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TMI Blog1958 (8) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... une, 1949, on the basis of the return of turnover furnished by the petitioners. Subsequently, it was found by the department that exports of tea amounting in value to Rs. 23,18,044-15-6 effected during the year of assessment were not included in the turnover already assessed to tax and, therefore, those exports also are liable for assessment under the Cochin Sales Tax Act. After requiring the company to file fresh return of turnover, the first respondent. added the amount mentioned above to the amount already taxed in the original order and fixed the taxable turnover at Rs. 24,26,029-15-6, and levied the necessary sales tax on this turnover. After giving credit to the amount already paid under the original order of assessment, the first respondent levied on the petitioners additional sales tax of Rs. 23,180-6-10 and as per the demand notice issued, the first respondent, by order of same date called upon the petitioners to pay the amount within the time mentioned in the notice. 5.. The petitioners filed an appeal under section 14 of the Cochin General Sales Tax Act to the Assistant Sales Tax Commissioner, Ernakulam, within the time mentioned in the Act. The second respondent, by o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax for the year of assessment 1123. As stated earlier, the reference S.T.R. No. 1 of 1954 relates also to the same period and covers the additional sales tax levied as per the order of the first respondent dated 6th August, 1952, and confirmed by the second respondent. Therefore, the points arising in O.P. 163 of 1953 and S.T.R. No. 1 of 1954 are substantially the same and they will be dealt with and disposed of together. 9.. In the affidavit filed in support of O.P. 163 of 1953, it is stated that there was an original assessment by the first respondent on 21st June, 1949, for the year ending 15th August, 1948, and the turnover was fixed at Rs. 1,07,985. Subsequently, the assessment was reopened by the first respondent and by order dated 6th August, 1952, the first respondent levied an additional sales tax on a further turnover of Rs. 23,18,044-15-6. It is further stated that this sum represented the total invoice value of export of tea arranged by the petitioners via Cochin Harbour to America, the cost of tea being Rs. 18,00,869, and the balance being freight, insurance, godown charges, commission etc., payable to the assessee. 10.. The petitioners further alleged that the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se grounds the petitioners challenged the orders of assessment as being without jurisdiction, illegal and void. 16.. The petitioners have also stated in the affidavit about their asking the Commissioner to refer certain questions under section 24 to this Court. 17.. In the end, the petitioners prayed for the issue of a writ of certiorari calling for the relevant records from the respondents and for quashing their orders dated 6th August, 1952, and 30th June, 1953, assessing the petitioners to sales tax, in respect of the teas in question. 18.. The Sales Tax Officer, First Circle, Ernakulam, Sri T.K. Padmanabhan, has filed a counter-affidavit on behalf of the respondents. 19.. The material allegations in the affidavit of the petitioners are denied. It is stated that the petitioner-company is a "dealer" within the definition of the Cochin Sales Tax Act, XV of 1121, and that the export of tea to the American Canadian companies constituted a "sale" within the State. The account of the assessee-company shows that they purchased the teas in question with its funds and the petitioners were dealing with the same in their own right. Several purchases from the producers were made on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehalf. If at any time, the advances were not enough, the petitioners supplied the necessary funds as may be required and charged interest for such sums. 25.. The manner of repayment and the drawing of bills were also mentioned in the reply affidavit. It is also stated that the sellers of the teas were quite aware that the petitioner-company was buying teas on behalf of the American companies. The purchases and the shipment were made in accordance with the agreement between the American and Canadian companies and Liptons Ltd. 26.. The interpretation placed upon clause 3 of the agreement is again challenged. 27.. It is also stated that the sellers of tea both under the terms of contract and the rules governing the sales of tea undertook risks only for ten days from the date of the arrival and storage in the godown of the sellers. As any risk arising thereafter would fall on the buyers, namely, the American Canadian companies, the assessee-company, as the agent of such buyers insured the teas until such time as they were removed from the said godown for shipment. There have been several occasions when the American companies insured the teas so as to cover the land journey also i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to the exact relationship in law occupied by the assessee-company with the American Canadian companies, that is, whether the assessee-company was only a buying agent of the latter. 32.. Section 2, clause (i), of the Cochin Sales Tax Act, XV of 1121, as amended by Act XXI of 1122 runs as follows: "(i) 'sale' with all its grammatical variations and cognate expressions means any transfer of property in goods for cash or deferred payment or other valuable consideration, including a transfer of property in goods involved in the execution of a contract, but does not include a mortgage, hypothecation, charge or pledge. Explanation I-Omitted. Explanation II-Notwithstanding anything to the contrary in the Cochin Sale of Goods Act, XXV of 1122, the sale of goods shall wherever the contract of sale as defined in that Act is made, be deemed for the purpose of this Act to have taken place in Cochin, if (i) the goods are actually in Cochin at the time when the contract for sale in respect thereof is made, or; (ii) the goods were manufactured in Cochin and the sale is effected by the manufacturer or his agent". In the counter-affidavit of the respondents, it is stated that the sales were eff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, came to the conclusion that till the tea passes the ship's rail, the title is with the assessees, they having purchased the goods with their own money. When the goods passed the ship's rail, there is a transfer of goods by the assessees to the American companies, which, in law amounts to a sale as per the definition in the Cochin Act. Regarding the second contention, the appellate authority held that the tea was exported from the Cochin Port. Then he says: "As the ships were in Cochin territorial waters when the tea exported passed the rails, the sales have to be considered as taken place in the Cochin State." In this view, the second respondent confirmed the order of the first respondent. 36.. It will be seen that the reasons given by the appellate authority are slightly different from those given by the first respondent. The first respondent put the case against the assessees mainly on the ground that the goods were all lying in godowns in Cochin. Evidently, the appellate authority was satisfied that this finding of the first respondent was not correct because the goods were kept only in the godowns at Fort Cochin, Madras State. But the appellate officer has held that the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sales as defined in the Cochin Act and as such, are liable for the levy of sales tax. The orders of the first and second respondents are within jurisdiction and not illegal. The question about the ships being in Cochin territorial waters appears to have been admitted before the second respondent or, at any rate, it has not been controverted by the assessees till a very last stage in this Court. In any event, when the officers have got jurisdiction to make the assessment in law, any error in the construction of the agreement cannot be made the subject of a writ of certiorari. 39.. The learned Advocate-General contended that the alternative plea of Mr. Nambiar will not avail his clients. Once the title to the tea passes under clause 3 to the American-Canadian companies when the goods pass the ship's rail, it is immaterial to consider in what way the assessees took the documents of title. Even there, the learned AdvocateGeneral has further contended that the practice adopted by the assesssees will clearly show that title has already passed to the AmericanCanadian company notwithstanding the absence of payment in full. 40.. At the outset, we may note an objection raised by the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an companies by the English company in its own name or otherwise as the English company shall think fit." There is also a prohibition against the foreign companies purchasing tea from any other source outside U.S.A. and Canada without prior consultations of the English company. Clause 3 provides for the English company using its best endeavours to purchase teas on most favourable terms for the American-Canadian companies having regard to availability of supplies, Government regulations etc. Then it provides: "Tea so purchased shall be shipped to the company requiring it in such quantities and of such qualities and at such times and to such places as the company requiring it may from time to time specify but upon the terms that the title to the tea passes to the American or Canadian company, as the case may be, as soon as the tea passes ship's rail at the port of shipment." Clause 4 casts an obligation on the English company making all necessary arrangements with regard to the actual shipments of tea. Clause 5 states that the foreign companies shall respectively repay to the English company the expenses incurred by the English company in the purchase and shipment of tea acquired on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... think fit." Clause 3 starts by casting an obligation on the English company to use its best endeavours in the matter of purchase of tea required by the American-Canadian companies. Later on, the clause says: "The tea so purchased shall be shipped to the company". Such a shipment is to be in such quantities and of such qualities and at such times and to such places as the American-Canadian companies requiring it from time to time specify. Though clause 3 refers to title to the tea passing to the American-Canadian companies as soon as the tea passes the ship's rail at the port of shipment, it has to be really read along with sub-clause (c) of clause 5 and clause 6. Clause 5 specifically speaks of the American-Canadian companies agreeing to "repay, to the English company the expenses mentioned in clauses (a) to (d) therein in respect of the purchase and shipment of tea acquired on their behalf". The expression used is "repay" which will show that all the purchases and other expenses were by the English company, not on their own account, but on behalf of the American-Canadian companies. This is made clearer in the said clause itself by stating: "purchase and shipment of tea acquired o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying goods in Cochin whether for commission, remuneration or otherwise and includes any society, club or association which sells or supplies goods to its members. Explanation I-The manager or agent of a dealer who resides outside Cochin and carries on the business of selling or supplying goods in Cochin shall, in respect of such business, be deemed to be a dealer for the purposes of this Act; Explanation II-A person who sells agricultural or horticultural produce grown by himself, or grown on any land in which he has an interest whether as owner, usufructuary mortgagee, tenant or otherwise, shall be deemed to be a dealer for the purposes of this Act." This contention that the assessees will be dealers cannot be accepted and it may be even unnecessary to consider the same because the case has not been put against the assessees by respondents 1 and 2 on this ground. No doubt, in the counter-affidavit filed here by Sri Padmanabhan on behalf of the respondents, the contention that the assessees are dealers has been taken for the first time. In the absence of any other material placed by the department, it is not possible for us to straightaway give any decision on this contention. But ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s passed the ship's rail and that the further travel of the goods is really the concern of the foreign companies. It is not as if that the parties intend as between themselves that the agent should pass a title in the goods to the foreign companies when they pass the ship's rail. On the other hand, the interpretation to be put on clause 3 fits in with the explanation given by the learned counsel for the petitioners that it is only from the insurance point of view that such a statement has been made. There is also evidence to show that notwithstanding this clause, the foreign companies have undertaken the insurance even covering the land journey of the goods till it reaches its destination in America or Canada. As the responsibility of the agent in the matter of insurance ceases under the agreement with the shipping of the goods, clause 3 has been so worded in the interests of the foreign companies themselves. When the relationship between the assessees and the foreign companies is that of only a buying agent and a principal, it will be doing violence to the intention of the parties to say that by virtue of clause 3, the foreign companies intended their agent to pass a title in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to Mr. Nambiar, even if the assessee-company is considered to be not an agent, still in view of the fact that the documents of title at the time of shipping are taken in the majority of cases in the name of the shipper or to his order, the property in the goods will not pass to the foreign buyers till payment is made against documents and as the documents are presented only in New York or Canada there is no question of any sale in law within the limits of Cochin State. He has furnished a tabular statement of the shipments between (sic.) which relates to the disputed transactions. Mr. Nambiar has also contended that even in those cases where the bill of lading has been taken in the name of the buyer, it cannot be considered in law to be an unconditional appropriation of the goods so as to pass title to the buyers forthwith. Even then, according to the learned counsel, as payment is necessary, title will pass only when the payment is made. Till that time, it must be considered to be only a conditional appropriation. The learned counsel has referred us to a decision of Rajagopalan and Rajagopala Ayyangar, JJ., reported in Gandhi Sons v. State of Madras[1955] 6 S.T.C. 694; A.I.R. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal of evidence, it would be artificial to assume that the consignors' minds were actually determined to the contrary by consideration of legal remedies, of which it is not shown that they had any knowledge, let the legal presumption be what it will......... cases, in which it has been held that taking the bill of lading in the shipper's own name negatives any unconditional appropriation to the buyer by the delivery of the goods on ship-board and indicates one conditional on the documents being taken up, can throw only an indirect light on the question here involved. Certainly no case was found, in which it was held that taking the bill of lading in the buyer's name, while withholding delivery of it until presentation and taking up of the documents, would not be, as an appropriation, equally conditional.' " 49.. After considering the terms of the arrangement between the parties in that case, the learned Judges held that there was no unconditional appropriation because the seller had further duties in connection with the goods which included loading them on board the ship and obtaining a proper bill of lading for conveyance of the goods to the contracted destination and the sell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .C. 98. This observation of the learned judges clearly shows that the contention of the learned Advocate-General here that the taking of the bill of lading in the name of the buyer in this instant case transfers the property in his name cannot be accepted. Further, the terms of the agreement are very clear, particularly, clause 5. The American and Canadian companies are to re-pay the English company the expenses incurred by the English company in respect of the purchase and shipment of the tea acquired on their behalf. The items of expenses mentioned therein are the purchase price, trade brokerage, carriage insurance, freight and other charges incurred with regard to the shipment. Therefore, even in those cases where the bill of lading has been taken in the name of the buyer, it cannot certainly be the intention of the assessee that the property in the goods is to pass to the buyers unconditionally without payment. Therefore, in our opinion, property in the goods, even in those cases, will pass only when the documents are accepted and payment made by the American-Canadian companies and there is no dispute that the documents were presented only in New York or Canada and payments mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h ground namely, that the ships were in Cochin territorial waters. We do not find even in the order of the appellate authority that his statement about the ships being in Cochin territorial waters is based upon any admission of the assessees or their representatives. 54. Excepting reiterating in paragraph 7 of its affidavit that admittedly, the shipment took place in the Cochin port within the Cochin territory, the State has not placed any further material from which such an admission could be inferred. Therefore, on this basis, even the construction placed upon clause 3 of the agreement by the second respondent will not give him jurisdiction to levy the sales tax in the circumstances of this case. The learned Advocate-General finally contended that even an agent, situated in the position of the assessees in this case, can be considered to be a vendor and as such, the transaction entered into by him can be considered to be a sale in law. The learned Advocate General relied upon the decision in Ireland v. Livingston[1872] L.R. 5 H.L. (E. and I.) 395. Particularly, he relied upon the observations of Justice Blackburn at page 408 as follows: "It is quite true that the agent who in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions of justice Blackburn have been commented upon in Cassaboglou v. Gibb(2). At page 807, Fry, Lord Justice, in dealing with these observations, observes as follows: "No doubt in that case Lord Blackburn uses stronger language, and says that the 'the legal effect of the transaction' is a contract of sale passing the property from the one to the other, and consequently the commission merchant is a vendor and has the right of one as to stoppage in transitu; but by the legal effect of the transaction he means the legal effect of an analogous contract to that of a contract of purchase and sale. It is important also to observe that Lord Chelmsford in that case puts the matter so as to conclude the existence of any contract of purchase and sale. He says, 'I would preface what I have to say by stating my opinion that the question is to be regarded as one between principal and agent, though the plaintiffs might in some respects be looked upon as vendors to the defendants, so as to give them a right of stoppage in transitu'. Therefore in such a case as the present there is in fact no contract of vendor and purchaser. If that be so, then is the principle on which the damages are to be asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who is the sole respondent, from enforcing his order dated 31st March, 1955. There is also another prayer for the issue of writ of prohibition or other direction prohibiting the said officer from proceeding to levy sales tax on similar exports made by the assessees from Cochin harbour in 1953-54, detailed in the schedule attached to the applicant's letter dated 23rd March, 1955. 60.. We do not propose to go into the merits of the contentions raised by the applicants or by the State in the affidavits filed in this Court. Apart from challenging the order of the Sales Tax Officer on the merits, the grievance of the applicants appears to be that no opportunity was given to the applicants to adduce necessary evidence regarding the several contentions raised by them including their contentions based on Article 286 of the Constitution. It is also clear from the affidavit that the assessment relates not only in respect of transactions with the American-Canadian Companies, but also with one Hayes G. Shimp (Inc.) and Hayes G. Shimp, Canada Ltd. 61.. No doubt, in the counter-affidavit filed on behalf of the State the material statements in the affidavit filed in support of this petition ..... X X X X Extracts X X X X X X X X Extracts X X X X
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