1962 (3) TMI 73 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the property in the goods passed to the Government of India on or about the 3rd December, 1953, upon delivery of the shipping documents and payment of the c.i.f. value while the goods were on the high seas.
2. Whether there was any sale in Bombay taxable under the Bombay Sales Tax Act, 1953.
3. Whether the Bombay Sales Tax Tribunal was right in not allowing fresh evidence on the endorsement of the bill of lading in favor of the Government of India.
4. Whether the sale of goods to the Government of India is protected under clause (1)(b) of Article 286 of the Constitution of India and thus exempt from sales tax.

Detailed Analysis:

Issue 1: Passage of Property in Goods
The central question was whether the property in the goods passed to the Government of India on the 3rd December, 1953, when the shipping documents were delivered, and the c.i.f. value was paid while the goods were on the high seas. The court considered the terms of the contract, the conduct of the parties, and the circumstances of the case to determine the intention regarding the passing of property.

The court noted that the delivery of the bill of lading might operate as a symbolic delivery of the cargo, and the property in the cargo might pass by endorsement and delivery of the bill of lading, provided such was the intention of the parties. However, in this case, clauses (5) and (6) of the contract indicated that the goods were to be inspected and weighed before delivery ex-docks, suggesting that the property was intended to pass only after the goods had crossed the customs barrier. Furthermore, the seller was required to clear the goods through customs, further indicating that the property in the goods did not pass while they were on the high seas. Thus, the court concluded that the property in the goods passed only after the goods were delivered ex-docks in Bombay.

Issue 2: Taxability of Sale in Bombay
The court affirmed that there was a sale in Bombay taxable under the Bombay Sales Tax Act, 1953. Since the property in the goods passed after the goods had crossed the customs barrier and were delivered ex-docks in Bombay, the sale took place within the State of Bombay. Therefore, the sale was subject to the Bombay Sales Tax Act, 1953.

Issue 3: Refusal to Allow Fresh Evidence
The Tribunal had refused to allow fresh evidence on the endorsement of the bill of lading in favor of the Government of India. The court noted that the Tribunal was prepared to regard the endorsement issue as material but did not permit the applicants to substantiate their contention with evidence because it had not been produced at an earlier stage. However, the State's counsel agreed to argue on the basis that the bill of lading was endorsed as contended by the applicants to avoid remand. Consequently, the court did not answer this question.

Issue 4: Protection Under Article 286
The court considered whether the sale of goods to the Government of India was protected under clause (1)(b) of Article 286 of the Constitution of India and thus exempt from sales tax. The court concluded that since the property in the goods passed after the goods had crossed the customs barrier in Bombay, the sale was not in the course of import. Therefore, the sale was not protected under Article 286 and was subject to sales tax.

Conclusion:
- Issue 1: The property in the goods did not pass to the Government of India on the high seas; it passed only after delivery ex-docks in Bombay.
- Issue 2: There was a sale in Bombay taxable under the Bombay Sales Tax Act, 1953.
- Issue 3: The question of allowing fresh evidence was not answered as the State agreed to argue on the basis that the bill of lading was endorsed.
- Issue 4: The sale was not protected under Article 286 of the Constitution of India and was subject to sales tax.

Reference answered accordingly.