# ] J. V. GOKAL & Co. (PRIVATE) LTD v. THE ASSISTANT COLLECTOR OF SALES-TAX

- **Citation:** [1960] 2 S.C.R. 852
- **Court:** Supreme Court of India
- **Decided:** 1959-02-09
- **Bench:** B. P. Sinha, P. B. Gajendragadkar, K. Subba Rao, K. c. DAS GUPTA, J. c. SHAH
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/j-v-gokal-co-private-ltd-v-the-assistant-collector-of-sales-tax-1790
- **Pages:** 15

## Headnote

Sales Tax-Sale in the course of import-Goods on high seasTransfer of shipping documents against payment ·Whether amounts
to delivery of goods-Whether transaction exempt from taxConstitution of India, Art, 286(r)(b).
The petitioner who entered into contracts with the
Government of India for the supply of certain quantities of sugar
of foreign origin, placed orders \vith dealers in foreign countries
and made arrangements for transporting the goods to Bombay
by engaging steamers. When the goods were on the high seas
and before the vessels arrived at Bo1nbay harbour, the petitioner
delivered to the Government the shipping documents including
the bill of lading pertaining to the goods and received the price.
After the goods reached the port, they were taken delivery of by
the Government of India after paying the requisite customs
duties to the authorities concerned.
For the assessment year
1954-55, the Assistant Collector of Sales Tax held that sales tax
was payable by the petitioner in respect of the transaction
relating to the sugar sold to the Government. The petitioner
claimed, inter alia, that the sales had taken place in the course
of import and therefore they were not liable to sales tax under
Art. 286(1)(b) of the Constitution of India.
But it was contended
for the Sales Tax Authorities that the sales were not in the
course of import and that, in any case, under the terms of the
contracts the intention of the parties was that notwithstanding
the delivery of the bills of lading against payment the property
in the goods should not pass to the Government till actual
delivery was made.
Held:
(1) that under Art. 286(r)(b) of the Constitution of
India the course of the import of the goods starts at a point when
the goods cross the customs barrier of the foreign country
and ends at a point in the importing country after the goods
cross the customs barrier ;
(2) that an importer can, if he receives the shipping
documents, transfer the property in the goods when they are on
the high seas to a third party by delivering to him shipping
documents against payment and such a sale is one made in the
course of import;
(3) that the delivery of a bill of lading while the goods are
afloat is equivalent to the delivery of the goods themselves;
Sanders Brothers v. Maclean & Co,, (1883) II Q. B. D. 327,
relied on.
(4) that oii a true construction of the contracts in question
the property in the goods passed to the Government of India
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SUPREME COURT REPORTS
853
when the shipping documents were delivered to them against
I{!6o
payment; and
(S) that the sales in question took place in the course of]. V. Gol1at & Co·
import into India and were exempted from sales tax under Art.
v.
286(r)(b) of the Constitution.
Assistant
State of Travancore-Cochin v. The Bombay Co. Ltd., [1952]
Collector of
S. C. R. III2, followed.
Sales-Tax
ORIGINAL JURISDICTION: Petition No. 38 of 1959.
Petition under article 32 of the Constitution of
India for enforcement of Fundamenal Rights.
Purshottam Tricumdas, and I. N. Shroff, for the
Petitioner.
A. V. Viswanatha Sastri, R. Ganapathi Iyer and
R. H. Dhebar, for the respondents.
N. A. Palkhivala and I. N. Shroff, for Interveners
Nos. 1 to 3 (The Bombay Chamber of Commerce &
Industry, Bombay and others).
C. J(. Daphtary, Solicitor General of India and
T. M. Sen, for intervener No. 4 (Attorney-Gen~ral
for India).
1960. January 25.
The Judgment of the Court
was delivered by
Subba Rao].
SuBBA RAO, J.-This is a petition under Art. 32 of
the Constitution for quashing the order of the first
respondent dated February 9, 1959, setting aside the
order .of the second respondent allowing a deduction
of an amount of Rs. 1,86,42,730-15-0 from the
petitioner's sales tax turn-over on the ground that
the said amount was not liable to tax by virtue of
s. 46 of the Bombay Sales Tax Act, 1953 (Act III of
1953), (hereinafter called the Act).
The material facts are not in dispute and they may
be briefly stated :
The petition

## Text

January 25.
852
SUPREME COURT REPORTS
[1960 (2)]
J. V. GOKAL & Co. (PRIVATE) LTD.
v.
THE ASSISTANT COLLECTOR OF SALES-TAX
(INSPECTION) AND OTHERS
(B. P. SINHA, c. J., P. B. GAJENDRAGADKAR,
K. SUBBA RAO, K. c. DAS GUPTA AND J. c. SHAH, JJ.)
Sales Tax-Sale in the course of import-Goods on high seasTransfer of shipping documents against payment ·Whether amounts
to delivery of goods-Whether transaction exempt from taxConstitution of India, Art, 286(r)(b).
The petitioner who entered into contracts with the
Government of India for the supply of certain quantities of sugar
of foreign origin, placed orders \vith dealers in foreign countries
and made arrangements for transporting the goods to Bombay
by engaging steamers. When the goods were on the high seas
and before the vessels arrived at Bo1nbay harbour, the petitioner
delivered to the Government the shipping documents including
the bill of lading pertaining to the goods and received the price.
After the goods reached the port, they were taken delivery of by
the Government of India after paying the requisite customs
duties to the authorities concerned.
For the assessment year
1954-55, the Assistant Collector of Sales Tax held that sales tax
was payable by the petitioner in respect of the transaction
relating to the sugar sold to the Government. The petitioner
claimed, inter alia, that the sales had taken place in the course
of import and therefore they were not liable to sales tax under
Art. 286(1)(b) of the Constitution of India.
But it was contended
for the Sales Tax Authorities that the sales were not in the
course of import and that, in any case, under the terms of the
contracts the intention of the parties was that notwithstanding
the delivery of the bills of lading against payment the property
in the goods should not pass to the Government till actual
delivery was made.
Held:
(1) that under Art. 286(r)(b) of the Constitution of
India the course of the import of the goods starts at a point when
the goods cross the customs barrier of the foreign country
and ends at a point in the importing country after the goods
cross the customs barrier ;
(2) that an importer can, if he receives the shipping
documents, transfer the property in the goods when they are on
the high seas to a third party by delivering to him shipping
documents against payment and such a sale is one made in the
course of import;
(3) that the delivery of a bill of lading while the goods are
afloat is equivalent to the delivery of the goods themselves;
Sanders Brothers v. Maclean & Co,, (1883) II Q. B. D. 327,
relied on.
(4) that oii a true construction of the contracts in question
the property in the goods passed to the Government of India
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SUPREME COURT REPORTS
853
when the shipping documents were delivered to them against
I{!6o
payment; and
(S) that the sales in question took place in the course of]. V. Gol1at & Co·
import into India and were exempted from sales tax under Art.
v.
286(r)(b) of the Constitution.
Assistant
State of Travancore-Cochin v. The Bombay Co. Ltd., [1952]
Collector of
S. C. R. III2, followed.
Sales-Tax
ORIGINAL JURISDICTION: Petition No. 38 of 1959.
Petition under article 32 of the Constitution of
India for enforcement of Fundamenal Rights.
Purshottam Tricumdas, and I. N. Shroff, for the
Petitioner.
A. V. Viswanatha Sastri, R. Ganapathi Iyer and
R. H. Dhebar, for the respondents.
N. A. Palkhivala and I. N. Shroff, for Interveners
Nos. 1 to 3 (The Bombay Chamber of Commerce &
Industry, Bombay and others).
C. J(. Daphtary, Solicitor General of India and
T. M. Sen, for intervener No. 4 (Attorney-Gen~ral
for India).
1960. January 25.
The Judgment of the Court
was delivered by
Subba Rao].
SuBBA RAO, J.-This is a petition under Art. 32 of
the Constitution for quashing the order of the first
respondent dated February 9, 1959, setting aside the
order .of the second respondent allowing a deduction
of an amount of Rs. 1,86,42,730-15-0 from the
petitioner's sales tax turn-over on the ground that
the said amount was not liable to tax by virtue of
s. 46 of the Bombay Sales Tax Act, 1953 (Act III of
1953), (hereinafter called the Act).
The material facts are not in dispute and they may
be briefly stated :
The petitioner is a private
company within the meaning of the Companies. Act,
1956, and has its registered office at Kasturi Buildings,
Bombay-I. On March 24, 1954 and April 15, 1954,
the petitioner entered into two contracts with the
Government of India for selling to the latter two
consignments of sugar-one of 9500 Long Tons of
sugar of Peruvian origin and the other of 25000
Metric Tons of sugar of continental origin. To fulfil
the terms of the contracts, the petitioner placed order
with dealers in foreign countries. The following are
the particulars relating to the first contract dated
854
SUPREME COURT REPORTS [1960 (2)]
r960
March 24, 1954, for the Rupply of 9500 Long Tons of
--
sugar:
]. V. Gokal & Co
(i) 3rd April, 1954
Letter of Credit opened by the
petitioner.
v.
Assistant
Collector of
Sales~Tax
Subba Rao].
(ii) 3rd l\fay, 1954
S. S. Alba sails from Sala verry
(Peru) carrying 9782.01688 Long
Tons of sugar.
(iii) 26th May, 1954
The petitioner delivered to its
(iv) 7th June, 1954
(v) 26th June, 1954
Bankers, the Central Bank of India
Limited, Bombay, along
with
the invoice for Rs. 50,35,405-11-0
the Documents of Title (viz. the
Bills of Lading duly endorsed in
favour of the Government of
India, Ministry of Food & Agriculture (Agriculture) to the above
goods) together with other papers
(such as Certificates) and instructed the said Bankers to present
the same to the Government of
India, and to collect the said
amount
of Rs. 50,35,405-11-0
from
the Deputy Accountant
General (Food & Rehabilitation),
New Delhi ........ .
Payment made to petitioner's
Bankers by the Government of
India against delivery of Invoice
and Bills of Lading.
Date of arrival of S. S. Alba at
Bombay Harbour.
The corresponding details pertaining to the second
contract are as follows :
Vessel
Vessel
Vessel
S. S. Eleni
s. s.
S.S. Inger
Stathatos
Giovanni
Marie
Amendola
I.
II.
III.
IV.
(i) 9910-858
9919-7158
4464-315
Total
24292- 8888
Tons.
Tons.
Tons
Tons.
(ii) 15/6th
15/6th
15/6th
Letter of Credit opened
June. 1954. June, 1954. June, 1954
by petitioner.
(iii) roth
31st July,
31st July,
Date of
Sailing
of
July, 1954.
1954.
1954,
Vessel.
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...
..
..
S.C.R.
SUPREME COURT REPORTS
855
Ig6o
Vessel
S.S. Eleni
Stathatos
Vessel
s. s.
Giovanni
Amendola
Vessel
S.S. Inger
Marie
]. V. Gokal & Co.
(iv) 22nd
12th August.16th August,
July, 1954.
1954.
1954.
(v) 26th
18th August,19th August,
July, 1954. . 1954.
1954.
(vi) 12th
3rd Septem- 9th SeptemAugust 1954. ber, 1954.
ber, 1954.
The petitioner delivered to its Bankers,
the
Bank of
Baroda
Limited, Bombay, along
with its invoices
for
Rs. 50,43,501-8-0, Rs. 22,
69,800-13-0,
Rs. 50,38,
997-14-0 respectively the
Documents of Title (viz.
the Bills of Lading) duly
endorsed in favour of
the Government of India,
Ministry of Food & Agriculture (Agriculture) to
the above goods together
with other papers (such
as
Certificates)
and
instructed the said Bankers to present the same
to the Government of
India and collect the said
amounts of Rs.
50.{3,
501-8-0,
Rs. 22,69,
800-13-0 and Rs. 50,38,
997-14-0,
from
the
Deputy Accountant General (Food & Rehabilita- _
tion) New Delhi.
Payment made to the
petitioner's Bankers by
the Government of India
against
delivery
of
Invoices and Bills of
Lading.
Date of arrival
of
Vessel at Bombay Harbour.
The foregoing particulars disclose that some weeks
before the vessel arrived at the Bombay harbour, i.e.,
when the vessels were on the high seas, the Government of India received the documents of title, including
bills of lading, pertaining to the sugar purchased by
them and paid the price to the petitioner. Indeed
after the goods reached the port, they were unloaded,
taken delivery of, and cleared by the Government of
109
v.
Assistant
Collector of
Sales-Tax
Subba Rao f·
•
856
SUPREME COURT REPORTS [1960(2)]
India after paying the requisite customs duties to the
authorities concerned.
f. v. Gvkat & Co.
For the assessment year 1954.55, i.e., April 1, 195!
v.
Aosistant
to March 31, 1955, the petitioner was assessed to salesColl"tor of
tax by the Sales Tax Officer, Licence1Circle, Division 1,
Sales-Tax
Bombay. In calculating the turn-over of the petitioner, the Sales Tax Officer deducted the price of the
Subba Rao J.
said two sales from the petitioner's turn-over. On
January 31, 1958, the first respondent, the Assistant
Collector of Sales Tax, issued a notice to the petitioner
under s. 31 of the Act proposing to review the said
assessment order passed by the Sales Tax Officer. In
due course the petitioner filed objections and made
his representations. The petitioner contended before
the first respondent that the notice should have been
•
issued, if at all, under s. 15 and not under s. 31 of the
Act inasmuch as the sales had been disclosed to the
Sales Tax Officer and the deduction of the same had
been allowed by him. It was also pleaded that in any
event the sales had taken place in the course of import
and therefore they were not liable to sales tax. The
first respondent rejected both the contentions and held
that sales tax was payable in respect of the said two
transactions. He reassessed the petitioner to a total
amount of sales tax and general tax of Rs.10,22,850-12-0
.Jess Rs. 315-3-0 already paid by the petitioner, i.e., a
sum of Rs. 10,22,535-9-0 and directed the second
respondent, the Sales Tax Officer, to issue a notice of
demand for the said amount. Pursuant to that order,
the second respondent issued a notice dated ]'ebruary
14, 1959. The petitioner has filed the present petition
for the issue of a writ of certiorari cancelling the
demand notice issuPd by the second respondent.
The learned Solicitor-General intervened on behalf
of the Union Government and Mr. Palkhivala intervened for interveners 1 to 3, and both of them
supported the petitioner.
Mr. Purshottam Tricumdas, appearing for the
petitioner, raised before us the following contentions:
(1) Under Art. 286(l)(b) of the Constitution, as it stood
before the Constitution (Sixth Amendment) Act, 1956,
the sales in question were not liable to sales tax inasmuch as they took place in the course of import of the
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SUPREME COURT REPORTS
857
goods into the territory of India; (2) the said sales
z960
were exempted from sales tax by the Bombay State
v -
under the explanation to Art. 286(1) of the Constitu- 1· · Gokal & co.
tion, as the goods were delivered for the purpose of
As:~tant
consumption in States other than Bombay; (3) the
Collector of
sales were effected outside the State of Bombay i.e.,
Sales-Tax
New Delhi, and therefore they were also exempted
under Art. 286(l)(a} of the Constitution; and (4) the
Subba Rao J.
first respondent could have only interfered with the
earlier order of assessment under s. 15 of the Act within
three years from the end of the assessment year
1954-55, i.e., March 31, 1955, and that the said period
havingelapsed, hehad no power to interfere in revision under s. 31 of the Act.
The first point is the most substantial. one in the
case and if the petitioner succeeds on that point, no
other question would arise for consideration.
The first question turns upon the interpretation of
Art. 286(l)(b) of the Constitution before it was amended
by the Constitution (Sixth Amendment) Act, 1956.
The said Article read ;
"(1) No law of a State shall impose, or authorise
the imposition of, a tax on the sale or purchase of
goods where such sale cir purchase takes place-
·
............................................................
(b) in the course of the import of goods into, or
export of the goods out of, tho territory of India. "
Under this Article, if the sales by the petitioner to the
Government of India took place in the course of the
import of the goods into the territory of India, the
Bombay State would have no power to impose sales
tax on the said sales.
What does the phrase "in the course of the import of
the goods into the territory of India" convey? The
crucial words of the phrase are "import" and " in the
course of". The term "import" signifies etymologically
" to bring in ". To import goods into the territory of
India therefore means to bring into the territory of
India goods from abroad. The words "course " means
" progress from point to point". The course of import,
therefore, starts from one point and ends at. another.
It starts when the goods cross the customs barrier in
foreign country and erids when they cross.the customs
858
SUPREME COURT REPORTS [1960 (2)]
z96o
barrier in the importing country. These words were
-
subject of judicial scrutiny by this Court in State of
J. v. Gokol & Co. Travancore-Oochin v. Shunmugha Vilas Cashew Nut
v.
Factory (1).
Construing these words, Patani"ali Sastri
Assistant
Colleclo' of
C.J., observed at p. 62 :
Sales-Tax
" The word "course" etymologically denotes
movement from one point to another, and the
Subba Rao J.
expression "in the course of" not only implies a
period of time during which the movement is in
progress but postulates also a connected relation. "
As regards the limits of the course, the learned Chief
Justice observed at p. 68 :
"It would seem, therefore, logical to hold that the
course or the export out of, or of the import into
the territory of India does not commence or termi-
. nate until the goods cross the customs barrier. "
Das, J., as he then was, in his dissenting judgment
practically agreod with Patanjali Sastri, C. J., on the
interpretation of the said words. The learned J ud.ge
expressed his view at p. 92 thus :
" The word "course" conveys to my mind the
idea of a gradual and continuous flow, an advance, a
journey, a passage or progress from one place to
another. Etymologically it means and implies motion,
a forward movement. The phrase "in the course of"
clearly has reference to a period of time during
which the movement is in progress. . Therefore, the
words "in the course of the import of the goods into
and the export of the goods out of the territory of
India " obviously cover the period of time during
which the goods are on their import or export
journey".
We respectfully agree with the aforesaid observations
of the learned Judges. The course of the import of
the goods may be said to begin when the goods enter
their import journey, i.e., when they cross the customs
barrier of the foreign country and end when they
cross the customs barrier of the importing country.
The next question is, when can it be said that a
sale takes place in the course of import journey ?
This Court in State of Travancore-Oochin v. The
Bombay Go. Ltd. (2) held that a sale which occasioned
(1) [1954J s.c.u. s~
(2) [1952] S.C.R. III2
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SUPREME COURT REPORTS
859
the export was a sale that took place in the course of
r960
export of the goods. If A, a merchant in India, sells his
-
goods to a merchant in London and puts through the f. v. Gokal & Co.
transaction by transporting the goods by a ship to
Ass~;tant
London, the said sale which occasioned the export is
Collector of
exempted under Art. 286(l)(b) of the Constitution from
Sales-Ta"
the levy of sales tax:. The same principle applies to a
converse case of goods which occasioned the import of
Subba Rao J.
the goods into India. This Court again in State of
Travancore-Cochin v. ~hanmugha Vilas Cashew Nut
Factory (1) extended the doctrine to a case of ~ale or a
purchase of goods effected within the State by transfer
of shipping documents while the goods were in the
course of transit. The decision dealt with three types
of purchases, viz., (i) purchases made in the local
market; (ii) purchases made in the neighbouring
districts of an adjacent State; and (iii) imports from
Africa. The imports from Africa consisted of two
groups-one group consisted of goods that were
purchased when they were on the high seas and_
shipped from the African ports to Cochin or Quilon :
we are not concerned with the other group. In the
said case som~ commission agents at Bombay arranged
for the purchase on behalf of the assessee, got delivery
of the shipping documents at Bombay through a bank
which advanced money against the shipping documents and collected the same from the assessees at
destination. This Court, by a majority, held that, in
respect of the purchases falling under the first group
of imports, the commission agents acted merely as
agents of the respondents therein and that the said
purch<tses occasioned the import and therefore came
within the exemption. That was not a case where
the goods were sold by an importer in India to a
third party when the goods were on the high seas. It
was a case where a party in Cochin purchased goods
which were on the high seas through his ageqt at
Bombay and the agent paid the price through a bank
against the shipping documents. But the learned
Judge, Patanjali Sastri, C. J., expressing the majority
view, considered the scope of the exemption in all its
aspects and summarized the conclusions thus at p. 69;
(1) [1954] S.C,l{, 53•
J. V. Gokal & Co.
v.
Assistant
Collector of
Sales-Tax
Subba Rao].
860
SUPREME COURT REPORTS [1960 (2)]
"Our conclusions may be summed up as follows:-
(1) Sales by export and purchases by import fall
within the exemption under article 286(l)(b) ..... .
. ..... (2) Purchases in the State by the exporter for the
purpose of export as well as sales in the State by the
importer after the goods have crossed the customs
barrier are not within the exemption. (3) Sales in
the State by the exporter or importer by transfer of
shipping documents while the goods are beyond
the customs barrier are within the exemption,
assuming that the State power of taxation extends
to such transactions. "
Das, J., as he then was, in his dissenting judgment,
agreed with Patanjali Sastri, C. J., on the third conclusion with which we are now concerned. The learned
Judge put forward his view at p. 94 thus:
"Such sales or purchases, by delivery of shipping
documents while the goods are on the high seas on
their import journey were and are well recognized
species of transactions done every day on a large
scale in big commercial towns like Bombay and
Calcutta and are indeed the necessary and concomitant incidents of foreign trade. To hold that these
sales or purchases do not take place " in the course
of" import or export but are to be regarded as
purely ordinary local or home transactions distinct
from foreign trade, is to ignore the realities of the
situation. Such a construction will permit the
imposition of tax by a State over and above the
customs duty or export duty levied by Parliament.
Such double taxation on the same lot of goods will
increase the price of the goods and, in the case of
export, may prevent the exporters from competing
in the world market and, in the case of import, will
put a greater burden on the consumers. This will
eventually hamper and prejudically affect our
foreign trade and will bring about precisely that
calamity which it is the intention and purpose of
our Constitution to prevent."
The learned Judge also in his judgment elaborately
considered the great hardship that would be caused to
an Indian importer ifhe was not permitted to sell the
goods which were on the high seas by delivery oJ
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SUPREME COURT REPORTS
861
shipping documents against payment. Though that
z96o
case dealt with a different situation, we agree with the
-
learned Judge's observations that an importer can, if.I· v. Gokal & co.
he
receives the shipping documents, transfer the
v.
Assistant
property in the goods when they are on the high seas
Collector of
to a third party by delivering to him shipping docuSales-Tax
ments against payment and such a sale is one made in
the course of import.
Subba Rao].
The legal position vis-a-vis the import-sale can be
summarized thus; (1) The course of import of goods
starts at a point when the goods cross the customs
barrier of the foreign country and ends at a point in
the importing country after the goods cross the
customs barrier ; (2) the sale which occasions the
import is a sale in the course of import; (3) a purchase
by an importer of goods when they are on the high
seas by payment against shipping documents is also a
purchase in the course of import and (4) a sale by an
importer of goods, after the property in the goods
passed to him either after the receipt of the documents
of title against payment or otherwise, to a third party
by a similar process is also a sale in the course of
import.
The next question is whether the sales by the petitioner to the Government of India are sales in the
course of import. From the facts narrated supra, it is
seen that the petitioner, pursuant to the earlier
contracts entered into with the Government of India,
delivered the shipping docume'nts, including the bill
of lading to the Government against payment when
the goods were on the high seas. In view of the
foregoing discussion, it should be held that the sales
fall under the fourth principle and therefore they were
sales that took place in the course of import of the
goods into India. A bill of lading is "a writing,
signed on behalf of the owner of the ship in which
goods are embarked, acknowledging the receipt of the
goods, and undertaking to deliver them at the end of
the voyage subject to such conditions as may be
mentioned in the bill of lading'. It is well settled in
commercial world that a bill of lading represents the
goods and the transfer· of it operates as a transfer of
the goods,
The legal effect of th.e transfer of a bill of
862
SUPREME COURT REPORTS [1960(2)]
z9<0
lading has been enunciated by Bowen, L. J., in Sanden
-
Brothers v. Macl-an & Go. (1) thus at p. 341:
J. v. Gokal & Co.
"The law as to the indorsement of bills of lading
A,,:;tant
is as clear as in my opinion the practice of all
Collector of
European merchants is thoroughly understood. A
Sal<S-Tax
cargo at sea while in the hands of the carrier is
Subba Rao].
necessarily incapable of physical delivery. During
this period of transit and voyage, the bill of lading
by the law merchant is universally recognised as its
symbol, and the indorsement and delivery of the bill
of lading operates as a symbolical delivery of cargo.
Property in the goods passes by s_uch indorse_ment
and delivery of the bill of lading, whenever it is the
intention of the parties that the property should
pass just as under similar circumstances the propei:ty
would pass by an actual delivery of the goods.
And
for the purpose of passing such property in the
goods and completing the title of the indorsee to
full possession thereof, the bill of lading, until
complete delivery of the cargo has been made on
shore to some one rightfully claiming under it,
remains in force as a symbol, and carries with it
not only the full ownership of the goods, but also
all rights created by the contract of carriage between
the shipper and the shipowner. It is a key which
in the hands of a rightfull owner is intended to unlock
the door of the warehouse, floating or fixed, in
which the goods may chance to be. "
We· have quoted the passage in extenso as it
clearly and fully states the law on the subject. It is not
disputed that the law in India is also similar to that
in England. The delivery of the bill of lading while
the goods are afloat is equivalent to the delivery of
the goods themselves. The learned counsel concedes
that ordinarily that will be so, but contends that in
the present case, the contract clearly indicates that
the intention of the parties was that till actual
delivery was made the property in the goods would
not pass to the buyer. Both the contracts are similar
in terms and they follow the standard terms prescribed by the Government. The main terms of the
contracts may be summarized thus:
(I) (1883) II Q.B.D. 327.
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S.C.R.
SUPREME COURT REPORTS
863
The first clause defines the term "sellers" to mea.n
I·,60
the party selling the sugar and the term "the Govern- J. v. Gok.,z & Co.
ment" to mean the President of India. Clause
2 prescribes that suitable gunny bags approved by
'Ass;;tant
the Government should be used for importing sugar.
collector of
Clause 3 provides for inspection of quality, weight
Sales-Tax
and packing of sugar by the Government at the time
of shipment. Clause 4 says that sugar shall be shipped
Subba Rao f.
to particular ports. Clause 5 compels the sellers to
engage steamers on charter terms, empowers the
Government to take delivery of the goods at the port
of discharge from the ship's rail and imposes the
burden on the sellers to meet the expenses of stevedoring, lighterage where necessary, hiring of cranes,
dock dues and pilotage. Clause 6 deals with the mode
o~ payment for supplies made; under that clause the
· sellers are to submit a bill for full •payment of cost
and freight value to the Government in the Ministry
of Food and Agriculture; New Delhi, duly supported
by a complete set of clean on board bills of lading
consisting of three negotiable and three non-negotiable copies, a certificate of origin of sugar, a certificate
of quality, weight and packing, a certificate from the
ship-owners that the freight has been paid in full and
that the ship owners retain no lien whatsoever on the
cargo on that account. Under clause 6 (c) letter of
credit shall be opened by the sellers at their cost, and
the Government of India agree to arrange for the
foreign exchange as necessary to the extent of the
cost-and-freight-value of the quantity of sugar purchased on the production of an import licence which
will be issued on application to the proper authority
on their prescribed form.
Clause 8 confers on the
Government a right, in the event of the sellers' failure
to supply the sugar in accordance with the terms of
the contract, to recover any sum as liquidated
damages, and/or by way of penalty upto a prescribed
amount. Clause 9 authorizes the Government, in the
event of the sellers failing to observe or perform any
provisions of the contract, to terminate the contract
forthwith. Clause II under the heading
"Force
Majeure" confers on the Government, in case delivery
in whole or in part is prevented or delayed directly
no
864
SUPREME COURT REPORTS [1960 (2)]
r960
or indirectly by any cause of ]'orce Majeure, war,
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strikes, rebellion, insurrection, political disturbances,
J. v. Gokal & Co. civil commotion, fire or flood, on account of plague
v.
or other epidemics, the right to cancel the contract
Assistant
c011"10, of
for the quantities so prevented or delayed. After the
Saleo-Tax
sellers entered into the contracts, they obtained the
requisite licences from the Government, opened letters
Subba 11ao J.
of credit, placed orders with foreign companies,
engaged a steamer on charter terms, took delivery of
the goods from the foreign firms and, when the goods
were on the high seas, delivered the documents of
title to the Central Government against payment and
the said Government, taking the licence from the
sellers, cleared the goods at the Bombay harbour.
Let us now scrutinize the terms of the contract to
ascertain whether they disclose any intention of the
parties that notwithstanding the delivery of the bill
of lading against payment the property in the goods
should. not pass to the Government. The circumstances under which the contracts were entered into
between the parties indicate that both the parties
were interested to see that property in the goods
passed in the ordinary way when the shipping documents were handed over to the Government against
payment. The sellers had to meet their liability to
the foreign companies with whom they opened letters
of credit and the Government must have been anxious
to get the title to the goods so that the sellers might
not divert the goods towards their other commitments
or to other buyers for more tempting prices. Under
the contract every safeguard for securing the goods
of agreed specifications was provided for in the earlier
clauses and therefore there was no reason for postponing the passing of the property in the goods to
the buyer till the goods were actually delivered in the
port. The sellers on their side would have been
anxious that the property should pass when the goods
were on the high seas, for otherwise they would be
compelled to pay sales tax. Nor are the clauses of
the contracts relied upon by the respondents inconsistent with the property in the goods passing in
accordance with the mercantile usage. The liability
undertaken by the sellers to meet the expenses relating
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S.C.R.
SUPREME COURT REPORTS
865
to stevedorage, lighterage where necessary, hiring of
rg6o
cranes, dock dues and pilotage, at the time of delivery 1 v ~1 & c
of the goods on which reliance is placed to indicate a · · :.a
o.
contrary intention, in our view, has nothing to do
Assistant
with the question raised, for that liability can rest
Collector of
with the sellers even after the property in the goods
Sales-Tax
has passed to the buyers; nor clauses 9 to 11 on which
Subba Rao].
strong reliance is placed by the learned counsel are
inconsistent with the property in the goods passing
1
to the buyer; they could legitimately be made applicable to a point of time when the property in the
goods has not passed to the buyer. If the sellers fail
to observe the performance of any provisions of the
. contracts before the property in the goods passed to
the buyer, under clause 9 of the contracts the buyer
can cancel the contract. So too, under cl. II, if any
contemplated mishap takes place on the high seas by
force majeure, the seller shall send a cablegram to that
effect and the buyer is empowered to cancel the whole
of the contract or a part of it. This also applies to
a point of time before the property in the goods has
passed to the buyer. If, on the other hand, the seller
delivers the shipping documents against payment and
thereafter if he does not deliver the goods at the port,
the buyer may have other remedies for the recovery
of damages etc. But that right is not covered by
either cl. (9) or cl. (11) of the contract. A scrutiny of
all the terms of the contract does not indicate the
intention that the property in the goods shall not
pass to the buyer notwithstanding delivery of shipping
documents against payment.
Apart from the terms of the contract, reliance is
also placed by the learned counsel for the respondents
on the following circumstances: (i) the seller himself
chartered the ship; and (ii) the licence issued by the
Government was made non-transferable. We do not
see how these two facts indicate the contrary intention.
If the seller himself chartered a steamer, when the
goods he purchased were loaded in the ship, the.
property in the goods passed to him and therefore
he was in a position to sell the same to the Government.
The fact that the licence was non-transferable
has no relation to the property in the goods passing
866
SUPREME COURT REPORTS [1960(2)]
I960
to the Government. The licence issued by the Govern-
-
ment is an exercise of the statutory power under the
J. v. Goilal & Co. relevant Act.
Whether the petitioner sold the goods
Ass~·tant
to the Government or to a third party, he had to
Collector of
obtain a licence.
Indeed in the present case, the
Sales-Tax•
licence was given to the seller with the express object
of fulfilling the contracts with the Government and
Subba Rao J.
was issued several days after the contracts were
executed, and indeed the Government took the licence
from the seller and cleared the goods through their
officer.
Ig60
January 29
For all the foregoing reasons we hold that the
property in the goods passed to the Government of
India when the shipping documents were delivered
to them against payment. It follows that the sale
of the gooQ.s by the petitioner to the Government of
India took place when the goods were on the high
seas.
That being so, the sales in question must be held
to have taken place in the course of the impor~ into
India and therefore they would be exempted from
sales tax under Art. 286(1)(b) of the Constitution.
In this view, no other question. would arise for
consideration. In the result the order of the Assistant
Collector of Sales Tax is set aside and that of the
Sales Tax Officer is restored. The respondents will
pay the costs of the petitioner.
Petition allowed.
STATE 0]' BOMBAY & OTHERS
v.
THE HOSPITAL MAZDOOR SABHA & OTHERS
(P. B. GAJENDRAGADKAR, K. SUBBA RAO AND
K. 0. DAS GUPTA, JJ.)
Industrial
Dispu.te-Retrenchment of worhmen by hospital
without
compc11satio11-V alidity-H ospital,
if
an
industry-
' l ndustry' Meaning-Industrial Disputes Act. I947 (I4 of Ig47).
ss. 2(j). 25F. 25r.
The serYices of respondents 2 and 3, · engaged as 'vard
eervants in the J. J. Group of Hospital, Bombay, under State
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control and management were retrenched without payment of
...
compensation as required bys. 25F(b) of the Industrial Disputes
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