TaxTMI 
TaxTMI 
1964 (10) TMI 56
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.... Act"), Sales Tax Officers had assess- ed the appellants to several amounts of tax in respect of their turnover for different years. The appellants had urged before the Sales Tax Officers that the transactions in question were not liable to pay sales tax, but their pleas were rejected and sales tax was ordered to be imposed in respect of the said transactions. The appellants then challenged the correctness of these orders by preferring appeals before the Sales Tax Appellate Tribunal. The Tribunal concurred with the view taken by the Sales Tax Officers and confirmed the respective orders of assessment. The appellants then moved the High Court of Kerala in its revisional jurisdiction under section 15B of the Travancore Act. These revision applications also failed; and that has brought the appellants to this Court by special leave. Though the periods and the amounts of turnover for which sales tax has been levied against the different appellants are not the same, the principal point which these appeals raise for our decision rests on facts which are common to all the cases, and so, it would be enough if we refer to the facts in respect of one of these appeals. We will accordingly m....
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....n thereof, technically known as 'brake'. The buyer shall be entitled to open the chests bid by him and examine the contents thereof to ascertain the actual state and condition of the tea. Difference or inferiority in quality, description, deterioration, damage and defect in packing will entitle the buyer to submit claims or rejection, or allowance or damage. Such claims must be submitted, after inspection, no doubt, not later than 5 P.M. on the 3rd day before the prompt day (ninth day after date of sale) or in the case of removal before the prompt day, at least 24 hours before such removal. Payment shall be made in Cochin on or before prompt day, in cash or by cheque or draft on a Cochin bank. If the buyer shall fail to pay for the tea or any part thereof on the due date for payment, the goods may be resold. Any loss arising on such resale shall be borne by the buyer. Delivery shall be taken before 5 P.M. on the 5th day after prompt day. The goods will be at sellers' risk to the extent of the sale price only, until 5 P.M. on the 5th day after prompt day or until removal by the buyer, if removed earlier". When the assessment proceedings in question were pending before the Sales T....
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....or consumption in that State, and the other where the title in the goods passed and the former is treated as the situs of the taxable event to the exclusion of the latter. In regard to sales of teas in lots by public auction, this Court held that the property in teas passed to the buyer under section 64 of the Act as soon as the offer was accepted on fall of the hammer at Fort Cochin in the State of Madras and, therefore, the only State which could have power to levy a tax on such sale would be the State of Madras and so far as the Travancore-Cochin was concerned, the sale would be an outside sale. The same view has been expressed by this Court in a subsequent decision coming from Kerala in Malayalam Plantations Ltd., Quilon v. The Deputy Commissioner of Agricultural Income-tax and Sales Tax, South Zone, Quilon [1964] 15 S.T.C. 665. The result is that the decision of the Kerala High Court in the case of A.V. Thomas & Co. I.L.R. (1960) Ker. 1395., on which the Sales Tax Authorities and the High Court of Kerala have decided the dispute between the appellants and the respondent State in the present proceedings is no longer good law, and that would inevitably mean that the appellant....
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....964, the procedure followed in conducting the sales in question was placed before us in the form of a summary which we have quoted at the beginning of this judgment. We, however, thought that since we were deciding the question as to where the title in the goods passed, it would be more satisfactory to have before us all the rules of the Tea Trade Association of Cochin which prescribed the procedure for these sales. Accordingly, the matter was adjourned to enable the parties to produce the said rules. The said rules have since then been produced before us and we have heard both Mr. Setalvad and Mr. Menon fully on the points raised by Mr. Menon that the sales in question are inside sales so far as the respondent State is concerned. Mr. Menon contends that in deciding this question we ought to bear in mind the fact that the sales are sales by sample to which section 17 of the Act applies. In the case of a contract of sale by sample, section 17(2) provides three implied conditions; they are: (a) that the bulk shall correspond with the sample in quality; (b) that the buyer shall have a reasonable opportunity of comparing the bulk with the sample; and (c) that the goods shall b....
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.... existence of those qualities, being part of the description of the thing sold, becomes essential to its identity; and the vendee cannot be obliged to receive and pay for a thing different from that for which he contracted". Judah Phillip Benjamin's "A Treatise on the Law of Sale of Personal Property" 8th Edn. by Finnemore & James. Another passage from the same book on which Mr. Menon relies speaks of acceptance as a taking of the goods by the buyer with the intention of becoming owner: p. 750. The argument is that the goods are required to be inspected in the case of a sale by sample and it is only when inspection discloses no material defects in the goods that acceptance follows, and that makes the contract a concluded contract by which title passes to the buyer. Similarly, Mr. Menon relies on one more statement of Benjamin which says, "The specific goods may, for instance, be sold by description. If the specific existing chattel is sold by description, and does not correspond with that description, the seller fails to comply, not with a warranty or collateral agreement, but with the contract itself by breach of a condition precedent": p. 304. In support of his case, Mr. Menon....
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....time as the parties to the contract intend it to be transferred. Section 19(2) adds that for the purpose of ascertaining the intention of the parties, regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case. Under section 19(3) it is provided that unless a different intention appears, the rules contain- ed in sections 20 to 24 would be relevant to decide this question. One thing is clear in the present case, viz., that the goods in question were not unascertained goods, nor were they not in existence; goods were clearly in existence, they had been graded, weighed and pack- ed in numbered chests and a list was prepared in respect of the contents of these chests separately. It is true that what the buyers are shown at the time of sale by public auction are samples and the rules authorise the buyer to inspect the goods; but that is not to say that the sale is a sale of unascertained or non-existing goods. Let us, therefore, consider the relevant and material terms and conditions of the rules under which the sales take place, for it is these terms which will decide as to when title passes to the buyer. Con- dition No. 7 of the r....
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....on 11 has referred to the chests as having been purchased by the buyer; and that would be clearly against Mr. Menon's case. So, it would be reasonable not to base our decision principally on the words used by the conditions, such as "purchased" or "accepted", but to take into account the substance of these conditions. It may be stated at this stage that after the public auction takes place, claims have to be made by the buyer not later than the third day before the prompt day, or 24 hours before removal of goods, whichever event happens earlier. The prompt day is the 10th day on or before which payment has to be made by the buyer, and possession has to be taken by him before 5 P.M. on the fifth day after the prompt day (condition No. 22). The goods continue to be at the seller's risk to the extent of the sale price only until 5 P.M. on the fifth day after the prompt day or until removal by the buyer if removed earlier (condition No. 23). Condition 12 clearly shows that the buyer has a right to make claims either on the ground of difference or inferiority in quality disclosed on inspection, or as a result of a defect in packing or any other ground whatsoever. After the time sp....