RAMALINGAM AND CO Vs. STATE OF MADRAS

JUDGEMENT

(1.) M/s Ramalingam and Co.-hereinafter called the assessees-are a firm doing business principally as exporters of vegetable fibres to foreign countries. They have their place of business at Tuticorin in the district of Tirunelveli in the State of Madras.

(2.) The contracts of sale are made by correspondence on approval of samples sent by the assessees to the foreign buyers. The contracts are C. I. F. or C. F. and the price is payable by draft upon bank credit to be opened by the buyer. The course of dealing between the assessees and the foreign buyers was as follows:-

(3.) After the contract for a quantity of goods was finalised by correspondence and the price ascertained the foreign buyer opened with his own bankers an irrevocable Letter of Credit in favour of the assessees for 95% of the net invoice value. Intimation of the opening of the Letter of Credit was then given to the assessees through a bank operating in the Province of Madras. The assessees then shipped the goods, obtained Bill of Lading in their own names and lodged the shipping documents endorsed in blank with their own bankers together with the invoice and Bill of Exchange for 95% of the invoice value. The assessees then discounted the Bills through their own bankers. The shipping documents were forwarded to the foreign banker who on presentation paid 95% of the invoice amount. The Bill of Lading was then delivered by the foreign banker to the buyer and the goods were unloaded.