TaxTMI 
TaxTMI 
1962 (4) TMI 53
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....to which we shall later refer. Civil Appeal No. 368 of 1961 arises out of Original Suit No. 268 of 1951 in the file of the District Munsif's Court, Rajahmundry. by the respondent for setting aside an assessment and obtaining refund of a sum of Rs. 2,941-7-0 which was partly the sum assessed and collected as sales tax for the assessment year 1947-48, while Civil Appeal No. 369 of 1961 is from a similar suit praying for identical reliefs in respect of the year 1946-47, the amount of which refund was sought however being Rs. 1,631-12-0. The basis of the suits briefly was that the transactions whose turnover was included in his assessment, were not "sales of goods" within the Madras General Sales Tax Act (Act IX of 1939) and that consequently the assessment to tax and recovery of the same were illegal and without jurisdiction. Both the suits were decreed by the District Munsif-a decision which was affirmed by the Subordinate Judge of Rajahmundry on appeal by the State and by the High Court of Andhra Pradesh on further appeal also by the State. It is from these two judgments and decrees in the two second appeals that the present appeals have been brought. It was common ground that....
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....We shall now set out the nature of the transactions which the learned Judges of the High Court have held have not resulted in "a sale of goods" by the respondent so as to attract the tax under the charging section in respect of the "turnover" represented by such sales. The respondent is, as stated earlier, a dealer in gunny bags. The gunny bags dealt with by him were those manufactured in two mills known as Chittivalsa and Nellimerla Mills both situated in Chittivalsa in Visakhapatnam District. The purchase by the respondent from the mills was on terms of a written contract which was on printed form. We shall set out the relevant terms of one of the sample contracts for under- standing the point involved, as it is common ground that every contract entered into by the respondent with the mills was in this form. These contracts were entered into by brokers acting for the respondent and who sent him "bought-notes" setting out the terms upon which the purchases had been effected from the mills, and one of these, exhibit AI, filed in O.S. 268 of 1951, has been treated as typical. It recites the purchase on behalf of the respondent of 30,000 bags from the Chittivalsa Mills, specifies the....
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....effected by the respondent. Put in another form the argument which was upheld by the Courts below was that the transactions entered into by the respondent were mere sales or transfers of delivery orders and not any "sale of goods" so as to bring them to charge under section 3 of the Act. It is the correctness of this conclusion that is in controversy in these appeals. It is necessary for us to canvass in detail the argument which found favour with the Courts below by reason of the judgment of this Court in Bayyana v. Government of Andhra Pradesh [1961] 12 S.T.C. 147; A.I.R. 1961 S.C. 1065., where the points urged in favour of the respondent were considered and repelled. The correctness of this decision was not disputed before us. Dealing with the transaction involved in the successive endorsements of the delivery orders issued to the purchaser from the mills, this Court said: "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 good....
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....ivery order as some paper, though this was of some value in that it enabled the endorsee to approach the mills and obtain delivery of the goods. The result of the acceptance of this view would be to eliminate the respondent altogether from the chain and, so to speak, treat the ultimate endorsee as the purchaser from the mills. Naturally if that was correct the respondent would have effected no purchase of the goods nor, of course, any sale of goods, there being only one transaction of sale by the mills to the ultimate endorsee of the delivery order. In Bayyana's case [1961] 12 S.T.C. 147; A.I.R. 1961 S.C. 1065., this Court held that this was not a correct understanding of the legal effect of the endorsement of the delivery orders. No doubt, with- out an appropriation of goods to an agreement for sale there cannot be a completed contract in which the property in the goods passes to the purchaser and unless property in the goods passes, there is no sale. But the question is what is the effect of the property in the goods passing to the ultimate endorsee of the delivery order. In this connection reference could usefully be made to the decision in Butterworth v. Kingway Motors Ltd. ....
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.... this Court that the High Court was right in distinguishing the earlier decision. The circumstance that in Bayyana's case [1961] 12 S.T.C. 147; A.I.R. 1961 S.C. 1065, besides the contract of purchase of the gunny bags there was a further agreement that the mills would give delivery of the goods to the nominees of the purchaser does not really affect the principle, in view of the admitted fact that on the uncontradicted evidence in this case, it was the common understanding of the parties that the mills would honour the endorsement of the delivery order and deliver the goods contracted for to the endorsee who produced it. Learned counsel for the respondent made a suggestion that in the present case there was no proof that the goods represented by the contract had been delivered to the ultimate endorsee, with the result that the appellant had not established a "sale of goods" at any stage. No doubt, if on the facts there was no delivery of the goods to the last holder of the delivery order, the entire fabric on which the case for the appellant rests would disappear. There is however no factual basis for this submission. This fact was not alleged by the respondent at any stage of t....