PETITIONER: BAYYANA BHIMAYYA Vs. RESPONDENT: THE GOVERNMENT OF ANDHRA PRADESH DATE OF JUDGMENT: 14/12/1960 BENCH: HIDAYATULLAH, M. BENCH: HIDAYATULLAH, M. KAPUR, J.L. SHAH, J.C. CITATION: 1961 AIR 1065 1961 SCR (3) 267 CITATOR INFO : F 1962 SC1585 (5,7,8,9) R 1973 SC1061 (11,12) D 1975 SC1996 (2) D 1978 SC 389 (22,44) ACT: Sales Tax-Delivery order-Meaning of-Two separate transactions-Sales-tax, if leviable at both Points-Sale of Goods Act, 1930 (111 of 1930), s. 2(4)-Madras General Sales Tax Act, 1939 (Mad. IX of 1939). HEADNOTE: The respondents dealt in gunnies. They first entered into contracts with two Mills agreeing to purchase gunnies at a certain rate for future delivery, and also entered into agreement with third parties, by which they charged something extra from those third parties and handed over the delivery order known as kutcha delivery order. The Mills however did not accept the third parties as contracting parties, but only as the agents of the appellants and delivered the goods against the kutcha delivery orders, and collected the Sales Tax from the third parties. The tax authorities treated these transactions between the appellant and the third parties as fresh sales and sought to levy sales-tax again, which the appellants contended, was not demandable as there were no second sales; the delivery of a kutcha delivery order did not amount to a sale of goods, but was only an assignment of a right to obtain delivery of gunnies which were not in existence and not appropriated to the contract; this was only an assignment of a forward contract. Held, that the agreements between the parties showed that third parties were not recognised by the sellers. A delivery order being a document of title to goods, the possession of such a document not only gave the right to recover the goods but also to transfer them to another by endorsement or delivery. There being two separate transactions of sale, one between the Mills and the original purchasers and the other between the original purchasers and third parties, tax was payable at both the points. The Sales Tax officer, Pilibhit v. M/s. Budh Prakash jai Prakash, [1955] 1 S.C.R. 243, Poppatlal Shah v. The State of Madras, [1953] S.C.R. 677, and The State of Andhra v. Kolla Sreeramamurthy, decided on June 27, 1957, referred to. JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 223 and 224
of 1960.
Appeals from the order dated November 23, 1956, of the
Andhra Pradesh High Court, Hyderabad, in Tax Revision Cases
Nos. 17 and 18 of 1956.
268
C. K. Daphtary, Solicitor-General of India and T. V. B.
Tatachari, for the appellants.
K. N. Rajagopal Sastri and D. Gupta, for the respondent.
1960. December 14. The Judgment of the Court was delivered
by
HIDAYATULLAH, J.-These are two appeals on certificates
granted by the High Court of Andhra Pradesh against a common
judgment in a sales tax revision filed by the appellants in
the High Court.
The facts are as follows: In the year 1952-53, for which the
assessment of sales tax was in question, the appellants
dealt in gunnies, and purchased them from two Mills in
Vishakapatnam District and in respect of which they issued
delivery orders to third parties, with whom they had entered
into separate transactions. The procedure followed by the
appellants was this: They first entered into contracts with
the Mills agreeing to purchase gunnies at a certain rate for
future delivery. Exhibit A-1 is a specimen of such
contracts. The appellants also entered into agreements with
the Mills, by which the Mills agreed to deliver the goods to
third parties if requested by the appellants. The Mills,
however, did not accept the third parties as contracting
parties but only as agents of the appellants. Exhibits A-2
and A-2(a) are specimen agreements of this kind. Before the
date of delivery, the appellants entered into agreements
with third parties, by which they charged something extra
from the third parties and handed over to them the delivery
orders, which were known as kutcha delivery orders.
Exhibits A-3 and A-4 are specimens of the agreement and the
delivery orders respectively. The Mills used to deliver the
goods against the kutcha delivery orders along with an
invoice and a bill, of which Exs. A-6 and A-7 are specimens
respectively, and collected the sales tax from the third
parties. The tax authorities, however, treated the
transaction between the appellants and third parties as a
fresh sale, and sought to levy sales tax on it
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again, which, the appellants, contended, was not demandable,
as there was no second sale.
The appellants failed in their contentions before the Deputy
Commercial Tax Officer, Guntur, and their appeals to the
Deputy Commissioner of Commercial Taxes, Guntur and the
Andhra Sales Tax Appellate Tribunal, Guntur, were
unsuccessful. The appellants then went up in revision to
the High Court under the Madras General Sales Tax Act, 1939
(as amended by Madras Act No. 6 of 1951), but were again
unsuccessful. The High Court, however, granted
certificates, on which these appeals have been filed.
The contentions of the appellants are that the agreement and
the delivery of the kutcha delivery order did not amount to
a sale of goods, but was only an assignment of a right to
obtain delivery of the gunnies, which were not in existence
at the time of the transaction with third parties, and were
not appropriated to the contract, or, in the alternative,
that this was only an assignment of a forward contract.
They seem to have relied in the High Court upon the deci-
sions of this Court reported in The Sales Tax Officer,
Pilibhit v. Messrs. Budh Prakash Jai Prakash(1) and
Poppatlal Shah v. The State of Madras (2) to show that these
transactions were not sales. These cases were not relied
upon by the appellants before us, presumably because the
High Court has adequately shown their inapplicability to the
facts here.
The learned Solicitor-General appearing for the appellants
rested his case entirely upon the first contention, namely,
that there was only an assignment of a right to obtain
delivery of the gunnies and not a sale. He contended that
there was only one transaction of sale between the Mills and
the third parties, who, on the strength of the assignment of
the right to take delivery, had received the goods from the
Mills. in our opinion, this does not represent the true
nature of the transactions, either in fact, or in law.
To begin with, the Mills had made clear in their agreements
that they were not recognising the third parties as
contracting parties having privity with
(1) [1955] 1 S.C.R. 243.
(2) [1953] S.C.R. 677.
270
them, and that delivery would be given against the kutcha
delivery orders to the third parties as agents of the
appellants. The Mills, therefore, recognised only the
appellants as contracting parties, and there was thus a sale
to the appellants from the Mills, on which ,;sales tax was
correctly demanded and was paid. In so far as the third
parties were concerned, they had purchased the goods by
payment of an extra price, and the transaction must, in law
and in fact, be considered a fresh transaction of sale
between the appellants and the third parties. A delivery
order is a document of title to goods (vide s. 2(4) of the
Sale of Goods Act), and the possessor of such a document has
the right not only to receive the goods but also to transfer
it to another by endorsement or delivery. At the moment of
delivery by the Mills to the third parties, there were, in
effect, two deliveries, one by the Mills to the Appellants,
represented, in so far as the Mills were concerned, by the
appellants’ agents, the third parties, and the other, by the
appellants to the third parties as buyers from the
appellants. These two deliveries might synchronise in point
of time, but were separate, in point of fact and in the eye
of law. If a dispute arose as to the goods delivered under
the kutcha delivery order to the third parties against the
Mills, action could lie at the instance of the appellants.
The third parties could proceed on breach of contract only
against the appellants and not against the Mills. In our
opinion, there being two separate transactions of sale, tax
was payable at both the points, as has been correctly
pointed out by the tax authorities and the High Court.
The appellants relied upon a decision of the Andhra Pradesh
High Court in The State of Andhra v. Kolla Sreeramamurty
(3), but there, the facts were different, and the Division
Bench itself in dealing with the case, distinguished the
judgment under appeal, observing that there was no scope for
the application of the principles laid down in the judgment
under appeal, because in the cited case, “the property in
the goods did not pass from the mills to the assessee and
(3) Second Appeals Nos. 194 & 195 of 1954 decided on June
27, 1957.
271
there was no agreement of sale of goods to be obtained in
future between the assessee and the third party”.
In the result, the appeals tail, and are dismissed with
costs. One hearing fee.
Appeals dismissed.
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