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TMI Blog1956 (2) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... sed, the aggrieved plaintiffs have preferred O.S.A. No. 54 of 1953. The nature of the transactions, on the basis of which the liability to tax under the Madras General Sales Tax Act is rested by the State, is the same in regard to the two years which are the subject-matter of these two appeals, but different decisions have been rendered in the two suits, because of factors to which we shall later advert. In Suit No. 446 of 1947 relating to the year 1944-45, from which O.S.A. No. 62 of 1951 has been filed, the Deputy Commercial Tax Officer, Harbour division-the assessing authority-determined the total turnover of Louis Dreyfus and Co., Ltd., whom we shall here- after call the assessee, at Rs. 2,53,72,488-14-11 by an order dated 27th March, 1946, and levied the tax payable on that figure, which the assessee duly paid and the correctness of this levy is not in dispute. But just about a year afterwards, on 28th March, 1947, the Commercial Tax Officer, North Madras, issued a notice to the assessee to show cause why the above assessment should not be revised under rule 14(2) of the Madras General Sales Tax Rules, and after considering the objections to his jurisdiction and the merits o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... came up for consideration before Govinda Menon and Krishnaswami Nayudu, JJ., in S.A. No. 612 of 1949, in which judgment was rendered on 28th March, 1952. This judgment which was delivered by Krishnaswami Nayudu, J., for the Bench substantially affirmed what had been laid down in C.S. No. 446 of 1947 as regards these rules. A similar decision had also been reached by a Judge of the City Civil Court from which the State had filed C.C.C.A. No. 137 of 1951. The State, which challenged the correctness of the construction of the rules adopted in these several decisions, request- ed that the question involved might be heard by a Full Bench, and as the point was of general importance the request was granted. The Full Bench has now answered the reference against the assessee. It is unnecessary to set this out in any detail, as the further hearing of this appeal has proceeded on the basis that as the result of the Full Bench ruling the jurisdiction of the Commercial Tax Officer to revise the assessment in the circumstances of this case stands affirmed, leaving the question as to the liability to tax arising out of the sales transactions involved in the suit as the only one left for determina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing rise (1) [1952] 3 S.T.C. 396; (1952) 2 M.L.J. 593. to a tax liability, and the circumstance that the title to the goods passed to the buyer beyond the limits of this State was not a final or determining factor. This Court accepted this contention of Government and as "the assessee had an office at Madras, its accounts were maintained here; the goods which were the subject-matter of sale were in Madras and delivered to common carriers in Madras and the sale price was entered in the accounts of the assessee maintained at Madras" the transaction was held to have a sufficient connection with Madras so as to enable the seller to be taxed. It was by applying the principles of this decision which was binding on him that Subba Rao, J., held against the plaintiff in C.S. No. 370 of 1950. The learned Judge rested his decision almost wholly on the circumstances that the goods which were the subject-matter of the transactions in the case before him were within the State at the time of the contract, and that they were despatched from here in implementation of the contract. The place of passing of property as the sole test for determining the locus for fixing liability to sales tax, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o contracts of purchase with merchants in Bombay through the brokers of that city. The contracts were in the form set out in Ex. P. 1 in C.S. No. 370 of 1950, which is identical with Ex. P. 19 in C.S. No. 446 of 1947, these being the counterparts signed by the seller. This document which was signed by the seller and addressed to the assessee, the buyer, after reciting the sale of the quantity specified and the price stipulated for the latter "being free railway station Bombay or to be delivered at buyer's godown" which is also at Bombay. The payment was to be according to the rules of the general terms and conditions, that 90% of the invoice price was to be paid against railway receipts and the balance after the acceptance of the goods and after a final weighment at Marmagoa (Marmagoa was expressly named as the place where the goods were to be delivered). The buyer had an option of rejecting the goods after their delivery at Marmagoa, if it should turn out that they were not equal to the quality stipulated. It was a further term of this con- tract that the sellers should intimate the buyer the name of their constituents, the quantities of goods which they were in a position to cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the second of the above matters to support the levy of the tax. The contract here was one for the sale of unascertained goods, and hence there could be no passing of property until the goods were ascertained. The argument advanced was that the goods became ascertained when the dealers or "constituents" who had sold the goods to the sellers from whom the assessee purchased, lost control over the goods by loading them in waggons, taking the railway receipts in the name of the seller's nominees, viz., the assessees as the consignors. It was urged that if the property in the goods passed from these "constituents" by their delivery to a carrier, the person to whom the property would pass would be their Bombay buyers, but as these buyers had in their turn sold the goods to the assessees and had nominated the latter to accept the delivery by taking the receipt in their name as consignor, the title to the goods would pass by the very act of delivery to the carrier to the assessee itself. It will be seen that this contention rests primarily on the circumstance of the assessees figuring as consignor and consignee in the railway receipts obtained by "the constituents". (1) [1952] 3 S.T.C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... weight, and analysed for quality at Marmagoa, and that the final payment was made after adjusting the freight to the account of the sellers which is indication that the intention of the parties in having the goods consigned in the name of the buyer as con- signor and consignee was merely to enable the export of the goods to be effected so as to comply with the restrictions in that regard and not to pass title in the goods to the buyer. We have had occasion to deal with a similar question in Gandhi and Sons v. State of Madras(1), and, therefore, we do not find it necessary to embark again on any detailed discussion of the legal principles involved. Following the reasoning of that decision we hold that the learned judges were right in their view, that the property in the goods in what are termed the "Bombay sales" did not pass to the buyer within this State. The result is that on the ruling of Poppatlal Shah's case(2), the assessees are not liable to sales tax in respect of these purchases. We shall next consider the purchases through the arthias which are referred to as the port-pass contracts in C.S. No. 446 of 1947. The etymological meaning of the expression arthia appears to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uying from the arthias" and of "buying from any other party" by implication appears to suggest that the relationship between the arthia and trader is that of seller and buyer. Clause 3 reverts to the idea expressed in clause 1 and provides: "That the said arthias shall on receipt of orders from the said traders make purchases for the traders' houses concerned of such goods within such quantities and within such limits of prices as the arthias may from time to time be advised and on-such terms as the usual port- pass contract of the said traders for the various articles they deal in may contain from time to time." The practice appears to have been for the assessee to indicate quantities required, as well as the prices it was willing to pay, and on receipt of this advice the arthias would, either from goods already contracted for by them or from those which they were able to secure subsequently implement their contract with the traders. The assessees called in this contract "traders" had no concern with the prices at which the arthias were able to effect their purchases, and clause 13 expressly forbade the arthias to pledge the credit of the traders. Clause 13 runs: "That the arthi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the growers or dealers, it was as if the assessees had themselves entered into these contracts, with the result that when these constituents delivered these goods at the railway stations for being loaded in waggons they parted with their title which thereafter vested in the assessees. But this would be the case only if the arthias were strictly intermediaries who brought about the relationship of seller and buyer between the constituent and the assessees. The terms of Exhibit P. 14(a), however, do not enable this to be established. The arrangements riddled as it is with ambiguity as regards the legal rela- tionship brought about between arthias and traders had to be read along with the port-pass terms which it incorporates. There is no ambiguity or doubt as regards the latter, and Exhibit P. 14(c) clearly envisages the arthia, as a seller in relation to the trader. Further, having regard to clauses 12 and 13 of Exhibit P. 14(a), there could be no contractual relationship between "constituent" and the assessee. In the face of these, we are clearly of the opinion that for the present pur- poses there is no essential difference between the direct purchases from the Bombay merchan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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