1965 (12) TMI 106 - SC - VAT and Sales Tax

Property ownership determined by intention & legal principles. Purchase tax applies to non-registered dealer purchases.

The court held that the property in the rubber consignments passed to the appellant in Bombay, not Cochin, based on the intention of the parties and legal ... 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? Whether the purchase tax under section 10(a) is leviable in respect of the purchases in dispute? Held that:- Appeal dismissed. 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. Issues Involved:1. Whether the property in the rubber consignments passed to the appellant in Cochin, i.e., outside the State of Bombay.2. Whether the purchase tax under section 10(a) is leviable in respect of the purchases in dispute.Issue-wise Detailed Analysis:Issue 1: Whether the property in the rubber consignments passed to the appellant in Cochin, i.e., outside the State of Bombay.The first question to determine is whether the property in the rubber consignments passed to the appellant in Cochin, outside the territorial limits of the State of Bombay. The facts found by the Sales Tax Tribunal indicate that the Cochin sellers had agents in Bombay who received the appellant's orders and arranged for the shipping of goods. The goods were shipped by the Cochin sellers from Cochin to Bombay, with the bills of lading in the name of the sellers as consignors and consignees. The invoices indicated that the goods were shipped 'at the risk and on account of Messrs. Carona Sahu and Company (P.) Ltd.' Insurance charges, freight, and other charges were borne by the appellant. The bills of lading were sent through the bank to be delivered to the buyers in Bombay upon payment of the price.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' merely indicated that the insurance charges were to be paid by the buyers. The appellant argued that the property in the rubber consignments passed to them in Cochin. However, the court found no warrant for this submission, supporting the High Court's view.The law establishes that in a contract for the sale of unascertained goods, the property does not pass to the purchaser unless there is an unconditional appropriation of the goods in a deliverable state to the contract. Delivery to a common carrier is sufficient to pass the property, but delivery on board a vessel under a bill of lading is not delivery to the buyer but to the captain as bailee. The seller may take the bill of lading to his own order, controlling the possession of the captain and maintaining the right to demand possession from the captain. This is consistent even with a special term that the goods are shipped on account of and at the risk of the buyer.Referring to Gabarron v. Kreeft [1875] L.R. 10 Ex. 274, the court noted that the appropriation would not pass the property if there was no intention to pass it. Sections 23 and 25 of the Indian Sale of Goods Act, identical to the English Sale of Goods Act, support this principle. Section 25 states that the seller may reserve the right of disposal of the goods until certain conditions are fulfilled, and the property does not pass until those conditions are met. The appellant's argument that the property passed on shipment in Cochin was dismissed.In Shepherd v. Harrison [1871] L.R. 5 H.L. 116, the House of Lords held that the property in goods did not pass to the plaintiffs despite the goods being shipped 'on account and at the risk of the consignees.' Applying this principle, the court concluded that the High Court correctly held that the property in the rubber consignment passed to the appellant in the State of Bombay.Issue 2: Whether the purchase tax under section 10(a) is leviable in respect of the purchases in dispute.The second question is whether the purchase tax under section 10(a) was leviable for the disputed purchases. The relevant provisions of the Bombay Sales Tax Act, 1953, include Section 2(6) defining a 'dealer,' Section 2(11) defining a 'registered dealer,' and Section 2(13) defining 'sale.' Section 6 mandates that every dealer liable to pay tax under the Act must pay sales tax, general sales tax, purchase tax, and tax on purchases as specified.Section 10(a) specifies that purchase tax is levied on the turnover of purchases from a person who is not a registered dealer. The appellant argued that 'person' in section 10(a) should mean a dealer carrying on business in Bombay but not registered under the Act. The court rejected this argument, finding no reason to limit the term 'person' in section 10(a). The section clearly states that purchases from a person who is not a registered dealer are subject to purchase tax. The appellant, being a dealer, made purchases from sellers who were not registered dealers, satisfying the provisions of section 10(a).The appellant also contended that section 10(a) does not apply to purchases brought from outside Bombay for consumption within the state, arguing that section 10C would apply instead. The court found no warrant for this argument. Section 10C applies where goods are delivered for consumption within Bombay as a direct result of a sale, and it applies to a 'buyer' who brings goods into Bombay, not necessarily a dealer. Section 10C deals with specific goods notified by the State Government, while section 10(a) includes all purchases from non-registered dealers. The court concluded that the scope and ambit of these sections are different, and the High Court rightly answered this question in favor of the State.Conclusion:The appeal was dismissed with costs, upholding the High Court's judgment that the property in the rubber consignments passed to the appellant in Bombay and that the purchase tax under section 10(a) was leviable on the disputed purchases.