MILKHIRAM INDIA PRIVATE LTD Vs. STATE OF BOMBAY
LAWS(BOM)-1962-3-8
HIGH COURT OF BOMBAY
Decided on March 28,1962

MILKHIRAM (INDIA) PRIVATE LTD. Appellant
VERSUS
STATE OF BOMBAY Respondents

JUDGEMENT

Desai, J. - (1.)In this reference under section 34 of the Bombay Sales Tax Act of 1953, the Sales Tax Tribunal has referred to this Court the following four questions :- 1. Whether on the facts and in the circumstances of this case the property in the goods passed to the Government of India on or about the 3rd December, 1953, on the applicants' delivering the shipping documents to the Government of India and on the Government of India paying the c.i.f. value of the said goods to the applicants when the said goods were on the high seas outside the Bombay State. 2. Whether on the facts and in the circumstances of this case there was any sale in Bombay taxable under the Bombay Sales Tax Act, 1953. 3. Whether the Bombay Sales Tax Tribunal was right in not allowing fresh evidence on the point of endorsement on the bill of lading in favour of the Government of India, and 4. Whether on the facts and in the circumstances of this case the sale of goods made to the Government of India is protected under clause (1)(b) of Article 286 of the Constitution of India and as such exempt from the sales tax.
(2.)The applicant, which is a private limited company, entered into a contract with the Government of India, Ministry of Food and Agriculture, New Delhi, in September, 1953, for sale of large quantities of Cuban Sugar on terms and conditions mentioned in the letter dated 12th September, 1953, addressed to them by the Government of India. After the sugar had been shipped by the foreign exporters, the bill of lading was received by applicants on the 3rd December, 1953, and thereupon a bill for full payment of the c.i.f. value was submitted by the applicants to the officer of the Government of India designated in the contract along with a complete set of bill of lading and other documents in accordance with clause (8) of the contract. On the 23rd of December, 1953, the applicants received payment from the Government in accordance with the bills submitted by them. On the 3rd of January, 1954, the consignment of sugar arrived at Bombay by S. S. Ameriki. Thereafter the goods were inspected and weighed before an authorised officer of the Government under clause (5) of the contract and they were delivered to the Government of India by the applicants ex-docks after clearance, and payment of all costs and charges referred to in clause (7) of the contract. On the 11th of February, 1954, the applicants prepared their final bill for the balance price under clause (8) of the contract. On the 20th of April, 1955, the applicants made an application to the Collector of Sales Tax under section 27 of the Bombay Sales Tax Act of 1953 to determine whether any sales tax was payable on the sales made by the applicants to the Government of India under the contracts mentioned in the application under which sugar was supplied by them to the Government of India. The Additional Collector of Sales Tax, who decided the application held that sales tax was payable in respect of the said sales of sugar effected by the applicants. He held, relying on clauses (5) and (6) of the contract, which related to inspection, weighment and delivery, that the sale could not have taken place on the high seas particularly as the inspection and weighment was to be made before the delivery, which was to be made ex-docks by the applicants and that even the weighment charges were to be incurred by the applicants. In his view clause (12) of the contract which entitled the Government of India to terminate the contract forthwith in the event of the failure on the part of the applicants to abide by any of the provisions of the contract even after the goods were landed in Bombay, indicated that the property in the goods was not intended to pass before the goods had been cleared by the applicants and delivered to the Government. He also negatived a further contention, which was set up by the applicants before him, viz., that the sales were not liable to tax under the Bombay Sales Tax Act, 1953, because the sale had taken place at New Delhi and the sale in question had been completed prior to 1st January, 1954. Against the decision given by the Additional Collector of Sales Tax, the applicants preferred an appeal before the Sales Tax Tribunal at Bombay. The main contention, which was urged before the Tribunal, was that the sale in the present case was in the course of import since it had taken place while the goods were on the high seas. It was contended that property in the goods had passed by transfer of the shipping documents while the goods were in transit and, therefore, the sale had taken place in the course of import. The Tribunal did not accept the above contentions of the applicants because it held that clause (8) of the agreement under which the shipping documents were alleged to have been transferred and delivered to the Government of India, did not show that the bill of lading was required to be endorsed in favour of the Government of India and that there was no evidence produced by the applicants to show that such endorsement was made on the bill of lading. An opportunity was sought by the applicants to produce evidence showing that the bill of lading had been duly endorsed in favour of the Government of India before it was passed on to the Government under clause (8) along with the other documents required under the said clause. The Tribunal, however, refused to grant an opportunity to the applicants on the ground that the applicants had made no attempt at any previous stage to prove the endorsement and, therefore, there was no reason why a further opportunity should be allowed to them at that stage. The Tribunal then concluded that as they were not satisfied that the bill of lading was endorsed to the Government of India while the goods were on the high seas, they were unable to accept the contention urged before them by the applicants that the sales had taken place during the course of import. The view of the Tribunal was that the intention of the parties appeared to be that prior to the sale being completed the applicants were to allow inspection and weighment and give delivery ex-docks in accordance with clauses (5) and (6) of the contract and in view of the said intention, the property in the goods was intended to pass not during the course of import but after the goods had crossed the customs barrier of the importing country. It accordingly dismissed the appeal. At the instance of the applicants, it drew up a statement of the case and referred to this Court the four questions, which we have already set out above.
(3.)Mr. Mistry, learned counsel who appears for the applicants, has urged that the Tribunal has erred in disallowing thus applicants' request for grant of an opportunity to establish that the bill of lading in respect of the goods had been endorsed by the applicants in favour of the Government of India before it was delivered along with the other documents referred to in clause (8) of the contract. He has pointed out that before the Additional Collector of Sales Tax it was contended on behalf of the applicants in support of their submission that the property in the goods had passed while the goods were on the high seas and that the bill of lading had been transferred by them to the Government after due endorsement, but the Additional Collector of Sales Tax had not applied his mind to the said circumstances and had proceeded on the basis of certain clauses of the contract between the parties and held that in view of the said terms of the contract, the intention between the parties was that the property in the goods should pass to the buyers only after the goods were weighed and inspected and brought out of the customs barriers of the importing country. According to Mr. Mistry, therefore, although the contention was raised by the applicants before the Additional Collector of Sales Tax, it had not been put in issue by the Collector and he had not called upon the applicants to satisfy him with regard to the said contention, his decision being based on other grounds. Before the Tribunal, however, when the contention was raised the Tribunal was prepared to regard it as a contention of substance and material for the determination of the question before it. It, however, did not permit the applicants to substantiate the said contention by producing evidence in support thereof on the ground that such evidence had not been produced by the applicants at an earlier stage. Mr. Mistry complains that since it was only when the matter was before the Tribunal that the question as to whether the bills of lading were endorsed by the applicants in favour of the Government was put in issue, the Tribunal ought to have allowed the applicants an opportunity to produce evidence which the applicants desired to produce before it.


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