# SUPREME COURT REPORTS [1959] Supp. THE COMMISSIONER OF SALES-TAX, EASTERN DIVISION, NAGPUR v. HUSEN ALI ADAMJI AND CO

- **Citation:** [1959] Supp. 2 S.C.R. 702
- **Court:** Supreme Court of India
- **Decided:** 1959
- **Case number:** Civil Appeal No. 13 of 1958
- **Bench:** S. R. Das, N. H. Bhagwati, M. liIDAYATULLAH
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/supreme-court-reports-1959-supp-the-commissioner-of-sales-tax-eastern-division-1731
- **Pages:** 17

## Headnote

Sales Tax-Contract of
sale-Construction-Unascertained
goods-Levy of tax on goods sent by rail-Place where property in
goods passes-Place of appropriation on delivery-Indian Sale of
Goods Act, I930 (III of I930), ss. 4, I8, 23, 33, 39-Central Provinces and Berar Sales Tax Act, I947 (C. P. & Bcrar XXI of
I947), s. 2(g), Explanation II.
The respondent company was a dealer in matchwood called
"sawar" and his place of business was situate in Chanda in the
erst,vhile Central Provinces. Pursuant to an agreement between
the respondent and a match factory, the former loaded diverse
quantities of "sawar" logs on railway wagons and despatched
the same by rail from Chanda and other railway stations in the
Central Provinces to Ambernath, a town in the erstwhile Province of Bombay. Under cl. 4 of the agreement the goods to be
supplied under the contract shall be despatched by the contractor
from certain railway stations within the Central Provinces,
while cl. 2 reserved the right of the consignee to examine the
goods on arrival at Ambernath and to reject the same if they
were found, in the opiniqn of the factory manager, not to conform with the specifications. Clause 6 provided that the goods
shall be measured under the supervision of the factory's representative, the decision of the factory manager at Ambernath
being binding on the contractor, and by cl. 7 the prices of the
goods shall be·" F. 0. R. Ambernath ". The course of dealings
between the parties was that on arrival of the logs at Ambernath
the logs were inspected and measured by the factory manager
and the prices, calculated at the agreed rates, were paid to the
respondent's agent at Bombay. The question was as to when
and where the property in the logs passed from the respondent
to the consignee and whether the respondent was liable to pay
sales tax under the provisions of the.Central Provinces and Berar
Sales Tax Act, 1947· At the date when the agreement was
entered into, the logs were unascertained goods. There was also
no evidence that at that date the particular logs delivered thereunder were in the Central Provinces in the shape of logs at all.
The sales tax department levied the tax on the respondent on the
grounds, inter alia, that (1) the property in the logs passed from
the respondent to the factory consignee under s. 23 of the Indian
Sale of Goods Act, 1930, when the logs were loaded in the wagons
at railway stations within the Centra 1 Provinces and the railway
(2) S.C.R. SUPREME COURT REPORTS
703
receipts taken in the name of the factory were forwarded to the
x959
latter, and that (2) in any case, as the logs were in the Central
Provinces at the date when the contract for sale was made, the Commissioner of
transfer in them must be deemed to have taken place there
Sales Tax
under Explanation II to s. 2(g) of the Central Provinces and
v.
Berar Sales Tax Act, 1947·
Husenali
Held : (1) that on a proper construction of the contract as a
Adamji 0- Co.
whole the intention of the parties was that the respondent
would send the logs by rail from the different stations in the
Central Provinces to Ambernath where the factory manager
would inspect, measure and accept the same if in his opinion
they were of the description and quality agreed upon. Consequently, as the respondent sent the logs and left it to the
factory to appropriate to the contract such of them as they
accepted as of contract quality and description, the property
in the logs did not pass to the buyer by the mere delivery to the
railway for carriage but passed only at Ambernath when the
logs were appropriated by the factory with the assent of the
seller within the meaning of s. 23 of the Indian Sale of Goods
Act, 1930.
(2) that Explanation II to s. 2(g) of the Central Provinces &
Berar Sales Tax Act, 1947, was not applicable to the case,
'
because under the Explanation the goods, in respect of which
the contract of sale is made, must, at the date of the contract be
in existence in the Central Provinces, that is to

## Text

April 2z.
702
SUPREME COURT REPORTS [1959] Supp.
THE COMMISSIONER OF SALES-TAX,
EASTERN DIVISION, NAGPUR
v.
HUSEN ALI ADAMJI AND CO.
(S. R. DAS, C. J., N. H. BHAGWATI and
M. liIDAYATULLAH, JJ.)
Sales Tax-Contract of
sale-Construction-Unascertained
goods-Levy of tax on goods sent by rail-Place where property in
goods passes-Place of appropriation on delivery-Indian Sale of
Goods Act, I930 (III of I930), ss. 4, I8, 23, 33, 39-Central Provinces and Berar Sales Tax Act, I947 (C. P. & Bcrar XXI of
I947), s. 2(g), Explanation II.
The respondent company was a dealer in matchwood called
"sawar" and his place of business was situate in Chanda in the
erst,vhile Central Provinces. Pursuant to an agreement between
the respondent and a match factory, the former loaded diverse
quantities of "sawar" logs on railway wagons and despatched
the same by rail from Chanda and other railway stations in the
Central Provinces to Ambernath, a town in the erstwhile Province of Bombay. Under cl. 4 of the agreement the goods to be
supplied under the contract shall be despatched by the contractor
from certain railway stations within the Central Provinces,
while cl. 2 reserved the right of the consignee to examine the
goods on arrival at Ambernath and to reject the same if they
were found, in the opiniqn of the factory manager, not to conform with the specifications. Clause 6 provided that the goods
shall be measured under the supervision of the factory's representative, the decision of the factory manager at Ambernath
being binding on the contractor, and by cl. 7 the prices of the
goods shall be·" F. 0. R. Ambernath ". The course of dealings
between the parties was that on arrival of the logs at Ambernath
the logs were inspected and measured by the factory manager
and the prices, calculated at the agreed rates, were paid to the
respondent's agent at Bombay. The question was as to when
and where the property in the logs passed from the respondent
to the consignee and whether the respondent was liable to pay
sales tax under the provisions of the.Central Provinces and Berar
Sales Tax Act, 1947· At the date when the agreement was
entered into, the logs were unascertained goods. There was also
no evidence that at that date the particular logs delivered thereunder were in the Central Provinces in the shape of logs at all.
The sales tax department levied the tax on the respondent on the
grounds, inter alia, that (1) the property in the logs passed from
the respondent to the factory consignee under s. 23 of the Indian
Sale of Goods Act, 1930, when the logs were loaded in the wagons
at railway stations within the Centra 1 Provinces and the railway
(2) S.C.R. SUPREME COURT REPORTS
703
receipts taken in the name of the factory were forwarded to the
x959
latter, and that (2) in any case, as the logs were in the Central
Provinces at the date when the contract for sale was made, the Commissioner of
transfer in them must be deemed to have taken place there
Sales Tax
under Explanation II to s. 2(g) of the Central Provinces and
v.
Berar Sales Tax Act, 1947·
Husenali
Held : (1) that on a proper construction of the contract as a
Adamji 0- Co.
whole the intention of the parties was that the respondent
would send the logs by rail from the different stations in the
Central Provinces to Ambernath where the factory manager
would inspect, measure and accept the same if in his opinion
they were of the description and quality agreed upon. Consequently, as the respondent sent the logs and left it to the
factory to appropriate to the contract such of them as they
accepted as of contract quality and description, the property
in the logs did not pass to the buyer by the mere delivery to the
railway for carriage but passed only at Ambernath when the
logs were appropriated by the factory with the assent of the
seller within the meaning of s. 23 of the Indian Sale of Goods
Act, 1930.
(2) that Explanation II to s. 2(g) of the Central Provinces &
Berar Sales Tax Act, 1947, was not applicable to the case,
'
because under the Explanation the goods, in respect of which
the contract of sale is made, must, at the date of the contract be
in existence in the Central Provinces, that is to say, that the
goods must at the date of the contract be there in the form in
which they are agreed to be sold and there was no evidence, in
the present case, for this.
CIVIL APPELLATE JURISDICTION:
Civil Appeal No.
13 of 1958.
Appeal by special leave from the judgment and
order dated June 29, 1954, of the former Nagpur High
Court in Misc. Civil Case No. 219 of 1952.
R. Ganapathy Iyer and D. Gupta, for the appellant.
M. 0. Setalvad, Attorney-General for India, K. G.
Chondke, J.B. Dadachanji and K. K. Raizada, for the
respondents.
I. N. Shroff, for the Intervener (State of Madhya
Pradesh).
1959.
April 21.
The Judgment of the Court was
delivered by
DAS, C. J.-This is an appeal by special leave
Das c. J.
against the order of the High Court of Judicature at
Nagpur dated June 2!J, 1954, answering against the
704
SUPREME COURT REPORTS [1959] Supp.
appellant certain questions r~ferred to it by the Board
of Revenue under s. 23(1) of the Central Provinces &
Cpmmissioner of Berar Sales Tax Act, 1947 (hereinafter referred to as
Sales Tax
r959
v.
Husenali
Adaniji & Co.
Das' C. ].
"the Act"). The reference arose out of an order of
assessment made on the respondent for payment of
sales tax for the period June 1, 1947, to November 12,
1947, on a taxable turnover of Rs. 30,067-9·0.
The facts leading up to the present appeal may
shortly be stated as follows.
The respondent deals in
matchwood called "sawn,r" (Bombay Malabaricum).
His place of business is situate at Chanda in the erstwhile Central Provinces. In January 1948 the respondent entered into an agreement with the Western
India Match Co. Ltd., which is popula.rly known and
will hereinafter be referred to as " WIMCO" for the
supply of a minimum quantity of 2,500 tons of sawar
logs during the season 1947-48.
This agreement is
evidenced by WIMCO's letter dated January 7, 1948,
accepting and confi,rming it. Unfortunately that letter,
although a part of the record, has not been printed in
the Paper Book. It is common ground, however, that
the agreement of sale was subject to the conditions
appearing in a formal contract in writing dated
March 2, 1945, which is said to have been renewed
from year to year. It appears that prior to the execution of the last mentioned contract there was another contract between the respondent and WIMCO
which was dated October 18, 1940. Evidently that
contract was superseded by the later one of March 2,
1945, the terms and conditions whereof were renewed
year after year. It is, therefore, not easily intelligible
why both the contracts were filed before the Sales Tax
authorities and actually mentioned in the first question that was referred to the Hight Court.
Both the contracts have been printed in the Paper
Book and reference has been made to some of the
terms of both of them in the course of the arguments
·before us.
The reason for referring to the terms of the
earlier eontract is presumably to emphasise the variation in the language used in the corresponding provisions of the later contract as indicative of a· definite
change in .the intention of the parties. It is, therefore,
•
(2) S.C.R.
SUPREME COURT REPORTS
705
as well that the relevant clauses of both the contracts
should be set out here for properly following the arguments advanced on both sides.
Reference may first be made to the earlier contract
dated October 18, 1940.
Clause 1 sets out the specifications, that is to say, the dimensions and quality of
the logs to be delivered under the contract which
need not be reproduced here.
The other material
clauses, omitting the unnecessary portions thereof,
may now be set out :-
" 2.
The Contractor agrees that any logs supplied by him which do not conform with the specification
herein shall not be accepted or paid for by the company and he the contractor undertakes to remove all
logs so rejected at his own expense from the Company's premises within fifteen days after date of notice
to him or his representative from the Company so to
remove such fogs.
Should the Contractor fail to remove such logs from the Company's premises within
the period stipulated it is hereby mutually agreed that
such failure shall be construed as being the Contractor'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
89
r959
Commissioner of
Sales Tax
v.
Husena.Ii
Adamji & Co.
Das C. ].
706
SUPREME COURT REPORTS [1959] Supp.
I959
Company's Factory Manager at Ambernath on arrival
Commissioner of of the goods at the Factory in accordance with the
Sales Tax
following stipulations :-
v.
I-lusenali
Adamji &- Co.
Das C. j.
The Conti:actor 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
cl. 6 of the contract as "F.O.R. Ambernath ".
We now pass on to the later contract of March 2,
1945. Clause 1 sets out the specifications of the logs to be
supplied under the contract in exactly the same language as in cl. I of the earlier contract. The other
material clauses, again omitting the unnecessary portions, are as follows :-
" 2. The contractor agrees that any logs supplied by him. which, on arrival at Ambernath, are found
in the opinion of the Company's Factory Manager not
to conform with the specifications herein shall not be
accepted or paid for by the Company, notwithstanding
the fact that such logs may have been accepted by
the Company's representatives before being railed to
Ambernatb."
It may be mentioned here that Ambernath is a place
situate in the erstwhile province of Bombay and outside the Central Provinces.
"4. The goods to be supplied under this contract
shall be despatched by the Contractor from railway
stations on the B. N. Railway, N. S. Railway and
G. I. P. Railway sections between the following
stations .
. . . . . . . . . . . . . . . . . . . . . i ............................................. ·,;
It is unnecessary to set out the names of the stations
which, it may, however, be stated, are all in the erstwhile Central Provinces. Clause 6 provides:
" 6.
Measurements :-
The goods under this contract shall be measured
under the supervision of the Company's representative
in accordance with the following stipulations:-
(2) S.C.R.
SUPREME COURT REPORTS
707
..................................................... ' .............. .
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 under the contract
are specified as" F.0.R. Ambernath" in cl. 7 which
concludes with the following sentence:
"The money so due and payable shall be paid by
the Company to the Contractor when the measurements of the goods have been completed under the
supervision of the Company's representative."
Pursuant to the agreement between the respondent
and WIMCO, the former loaded diverse quantities of
Sawar logs on railway wagons and despatched the
same by railway from Chanda or other railway
stations in the Central Provinces to Ambernath in the
erstwhile province of Bombay and outside the Central
Provinces. It is not disputed that on many occasions
the representative of WIMCO was present at the railway station when the logs were sorted out and loaded
into the wagons. The statement of the case submitted
along with the r-eference under s. 23(1) of the Act is
silent on the point as to whether the railway receipts
were made out with WIMCO as the consignee; but it
is abundantly clear from the order of the Assistant
Commissioner, Sales Tax, which is.part of the record
-and it has not been disputed before us-that " the
railway receipt which is a document of title according
to s. 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, tb.e
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
I959
Commissioner of
Sales Tax
v.
Husenali
Adamji & Co.
Das C. J.
708
SUPREME COURT REPORTS
[1959] Supp.
I959
decision is Whether the respondent is liable to pay any
C
-. -.
sales tax under the Act.
oinmissioner of
•
.
•
Sales Tax
It will be convement at this stage to refer to the
v.
rekivant provisions of law applicable to the facts of
Husenali
this case. Section 4 of that Act is the charging section.
Adamji & Co. According to this section sales tax is payable " on all
Das C. ].
sales effected after the commencement of the Act."
"Sale" is defined by s. 2(g) of the Act. At the relevant
period, that section, omitting Explanation I, which is
not material for our purpose, ran as follows:-
" ' Sale' with all its grammatical variations and
cognate expressions means any transfer of property in
goods for cash or deferred payment or other valuable
consideration, including a transfer of property in goods
made in course of the execution of a contract, but does
not include a mortgage, hypothecation, charge or
pledge .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Explanation II :-Notwithstanding anything to
the contrary . in the Indian Sale of Goods Act, 1930,
the sale of any goods which are actually in the Central
Provinces and Berar at the time when the contract o/
sale as defined in that Act in respect thereof is made,
shall, wherever the said contract of sale is made, be
deemed for the purpose of this Act to have taken place
in the Central Provinces and Berar ."
The Act being a. piece of legislation enacted by the
legislature of the erstwhile Province of Central Provinces and Berar, its operation is limited to the territories of that province. Therefore, the question arises:
Does the sum of Hs. 30,067 .9.0 represent the prices of
logs sold by the re&pondent within the Central Provinces ? Sale being the transfer of property in the
goods agreed to be sold, we have to enquire if the property in the goods which fetched the sale proceeds on
which the sales tax is sought to be levied was transferred in the Central Provinces as contemplated in the
main definition or if those goods were actually in the
Central Provinces at the time when the contract for
sale as defined in the Sale of Goods Act in respect
thereof was made as required by Explanation II set
(2) S.C.R.
SUPREME COURT REPORTS
709
out above. This takes us to the Sale of Goods Act,
1930.
Section 4 of the Sale of Goods Act is expressed in
the words following:-
" 4. Sale and agreement to sell :-(1) A contract
of sale of goods is a contract whereby the seller transfers or agrees to tr~nsfer the property in goods to the
buyer for a price.
There may be a contract of sale
between one part-owner and another.
(2) A contract of sale may be absolute or conditional.
(3) Where under a contract of sale the property
in the goods is transferred from the seller to the buyer,
the contract is called a sale, but where the transfer of
the property in the goods is to take place at a future
time or subject to some condition thereafter to be
fulfilled, the contract is called an agreement to sell.
(4) An agreement to sell bec9m.es a sale when 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 WIMBO ?
The transfer of property in the goods as between the
seller and buyer is dealt with in Oh. 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
and until the goods are ascertained."
Passing over ss. 19 to 22·which (except as to sub-s. (3)
of s. 19) apparently apply to contracts for the sale of
I959
Commissioner of
Sales Tax
v.
Husenali
Adamji & Co.
Das C. ].
r959
Conimissioncr of
Sales Tax
v.
Husenali
Adamji & Co.
Das C. J.
710
SUPREME COURT REPORTS [1959] Supp.
specific or ascertained goods, we come to s. 23 which
provides :-
.
"23. Sale of unascertained goods and appropriation :-( 1) Where there is a contract for the sale of
unascertained or future goods by description and goods
of that description and in a deliverable state are
unconditionally appropriated to the contract, either by
the seller with the assent of the buyer or by the buyer
with the assent of the seller, the property in the goods
thereupon passes to the buyer. Such assent may be
expressed or implied, and may be given either before
or after the appropriation is made.
(2) Delivery to carrier :-Where, in pursuance of
the contract, the seller delivers the goods to the buyer
or to a carrier or other bailee (whether named by the
buyer or not) for the purpose of transmission to the
buyer, and ·does not reserve the right of disposal, he is
deemed to have unconditionally appropriated the'
goods to the con tract."
Reference may next be made to s. 33 ands. 39(1). Section 33 says:-
" 33.
Delivery :-Delivery of goods sold may be
made by doing anything which the parties agreed
shall be treated as deli very or which has the effect of
putting the goods in the possession of the buyer or of
any person authorised to hold them on his behalf."
Section 39(1) runs as follows:-
" 39. Delivery to carrier or wharfinger :-
(1) Where, in pursuance of a contract of sale, the
seller is authorised or required to send the goods to the
buyer, delivery of the goods to a carrier, whether
named by the buyer or not, for the purpose of transmission to the buyer, or delivery of the goods to wharfinger, for safe custody, is prima facie deemed to be
delivery of the goods to the buyer."
Keeping the provisions of the above quoted sections
of the two Acts in view, we have to decide when and
where the property in the logs passed from the respondent to WIMCO.
The Assistant Commissioner of Sales Tax assessed
the respondent to a tax of Rs. 939-10-0 and imposed
on the respondent a penalty of Rs. 100 under s. 25 of
(2) S.C.R. SUPREME COURT REPORTS
711
the Act for not having submitted its return in contravention of r. 19 of the Central Provinces and Berar
Sales Tax Rules. The Assistant Commissioner took
the view that the loading of the logs into the wagons
at railway stations within the Central Provinces and
the taking out of the railway receipts in the name of
the consignee, WIMCO, and the delivery of the same
to WIMCO, had the effect of putting the latter in possession of.the goods as laid down in s. 39(1) 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 pa.y 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 s. 2(g)
of the Act as over-riding 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 s. 39(1) of the Sale ofGoods 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 s. 22(4)
of the Act, the Board treated the memorandum of
appeal as an application for revision under sub-s. 5 of
s. 22 of the Act read with r. 57.
Both the members
of the Board of Revenue came to the same conclusion,
namely, that the sales were liable to assessment under
the Act, but the reasonings adopted by them were
somewhat different. Shri Shrivastava, a member of
the Board of Revenue, took the view that as soon as
logs answering the description agreed upon were
brought to the railhead, at Chanda and sorted out and
r959
Commissioner of
Sales Tax
v.
Husenali
Adamji & Co.
Das C. }.
712
SUPREME COURT REPORTS [1959] Supp.
loaded in the wagons in the presence of WIMCO's reCommissioner of presentatives, there was an implied contract of sale of
safos Tax
specific and ascertained goods, as evidenced by the
'959
v,
I-Jusenali
Adamji 0- Co.
Das C. ],
•
conduct of parties and the property in each consignment passed immediately from the respondent to
WIMCO at the railway station in the Central Provinces where such implied contracts were made. 'The
Chairman of the Board of Revenue, however, took the
view that the contract of sale was made outside the
Central Provinces, namely, in Bombay and that,
under thp, Sale of Goods Act, the property in the logs
passed to WIMCO in Ambernath outside the province
but that as the logs were in the Central Provinces,
either in the form of logs or in the form immediately
preceding, namely, trees standing on the laud which
had been impliedly agreed to be severed from the land
before actual sale, Explanation II to s. 2(g) of the Act
applied and the sale must, accordingly, be deemed to
have taken place within the Central Provinces and,
must, therefore, be liable to sales tax under the Act.
The Board rejected the application but remitted the
penahy.
On the application of the respondent under s. 23(1)
of the Act, the Board of Revenue submitted to the
High Court a statement of case raising the following
questions :-
" (1) Did the agreements of the kind on recordthe one dated 18-10-40 and the other dated 2-3-45constitute contracts of sale-either express or implied
-in respect of sawar wood supplied by the assessee to
WIMCO?
(2) If the answer to question No. 1 be in the affirmative, did the contracts relate to specific or ascertained goods or to unascertained or future goods?
(3) Did the property in the goods pass to WIMCO
by consignment simpliciter at different railway stations within this province, or did it pass at Ambernath
when the goods were approved as provided in the contract?
( 4) Was reliance on the definition of 'goods' contained in s. 2(7) of the Sale of Goods Act in order in
applying Explanation II to s. ?(g) of the Sales Tax
(2) S.C.R. SUPREME COURT REPORTS
713
r959
Act in cases, where the goods sold were in the form of
trees standing on the land in this province at the time Commissioner of
of the contract of sale?"
sales Tax
v.
Husenali
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 conseAdamji "" co.
quently were not "sales" within the meaning of the
Das c. ].
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 we.s 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 definition of 'sale'
in the Sales Tax Act must be inter.ereted according to _
its definition in s. 2(d) of the Act and not according to
the definition in s. 2(7) of the Sale of Goods Act. The
standing sawar trees are not goods within the meaning
of the former Act."
The effect of the answers being to nullify the assessment order, the Commissioner of Sales Tax has come
up on appeal before us after obtaining special leave of
this Court.
The answers to the first two questions have not
been questioned before us.
The main arguments have
centred round the answers to questions 3 and 4.
The
answer to question 3 turned on the construction placed by the High Court on s. 23 of the Sale of Goods
Act. After quoting s. 23, the High Court observed as
follows:-
" After sorting the logs with the assent of the
buyer's representative, the applicant appropriated the
90
714
SUPREME COURT REPORTS [1959] Supp.
logs to the contract by railing them to the buyer's
Commissioner 1 destination at Ambernath. The statement of the case
501,, Tax
0 is silent on the point whether the railway receipts
I959
v.
Husenali
Adamji & Co.
Das C. ].
were made out with the Company as the consiguee.
The assent of the representative was provisional and
was not binding on the Company. Under the agreement it did not agree to nnconditionally appropriate
the logs to the contract as soon as they were delivered
to the railway with the assent of its representative
for carriage to Ambernath. It had expressly reserved
its right to reject the goods on examination at Ambernath. The agyeement therefore was that the buyer
should, with the assent of the seller, appropriate the
goods to the contract at Ambernath. The appropriation under s. 23 was not complete till the goods reached Ambernath and were appropriated by the Company to the contract. The appropriation of the goods
by the applicant at the railheads was conditional on
their acceptance by the buyer at Ambernath. There
is nothing in the statement of the case to show that
the logs were not so appropriated. Therefore, the
property in the logs passed to the buyer at Ambernath."
The learned counsel for the department appearing in
support of this appeal contends that property in the
logs passed from the respondents to WIMCO under
s. 23 when sawar logs were brought to the railway
station and loaded in the wagon and the railway
receipts taken in the name of WIMCO were forwarded
to the latter. There was an. unconditional appropriation of the goods 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 cl. 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
(2) S.C.R.
SUPREME COURT REPORTS
715
not, under s. 18, pass unless and until the goods were
z959
ascertained. His contention is that logs of the conCommissioner of
tract quality and description having been unconditioSales Tax
nally appropriated by the respondent to the contract
v.
without reserving to itself any right of disposal and
Husenali
WIMCO having expressly through its representative
Adamji"" Co.
or impliedly by the very terms of the contract assentc
Das
. ].
ed to such appropriation, property in them passed
under s. 23 from the respondent to WIMCO at the
railway stations within the Central Provinces as soon
as the sawar logs were loaded on the wagons and the
railway receipts were taken out in the name of·
WIMCO. It is said that so far as the respondent is
concerned it unconditionally appropriated the logs to
the contract. Seeing that they were actually accepted
by WIMCO on their arrival at Ambernath it is quite
clear that the logs were of the contract qu.ality and
description. The only question, according to learned
counsel for the department, therefore, is whether
there was assent of WIMCO to such appropriation. It
has been found as a fact that WIMCO's representative was not present on all occasions when sawar logs
used to be loaded on the railway wagons. There is no
evidence that he was actually present when these
particular sawar logs, with the sale proceeds of which
we are concerned, were put into the wagons. Nor is
there an iota of evidence that the representative of
WIMCO had any authority to bind WIMCO by any
assent. In view of these .difficulties, learned counsel
for the department did not press the case of express
assent of the representative of WIMCO and concentrated on the case of implied assent. It is quite clear
from the language of s. 23 itself, that the appropriation may be by the seller with the assent of the buyer
or by the buyer with the assent of_ the seller, that
assent to appropriation may be express or implied and
that it may be given after the appropriation or in
advance before such appropriation. Learned counsel
for the department lays strong emphasis on the provision of cl. 4 in the contract that the sawar logs should
be despatched by rail from certain stations within the
Central Provinces and contends that deiivery by the
seller of sawar logs of the contract quality and
716
SUPREME COURT REPORTS [1959] Supp.
I959
description to the rail ways in terms of the contract
without the reservation of any right of disposat bas
Coni~~1::i
0
;:: of the effect of passing the property therein to WIMCO
at the railway stations in the Central Provinces under
s. 23 as well as of constituting delivery of them at the
railway stations under ss. 33 and 39(1). The argument
is prima facie sound unless there be some other provision in the contract to negative this conclusion, e. g.,
v.
Husenali
Ada1nji 6- Co.
Das C. j.
that the logs must be carried to Ambernath and delivered there (See The Badische Anilin und Soda
Fabrik v. The Basle Chemical Works, Bindschedler (1) ).
Learned counsel for the department does not urge
that if the matter bad to be decided on the terms of
the earlier contract dated October 18, 1940, be 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 cl. 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 cl. 3 that the goods shall be delivered at
Ambernath in the presence of WIMCO's Factory
Manager and of cl. 6 providing tba t the prices will be
"F.O.R. Ambernatb" 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 later
contract cl. 2 is differently worded and there is no
express provision that the goo,ds should be delivered
at Ambernath. There are, nevertheless, several other
provisions in the later contract indicating that property in the logs loaded in the wagon will not pass to
WIMCO until after the goods arrive at Ambernath
and are inspected, measured and accepted by WIMCO's
Factory Manager. Clause 2 of the later contract quite
clearly reserves the right of \VIMCO to examine the
goods on arrival and to reject the same if they are
found, in the opinion of its Factory Manager, not to
(1) [1898) A,C. 200,
(2) S.C.R. SUPREME COURT REPORTS
717
conform with the specifications. This reservation,
z959
which is made notwithstanding the fact that the logs c · .-.
01
.
.
om1nissioner
may have been accepted by its representative before
Sales Tax
they were railed to Ambernath, clearly indicates that
v.
the so called acceptance by the representative was not
Husenali
final but
WMI entirely tentative and sabject to Adamji & Co.
approval of the logs by WIMCO's Factory Manager at
Am bernath after their arrival. This circumstance
certainly militates against the property in them
having already passed to WIMCO at the railway
stations in the Central Provinces. The provisions of cl. 6
1
that the goods shall be measured under the supervision of WIMCO's representative, the decision of its
]'actory Manager at Ambernath being binding on the
respondent a:qd of cl. 7 that the prices shall be" ]'.O.R.
Ambernath " and shall be payable after such measurement of the logs by WIMCO's repqisentative further
reinforce the conclusion that the intention of the
parties was that property in the goods shall not pass
until the logs arrive at Ambernath and are there
inspected, measured and accepted by WIMCO. In our
judgment the prima facie case of what might have
been the appropriation of the logs by the respondent
by loading on the wagons logs of the contract quality
and description with the .assent of WIMCO given in
advance by the terms of cl. 4 is effectively displaced
by the provisions of els. 2, 6 and 7 of the later contract which clearly indicate a contrary intention. On
a proper construction of the contract as a whole the
intention of the parties clearly was that the respondent
would send the logs by rail from the different stations
in the Central Provinces to Ambernath where WIMCO's
Factory Manager would inspect, measure and accept
the same if in his opinion they were of the description
and quality agreed upon. In other words the respondent sent the logs and left it to WIMCO to appropriate
to the contract such of them as they accepted as of
contract quality and description. The respondent,
therefore, gave in advance its assent to WIMCO's
appropriation 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
Das C. ].
,
718
SUPREME COURT REPORTS [1959] Supp.
upon the argument founded on Explanation II to
Commissioner of s. 2(g) and ·argues, somewhat half.heartedly, that
Sales Tax
notwithstanding the provisions of the Sale of Goods
v.
Ilusenali
Adamji & Co.
Das C . ./.
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 (1) 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 must have been in existence in the Central Provinces either in the shape of :Jogs or in the shape of
standing timber. There. is no evidence that at the date
when the agreement for sale was made, the particular
logs delivered thereunder were in the Central Provinces
in the shape of logs at all. Learned counsel says that,
at any rate, they must have been in existence there in
the shape of standing timber. Apart from anything
else, the agreement here was not " in respect of" any
standing timber and there was no provision in the
agreement as between the respondent and WIMCO for
severance of the standing timber before sale under
that agreement. In order to attract Explanation II
the goods, in respect of which the contract of sale is.
made, must, at the date of the contract be in existence
in the Central Provinces, that is to say, that the goods
must at the date 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. In our judgment, there.
is no force in this alternative argument.
The result, therefore, is that this appeal is dismissed
with costs.
Appeal dismissed.
(1) [1953) S.C.R. 677.