# M/S. CARONA SAHU CO. LTD v. STA TE OF MAHARASHTRA

- **Citation:** [1966] 2 S.C.R. 845
- **Court:** Supreme Court of India
- **Decided:** 1965-12-02
- **Case number:** Civil Appeal No. 275 of 1964
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-carona-sahu-co-ltd-v-sta-te-of-maharashtra-3758
- **Pages:** 9

## Headnote

B
c
D
E
F
G
H
[P. B.
M.
M/S. CARONA SAHU CO. LTD.
v.
STA TE OF MAHARASHTRA
December 2, 1965
GAJENDRAGADKAR, C.J., K. N. WANCHOO,
HIDAYATULLAH,
V.
R.AMASWAMI
AND
P. SATYANARAYANA RAJU, JJ.]
Bombay Sales-tax Act (3 of 1953), ss. IO(a), 10-C-Goods shipped
front Ccchin under biU of lading at risk of buyer in Bon1b11y but de!tverable to buyer only on paymen..r of price to bankers-Properly in goods
whether passes to buyer in Cochin or in Bombay-Goods whether liable
to purchase tax under s. lO(a)-Sectlon 10-C whether applies ..
Sale of Goods Act (3 of 1930), s. 25(2)-Passing of property when
gaods shipped under bill of lading.
The appellant-company, a rnanufac~u~er ?f foot\vear in Bom~ay, purchased rubber from certain dealNs residmg m the State of Cochm. The
goods were shipped by the Cochin sellers from Cochin to Bombay. under
bills of lading in which the sellers themselves were Il?Jlled as cons1~ees.
The invoices however showed that the goods were shipped at the nsk of
the
appellant
which
was
to
pay insurance
as
well
as freight
and other charges.
For the period April I, 1954 ta
March 31, 1955,
the appellant was assessed to purchase tax under s. IO(a) of the Bombay
Sales-tax Act (3 of 1953). The appellant"s appeal under s. 30 of the
Act failed.
In a reference under s. 34( I) of the Act the High Court
held that the property was intended
by the parties to pass in Bombay
and the appellant was liable to purchase tax.
The appellant then came
to this Court by special leave.
It was contended an behalf of the appellant that (I) the property in
the rubber consignments had passed ta the appellant in Cochin, (2) the
term 'person' in s. lO(a) should
be read
as meaning a
dealer
who
carries on business in Bombay but \Vho is not registered undet the Act
and (3) s. 10-C and not s. lO(a) applied to the transactions in question.
HELD : ( i) The ordinary rule that unascertained goods are unconditionally appropriated to the contract and property passes to the buyer
on the de1ivery of the said goods to the common carrier, does not apply
to cases where goods are shipped under a bill of lading.
In the latter
case deliv~1y by the seller is .nat delivery to the buyer but io the Captain
of the ship as bailor for delivery to the person indicated in the bill of
ladmg.
The seller may .take the bill of lading to his own order.
The
effect. of such a transact10n would be to control the possession of the
Captam as ballce and make him accounfable for delivery of the goods tn
the seller.
The seller thu~ keeps
to himself. the right of
demanding
possession from the Captan~ and this
is consistent
even with a special
tenn that th.e goods are sh1pp~d on accGunt of and at the risk of the
buyer.
Section. 25 of the Indian Sale of
Goods Act itself states that
where goods shipped are and by the bill of lading they are deliverable to
the order of .the seller or his agent, the seller is prinza facie deerned to
reserve the nght of disposal. [848 E-G]
Gabarron v. Kreeft. (1875) LR. 10 Ex. 274,. referre\I t~.
The fact. tha.t the goods were shipped at the risk of the buyer would
not necessarily imply that property. in the goods had
passed to the
846
SUPREME COURT REPORTS
[1966] 2 S.C.R.
buyer. The endorsement to that effect in the invoice only indicated that
A
the insurance charges were to be paid by the appellant. The clause
bad no bearing on the question of passing of title. [849 G-H]
. Shephered v. Harrison, 1871 L.R. (V) H.L. 116, relied on.
(ii) There is nothing in the context or language of s. lO(a) for importing any qualification on the plain
meaning of the word 'person' in
that section. The section plainly states that purchases made by a dealer
from a person who is not a registered dealer will be subject to purchase
B
tax. The appellant was a dealer and it had made the purchases in question from sellers who were not registered dealers. The
provisions of
s. lO(a) of the Act were thus. clearly attracted and the purchases V.'ere
liable to tax. [852 F]
(iii) The contention that s

## Text

B
c
D
E
F
G
H
[P. B.
M.
M/S. CARONA SAHU CO. LTD.
v.
STA TE OF MAHARASHTRA
December 2, 1965
GAJENDRAGADKAR, C.J., K. N. WANCHOO,
HIDAYATULLAH,
V.
R.AMASWAMI
AND
P. SATYANARAYANA RAJU, JJ.]
Bombay Sales-tax Act (3 of 1953), ss. IO(a), 10-C-Goods shipped
front Ccchin under biU of lading at risk of buyer in Bon1b11y but de!tverable to buyer only on paymen..r of price to bankers-Properly in goods
whether passes to buyer in Cochin or in Bombay-Goods whether liable
to purchase tax under s. lO(a)-Sectlon 10-C whether applies ..
Sale of Goods Act (3 of 1930), s. 25(2)-Passing of property when
gaods shipped under bill of lading.
The appellant-company, a rnanufac~u~er ?f foot\vear in Bom~ay, purchased rubber from certain dealNs residmg m the State of Cochm. The
goods were shipped by the Cochin sellers from Cochin to Bombay. under
bills of lading in which the sellers themselves were Il?Jlled as cons1~ees.
The invoices however showed that the goods were shipped at the nsk of
the
appellant
which
was
to
pay insurance
as
well
as freight
and other charges.
For the period April I, 1954 ta
March 31, 1955,
the appellant was assessed to purchase tax under s. IO(a) of the Bombay
Sales-tax Act (3 of 1953). The appellant"s appeal under s. 30 of the
Act failed.
In a reference under s. 34( I) of the Act the High Court
held that the property was intended
by the parties to pass in Bombay
and the appellant was liable to purchase tax.
The appellant then came
to this Court by special leave.
It was contended an behalf of the appellant that (I) the property in
the rubber consignments had passed ta the appellant in Cochin, (2) the
term 'person' in s. lO(a) should
be read
as meaning a
dealer
who
carries on business in Bombay but \Vho is not registered undet the Act
and (3) s. 10-C and not s. lO(a) applied to the transactions in question.
HELD : ( i) The ordinary rule that unascertained goods are unconditionally appropriated to the contract and property passes to the buyer
on the de1ivery of the said goods to the common carrier, does not apply
to cases where goods are shipped under a bill of lading.
In the latter
case deliv~1y by the seller is .nat delivery to the buyer but io the Captain
of the ship as bailor for delivery to the person indicated in the bill of
ladmg.
The seller may .take the bill of lading to his own order.
The
effect. of such a transact10n would be to control the possession of the
Captam as ballce and make him accounfable for delivery of the goods tn
the seller.
The seller thu~ keeps
to himself. the right of
demanding
possession from the Captan~ and this
is consistent
even with a special
tenn that th.e goods are sh1pp~d on accGunt of and at the risk of the
buyer.
Section. 25 of the Indian Sale of
Goods Act itself states that
where goods shipped are and by the bill of lading they are deliverable to
the order of .the seller or his agent, the seller is prinza facie deerned to
reserve the nght of disposal. [848 E-G]
Gabarron v. Kreeft. (1875) LR. 10 Ex. 274,. referre\I t~.
The fact. tha.t the goods were shipped at the risk of the buyer would
not necessarily imply that property. in the goods had
passed to the
846
SUPREME COURT REPORTS
[1966] 2 S.C.R.
buyer. The endorsement to that effect in the invoice only indicated that
A
the insurance charges were to be paid by the appellant. The clause
bad no bearing on the question of passing of title. [849 G-H]
. Shephered v. Harrison, 1871 L.R. (V) H.L. 116, relied on.
(ii) There is nothing in the context or language of s. lO(a) for importing any qualification on the plain
meaning of the word 'person' in
that section. The section plainly states that purchases made by a dealer
from a person who is not a registered dealer will be subject to purchase
B
tax. The appellant was a dealer and it had made the purchases in question from sellers who were not registered dealers. The
provisions of
s. lO(a) of the Act were thus. clearly attracted and the purchases V.'ere
liable to tax. [852 F]
(iii) The contention that s. 10-C governed the transactions in question could not be sustained. Section 10-C reproduces the Explanation to
Art. 286(l)(a) of the Constitution and would apply only where under
C
• general law the sale takes place out>ide
the State but the goods
are
delivered as a direct result of the sale for consumption within the State
of Bombay.
[853 BJ
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 275 of
1964.
Appeal by special leave from the judgment and order dated
D
April 23, 1962 of the Bombay High Court in Sales Tax Reference
No. 18 of 1961.
S. B. Donde, K. Rajendra Chaudhuri and K. R. Chaudhuri, for
the appellant.
C. B. Agarwa/a, R. Ganapathy Iyer, B. R. G. K. Achar, and
R. H. Dhebar, for the respondent.
The Judgment of the Court was delivered by
Ramaswami, J.
This appeal is brought by Special Leave
against the judgment of the High Court of Judicature at Bombay
dated April 23, 1962 on a reference by the Bombay Sales Tax
Tribunal under s. 34(1) of the Bombay Sales Tax Act, 1953.
The appellant is a manufacturer of footwear
in Bombay.
During the assessment year April 1, 1954 to March 31, 1955, the
appellant purchased rubber from certain dealers residing in the
State of Cochin.
These purchases were assessed to purchase tax
by the Sales Tax Officer under s. 10 (a) of the Bombay Sales Tax
Act (Bombay Act III of 1953-hereinafter referred to as the Act)
as they were made "from a person who is not a registered dealer".
The Cochin sellers had their agents in Bombay who received
orders on behalf of the appellant.
The orders of the appellant
were accepted by the agents in Bombay and the goods were
shipped by the sellers from Cochin to Bombay.
After the. goods
were shipped, the demand drafts were forwarded along with the
E
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CARONA SAHU v. MAHARASHTRA (Ramaswami, J.)
847
A Bills of Lading by the vendors to their bankers in Bombay. The
bankers endorsed the bill of lading in Bombay and handed it over
to purchasers in Bombay in exchange for the price. The price
was also paid in Bombay: In the Bills of Lading the sellers in
Cochin were described as both consignors and consignees. After
the goods were shipped, an invoice was drawn on the appellant
B in which were printed the following words :
"Shipped per S.S. . . . . . . . . . . . . . . from Cochin to
Bombay on account and risk of Messrs Carona Sahu
Co. Ltd., 15-A, Elphinstone Circle, Fort, Bombay."
C For the period April l, 1954 to March 31, 1955, the appellant
was assessed to purchase tax by the Sales Tax Officer, Licence
Circle, Bombay by his assessment order dated March 31, 1956
under cl. (a) of s. 10 of the Act.
The appellant preferred an
appeal under s. 30 of the Act to the Assistant Collector of Sales
Tax, Appeals II, Bombay Circle, Bombay but it was dismissed.
D A revision application to the Additional Collector of Sales Tax
was dismissed.
The appellant thereafter moved the Sales Tax
Appellate Tribunal at Bombay for revision of the order passed by
the Additional Collector of Sales Tax.
By its judgment dated
September 4, 1959 the Bombay Sales Tax Tribunal dismissed the
revision application and confirmed the order made oy the Sales
E Tax authorities.
At the instance of the appellant, the Sales Tax
Tribunal referred the following questions of law for decision of
the Bombay High Court under s. 34(1) of the Act :
F
1. Whether on the facts and circumstances of the
case, the property in the rubber consignments passed to
the applicant in Cochin i.e. outside the State of
Bombay?
2. Whether the purchase tax under s .. fO(a) is
leviable in respect of the purchases in dispute ?
By its judgment dated April 23, 1962 the Bombay High Court
G answered both the questions of law in favour of the State and·
against the appellant.
The first question that arises for determination in this case is,
whether, on the facts and circumstances of the case, the property
in the rubber consignments passed to the appellant in Cochin i.e;
H outside the territorial limits of the State of Bombay.
In this connection the facts found by the Sales Tax Tribunal are that the
Cochin sellers had their agents in Bombay who received the
orders of the appellant and arranged for ~he shipping of
the
848
SUPREME
COURT
REPORTS
[1966] 2 S.C.R.
goods.
In accordance with these orders the goods were
A
shipped by the Cochin sellers from Cochin to Bombay.
The Bills
-0f Lading were in the name of the sellers as consignors and consignees. The invoices however showed that the goods were ship-
. ped at the "risk and on account of M/s. Carona Sahu and Company
(P) Ltd." The insurance charges were borne by the appellant
who also paid freight and other charges. The bills of lading were
B
sent by the sellers through the bank to be delivered to the buyers
in Bombay on payment of the price of the goods. In view of these
facts, the High Court held that the property was intended by the
parties to pass in Bombay and the endorsement in the invoice
that the goods were being shipped "on account of and at the risk
·of the _buyers" did not mean anything more than that the insurance
·charges were to be paid by the buyers. On behalf of the appellant, Mr. Donde submitted that the property in the rubber consignments had passed to the appellant in Cochin. In our opinion,
there is no warrant for this submission and the view taken by the
High Court is correct.
The law is well established that in the case of a contract for
·sale of unascertained goods the property does not pass to the pur-
·chaser unless there is unconditional appropriation, of the goods in .
c
D
a deliverable state to the contract.
In the case of such a contract,
delivery of the goods by the vendor to the common carrier is an
appropriation sufficient to pass the property.
But there is a differE
ence in the legal effect of delivering goods to a common carrier
on the one hand and shipment on board a ship under a bill of
Jading on the other hand.
Where goods are delivered on board
a vessel to be carried, and a bill of Jading is taken, the delivery
by the seller is not delivery to the buyer, but to the captain as
bailee for delivery to the person indicated by the bill of Jading.
F
The seller may therefore take the bill of Jading to his own order.
The effect of this transaction is to control the possession of the
captain and make the captain accountable to deliver the goods to
the seller as the holder of the bill of lading.
The bill of lading
is the symbol of property, and by so taking the bill of Jading the
seller keeps to himself the right of dealing with property shipped
G
and also the right of demanding possession from the captain, and
this is consistent even with a special term that the goods
are
shipped ori account of and at the risk of the buyer. In Gabarron
v. Kreeft (1 ) Lord Parker laid down the principle as follows :
"The English cases, however, on which the Sale of
Goods Act was founded seem to show that the appro-
.(I} (1875) L.R. 10 Ex. 274.
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A
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CARONA SAHU v. MAHARASHTRA (Ramaswami, J.)
849
priation would not be such as to pass the property if
it appears or can be inferred that there was no actual
intention to pass it. If the seller takes the bill of lading
to his own order and parts with it to a third person, not
the buyer, and that third person, by possession of the
bill of lading, gets the goods, the buyer is held not to
have the property so as to enable him to recover from
the third party, notwithstanding that the act of the seller
was a clear breach of the contract."
Ss. 23 and 25 of the Indian Sale of Goods Act are identical in
language to the corresponding provisions of the English Sale of
C Goods Act.
S. 25 states as follows :
D
E
F
" ( 1) Where there is a contracf for the sale of specific goods or where goods are subsequently appropriated to the contract, the seller may, by the terms of
the contract or appropriation, reserve the right of disposal of the goods until certain conditions are fulfilled. In
such case, notwithstanding the delivery of the goods to
a buyer, or to a carrier or other bailee for the purpose
of transmission to the buyer, the property in the goods
does not pass to the buyer until the conditions imposed
by the seller are fulfilled.
·
(2) Where goods are shipped and by the bill of
lading the goods
are deliverable to the order of the
seller or his agent, the seller is prima facie deemed to
reserve the right of disposal.
·
"
On behalf of the appellant it was contended that the goods
were shipped "on account and at the risk of Messrs. Carona Sahu
and Company (P) Ltd." and therefore the property in the goods
must be held to have passed to the appellant on shipment in
G Cochin.
We do not think there is any substance in this argument.
The endorsement in the invoice merely indicated that the
insurance charges were to be paid by the appellant and the clause
has no bearing on the question of the passing of title. In
Shepherd v. Harrison(') the plaintiff in England sent an order
to P and Co. at Pemambuco to buy cotton for the plaintiff. P
H and Co. bought cotton on account of the plaintiff and made out
an invoice "on account and risk of M/s. John Shepherd & Co."
(I) 1871 L.R. (V) H.L. 116.
850
. SUPREME
COURT
REPORTS
[1966) 2 S.C.R .
but the bills of lading were taken deliverable to P and Co.'s order
A
or assigns paying freight.
The invoice was sent directly to the
plaintiff bnt the bills of lading were endorsed in blank by P and
Co. and sent with the bill of exchange to their own agents in
England.
The English agents forwarded the bills of lading with
the bills of exchange to the plaintiff requesting him to accept the
hill of exchange.
The plaintiff retained the bill of lading but B
returned the bill of exchange unaccepted on the ground that P
and Co. had not complied with the plaintiff's order.
The plaintiff then presented the documents to the defendants who refused to
deliver the cotton in view of the instructions from the agents of
the consignor.
On these facts, it was held by the House of Lords
that the property in the goods did not pass to the plaintiffs although
C
they had retained the bill of lading because no property was
intended to pass until the plaintiff had accepted the bills of exchange. It was strongly argued for the plaintiff that the goods
were shipped on account and at the risk of the consignees, but
the House of Lords unanimously dismissed the appeal holding D
that the property in the goods did not pass to the purchaser either
in Pernambuco or in Liverpool. Dealing with the argument that
the transfer of risk was an indication of the transfer of property,
Lord Cairns held as follows :
"In the invoice, the goods are described as being
shipped on account and at the risk of the plaintiff. But
along with the invoice, a bill of lading was taken from
the Captain, making the cotton deliverable, not to the
plaintiff, but to the shipper on board. It is perfectly
well settled that, in that state of things, the entry upon
the invoice, stating that the goods are to be shipped on
account and at the risk of the consignee, is not conclusive but may be overruled by the circumstance of the
jus disponendi being reserved by the shipper through the
medium of the bill of lading."
E
F
Applying this principle to the present case, we are of the opinion
that the High Court rightly held, upon the facts found, that the
G
property in the rubber consignment passed to the appellant in the
State of Bombay.
We pass on to consider the second question of law arising in
this case-whether the purchase tax under s. 10 (a) was leviable
in respect of the purchases in dispute.
It is necessary at this stage
to reproduce the relevant provisions of the Bombay Sales Tax
H
Act, 1953 as it stood at the material time.
Section 2(6) of the
Act defines a "dealer" as meaning any person who carries on the
'
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CARONA SAHU v. MAHARASHTRA (Ramaswami, I.)
851
A business of selling or buying goods in the pre-Reorgansiation State
of Bombay excluding the transferred territories, whether for commission, remuneration or otherwise and includes a State Government which carries on such business and any society, club or
association which sells goods to or buys goods from its members.
B
Section 2 (11) defines a "registered dealer"
to mean a dealer
registered under s. 11 or deemed to be a registered dealer under
s. 12-B.
According to s. 2(13) "sale" means a sale of goods.
made within the pre-Reorganisation State of Bombay, excluding
the tranferred territories for cash or deferred payment or other
valuable consideration and includes any supply by a society or
club or an association to its members on payment of price or fees
C or subscription, but does not include a mortgage, hypothecation,
charge or pledge.
Section 6 of the Act is to the following effect :
D
E
F
"(1) Subject to any rules made under s. 18-B
there shall be paid by every dealer who is liable to pay
tax under this Act-
( ia) sales tax or purchase tax on his sales or purchases in accordance with the provisions of section 7-A,
(a) a sales tax on his sales levied in accordance with
the provisions of section 8,
(b) a general sales tax on his sales levied in accordance with the provisions of section 9, and
( c) a purchase tax on his purchases levied in accordance with the provisions of section 10,
( d) a tax on his purchases levied in accordance with
the provisions of section 10-AA.
( 2) The tax payable by a dealer under any clause of
sub-section ( 1) shall be paid in addition to the tax or
taxes, if any, payable by such dealer under any other
clause or clauses of the said sub-section."
G Section 10 (a) states as follows :
H
"10. Subject to the provisions of section 7, there
shall be levied a purchase tax on the turnover of purchases of goods specified in column 1 of Schedule B at
the rates, if any, specified against such goods in column
4 of the said schedule,-
( a) where such goods are purchased from a
person who is not a registered dealer;"
I
'
852
SUPREME
COURT
REPORTS
[1966] 2 S.C.R.
Section 10-C reads :
"In the case of such goods as may be specified by
the State Government by notification
ill' the Official
Gazette from time to time, which have been despatched
or brought from any place in India outside the State
of Bombay and are actually delivered as a direct result
of a purchase to a buyer in the State of Bombay for
consumption therein, there shall be paid by such buyer
on such purchase an outside goods purchase tax levied
at such rate not exceeding twenty-one pies in the rupee
as may be specified in such notification, unless the buyer
produces a declaration made by the seller of such goods
in the prescribed form certifying that the seller fa a registered dealer and shall, pay the tax on such sale in due
course:
A
B
c
Provided that no such tax shall be levied on the purchase of any goods by a registered dealer if after the
purchase the goods are sold by him or used by him in
D
the prescribed manner in the manufacture or processing of any goods for sale."
It is argued by Mr. Donde that the term "person" in s. lO(a)
should be read as meaning a dealer who carries on business in
Bombay but who is not registered under the Act.
In other words,
E.
it is contended that the person referred to in s. 10 (a) must be a
dealer within the definition of s. 2 ( 6) of the Act but who is not
registered either because he failed
to get himself registered or
because his turnover is less than the specified limit. We are unable to accept the argument put forward by Mr. Donde as correct.
We see no reason for placing any limitation or qualification F
on the term "person" which occurs in s. 10 (a). There is nothing
in the context or language of the section for importing any qualification on the plain meaning of that expression. That section
plainly states that purchases made by a dealer. from a person who
is not a registered dealer will be subject to purchase tax. The
appellant is a dealer and it has made the purchases in question
G
from the sellers who are not registered dealers. The provisions
of s. 10 (a) of the Act are· satisfied in the present case and the
purchases in question accordingly are liable to tax.
The next contention of Mr. Donde is that the provisions of
s. 10 (a) cannot apply to transactions of purchase where the purH
·chased goods have been brought from outside the State of Bombay
for consumption in that State because s. 10-C of the Act would
apply to such transactions.
We do not think there is any warrant
,
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CARONA SAHU V. MAHARASHTRA (Ramaswami, !.)
853
A in this argument.
S. 10-C reproduces the Explanation to Art.
286 ( 1) (a) of the Constitution and it would apply where under
general law the sale takes place outside the State but the goods
· are delivered as a direct result of the sales for consumption within
the State of Bombay.
The buyer referred to in s. 10-C need not
necessarily be a dealer under the Act, because so far as the dealers
B are concerned they are only liable to three types of taxes, viz.,
sales tax, general tax and purchase tax, enumerated in s. 6 which
is the charging section. On the other hand, s. 10-C applies to a
"buyer" who brings into the State of Bombay goods which are
notified in the Official Gazette. It should also be noticed that
s. 10-C deals only with certain specific goods to be notified by
C !he State Government, whereas s. lO(a) includes all purchases
made from persons other than registered dealers. It is manifest
that the scope and ambit of these two sections are different. We
are of opinion that Mr. Donde is unable to make good his submission on this aspect of the case and the High Court has rightly
0
answered this question of law also in favour of the State and
against the assessee.
E
For the reasons expressed, we hold that this appeal fails and
must be dismissed with costs.
Appeal dismissed .