Appeals Nos 223 and 224 of 1960
Appeals from the order dated November 23 1956 of the Andhra Pradesh High Court Hyderabad in Tax Revision Cases Nos 17 and 18 of 1956
268 C K Daphtary Solicitor General of India and T V B Tatachari for the appellants
K N Rajagopal Sastri and D Gupta for the respondent
December 14
The Judgment of the Court was delivered by HIDAYATULLAH J
These are two appeals on certificates granted by the High Court of Andhra Pradesh against a common judgment in a sales tax revision filed by the appellants in the High Court
The facts are as follows In the year 1952 53 for which the assessment of sales tax was in question the appellants dealt in gunnies and purchased them from two Mills in Vishakapatnam District and in respect of which they issued delivery orders to third parties with whom they had entered into separate transactions
The procedure followed by the appellants was this They first entered into contracts with the Mills agreeing to purchase gunnies at a certain rate for future delivery
Exhibit A 1 is a specimen of such contracts
The appellants also entered into agreements with the Mills by which the Mills agreed to deliver the goods to third parties if requested by the appellants
The Mills however did not accept the third parties as contracting parties but only as agents of the appellants
Exhibits A 2 and A 2a are specimen agreements of this kind
Before the date of delivery the appellants entered into agreements with third parties by which they charged something extra from the third parties and handed over to them the delivery orders which were known as kutcha delivery orders
Exhibits A 3 and A 4 are specimens of the agreement and the delivery orders respectively
The Mills used to deliver the goods against the kutcha delivery orders along with an invoice and a bill of which Exs
A 6 and A 7 are specimens respectively and collected the sales tax from the third parties
The tax authorities however treated the transaction between the appellants and third parties as a fresh sale and sought to levy sales tax on it 269 again which the appellants contended was not demandable as there was no second sale
The appellants failed in their contentions before the Deputy Commercial Tax Officer Guntur and their appeals to the Deputy Commissioner of Commercial Taxes Guntur and the Andhra Sales Tax Appellate Tribunal Guntur were unsuccessful
The appellants then went up in revision to the High Court under the Madras General Sales Tax Act 1939 as amended by Madras Act No 6 of 1951 but were again unsuccessful
The High Court however granted certificates on which these appeals have been filed
The contentions of the appellants are that the agreement and the delivery of the kutcha delivery order did not amount to a sale of goods but was only an assignment of a right to obtain delivery of the gunnies which were not in existence at the time of the transaction with third parties and were not appropriated to the contract or in the alternative that this was only an assignment of a forward contract
They seem to have relied in the High Court upon the deci sions of this Court reported in The Sales Tax Officer Pilibhit vs Messrs Budh Prakash Jai Prakash1 and Poppatlal Shah vs The State of Madras 2 to show that these transactions were not sales
These cases were not relied upon by the appellants before us presumably because the High Court has adequately shown their inapplicability to the facts here
The learned Solicitor General appearing for the appellants rested his case entirely upon the first contention namely that there was only an assignment of a right to obtain delivery of the gunnies and not a sale
He contended that there was only one transaction of sale between the Mills and the third parties who on the strength of the assignment of the right to take delivery had received the goods from the Mills
in our opinion this does not represent the true nature of the transactions either in fact or in law
To begin with the Mills had made clear in their agreements that they were not recognising the third parties as contracting parties having privity with 1  2  270 them and that delivery would be given against the kutcha delivery orders to the third parties as agents of the appellants
The Mills therefore recognised only the appellants as contracting parties and there was thus a sale to the appellants from the Mills on which sales tax was correctly demanded and was paid
In so far as the third parties were concerned they had purchased the goods by payment of an extra price and the transaction must in law and in fact be considered a fresh transaction of sale between the appellants and the third parties
A delivery order is a document of title to goods vide section 24 of the Sale of Goods Act and the possessor of such a document has the right not only to receive the goods but also to transfer it to another by endorsement or delivery
At the moment of delivery by the Mills to the third parties there were in effect two deliveries one by the Mills to the Appellants represented in so far as the Mills were concerned by the appellants  agents the third parties and the other by the appellants to the third parties as buyers from the appellants
These two deliveries might synchronise in point of time but were separate in point of fact and in the eye of law
If a dispute arose as to the goods delivered under the kutcha delivery order to the third parties against the Mills action could lie at the instance of the appellants
The third parties could proceed on breach of contract only against the appellants and not against the Mills
In our opinion there being two separate transactions of sale tax was payable at both the points as has been correctly pointed out by the tax authorities and the High Court
The appellants relied upon a decision of the Andhra Pradesh High Court in The State of Andhra vs Kolla Sreeramamurty 3 but there the facts were different and the Division Bench itself in dealing with the case distinguished the judgment under appeal observing that there was no scope for the application of the principles laid down in the judgment under appeal because in the cited case the property in the goods did not pass from the mills to the assessee and 3 Second Appeals Nos
194  195 of 1954 decided on June 27 1957
271 there was no agreement of sale of goods to be obtained in future between the assessee and the third party
In the result the appeals tail and are dismissed with costs
One hearing fee
Appeals dismissed


Summary:
The respondents dealt in gunnies
They first entered into contracts with two Mills agreeing to purchase gunnies at a certain rate for future delivery and also entered into agreement with third parties by which they charged something extra from those third parties and handed over the delivery order known as kutcha delivery order
The Mills however did not accept the third parties as contracting parties but only as the agents of the appellants and delivered the goods against the kutcha delivery orders and collected the Sales Tax from the third parties
The tax authorities treated these transactions between the appellant and the third parties as fresh sales and sought to levy sales tax again which the appellants contended was not demandable as there were no second sales the delivery of a kutcha delivery order did not amount to a sale of goods but was only an assignment of a right to obtain delivery of gunnies which were not in existence and not appropriated to the contract this was only an assignment of a forward contract
Held that the agreements between the parties showed that third parties were not recognised by the sellers
A delivery order being a document of title to goods the possession of such a document not only gave the right to recover the goods but also to transfer them to another by endorsement or delivery
There being two separate transactions of sale one between the Mills and the original purchasers and the other between the original purchasers and third parties tax was payable at both the points
The Sales Tax officer Pilibhit vs Ms Budh Prakash jai Prakash   Poppatlal Shah vs The State of Madras   and The State of Andhra vs Kolla Sreeramamurthy decided on June 27 1957 referred to