Ajay Nath Rot, J.@mdashThis is an appeal from a judgment and decree dated the 30th of September, 1997, passed by the Hon''ble Mr. Justice Sujit Kumar Sinha, as His Lordship then was, decreeing the respondents'' suit. It is a little disheartening for us to dispose of a matter which started with an agreement between the parties made somewhere in the middle of the year 1973, after which 28 years have rolled by. The transactions, as we shall presently narrate, are commercial transactions, and a lot of the heat is lost if decades go by without any finality in the decision being reached.
2. Be that as it may, let us proceed on the principle better late than never.
3. The appellants entered into contracts for purchase of large quantities of jute sacking for delivery to the Government of Sudan. The total contract value was of the order of Rs. 2.5 crore. Much the larger part of the price has been paid and the dispute arises only with regard to a small portion thereof, about Rs. 13 lac. The contract was entered into in June, 1973. As per written terms the loading in ships was to be made in August or September, 1973; delivery at Sudan Port in September-October, 1973.
4. The contract was cost and freight Sudan Port. This means, as is well known, that cost and freight would be to the account of the seller, i.e., the respondents and they would be responsible for carriage upto and delivery at the Port of Sudan. The usual phrase is c.i.f. but we have not been troubled with insurance at all.
5. At the time of the making of the contract a certain amount of export duty was payable on jute sacking. The rate was Rs. 150/- per tonne. There is evidence that even at the time the contract was made, the trading community was expecting a remittance of this duty but it is equally in evidence that at the time of making of the contract the export duty had not been abolished and was very much in operation. The remission of the duty came sometime on or about the 28th of August, 1973.
6. Delivery was made as per agreement by the respondents at the Port of Sudan during the last four months of 1973. It is the admitted case of both the parties that in fact no export duty was paid by the respondents.
7. The case of the appellants is very well summarized in a letter written on their behalf on the 20th of February, 1974 by their Deputy Marketing Manager. It is simply stated in the concluding portion of that letter that the element of export duty at the rate of Rs. 150/- per tonne was payable. But due to abolition of duty on sacking from 28.8.73 the respondents were not required to pay any export duty; as such the STC have deducted the amount of export duty from the respondents'' bill as per the provisions of Section 64A of the Sale of Goods Act, 1930.
8. It is indeed the applicability of that section, to the facts and circumstances of this case, which is determinative of this appeal. The said section is set out below:
64-A. In contracts of sale, amount of increased or decreased taxes to be added or deducted - (1) Unless a different intention appears from the terms of the contract, in the event of any tax of the nature described in sub-section (2) being imposed, increased, decreased or remitted in respect of any goods after the making of any contract for the sale or purchase of such goods without stipulation as to the payment of tax where tax was not chargeable at the time of the making of the contract, or for the sale or purchase of such goods tax-paid where tax was chargeable at that time,-a) if such imposition or increase so takes effect that the tax, or increased tax, as the case may be, or any part of such tax is paid or is payable, the seller may add so much to the contract price as will be equivalent to the amount paid or payable in respect of such tax or increase of tax, and he shall be entitled to be paid and to sue for and recover such addition; and (b) if such decrease or remission so takes effect that the decreased tax only, or no tax, as the case may be, is paid or is payable, the buyer may deduct so much from the contract price as will be equivalent to the decrease of tax or remitted tax, and he shall not be liable to pay, or be sued for, or in respect of, such deduction.
(2) The provision of sub-section (1) apply to the following taxes, namely :
(a) any duty of customs or excise on goods;
(b) any tax on the sale or purchase of goods.
9. The case made by the single witness of the respondents from the box in the trial court was that they had not included export duty in computation of their price. Even documents were sought to be exhibited to that effect. The evidence given from the: box is not totally consistent, but this is the general trend of the plaintiffs witness. The defendant appellant''s witness on the other hand stated in two questions, viz., questions 66 and 67 that (i) the STC did not ask for the seller''s formula for calculation of their price; and (ii) it is the trade practice that everybody while quoting his offer includes all elements of cost.
10. The meaning of the last part of the evidence is that it cannot be, that as a trader, the seller did not take into account the export duty element then in operation, but left it out of the selling price.
11. To prevent any confusion of thought it should be borne in mind that this not a case, at least as between the parties before us, of any unjust enrichment by any one of them. The S.T.C.''s case is not that they had to refund the element of export duty to the Sudanese Government or that the Sudanese Government paid, in their turn, the price of goods less the export duty to the STC. The point here is where does the gain go?
12. The STC''s case simply is that as export duty was remitted after the making of the contract, and the respondents did not pay export duty they cannot get it as part of the purchase price. According to them, the gain is theirs; the respondents contend otherwise.
13. So far as the written part of the contract is concerned, the price clause runs as follows:
PRICE : @ Rs. 287/70 per 100 bags C & F Port Sudan.
14. Where the contract is in writing, it is neither good law nor good policy to be guided by the evidence of parties, one of them trying to establish that in the sale price the element of export duty was not included, and another party seeking to establish that as a matter of ordinary trade practice it must have been so included. In our opinion, the applicability of section 64A in the facts and circumstances of this case raises a point of construction of the contractual documents and clauses; it is not a point of believing either this side''s witness or that.
15. From the terms of Section 64A. it is quite clear, that unless a different intention appears from the terms of the contract, the section puts increase or decrease of the types of duty or tax mentioned in that section to the account of the purchaser. In general, if duty is increased, the purchaser pays the increment and if duty is decreased, the purchaser cannot be compelled to pay the amount of the reduction.
16. In explaining the reason for this policy, i.e., that increase or decrease goes to the purchaser''s account, it was said in the case of Central Hindustan, reported at AIR 1962 Bombay 222 that the burden of duty of Customs or Excise is always intended to be transferred to consumers because these are in the nature of indirect taxes.
17. The reasoning, therefore is that, just as a consumer ultimately bears the burden of indirect taxes, so also does an intermediate purchaser, even if he is not the actual consumer.
18. But this does not get us very (sic) in solving the problem of the applicability of 64A.
19. It is our opinion that that section, prior to commencement of Clauses (a) and (b), contains in the latter parts, two different situations. The first situation is where at the time of the making of the contract, tax was chargeable. The section envisages, in this situation, that there is no stipulation as to the payment of tax. Since the parties are silent, and since a different intention does not appear, section 64A fills in the gap; it fills in the gap by allowing the increase or imposition to be taken by the seller from the purchaser as per clause (a).
20. The second part of Section 64A relates to the situation where tax was chargeable at the time of the making of the contract. This is the situation in the case in hand. In such a situation. Section 64A envisages that the sale or purchase of the goods must be tax paid.
21. It is the construction of these words "tax paid" which determines this appeal. If it is a question of the assumed suppositions of the parties, or the motive of the parties, it might be quite easy to prove that a seller will always include, or at least want to include, in the price element, the tax which ultimately has to be paid and therefore, the agreement for the sale of the goods must be taken to be an agreement for sale of tax paid goods. The price element must include tax as no seller sells goods for losing money.
22. If, however, the words "tax paid" relate to a particular express stipulation in the contract, then quite another result will follow; it might well be that at the time of the making of the contract, the parties have not adverted to the point of payment of tax expressly; just as they might omit mentioning of any possibility of increase or decrease or imposition of tax, so also might they similarly omit to mention that the goods sold must be tax paid goods. In case of such omission, the gain for remission goes to the seller, but the gain for decrease goes to the purchaser.
23. When we say that the words "tax paid" must relate, in reference to Section 64A, to an express stipulation in the contract, we must not be understood as saying, that the stipulation has to be a written one; all that it has to be, is that it must be express. If the entire contract is oral, the stipulation of the goods being tax paid might also be oral, but it will have to be express. It will not do to keep the idea of the goods being tax paid completely locked up in one''s chest, and then, if and when the tax or duty is abolished, to fall back upon the supposition, or imagined assumption, of the parties, and thus to say, that although the words "tax paid" were not made express, those must have been in the background.
24. If it were permissible to leave the term of the goods being "tax paid" to the region of implied terms, then Section 64A would not contain so many extra words just before clauses (a) and (b) as it does, but the remission of duty would be left to the purchaser''s profit, even if there be no stipulation as to payment of tax. The upward or downward variation of tax or duty to the purchaser''s account, in that event, would have been always the case, where the contract contains no stipulation as to payment of tax. But the wording of Section 64A does not proceed on that basis. There is a special second part of 64A, just before the commencement of clause (a) where, the situation where tax was chargeable at the time of making of the contract is envisaged; in such a situation the precondition for application of Section 64A is not that the contract is without stipulation as to payment of tax, but that the pre-condition is that the contract is for the sale or purchase of goods tax paid.
25. Another reason why the words "tax paid" must refer to express stipulation is that the beginning of Section 64A shows, that a different intention of the parties, to override that section, must appear from the terms of the contract. These terms always have to be express, the implication of terms in a contract being left to very special situations like fundamental breach or some specialized cases like fitness and merchantability of goods sold. In Section 64A the terms referred to, in regard to tax or duty, are always express terms. Were it not so, it would be open to the parties to render to Section 64A completely meaningless by seeking to adduce evidence, as they did here, as to whether the upward or downward revision of duty should be to the seller''s account or the purchaser''s.
26. In these circumstances, we are of the opinion that so far as the present contract is concerned, it was silent as to payment of tax. It did not contain any stipulation that the goods would have to be tax paid, in regard to the export duty element There is no stipulation either that the goods would have to be duty paid. Needless to mention the words "tax paid" in Section 64A must also cover the words "duty paid". But no such words are there in the contract.
27. In a situation like this it is neither open to the court to speculate, nor open to the parties to give evidence, as to whether the export duty formed or did not form part of the agreed price of the goods. Since the goods are not mentioned expressly as duty paid, and since export duty was chargeable at the time of making of the contract. Section 64A cannot be made to apply to the profit of the purchaser, as per clause (b) of it. To have that profit, out of remission of duty, the purchaser would have to stipulate, first expressly, that the goods would have to be export duty paid.
28. Needless to mention, the State Trading Corporation is not the Customs Authority and it had no reason specially to stipulate that the goods would have to be export duty paid. All it needed were the goods, as per specification, at the appropriate time and at the place where those were needed, i.e. the Port of Sudan. In case the sellers were able to arrange delivery in that manner, even (hypothetically) without the necessity of export of the goods, and cause those to be delivered, even then, that would fulfil the contract in all its substantial terms. Thus STC cannot get the benefit of the remission of export duty, which remission was made after the making of the contract. Accordingly, there is absolutely no reason to interfere with the judgment and decree passed in the court below.
29. The appeal is dismissed with costs.
30. As a consequence of this appellate decree the Bank Guarantee furnished by the respondents in regard to principal sum, which has already been withdrawn by them shall stand discharged immediately. In regard to the interest part, the Bank Guarantee furnished by the appellant shall be forthwith invoked and the proceeds paid over to the respondents in pro tanto satisfaction.
31. Slay of operation of the appellate decree is prayed for but such prayer is refused. All parties, the departments and all others concerned to act on a signed Xerox copy of this dictated judgment on the undertaking to have the decree perfected.
S.N. Bhattacharjee, J.
I agree.
