Case Note & Summary
The Supreme Court of India heard an appeal by special leave against a judgment of the Bombay High Court dated April 23, 1962, in a sales tax reference under Section 34(1) of the Bombay Sales Tax Act, 1953. The appellant, a footwear manufacturer in Bombay, purchased rubber from dealers in Cochin during the assessment year April 1, 1954 to March 31, 1955. The Cochin sellers shipped the goods from Cochin to Bombay under bills of lading in which the sellers themselves were named as consignees. The invoices stated that the goods were shipped on account and at the risk of the appellant, and the appellant paid insurance, freight, and other charges. The bills of lading were sent through bankers to Bombay and delivered to the appellant only upon payment of price in Bombay. The Sales Tax Officer assessed these purchases to purchase tax under Section 10(a) of the Bombay Sales Tax Act, 1953 because the sellers were not registered dealers. The appellant's appeal and revision were dismissed, and the Bombay Sales Tax Tribunal dismissed the revision on September 4, 1959. The Tribunal referred two questions to the High Court: whether property in the rubber consignments passed in Cochin outside Bombay, and whether purchase tax under Section 10(a) was leviable. The High Court answered both in favour of the State. The appellant argued before the Supreme Court that property passed in Cochin upon shipment because the goods were shipped on account and at the risk of the buyer; that the term 'person' in Section 10(a) should be read as a dealer carrying on business in Bombay but not registered; and that Section 10-C, not Section 10(a), applied. The respondent State contended that property passed in Bombay because the bills of lading named the sellers as consignees and were delivered against payment in Bombay; the risk clause only related to insurance charges; Section 10(a) had plain meaning; and Section 10-C had no application. The Supreme Court held that where goods are shipped under a bill of lading deliverable to the seller's order, the seller prima facie reserves the right of disposal under Section 25(2) of the Sale of Goods Act, 1930, and property does not pass until the buyer obtains the bill of lading against payment. The phrase 'on account and at the risk of the buyer' only indicates that insurance charges are borne by the buyer and has no bearing on passing of title, as established in Shepherd v. Harrison. The Court rejected the restricted interpretation of 'person' in Section 10(a), finding no contextual or linguistic basis to qualify its plain meaning; purchases by a dealer from any person not a registered dealer are taxable. Section 10-C, which reproduces the Explanation to Article 286(1)(a) of the Constitution, applies only where a sale takes place outside the State under general law but goods are delivered for consumption within the State; it did not apply because property passed in Bombay. Accordingly, the Supreme Court dismissed the appeal and affirmed the High Court's decision, holding that the appellant was liable to purchase tax under Section 10(a).
Headnote
A) Sale of Goods - Passing of Property - Unascertained Goods and Reservation of Right of Disposal - Sale of Goods Act, 1930, Section 25(2) - The case involved rubber consignments shipped from Cochin to Bombay under bills of lading where sellers named as consignees. Court held that delivery to carrier and shipment under such bills did not pass property to buyer in Cochin; seller prima facie reserved right of disposal. Held that property passed in Bombay upon endorsement and delivery of bills of lading against payment. (Paras Not mentioned) B) Sale of Goods - Passing of Property - Effect of 'on account and risk of buyer' Clause - Sale of Goods Act, 1930, Section 25(2) - Invoice printed that goods shipped on account and risk of buyer. Court held this clause only indicated insurance charges were to be paid by buyer, not that property passed; reliance placed on Shepherd v. Harrison. Held that risk clause has no bearing on passing of title. (Paras Not mentioned) C) Sales Tax - Purchase Tax - Interpretation of 'Person' in Section 10(a) - Bombay Sales Tax Act, 1953, Section 10(a) - Appellant contended 'person' means dealer carrying on business in Bombay but not registered; Court rejected, giving plain meaning. Held that purchases by dealer from any person not registered dealer are liable to purchase tax under Section 10(a). (Paras Not mentioned) D) Sales Tax - Applicability of Section 10-C - Bombay Sales Tax Act, 1953, Sections 10(a), 10-C - Section 10-C reproduces Explanation to Article 286(1)(a) of Constitution and applies only where sale outside State but goods delivered for consumption within State. Court held transactions not covered, property passed in Bombay; Section 10(a) applied. Held that Section 10-C not applicable. (Paras Not mentioned)
Issue of Consideration
Whether property in rubber consignments passed to appellant in Cochin or Bombay; whether purchase tax under Section 10(a) of Bombay Sales Tax Act, 1953 leviable; whether term 'person' in Section 10(a) restricted to Bombay unregistered dealer; whether Section 10-C applies instead of Section 10(a).
Final Decision
Supreme Court dismissed the appeal and affirmed the High Court's judgment. Held that property in rubber consignments passed in Bombay, not Cochin; Section 10(a) of Bombay Sales Tax Act, 1953 applied and purchase tax was leviable; Section 10-C did not apply.
Law Points
- Legal points not extracted
- Section 25(2) of Sale of Goods Act
- 1930 prima facie reserves right of disposal when bill of lading deliverable to seller's order
- delivery to carrier not sufficient to pass property
- phrase 'on account and risk of buyer' only allocates insurance charges
- Section 10(a) of Bombay Sales Tax Act
- 1953 plain meaning includes any person not registered dealer
- Section 10-C applies only to sales outside State with goods delivered for consumption within State.
