TMI Blog1980 (4) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... issue an appropriate circular requiring the production of an agreement with or an order from a foreign buyer from the registered exporters just before the property in the coffee sold at such auctions passes under clauses 19 and 20 of the auction conditions. As regards past dealings and transactions, final assessment, if any, made by the taxing authorities as well as recoveries if made thereunder contrary to the view expressed by us above deserve to be set aside and reassessments made and the concerned State Governments will direct their taxing authorities to do the needful and further direct the refund of recoveries made to the Coffee Board which in its turn will refund the same to the concerned registered exporters. Assessments or recoveries if made in conformity with our judgment need not be disturbed. - W.P. Nos. 3130, 4238, 4239 of 1978, & 8, 1458 of 1979 - - - Dated:- 15-4-1980 - TULZAPURKAR V.D., DESAI D.A. AND SEN A.P. JJ. P.G. Nair, Senior Advocate (K.J. Chandran, J.B. Dadachanji, K.J. John and Sri Narain, Advocates, with him), for respondent No. 1 N. Nettar, Advocate, for respondent No. 2, S.T. Desai, Senior Advocate (A.V. Rangam, Advocate, with him), for res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porated under section 5 of the Coffee Act, 1942, an enactment passed to provide for the development of the coffee industry under the control of the Union. Sections 4 to 10 of the Act deal with the setting up of the Coffee Board on which all interests are represented and some Members of Parliament and Government officers are nominated. The Board exercises powers and discharges functions assigned to it under the Act and the Coffee Rules framed thereunder. The Act compels the registration of all owners of coffee estates and licensing of owners and dealers and it also imposes control on the sale, export and re-import of coffee into India. In regard to sale it fixes prices for sale of coffee either wholesale or retail by registered owners and licensed owners for the purpose of sale in the Indian market and the Coffee Board fixes internal sale quota for each estate owner and the owner has to observe this quota and also the price fixed and under section 25 all coffee produced by a registered estate in excess of the quantities specified in the internal sale quota allotted to that estate, or when no internal sale quotas have been allotted to the estates, all the coffee produced by the estat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Chief Coffee Marketing Officer, an executive appointed by the Central Government on the Board, at any time if it is found that a permit-holder has sold or has attempted to sell coffee bought by him at the "export auction" within the internal market without his written permission or if any of the other permit conditions are contravened. A specimen of the permit together with the conditions attaching to it has been annexed to each petition. The actual "export auctions" are conducted on the basis of "the terms and conditions of sale of coffee in the course of export" framed by it and the registered exporters participate in such auctions on those terms and conditions. A specimen copy of these auction conditions has been annexed to each petition. Clause 3 thereof declares that all auctions and sales made thereat are subject to (i) the auction conditions, (ii) the permit conditions and (iii) such other rules or conditions as may be prescribed by the Chief Coffee Marketing Officer. Under clause 4 only dealers who have registered themselves as exporters of coffee with the Coffee Board and who hold a permit from the Chief Coffee Marketing Officer in that behalf are permitted to partici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral Sales Tax Act, 1956, which was inserted on 7th September, 1976, with retrospective effect from 1st April, 1976, by the Amending Act (103 of 1976), the exemption from liability to tax under the Act in regard to a sale in the course of the export was and continues to be governed by section 5(1) of the Act which runs thus: "5. (1) A sale or purchase of goods shall be deemed to take place in the course of the export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India." The aforesaid provision was examined by this Court in two leading cases, namely, Coffee Board, Bangalore v. Joint Commercial Tax Officer, Madras [1970] 25 S.T.C. 528 (S.C.); [1970] 3 S.C.R. 147., and Mohd. Serajuddin v. State of Orissa [1975] 36 S.T.C. 136 (S.C.); [1975] Supp. S.C.R. 169., and a certain interpretation had been accorded by this Court to the expression "in the course of export" and according to these decisions the last sale, immediately preceding the sale occasioning the export of goods out of India (hereinafter called the "pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idders) should satisfy three conditions: (a) he must have an export contract (i.e., either agreement or order) from a foreign buyer, (b) he must have it on hand at the time when he participates in the export auction and (c) he should give proof of the export of the coffee purchased at the auction. By way of compliance with the conditions (a) and (b) above, the said circular requires the registered exporters to deposit with the Board before the commencement of each auction copies of the export orders or agreements from their foreign buyers. Obviously the Coffee Board proceeds on the basis that section 5(3) requires an agreement with or an order from a foreign buyer and that too it must exist at the time of participation in the auction inasmuch as in its view the property in the coffee sold at such auction passed and the penultimate sale takes place at the fall of the hammer under section 64(2) of the Sale of Goods Act. Further, as the Coffee Board could not be certain as to how the sales tax authorities would treat the penultimate sales in the matter of granting exemption the said circular requires the bidders to make a contingency deposit in cash equivalent to the sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to the custom station for shipment because till then the Coffee Board has a right of disposal over the same within the meaning of section 25 of the Sale of Goods Act under clause 31 and in any event not until the same is weighed and set apart and price paid therefor under clause 19 and hence if the agreement with the foreign buyer is available before that it would be sufficient compliance of section 5(3). The Board's view that the property in the coffee sold at the auctions passes to the bidders at the fall of the hammer is clearly unsustainable. The petitioners thus contend that the aforesaid action on the part of the Coffee Board in forcing the registered exporters of coffee, including the petitioners, to make contingency deposits or to furnish bank guarantees to secure payment of sales tax on transactions which have been specifically exempted from sales tax by section 5(3) and the proviso to section 6(1) of the Central Sales Tax Act, 1956, read with article 286(1) of the Constitution of India is without authority of law and the Board's circular dated 7th February, 1977, is unreasonable, arbitrary, illegal, without authority of law and violative of their fundamental rights u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions for such sales and the circular dated 7th February, 1977, is one such communication addressed to the registered exporters containing additional terms or conditions concerning sales tax in the matter of such auctions and neither the auction conditions nor the circular stem from any statute but are matters falling within the realm of contract and therefore no writ petition challenging Lie circular is maintainable. Secondly, the Coffee Board is entitled to protect its interest and since it has an apprehension that exemption provided for by section 5(3) of the Central Sales Tax Act, 1956, may not be made available by the assessing authorities under the sales tax law, the Coffee Board decided to safeguard its interest by taking contingency deposits or bank guarantees equivalent to the amount of sales tax that would be payable in respect of the export auctions. It is pointed out in this behalf that all kinds of penultimate sales or purchases are not exempt under section 5(3) but the exemption is hedged in with conditions specified therein and only when those conditions are proved to the satisfaction of the assessing authority the exemption will arise and until then there is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis that the auction conditions truly govern the rights and obligations of the parties to such sale. We may also state that during the hearing the counsel for the State of Tamil Nadu also raised the question of the vires of section 5(3), apart from its construction; he contended that the provision itself was ultra vires article 286(2) on the ground that instead of formulating any principle for determining when a sale or purchase of goods takes place in the course of export outside the territory of India-for which alone power to make law has been conferred on Parliament-the Parliament has created a legal fiction to the effect that a penultimate sale or purchase, in certain circumstances, shall be deemed to be in the course of export when in truth and reality it is not and the creation of such legal fiction is beyond the power or outside the authority conferred by article 286(2). From the rival contentions which have been summarised above, it will appear clear that principally four questions arise for our decision in these petitions. The first relates to the maintainability of the writ petitions against the Coffee Board; the second is whether the amendment introduced by insertion o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the goods have crossed the customs frontiers of India, would be sales in the course of export. Section 5(1) which was enacted in the Central Sales Tax Act, 1956, pursuant to the power conferred on Parliament by article 286(2) [which was introduced by the Constitution (Sixth Amendment) Act, 1956) merely gave legislative recognition to the aforesaid two principles which had been formulated by this Court while interpreting article 286(1)(b) but while adding sub-section (3) to section 5 of the Act, Parliament had created a. legal fiction to the effect that a penultimate sale satisfying certain specified conditions shall also be deemed to be a sale in the course of export when in truth and reality it is not. According to him, creation of such fiction is not formulation of any principle and as such the provision is beyond the power or authority conferred on Parliament by article 286(2). It is not possible to accept the aforesaid contention for the reasons we shall presently indicate. It is true that the word "deemed" has been used in section 5(3) but the same word has been used not merely in section 5(1) but also in the other two sections 3 and 4 of Chapter II of the Central Sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion; if that be so, it is difficult to accept the contention that in sub-section (3) the same word should be construed as creating a fiction. Thirdly, a principle has been explained in Butterworths' Words and Phrases, Second Edition, Vol. 4, at page 177, thus: "A 'principle' means a general guiding rule, and does not include specific directions, which vary according to the subject-matter" (per Shearman, J., in M'Creagh v. Frearson 1922 W.N. 39.]. Similarly in Words and Phrases, Permanent Edition, Vol. 33A, at page 327, it is explained that "principle means a general law or rule adopted or professed as a guide to action". In other words, as opposed to any specific direction governing any particular or specific instance, transaction or situation a principle would be a guiding rule applicable generally to cases or class of cases. Looked at from this angle it will be clear that sub-section (3) of section 5 formulates a principle inasmuch as it lays down a general guiding rule applicable to all penultimate sales that satisfy the two conditions specified therein and not any specific direction governing any particular or specific transaction of a penultimate sale. In other words the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r words, the phrase "the agreement for or in relation to such export" is wide enough to include any binding or enforceable agreement to export even with a local party to implement which the penultimate sale should have taken place. According to the counsel, the words "such export" occurring at the end of the sub-section mean the physical export of the goods outside India and it is significant that Parliament has linked "the agreement or order" with "such export" (meaning the physical export outside India) and not with "the sale occasioning the export". The argument is had Parliament intended that the agreement with or order from a foreign buyer was essential it would have said "the agreement or order for or in relation to such sale occasioning the export". Further, relying upon the Statement of Objects and Reasons appended to the relevant Bill, it is contended that the benefit of this new provision was intended to be extended to even small manufacturers who produce goods for a foreign market but have to depend upon private export houses possessing the requisite expertise of export trade or a statutory canalising agency like the State Trading Corporation for the export of their good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... linked up with the sale so that the bond cannot be dissociated without a breach of the obligation arising by statute, contract or mutual understanding between the parties arising from the nature of the transaction, the sale is in the course of export." The counsel urged that securing a foreign buyer's contract or a foreign buyer's order is not the only mode in which the requisite obligation to export, affording the inextricable link between the sale and export, can arise; such obligation can arise by reason of a binding or enforceable covenant to export being incorporated in the contract of the penultimate sale entered into with a local party as is the case in the export auctions conducted by the Coffee Board where under clause 26 it is obligatory on the part of the registered exporters to export the coffee sold to them and perhaps with the Coffee Board possessing statutory powers to enforce the condition on pain of imposition of penalty and seizure of unexported coffee the obligation to export will have greater sanctity than the obligation arising from a foreign buyer's contract or a foreign buyer's order. The counsel, therefore, contended that the penultimate sales herein, nam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchase (meaning the penultimate sale or purchase) took place after, and was for the purpose of complying with, the agreement or order for or in relation to such export. " It is true that Parliament has not said "the agreement or order for or in relation to such sale occasioning the export", but has used the phrase "the agreement or order for or in relation to such export". But in our view two aspects emerge very clearly on a close scrutiny of this phrase which by implication show that the "agreement" spoken of there refers to the agreement with a foreign buyer and not an agreement with a local party containing a covenant to export. In the first place the concerned phrase speaks of two things in disjunctive: "agreement" or "order". The word "order" which appears in a statute dealing with sales tax must be understood in a commercial sense, that is, in the sense in which traders and commercial men will understand it. In commercial sense an order means a firm request for supply of definite goods emanating from a buyer, an indent placed by a purchaser and, therefore, an order for or in relation to export would mean an indent from a foreign buyer. It is not possible to accept the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e agreement with a foreign buyer and not an agreement or any agreement with a local party containing the covenant to export. Coming to the mischief rule, in In re Mayfair Property Co. [1898] 2 Ch. 28 at 35., Lindley, M.R., re-enunciated it thus: "In order properly to interpret any statute it is necessary to consider how the law stood when the statute to be construed was passed, what the mischief was for which the old law did not provide, and the remedy provided by the statute to cure that mischief." Looked at from this angle it will be desirable to indicate in brief the position that obtained prior to the enactment of section 5(1) of the Central Sales Tax Act, 1956, how section 5(1) after its enactment had been interpreted by this Court and why the enactment of the new provision contained in section 5(3) was felt necessary. Prior to the enactment of section 5(1) there was no legislative guidance as to what transactions of sale or purchase could be said to be "in the course of export" and the said expression occurring in article 286(1)(b) of the Constitution was construed by this Court in what have come to be known as the first and the second Travancore-Cockin cases, namely, State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods out of India) rather very strictly in the two cases, namely, the Coffee Board's case [1970] 25 S.T.C. 528 (S.C.); [1970] 3 S.C.R. 147., and the Mohd. Serajuddin's cases. In the former case, in regard to the very export auctions conducted by the Coffee Board for the avowed purpose of exporting the coffee through the registered exporters (which are the subject-matter of the instant writ petitions) this Court negatived the claim that the sales of coffee at such auctions were made "in the course of export" within the meaning of section 5(1) on the ground there were two sales, one by the Coffee Board to the intermediary (registered exporter) and the other by the intermediary to the importer and that the first sale was not "in the course of export" for the export began from the intermediary and ended with the importer and that the introduction of the intermediary (registered exporter) between the seller (Coffee Board) and the importing buyer broke the link. This Court laid down the test that there must be a single sale which itself caused the export and there was no room for two or more sales being "in the course of export". In other words, notwithstanding the compulsion to export a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 5(1) of the Central Sales Tax Act, a sale or purchase of goods can qualify as a sale in the course of export of the goods out of the territory of India only if the sale or purchase has either occasioned such export or is by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India. The Supreme Court has held (vide Mohd. Serajuddin v. State of Orissa, 36 S.T.C. 136) that the sale by an Indian exporter from India to the foreign importer alone qualifies as a sale which has occasioned the export of the goods. According to the Export Control Orders exports of certain goods can be made only by specified agencies such as. the State Trading Corporation. In other cases also, manufacturers of goods, particularly in the small-scale and medium sectors, have to depend upon some experienced export house for exporting the goods because special expertise is needed for carrying on export trade. A sale of goods made to an export canalising agency such as the State Trading Corporation or to an export house to enable such agency or export house to export those goods in compliance with an existing contract or order is inextricably connected with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exemption was to promote our exports in fiercely competitive international markets and, according to the counsel, both these objectives would be frustrated if the narrow construction was placed on the expression "the agreement" as meaning the agreement with a foreign buyer and that the construction suggested by him would carry out the objectives. It is true that the benefit of the exemption was intended to be extended to small and medium scale manufacturers desirous of exporting their goods but the requirement of the new provision is not that they must procure or have with them a foreign buyer's contract but the requirement is that before they complete the sale of their goods to the canalising agency or the private export house there must be in existence a foreign buyer's contract to implement which they should have sold their goods to such agency or export house. In the nature of things such manufacturers who have no expertise of export trade are not expected to have a foreign buyer's contract with them and it would be sufficient compliance of the provision if the canalising agency or the export house has with it the foreign buyer's contract. It would, therefore, be incorrect t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y urged that the penultimate sales by the Coffee Board to the registered exporters include in them a covenant to export and having regard to clauses 26, 30 and 31 there is a compulsion on the registered exporters to export the coffee on pain of imposition of a penalty and seizure of unexported coffee and reliance in that behalf was placed upon the observations of Shah, J., in the Ben Gorm Nilgiri Plantations Company's case [1964] 15 S.T.C. 753 (S.C.); [1964] 7 S.C.R. 706. In our view, the observations (quoted in extenso in the earlier part of the judgment) will have to be read in the context of the facts which obtained in that case. It was a case of only one sale which had resulted in the export and the question was whether transactions of sale of tea chests by the manufacturer at public auctions held at Fort Cochin to the local agents of foreign buyers were exempt from levy of sales tax under article 286(1)(b) and though it was common ground that the purchases by the local agents of foreign buyers were with a view to export the goods to their principals abroad and that the goods were in fact exported out of India this Court found nothing in the transactions from which a bond or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the phrase "the agreement or order for or in relation to such export" occurring therein and, as we have said above, since on proper construction the expression "the agreement or order" means the agreement with or an order from a foreign buyer it must be held that the Parliament intended to prescribe that the obligation to export arising only from such agreement or order that would afford the inextricable link so as to constitute the penultimate sale a sale in the course of export. Having come to the conclusion that on proper construction the expression "the agreement" occurring in section 5(3) refers to the agreement with a foreign buyer and does not include any agreement with a local party containing a covenant to export, the next question that arises for our consideration is as to when does the penultimate sale (the sale of coffee at export auctions conducted by the Coffee Board to the registered exporters) takes place, i.e., becomes complete by the passing of the property in the coffee sold thereat to the registered exporters. The determination of the point of time at which the property in the coffee passes to the registered exporters becomes necessary because before that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le" has been defined in section 2(g) for the purpose of that Act and under section 2(g) of the Central Sales Tax Act "sale" means "any transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable consideration, and includes a transfer of goods on the hire-purchase or other system of payment by instalments, but does not include a mortgage or hypothecation of or a charge or pledge on goods". In other words, wherever the word "sale" occurs in the Central Sales Tax Act, 1956, it is this definition given in section 2(g) that will be applicable and therefore the word "sale" in section 5(3) must mean transfer of the goods by one person to another for cash or for deferred payment or for any other valuable considerations; it cannot mean "agreement to sell". Moreover, there is nothing in the context of section 5(3) to suggest that the word "sale" occurring therein should be understood differently. In the Balabhagas Hulaschand's case [1976] 37 S.T.C. 207 (S.C.); [1976] 2 S.C.R. 939., this Court in the context of the question as to when a sale could be said to take place in the course of inter-State trade or commerce gave an extended meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioneer announces its completion by the fall of the hammer or in other customary manner; and, until such announcement is made, any bidder may retract his bid." Clause 19 of the auction conditions which deals with weighment, delivery and payment of price contains an overriding provision to this effect: "Notwithstanding anything contained in these conditions, the property in the coffee sold shall not pass to the buyer until after he has paid the full price and the coffee sold to him is weighed and set apart for delivery to him." Clause 26 declares that it is an essential condition of the auction that the coffee sold thereat shall be exported to stipulated destinations in the catalogue of lots or to such foreign country as may be approved by the Chief Coffee Marketing Officer within three months or such extended time as may be allowed (which extension shall not exceed one year) and the same shall not, under any circumstances, be diverted to any other destination or sold or be disposed of, or otherwise released in India, while this condition is enforced by seizure of the unexported coffee under clause 31 which runs thus: "31. On default by the buyer to export the coffee aforesa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the overriding provision may bind the parties to the contract but will not have the effect of creating an estoppel against a third party like a State Government or its sales tax authorities from contending or showing that the property at such auctions passes at the fall of the hammer and if under the other terms of the auction it is clear that the property has passed or does pass to the auction purchaser at the fall of the hammer a mere declaration of the intention on the part of the contracting parties deferring or postponing the passing of the property will not affect the question and in that behalf reliance was placed upon the observations of Lord Chancellor Herschell in McEntire v. Crossley Bros. Ltd. [1895-1899] All E.R. (Reprint) 829 at 832., where the observations run thus: "Upon an agreement to sell, it depends upon the intention of the parties whether the property passes or does not pass. Here the parties have in terms expressed their intention, and said that the property shall not pass until the full purchase money is paid. I know no reason to prevent that being a perfectly lawful agreement. If that was really the intention of the parties, I know of no rule or princip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant case is concerned, the counsel for the petitioners urged that section 64(2) was not attracted for two reasons: (a) the export auctions conducted by the Coffee Board are not unconditional but subject to certain conditions, particularly the condition expressly relating to the passing of the property as contained in clause 19 and (b) factually the sale is never in respect of lots of specific or ascertained goods inasmuch as it is abundantly clear from the affidavit of Shri Meenaxi Sunderam, the Chief Coffee Marketing Officer of the Coffee Board, dated 20th February, 1980, that every lot put up for auction invariably contains 5 per cent of coffee more than the quantity indicated in the catalogues and the coffee sold from any particular lot is required to be weighed and set apart and appropriated to the contract before delivery is given. Apart from the factual ground, the counsel urged that the position in law that section 64 is subject to a contract to the contrary is very clear and under clause 19 the passing of property in the coffee sold at the export auctions has been deferred until after the coffee sold is weighed, set apart for delivery and price is paid therefor and acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese we find considerable force in the submissions made by the counsel for the petitioners. Regarding section 64(2) of the Sale of Goods Act it seems to us that that provision does not deal with the question of the passing of the property in the goods sold at auction sale but instead it deals with the completion of the contract of sale. It is true that sub-section (2) says that "the sale is complete" when the auctioneer announces its completion by the fall of hammer or in other customary manner, but, the next following provision which says: and "until such announcement is made any bidder may retract his bid" suggests that what is complete at the fall of the hammer or the announcement of closure in other customary manner is that the contract for sale is complete. It is well-known that our Sale of Goods Act, 1930, is based upon and is largely a reproduction of the English Sale of Goods Act, 1893, and in principle as well as in most details the law of sale of goods in both the countries is now the same and, therefore, the English authorities on interpretation of different sections, although not technically binding in India, would have great persuasive value. It will be pertinent to o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cording to which he had been paying large amounts to well-known auctioneers. D thus accepted the cheque, King signing a form which stated: "I hereby certify that my cheque No.- will be met on presentation at my bank. Furthermore, I agree that the ownership of the vehicles will not pass to me until such time as the proceeds of my cheques have been credited to South London Motor Auction account at Lloyds Bank." King was permitted to remove the vehicles and he sold the Standard Car to a third party, C, who sold it to the defendant, S. The cheque was dishonoured on presentation and it transpired that King had no connections with King's Motors. D sought from S return of the car or payment of its value. Negativing the claim, the court held that the contract for sale was unconditional and, therefore, the property in the car passed on the fall of the hammer under the Sale of Goods Act, 1893, section 18(1), and D's right under section 39(1)(b) of that Act to retain the car until payment was made was relinquished when he gave possession to King. On the question of the passing of the property the court at page 34 observed thus: "The second point on which the plaintiff relies is that the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the fall of the hammer. These common law principles are adopted by both the Uniform Sales Act and the Uniform Commercial Code. Where the seller reserves the right to refuse to accept any bid made, a binding sale is not consummated between the seller and the bidder until the seller accepts the bid....... Once a bid has been accepted, the Parties occupy the same relation towards each other as exists between promisor and promisee in an executory contract of sale conventionally made." Again in para 48 at page 260 on the question of passing of title the following statement of law occurs: "48. Passing of title; risk of loss of Property.-The acceptance of the bid upon the fall of the hammer gives rise to contract rights which may be enforced, but does not necessarily convey or transfer the title to the property. As in the case of sales generally, the intention of the parties derived from the terms of the contract and the circumstances of the case primarily determines the question as to when title passes. Many cases hold that in an auction sale of chattels, when the sale is without condition and where nothing remains to be done to the property before its delivery, either to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or identifiable goods and auction sales in regard to unascertained goods and held that in regard to the former the property in the goods passed when the contract was accepted at the fall of hammer and not in the latter case. That was a case where the teas were stored in the godowns in the Willingdon Island which was in the State of Travancore-Cochin and samples of those teas were taken to Fort Cochin which at the relevant time was in the State of Madras. At Fort Cochin by the samples the teas were sold by public auction in lots, some of the lots were purchased in their entirety and others in parts and after the consideration money was paid at Fort Cochin delivery orders were given to the buyers addressed to the godown keepers at Willingdon Island and actual delivery of tea was taken there. These teas were then sent out from Willingdon Island in Travancore-Cochin for consumption either in other parts of India or were exported out of India. The taxability of the sales of teas in the manner mentioned above under the Travancore-Cochin General Sales Tax Act depended upon whether the sales could be held to have taken place at Willingdon Island, i.e., within the territory of Travancore-C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which contains "Miscellaneous" provisions and section 62 which occurs in the same chapter clearly provides that where any right, duty or liability would arise under a contract of sale by implication of law, it may be negatived or varied by express agreement or by the course of dealing between the parties, or by usage, if the usage is such as to bind both the parties to the contract. Ordinarily. the rights, duties and liabilities arising under a contract of sale by implication of law spoken of in section 62 refer to the rights, duties and obligations referred to in Chapter III containing provisions which lay down rules as to transfer of property as between seller and buyer and transfer of title but there is no reason why section 62 should not apply to rights, duties and obligations arising under section 64 in regard to auction sales. In other words, section 64 would be subject to section 62. Moreover, there is intrinsic material in section 64 itself, which shows that the provisions thereof could be subject to a contract to the contrary. For instance, sub-section (1) thereof provides that where goods are put up for sale in lots then each lot is prima facie deemed to be the subject o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties in an executory contract. This is also made clear expressly by clause 13(a) of the auction conditions which runs thus: "13(a) After the bidding has come to a close on each lot, the sale conducting officer shall declare the bid accepted by him and make entry accordingly in the register of bids. Thereupon the contract between the registered dealer by or on whose behalf the bid was tendered and the Coffee Board becomes complete." The aforesaid clause suggests that the parties to the auction sale also understood section 64(2) of the Sale of Goods Act in the manner in which we have interpreted it. On the question of the passing of the property the specific provision is to be found in clause 19 of the auction conditions. As stated earlier clause 19 principally deals with aspects of delivery, weighment and payment of price and towards the end it contains an overriding provision to the effect that notwithstanding anything contained in these conditions, the property in the coffee sold shall not pass to the buyer until after he has paid the full price and the coffee sold to him is weighed and set apart for delivery to him. In other words, it is clear that the parties intended th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause 20 clearly go to show that after the price is fully paid and the coffee sold is weighed and set apart for delivery to the buyer the same lies with the Coffee Board at the risk of the buyer and if during the interval if there be any gain or loss in weight the same will be credited and debited to his account. This provision clearly indicates in positive terms that the property in the coffee sold at the export auction passes to the buyer not before the payment of full price, weighment and setting apart thereof for delivery to the buyer but immediately after such payment, weighment and setting apart for delivery. We might refer to another clause, namely, clause 23, which contains another special overriding provision providing for non-liability of the Coffee Board in case damage to the coffee sold or to the warehouse wherein the coffee was stored occurs by fire, flood, strike, riot, civil commotion, etc., etc., and it is provided that notwithstanding anything contained in the auction conditions in regard to the payment of prices, insurance/warehouse charges, delivery or other conditions and notwithstanding the provisions of the Sale of Goods Act in regard to passing of property, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h has already become the property of the buyer under clauses 19 and 20 of the auction conditions and all that clause 31 provides is that if default is made by the buyer in exporting coffee within the prescribed time or extended time it shall be lawful for the Coffee Board without reference to the buyer to seize the unexported coffee and take Possession thereof and deal with it as if it were the part and parcel of the Board's coffee held by them in their Pool stock. Far from amounting to a reservation of the right of disposal over the unexported coffee to the Coffee Board, clause 31 is in the nature of a defeasance clause in the sense that what is vested in the buyer under the earlier conditions, the same shall revert back to the Coffee Board if the buyer commits a default in fulfilling the essential condition. Such a reading of clause 31 would be consistent with a further provision which is to be found in the latter portion of that clause. The latter part of clause 31 provides that after the coffee is seized and it becomes part and parcel of the Board's coffee held by it in its pool stock, the Board shall resell the same but after such resale the Chief Coffee Marketing Officer sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board) the property in the coffee sold thereat passes to the buyer immediately upon payment of full price, weighment and setting apart of the coffee for delivery to the buyer under clauses 19 and 20 of the auction conditions and it would be at this stage, i.e., just before this stage is reached that the agreement with or order from a foreign buyer must be available or produced in order to attract section 5(3) of the Central Sales Tax Act, 1956. In the result the writ petitions are partly allowed. The impugned circular dated 7th February, 1977, to the extent to which it insists on production of an agreement with or an order from a foreign buyer from the registered exporters before participating in export auctions is quashed; it is also quashed hereafter to the extent to which it requires the registered exporters to make contingency deposits or furnish bank guarantees out of abundant caution inasmuch as such requirement would be unnecessary in view of our authoritative pronouncement. The Coffee Board may, if so advised, modify its circular or issue an appropriate circular requiring the production of an agreement with or an order from a foreign buyer from the registered exporters ju ..... X X X X Extracts X X X X X X X X Extracts X X X X
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