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TMI Blog1996 (11) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the case, the Tribunal was right in law in placing the burden on the assessee, and in holding that the same was not discharged even when the Tribunal itself had failed to take into consideration various evidence produced, and thus the final finding is not vitiated in law ? 4. Whether, on the facts and in the circumstances of the case, the Tribunal's finding, as to the conduct of the assessee with special reference to the assessee's contention regarding availability of unpledged stock holding that the same is of no consequence can be justified in law and is sustainable from material on record ? 5. Whether, on the facts and in the circumstances of the case, the Tribunal's ultimate conclusion can be justified in law it having taken into consideration irrelevant material in the form of past events unconnected with the issue at hand and it having ignored undisputed documentary evidence in the form of letters, etc., of third parties ? 6. Whether the Tribunal's ultimate finding confirming the addition in question is not perverse, the same being based on mere inferences, conjectures and surmises and against material and evidence on record ?" The aforesaid questions are reprod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td., who originally had pledged with the Jamnagar District Co-operative Bank Ltd., when Raxor Chicory Supply Co., purchased chicory roots from Jamnagar Agricultural Products Co-operative Society Ltd., the goods were delivered through Jamnagar District Co-operative Bank Ltd. as the same were within the custody of the bank, directly to our godown as the same were to be pledged with us by Raxor Chicory Supply Co. In short, goods were delivered to our godown through Jamnagar District Co-operative Bank Ltd. and we pledged the same to the State Bank of Saurashtra meaning thereby that goods which were within the custody of Jamnagar District Co-operative Bank Ltd. were transferred to the custody of State Bank of Saurashtra and hence delivery given by Jamnagar District Co-operative Bank Ltd. on various dates were the dates on which the goods were delivered to us and in turn the dates on which we pledged the same with the State Bank of Saurashtra. Though the State Bank of Saurashtra has shown the dates of pledge as September 18, 1973, and September 19, 1973, the actual pledge was made on different dates as stated in our above letter." The assessee had also executed two trust receipts in fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of the assessee at any time that he received 200 metric tonnes of chicory from Raxor on September 18 and 19, 1973, and pledged the same on that date. It is admitted that though pledge documents were executed on September 18 and 19, 1973, in fact pledge of those goods had taken place only on the four aforesaid dates as and when the part delivery has been received by the assessee at his godown, which were held by him for the bank as security for the aforesaid loan and he had not received the full stocks of the transaction on the two relevant dates to fulfil the obligation of actual delivery out of stock to the bank on those days. The assessee has clearly pleaded that though he had executed the documents of pledge of 200 metric tonnes on the two dates, in fact the goods under transaction had not reached his godown on those days and, therefore, they did not become the subject of pledge on the two dates but became the subject-matter of pledge on the four dates respectively when the goods were received by the assessee and not earlier to that. There is no dispute up to this extent. The dispute is in respect of two aspects, firstly, whether the actual delivery was given of 200 metric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assumption but without expressing any opinion about the correctness of the finding of actual delivery of 200 metric tonnes of chicory roots having been made to the bank on September 18 and 19, 1973, by the assessee. Here, it would be pertinent to notice one very relevant fact which has come on record and has found place in the order of the Tribunal as well. The assessee had placed that he had on the relevant dates 1,56,992 kgs. of stock of chicory roots recorded in its books of account, which was readily available with it for pledging. Therefore, it had no need to concoct the story of non-delivery if in fact it had delivered the stocks on those two days. The correctness of the fact that the assessee had with it stock weighing 1,56,992 kgs. and which was readily available for it to pledge was not questioned and was assumed to be correct. However, no significance to this was attached by the Tribunal or for that matter any of the authorities below, for the reason that the assessee has not claimed that any part of that stock was made available for pledging. In the light of this the scenario which emerges is that the assessee actually delivered 200 metric tonnes of chicory to the ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e had pleaded that he had in fact delivered 200 metric tonnes stocks on September 18 and 19 out of goods received from Raxor. In that event, proof of non-receipt of stock from Raxor on the two dates would have rendered the assessee's explanation about actual delivery being related of stock record false and in the absence of any proof furnished by the assessee about the source of actual delivery made by him, a legitimate inference could be drawn against the assessee. But where the assessee pleads that he did not in fact deliver the stocks of 200 metric tonnes on 18th and 19th September, because he has not in fact received the stock which was to be pledged with the bank, and the pledge has not taken in fact on these two dates, this plea is not falsified by the fact that the assessee had not received the full quantity of chicory roots purchased and agreed to be pledged on the two relevant dates. On the contrary this supports the plea that the chicory roots of Raxor transaction could not have been the subject-matter of actual delivery for pledge on 18th and 19th September. Its plea was in consonance with the terms of the whole transaction as spelt out in the Tribunal's order. Clearly o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence to trust receipts which form part of statement of case goes to show that they were executed on September 18 and 19, 1973. They also show that they related to chicory roots to be received from Raxor Chicory Supply Co. and delivery was to come from Jamnagar District Co-operative Bank Ltd. The assessee had also placed on record documents showing that the goods to be supplied to the assessee were in fact in the possession of Jamnagar District Co-operative Bank and actual delivery was to be made from the said bank. Further facts which are clear from those two receipts are that the documents of these goods were in the first instance handed over to the bank as security. The trust receipts were executed in lieu of handing over these documents to the assessee by the bank and securing that when delivery of the said goods is taken by the assessee through these documents the same remain the security of the bank, in respect of the transaction. We reproduce one of the trust receipts, the other is in identical terms : "In consideration of your handing over to me/us the R. Rs of the goods as per particulars at the foot of this receipt held by your bank as security towards our cash credit a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly irrelevant considerations in the first place in assuming that any goods were required to be pledged on 18th and 19th September de hors the stipulations between the parties. It ignored the vital aspect of the stipulation between the parties as to requirement of security, which clearly spelt out from the trust receipts, which was very much before it. Yet another error which the Tribunal committed was to assume, without any basis, that on 18th and 19th September, the assessee was in possession of undisclosed stock to fill the deficiency in actual receipts. As discussed above, there was no basis for such assumption in the facts and circumstances of the present case. One more relevant circumstance which has been lost sight of is that the initial security has come into existence, not by actual delivery of goods, but by delivery of documents of goods which were yet to be received. These documents were redelivered by the assessee on 18th and 19th, respectively, with the stipulation that the goods secured under those documents shall be held by the assessee as security for the bank and shall be also as per its direction. It did not stipulate actual physical delivery of the same to the ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions by means of which title passes directly from manufacturer or seller to banker or lender who as owner delivers goods to dealer in whose behalf he is acting secondarily, and to whom title goes ultimately when primary right of banker or lender has been satisfied." From the above it is abundantly clear that the trust letters/receipts are executed to ensure that goods, which are either in the possession of the bank are released to the debtor or are to be received by the buyer remain as security for the bank while in the custody of the buyer. It has nothing to do with time and act of delivery of goods to the bank. Moreover, this also makes it clear that the trust letters/receipts, in case the goods are yet to come into the possession of the customer, are executed and such goods are received and delivered by the customer as security on behalf of the bank. That is to say where a trust letter is executed in respect of documents of title the goods covered by these documents only become the subject of security or in other words specific goods relating to which documents are handed over to the debtor by the financier alone are intended to be subjected to security agreement. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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