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PETITIONER: BAYYANA BHIMAYYA

       Vs.

RESPONDENT: THE GOVERNMENT OF ANDHRA PRADESH

DATE OF JUDGMENT: 14/12/1960

BENCH: HIDAYATULLAH, M. BENCH: HIDAYATULLAH, M. KAPUR, J.L. SHAH, J.C.

CITATION:  1961 AIR 1065            1961 SCR  (3) 267  CITATOR INFO :  F          1962 SC1585  (5,7,8,9)  R          1973 SC1061  (11,12)  D          1975 SC1996  (2)  D          1978 SC 389  (22,44)

ACT: Sales    Tax-Delivery    order-Meaning    of-Two    separate transactions-Sales-tax,  if leviable at both Points-Sale  of Goods Act, 1930 (111 of 1930), s. 2(4)-Madras General  Sales Tax Act, 1939 (Mad.  IX of 1939).

HEADNOTE: The  respondents dealt in gunnies.  They first entered  into contracts  with two Mills agreeing to purchase gunnies at  a certain  rate  for future delivery, and  also  entered  into agreement   with  third  parties,  by  which  they   charged something extra from those third parties and handed over the delivery  order known as kutcha delivery order.   The  Mills however  did  not accept the third  parties  as  contracting parties,  but  only  as the agents  of  the  appellants  and delivered the goods against the kutcha delivery orders,  and collected  the  Sales Tax from the third parties.   The  tax authorities treated these transactions between the appellant and  the  third parties as fresh sales and  sought  to  levy sales-tax  again,  which the appellants contended,  was  not demandable as there were no second sales; the delivery of  a kutcha delivery order did not amount to a sale of goods, but was  only  an assignment of a right to  obtain  delivery  of gunnies which were not in existence and not appropriated  to the  contract;  this  was only an assignment  of  a  forward contract. Held,  that the agreements between the parties  showed  that third  parties  were  not  recognised  by  the  sellers.   A delivery  order  being  a document of title  to  goods,  the possession  of  such a document not only gave the  right  to recover  the goods but also to transfer them to  another  by endorsement   or   delivery.   There  being   two   separate transactions of sale, one between the Mills and the original purchasers and the other between the original purchasers and third parties, tax was payable at both the points. The  Sales Tax officer, Pilibhit v. M/s.  Budh  Prakash  jai

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Prakash, [1955] 1 S.C.R. 243, Poppatlal Shah v. The State of Madras, [1953] S.C.R. 677, and The State of Andhra v.  Kolla Sreeramamurthy, decided on June 27, 1957, referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 223 and 224 of 1960. Appeals  from  the  order dated November 23,  1956,  of  the Andhra Pradesh High Court, Hyderabad, in Tax Revision  Cases Nos. 17 and 18 of 1956. 268 C.   K.  Daphtary, Solicitor-General of India and T.  V.  B. Tatachari, for the appellants. K.   N. Rajagopal Sastri and D. Gupta, for the respondent. 1960.  December 14.  The Judgment of the Court was delivered by HIDAYATULLAH,  J.-These  are  two  appeals  on  certificates granted by the High Court of Andhra Pradesh against a common judgment in a sales tax revision filed by the appellants  in the High Court. The facts are as follows: In the year 1952-53, for which the assessment  of  sales tax was in  question,  the  appellants dealt  in  gunnies,  and purchased them from  two  Mills  in Vishakapatnam  District and in respect of which they  issued delivery orders to third parties, with whom they had entered into  separate transactions.  The procedure followed by  the appellants was this: They first entered into contracts  with the Mills agreeing to purchase gunnies at a certain rate for future  delivery.   Exhibit  A-1  is  a  specimen  of   such contracts.  The appellants also entered into agreements with the Mills, by which the Mills agreed to deliver the goods to third  parties if requested by the appellants.   The  Mills, however,  did  not accept the third parties  as  contracting parties but only as agents of the appellants.  Exhibits  A-2 and A-2(a) are specimen agreements of this kind.  Before the date  of  delivery, the appellants entered  into  agreements with  third parties, by which they charged  something  extra from the third parties and handed over to them the  delivery orders,   which  were  known  as  kutcha  delivery   orders. Exhibits A-3 and A-4 are specimens of the agreement and  the delivery orders respectively.  The Mills used to deliver the goods  against  the  kutcha delivery orders  along  with  an invoice and a bill, of which Exs.  A-6 and A-7 are specimens respectively,  and  collected the sales tax from  the  third parties.    The  tax  authorities,  however,   treated   the transaction  between the appellants and third parties  as  a fresh sale, and sought to levy sales tax on it 269 again, which, the appellants, contended, was not demandable, as there was no second sale. The appellants failed in their contentions before the Deputy Commercial  Tax  Officer, Guntur, and their appeals  to  the Deputy  Commissioner  of Commercial Taxes,  Guntur  and  the Andhra   Sales   Tax  Appellate   Tribunal,   Guntur,   were unsuccessful.   The appellants then went up in  revision  to the High Court under the Madras General Sales Tax Act,  1939 (as  amended  by Madras Act No. 6 of 1951), but  were  again unsuccessful.     The   High   Court,    however,    granted certificates, on which these appeals have been filed. The contentions of the appellants are that the agreement and the delivery of the kutcha delivery order did not amount  to a  sale of goods, but was only an assignment of a  right  to obtain delivery of the gunnies, which were not in  existence

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at the time of the transaction with third parties, and  were not  appropriated to the contract, or, in  the  alternative, that  this  was only an assignment of  a  forward  contract. They  seem to have relied in the High Court upon  the  deci- sions  of  this  Court reported in The  Sales  Tax  Officer, Pilibhit  v.  Messrs.   Budh  Prakash  Jai  Prakash(1)   and Poppatlal Shah v. The State of Madras (2) to show that these transactions  were not sales.  These cases were  not  relied upon  by  the appellants before us, presumably  because  the High Court has adequately shown their inapplicability to the facts here. The  learned Solicitor-General appearing for the  appellants rested his case entirely upon the first contention,  namely, that  there  was  only an assignment of a  right  to  obtain delivery  of the gunnies and not a sale.  He contended  that there was only one transaction of sale between the Mills and the third parties, who, on the strength of the assignment of the right to take delivery, had received the goods from  the Mills.  in  our opinion, this does not  represent  the  true nature of the transactions, either in fact, or in law. To begin with, the Mills had made clear in their  agreements that  they  were  not  recognising  the  third  parties   as contracting parties having privity with (1) [1955] 1 S.C.R. 243. (2) [1953] S.C.R. 677. 270 them,  and that delivery would be given against  the  kutcha delivery  orders  to  the third parties  as  agents  of  the appellants.   The  Mills,  therefore,  recognised  only  the appellants as contracting parties, and there was thus a sale to  the appellants from the Mills, on which ,;sales tax  was correctly  demanded  and was paid.  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 goods (vide s. 2(4) of  the Sale of Goods Act), and the possessor of such a document has the right not only to receive the goods but also to transfer it to another by endorsement or delivery.  At the moment  of delivery  by the Mills to the third parties, there were,  in effect, two deliveries, one by the Mills to the  Appellants, represented,  in so far as the Mills were concerned, by  the appellants’ agents, the third parties, and the other, by the appellants   to  the  third  parties  as  buyers  from   the appellants.  These two deliveries might synchronise in point of time, but were separate, in point of fact and in the  eye of law.  If a dispute arose as to the goods delivered  under the  kutcha delivery order to the third parties against  the Mills,  action could lie at the instance of the  appellants. The  third parties could proceed on breach of contract  only against  the appellants and not against the Mills.   In  our opinion, there being two separate transactions of sale,  tax was  payable  at  both the points,  as  has  been  correctly pointed out by the tax authorities and the High Court. The appellants relied upon a decision of the Andhra  Pradesh High  Court  in The State of Andhra v.  Kolla  Sreeramamurty (3),  but there, the facts were different, and the  Division Bench  itself  in dealing with the case,  distinguished  the judgment under appeal, observing that there was no scope for the application of the principles laid down in the  judgment under  appeal, because in the cited case, "the  property  in the goods did not pass from the mills to the assessee and (3)  Second  Appeals Nos. 194 & 195 of 1954 decided on  June 27, 1957.

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271 there  was no agreement of sale of goods to be  obtained  in future between the assessee and the third party". In  the  result, the appeals tail, and  are  dismissed  with costs.  One hearing fee.                                           Appeals dismissed.                        _________________