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TMI Blog1959 (4) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the contract be there in the form in which they are agreed to be sold. There is not an iota of evidence on that point. X X X X Extracts X X X X X X X X Extracts X X X X ..... 's consent to relinquish all claims whatsoever to such rejected logs, and the contractor agrees to such logs thereupon becoming the property of the company and that the contractor shall have no claim whatsoever upon the company for payment either in respect of the supply by him of such rejected logs or arising out of the disposal by the company of such logs." "3. The said goods shall be delivered at Ambernath in the quantities and at the times hereinafter mentioned, i.e. 4. The goods to be supplied under this contract shall be despatched by the contractor from railway stations on the B. N. R. and G.I.P.R. sections between the following stations: 5. Measurements: The goods under this contract shall be measured under the supervision of the company's factory manager at Ambernath on arrival of the goods at the factory in accordance with following stipulations: The contractor agrees to accept the decision of the company's factory manager at Ambernath as final and binding." The prices of the logs to be supplied are set out in clause 6 of the contract as "F.O.R. Ambernath". We now pass on to the later contract of March 2, 1945. Clause I sets out the specifications of the logs to be suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les Tax, which is part of the record-and it has not been disputed before usthat "the railway receipt which is a document of title according to section 2(4) of the Indian Sale of Goods Act is taken in the name of the consignee." The course of dealings between the parties also appears to be that, on arrival of the logs at Ambernath, the consignee buyer, Wimco, paid the railway freight and the logs were inspected and measured by WIMCO'S factory manager and the prices, calculated at the agreed rates, were paid to the respondent's agent at Bombay. There is no doubt that the price of the logs supplied by the respondent to Wimco under the agreement and accepted by the latter during the period in question amounted to Rs. 30,067-9-0. The question for our decision is whether the respondent is liable to pay any sales tax under the Act. It will be convenient at this stage to refer to the relevant provisions of law applicable to the facts of this case. Section 4 of that Act is the charging section. According to this section sales tax is payable "on all sales effected after the commencement of the Act." "Sale" is defined by section 2(g) of the Act. At the relevant period, that section, omitting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred." There can be no doubt that the agreement pursuant to which the logs were supplied by the respondent to WIMCO was an agreement to sell within the meaning of the above section. There is also no controversy between the parties that at the date when this agreement was entered into, the logs were unascertained goods. The question is: When did that agreement to sell unascertained goods become a sale and where did such sale take place? In other words, when and where did the property in those goods pass from the respondent to WIMCO? The transfer of property in the goods as between the seller and buyer is dealt with in Chapter III of the Sale of Goods Act. Section 18 of the Sale of Goods Act runs thus: "18. Goods must be ascertained.-Where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless unless and until the goods are ascertained." Passing over sections 19 to 22 which [except as to sub-section (3) of section 19] apparently apply to contracts for the sale of specific or ascertained goods, we come to section 23 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as laid down in section 39(l) of the Indian Sale of Goods Act and he accordingly held that the sale of the goods took place at Chanda and other railway stations in the Central Provinces and that the assessee was, consequently, liable to pay the sales tax under the Act. The respondent preferred an appeal to the Sales Tax Commissioner who upheld the Assistant Commissioner's order of assessment as well as of the penalty. He laid greater emphasis on Explanation II to section 2(g) of the Act as overriding the provisions of the Indian Sale of Goods Act in respect of the transfer of property in the logs and held that as the logs were in the Central Provinces at the date when the contract for sale was made, the transfer in them must be deemed to have taken place there under that Explanation. He also agreed with the Assistant Commissioner that the delivery of the logs to the railway company and the sending of the documents of title to WIMCO had, under section 39(1) of the Sale of Goods Act, the effect of putting WIMCO in possession of the logs. The respondent preferred what in form appeared to be a second appeal to the Board of Revenue. As, however, there could be no second appeal under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the contract? (4) Was reliance on the definition of 'goods' contained in section 2(7) of the Sale of Goods Act in order in applying Explanation II to section 2(g) of the Sales Tax Act in cases, where the goods sold were in the form of trees standing on the land in this Province at the time of the contract of sale?" In its judgment dated June 29, 1954, the High Court took the view that the sales in question did not take place in the Central Provinces and Berar and consequently were not "sales" within the meaning of the Act and, therefore, not liable to tax. It gave the following answers to the above questions: "Our answers to the questions referred for decision are: (1) The agreement in question was an express agreement to sell sawar logs to WIMCO. There was neither an express nor an implied contract each time goods were railed. (2) The contract was not for delivery of specific goods but of unascertained or future goods by description. (3) The property in the goods did not pass to the buyer by the delivery to the railway for carriage. It passed at Ambernath where the goods were appropriated by the buyer to the contract with the assent of the seller. (4) The word 'goods' in the def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the contract by the respondent. There was, according to learned counsel, assent on the part of WIMCO to this appropriation in two ways, namely, (a) expressly given by its representative who was present at the railway station, and (b) impliedly given by WIMCO by having agreed in advance that the goods should be despatched by rail from the stations mentioned in clause 4 of the agreement, all of which were situate in the Central Provinces. There is no doubt -and indeed it has been categorically conceded by learned counsel for the department-that the contract was for sale of unascertained goods and consequently the property in them could not, under section 18, pass unless and until the goods were ascertained. His contention is that logs of the contract quality and description having been unconditionally appropriated by the respondent to the contract without reserving to itself any right of disposal and WIMCO having expressly through its representative or impliedly by the very terms of the contract assented to such appropriation, property in them passed under section 23 from the respondent to WIMCO at the railway stations within the Central Provinces as soon as the sawar logs were l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided on the terms of the earlier contract dated October 18, 1940, he could properly say that there was nothing in the contract negativing the idea of the passing of property in the logs within the Central Provinces. The cumulative effect of the provisions of clause 2 that the property in the rejected logs would pass to WIMCO upon the failure of the respondent to remove the same after rejection, of clause 3 that the goods shall be delivered at Ambernath in the presence of WIMCO'S factory manager and of clause 6 providing that the prices will be "F.O.R. Ambernath" clearly militate against the theory of passing of property immediately on the goods being loaded into the wagons. While not contesting this, learned counsel for the department urges that there is no such contrary intention indicated in the later contract of March 2, 1945, which really governs the case. We are unable to accept this distinction as of any substance. It is true that in this latter contract clause 2 is differently worded and there is no express provision that the goods should be delivered at Ambernath. There are, nevertheless, several other provisions in the later contract indicating that property in the lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riation of the goods at Ambernath. Therefore, the decision of the High Court cannot be assailed but must be accepted as well-founded in fact and in law. Learned counsel for the department then falls back upon the argument founded on Explanation 11 to section 2(g) and argues, somewhat half-heartedly, that notwithstanding the provisions of the Sale of Goods Act regarding the passing of property in the goods the sale under consideration must be deemed, in the light of that Explanation, to have taken place within the Central Provinces. The question of the constitutional validity of that Explanation was not raised in the High Court and indeed, in view of the decision of this Court in Poppatlal Shah v. State of Madras[1953] S.C.R. 677; 4 S.T.C. 188. and other cases, cannot now be raised and we must proceed on the footing that Explanation II did not transgress the legislative competency of the Legislature which enacted the same. It will be noticed that Explanation II can apply only if the goods "in respect of" which the contract of sale is entered into are, at the date of such contract, actually in the Central Provinces. Learned counsel for the department urges that the logs delivered m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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