# BAYYANA BHIMAYYA v. THE GOVERNMENT OF ANDHRA PRADESH

- **Citation:** [1961] 3 S.C.R. 267
- **Court:** Supreme Court of India
- **Decided:** 1961
- **Case number:** Civil Appeals Nos. 223 and 224 of 1960
- **Bench:** J. L. Kapur, M. Hidayatullah, J. c. SHAH
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/bayyana-bhimayya-v-the-government-of-andhra-pradesh-1979
- **Pages:** 5

## Headnote

Sales Tax-Delivery order-Mealfing of-Two separate transactions-Sales-tax, if leviable at both points-Sale of Goods Act,
r930 (Ill of r930), s. 2(4)-Madras General Sales Tax Act, I939
(Mad. IX of r939).
The respondents dealt in gun!lies. They first entered into
contracts with two Mills agreeing to purchase gunnies at a certain rate for future .delivery, and also entered into agreement
with third parties, by which they charged something extra from
those third parties and handed over the delivery order known as
kutcha delivery order. The Mills h~wever did not accept the
third parties as contracting parties, but only as the agents of the
appellants and delivered the goods against the kutcha delivery
orders, and collected the Sales Tax from the third parties. The
tax authorities treated these transactions between the appellant
and the third parties as fresh sales and sought to levy sales-tax
again, which the appellants contended, was not demandable as
there were no second sales; the delivery of a kutcha delivery
order did not amount to a sale of goods, but was only an assignment of a right to obtain delivery of gunnies which were not in
existence and not appropriated to the contract; this was only
an assignment of a forward contract.
Held, that the agreements between the parties showed that
third parties were not recognised by the sellers. A delivery
order being a document of title to goods, the possession of such
a document not only gave the right to recover the goods but
also to transfer them to another by endorsement or delivery.
There being two separate transactions of sale, one between the
Mills and the original purchasers and the other between the
original purchasers and third parties, tax was payable at both
the points.
The Sales Tax Officer, Pilibhit v. M/s. Budh Prakash Jai
Prakash, [1955] I S.C.R. 243, Poppatlal Shah v. The State of
Madras, [1953] S.C.R. 677, and The State of Andhra v. Ko/la Sreeramamurthy, decided on June 27, 1957, referred to.
CIVIL APPELLATE
JURISDICTION:
Civil Appeals
Nos. 223 and 224 of 1960.
Appeals from the order dated November 23, 1956,
of the Andhra Pradesh High Court, Hyderabad, in
Tax Revision Cases Nos. 17 and 18 of 1956.
December x4.
268
SUPREME COURT REPORTS
[1961)
'96°
C. ](. Daphtary, Solicitor-General of India and T. V.
Bayyana
R. Tatachari, for the appellants.
Bhimay_va
K. N. Rajagopal Sastr-i and D. Gupta, for the resTht Go~,'ernment pondent.
of Andhra Pradesh
1960. December 14. The Judgment of the Court
llidayatullah J. was delivered by
•
HrnAYATULLAH, J.-These are two appeals on
certificates granted by the High Court of Andhra Pradesh against a common judgment in a sales tax revision filed by the appellants in the High Court.
The facts are as follows: In tlie year 1952-53, for
which the assessment of sales tax was in question,
the appellants dealt in gunnies, and purchased them
from two Mills in Vishakapatnam District and in respect of which they issued delivery orders to third
parties, with whom they had entered into separate
transactions. The procedure followed 'by the appellants was this: They first entered into contracts with
the Mills agreeing to purchase gunnies at a certain
rate for future delivery. Exhibit A-1 is a specimen
of such contracts. The appellants also entered into
agreements with the Mills, by which the Mills agreed
to deliver the goods to third parties if requested by
the appellants. The Mills, however, did not accept
the third parties as contracting parties but only as
agents of the appellants. Exhibits A-2 and A-2(a)
are specimen agreements of this kind. Before the
date of delivery, the appellants entered into agreements with third parties, by which they charged
something extra from the third parties and handed
over to them the delivery orders, which were known
as kutcha delivery orders. Exhibits A-3 and A-4 are
specimens of the agreement and the delivery orders
respectively. The Mills used to deliver the goods
against the kutcha delivery orders along with an in

## Text

3 S.C.R. SUPREME COURT REPORTS
267
BAYYANA BHIMAYYA
v.
THE GOVERNMENT OF ANDHRA PRADESH
(J. L. KAPUR, M. HIDAYATULLAH and J. c. SHAH, JJ.)
Sales Tax-Delivery order-Mealfing of-Two separate transactions-Sales-tax, if leviable at both points-Sale of Goods Act,
r930 (Ill of r930), s. 2(4)-Madras General Sales Tax Act, I939
(Mad. IX of r939).
The respondents dealt in gun!lies. They first entered into
contracts with two Mills agreeing to purchase gunnies at a certain rate for future .delivery, and also entered into agreement
with third parties, by which they charged something extra from
those third parties and handed over the delivery order known as
kutcha delivery order. The Mills h~wever did not accept the
third parties as contracting parties, but only as the agents of the
appellants and delivered the goods against the kutcha delivery
orders, and collected the Sales Tax from the third parties. The
tax authorities treated these transactions between the appellant
and the third parties as fresh sales and sought to levy sales-tax
again, which the appellants contended, was not demandable as
there were no second sales; the delivery of a kutcha delivery
order did not amount to a sale of goods, but was only an assignment of a right to obtain delivery of gunnies which were not in
existence and not appropriated to the contract; this was only
an assignment of a forward contract.
Held, that the agreements between the parties showed that
third parties were not recognised by the sellers. A delivery
order being a document of title to goods, the possession of such
a document not only gave the right to recover the goods but
also to transfer them to another by endorsement or delivery.
There being two separate transactions of sale, one between the
Mills and the original purchasers and the other between the
original purchasers and third parties, tax was payable at both
the points.
The Sales Tax Officer, Pilibhit v. M/s. Budh Prakash Jai
Prakash, [1955] I S.C.R. 243, Poppatlal Shah v. The State of
Madras, [1953] S.C.R. 677, and The State of Andhra v. Ko/la Sreeramamurthy, decided on June 27, 1957, referred to.
CIVIL APPELLATE
JURISDICTION:
Civil Appeals
Nos. 223 and 224 of 1960.
Appeals from the order dated November 23, 1956,
of the Andhra Pradesh High Court, Hyderabad, in
Tax Revision Cases Nos. 17 and 18 of 1956.
December x4.
268
SUPREME COURT REPORTS
[1961)
'96°
C. ](. Daphtary, Solicitor-General of India and T. V.
Bayyana
R. Tatachari, for the appellants.
Bhimay_va
K. N. Rajagopal Sastr-i and D. Gupta, for the resTht Go~,'ernment pondent.
of Andhra Pradesh
1960. December 14. The Judgment of the Court
llidayatullah J. was delivered by
•
HrnAYATULLAH, J.-These are two appeals on
certificates granted by the High Court of Andhra Pradesh against a common judgment in a sales tax revision filed by the appellants in the High Court.
The facts are as follows: In tlie year 1952-53, for
which the assessment of sales tax was in question,
the appellants dealt in gunnies, and purchased them
from two Mills in Vishakapatnam District and in respect of which they issued delivery orders to third
parties, with whom they had entered into separate
transactions. The procedure followed 'by the appellants was this: They first entered into contracts with
the Mills agreeing to purchase gunnies at a certain
rate for future delivery. Exhibit A-1 is a specimen
of such contracts. The appellants also entered into
agreements with the Mills, by which the Mills agreed
to deliver the goods to third parties if requested by
the appellants. The Mills, however, did not accept
the third parties as contracting parties but only as
agents of the appellants. Exhibits A-2 and A-2(a)
are specimen agreements of this kind. Before the
date of delivery, the appellants entered into agreements with third parties, by which they charged
something extra from the third parties and handed
over to them the delivery orders, which were known
as kutcha delivery orders. Exhibits A-3 and A-4 are
specimens of the agreement and the delivery orders
respectively. The Mills used to deliver the goods
against the kutcha delivery orders along with an invoice
and a bill, of which Exs. A-6 and A-7 are specimens
respectively, and collected the sales tax from the third
parties. The tax authorities, however, treated the
transaction between the appellants and third parties
::.s a fresh sale, and sought to levy sales tax on it
3 S.C.R. SUPREME COURT REPORTS
269
again, which, the appellants, contended, was not
1960
demandable, as there was no second sale.
The appellants failed in their contentions before
::,;;:;,.~;:
the Deputy Commercial Tax Officer, Guntur, and their
v.
appeals to the Deputy Commissioner of Commercial The Government
Taxes, Guntur and the Andhra Sales Tax Appellate of Andhra Pradesh
Tribunal, Guntur, were unsuccessful. The appellants
h
h H . h C
d
Hidayatullah ].
t en went up in revision to t e
1g
ourt un er the
Madras General Sales Tax Act, 1939 (as amended by
Madras Act No. 6 of 1951 ), but were again unsuccessful.
The High Court, however, granted certificates,
on which thes~ appeals have been filed.
The contentions of the appellants are that the
agreement and the delivery of the kutcha delivery
order did not amount to a sale of goods, but was only
an assignment of a right to obtain delivery of the
gunnies, which were not in existence at the time of the
transaction with third parties, and were not appropriated to the contract, or, in the alternative, that this
was only an assignment of a forward contract. They
seem to have relied in the High Court upon the decisions of this Court reported in The Sales Tax Officer,
Pilibhit v. Messrs. Budh Prakash J ai Prakash(') and
Poppatlal Shah v. The State of Madras (') to show that
these transactions were not sales. These cases were
not relied upon by the appellants before us, presumably because the High Court has adequately shown
their inapplicability to the facts here.
The learned Solicitor-General appearing for the
appellants rested his case entirely upon the first contention, namely, that there was only an assignment
of a right tu obtain delivery of the gunnies and not a
sale. He contended that there was only one transaction of sale between the Mills and the third parties,
who, on the strength of the assignment of the right to
take delivery, had received the goods from the Mills.
In our opinion, this does not represent the true nature
of the transactions, either in fact, or in faw.
To begin with, the Mills had made clear in their
agreements that they were not recognising the third
parties as contracting parties having privity with
(1) [195~) 1 S.C.R. 243.
(2) [1953] S.C.R. 677.
270
SUPREME COURT REPORTS
[1961]
'960
them, and that delivery would be given against the
Bayyona
kutcha delivery orders to the third parties as agents
Bhimayya
of the appellants. The Mills, therefore, recognised only
v.
the appellants as contracting parties, a.nd there was
The Government thus a sale to the appellants from the Mills, on which
01 Andhro Pradesh sales tax was correctly demanded and was paid. In
-
so far as the third parties were concerned, they had
Hidayatullah ]. purchased the goods by payment of an extra price,
and the transaction must, in law and in fact, be considered a fresh transaction of sale between the appellants and the third parties. A delivery order is a
document of title to goods (vide s. 2(4). of the Sale of
Goods Act), and the possessor of such a document has
the right not only to receive the goods but also to
transfer it to another by endorsement or delivery. At
the moment of delivery by the Mills to the third
parties, there were, in effect, two deliveries, one by
the Mills to the Appellants, represented, in so far as
the Mills were concerned, by the appellants' agents,
the third parties, and the other, by the appellants to
the third parties as buyers from the appellants. These
two deliveries might synchronise in point of time, but
were separate/in point of fact and in the eye of law.
If a dispute arose as to the goods delivered under the
kutcha delivery order to the third parties against the.
Mills, action could lie at the instance of the appellants.
The third parties could proceed on breach of contract
only against the appellants and not against the Mills.
In our opinion, there being two separate transactions
of sale, tax was payable at both the points, as has
been correctly pointed out by the tax authorities and
the High Court.
The appellants relied upon a decision of the Andhra
Pradesh High Court in The State of Andhra v. Kolla
Sreeramamurty (3), but there, the facts were different,
and the Division Bench itself in dealing with the
case, distinguished the judgment under appeal, observing that there was no scope for the application of
the principles laid down in the judgment under
appeal, because in the cited case, "the property in the
goods did not pass from the mills to the assessee and
(3) Second Appeals Nos. 194 & 195 of 1954 decided on June 27, 1957 •.
3 S.C.R. SUPREME COURT REPORTS
271
there was no agreement of sale of goods to be obtained in future between the assessee and the third
party".
In the result, the appeals fail, and are dismissed
with costs. One hearing fee.
Appeals.dismissed.
R. G. S. NAIDU AND CO.
v.
COMMISSIONER OF INCOME-TAX AND
EXCESS PROFITS TAX, MADRAS
(And connected appeals)
(J. L. KAPUR, M. HIDAYATULLAH and J. c. SHAH, JJ.)
Excess Profits Tax-Excess profits, unassessed or u11derassessed
-Assessment, if can be reopened-Apportionment of income-Excess
Profits Tax Act, z940 (XV of z940), s. z5, r. 9, Sch. I.
Under an agreement dated July II, 1945, the appellants
were appointed managing agents of the Coimbatore Spinning and
Weaving Co. Ltd., for 20 years, and certain remuneration was
provided for them including 10% commission on the net profits
of the company due and payable yearly immediattily after the
accounts of the company were closed and commissions on purchases and capital expenditure of the company. Prior to October l, 1944• the appellants were the managing agents of the
Coimbatore Mills Agency Ltd., who were the managing agents of
the Coimbatore Spinning and Weaving Co. Lt<;!.
The year of
account of the appellants ended on March 31, of the company on
June 30, and of the Agency Company on September 30. For the
assessment year 1945-46 the appellants submitted a return of
their income which included the stipulated remuneration and
commissions. This return was accepted by the Income-tax Officer, and Excess Profits Tax liability for the chargeable accounting period ending March 31, 1945. was also worked out on that
basis. A return of income was submitted by the ap)lellants for
the assessment year 1946-47 which included commission for the
period 1-4-45 to 3o-6-45 on purchases of cotton and stores and on
capital expenditure. The Tax Officer directed that the commis1ion on purchases and capital expenditure be taken into account
Bayyana
Bhimayya
v.
The Government
of Andhra Pradesh
Hidayatullah ].
Deeember I 4.