1959 (4) TMI 20 - SC - VAT and Sales Tax

Supreme Court rules sales not taxable outside jurisdiction under Sales Tax Act

Commissioner of Sales Tax, Eastern Division, Nagpur Versus Husenali Adamji and Co. and Another

The Supreme Court upheld the High Court's decision that the sales did not occur within the Central Provinces and Berar, thus not subject to tax under the ... Whether the railway receipts were made out with the company as the consignee? Whether the railway receipts were made out with Wimco as the consigee? Held that:- Appeal dismissed. There is no evidence that at the date when the agreement for sale was made, the particular logs delivered thereunder were in the Central Provinces in the shape of logs at all. Learned counsel says that, at any rate, they must have been in existence there in the shape of standing timber. Apart from anything else, the agreement here was not 'in respect of ' any standing timber and there was no provision in the agreement as between the, respondent and WIMCO for severance of the standing timber before sale under that agreement. In order to attract Explanation II the goods, in respect of which the contract of sale is made, must, at the date of the contract be in existence in the Central Provinces, that is to say, that the goods must at the date of the contract be there in the form in which they are agreed to be sold. There is not an iota of evidence on that point. Issues Involved:1. Whether the agreements constituted contracts of sale.2. Whether the contracts related to specific or unascertained goods.3. When and where the property in the goods passed to the buyer.4. Applicability of Explanation II to section 2(g) of the Central Provinces and Berar Sales Tax Act, 1947.Analysis of the Judgment:1. Whether the agreements constituted contracts of sale:The High Court determined that the agreements in question were express agreements to sell sawar logs to WIMCO. There was neither an express nor an implied contract each time goods were railed. This conclusion was not contested in the appeal before the Supreme Court.2. Whether the contracts related to specific or unascertained goods:The High Court found that the contracts were for the delivery of unascertained or future goods by description, rather than specific goods. This finding was also not disputed in the appeal.3. When and where the property in the goods passed to the buyer:The central issue was whether the property in the goods passed to WIMCO at the railway stations in the Central Provinces or at Ambernath. The High Court held that the property did not pass to the buyer by delivery to the railway for carriage; instead, it passed at Ambernath where the goods were appropriated by the buyer to the contract with the seller's assent. This conclusion was based on the interpretation of section 23 of the Sale of Goods Act and the terms of the contracts. The High Court noted:- 'The appropriation under section 23 was not complete till the goods reached Ambernath and were appropriated by the company to the contract.'- The reservation of the right to reject the goods upon inspection at Ambernath indicated that the property in the goods did not pass at the railway stations.The Supreme Court upheld this conclusion, emphasizing the provisions of the later contract of March 2, 1945, which reserved WIMCO's right to inspect and reject the logs at Ambernath. The Court stated:- 'The intention of the parties clearly was that the respondent would send the logs by rail from the different stations in the Central Provinces to Ambernath where WIMCO'S factory manager would inspect, measure and accept the same if in his opinion they were of the description and quality agreed upon.'4. Applicability of Explanation II to section 2(g) of the Central Provinces and Berar Sales Tax Act, 1947:Explanation II states that the sale of any goods actually in the Central Provinces at the time when the contract of sale is made shall be deemed to have taken place in the Central Provinces. The High Court interpreted 'goods' in the Sales Tax Act according to its definition in section 2(d) of the Act, not according to the definition in section 2(7) of the Sale of Goods Act. The Court concluded that standing sawar trees are not goods within the meaning of the Sales Tax Act.The Supreme Court agreed, noting:- 'In order to attract Explanation II the goods, in respect of which the contract of sale is made, must, at the date of the contract be in existence in the Central Provinces, that is to say, that the goods must at the date of the contract be there in the form in which they are agreed to be sold.'The Court found no evidence that the logs were in the Central Provinces in the form agreed to be sold at the date of the contract. Therefore, Explanation II did not apply.Conclusion:The Supreme Court upheld the High Court's decision that the sales in question did not take place within the Central Provinces and Berar and were not liable to tax under the Central Provinces and Berar Sales Tax Act, 1947. The appeal was dismissed with costs.