) Act and the enactment of the Central Sales Tax Act, the law in this respect has changed. Section 5 of the Central Sales Tax Act uses the expression customs frontier and not customs barrier ; customs frontier as used in this section cannot be equated to customs barrier ; State of Madras v. Dawar and Company (1971) 1 SCR 572.) The law now is that the course of export commences after the goods cross the customs frontier and a sale by transfer of documents of title to goods after that stage is in the course of export. The determining line of the course of export or import is now the Customs frontier and not the customs barrier. In Coffee Boards case, Wadeyars case was referred and it was held to decide that "if the property in the goods passed to the buyer after passing of the customs frontier for export out of India, the sale was in the course of export. " Wadeyars case, if it is read in that way, can still be of some relevance for deciding cases under the second limb of section 5 (1); otherwise the case does not now hold the field in view of the change in the law introduced after the Constitution (Sixth Amendment) Act. The petitioner, therefore, cannot derive any assistance from Wadeyars case. ( 13. The petitioner, therefore, cannot derive any assistance from Wadeyars case. ( 13. ) THE petitioners learned counsel also relied upon K. G. Khosla and company v. Deputy Commissioner of Commercial Taxes (1966) 3 SCR 352 .) and Deputy Commercial agricultural Income Tax and Sales Tax v. Kotak and Company ( AIR 1973 SC 2491 .) In the former case the appellant K. G. Khosla and Company entered into a contract with the Director General of Supplies and Disposal for supply of axle-box bodies. According to the contract the goods were to be manufactured by a named manufacturer in Belgium and the D. G. I. S. D. London was to inspect the goods at the works of the manufacturers. Another inspection by the Deputy director of Inspections, Ministry of W. H. and S. , Madras was provided for in the contract. The goods were consigned by the Belgium manufacturers to the appellant by ship under bills of lading in which the appellant was the consignee. The goods were cleared by the appellants clearing agents at Madras and despatched for delivery to the buyer. On these facts it was held that the sales of the axle-box bodies by the appellant to the Director General of Supplies and disposals were in the course of import, for it was incidental to the contract that the axle-box bodies be manufactured in Belgium, inspected there and imported into India for the buyer. "movement of goods from Belgium to india was in pursuance of the conditions of the contract between the assessee and the Director General of Supplies. There was no possibility of the goods being diverted by the assessee for any other purpose. " The facts in the second case were that the firm of Kotak and Co. was engaged in the supply of foreign cotton to textile mills in India on the basis of import licences issued to the mills authorising import of foreign cotton by them. The firm contacted the foreign supplier and on the latter agreeing to supply the quantity required by the mills, the firm entered into contract to supply the cotton. The goods were imported under the import licences of the mills and the bill of lading obtained by the foreign suppliers on shipment of the goods was also issued in the name of the mills. The goods were imported under the import licences of the mills and the bill of lading obtained by the foreign suppliers on shipment of the goods was also issued in the name of the mills. The price was fixed on G. I. F. terms and the payment was to be made by the mills against the document. On these facts it was held that the case was similar to the case of K. G. Khosla and Company and the sale by the assessee to mills was in the course of import. Apart from the distinction that both these cases relate to sales in the course of import under section 5 (2) of the Central Sales Tax Act and not to sales in the course of export under section 5 (1), the facts were also very much different. In these cases the contract of sale between the Indian importer and the Indian buyer clearly necessitated that the goods be imported and the movement of the goods from the foreign country to India was as a result of the conditions of the contract. The two sales, one between the foreign exporter and the Indian importer and the other between the Indian importer and the Indian buyer, were so inextricably connected that the latter sale was also held to be in the course of import. In spite of K. G. Khoslas case was held in Coffee Boards case that there can be only one sale that can occasion the export within section 5 (1 ). This was the real point of difference between the majority and minority opinions in Coffee boards case. As Sikri, J. put it in his minority judgment, the heart of the matter lay in answering the question-can two sales occasion an export? The majority answered this question in the negative. As in the instant case we are dealing with section 5 (1), Coffee Boards case has controlling effect and the cases of K. G. Khosla and Company and Kotak and Company are not so helpful. Further, as pointed out earlier, on facts also they are distinguishable. ( 14. The majority answered this question in the negative. As in the instant case we are dealing with section 5 (1), Coffee Boards case has controlling effect and the cases of K. G. Khosla and Company and Kotak and Company are not so helpful. Further, as pointed out earlier, on facts also they are distinguishable. ( 14. ) ANOTHER Supreme Court case that was referred to us on this point is the case of State of Bihar v. Tata Engineering and Locomotive Company limited ( 1971 2 SCR 849 .)In that case the question was whether certain sales were in the course of inter state trade and commerce as contemplated by Article 286 (2) as it stood before the Constitution (Sixth Amendment) Act. Although certain general principles were stated as arising from the decided cases, the case is not very helpful for deciding the controversy raised in the instant case. ( 15. ) OUT of the High Court cases which were referred to us on the point three cases which are on somewhat similar facts support the conclusion reached by us. These cases are Erattamuthu v. Joint Comml. Tax Officer ( 1971 28 STC 649 Madras) Hindustan Cashew products (P) Ltd v. Sales Tax Officer (1971 28 STC 730 Kerala) and State of Orissa v. Md. Serajuddin (1973 Tax. LR 2099 Orissa) A case which was relied upon on behalf of the petitioner is Commr. of Comml. Taxes v. Thakur Prasad Sao ( 1972 29 STC 551 Pat) In this case a dealer of Ranchi in Bihar sold iron ore to the State Trading Corporation of India on if. a. s. basis which has the same effect as sales on f. o. b. basis. The ore was delivered by the dealer by loading the same on board a ship at Calcutta. On these facts it was held that the title in the goods passed to the buyer only after the goods had crossed the customs frontier of India and the sales were in the course of export. With great respect we are unable to agree with this decision. It was wrongly assumed by the learned Judges that the title passed after crossing the customs frontier and the distinction between customs frontier and customs barrier was lost sight of. ( 16. With great respect we are unable to agree with this decision. It was wrongly assumed by the learned Judges that the title passed after crossing the customs frontier and the distinction between customs frontier and customs barrier was lost sight of. ( 16. ) LEARNED counsel for the petitioner also contended that the territory of India did not include territorial waters and, therefore, property in the goods in these sales passed outside the territory of India within the meaning of section 5 (1) of the Central Sales Tax Act when the goods were loaded or. a board a ship at Bombay or Vizag. The learned counsel in this connection referred to us the definition of territory of India in Article 1 of the Constitution. ( 17. ) THE above contention proceeds upon a complete misconception. The territory of India no doubt, as declared by Article 1, comprises of (a) the territories of the States, (b) the Union territories and (c) such other territories as may be specified. But it is wrong to assume that the territories of the States and Union territories do not include any part of the coastal waters. Under international law the territory of a State not only consists of the land within its boundaries but also includes certain waters which are within or adjecent to its land boundaries. These waters are of two kinds - national (also called internal) and territorial. National Waters "consist of the waters in its lakes, in its canals, in its rivers together with their mouths, in its ports and harbours, and in some of its gulfs and bays. " "national Waters are, in fact, legally, though not physically, equivalent to national land. " Territorial Waters "consist of the waters contained in a certain zone or belt called the maritime or marginal belt which surrounds a State;" [oppenheim, International Law, 8th edition, pp. 460, 461]. In the Convention on the Territorial Sea and Contiguous Zone, signed at Geneva on April 29, 1958, the rules of international law concerning coastal waters were restated as follows : " (1) Internal waters, for example, ports, harbours, roadsteads, close-in bays and gulfs, and waters on the shoreward side of the straight baselines from which the territorial sea may be measured, as mentioned below. Over such waters, the coastal State has sovereignty as complete as over its own territory, and may deny access to foreign vessels, except when in distress, or except when the passage of foreign vessels must be permitted under Article 5 paragraph 2 of the Convention. (2) The territorial sea, or maritime belt, being a belt of coastal waters to a width of at least three miles, measured from the low-water mark, or from selected straight baselines drawn at a distance from the coast. Subject to the right of innocent passage of foreign vessels, and subject to the duty of the coastal state to warn passing vessels against known dangers of navigation, that State has sovereignty over the territorial sea. (3) The contiguous zone, being a belt contiguous to the territorial sea, but not extending beyond twelve miles from the low-water mark or other selected straight baselines. The territorial State does not have sovereignty over this zone, but may exercise control therein for the purpose of enforcing compliance in its territory and territorial sea with certain of its laws and regulations. " [quoted from Starke, International Law, 7th edition p. 213]. ( 18. ) IT is, therefore, clear that territory of a State includes National or internal waters and Territorial waters. Over the former, which includes waters in points and harbours, the State exercises as complete a sovereignty as over its own land territory. As regards the latter, i. e. territorial waters, the state has sovereignty subject to the right of innocent passage of foreign vessels and subject to the duty of the coastal State to warn passing vessels against known dangers of navigation. The limit of the territorial waters beyond three miles is not yet settled, but the current weight of State practice and consultations is in favour of six to twelve miles limit; [starke, 7th edition, pp. 215, 216]. The president of India issued a proclamation on 22nd March 1956 fixing the limit of territorial waters of India at six nautical miles into the sea measured from the appropriate baseline. Article 297 of the Constitution provides that all lands, minerals and other things of value underlying the ocean within the territorial waters or the continental shelf of India shall vest in the Union and be held for the purpose of the Union. Article 297 of the Constitution provides that all lands, minerals and other things of value underlying the ocean within the territorial waters or the continental shelf of India shall vest in the Union and be held for the purpose of the Union. Under this Article what vests in the Union is the sea bed and not territorial waters ; the territorial waters form part of the coastal States and Union territories as was also the position under the Government of India Act, 1935; A. M. S. S. V. M. and Co. v. State of Madras. (ILR 1953 Mad. 1175, PP. 1191, 1192. .) The territory of India which comprises of the territories of the States and Union territories includes the waters in its ports and harbours and territorial waters. Indeed, the Supreme Court in Wadeyars case has held that the territorial limits of India "would include the. territorial waters of India. " For these re sons, we must reject the contention that as the property in the good passed on board a ship at Bombay or Vizag. , the property passed outside the territory of india within section 5 (1) of the Central Sales Tax Act. ( 19. ) AS a result of the discussion aforesaid, we are of opinion that the assistant Commissioner was right in holding that sales in pursuance of agreements Annexures N, O and P did not qualify for exemption as sales in the course of export. ( 20. ) NEXT come the sales under the agreements Annexures S, T and U. As regards Annexure S, it has been accepted before us by the learned counsel for the petitioner that under this contract, during the relevant period, only 1,000 metric tons of ore was sold to an Indian buyer Ram Bahadur Thakur and co. and delivery was taken ex-plot by the buyer. This sale was, therefore, not even an f. o. b. sale and cannot be regarded as a sale in the course of export. As regards Annexures T and U, these agreements are on f. o. b. terms similar to agreements Annexures N, O and P discussed earlier in favour of Indian buyers, namely, R. S. G. K. Agrawal and Sons and Natwarlal Shamaldas. As regards Annexures T and U, these agreements are on f. o. b. terms similar to agreements Annexures N, O and P discussed earlier in favour of Indian buyers, namely, R. S. G. K. Agrawal and Sons and Natwarlal Shamaldas. The difference mainly is this that the buyers under the agreements T and U were not themselves the exporters and they were obliged, because of canalization of exports, to sell the ore purchased by them to M M T C. Thus in these cases there were at least three sales before the goods moved out of the territory of India-- (1) Sale by the petitioner company to Indian buyers ; (2) sale by the Indian buyers to MMTC, the Indian exporter, and (3) sale by MMTC to the foreign importer. For the reasons already indicated while dealing with the case of sales under agreements N, O and P, we are of opinion that the first and second sales did not occasion the export of the goods out of the territory of india and they were not sales in the course of export. The Assistant Commissioner in the assessment order has also held that actual export in case of sales under Annexures T and U has not been established as copies of bills of lading were not filed. Even if we were persuaded to hold that the goods were actually exported, we are clear that the sales did not occasion the export. The assistant Commissioner was, therefore, right in holding that the sales under the agreements Annexures S, T and U were not in the course of export. Outside Sales: ( 21. ) IT was next contended by the learned counsel for the petitioner that all the sales of manganese ore from the petitioners mines in Madhya Pradesh to outside purchasers were outside sales and not sales in the course of interstate trade or commerce and the sales could not be taxed in this State. The Pete tioners case on this point is that what it sells is not ore of any ore mine, but mixtures of ores obtained from different mines. The most popular mixture is known as oriental mixture which contains 49. 25% manganese, 0. 15% phosphorus, 9. 00% Silica, 2. 5% Alumina and 7. 5% Iron. The Pete tioners case on this point is that what it sells is not ore of any ore mine, but mixtures of ores obtained from different mines. The most popular mixture is known as oriental mixture which contains 49. 25% manganese, 0. 15% phosphorus, 9. 00% Silica, 2. 5% Alumina and 7. 5% Iron. Oriental mixture and other mixtures that the petitioner sells are obtained by mixing the ores from the mines in Madhya Pradesh with the ores from the mines of Maharashtra. These different mixtures cannot be obtained by mixing the ores obtainable in Madhya pradesh alone or Maharashtra alone, but they can only be obtained by mixing the ores from the petitioner companys mines in both the States. So when the petitioner company has to supply a particular quantity of mixture of a particular specification, it first calculates how much quantity of ore from each particular mine would be needed to make up the mixture of contracted quality and quantity. Instructions are then issued to the different mines to rail the ores of specified quantity to the destination. The mixture is produced in the process of unloading of ores coming from different mines at the place of destination. No other physical or mechanical process is needed for producing the mixture. The argument of the learned counsel for the petitioner is that a contract for the sale of oriental mixture or any other mixture is a contract for sale of future goods, that the goods sold come into existence at the place of destination after the wagons coming from different mines are unloaded at one place, and that the goods sold are neither appropriated to the contract in Madhya Pradesh nor do they move from Madhya Pradesh to another State for the reason that the goods sold are never in existence in Madhya Pradesh and they come into existence for the first time at the place of destination. ( 22. ) THE agreements which are relevant on this point are Annexures R-1 to R-7. All these agreements are similar in nature and it will be sufficient to notice the terms and conditions of Annexure R -1. By this agreement the petitioner company agreed to sell to the Universal Ferro and Allied Chemical ltd. , Tumsar (Maharashtra) specified quantity of oriental mixture of manganese ore. All these agreements are similar in nature and it will be sufficient to notice the terms and conditions of Annexure R -1. By this agreement the petitioner company agreed to sell to the Universal Ferro and Allied Chemical ltd. , Tumsar (Maharashtra) specified quantity of oriental mixture of manganese ore. The conditions as to quality, price, delivery and payment in this agreement are as follows : "quality : The average quality of the ore to be supplied by Sellers should be, without guarantee, 49. 25% Manganese, 0. 15% Phosphorus, 9% Silica and 7. 5% Iron PROVIDED ALWAYS that as such supplies are furnished by mixtures of ores from the Sellers-several mines the average quality of the samples taken from deliveries from each mine shall form the basis of settlement. PRICE: The basis price will be Rupees One Hundred and Ten (Rs. 110) per metric tonne basis 49. 25% Manganese, with scale prorata, free on rail Mine Sidings, plus Sales Tax, if any. DELIVERY: Approximately in equal monthly instalments, subject to availability of wagons. Buyers will be responsible to arrange with the Railway for the supply of wagons necessary to take delivery of the ore at the Sidings and in the quantities to be declared by the Sellers Managing Director in Nagpur. The Sellers will load the component ores from their mines into the wagons which will be arranged for by the Buyers who shall be the consignees, in the name of the Sellers, who shall be the consignors, at such mines sidings and for such quantities as may be declared from time to time by the Sellers Managing Director, the destination of all the wagons being tumsar in the State of Maharashtra and the railway freight being payable by the Buyers at the destination. As aforesaid, after the loading of the component ores into wagons the buyers shall be responsible in all respects in respect of the goods so loaded into the wagons. PAYMENT : Buyers to open a confirmed, irrevocable, divisible and without recourse to drawer, Letter of Credit in favour of the Sellers for 100% of the f. o. r. value of the tonnage to be supplied in each month and permitting payment as follows within 14 days from the date of receipt by the negotiating Bank of the Sellers invoice. 95% of the value of the material against the following documents: 1. Sellers provisional invoice, in triplicate. 95% of the value of the material against the following documents: 1. Sellers provisional invoice, in triplicate. 2. A statement showing particulars of despatches from different loading points during the month accompanied by memos of despatches giving the number and the date of railway receipt, the name of the railway station, chargeable tonnage shown on the railway receipt, duly countersigned by Buyers representative in token of receipt of the railway receipts detailed in the said memos. In the case of a revolving Letter of Credit fresh railing instructions will not be issued by Sellers until the Letter of Credit has been fully revalidated and the Sellers have been advised to that effect by the Bank. Final payment of the remaining 5% of the value of the material against the following documents: 1. Sellers Final Invoice, in triplicate. 2. A statement of analysis showing the average analysis of the ore. " It will be seen from the terms and conditions of the agreements of sale that samples taken from deliveries from each mine were to form the basis of settlement, the price was f. o. r. mine sidings with scale pro rata depending on manganese content of the ore, deliveries were taken by the buyers who were consignees at the mines sidings and the risk passed to the buyers after the loading of the goods into the wagons at the mines sidings. May be that the buyers, as argued by the learned counsel for the petitioner, could still reject the goods at the destination if the ores arriving from different mines were not in such a proportion as to result into a mixture of the contracted grade. But the component ores were appropriated to the contract at the mines sidings by the sellers with the consent of the buyers when they were loaded in the wagons. The ore from the mines of Madhya Pradesh moved to the place of destination in another State as a result of a term or covenant in the contract of sale ; and the ore was within Madhya Pradesh at the time of its appropriation to the contract of sale. ( 23. The ore from the mines of Madhya Pradesh moved to the place of destination in another State as a result of a term or covenant in the contract of sale ; and the ore was within Madhya Pradesh at the time of its appropriation to the contract of sale. ( 23. ) BUT then it is said that sections 3 (a), 4 (2) (b) and 9 (1) of the central Sales Tax Act talk of goods which are the subject-matter of sale and the consignments of ore proceeding from Madhya Pradesh were not the goods sold but only components of the mixture which was the subject-matter of sale and which came into existence only at the destination station. This argument of the learned counsel, which is the main argument, must now be examined. It is true that movement of goods from one State to another to which section 3 (a) and 9 of the Act refer in the context of a sale in the course of interstate trade or commerce is the movement of goods which are the subject-matter of sale. Similarly, goods in section 4 (2) (b) of the Act, which defines inside sale with reference to the existence of the goods inside a State at the time of their appropriation to the contract of sale, also refers to the appropriation of the goods sold. The difficulty, however, lies in accepting the contention that the mixture at the destination is entirely a new commercial commodity different and distinct from its components. The components of the mixture are manganese ore. The mixture is obtained without going through any process of manufacture by just unloading the wagons containing ores of different grades at one place. The mixture so obtained is nothing but manganese ore. The buyers know that what they are receiving are ores from different mines in a particular proportion to be unloaded at one place to make up the mixture of specified grade; they take delivery of the component ores at the mines sidings; the risk passes to them after taking delivery ; the unloading at the destination is also done by them as they are the consignees; the price is fixed f. o. r. mines sidings ; the price is calculated on the basis of analysis of the component ores according to their manganese content and not by analysing the mixture. Having regard to this practice in the trade evidenced by the agreements, we are of opinion that the mixture resulting at the time of unloading of ores coming from different mines is not regarded as a different and distinct commodity from its components. To put it differently, if the agreement to sell is a certain quantity, mixture of grade A, which is obtain ed by unloading component ores of grades B and C at the place of destination, the contract is really for sale of component ores of grades B and C in such a proportion as to produce the specified quantity of mixture of grade A. The buyers in effect purchase the component ores subject possibly to the right of rejection in case the component ores are not sent in a proportion as to result in a mixture of contracted grade. This being the position, we reject the argument that the component ores were not the goods sold and that the mixture of ores is a new commercial commodity different from its components. Learned counsel for the petitioner relied upon an unreported judgment of the bombay High Court in the case of The Central Provinces Manganese Ore Company Ltd. v. The State of Maharashtra. (Sales Tax References 17 to 19 of 1964), decided on the 22nd July 1969. where it has been held in another context that mixture is different from its components. For the reasons already indicated we are unable to agree with this view. ( 24. ) IN case of despatches of ores to the ports of Bombay and Vizag, to comply with the orders of buyers who wanted the goods for export, the petitioner was the consignor and its shipping agents were the consignees. In these cases the delivery was taken by the buyers either ex-plot or on board a ship. But here also, to comply with any particular order, the petitioner first decided what quantity of ore from each mine would be needed to make the mixture of the contracted quality. The ores from different mines were then railed to the port and the mixture resulted in the process of unloading. As the mixture is not a new commodity different and distinct from the components, the goods sold were the ores from different mines mixed in a particular proportion. The ores from different mines were then railed to the port and the mixture resulted in the process of unloading. As the mixture is not a new commodity different and distinct from the components, the goods sold were the ores from different mines mixed in a particular proportion. These goods i. e. the ores from different mines were appropriated to the contract of sale at the time of loading them in wagons at the mines sidings and the movement of goods from the mines sidings to the port was an incident of the contract of sale. ( 25. ) SECTION 3 (a) of the Central Sales Tax Act provides that a sale or purchase of goods shall be deemed to take place in the course of interstate trade or commerce if the sale or purchase occasions the movement of goods from one State to another. As construed by the Supreme Court, a sale falls under this section "if the movement of goods from one State to another is under a covenant or incident of the contract of sale. " See-Tata Iron and Steel Company Limited v. Sarkar (1961 1 SCR 379, p. 390) ; Tata Engineering and Locomotive Company Limited v. The Assistant Commissioner ( 1970 3 SCR 862 , p. 866)and State of Bihar v. Tata Engineering and Locomotive Company ( 1971 2 SCR 849 , p. 854) As regards sales to outside buyers under agreements annexures R-1 to R-7, it is quite clear that the movement of manganese ore from the mine, in Madhya Pradesh to another State was under a covenant of the contract of sale and the sales were in the course of interstate trade and commerce under section 3 (a ). In case of sales to buyers who purchased the ore for export, there is no clear term in the agreements for movement of the ores from Madhya Pradesh. But the ore from the mines of Madhya Pradesh was appropriated to the contract by the petitioner in Madhya Pradesh at the time of loading it in the wagons at the mines sidings and the ore sold moved to Bombay or Vizag. in another State as a necessary incident of the contract of sale. Property in the goods may have passed at the destination, but passing of property is not the test under section 3 (1 ). in another State as a necessary incident of the contract of sale. Property in the goods may have passed at the destination, but passing of property is not the test under section 3 (1 ). As the movement of the goods was under a covenant or an incident of the contract of sale, all these sales fell within section 3 (1) and were sales in the course of interstate trade or commerce. Further, as the movement of the goods, in so far as the ore from the mines in Madhya Pradesh is concerned, commenced from this State, the tax can be levied and collected in this State under section 9 of the Act. ( 26. ) THESE sales were also not outside sales with reference to the State of Madhya Pradesh. Sales of ore being sale of unascertained goods, the relevant provision applicable in this respect is section 4 (2) (b) of the Central sales Tax Act. Sale under this provision is deemed to take place inside a state where the goods are "at the time of their appropriation to the contract of sale by the seller or by buyer, whether assent of the other party is prior or subsequent to such appropriation. " It is to be noticed that section 4 (2) (b)unlike section 23 (1) of the Sale of Goods Act does not talk of unconditional appropriation with the assent of the other party or of passing of property. It is, therefore, not necessary for application of section 4 (2) (b) that the goods. should be unconditionally appropriated to the contract with the assent of the other party or that the property should have passed at the time of appropriate tion. It is sufficient for section 4 (2) (b) if the goods are appropriated by the seller and the other party assents to it later. In the instant case the seller appropriated the ore despatched from the mines in Madhya Pradesh at the mines sidings. In case of sales to purchasers under the agreements Annexures R-1 to R-6 the goods were so appropriated with the prior consent of the buyers. In cage of sales to the buyers purchasing for export, the appro privation was assented to when the goods were accepted by the buyers at the port. In case of sales to purchasers under the agreements Annexures R-1 to R-6 the goods were so appropriated with the prior consent of the buyers. In cage of sales to the buyers purchasing for export, the appro privation was assented to when the goods were accepted by the buyers at the port. It is immaterial that the buyers could reject the goods at the place of destination or at the port if the petitioner company did not despatch component ores in such proportion as to make up the mixture of contracted grade, for section 4 (1) does not refer to unconditional appropriation or passing of property. The position, therefore, is that the sales fell within section 4 (2) (b)and were inside sales as regards the State of Madhya Pradesh. ( 27. ) SECTION 4 of the Central Sales Tax Act is subject to section 3 of the act. As the sales were interstate sales under section 3, they were not taxable under the State Act in spite of the fact that they were inside sales under section 4 (2 ). The sales were taxable only as interstate sales in Madhya Pradesh under section 9 of the Central Sales Tax Act. The Assistant Commissioner was, therefore, right in taxing these sales as interstate sales. Miscellaneous Points: ( 28. ) LEARNED counsel for the petitioner then contended that the Assistant commissioner acted illegally in imposing a penalty of Rs. 1,000 for late filing of return under the Central Sales Tax Act. The argument of the learned counsel is that in the absence of any provision in the Central Act making a dealer liable to penalty, penalty cannot be imposed by drawing upon sec tion 17 (3) of the State Act with the help of section 9 (2) of the Central Act. The argument need not be considered any further as it is concluded against the petitioner by two Division Bench decisions of this Court which arc bindings on us. These decisions are Commissioner of Sales Tax v. Kantian Mohanlal and Brothers (19 STC 377.) and Premier Refractories of India, Katni v. Sales tax Officer (1973 vikraya Kar Nirnaya 290.) ( 29. ) LEARNED counsel then challenged the imposition of purchase tax on a turnover of Rs. 748 under section 7 (1) of the State Act on the ground that proviso to that section grants an exemption upto Rs. 5,000. ) LEARNED counsel then challenged the imposition of purchase tax on a turnover of Rs. 748 under section 7 (1) of the State Act on the ground that proviso to that section grants an exemption upto Rs. 5,000. The argument cannot be accepted. The turnover of Rs. 748 represents purchases from unregistered dealers, but to claim exemption under the proviso the petitioner should have proved that "the aggregate of purchase prices of all the goods purchased" did not exceed Rs. 5,000. The aggregate of purchase prices of all the goods purchased would obviously include purchases made from both registered and unregistered dealers. The petitioner does not claim that all its purchases did not exceed Rs. 5,000. Therefore, it cannot be held that the petitioner was entitled to exemption under the proviso to section 7 (1 ). ( 30. ) THE petitioners learned counsel then contended that the Assistant commissioner was wrong in holding that turnover of interstate sales to the extent of Rs. 1,37,54,720 was not supported by C Forms. This argument raises a question of fact which can be more conveniently raised in appeal and cannot be properly decided in a writ petition. ( 31. ) IT was lastly contended that total sales to Bhilai Steel Plant taxed under the State Act Aggregate to Rs. 7,15,316. 15 as was contended by the purchasers, and the Assistant Commissioner has wrongly taken the total amount of these sales to be Rs. 7,54,578. 41. The Assistant Commissioner has taken this figure from the final bill of the petitioner company which was sent to the purchasers. It cannot be said that the total amount of these sales was determined by the Assistant Commissioner without any basis. The dispute raised by the petitioner can be more conveniently raised in appeal and cannot be properly decided in this petition. ( 32. ) AS a result of the above discussion, the petitioner succeeds to the extent of sales covered by the agreements Annexures Q and R. These sales were in the course of export and were not taxable. The petition is partly allowed. The respondents are restrained from recovering sales tax on the sales covered by agreements Annexures Q and R and the Assistant Commissioner of Sales Tax is directed to amend the assessment order under the Central sales Tax Act accordingly. In all other respects the petition fails and is dismissed. The petition is partly allowed. The respondents are restrained from recovering sales tax on the sales covered by agreements Annexures Q and R and the Assistant Commissioner of Sales Tax is directed to amend the assessment order under the Central sales Tax Act accordingly. In all other respects the petition fails and is dismissed. Having regard to the circumstances of the case, there shall be no order as to costs. The security deposit shall be refunded to the petitioner. Petition partly allowed.