PETITIONER: M/S. CARONA SAHU CO. LTD. Vs. RESPONDENT: STATE OF MAHARASHTRA DATE OF JUDGMENT: 02/12/1965 BENCH: RAMASWAMI, V. BENCH: RAMASWAMI, V. GAJENDRAGADKAR, P.B. (CJ) WANCHOO, K.N. HIDAYATULLAH, M. SATYANARAYANARAJU, P. CITATION: 1966 AIR 1153 1966 SCR (2) 845 ACT: Bombay Sales-tax Act (3 of 1953), ss,. 10(a), 10-C-Goods shipped from Cochin under bill of lading at risk of buyer in Bombay but deliverable to buyer only on payment of price to bankers-Property in goods whether passes to buyer in Cochin or in Bombay-Goods whether liable to purchase tax under s. 10(a)-Section 10-C whether applies. Sale of Goods Act (3 of 1930), s. 25(2)-Passing of property when goods shipped under bill of lading. HEADNOTE: The appellant-company, a manufacturer of footwear in Bombay, purchased rubber from certain dealers residing in the State of Cochin. The goods were shipped by the Cochin sellers from Cochin to Bombay under bills of lading in which the sellers themselves were named as consignees. The invoices however showed that the goods were shipped at the risk of the appellant which was to pay insurance as well as freight and other charges. For the period April 1, 1954 to March 31, 1955, the appellant was assessed to purchase tax under s. 10(a) of the Bombay Sales-tax Act (3 of 1953). The appellant's appeal under s. 30 of the Act failed. In a reference under s. 34(1) of the Act the High Court held that the property was intended by the parties to pass in Bombay and the appellant was liable to purchase tax. The appellant then came to this Court by special leave. It was contended on behalf of the appellant that (1) the property in the rubber consignments had passed to the appellant in Cochin, (2) the term 'person' in s. 10(a) should be read as meaning a 'dealer who carries on business in Bombay but who is not registered under the Act and (3) s. 10-C and not s. 10(a) applied to the transactions in question. HELD : (i) The ordinary rule that unascertained goods are unconditionally appropriated to the contract and property passes to the buyer on the delivery of the said goods to the common carrier, does not apply to cases where goods are shipped under a bill of lading. In the latter case delivery by the seller is not delivery to the buyer but to the Captain of the ship as bailor for delivery to the person indicated in the bill of lading. The seller may take the bill of lading to his own order. The effect of such a transaction would be to control the possession of the Captain as bailee and make him accountable for delivery of the goods to the seller. The seller thus keeps to himself the right of demanding possession from the Captain and this is consistent even with a special term that the, goods are shipped on account of and at the risk of the buyer. Section 25 of the Indian Sale of Goods Act itself states that where goods shipped are and by the bill of lading they are deliverable to the order of the seller or his agent, the seller is prima facie deemed to reserve the right of disposal. [848 E-G] Gabarron v. Kreeft. (1875) L.R. 10 Ex. 274, referred to. The fact that the goods were shipped at the risk of the buyer would not necessarily imply that property in the goods had passed to the 846 buyer, The endorsement to that effect in the invoice only indicated that the insurance charges were to be paid by the appellant. The clause had no bearing on the question of passing of title. [849 G-H] Shephered v. Harrison, 1871 L.R. (V) H.L. 116, relied on. (ii) There is nothing in the context or language of s. 10(a) for importing any qualification on the plain meaning of the word 'person' in that section. The section plainly states that purchases made by a dealer from a person who is not a registered dealer will be subject to purchase tax. The appellant was a dealer and it had made the purchases in question from sellers who were not registered dealers. The provisions of s. 10(a) of the Act were thus clearly attracted and the purchases were liable to tax. [852 F] (iii) The contention that s. 10-C governed the transactions in question could not be sustained. Section 10-C reproduces the Explanation to Art. 286(1)(a) of the Constitution and would apply only where under general law the sale takes place outside the State but the goods are delivered as a direct result of the sale for consumption within the State of Bombay. [853 B] JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 275 of 1964.
Appeal by special leave from the judgment and order dated
April 23, 1962 of the Bombay High Court in Sales Tax
Reference No. 18 of 1961.
S. B. Donde, K. Rajendra Chaudhuri and K. R. Chaudhuri,
for the appellant.
C. B. Agarwala, R. Ganapathy lyer, B. R. G. K. Achar, and
R. H. Dhebar, for the respondent.
The Judgment of the Court was delivered by
Ramaswami, L This appeal is brought by Special Leave against
the judgment of the High Court of Judicature at Bombay dated
April 23, 1962 on a reference by the Bombay Sales Tax
Tribunal under S. 34(1) of the Bombay Sales Tax Act, 1953.
The appellant is a manufacturer of footwear in Bombay.
During the assessment year April 1, 1954 to March 31, 1955,
the appellant purchased rubber from certain dealers residing
in the State of Cochin. These purchases were assessed to
purchase tax by the Sales Tax Officer under S. 1 0 (a) of
the Bombay Sales Tax Act (Bombay Act III of 1953-hereinafter
referred to as the Act) as they were made “from a person who
is not a registered dealer”. The Cochin sellers had their
agents in Bombay who received orders on behalf of the
appellant. The orders of the appellant were accepted by the
agents in Bombay and the goods were shipped by the sellers
from Cochin to Bombay. After the goods were shipped, the
demand drafts were forwarded along with the
847
Bills of Lading by the vendors to their bankers in Bombay.
The bankers endorsed the bill of lading in Bombay and handed
it over to purchasers in Bombay in exchange for the price.
The price was also paid in Bombay. In the Bills of Lading
the sellers in, Cochin were described as both consignors and
consignees. After the goods were shipped, an invoice was
drawn on the appellant in which were printed the following
words :
“Shipped per S.S…………… from Cochin to
Bombay on account and risk of Messrs Carona
Sahu Co. Ltd., 15-A, Elphinstone Circle, Fort,
Bombay.”
For the period April 1, 1954 to March 31, 1955, the
appellant was assessed to purchase tax by the Sales Tax
Officer, Licence Circle, Bombay by his assessment order
dated March 31, 1956, under cl. (a) of s. 10 of the Act; The
appellant preferred an appeal under s. 30 of the Act to the
Assistant Collector of Sales Tax, Appeals 11, Bombay Circle,
Bombay but it was dismissed. A revision application to the
Additional Collector of Sales Tax was dismissed. The
appellant thereafter moved the Sales Tax Appellate Tribunal
at Bombay for revision of the order passed by the Additional
Collector of Sales Tax. By its judgment dated September 4,
1959 the Bombay Sales Tax Tribunal dismissed the revision
application and confirmed the order made by the Sales Tax
authorities. At the instance of the appellant, the Sales
Tax Tribunal referred the following questions of law for
decision of’ the Bombay High Court under s. 34(1) of the Act
1. Whether on the facts and circumstances of
the case, the property in the rubber
consignments passed to the applicant in Cochin
i.e. outside the State of Bombay ?
2. Whether the purchase tax under s. 10(a) is
leviable in respect of the purchases in
dispute ?
By its judgment dated April-23, 1962 the Bombay High Court
answered both the questions of law in favour of the State
and’ against the appellant.
The first question that arises for determination in this
case is, whether, on the facts and circumstances of the
case, the property in the rubber consignments passed to the
appellant in Cochin i.e. outside the territorial limits of
the State of Bombay. In this connection the facts found by
the Sales Tax Tribunal are that the Cochin sellers had their
agents in Bombay who received the orders of the appellant
and arranged for the shipping of the-
848
goods. In accordance with these orders the goods were,
shipped by the Cochin sellers from Cochin to Bombay. The
Bills of Lading were in the name of the sellers as
consignors and consignees. The invoices however showed that
the goods were shipped at the “risk and on account of M/s.
Carona Sahu and Company (P) Ltd.” The insurance charges were
borne by the appellant who also paid freight and other
charges. The bills of lading were sent by the sellers
through the bank to be delivered to the buyers in Bombay on
payment of the price of the goods. In view of these facts,
the High Court held that the property was intended by the
parties to pass in Bombay and the endorsement in the invoice
that the goods were being shipped “on account of and at the
risk of the buyers” did not mean anything more than that the
insurance charges were to be paid by the buyers. On behalf
of the appellant, Mr. Donde submitted that the property in
the rubber consignments had passed to the appellant in
Cochin. In our opinion, there is no warrant for this
submission and the view taken by the High Court is correct.
The law is well established that in the case of a contract
for ,sale of unascertained goods the property does not pass
to the purchaser unless there is unconditional
appropriation, of the goods in a deliverable state to the
contract. In the case of such a contract, delivery of the
goods by the vendor to the common carrier is an
appropriation sufficient to pass the property. But there is
a difference in the legal effect of delivering goods to a
common carrier on the one hand and shipment on board a ship
under a bill of lading on the other hand. Where goods are
delivered on board a vessel to be carried, and a bill of
lading is taken, the delivery by the seller is not delivery
to the buyer, but to the captain as bailee for delivery to
the person indicated by the bill of lading. ‘The seller may
therefore take the bill of lading to his own order. The
effect of this transaction is to control the possession of
the captain and make the captain accountable to deliver the
goods to the seller as the holder of the bill of lading.
The bill of lading is the symbol of property, and by so
taking the bill of lading the seller keeps to himself the
right of dealing with property shipped and also the right of
demanding possession from the captain, and this is
consistent even with a special term that the goods are
shipped on account of and at the risk of the buyer. In
Gabarron v. Kreeft(1) Lord Parker laid down the principle
as follows
“The English cases, however, on which the Sale
of Goods Act was founded seem to show that the
appro-
(1) (1875) L.R. 10 Ex. 274.
849
priation would not be such as to pass the
property if it appears or can be inferred that
there was no actual intention to pass it. If
the seller takes the bill of lading to his own
order and parts with it to a third person, not
the buyer, and that third person, by
possession of the bill of lading, gets the
goods, the buyer is held not to have the
property so as to enable him to recover from
the third party, notwithstanding that the act
of the seller was a clear breach of the
contract.”
Ss. 23 and 25 of the Indian Sale of Goods Act
are identical in language to the corresponding
provisions of the English Sale of Goods Act.
S. 25 states as follows :
“(1) Where there is a contract-for the sale of
specific goods or where goods are subsequently
appropriated to the contract, the seller may,
by the terms of the contract or appropriation,
reserve the right of disposal of the goods
until certain conditions are fulfilled. In
such case, notwithstanding the delivery of the
goods to a buyer, or to a carrier or other
bailee for the purpose of transmission to the
buyer, the property in the goods does not pass
to the buyer until the conditions imposed by
the seller are fulfilled.
(2) Where goods are shipped and by the bill
of lading the goods are deliverable to the
order of the seller or his agent, the seller
is prima facie deemed to reserve the right of
disposal.
. . . . .”
On behalf of the appellant it was contended that the goods
were shipped “on account and at the risk of Messrs. Carona
Sahu and Company (P) Ltd.” and therefore the property in the
goods must be held to have passed to the appellant on
shipment in Cochin. We do not think there is any substance
in this argument. The endorsement in the invoice merely
indicated that the insurance charges were to be paid by the
appellant and the clause has no bearing on the question of
the passing of title. In Shepherd v. Harrison(1) the
plaintiff in England sent an order to P and Co. at
Pernambuco to buy cotton for the plaintiff. P and Co.
bought cotton on account of the plaintiff and made out an
invoice “on account and risk of M/s. John Shepherd & Co.”
(1) 1871 L.R. (V) H.L. 11 6.
850
but the bills of lading were taken deliverable to P and
Co.’s order or assigns paying freight. The invoice was sent
directly to the plaintiff but the bills of lading were
endorsed in blank by P and Co. and sent with the bill of
exchange to their own agents in England. The English agents
forwarded the bills of lading with the bills of exchange to
the plaintiff requesting him to accept the bill of exchange.
The plaintiff retained the bill of lading but returned the
bill of exchange unaccepted on the ground that P and Co. had
not complied with the plaintiff’s order. The plaintiff then
presented the documents to the defendants who refused to
deliver the cotton in view of the instructions from the
agents of the consignor. On these facts, it was held by the
House of Lords that the property in the goods did not pass
to the plaintiffs although they had retained the bill of
lading because no property was intended to pass until the
plaintiff had accepted the bills of exchange. It was
strongly argued for the plaintiff that the goods were
shipped on account and at the risk of the consignees, but
the House of Lords unanimously dismissed the appeal holding
that the property in the goods did not pass to the purchaser
either in Pernambuco or in Liverpool. Dealing with the
argument that the transfer of risk was an indication of the
transfer of property, Lord Cairns held as follows
“In the invoice, the goods are described as
being shipped on account and at the risk of
the plaintiff. But along with the invoice, a
bill of lading was taken from the Captain,
making the cotton deliverable, not to the
plaintiff, but to the shipper on board. It is
perfectly well settled that, in that state of
things, the entry upon the invoice, stating
that the goods are to be shipped on account
and at the risk of the consignee, is not
conclusive but may be overruled by the
circumstance of the jus disponendi being
reserved by the shipper through the medium of
the bill of lading.”
Applying this principle to the present case, we are of the
opinion that the High Court rightly held, upon the facts
found, that the property in the rubber consignment passed to
the appellant in the State of Bombay.
We pass on to consider the second question of law arising in
this case-whether the purchase tax under S. 10(a) was
leviable in respect of the purchases in dispute. It is
necessary at this stage to reproduce the relevant provisions
of the Bombay Sales Tax Act, 1953 as it stood at the
material time. Section 2(6) of the Act defines a “dealer”
as meaning any person who carries on the
851
business of selling or buying goods in the pre-
Reorgansiation State of Bombay excluding the transferred
territories, whether for commission, remuneration or
otherwise and includes a State Government which carries on
such business and any society, club or association which
sells goods to or buys goods from its members. Section
2(11) defines a “registered dealer” to mean a dealer
registered under s. 11 or deemed to be a registered dealer
under s. 12-B. According to s. 2(13) “sale” means a sale of
goods. made within the pre-Reorganisation State of Bombay,
excluding the tranferred territorie’s for cash or deferred
payment or other valuable consideration and includes any
supply by a society or club or an association to its members
on payment of price or fees or subscription, but does not
include a mortgage, hypothecation, charge or pledge.
Section 6 of the Act is to the following effect
“(1) Subject to any rules made under S. 18-B
there shall be paid by every dealer who is
liable to pay tax under this Act-
(ia) sales tax or purchase tax on his sales or
purchases in accordance with the provisions of
section 7-A
(a) a sales tax on his sales levied in
accordance with the provisions of section 8,
(b) a general sales tax on his sales levied
in accordance with the provisions of section
9, and
(c) a purchase tax on his purchases levied
in accordance with the provisions of section
10,
(d) a tax on his purchases levied in
accordance with the provisions of section 10-
AA.
(2) The tax payable by a dealer under any
clause of
sub-section (1) shall be paid in addition to
the tax or taxes, if any, payable by such
dealer under any other clause or clauses of
the said sub-section.”
Section 10(a) states as follows :
“10. Subject to the provisions of section 7,
there shall be levied a purchase tax on the
turnover of purchases of goods specified in
column 1 of Schedule B at the rates, if any,
specified against such goods in column 4 of
the said schedule,-
(a) where such goods are purchased from a
person who is not a registered dealer;”
852
Section 10-C reads :
“In the case of such goods as may be specified
by the State Government by notification in the
Official Gazette from time to time, which have
been despatched or brought from any place in
India outside the State of Bombay and are
actually delivered as a direct result of a
purchase to a buyer in the State of Bombay for
consumption therein, there shall be paid by
such buyer on such purchase an outside goods
purchase tax levied at such rate not exceeding
twenty-one pies in the rupee as may be
specified in such notification, unless the
buyer produces a declaration made by the
seller of such goods in the prescribed form
certifying that the seller is a registered
dealer and shall pay the tax on such sale in
due course :
Provided that no such tax shall be levied on
the purchase of any goods by a registered
dealer if after the purchase the goods are
sold by him or used by him in the prescribed
manner in the manufacture or processing of any
goods for sale.”
It is argued by Mr. Donde that the term “person” in s. 10(a)
should be read as meaning a dealer who carries on business
in Bombay but who is not registered under the Act. In other
words, it is contended that the person referred to in s.
10(a) must be a dealer within the definition of s. 2 (6) of
the Act but who is not registered either because he failed
to get himself registered or because his turnover is less
than the specified limit. We are unable to accept the
argument put forward by Mr. Donde as correct. We see no
reason for placing any limitation or qualification on the
term “person” which occurs in s. 10 (a). There is nothing
in the context or language of the section for importing any
qualification on the plain meaning of that expression. That
section plainly states that purchases made by a dealer from
a person who is not a registered dealer will be subject to
purchase tax. The appellant is a dealer and it has made the
purchases in question from the sellers who are not
registered dealers. The provisions of s. 10(a) of the Act
are satisfied in the present case and the purchases in
question accordingly are liable to tax.
The next contention of Mr. Donde is that the provisions of
S. 10(a) cannot apply to transactions of purchase where the
purchased goods have been brought from outside the State of
Bombay for consumption in that State because s. 10-C of the
Act would apply to such transactions. We do not think there
is any warrant
853
in this argument. S. 10-C reproduces the Explanation to
Art. 286(1)(a) of the Constitution and it would apply where
under general law the sale takes place outside the State but
the goods are delivered as a direct result of the sales for
consumption within the State of Bombay. The buyer referred
to in s. 10-C need not necessarily be a dealer under the
Act, because so far as the dealers are concerned they are
only liable to three types of taxes, viz., sales tax,
general tax and purchase tax, enumerated in s. 6 which is
the charging section. On the other hand. s. 10-C applies to
a “buyer” who brings into the State of Bombay goods which
are notified in the Official Gazette. It should also be
noticed that s. 10-C deals only with certain specific goods
to be notified by the State Government, whereas s. 10(a)
includes all purchases made from persons other than
registered dealers. It is manifest that the scope and ambit
of these two sections are different. We are of opinion that
Mr. Donde is unable to make good his submission on this
aspect of the case and the High Court has rightly answered
this question of law also in favour of the State and against
the assessee.
For the reasons expressed, we hold that this appeal fails
and must be dismissed with costs.
Appeal dismissed.
854