Case: A.V. Thomas &amp; Company Ltd Vs. Dy. Commr. of Agrl. Income Tax &amp; Sales Tax. Trivandrum

the goods are specified goods the title passes to the buyer. In the present case as soon as the hammer fell the title in the goods passed to the buyer as the goods were specific goods i.e. goods which were auctioned in full lots and this event took place at Fort Cochin which was in the State of Madras. But in the case of unascertained goods the title in the goods does not pass to the buyer unless and until the goods are ascertained. It was for this reason that a distinction was drawn by the Sales tax Appellate Tribunal between goods which were sold in full lots and those which were sold in portions. In regard to the former it was held that the title passed as soon as the hammer fell but not so in regard to the latter and therefore the sale of "full lots was held to have taken place outside the State of Travancore Cochin and of portions of lots inside that State. The case was consequently remanded to the Sales tax Officer for determining the amount of the tax. 6. The High Court in revision held that the words in Art. 286 (1) (a) "outside the State" do not mean transfer of ownership, according to the Sale of Goods Act but it was lex situs which determines the taxability of the transaction and the correct position is that the ownership in the goods is transferred according to the law of the place where the goods are situate. Therefore the sale in the present case was in the State of Travancore Cochin and there is nothing in the Explanation to Art. 286 (1) (a) which provides to the contrary. 7. It has been found and it has not been disputed that the title to the goods in the present case passed at Fort Cochin. The purchase money was paid there and the purchaser obtained from the auctioneer delivery notes directing the godown keepers at Willingdon Island to deliver the goods and only the actual physical delivery of the goods took place at Willingdon Island. In these circumstances the question is whether the sale was "outside" or "inside sale" as the expressions have been compendiously used in various judgments to indicate sales taking place within a State or without it. The Explanation to Art. 286 (1) (a) which has been set out above explains what a sale outside the State is. According to that Explanation a fiction is created as between two States, one where the goods are delivered for consumption in that State and the other where the title in the goods passes and the former is treated as the situs of the taxable event to the exclusion of the latter. Therefore where the Explanation applies the difficulty about the situs is resolved but in a case like the present one the difficulty still remains because the explanation does not operate in the sense that the rival States claiming to tax the same taxable event are not the States of delivery for consumption in that State and those where the title in the goods passes. In somewhat similar circumstances this court in Indian Copper Corporation Ltd. v. State of Bihar ([1961] 2 S.C.R. 276, 286, ) held by a majority decision that the opening words of Art: 286 (1) which speak of a sale or purchase taking place and the non-obstante clause in the Explanation which refers to the general law relating to the sale of goods, indicated that it was the "passing of property within the State" that was intended to be fastened on, for the purpose of determining, whether the sale in question was "inside" or "outside" the State and therefore subject to the operation of the "Explanation", that State in which property passed would be the only State which would have the power to levy a tax on the sale. At page 286 it was observed: "The conclusion reached therefore is that where the property in the goods passed within a State as a direct result of the sale, the sale transaction is not outside the State for the purpose of Art. 286 (1) (a) unless the Explanation operates". The majority decision in Indian Copper Corporation Ltd. v. State of Bihar (1) concludes the point in favour of the appellant. On the facts of this case it was found by the Sales Tax Appellate Tribunal that in regard to the sales of tea in full lots the property passed at Fort Cochin and this view has not been challenged in this court. Therefore, on the majority decision in Indian Copper Corporation Ltd. v. State of Bihar ([1961] 2 S.C.R. 276, ) the only State which would have the power to levy a tax on such sales would be the State of Madras and so far as Travancore Cochin was concerned, the sale would be an outside sale.In the present case therefore the sale was an "outside sale" and cannot be said to be an "inside sale" qua Travancore Cochin because the title passed at Fort Cochin which is in the State of Madras. Apart. from that the money was paid there and the delivery order was also received there even though the actual physical delivery of goods was made at a Willingdon Island in the State of Tranvancore Cochin. The fiction created by the Explanation to, Art. 286 (1)(a) is inapplicable because there was no delivery as a direct result of sale for the purpose of consumption in any particular State. There then remains the question of goods which were exported out of India from Willingdon Island. In the case of those goods also it cannot be said that there was a sale inside the State of Travancore Cochin because the same considerations will apply to those sales as to the sales already discussed i.e. goods the title to which passed at Fort Cochin were delivered at Willingdon Island and were delivered for consumption in parts of India other than Travancore Cochin.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]Specific goods in s. 2 (14) of the Sale of Goods Act means goodsidentified and agreed upon at the time contract is made. Therefore on the fall of the hammer theoffer is accepted and if the goods are specified goods the title passes to the buyerIn the present case as soon as the hammer fell the title in the goods passed to the buyer as the goods were specific goods i.e. goods which were auctioned in full lots and this event took place at Fort Cochin which was in the State of Madras. But in the case of unascertained goods the title in the goods does not pass to the buyer unless and until the goods are ascertained. It was for this reason that a distinction was drawn by the Sales tax Appellate Tribunal between goods which were sold in full lots and those which were sold in portions. In regard to the former it was held that the title passed as soon as the hammer fell but not so in regard to the latter and therefore the sale of "full lots was held to have taken place outside the State of Travancore Cochin and of portions of lots inside that State. The case was consequently remanded to the Sales tax Officer for determining the amount of the tax6. The High Court in revision held that the words in Art. 286 (1) (a) "outside the State" do not mean transfer of ownership, according to the Sale of Goods Act but it was lex situs which determines the taxability of the transaction and the correct position is that the ownership in the goods is transferred according to the law of the place where the goods are situate. Therefore the sale in the present case was in the State of Travancore Cochin and there is nothing in the Explanation to Art. 286 (1) (a) which provides to the contrary7. It has been found and it has not been disputed that the title to the goods in the present case passed at Fort Cochin. The purchase money was paid there and the purchaser obtained from the auctioneer delivery notes directing the godown keepers at Willingdon Island to deliver the goods and only the actual physical delivery of the goods took place at Willingdon IslandIn somewhat similar circumstances this court in Indian Copper Corporation Ltd. v. State of Bihar ([1961] 2 S.C.R. 276, 286, ) held by a majority decision that the opening words of Art: 286 (1) which speak of a sale or purchase taking place and the non-obstante clause in the Explanation which refers to the general law relating to the sale of goods, indicated that it was the "passing of property within the State" that was intended to be fastened on, for the purpose of determining, whether the sale in question was "inside" or "outside" the State and therefore subject to the operation of the "Explanation", that State in which property passed would be the only State which would have the power to levy a tax on the sale. At page 286 it was observed: "The conclusion reached therefore is that where the property in the goods passed within a State as a direct result of the sale, the sale transaction is not outside the State for the purpose of Art. 286 (1) (a) unless the Explanation operates". The majority decision in Indian Copper Corporation Ltd. v. State of Bihar (1) concludes the point in favour of the appellant. On the facts of this case it was found by the Sales Tax Appellate Tribunal that in regard to the sales of tea in full lots the property passed at Fort Cochin and this view has not been challenged in this court. Therefore, on the majority decision in Indian Copper Corporation Ltd. v. State of Bihar ([1961] 2 S.C.R. 276, ) the only State which would have the power to levy a tax on such sales would be the State of Madras and so far as Travancore Cochin was concerned, the sale would be an outside sale.In the present case therefore the sale was an "outside sale" and cannot be said to be an "inside sale" qua Travancore Cochin because the title passed at Fort Cochin which is in the State of Madras. Apart. from that the money was paid there and the delivery order was also received there even though the actual physical delivery of goods was made at a Willingdon Island in the State of Tranvancore Cochin. The fiction created by the Explanation to, Art. 286 (1)(a) is inapplicable because there was no delivery as a direct result of sale for the purpose of consumption in any particular State. There then remains the question of goods which were exported out of India from Willingdon Island. In the case of those goods also it cannot be said that there was a sale inside the State of Travancore Cochin because the same considerations will apply to those sales as to the sales already discussed i.e. goods the title to which passed at Fort Cochin were delivered at Willingdon Island and were delivered for consumption in parts of India other than Travancore Cochin.