Endorsement of delivery orders can amount to a taxable sale where property in goods passes through actual delivery and appropriation.

Endorsement of delivery orders in the course of business, followed by delivery of the gunny bags to the ultimate holder, was treated as a sale of goods because the transaction, in substance, transferred property in the goods. Although the goods were unascertained at the initial contract stage, they were in existence and capable of appropriation when the delivery orders were issued. The endorsement was not merely a transfer of paper; it enabled delivery from the mills and completed the chain of sale, with title acquired on delivery relating back through the intermediate transfers. The transactions were therefore chargeable to tax as sales under the Madras General Sales Tax Act.

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Issues: Whether the respondent's endorsements of delivery orders, followed by delivery of gunny bags to the ultimate holders, constituted sales of goods liable to tax under the Madras General Sales Tax Act, 1939.

Analysis: The turnover became taxable if the transaction, viewed in substance, resulted in transfer of property in goods by the respondent in the course of business. The goods were unascertained at the time of the initial contract, but they existed and were capable of appropriation when the delivery orders were issued. By endorsing the delivery orders, the respondent enabled the ultimate holder to obtain delivery from the mills, and the legal effect was not a mere transfer of a piece of paper. The endorsement and the ensuing delivery completed a sale in the chain of transactions, and the title acquired on delivery fed the prior defective title of the intermediate transfers. The bar under section 18A and the constitutional objections were not decided because the appeal was disposed of on the merits.

Conclusion: The transactions amounted to sales of goods by the respondent and were chargeable to tax under section 3 of the Act; the liability was upheld in favour of the Revenue.

Ratio Decidendi: Where delivery orders representing goods are endorsed in the course of business and the ultimate endorsee obtains delivery of the goods, the transaction is a sale of goods if it results in transfer of property in the goods, even though the intermediate holder did not personally take delivery.

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