1956 (11) TMI 26 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the transactions between the assessees and the mills, and the assessees and the third parties, constitute one sale or two distinct sales.
2. Whether the issue of a mill letter or kucha delivery order constitutes a sale or merely an authorisation to take delivery of goods.
3. Whether goods not in existence at the time of the kucha delivery order can be considered a sale under the Sale of Goods Act.
4. Whether sales tax can be levied on the sale of a right to obtain delivery of goods.

Detailed Analysis:

1. One Sale or Two Distinct Sales:
The primary issue was whether the transactions between the assessees and the mills, and the assessees and the third parties, constituted one sale or two distinct sales. The court held that there were two distinct and separate sales. The assessees first entered into an agreement with the jute mills for the purchase of gunnies and then entered into separate contracts with third parties for the sale of these goods. The third parties took delivery of the goods directly from the mills, paying the balance of the price to the mills on the strength of mill-letters passed on to them by the assessees. The court noted that the transactions involved all the elements of a sale, including the existence of goods, payment or promise to pay the price, and the passing of title in the goods.

2. Mill Letter or Kucha Delivery Order:
The assessees contended that the issue of a mill letter or kucha delivery order was merely an authorisation for the purchaser to take delivery of the goods and did not constitute a sale. The court rejected this argument, stating that the transaction between the assessees and the third party was a sale of goods. The kucha delivery order was merely an instruction to the mills to deliver the goods, and the transaction involved all the ingredients of a sale, including the transfer of property and possession.

3. Existence of Goods at the Time of Kucha Delivery Order:
The assessees argued that since the goods were not in existence at the time of the kucha delivery order, the transaction could not be considered a sale under the Sale of Goods Act. The court referred to Sections 2(4), 6(3), 7, and 11 of the Sale of Goods Act and concluded that even if the goods were not in existence at the time of the contract, the transaction would become a sale once the goods were delivered. The court noted that the goods were ascertained and the delivery was postponed to a subsequent date, making the transaction a sale upon delivery.

4. Levy of Sales Tax:
The assessees contended that sales tax could only be levied on the turnover represented by the sale of goods and not on the sale of a right to obtain delivery of goods. The court held that the transaction between the assessees and the third party was a sale of goods and not merely an authorisation to receive goods. Therefore, the transaction was subject to sales tax. The court also referred to the definitions of "turnover" in the Sales Tax Act and "forward contract" in the Forward Contracts (Regulation) Act, 1952, to support its conclusion.

Conclusion:
The court dismissed the revisions filed by the assessees, holding that the transactions constituted two distinct sales, that the issue of a mill letter or kucha delivery order constituted a sale, that the goods were in existence at the time of the kucha delivery order, and that sales tax could be levied on the sale of goods. The court found no substance in the revisions and dismissed them with costs.

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