1962 (4) TMI 53 - SC - VAT and Sales Tax

Whether the transactions to whose details we shall presently refer, which the respondent admittedly entered into, were or were not sales of goods within the Madras General Sales Tax Act (Act IX of 1939) so as to enable the turnover represented by these sales to be brought to tax under the Act? Held that - Appeal allowed. No doubt, if on the facts there was no delivery of the goods to the last holder of the delivery order, the entire fabric on which the case for the appellant rests would disappear. There is however no factual basis for this submission. This fact was not alleged by the respondent at any stage of the proceedings starting from the plaint in the Court of the District Munsif right up to the statement of the case in this Court and besides, all the Courts have proceeded on the basis that such delivery was effected to the last endorsee of the delivery order but they held that such delivery did not become a sale by the respondent so as to attract the liability to tax under section 3 of the Act. We have therefore no hesitation in rejecting this argument.

Summary

Issues Involved:
1. Liability to sales tax under the Madras General Sales Tax Act.
2. Definition and interpretation of "sales of goods."
3. Appropriation of goods and the passing of property.
4. Effect of endorsement of delivery orders.
5. Retrospective application and constitutionality of Section 18A of the Madras General Sales Tax Act.

Issue-Wise Detailed Analysis:

1. Liability to Sales Tax under the Madras General Sales Tax Act:
The primary issue in both appeals is the liability of the respondent, a dealer in gunny bags, to sales tax for transactions conducted during the assessment years 1946-47 and 1947-48. The respondent contended that the transactions in question were not "sales of goods" under the Madras General Sales Tax Act (Act IX of 1939), making the assessments and tax recovery illegal and without jurisdiction. The District Munsif, Subordinate Judge, and the High Court of Andhra Pradesh all ruled in favor of the respondent, leading to the present appeals by the State of Andhra Pradesh.

2. Definition and Interpretation of "Sales of Goods":
The Act defines "turnover" as the aggregate amount for which goods are bought or sold, and "sale" as every transfer of property in goods by one person to another in the course of trade or business for valuable consideration. The controversy centered on whether the respondent's transactions, which involved endorsing delivery orders rather than taking physical delivery of goods, constituted "sales of goods."

3. Appropriation of Goods and the Passing of Property:
The respondent purchased gunny bags from mills under written contracts and received delivery orders. Instead of taking delivery, the respondent endorsed these orders, which were subsequently endorsed multiple times before the ultimate holder took delivery from the mills. The courts below concluded that the respondent's actions did not amount to "sales of goods" because the transactions involved only the transfer of delivery orders, not the actual goods.

4. Effect of Endorsement of Delivery Orders:
The Supreme Court referenced its decision in Bayyana v. Government of Andhra Pradesh, which held that the endorsement of delivery orders constituted a fresh transaction of sale between the original purchaser and the ultimate endorsee. The delivery orders, being documents of title, allowed the possessor to transfer the right to receive goods. Thus, the endorsement and subsequent delivery of goods to the ultimate endorsee amounted to a completed sale by the respondent, making him liable for sales tax.

5. Retrospective Application and Constitutionality of Section 18A of the Madras General Sales Tax Act:
Section 18A, introduced by Madras Act VI of 1951, barred suits challenging assessments made under the Act. Although this point was not initially raised, the appellant later argued that the respondent's suits were barred by this section. The respondent countered that Section 18A should not apply retrospectively and, if it did, it would be unconstitutional under Articles 19(1)(f) and (g). The Supreme Court found it unnecessary to address these arguments due to its decision on the merits of the appeals.

Conclusion:
The Supreme Court allowed the appeals, concluding that the respondent's endorsement of delivery orders and the subsequent delivery of goods to the ultimate endorsee constituted "sales of goods" under the Act. Therefore, the respondent was liable for sales tax on these transactions. The appeals were allowed with costs, and the suits filed by the respondent were dismissed.