The Commissioner of Sales-Tax, Eastern
Division, Nagpur Vs. Husenali Adamji And Co  INSC 44 (21 April 1959)
21/04/1959 DAS, SUDHI RANJAN (CJ) DAS, SUDHI
RANJAN (CJ) BHAGWATI, NATWARLAL H.
CITATION: 1959 AIR 887 1959 SCR Supl. (2) 702
CITATOR INFO :
R 1963 SC1207 (40) RF 1970 SC1756 (10) D 1976
SC 410 (13) RF 1977 SC 879 (24) E&R 1990 SC1753 (14)
Sales Tax-Contract of
sale-Construction-Unascertained goods Levy of tax on goods sent by rail-Place
where property in goods Passes-Place of appropriation on delivery-Indian Sale
of Goods Act, 1930 (III of 1930), ss. 4, 18, 23, 33, 39Central Provinces and
Berar Sales Tax Act, 1947 (C. P. & Berar XXI of 1947), S. 2(g), Explanation
The respondent company was a dealer in
matchwood called sawar " and his place of business was situate in Chanda
in the erstwhile Central Provinces. Pursuant to an agreement between the
respondent and a match factory, the former loaded diverse quantities of "
sawar " logs on railway wagons and despatched the same by rail from Chanda
and other railway stations in the Central Provinces to Ambernath, a town in the
erstwhile Province of Bombay. Under cl. 4 Of the agreement the goods to be
supplied under the contract shall be despatched by the contractor from certain
railway stations within the Central Provinces, while cl. 2 reserved the right
of the consignee to examine the goods on arrival at. Ambernath and to reject
the same if they, were found, in the opinion of the factory manager, not to
conform with the specifications. Clause 6 provided that the goods shall be
measured under the supervision of the factory's representative, the decision of
the factory manager at Ambernath being binding on the contractor, and-by cl. 7
the prices of the goods shall be " F. O.R. Ambernath ". The course of
dealings between the parties was that on arrival of the logs at Ambernath the
logs were inspected and measured by the factory manager and the prices,
calculated at the agreed rates, were paid to the respondent's agent at Bombay.
The question was as to when and where the property in the logs passed from the
respondent to the consignee and whether the respondent was liable to pay sales
tax under the provisions of the Central Provinces and Berar Sales Tax Act, 1947.
At the date when the agreement was entered into, the logs were unascertained
goods. There was also no evidence that at that date the particular logs
delivered there under were in the Central Provinces in the shape of logs at
all. The sales tax department levied the tax on the respondent on the grounds,
inter alia, that (1) the property in the logs passed from the respondent to the
factory consignee under S. 23 Of the Indian Sale of Goods Act, 1930, when the
logs were loaded in the wagons at railway stations within the Central Provinces
and the railway 703 receipts taken in the name of the factory were forwarded to
the latter, and that (2) in any case, as the logs were in the Central Provinces
at the date when the contract for sale was made, the transfer in them must be
deemed to have taken place there under Explanation II to S. 2(g) Of the Central
Provinces and Berar Sales Tax Act, 1947.
Held : (1) that on a proper construction of
the contract as a whole the intention of the parties was that the respondent
would send the logs by rail from the different stations in the Central
Provinces to Ambernath where the factory manager would inspect, measure and
accept the same if in his opinion they were of the description and quality
agreed upon. Consequently, as the respondent sent the logs and left it to the
factory to appropriate to the contract such of them as they accepted as of
contract quality and description, the property in the logs did not pass to the
buyer by the mere delivery to the railway for carriage but passed only at
Ambernath when the logs were appropriated by the factory with the assent of the
seller within the meaning of S. 23 of the Indian Sale of Goods Act, 1930.
(2) that Explanation II to s. 2(g) of the
because under the Explanation the goods, in
respect of which the contract of sale is made, must, at the date of the
contract be in existence in the Central Provinces, that is to say, that the
goods must at the date of the contract be there in the form in which they are
agreed to be sold and there was no evidence, in the present case, for this.
& CIVIL APPELLATE JURISDICTION: Civil
Appeal No. 13 of 1958.
Appeal by special leave from the judgment and
order dated June 29, 1954, of the former Nagpur High Court in Misc. Civil Case
No. 219 of 1952.
R. Ganapathy Iyer and D. Gupta, for the
M. C. Setalvad, Attorney-General for India, K.
G. Chondke, J. B. Dadachanji and K. K. Raizada, for the respondents.
I. N. Shroff, for the Intervener (State of
1959. April 21. The Judgment of the Court was
delivered by DAS, C. J.-This is an appeal by special leave, against the order
of the High Court of Judicature at Nagpur dated June 29, 1954, answering
against the 704 appellant certain questions referred to it by the Board of
Revenue under s. 23(1) of the Central Provinces & Berar Sales Tax Act, 1947
(hereinafter referred to as "the Act").
The reference arose out of an order of
assessment made on the respondent for' payment of sales tax for the period June
1, 1947, to November 12, 1947, on a taxable turnover of Rs. 30,067-9-0.
The facts leading up to the present -appeal
may shortly be stated as follows. The respondent deals in matchwood called
" sawar " (BombayMalabaricum). His place of business is situate at
Chanda in the erstwhile Central Provinces. In January 1948 the respondent
entered into an agreement with the Western India Match Co. Ltd., which is
popularly known and will hereinafter be referred to as " WIMCO " for
the supply of a minimum quantity of 2,500 tons of sawar logs during the season
1947-48. This agreement is evidenced by WIMCO's letter dated January 7, 1948,
accepting and confirming it. Unfortunately that letter, although a part of the
record, has not been printed in the Paper Book. It is common ground, however,
that the agreement of sale was subject to the conditions appearing in a formal
contract in writing dated March 2, 1945, which is said to have been renewed
from year to year. It appears that prior to the execution of the last mentioned
contract there was another contract between the respondent and WIMCO which was
dated October 18, 1940. Evidently that contract was superseded by the later one
of March 2, 1945, the terms and conditions whereof were renewed year after
year. It is, therefore, not easily intelligible why both the contracts were
filed before the Sales Tax authorities and actually mentioned in the first
question that was referred to the Hight Court.
Both the contracts have been printed in the
Paper Book and reference has been made to some of the terms of both of them in
the course of the arguments before us. The reason for referring to the terms of
the ,earlier contract is presumably to emphasise the variation in the language
used in the corresponding provisions of the later contract as indicative of a
definite change in the intention of the parties. It is, therefore, 705 as well
that the relevant clauses of both the contracts should be set out here for
properly following the arguments advanced on both sides.
Reference may first be made to the earlier
contract dated October 18, 1940. Clause I sets out the specifications, that is
to say, the dimensions and quality of the logs to be delivered under the
contract which need not be reproduced here. The other material clauses,
omitting the unnecessary portions thereof, may now be set out:" 2. The
Contractor agrees that any logs supplied by him which do not conform with the
specification herein shall not be accepted or paid for by the company and he
the contractor undertakes to remove all logs so rejected at his own expense
from the Company's premises within fifteen days after date of notice to him or
his representative from the Company so to remove such logs. Should the
Contractor fail to i.e.
move such logs from the Company's premises
within the period stipulated it is hereby mutually agreed that such failure
shall be construed as being the Contractor's consent to relinquish all claims
whatsoever to such rejected logs, and the Contractor agrees to such logs
thereupon becoming the property of the company and that the contractor shall
have no claim whatsoever upon the company for payment either in respect of the
supply by him of such rejected logs or arising out of the disposal by the
Company of such logs." " 3. The said goods shall be delivered at
Ambernath in the quantities and at the times hereinafter mentioned, i.e.,
" 4. The goods to be supplied under this Contract shall be despatched by
the Contractor from Railway Stations on the B.N.R. and G.I.P.R. Sections
between the following Stations :
" 5. Measurements:-The goods under this
contract shall be measured under the supervision of the 89 706 Company's
Factory Manager at Ambernath on arrival of the goods at the Factory in
accordance with the following stipulations: The Contractor agrees to... accept
the decision of the Company's Factory Manager at Ambernath as final and
binding." The prices of the logs to be supplied are set out in cl. 6 of
the contract as "F.O.R. Ambernath ".
We now pass on to the later contract of March
Clause 1 sets out the specifications of the
logs to be supplied under the contract in exactly the same language as in el. I
of the earlier contract. The other material clauses, again omitting the
unnecessary portions, are as follows:" 2. The contractor agrees that any
logs supplied by him which, on arrival at Ambernath, are found in the opinion
of the Company's Factory Manager not to conform with the specifications herein
shall not be accepted or paid for by the Company, notwithstanding the fact that
such logs may have been accepted by the Company's representatives before being
railed to Ambernath." It may be mentioned here that Ambernath is a place
situate in the erstwhile province of Bombay and outside the Central Provinces.
" 4. The goods to be supplied under this
contract shall be despatched by the Contractor from railway stations on the B.
N. Railway, N. S. Railway and G. 1. P.
Railway sections between the following stations.
It is unnecessary to set out the names of the
stations which, it may, however, be stated, are all in the erstwhile Central
Provinces. Clause 6 provides:
"6. Measurements:The goods under this contract
shall be measured under the supervision of the Company's representative in
accordance with the following stipulations:707 The contractor agrees to accept
the decision of the Company's Factory Manager at Ambernath as final and
binding." The prices of the logs to be supplied under the contract are
specified as " F.O.R. Ambernath " in cl. 7 which concludes with the
" The money so due and payable shall be
paid by the Company to the Contractor when the measurements of the goods have
been completed under the supervision of the Company's representative."
Pursuant to the agreement between the respondent and WIMCO, the former loaded
diverse quantities of Sawar logs on railway wagons and despatched the same by
railway from Chanda or other railway stations in the Central Provinces to
Ambernath in the erstwhile province of Bombay and outside the Central
Provinces. It is not disputed that on many occasions the representative of
WIMCO was present at the railway station when the logs were sorted out and
loaded into the wagons. The statement of the case submitted along with the
reference under s. 23(1) of the Act is silent on the point as to whether the
railway receipts were made out with WIMCO as the consignee; but it is
abundantly clear from the order of the Assistant Commissioner, Sales Tax, which
is part of the record -and it has not been disputed before usthat " the
railway receipt which is a document of title according to s. 2(4) of the Indian
Sale of Goods Act is taken in the name of the consignee." The course of
dealings between the parties also appears to be that, on arrival of the logs at
Ambernath, the consignee buyer WIMCO, paid the railway freight and the logs were
inspected and measured by WIMCO's Factory Manager and the prices, calculated at
the agreed rates, were paid to the respondent's agent at Bombay.
There is no doubt that the price of the logs
supplied by the respondent to WIMCO under the agreement and accepted by the
latter during the period in question amounted to Rs. 30,0679-0. The question
for our 708 decision is whether the respondent is liable to pay any sales tax
under the Act.
It will be convenient at this stage to refer
to the relevant provisions of law applicable to the facts of this case.
Section 4 of that Act is the charging
section. According to this section safes tax is payable " on all sales
effected after the commencement of the Act." " Sale " is defined
by s. 2(g) of the Act. At the relevant period, that section, omitting
Explanation 1, which is not material for our purpose, ran as follows:"
'Sale' with all its grammatical variations and cognate expressions means any
transfer of property in goods for cash or deferred payment or other valuable
consideration, including a transfer of property in goods made in course of the
execution of a contract, but does not include a mortgage, hypothecation, charge
Explanation II:-Notwithstanding anything to
the contrary in the Indian Sale of Goods Act, 1930, the sale of any goods which
are actually in the Central Provinces and Berar at the time when the contract
of sale as defined in that Act in respect thereof is made, shall, wherever
the-said contract of sale is made, be deemed for the purpose of this Act to
have taken place in the Central Provinces and Berar." The Act being a
piece of legislation enacted by the legislature of the erstwhile Province of
Central Provinces and Berar, its operation is limited to the territories of
that province. Therefore, the question arises: Does the sum of Rs. 30,067-9-0
represent the prices of logs sold by the respondent within the Central
Provinces ? Sale being the transfer of property in the goods agreed to be sold,
we have to enquire if the property in the goods which fetched the sale proceeds
on which the sales tax is sought to be levied was transferred in the Central
Provinces as contemplated in the main definition or if those goods were
actually in the Central Provinces at the time when the contract for sale as
defined in the Sale of Goods Act in respect thereof was made as required by
Explanation II set 709 out above. This takes us to the Sale of Goods Act, 1930.
Section 4 of the Sale of Goods Act is
expressed in the words following:"4. Sale and agreement to sell:-(I) A
contract of sale of goods is a contract whereby the seller transfers or agrees
to transfer the property in goods to the buyer for a price.
There may be a contract of sale between one
part-owner and another.
(2) A contract of sale may be absolute or
(3) Where under a contract of sale the
property in the goods is transferred from the seller to the buyer, the contract
is called a sale, but where the transfer of the property in the goods is to
take place at a future time or subject to some condition thereafter to be
fulfilled, the contract is called an agreement to sell.
(4) An agreement to sell becomes a sale when
the time elapses or the conditions are fulfilled subject to which the property
in the goods is to be transferred." There can be no doubt that the
agreement pursuant to which the logs were supplied by the respondent to WIMCO
was an agreement to sell within the meaning of the above section. There is also
no controversy between the parties that at the date when this agreement was
entered into, the logs were unascertained goods. The question is: When did that
agreement to sell unascertained goods become a sale and where did such sale take
place ? In other words, when and where did the property in those goods pass
from the respondent to WIMCO ? The transfer of property in the goods as between
the seller and buyer is dealt with in Ch. III of the Sale of Goods Act. Section
18 of the Sale of Goods Act runs thus :
" 18. Goods must be ascertained:-Where
there is a contract for the sale of unascertained goods, no property in the
goods is transferred to the buyer unless and until the goods are
ascertained." Passing over ss. 19 to 22 which (except as to sub-s. (3) of
s. 19) apparently apply to contracts for the sale of 710 specific or
ascertained goods, we come to s. 23 which provides :" 23. Sale of
unascertained goods and appropriation :-(I) Where there is a contract for the
sale of unascertained or future goods by description and goods of that
description and in a deliverable state are unconditionally appropriated to the
contract, either by the seller with the assent of the buyer or by the buyer
with the assent of the seller, the property in the goods thereupon passes to
the buyer. Such assent may be expressed or implied, and may be given either
before or after the appropriation is made.
(2) Delivery to carrier:-Where, in pursuance
of the contract, the seller delivers the goods to the buyer or to a carrier or
other bailee (whether named by the buyer or not) for the purpose of
transmission to the buyer, and does not reserve the right of disposal, he is
deemed to have unconditionally appropriated the goods to the contract."
Reference may next be made to s. 33 and s. 39(1). Section 33 says:" 33.
Delivery :-Delivery of goods sold may be made by doing anything which the
parties agreed shall be treated as delivery or which has the effect of putting
the goods in the possession of the buyer or of any person authorised to hold
them on his behalf" Section 39(1) runs as follows:" 39. Delivery to
carrier or wharfinger:(1) Where, in pursuance of a contract of sale, the seller
is authorised or required to send the goods to the buyer, delivery of the goods
to a carrier, whether named by the buyer or not, for the purpose of
transmission to the buyer, or delivery of the goods to wharfinger, for safe
custody, is prima facie deemed to be delivery of the goods to the buyer."
Keeping the provisions of the above quoted sections of the two Acts in view, we
have to decide when and where the property in the logs passed from the
respondent to WIMCO.
The Assistant Commissioner of Sales Tax
assessed the respondent to -a tax of Rs. 939-10-0 and imposed on the respondent
a penalty of Rs. 100 under s. 25 of 711 the Act for not having submitted its
return in contravention of r. 19 of the Central Provinces and Berar Sales Tax
The Assistant Commissioner took the view that
the loading of the logs into the wagons at railway stations within the Central
Provinces and the taking out of the railway receipts in the name of the
consignee, WIMCO, and the delivery of the same to WIMCO, had the effect of
putting the latter in possession of the goods as laid down in s. 39(1) of the
Indian Sale of Goods Act and he accordingly held that the sale of the goods
took place at Chanda and other railway stations in the Central Provinces and
that the assessee was, consequently, liable to pay the sales tax under the Act.
The respondent preferred an appeal to the
Sales Tax Commissioner who upheld the Assistant Commissioner's order of
assessment as well as of the penalty. He laid greater emphasis on Explanation
II to s. 2(g) of the Act as overriding the provisions of the Indian Sale of
Goods Act in respect of the transfer of property in the logs and held that as
the' logs were in the Central Provinces at the date when the contract for sale
was made, the transfer in them must be deemed to have taken place there under
that Explanation. He also agreed with the Assistant Commissioner that the
delivery of the logs to the railway company and the sending of the documents of
title to WIMCO had, under s.
39(1) of the Sale of Goods Act, the effect
of putting WIMCO in possession of the logs.
The respondent preferred what in form
appeared to be a second appeal to the Board of Revenue. As, however, there
could be no second appeal under s. 22(4) of the Act, the Board treated the
memorandum of appeal as an application for revision under sub-s. 5 of s. 22 of
the Act read with r. 57.
Both the members of the, Board of Revenue
came to the same conclusion, namely, that the sales were liable to assessment
under the Act, but the reasonings adopted by them were somewhat different. Shri
Shrivastava, a member of the Board of Revenue, took the view that as soon as
logs answering the description agreed upon were brought to the railhead at
Chanda and sorted out and 712 loaded in the wagons in the presence of WIMCO's
representatives, there was an implied contract of sale of specific and
ascertained goods, as evidenced by the conduct of parties and the property in
each consignment passed immediately from the respondent to WIMCO at the railway
station in the Central Provinces where such implied contracts were made. The
Chairman of the Board of Revenue, however, took the view that the contract of
sale was made outside the Central Provinces, namely, in Bombay and that, under
the Sale of Goods Act, the property in the logs passed to WIMCO in Ambernath
outside the province but that as the logs were in the Central Provinces, either
in the form of logs or in the form immediately preceding, namely, trees
standing on the land which had been impliedly agreed to be severed from the
land before actual sale, Explanation II to s. 2(g) of the Act applied and the
sale must, accordingly, -be deemed to have taken place within the Central
Provinces and, must, therefore, be liable to sales tax under the Act.
The Board rejected the application but
remitted the penalty.
On the application of the respondent under s.
23(1) of the Act, the Board of Revenue submitted to the High Court a statement
of case raising the following questions:" (1) Did the agreements of the
kind on record the one dated 18-10-40 and the other dated 2-3-45constitute
contracts of sale-either express or implied -in respect of sawar wood supplied
by the assessee to WIMCO? (2) If the answer to question No. I be in the
affirmative, did the contracts relate to specific or ascertained goods or to
unascertained or future goods? (3) Did the property in the goods pass to WIMCO
by consignment simpliciter at different railway stations within this province,
or did it pass at Ambernath when the goods were approved as provided in the
contract ? (4) Was reliance on the definition of I goods' contained in s. 2(7)
of the Sale of Goods Act in order in applying Explanation II to s. 2(g) of the
Sales Tax 713 Act in cases, where the goods sold were in the form of trees
standing on the land in this province at the time of the contract of
sale?" In its judgment dated June 29, 1954, the High Court took the view
that the sales in question did not take place in the Central Provinces and
Berar and consequently were not " sales " within the meaning of the
Act and, therefore, not liable to tax. It gave the following answers to the
above questions:" Our answers to the questions referred for decision are :(1)
The agreement in question was an express agreement to sell sawar logs to WIMCO.
There was neither an express nor an implied contract each time goods were
(2) The-contract was not for delivery of
specific goods but of unascertained or future goods by description.
(3) The property in the goods did not pass to
the buyer by the delivery to the railway for carriage. It passed at Ambernath
where the goods were appropriated by the buyer to the contract with the assent
of the seller.
(4) The word ' goods ' in the definition of I
sale in the Sales Tax Act must be interpreted according to its definition in s.
2(d) of the Act and not according to the definition in s. 2(7) of the Sale of
Goods Act. The standing sawar trees are not goods within the meaning of the
former Act." The effect of the answers being to nullify the assessment
order, the Commissioner of Sales Tax has come up on appeal before us after
obtaining special leave of this Court.
The answers to the first two questions have
not been questioned before us. The main arguments have centred round the
answers to questions 3 and 4. The answer to question 3 turned on the
construction placed by the High Court on s. 23 of the Sale of Goods Act. After
quoting s. 23, the High Court observed as follows:" After sorting the logs
with the assent of the buyer's representative, the applicant appropriated the
90 714 logs to the contract by railing them to the buyer's destination at
Ambernath. The statement of the case is silent on the point whether the railway
receipts were made out with the Company as the consignee. The assent of the
representative was provisional and was not binding on the Company. Under the
agreement it did not agree to unconditionally appropriate the logs to the
contract as soon as they were delivered to the railway with the assent of its
representative for carriage to Ambernath. It had expressly reserved its right
to reject the goods on examination at Ambernath. The agreement therefore was
that the buyer should, with the assent of the seller, appropriate the goods to
the contract at Ambernath. The appropriation under s. 23 was not complete till
the goods reached Ambernath and were appropriated by the Company to the
contract. The appropriation of the goods by the applicant at the railheads was
conditional on their acceptance by the buyer at Ambernath. There is nothing in
the statement of the case to show that the logs were not so appropriated.
Therefore, the property in the logs passed to the buyer at Amber nath."
The learned counsel for the department appearing in support of this appeal
contends that property in the logs passed from the respondents to WIMCO under
s. 23 when sawar logs were brought to the railway station and loaded in the wagon
and the railway receipts taken in the name of WIMCO were forwarded to the
latter. There was an unconditional appropriation of the goods to the contract
by the respondent. There was, according to learned counsel, assent on the part
of WIMCO to this appropriation in two ways, namely, (a) expressly given by its
representative who was present at the railway station, and (b) impliedly given
by WIMCO by having agreed in advance that the goods should be despatched by
rail from the stations mentioned in cl. 4 of the agreement, all of which were
situate in the Central Provinces.
There is no doubt-and indeed it has been
categorically conceded by learned counsel for the department -that the contract
was for sale of unascertained goods and consequently the property in them could
715 not, under s. 18, pass unless and until the goods were ascertained. His
contention is that logs of the contract quality and description having been
unconditionally appropriated by the respondent to the contract without
reserving to itself any right of disposal and WIMCO having expressly through
its representative or impliedly by the very terms of the contract assented to
such appropriation, property in them passed under s. 23 from the respondent to
WIMCO at the railway stations within the Central Provinces as soon as the sawar
logs were loaded on the wagons and the railway receipts were taken out in the
name of WIMCO. It is said that so far as the respondent is concerned it
unconditionally appropriated the logs to the contract.
Seeing that they were actually accepted by
WIMCO on their arrival at Ambernath it is quite clear that the logs were of the
contract quality and description. The only question, according to learned
counsel for the department therefore, is whether there was assent of WIMCO to
It has been found as a fact that WIMCO's
representative was not present on all occasions when sawar logs used to be
loaded on the railway wagons. There is no evidence that he was actually present
when these particular sawar logs, with the sale proceeds of which we are
concerned, were put into the wagons. Nor is there an iota of evidence that the
representative of WIMCO had any authority to. bind WIMCO by any assent. In view
of these difficulties, learned counsel for the department did not press the
case of express assent of the representative of WIMCO and concentrated on the
case of implied assent. It is quite clear from the language of s. 23 itself,
that the appropriation may be by the seller with the assent of the buyer or by
the buyer with the assent of the seller, that assent to representation may be
express or implied and that it may be given after the appropriation or in
advance before such appropriation. Learned counsel for the department lays
strong emphasis on the provision of cl. 4 in the contract that the sawar logs
should be despatched by rail from certain stations within the Central Provinces
and contends that delivery by the seller of sawar logs of the contract quality
and 716 description to the railways in terms of the contract without the
reservation of any right of disposal has the effect of passing the property
therein to WIMCO at the railway stations in the Central Provinces under s. 23
as well as of constituting delivery of them at the railway stations under ss.
33 and 39(1). The argument is prima facie sound unless there be some other
provision in the contract to negative this conclusion, e. g., that the logs
must be carried to Ambernath and delivered there (See The Badische Anilin and
Soda Fabrik v. The Basle Chemical Works, Bindschedler (1)).
Learned counsel for the department does not
urge that if the matter had to be decided on the terms of the earlier contract
dated October 18, 1940, he could properly say that there was nothing in the
contract negativing the idea of the passing of property in the logs within the
Central Provinces. The cumulative effect of the provisions of el. 2 that the
property in the rejected logs would' pass to WIMCO upon the failure of the
respondent to remove the same after rejection, of el. 3 that the goods shall be
delivered at Ambernath in the presence of WIMCO's Factory Manager and of el. 6
providing that the prices will be " F.O.R. Ambernath " clearly
militate against the theory of passing of property immediately on the goods being
loaded into the wagons.
While not contesting this, learned counsel
for the department urges that there is no such contrary intention indicated in
the later contract of March 2, 1945, which really governs the case. We are
unable-to accept this distinction as of any substance. It is true that in this
later contract cl. 2 is differently worded and there is no express provision
that the goods should be delivered at Ambernath. There are, nevertheless,
several other provisions in the later contract indicating that property in the
logs loaded in the wagon will not pass to WIMCO until after the goods arrive at
Ambernath and are inspected, measured and accepted by WIMCO's Factory Manager.
Clause 2 of the later contract quite clearly reserves the right of WIMCO to
examine the goods on arrival and to reject the same if they are found, in the
opinion of its Factory Manager, not to (1)  A.C. 200, 717 conform with
the specifications. This reservation, which is made notwithstanding the fact
that the logs may have been accepted by its representative before they were
railed to Ambernath, clearly indicates that the so called acceptance by the
representative was not final but was entirely tentative and subject to approval
of the logs by WIMCO's Factory Manager at Ambernath after their arrival. This
circumstance certainly militates against the property in them having already
'passed to WIMCO at the railway stations in the Central Provinces. The
provisions of cl. 6 that the goods shall be measured under the supervision of
WIMCO's representative, the decision of its Factory Manager at Ambernath being
binding on the respondent and of el. 7 that the prices shall be " F.O.R.
Ambernath " and shall be payable after such measurement of the logs by
WIMCO's representative further reinforce the conclusion that the intention of
the parties was that property in the goods shall not pass until the logs arrive
at Ambernath and are there inspected, measured and accepted by WIMCO. In our
judgment the prima facie case of what might have been the appropriation of the
logs by the respondent by loading on the wagons logs of the contract quality
and description with the assent of WIMCO given in .advance by the terms of el.
4 is effectively displaced by the provisions of cls. 2, 6 and 7 of the later
contract which clearly indicate a contrary intention. On a proper construction
of the contract as a whole the intention of the parties clearly was that the
respondent would send the logs by rail from the different stations in the
Central Provinces to Ambernath where WIMCO's Factory Manager would inspect,
measure and accept the same if in his opinion they were of the description and
quality agreed upon. In other words the respondent sent the logs and left it to
WIMCO to appropriate to the contract such of them as they accepted as of
contract quality and description. The respondent, therefore, gave in advance
its assent to WIMCO's appropriation of the goods at Ambernath.
Therefore, the decision of the High Court
cannot be assailed but must be accepted as well-founded in fact and in law.
Learned counsel for the department then falls
back 718 upon the Argument founded on ExplanationII to s. 2(g) and 'argues,
somewhat halfheartedly, that notwithstanding the provisions of the Sale of
Goods Act regarding the passing of property in the goods the sale under
consideration must be deemed, in the light of that Explanation, to have taken
place within the Central Provinces. The question of the constitutional validity
of that Explanation was not raised in the High Court and indeed, in view of the
decision of this Court in Poppatlal Shah v. State of Madras (1) and other'
cases, cannot now be raised and we must proceed on the footing that Explanation
11 did not transgress the legislative competency of the Legislature which
enacted the same. It will be noticed that Explanation II can apply only if the
goods " in respect of " which the contract of sale is entered into
are, at the date of such contract, actually in the Central Provinces. Learned
counsel for the department urges that the logs delivered must have been in
existence in the Central Provinces either in the shape of ';logs or in the
shape of standing timber. There is no evidence that at the date when the agreement
for sale was made, the particular logs delivered there under were in the
Central Provinces in the shape of logs at all. Learned counsel says that, at
any rate, they must have been in existence there in the shape of standing
timber. Apart from anything else,, the agreement here was riot " in
respect of " any standing timber and there was no provision in the
agreement as between the respondent and WIMCO for severance of the standing
timber before sale under that agreement. In order to attract Explanation II the
goods, in respect of which the contract of sale is made, must, at the date of
the contract be in existence in the Central Provinces, that is to say, that the
goods must at the date of the contract be there in the form in which they are
agreed to be sold. There is not an iota of evidence on that point. In our
judgment, there is no force in this alternative argument.
The result, therefore, is that this appeal is
dismissed with costs.
(1)  S.C.R. 677.