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PETITIONER: THE COMMISSIONER OF SALES-TAX,EASTERN DIVISION, NAGPUR

       Vs.

RESPONDENT: HUSENALI ADAMJI AND CO.

DATE OF JUDGMENT: 21/04/1959

BENCH: DAS, SUDHI RANJAN (CJ) BENCH: DAS, SUDHI RANJAN (CJ) BHAGWATI, NATWARLAL H. HIDAYATULLAH, M.

CITATION:  1959 AIR  887            1959 SCR  Supl. (2) 702  CITATOR INFO :  R          1963 SC1207  (40)  RF         1970 SC1756  (10)  D          1976 SC 410  (13)  RF         1977 SC 879  (24)  E&R        1990 SC1753  (14)

ACT: Sales Tax-Contract of sale-Construction-Unascertained goods- Levy  of tax on goods sent by rail-Place where  property  in goods Passes-Place of appropriation on delivery-Indian  Sale of  Goods  Act, 1930 (III of 1930), ss. 4, 18, 23,  33,  39- Central  Provinces and Berar Sales Tax Act, 1947 (C.   P.  & Berar XXI of 1947), S. 2(g), Explanation II.

HEADNOTE: The  respondent  company was a dealer  in  matchwood  called sawar  " and his place of business was situate in Chanda  in the  erstwhile Central Provinces.  Pursuant to an  agreement between  the  respondent  and a match  factory,  the  former loaded  diverse  quantities  of " sawar "  logs  on  railway wagons and despatched the same by rail from Chanda and other railway  stations in the Central Provinces to  Ambernath,  a town  in the erstwhile Province of Bombay.  Under cl.  4  Of the  agreement the goods to be supplied under  the  contract shall  be despatched by the contractor from certain  railway stations within the Central Provinces, while cl. 2  reserved the  right of the consignee to examine the goods on  arrival at.   Ambernath and to reject the same if they, were  found, in  the opinion of the factory manager, not to conform  with the specifications.  Clause 6 provided that the goods  shall be  measured under the supervision of the  factory’s  repre- sentative, the decision of the factory manager at  Ambernath being binding on the contractor, and-by cl. 7 the prices  of the  goods  shall be " F. O.R. Ambernath ".  The  course  of dealings between the parties was that on arrival of the logs at  Ambernath  the logs were inspected and measured  by  the factory  manager  and the prices, calculated at  the  agreed rates,  were paid to the respondent’s agent at Bombay.   The question  was as to when and where the property in the  logs passed from the respondent to the consignee and whether  the respondent was liable to pay sales tax under the  provisions

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of the Central Provinces and Berar Sales Tax Act, 1947.   At the date when the agreement was entered into, the logs  were unascertained  goods.   There was also no evidence  that  at that  date the particular logs delivered thereunder were  in the  Central  Provinces in the shape of logs  at  all.   The sales tax department levied the tax on the respondent on the grounds,  inter  alia,  that (1) the property  in  the  logs passed from the respondent to the factory consignee under S. 23 Of the Indian Sale of Goods Act, 1930, when the logs were loaded in the wagons at railway stations within the  Central Provinces and the railway 703 receipts taken in the name of the factory were forwarded  to the  latter, and that (2) in any case, as the logs  were  in the Central Provinces at the date when the contract for sale was made, the transfer in them must be deemed to have  taken place  there under Explanation II to S. 2(g) Of the  Central Provinces and Berar Sales Tax Act, 1947. Held : (1) that on a proper construction of the contract  as a whole the intention of the parties was that the respondent would  send the logs by rail from the different stations  in the Central Provinces to Ambernath where the factory manager would inspect, measure and accept the same if in his opinion they were of the description and quality agreed upon.  Conse- quently, as the respondent sent the logs and left it to  the factory to appropriate to the contract such of them as  they accepted  as  of  contract  quality  and  description,   the property  in the logs did not pass to the buyer by the  mere delivery  to  the railway for carriage but  passed  only  at Ambernath  when  the logs were appropriated by  the  factory with the assent of the seller within the meaning of S. 23 of the Indian Sale of Goods Act, 1930. (2)  that Explanation II to s. 2(g) of the Central Provinces JUDGMENT: because under the Explanation the goods, in respect of which the  contract  of  sale is made, must, at the  date  of  the contract  be in existence in the Central Provinces, that  is to  say, that the goods must at the date of the contract  be there  in the form in which they are agreed to be  sold  and there was no evidence, in the present case, for this.

& CIVIL APPELLATE JURISDICTION: Civil Appeal No. 13 of 1958. Appeal  by special leave from the judgment and  order  dated June  29,  1954, of the former Nagpur High  Court  in  Misc. Civil Case No. 219 of 1952. R.   Ganapathy Iyer and D. Gupta, for the appellant. M.   C. Setalvad, Attorney-General for India, K. G. Chondke, J. B. Dadachanji and K. K. Raizada, for the respondents. I.   N.   Shroff,  for  the  Intervener  (State  of   Madhya Pradesh). 1959.  April 21.  The Judgment of the Court was delivered by DAS,  C. J.-This is an appeal by special leave, against  the order  of the High Court of Judicature at Nagpur dated  June 29, 1954, answering against the 704 appellant  certain questions referred to it by the Board  of Revenue  under  s. 23(1) of the Central  Provinces  &  Berar Sales Tax Act, 1947 (hereinafter referred to as "the  Act"). The  reference arose out of an order of assessment  made  on the respondent for’ payment of sales tax for the period June 1, 1947, to November 12, 1947, on a taxable turnover of  Rs. 30,067-9-0.

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The  facts leading up to the present -appeal may shortly  be stated as follows.  The respondent deals in matchwood called "  sawar " (Bombay- Malabaricum).  His place of business  is situate  at Chanda in the erstwhile Central  Provinces.   In January  1948 the respondent entered into an agreement  with the  Western India Match Co. Ltd., which is popularly  known and  will  hereinafter be referred to as " WIMCO "  for  the supply  of  a minimum quantity of 2,500 tons of  sawar  logs during  the season 1947-48.  This agreement is evidenced  by WIMCO’s   letter  dated  January  7,  1948,  accepting   and confirming  it.  Unfortunately that letter, although a  part of  the record, has not been printed in the Paper Book.   It is  common ground, however, that the agreement of  sale  was subject to the conditions appearing in a formal contract  in writing  dated  March 2, 1945, which is said  to  have  been renewed  from  year to year.  It appears that prior  to  the execution  of the last mentioned contract there was  another contract  between the respondent and WIMCO which  was  dated October 18, 1940.  Evidently that contract was superseded by the  later  one of March 2, 1945, the terms  and  conditions whereof were renewed year after year.  It is, therefore, not easily intelligible why both the contracts were filed before the  Sales  Tax authorities and actually  mentioned  in  the first question that was referred to the Hight Court. Both  the contracts have been printed in the Paper Book  and reference has been made to some of the terms of both of them in  the course of the arguments before us.  The  reason  for referring   to  the  terms  of  the  ,earlier  contract   is presumably  to emphasise the variation in the language  used in  the  corresponding provisions of the later  contract  as indicative  of  a definite change in the  intention  of  the parties.  It is, therefore, 705 as  well  that the relevant clauses of  both  the  contracts should be set out here for properly following the  arguments advanced on both sides. Reference  may first be made to the earlier  contract  dated October  18,  1940.  Clause I sets out  the  specifications, that is to say, the dimensions and quality of the logs to be delivered  under the contract which need not  be  reproduced here.  The other material clauses, omitting the  unnecessary portions thereof, may now be set out:- "  2.  The Contractor agrees that any logs supplied  by  him which do not conform with the specification herein shall not be accepted or paid for by the company and he the contractor undertakes to remove all logs so rejected at his own expense from  the Company’s premises within fifteen days after  date of  notice to him or his representative from the Company  so to  remove  such logs.  Should the Contractor fail  to  i.e. move such logs from the Company’s premises within the period stipulated  it is hereby mutually agreed that  such  failure shall  be  construed as being the  Contractor’s  consent  to relinquish all claims whatsoever to such rejected logs,  and the  Contractor agrees to such logs thereupon  becoming  the property  of the company and that the contractor shall  have no  claim whatsoever upon the company for payment either  in respect  of  the  supply by him of  such  rejected  logs  or arising out of the disposal by the Company of such logs." "  3. The said goods shall be delivered at Ambernath in  the quantities and at the times hereinafter mentioned, i.e., "  4. The goods to be supplied under this Contract shall  be despatched  by the Contractor from Railway Stations  on  the B.N.R. and G.I.P.R. Sections between the following  Stations : "  5.  Measurements:-The goods under this contract shall  be

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measured under the supervision of the 89 706 Company’s  Factory  Manager at Ambernath on arrival  of  the goods at the Factory in accordance with the following stipulations:- The Contractor  agrees  to...    accept the decision of  the Company’s   Factory  Manager  at  Ambernath  as  final   and binding." The  prices of the logs to be supplied are set out in cl.  6 of the contract as "F.O.R. Ambernath ". We  now  pass  on to the later contract of  March  2,  1945. Clause  1  sets  out the specifications of the  logs  to  be supplied under the contract in exactly the same language  as in  el.   I  of the earlier contract.   The  other  material clauses,  again  omitting the unnecessary portions,  are  as follows:- "  2.  The contractor agrees that any logs supplied  by  him which, on arrival at Ambernath, are found in the opinion  of the  Company’s  Factory  Manager not  to  conform  with  the specifications  herein shall not be accepted or paid for  by the  Company,  notwithstanding the fact that such  logs  may have  been accepted by the Company’s representatives  before being railed to Ambernath." It  may be mentioned here that Ambernath is a place  situate in the erstwhile province of Bombay and outside the  Central Provinces. "  4. The goods to be supplied under this contract shall  be despatched by the Contractor from railway stations on the B. N.  Railway,  N. S. Railway and G. 1.  P.  Railway  sections between the following stations. It  is  unnecessary  to set out the names  of  the  stations which, it may, however, be stated, are all in the  erstwhile Central Provinces.  Clause 6 provides: "6.     Measurements:- The  goods under this contract shall be measured  under  the supervision  of the Company’s representative  in  accordance with the following stipulations:- 707 The  contractor  agrees  to  accept  the  decision  of   the Company’s   Factory  Manager  at  Ambernath  as  final   and binding." The prices of the logs to be supplied under the contract are specified  as " F.O.R. Ambernath " in cl. 7 which  concludes with the following sentence: " The money so due and payable shall be paid by the  Company to  the Contractor when the measurements of the  goods  have been  completed  under  the  supervision  of  the  Company’s representative." Pursuant to the agreement between the respondent and  WIMCO, the  former  loaded  diverse quantities  of  Sawar  logs  on railway  wagons  and  despatched the same  by  railway  from Chanda or other railway stations in the Central Provinces to Ambernath  in the erstwhile province of Bombay  and  outside the  Central  Provinces.  It is not disputed  that  on  many occasions  the  representative of WIMCO was present  at  the railway  station  when the logs were sorted out  and  loaded into the wagons.  The statement of the case submitted  along with  the reference under s. 23(1) of the Act is  silent  on the  point as to whether the railway receipts were made  out with WIMCO as the consignee; but it is abundantly clear from the order of the Assistant Commissioner, Sales Tax, which is part of the record -and it has not been disputed before  us- that  "  the railway receipt which is a  document  of  title according  to  s. 2(4) of the Indian Sale of  Goods  Act  is

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taken in the name of the consignee." The course of  dealings between  the parties also appears to be that, on arrival  of the  logs at Ambernath, the consignee buyer WIMCO, paid  the railway freight and the logs were inspected and measured  by WIMCO’s  Factory Manager and the prices, calculated  at  the agreed rates, were paid to the respondent’s agent at Bombay. There is no doubt that the price of the logs supplied by the respondent to WIMCO under the agreement and accepted by  the latter during the period in question amounted to Rs. 30,067- 9-0.  The question for our 708 decision  is  whether the respondent is liable  to  pay  any sales tax under the Act. It will be convenient at this stage to refer to the relevant provisions  of  law applicable to the facts  of  this  case. Section 4 of that Act is the charging section.  According to this  section safes tax is payable " on all  sales  effected after  the commencement of the Act." " Sale " is defined  by s.  2(g) of the Act.  At the relevant period, that  section, omitting  Explanation  1,  which is  not  material  for  our purpose, ran as follows:- "  ’Sale’  with all its grammatical variations  and  cognate expressions means any transfer of property in goods for cash or   deferred  payment  or  other  valuable   consideration, including a transfer of property in goods made in course  of the  execution  of  a  contract,  but  does  not  include  a mortgage, hypothecation, charge or pledge.  ......................................................... Explanation II:-Notwithstanding anything to the contrary  in the  Indian Sale of Goods Act, 1930, the sale of  any  goods which are actually in the Central Provinces and Berar at the time  when  the contract of sale as defined in that  Act  in respect  thereof is made, shall, wherever the-said  contract of  sale is made, be deemed for the purpose of this  Act  to have taken place in the Central Provinces and Berar." The  Act  being  a  piece  of  legislation  enacted  by  the legislature  of the erstwhile Province of Central  Provinces and  Berar, its operation is limited to the  territories  of that province.  Therefore, the question arises: Does the sum of  Rs. 30,067-9-0 represent the prices of logs sold by  the respondent  within  the Central Provinces ? Sale  being  the transfer of property in the goods agreed to be sold, we have to  enquire if the property in the goods which  fetched  the sale proceeds on which the sales tax is sought to be  levied was transferred in the Central Provinces as contemplated  in the  main definition or if those goods were actually in  the Central Provinces at the time when the contract for sale  as defined in the Sale of Goods Act in respect thereof was made as required by Explanation II set 709 out above.  This takes us to the Sale of Goods Act, 1930. Section 4 of the Sale of Goods Act is expressed in the words following:- "4.  Sale and agreement to sell:-(I) A contract of  sale  of goods  is a contract whereby the seller transfers or  agrees to transfer the property in goods to the buyer for a  price. There  may be a contract of sale between one part-owner  and another. (2)  A contract of sale may be absolute or conditional. (3)  Where  under  a contract of sale the  property  in  the goods  is  transferred  from the seller to  the  buyer,  the contract  is  called a sale, but where the transfer  of  the property  in the goods is to take place at a future time  or subject  to some condition thereafter to be  fulfilled,  the contract is called an agreement to sell.

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(4)  An  agreement  to  sell becomes a sale  when  the  time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred." There can be no doubt  that  the agreement pursuant to which the  logs  were supplied by the respondent to WIMCO was an agreement to sell within  the meaning of the above section.  There is also  no controversy  between the parties that at the date when  this agreement  was  entered into, the  logs  were  unascertained goods.   The  question is: When did that agreement  to  sell unascertained  goods become a sale and where did  such  sale take place ? In other words, when and where did the property in those goods pass from the respondent to WIMCO ? The transfer of property in the goods as between the  seller and  buyer  is dealt with in Ch.  III of the Sale  of  Goods Act.  Section 18 of the Sale of Goods Act runs thus : " 18.  Goods must be ascertained:-Where there is a  contract for  the  sale of unascertained goods, no  property  in  the goods is transferred to the buyer unless and until the goods are ascertained." Passing over ss. 19 to 22 which (except as to sub-s. (3)  of s. 19) apparently apply to contracts for the sale of 710 specific  or  ascertained  goods, we come  to  s.  23  which provides :- "  23.  Sale of unascertained goods and appropriation  :-(I) Where  there is a contract for the sale of unascertained  or future  goods by description and goods of  that  description and in a deliverable state are unconditionally  appropriated to the contract, either by the seller with the assent of the buyer  or  by the buyer with the assent of the  seller,  the property  in the goods thereupon passes to the buyer.   Such assent may be expressed or implied, and may be given  either before or after the appropriation is made. (2)  Delivery   to  carrier:-Where,  in  pursuance  of   the contract, the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or  not) for  the purpose of transmission to the buyer, and does  not reserve  the  right  of  disposal,  he  is  deemed  to  have unconditionally appropriated the goods to the contract." Reference  may next be made to s. 33 and s. 39(1).   Section 33 says:- "  33.   Delivery :-Delivery of goods sold may  be  made  by doing anything which the parties agreed shall be treated  as delivery or which has the effect of putting the goods in the possession of the buyer or of any person authorised to  hold them on his behalf" Section 39(1) runs as follows:- " 39.  Delivery to carrier or wharfinger:- (1)  Where,  in pursuance of a contract of sale, the  seller is  authorised or required to send the goods to  the  buyer, delivery  of  the goods to a carrier, whether named  by  the buyer or not, for the purpose of transmission to the  buyer, or delivery of the goods to wharfinger, for safe custody, is prima  facie  deemed  to be delivery of  the  goods  to  the buyer." Keeping  the provisions of the above quoted sections of  the two  Acts  in  view, we have to decide when  and  where  the property in the logs passed from the respondent to WIMCO. The  Assistant  Commissioner  of  Sales  Tax  assessed   the respondent  to  -a tax of Rs. 939-10-0 and  imposed  on  the respondent a penalty of Rs. 100 under s. 25 of 711 the Act for not having submitted its return in contravention of r. 19 of the Central Provinces and Berar Sales Tax Rules.

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The Assistant Commissioner took the view that the loading of the  logs  into the wagons at railway  stations  within  the Central Provinces and the taking out of the railway receipts in the name of the consignee, WIMCO, and the delivery of the same to WIMCO, had the effect of putting the latter in  pos- session of the goods as laid down in s. 39(1) of the  Indian Sale  of Goods Act and he accordingly held that the sale  of the goods took place at Chanda and other railway stations in the   Central   Provinces  and  that   the   assessee   was, consequently, liable to pay the sales tax under the Act. The  respondent  preferred  an  appeal  to  the  Sales   Tax Commissioner  who upheld the Assistant Commissioner’s  order of  assessment as well as of the penalty.  He  laid  greater emphasis  on Explanation II to s. 2(g) of the Act  as  over- riding  the  provisions of the Indian Sale of Goods  Act  in respect  of  the transfer of property in the logs  and  held that as the’ logs were in the Central Provinces at the  date when  the contract for sale was made, the transfer  in  them must  be  deemed  to  have  taken  place  there  under  that Explanation.  He also agreed with the Assistant Commissioner that the delivery of the logs to the railway company and the sending  of  the documents of title to WIMCO had,  under  s. 39(1) of the Sale of Goods Act, the effect of putting  WIMCO in possession of the logs. The  respondent  preferred  what in form appeared  to  be  a second  appeal to the Board of Revenue.  As, however,  there could  be  no second appeal under s. 22(4) of the  Act,  the Board treated the memorandum of appeal as an application for revision under sub-s. 5 of s. 22 of the Act read with r. 57. Both  the members of the, Board of Revenue came to the  same conclusion, namely, that the sales were liable to assessment under  the  Act,  but the reasonings adopted  by  them  were somewhat different.  Shri Shrivastava, a member of the Board of Revenue, took the view that as soon as logs answering the description  agreed  upon were brought to  the  railhead  at Chanda and sorted out and 712 loaded  in  the  wagons  in  the  presence  of  WIMCO’s  re- presentatives,  there  was an implied contract  of  sale  of specific and ascertained goods, as evidenced by the  conduct of  parties  and  the property in  each  consignment  passed immediately  from  the respondent to WIMCO  at  the  railway station   in  the  Central  Provinces  where  such   implied contracts were made.  The Chairman of the Board of  Revenue, however,  took the view that the contract of sale  was  made outside  the Central Provinces, namely, in Bombay and  that, under the Sale of Goods Act, the property in the logs passed to  WIMCO in Ambernath outside the province but that as  the logs  were in the Central Provinces, either in the  form  of logs  or  in the form immediately preceding,  namely,  trees standing  on the land which had been impliedly agreed to  be severed from the land before actual sale, Explanation II  to s.  2(g) of the Act applied and the sale must,  accordingly, -be deemed to have taken place within the Central  Provinces and, must, therefore, be liable to sales tax under the Act. The Board rejected the application but remitted the penalty. On  the application of the respondent under s. 23(1) of  the Act,  the  Board of Revenue submitted to the  High  Court  a statement of case raising the following questions:- " (1) Did the agreements of the kind on record the one dated 18-10-40  and the other dated 2-3-45constitute contracts  of sale-either  express  or implied -in respect of  sawar  wood supplied by the assessee to WIMCO? (2)  If the answer to question No. I be in the  affirmative, did the contracts relate to specific or ascertained goods or

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to unascertained or future goods? (3)  Did  the  property  in  the  goods  pass  to  WIMCO  by consignment simpliciter at different railway stations within this  province, or did it pass at Ambernath when  the  goods were approved as provided in the contract ? (4)  Was reliance on the definition of I goods’ contained in s.  2(7)  of  the Sale of Goods Act  in  order  in  applying Explanation II to s. 2(g) of the Sales Tax 713 Act in cases, where the goods sold were in the form of trees standing  on  the land in this province at the time  of  the contract of sale?" In its judgment dated June 29, 1954, the High Court took the view  that the sales in question did not take place  in  the Central  Provinces  and Berar and consequently  were  not  " sales  " within the meaning of the Act and,  therefore,  not liable  to tax.  It gave the following answers to the  above questions:- " Our answers to the questions referred for decision are :- (1)  The  agreement in question was an express agreement  to sell sawar logs to WIMCO.  There was neither an express  nor an implied contract each time goods were railed. (2)  The-contract was not for delivery of specific goods but of unascertained or future goods by description. (3)  The property in the goods did not pass to the buyer  by the  delivery  to the railway for carriage.   It  passed  at Ambernath where the goods were appropriated by the buyer  to the contract with the assent of the seller. (4)  The  word ’ goods ’ in the definition of I sale in  the Sales   Tax  Act  must  be  interpreted  according  to   its definition  in s. 2(d) of the Act and not according  to  the definition  in  s.  2(7)  of the Sale  of  Goods  Act.   The standing sawar trees are not goods within the meaning of the former Act." The  effect of the answers being to nullify  the  assessment order,  the Commissioner of Sales Tax has come up on  appeal before us after obtaining special leave of this Court. The  answers  to  the  first two  questions  have  not  been questioned before us.  The main arguments have centred round the  answers to questions 3 and 4. The answer to question  3 turned on the construction placed by the High Court on s. 23 of  the  Sale of Goods Act.  After quoting s. 23,  the  High Court observed as follows:- "  After  sorting the logs with the assent  of  the  buyer’s representative, the applicant appropriated the 90 714 logs  to  the  contract  by  railing  them  to  the  buyer’s destination  at  Ambernath.  The statement of  the  case  is silent  on the point whether the railway receipts were  made out  with the Company as the consignee.  The assent  of  the representative  was provisional and was not binding  on  the Company.    Under  the  agreement  it  did  not   agree   to unconditionally appropriate the logs to the contract as soon as they were delivered to the railway with the assent of its representative for carriage to Ambernath.  It had  expressly reserved  its  right to reject the goods on  examination  at Ambernath.   The  agreement  therefore was  that  the  buyer should, with the assent of the seller, appropriate the goods to the contract at Ambernath.  The appropriation under s. 23 was  not complete till the goods reached Ambernath and  were appropriated   by   the  Company  to  the   contract.    The appropriation of the goods by the applicant at the railheads was  conditional  on  their  acceptance  by  the  buyer   at Ambernath.  There is nothing in the statement of the case to

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show that the logs were not so appropriated.  Therefore, the property in the logs passed to the buyer at Amber nath." The learned counsel for the department appearing in  support of  this  appeal contends that property in the  logs  passed from  the respondents to WIMCO under s. 23 when  sawar  logs were brought to the railway station and loaded in the  wagon and  the  railway receipts taken in the name of  WIMCO  were forwarded  to  the  latter.   There  was  an   unconditional appropriation   of  the  goods  to  the  contract   by   the respondent.  There was, according to learned counsel, assent on  the  part of WIMCO to this appropriation  in  two  ways, namely,  (a) expressly given by its representative  who  was present  at the railway station, and (b) impliedly given  by WIMCO  by having agreed in advance that the goods should  be despatched  by rail from the stations mentioned in cl. 4  of the  agreement,  all of which were situate  in  the  Central Provinces. There  is  no  doubt-and indeed it  has  been  categorically conceded  by  learned counsel for the department  -that  the contract   was   for  sale  of   unascertained   goods   and consequently the property in them could 715 not,  under  s.  18, pass unless and until  the  goods  were ascertained.   His contention is that logs of  the  contract quality   and   description  having   been   unconditionally appropriated  by  the  respondent to  the  contract  without reserving  to itself any right of disposal and WIMCO  having expressly  through  its representative or impliedly  by  the very  terms of the contract assented to such  appropriation, property  in them passed under s. 23 from the respondent  to WIMCO  at the railway stations within the Central  Provinces as soon as the sawar logs were loaded on the wagons and  the railway receipts were taken out in the name of WIMCO.  It is said  that  so  far  as  the  respondent  is  concerned   it unconditionally  appropriated  the  logs  to  the  contract. Seeing  that they were actually accepted by WIMCO  on  their arrival at Ambernath it is quite clear that the logs were of the  contract quality and description.  The  only  question, according  to learned counsel for the department  therefore, is whether there was assent of WIMCO to such  appropriation. It has been found as a fact that WIMCO’s representative  was not  present  on all occasions when sawar logs  used  to  be loaded on the railway wagons.  There is no evidence that  he was actually present when these particular sawar logs,  with the  sale proceeds of which we are concerned, were put  into the  wagons.   Nor  is there an iota of  evidence  that  the representative of WIMCO had any authority to. bind WIMCO  by any assent.  In view of these difficulties, learned  counsel for the department did not press the case of express  assent of the representative of WIMCO and concentrated on the  case of  implied assent.  It is quite clear from the language  of s.  23 itself, that the appropriation may be by  the  seller with the assent of the buyer or by the buyer with the assent of the seller, that assent to representation may be  express or implied and that it may be given after the  appropriation or  in advance before such appropriation.   Learned  counsel for the department lays strong emphasis on the provision  of cl.  4  in  the  contract that  the  sawar  logs  should  be despatched by rail from certain stations within the  Central Provinces and contends that delivery by the seller of  sawar logs of the contract quality and 716 description to the railways in terms of the contract without the  reservation of any right of disposal has the effect  of passing  the  property  therein  to  WIMCO  at  the  railway

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stations in the Central Provinces under s. 23 as well as  of constituting delivery of them at the railway stations  under ss. 33 and 39(1).  The argument is prima facie sound  unless there  be some other provision in the contract  to  negative this  conclusion,  e. g., that the logs must be  carried  to Ambernath  and delivered there (See The Badische Anilin  and Soda Fabrik v. The Basle Chemical Works, Bindschedler  (1)). Learned counsel for the department does not urge that if the matter  had  to  be  decided on the  terms  of  the  earlier contract dated October 18, 1940, he could properly say  that there was nothing in the contract negativing the idea of the passing   of  property  in  the  logs  within  the   Central Provinces.  The cumulative effect of the provisions of el. 2 that the property in the rejected logs would’ pass to  WIMCO upon the failure of the respondent to remove the same  after rejection,  of  el. 3 that the goods shall be  delivered  at Ambernath in the presence of WIMCO’s Factory Manager and  of el. 6 providing that the prices will be " F.O.R. Ambernath " clearly  militate against the theory of passing of  property immediately  on  the  goods being loaded  into  the  wagons. While   not  contesting  this,  learned  counsel   for   the department  urges that there is no such  contrary  intention indicated  in  the later contract of March  2,  1945,  which really  governs  the  case.  We are  unable-to  accept  this distinction  as of any substance.  It is true that  in  this later  contract cl. 2 is differently worded and there is  no express  provision  that the goods should  be  delivered  at Ambernath.    There   are,   nevertheless,   several   other provisions in the later contract indicating that property in the  logs loaded in the wagon will not pass to  WIMCO  until after  the  goods  arrive at Ambernath  and  are  inspected, measured and accepted by WIMCO’s Factory Manager.  Clause  2 of  the later contract quite clearly reserves the  right  of WIMCO to examine the goods on arrival and to reject the same if  they are found, in the opinion of its  Factory  Manager, not to (1)  [1898] A.C. 200, 717 conform with the specifications.  This reservation, which is made  notwithstanding the fact that the logs may  have  been accepted  by its representative before they were  railed  to Ambernath,  clearly indicates that the so called  acceptance by  the  representative  was  not  final  but  was  entirely tentative  and  subject to approval of the logs  by  WIMCO’s Factory  Manager  at Ambernath after  their  arrival.   This circumstance  certainly  militates against the  property  in them having already ’passed to WIMCO at the railway stations in the Central Provinces.  The provisions of cl. 6 that  the goods  shall  be measured under the supervision  of  WIMCO’s representative,  the  decision  of its  Factory  Manager  at Ambernath being binding on the respondent and of el. 7  that the  prices  shall  be " F.O.R. Ambernath  "  and  shall  be payable  after  such  measurement of  the  logs  by  WIMCO’s representative  further  reinforce the conclusion  that  the intention  of  the parties was that property  in  the  goods shall  not pass until the logs arrive at Ambernath  and  are there  inspected,  measured and accepted by WIMCO.   In  our judgment  the prima facie case of what might have  been  the appropriation  of the logs by the respondent by  loading  on the wagons logs of the contract quality and description with the assent of WIMCO given in .advance by the terms of el.  4 is effectively displaced by the provisions of cls. 2, 6  and 7  of the later contract which clearly indicate  a  contrary intention.   On a proper construction of the contract  as  a whole  the  intention of the parties clearly  was  that  the

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respondent  would send the logs by rail from  the  different stations in the Central Provinces to Ambernath where WIMCO’s Factory  Manager would inspect, measure and accept the  same if  in his opinion they were of the description and  quality agreed  upon.  In other words the respondent sent  the  logs and left it to WIMCO to appropriate to the contract such  of them   as   they  accepted  as  of  contract   quality   and description.  The respondent, therefore, gave in advance its assent  to WIMCO’s appropriation of the goods at  Ambernath. Therefore, the decision of the High Court cannot be assailed but must be accepted as well-founded in fact and in law. Learned counsel for the department then falls back 718 upon the Argument founded on Explanation- II to s. 2(g)  and ’argues,  somewhat halfheartedly, that  notwithstanding  the provisions of the Sale of Goods Act regarding the passing of property  in the goods the sale under consideration must  be deemed,  in  the light of that Explanation,  to  have  taken place  within  the Central Provinces.  The question  of  the constitutional  validity of that Explanation was not  raised in  the  High Court and indeed, in view of the  decision  of this  Court  in Poppatlal Shah v. State of  Madras  (1)  and other’  cases, cannot now be raised and we must  proceed  on the  footing  that  Explanation 11 did  not  transgress  the legislative competency of the Legislature which enacted  the same.  It will be noticed that Explanation II can apply only if the goods " in respect of " which the contract of sale is entered into are, at the date of such contract, actually  in the  Central Provinces.  Learned counsel for the  department urges that the logs delivered must have been in existence in the  Central Provinces either in the shape of ’;logs  or  in the shape of standing timber.  There is no evidence that  at the  date  when  the  agreement  for  sale  was  made,   the particular  logs  delivered thereunder were in  the  Central Provinces in the shape of logs at all.  Learned counsel says that, at any rate, they must have been in existence there in the  shape of standing timber.  Apart from  anything  else,, the  agreement here was riot " in respect of " any  standing timber  and  there  was no provision  in  the  agreement  as between  the  respondent  and WIMCO  for  severance  of  the standing timber before sale under that agreement.  In  order to attract Explanation II the goods, in respect of which the contract of sale is made, must, at the date of the  contract be  in existence in the Central Provinces, that is  to  say, that the goods must at the date of the contract be there  in the form in which they are agreed to be sold.  There is  not an  iota of evidence on that point.  In our judgment,  there is no force in this alternative argument. The result, therefore, is that this appeal is dismissed with costs. Appeal dismissed. (1)  [1953] S.C.R. 677. 719