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TMI Blog1964 (10) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... B., WANCHOO K.N., HIDAYATULLAH M., RAGHUBAR DAYAL AND MUDHOLKAR J.R. JJ P. Govinda Menon and Dr. V.A. Seyid Muhammad, for the respondent in all the appeals. M.C. Setalvad, Senior Advocate (Rameshwar Nath, S.N. Andley and P.L. Vohra of M/s. Rajinder Narain Co., with him), for the appellants in all the appeals. -------------------------------------------------- The judgment of the Court was delivered by GAJENDRAGADKAR, C.J.- This is a group of fifteen appeals by special leave which raise a common question of law. The appellants in these respective appeals are plantation companies which grow their own tea in tea estates and sell their products. Under the relevant provisions of the Travancore-Cochin General Sales Tax Act XI of 1125 (hereinafter called the "Travancore Act"), Sales Tax Officers had assess- ed the appellants to several amounts of tax in respect of their turnover for different years. The appellants had urged before the Sales Tax Officers that the transactions in question were not liable to pay sales tax, but their pleas were rejected and sales tax was ordered to be imposed in respect of the said transactions. The appellants then challenged t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forwarding agents, Messrs. Peirce Leslie Co. Ltd., Cochin, at Wellingdon Island to be stored there awaiting further instructions. Thereafter, the brokers in Fort Cochin check the weight of the chests, draw samples of their contents and group the chests in lots. They then publish printed catalogues giving the name of the estate and the godowns, the numbers of the lots, the serial numbers and total number of chests in each lot, the weight of each chest and the total weight of each lot and advertise the sale of such chests with export rights, by public auction, at Fort Cochin on a particular date and hour. The sale is conducted, by samples, at Fort Cochin, at the proclaimed date and hour and is confirmed in the name of the highest bidder. The bid may be for an entire lot or for a portion thereof, technically known as 'brake'. The buyer shall be entitled to open the chests bid by him and examine the contents thereof to ascertain the actual state and condition of the tea. Difference or inferiority in quality, description, deterioration, damage and defect in packing will entitle the buyer to submit claims or rejection, or allowance or damage. Such claims must be submitted, after inspec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent State of Kerala in the present proceedings, they have held that the transactions with which the appellant was concerned could be validly assessed by the respond- ent State. The same view, in substance, has been accepted by the High Court when it rejected the revision application filed by the appellant before it. Meanwhile, the decision of the Kerala High Court in the case of A.V. Thomas Co. I.L.R. (1960) Ker. 1395., was reversed by this Court when the matter came before it in appeal in A.V. Thomas Co. Ltd. v. Deputy Com- missioner of Agricultural Income-tax and Sales Tax, Trivandrum [1963] 14 S.T.C. 363; A.I.R. 1964 S.C. 569. In that case, this Court has held that the Explanation to Article 286(1) creates a fiction as between two States, one where the goods are delivered for consumption in that State, and the other where the title in the goods passed and the former is treated as the situs of the taxable event to the exclusion of the latter. In regard to sales of teas in lots by public auction, this Court held that the property in teas passed to the buyer under section 64 of the Act as soon as the offer was accepted on fall of the hammer at Fort Cochin in the State of Mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the construction of Article 286. In the latter case of Malayalam Plantations Ltd. [1964] 15 S.T.C. 665., this question was attempted to be raised before this Court, but this Court did not allow the appellant to argue that point, because the finding of the Sales Tax Authorities that the title in the goods had passed at Fort Cochin on the fall of the hammer at the auction had not been disputed before the High Court. Mr. Menon contends that in the present proceedings, the respondent State has been urging at all material stages that the sales in question are inside sales, and so, he should be permitted to argue that point. We have accordingly heard Mr. Menon on this point and we propose to decide it on the merits. When these appeals were heard by us first on the 10th September, 1964, the procedure followed in conducting the sales in question was placed before us in the form of a summary which we have quoted at the beginning of this judgment. We, however, thought that since we were deciding the question as to where the title in the goods passed, it would be more satisfactory to have before us all the rules of the Tea Trade Association of Cochin which prescribed the procedure for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of the goods took place at these godowns. It is after the goods are inspected by the buyer and accepted by him that the contract is completed and title passes from the seller to the buyer. This event takes place in the Wellingdon Island, and so, the transaction of sale is an inside sale for the purpose of sales tax levied by the respondent State. In support of this argument, Mr. Menon has referred us to the statement of Benjamin that "where the subject-matter of the sale is not in existence, or not ascertained at the time of the contract, an engagement that it shall, when existing or ascertained, possess certain qualities, is not a mere warranty, but a condition, the perform- ance of which is precedent to any obligation upon the vendee under the contract, because the existence of those qualities, being part of the description of the thing sold, becomes essential to its identity; and the vendee cannot be obliged to receive and pay for a thing different from that for which he contracted". Judah Phillip Benjamin's "A Treatise on the Law of Sale of Personal Property" 8th Edn. by Finnemore James. Another passage from the same book on which Mr. Menon relies speaks of acceptance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sense unascertained and it could be concluded only when the buyer inspected the goods and accepted them. The position in regard to the relevant provisions of the Act bearing on the question as to when title in the goods sold passes, is not in doubt. If the contract of sale is for ascertained goods which are actually described in the list prepared before the sales are held and it appears that all material particulars about the goods are shown in the list, then the question as to when title passes would depend essentially upon the intention of the parties expressed in the terms of the contract. Section 19(1) of the Act provides that where there is a contract for the sale of specific or ascertained goods, the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred. Section 19(2) adds that for the purpose of ascertaining the intention of the parties, regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case. Under section 19(3) it is provided that unless a different intention appears, the rules contain- ed in sections 20 to 24 would be relevant to decide this question. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted by the buyer, who shall not be entitled to reject the tea or to claim any allowance or damages in respect thereof". Mr. Menon has placed considerable emphasis on the fact that this condition provides that the goods shall be deemed to have been accepted by the buyer when he failed to make inspection within the time allowed. In other words, his argument is that this condition shows that acceptance can be deemed to have taken place only after the procedure prescribed by condition 12 has not been followed and therefore, it envisages acceptance only after inspection in all cases. We do not think that such importance can be attached to the expression "to have been accepted by the buyer" on which Mr. Menon rests his argument. We have already seen that condition 11 has referred to the chests as having been purchased by the buyer; and that would be clearly against Mr. Menon's case. So, it would be reasonable not to base our decision principally on the words used by the conditions, such as "purchased" or "accepted", but to take into account the substance of these conditions. It may be stated at this stage that after the public auction takes place, claims have to be made by the buyer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the Arbitrator; and this condition is consistent only with the view that the goods have already been purchased by the buyer and the claim which he is allowed to make is as a result of the breach of the contract of sale. Mr. Menon attempted to argue that condition 13 merely enables the buyer to move the Arbitrator. According to him, the buyer can reject the contract of his own, or file a claim for damages in a civil court without having recourse to arbitration. In our opinion, condition 13 is not merely an enabling condition; it is an obligatory condition and it gives the buyer only one remedy, and that is to move the Arbitrator for appropriate relief. Condition 13 is also relevant. It reads thus: "If the buyer shall fail to pay for the tea or any part thereof on the due date for payment, the goods may be resold, either by auction or private sale, at the option of the seller. Any loss arising on such resale together with interest at 6 per cent. per annum from the due date and all charges incurred, shall be paid by the buyer to the seller, and the buyer shall not be entitled to any profit, which may accrue from such resale". This condition is consistent with the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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