MAY AND BAKER LTD Vs. STATE OF BOMBAY

JUDGEMENT

(1.) THIS is an appeal against, a decision of the Collector of Sales Tax, Bombay, made under Section 27 of the Bombay Sales Tax Act, 1953, that the supply of the goods by the appellants Messrs May and Baker Ltd. to Messrs May and Baker (India) Ltd., (hereinafter referred to as the company) under six specified consignment notes constituted sales for the purposes of the said Act. The firm of the company was established in Bombay in 1928. It used to receive goods manufactured in the appellants' factory in Dagenham, England, and to sell them. In 1944 the method of supply was altered to a system on a consignment basis. On 31st March, 1944, the appellants sent a cable to the company in which it was stated, "we propose take over your stocks specialities chemicals as at April first, and make all future supplies on consignment basis.. System we propose operating is as follows. For supplies specialities will issue consignment invoices for customs purposes at arrange consignment value basis on current domestic valueless commission plus cases freight marine and war risk insurance..when goods sold or leave your branch sales offices you will credit us with consignment value and debit us with your commission separately". In 1948 -49 the appellants built their own factory at Worli at Bombay. Since then the company has been receiving the bulk of the supplies from this factory and although some supplies used to come directly from England, we are not concerned with such supplies in this case. The company obtained a registration certificate under the Act of 1946, and the factory at Worli also obtained such a certificate. The company has become responsible for the marketing of the whole production of the Worli factory. There was no formal agreement between the company and the appellants, but the practice is that the company intimates its likely requirements from time to time and goods are consigned to the company under a consignment note in which no value of the goods is stated. Sales are effected by the company at list prices fixed in advance by the manufacturers. Products sold by the company bear labels in which the appellants are shown as the manufacturers and the company as the distributors.

(2.) ON the 1st January, 1953, the appellants wrote a letter marked "strictly confidential" to the Accountant of the company from which the following extracts appear to 'be relevant : "We have received your letter dated the 25th November, 1952, from which we note that on the 1st July, 1952, the form of the Reserve Bank Statement on the basis of which permission to remit is - given, was changed". "To deal with the situation created by the change made by the Reserve Bank we suggest you should arrange a meeting with some senior official of the Reserve Bank and describe to him the difficulties which you and we are facing as a result of the form of the statements now required". "It will first be necessary to explain in detail the method of trading which we use and the reasons why we prefer to use this method. Your explanation should therefore be on the following lines : -

(3.) THE appellants have contended that they have appointed the company as their selling agents, that there is no sale of any goods from them to the company and that the goods remain the property of the appellants until they are sold by the company to customers. They have relied on the following circumstances in respect of this contention : (1) the appellants have a right at all times before sale to recall from the company any goods consigned for sale, such right showing that the property remains up to the time of the sale in the appellants; and (2) although the company insures the goods on receipt, the cost of insurance premia are debited to the appellants by the company ; (3) the company receives its commission and credits to the appellants the price of the goods sold as soon as the sale takes place, even when the price of the goods has not been realised by the company. The Collector has stated that the right to recall goods is not compatible with the vesting of the property in the goods in the company when they are supplied and that the evidence as to insurance "may be said to support the view that the goods remained in the ownership of Messrs May and Baker Ltd., at least until the point of time when the sale took place at the hands of Messrs May and Baker (India) Ltd." According to the Collector, this view is supported by the decision of the Nagpur High Court in the case of Kalyanji v. Tikaram A.I.R. 1938 Nag. 254 and by the decision of the Madras High Court in the case of Kandula Radhakrishna Rao v. The Province of Madras [1952] 3 S.T.C. 121. The following considerations, in the Collector's opinion, support the view that he has taken, as commission agents vis -a -vis Messrs May and Baker Ltd. The company has the authority to sell in its own name; the invoices are issued by the company in its own name and not on behalf of the appellants ; the company and not the appellants can sue or be sued by its customers ; the appellants have no right to say to whom the company should sell the goods or whether it should sell or not sell to a particular party ; and the privity of contract is between the company and the customer. "This argues that at some point of time the title in the goods has passed from Messrs May and Baker Ltd., to Messrs May and Baker (India) Ltd., and that point of time must be held to occur when the sale of Messrs May and Baker (India) Ltd., to the customer takes place".