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PETITIONER: M/S.  CARONA SAHU CO.  LTD.

       Vs.

RESPONDENT: STATE OF MAHARASHTRA

DATE OF JUDGMENT: 02/12/1965

BENCH: RAMASWAMI, V. BENCH: RAMASWAMI, V. GAJENDRAGADKAR, P.B. (CJ) WANCHOO, K.N. HIDAYATULLAH, M. SATYANARAYANARAJU, P.

CITATION:  1966 AIR 1153            1966 SCR  (2) 845

ACT: Bombay  Sales-tax  Act (3 of 1953), ss,.  10(a),  10-C-Goods shipped from Cochin under bill of lading at risk of buyer in Bombay but deliverable to buyer only on payment of price  to bankers-Property in goods whether passes to buyer in  Cochin or  in Bombay-Goods whether liable to purchase tax under  s. 10(a)-Section 10-C whether applies. Sale of Goods Act (3 of 1930), s. 25(2)-Passing of  property when goods shipped under bill of lading.

HEADNOTE: The appellant-company, a manufacturer of footwear in Bombay, purchased rubber from certain dealers residing in the  State of  Cochin.   The goods were shipped by the  Cochin  sellers from  Cochin  to Bombay under bills of lading in  which  the sellers  themselves were named as consignees.  The  invoices however  showed that the goods were shipped at the  risk  of the appellant which was to pay insurance as well as  freight and  other charges.  For the period April 1, 1954  to  March 31,  1955, the appellant was assessed to purchase tax  under s.  10(a)  of  the Bombay Sales-tax Act (3  of  1953).   The appellant’s  appeal  under s. 30 of the Act  failed.   In  a reference under s. 34(1) of the Act the High Court held that the  property was intended by the parties to pass in  Bombay and the appellant was liable to purchase tax.  The appellant then came to this Court by special leave. It  was  contended on behalf of the appellant that  (1)  the property  in  the  rubber consignments  had  passed  to  the appellant  in  Cochin,  (2) the term ’person’  in  s.  10(a) should be read as meaning a ’dealer who carries on  business in Bombay but who is not registered under the Act and (3) s. 10-C  and  not  s.  10(a) applied  to  the  transactions  in question. HELD  : (i) The ordinary rule that unascertained  goods  are unconditionally  appropriated to the contract  and  property passes to the buyer on the delivery of the said goods to the common  carrier,  does not apply to cases  where  goods  are shipped under a bill of lading.  In the latter case delivery by  the  seller  is not delivery to the  buyer  but  to  the

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Captain  of  the ship as bailor for delivery to  the  person indicated  in the bill of lading.  The seller may  take  the bill  of  lading  to his own order.  The effect  of  such  a transaction  would  be  to control  the  possession  of  the Captain  as bailee and make him accountable for delivery  of the  goods to the seller.  The seller thus keeps to  himself the right of demanding possession from the Captain and  this is  consistent even with a special term that the, goods  are shipped on account of and at the risk of the buyer.  Section 25 of the Indian Sale of Goods Act itself states that  where goods  shipped  are  and  by the bill  of  lading  they  are deliverable  to  the order of the seller or his  agent,  the seller  is  prima  facie  deemed to  reserve  the  right  of disposal. [848 E-G] Gabarron v. Kreeft. (1875) L.R. 10 Ex. 274, referred to. The  fact  that the goods were shipped at the  risk  of  the buyer would not necessarily imply that property in the goods had passed to the 846 buyer,  The endorsement to that effect in the  invoice  only indicated that the insurance charges were to be paid by  the appellant.   The  clause had no bearing on the  question  of passing of title. [849 G-H] Shephered v. Harrison, 1871 L.R. (V) H.L. 116, relied on. (ii) There is nothing in the context or language of s. 10(a) for importing any qualification on the plain meaning of  the word  ’person’ in that section.  The section plainly  states that  purchases made by a dealer from a person who is not  a registered  dealer  will be subject to  purchase  tax.   The appellant  was  a dealer and it had made  the  purchases  in question from sellers who were not registered dealers.   The provisions  of  s.  10(a)  of  the  Act  were  thus  clearly attracted and the purchases were liable to tax. [852 F] (iii) The contention that s. 10-C governed the  transactions in question could not be sustained.  Section 10-C reproduces the  Explanation to Art. 286(1)(a) of the  Constitution  and would  apply  only where under general law  the  sale  takes place  outside  the State but the goods are delivered  as  a direct  result of the sale for consumption within the  State of Bombay. [853 B]

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 275 of 1964. Appeal  by special leave from the judgment and  order  dated April  23,  1962  of  the Bombay High  Court  in  Sales  Tax Reference No. 18 of 1961. S.   B.  Donde, K. Rajendra Chaudhuri and K.  R.  Chaudhuri, for the appellant. C.   B. Agarwala, R. Ganapathy lyer, B. R. G. K. Achar, and R.   H. Dhebar, for the respondent. The Judgment of the Court was delivered by Ramaswami, L This appeal is brought by Special Leave against the judgment of the High Court of Judicature at Bombay dated April  23,  1962  on a reference by  the  Bombay  Sales  Tax Tribunal under S. 34(1) of the Bombay Sales Tax Act, 1953. The  appellant  is  a manufacturer of  footwear  in  Bombay. During the assessment year April 1, 1954 to March 31,  1955, the appellant purchased rubber from certain dealers residing in  the State of Cochin.  These purchases were  assessed  to purchase  tax by the Sales Tax Officer under S. 1 0  (a)  of the Bombay Sales Tax Act (Bombay Act III of 1953-hereinafter referred to as the Act) as they were made "from a person who is  not a registered dealer".  The Cochin sellers had  their

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agents  in  Bombay  who received orders  on  behalf  of  the appellant.  The orders of the appellant were accepted by the agents  in Bombay and the goods were shipped by the  sellers from  Cochin to Bombay.  After the goods were  shipped,  the demand drafts were forwarded along with the                             847 Bills  of Lading by the vendors to their bankers in  Bombay. The bankers endorsed the bill of lading in Bombay and handed it  over to purchasers in Bombay in exchange for the  price. The  price was also paid in Bombay.  In the Bills of  Lading the sellers in, Cochin were described as both consignors and consignees.   After the goods were shipped, an  invoice  was drawn  on the appellant in which were printed the  following words :               "Shipped per S.S............... from Cochin to               Bombay  on account and risk of  Messrs  Carona               Sahu Co. Ltd., 15-A, Elphinstone Circle, Fort,               Bombay." For  the  period  April  1, 1954  to  March  31,  1955,  the appellant  was  assessed to purchase tax by  the  Sales  Tax Officer,  Licence  Circle, Bombay by  his  assessment  order dated March 31, 1956, under cl. (a) of s. 10 of the Act; The appellant preferred an appeal under s. 30 of the Act to  the Assistant Collector of Sales Tax, Appeals 11, Bombay Circle, Bombay but it was dismissed.  A revision application to  the Additional  Collector  of  Sales  Tax  was  dismissed.   The appellant thereafter moved the Sales Tax Appellate  Tribunal at Bombay for revision of the order passed by the Additional Collector of Sales Tax.  By its judgment dated September  4, 1959  the Bombay Sales Tax Tribunal dismissed  the  revision application  and confirmed the order made by the  Sales  Tax authorities.   At the instance of the appellant,  the  Sales Tax  Tribunal  referred the following questions of  law  for decision of’ the Bombay High Court under s. 34(1) of the Act               1.  Whether on the facts and circumstances  of               the   case,   the  property  in   the   rubber               consignments passed to the applicant in Cochin               i.e. outside the State of Bombay ?               2. Whether the purchase tax under s. 10(a)  is               leviable  in  respect  of  the  purchases   in               dispute ? By  its judgment dated April-23, 1962 the Bombay High  Court answered  both the questions of law in favour of  the  State and’ against the appellant. The  first  question that arises for determination  in  this case  is,  whether, on the facts and  circumstances  of  the case, the property in the rubber consignments passed to  the appellant  in Cochin i.e. outside the territorial limits  of the State of Bombay.  In this connection the facts found  by the Sales Tax Tribunal are that the Cochin sellers had their agents  in Bombay who received the orders of  the  appellant and arranged for the shipping of the- 848 goods.   In  accordance with these orders  the  goods  were, shipped  by the Cochin sellers from Cochin to  Bombay.   The Bills  of  Lading  were  in  the  name  of  the  sellers  as consignors and consignees.  The invoices however showed that the  goods were shipped at the "risk and on account of  M/s. Carona Sahu and Company (P) Ltd." The insurance charges were borne  by  the  appellant who also paid  freight  and  other charges.   The  bills  of lading were sent  by  the  sellers through the bank to be delivered to the buyers in Bombay  on payment of the price of the goods.  In view of these  facts, the  High Court held that the property was intended  by  the parties to pass in Bombay and the endorsement in the invoice

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that the goods were being shipped "on account of and at  the risk of the buyers" did not mean anything more than that the insurance charges were to be paid by the buyers.  On  behalf of  the appellant, Mr. Donde submitted that the property  in the  rubber  consignments  had passed to  the  appellant  in Cochin.   In  our  opinion, there is  no  warrant  for  this submission and the view taken by the High Court is correct. The  law is well established that in the case of a  contract for ,sale of unascertained goods the property does not  pass to    the   purchaser   unless   there   is    unconditional appropriation,  of the goods in a deliverable state  to  the contract.   In the case of such a contract, delivery of  the goods   by   the  vendor  to  the  common  carrier   is   an appropriation sufficient to pass the property.  But there is a  difference in the legal effect of delivering goods  to  a common carrier on the one hand and shipment on board a  ship under  a bill of lading on the other hand.  Where goods  are delivered  on  board a vessel to be carried, and a  bill  of lading is taken, the delivery by the seller is not  delivery to  the buyer, but to the captain as bailee for delivery  to the person indicated by the bill of lading.  ’The seller may therefore  take  the bill of lading to his own  order.   The effect  of this transaction is to control the possession  of the captain and make the captain accountable to deliver  the goods  to  the seller as the holder of the bill  of  lading. The  bill  of lading is the symbol of property,  and  by  so taking  the bill of lading the seller keeps to  himself  the right of dealing with property shipped and also the right of demanding   possession  from  the  captain,  and   this   is consistent  even  with  a special term that  the  goods  are shipped  on  account of and at the risk of  the  buyer.   In Gabarron v.    Kreeft(1) Lord Parker laid down the principle as follows               "The English cases, however, on which the Sale               of Goods Act was founded seem to show that the               appro-               (1)   (1875) L.R. 10 Ex. 274.                849               priation  would  not be such as  to  pass  the               property if it appears or can be inferred that               there was no actual intention to pass it.   If               the seller takes the bill of lading to his own               order and parts with it to a third person, not               the   buyer,   and  that  third   person,   by               possession  of  the bill of lading,  gets  the               goods,  the  buyer  is held not  to  have  the               property  so as to enable him to recover  from               the third party, notwithstanding that the  act               of  the  seller  was a  clear  breach  of  the               contract."               Ss. 23 and 25 of the Indian Sale of Goods  Act               are identical in language to the corresponding               provisions  of the English Sale of Goods  Act.               S. 25 states as follows :               "(1) Where there is a contract-for the sale of               specific goods or where goods are subsequently               appropriated to the contract, the seller  may,               by the terms of the contract or appropriation,               reserve  the  right of disposal of  the  goods               until  certain conditions are  fulfilled.   In               such case, notwithstanding the delivery of the               goods  to  a buyer, or to a carrier  or  other               bailee for the purpose of transmission to  the               buyer, the property in the goods does not pass               to  the buyer until the conditions imposed  by

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             the seller are fulfilled.               (2)   Where goods are shipped and by the  bill               of  lading  the goods are deliverable  to  the               order  of the seller or his agent, the  seller               is prima facie deemed to reserve the right  of               disposal.                .      .      .        .        ." On  behalf of the appellant it was contended that the  goods were shipped "on account and at the risk of Messrs.   Carona Sahu and Company (P) Ltd." and therefore the property in the goods  must  be  held to have passed  to  the  appellant  on shipment in Cochin.  We do not think there is any  substance in  this  argument.  The endorsement in the  invoice  merely indicated that the insurance charges were to be paid by  the appellant  and the clause has no bearing on the question  of the  passing  of  title.  In  Shepherd  v.  Harrison(1)  the plaintiff  in  England  sent  an  order  to  P  and  Co.  at Pernambuco  to  buy  cotton for the plaintiff.   P  and  Co. bought  cotton on account of the plaintiff and made  out  an invoice "on account and risk of M/s.  John Shepherd & Co." (1)  1871 L.R. (V) H.L. 11 6. 850 but  the  bills of lading were taken deliverable  to  P  and Co.’s order or assigns paying freight.  The invoice was sent directly  to  the  plaintiff but the bills  of  lading  were endorsed  in  blank by P and Co. and sent with the  bill  of exchange to their own agents in England.  The English agents forwarded the bills of lading with the bills of exchange  to the plaintiff requesting him to accept the bill of exchange. The  plaintiff retained the bill of lading but returned  the bill of exchange unaccepted on the ground that P and Co. had not complied with the plaintiff’s order.  The plaintiff then presented  the  documents to the defendants who  refused  to deliver  the  cotton in view of the  instructions  from  the agents of the consignor.  On these facts, it was held by the House  of Lords that the property in the goods did not  pass to  the  plaintiffs although they had retained the  bill  of lading  because no property was intended to pass  until  the plaintiff  had  accepted  the bills  of  exchange.   It  was strongly  argued  for  the plaintiff  that  the  goods  were shipped  on account and at the risk of the  consignees,  but the House of Lords unanimously dismissed the appeal  holding that the property in the goods did not pass to the purchaser either  in  Pernambuco or in Liverpool.   Dealing  with  the argument that the transfer of risk was an indication of  the transfer of property, Lord Cairns held as follows               "In  the invoice, the goods are  described  as               being  shipped on account and at the  risk  of               the plaintiff.  But along with the invoice,  a               bill  of  lading was taken from  the  Captain,               making  the  cotton deliverable,  not  to  the               plaintiff, but to the shipper on board.  It is               perfectly well settled that, in that state  of               things,  the entry upon the  invoice,  stating               that  the goods are to be shipped  on  account               and  at  the  risk of the  consignee,  is  not               conclusive   but  may  be  overruled  by   the               circumstance  of  the  jus  disponendi   being               reserved by the shipper through the medium  of               the bill of lading." Applying  this principle to the present case, we are of  the opinion  that  the High Court rightly held, upon  the  facts found, that the property in the rubber consignment passed to the appellant in the State of Bombay. We pass on to consider the second question of law arising in

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this  case-whether  the  purchase tax  under  S.  10(a)  was leviable  in  respect of the purchases in  dispute.   It  is necessary at this stage to reproduce the relevant provisions of  the  Bombay  Sales  Tax Act, 1953 as  it  stood  at  the material  time.  Section 2(6) of the Act defines a  "dealer" as meaning any person who carries on the 851 business   of   selling  or  buying  goods   in   the   pre- Reorgansiation  State  of Bombay excluding  the  transferred territories,   whether  for  commission,   remuneration   or otherwise  and includes a State Government which carries  on such  business  and any society, club or  association  which sells  goods  to or buys goods from  its  members.   Section 2(11)  defines  a  "registered  dealer"  to  mean  a  dealer registered  under s. 11 or deemed to be a registered  dealer under s. 12-B.  According to s. 2(13) "sale" means a sale of goods.  made within the pre-Reorganisation State of  Bombay, excluding  the tranferred territorie’s for cash or  deferred payment  or  other valuable consideration and  includes  any supply by a society or club or an association to its members on  payment of price or fees or subscription, but  does  not include   a  mortgage,  hypothecation,  charge  or   pledge. Section 6 of the Act is to the following effect               "(1)  Subject to any rules made under S.  18-B               there  shall  be paid by every dealer  who  is               liable to pay tax under this Act-               (ia) sales tax or purchase tax on his sales or               purchases in accordance with the provisions of               section 7-A               (a)   a  sales  tax  on his  sales  levied  in               accordance with the provisions of section 8,               (b)   a general sales tax on his sales  levied               in  accordance with the provisions of  section               9, and               (c)   a  purchase tax on his purchases  levied               in  accordance with the provisions of  section               10,               (d)   a   tax  on  his  purchases  levied   in               accordance with the provisions of section  10-               AA.               (2)   The  tax payable by a dealer  under  any               clause of               sub-section  (1) shall be paid in addition  to               the  tax  or taxes, if any,  payable  by  such               dealer  under any other clause or  clauses  of               the said sub-section."               Section 10(a) states as follows :               "10.  Subject to the provisions of section  7,               there  shall be levied a purchase tax  on  the               turnover  of purchases of goods  specified  in               column  1 of Schedule B at the rates, if  any,               specified  against such goods in column  4  of               the said schedule,-               (a)   where  such goods are purchased  from  a               person who is not a registered dealer;"               852               Section 10-C reads :               "In the case of such goods as may be specified               by the State Government by notification in the               Official Gazette from time to time, which have               been  despatched or brought from any place  in               India  outside  the State of  Bombay  and  are               actually  delivered  as a direct result  of  a               purchase to a buyer in the State of Bombay for               consumption  therein, there shall be  paid  by

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             such  buyer on such purchase an outside  goods               purchase tax levied at such rate not exceeding               twenty-one  pies  in  the  rupee  as  may   be               specified  in  such notification,  unless  the               buyer  produces  a  declaration  made  by  the               seller  of such goods in the  prescribed  form               certifying  that  the seller is  a  registered               dealer  and shall pay the tax on such sale  in               due course :                Provided that no such tax shall be levied  on               the  purchase  of any goods  by  a  registered               dealer  if  after the purchase the  goods  are               sold  by him or used by him in the  prescribed               manner in the manufacture or processing of any               goods for sale." It is argued by Mr. Donde that the term "person" in s. 10(a) should  be read as meaning a dealer who carries on  business in Bombay but who is not registered under the Act.  In other words,  it  is contended that the person referred to  in  s. 10(a) must be a dealer within the definition of s. 2 (6)  of the  Act but who is not registered either because he  failed to  get himself registered or because his turnover  is  less than  the  specified  limit.  We are unable  to  accept  the argument  put  forward by Mr. Donde as correct.  We  see  no reason  for placing any limitation or qualification  on  the term  "person" which occurs in s. 10 (a).  There is  nothing in the context or language of the section for importing  any qualification on the plain meaning of that expression.  That section plainly states that purchases made by a dealer  from a  person who is not a registered dealer will be subject  to purchase tax.  The appellant is a dealer and it has made the purchases   in  question  from  the  sellers  who  are   not registered  dealers.  The provisions of s. 10(a) of the  Act are  satisfied  in  the present case and  the  purchases  in question accordingly are liable to tax. The  next contention of Mr. Donde is that the provisions  of S. 10(a) cannot apply to transactions of purchase where  the purchased goods have been brought from outside the State  of Bombay for consumption in that State because s. 10-C of  the Act would apply to such transactions.  We do not think there is any warrant                             853 in  this  argument.  S. 10-C reproduces the  Explanation  to Art. 286(1)(a) of the Constitution and it would apply  where under general law the sale takes place outside the State but the goods are delivered as a direct result of the sales  for consumption within the State of Bombay.  The buyer  referred to  in  s. 10-C need not necessarily be a dealer  under  the Act,  because so far as the dealers are concerned  they  are only  liable  to  three types of  taxes,  viz.,  sales  tax, general  tax and purchase tax, enumerated in s. 6  which  is the charging section.  On the other hand. s. 10-C applies to a  "buyer" who brings into the State of Bombay  goods  which are  notified  in the Official Gazette.  It should  also  be noticed that s. 10-C deals only with certain specific  goods to  be  notified by the State Government, whereas  s.  10(a) includes   all  purchases  made  from  persons  other   than registered dealers.  It is manifest that the scope and ambit of these two sections are different.  We are of opinion that Mr.  Donde  is unable to make good his  submission  on  this aspect  of the case and the High Court has rightly  answered this question of law also in favour of the State and against the assessee. For  the reasons expressed, we hold that this  appeal  fails and must be dismissed with costs.

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Appeal dismissed. 854