POPPATLAL SHAH Vs. STATE OF MADRAS

JUDGEMENT

(1.) THE appellant is a partner of a firm of merchants called 'Indo-Malayan Trading Company' and has been convicted in proceedings taken under Section 15 of the Madras General Sales Tax Act for failure to pay the tax which had been imposed on the said firm. THE Indo-Malayan Trading Company carries on the business of purchasing and selling groundnut oil, sago and kirana articles and has its head office in the City of Madras. THE usual course of business is that the firm receives orders from merchants in Calcutta for the supply of these articles the orders are accepted in Madras the articles are purchased in the local markets and despatched to Calcutta by rail or steamer. THE relative railway receipts or bills of lading are taken in the name of the sellers and so are the insurance policies. THEy are then forwarded to their bankers in Calcutta who deliver the same to the consignees on payment of the price and other charges. During the period from 1st April, 1947, to 31st December, 1947, which is the period of assessment concerned in these proceedings the turnover of such transactions amounted to Rs. 37, 75, 357. THE point for decision is whether sales tax is leviable on this amount.

(2.) THE contention of the assessee is that the title to the goods sold passed only in Calcutta because the documents of title were taken in the name of the sellers and delivered to the purchaser on payment of the price at Calcutta and that consequently there was no sale within the Province of Madras and, therefore, no liability to pay the tax arises under the Act. THE Deputy Commercial Tax Officer passed an order on 12th February, 1949, rejecting this contention and assessing the firm to sales tax on these transactions and this decision was affirmed on appeal by the Commercial Tax Officer by his order dated 29th May, 1949. On 2nd June, 1949, notice of the final assessment and demand for payment of the amount of tax was issued to the firm. THE assessees preferred a revision to the Board and that was dismissed on 23rd May, 1950. On 14th August, 1950, the assessed filed a suit O.S. No. 903 of 1950 on the file of the City Civil Court, Madras, for a declaration that the imposition of the tax was not justified by the Act and was in consequences illegal. That suit was dismissed on 31st July, 1951, and an appeal against that judgment is pending in this Court, C.C.C.A. No. 131 of 1951. Meanwhile, the Government instituted the prosecution under Section 15, C.T. No. 1358 of 1950, out of which the present appeal has arisen. THE accused pleaded in before that the firm was not liable to be taxed under the provision of the Act and that the assessment was illegal. That plea was overruled and the appellant was ordered to pay a fine of Rs. 1, 000 in addition to the tax. Against the said order the accused has preferred this appeal.THE substantial question that arises for determination in this appeal is whether the sales in question took place within the Province of Madras. Mr. V. T. Rangaswami Iyengar, the learned Advocate for the appellant, argues that on the facts already stated - and there is no dispute above them - the sellers continued to be the owners of the goods until they were paid for and cleared in Calcutta and under the provisions of the Sale of Goods Act, the property in the goods passed to the purchasers only in Calcutta and that, therefore, the sale took place only there. THE contention of the learned Advocate-General, on the other hand, is that for purposes of the General Sales Tax Act the question whether there was a sale within the Province of Madras would have to be determined on a factual basis as to where the transaction took place and not on a consideration of questions as to where property passed in the goods. It is conceded on behalf of the Government that if the correct principle to apply is to determine where property in goods passed, the sales in question could not be held to have taken place within the Province of Madras. On the other hand, it is equally indisputable that if the true test is to determine where the transactions took place, the finding that the sales in question took place within the Province of Madras is unassailable, because the firm had its head office at Madras its accounts were maintained at Madras the goods which were the subject-matter of sale were in Madras and delivered to common carriers in Madras and the sale price was entered in the Madras accounts. THE question is which of these two stand-points is the correct one to adopt under the Act.

(3.) IN American Express Co. v. State of Iowa 108 US 133 49 L.Ed. 417 at 422), the question again arose with reference to goods shipped from one State to another under a C.O.D. contract. After observing that opinion was divided as to when under such a contract property passed the Court proceeded on to state :-