M/S. OUCHTERLONEY VALLEY ESTATES LTD. versus STATE OF KERALA

Citation: [1965] 1 S.C.R. 803 · Decided: 23-10-1964 · Supreme Court of India · Bench: P.B. GAJENDRAGADKAR · Disposal: Appeal(s) allowed
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Judgment (excerpt)

A 
M/S. OUCHTERLONEY VALLEY ESTATES LID. 
B 
c 
D 
E 
G 
H 
STATE OF KERALA 
(With Connected Appeals) 
October 23, 1964 
(P. B. GAJENDRAGADKAR, C.J., K. N. WANCHOO, 
M. HIDAYATULLAH, RAGHUBAR DAYAL AND 
J. R. MUDHOLKAR JJ.) 
Sales Tax-Sales by auction at Fort Cochin in Mddras State-Delivery 
after approval in Travancore-Cochin-Sale whether completed on fall of 
hammer at auctio.-i in Madras State-Taxability of sales under Travancore-
Cochin General Sales Tax Act (Act 11 of 1125). 
Teas produced by the appellants were classified and stocked in lots in 
godowns at Willingdon Island which at the relevant time was in the State 
of Travancore-Cochin. 
The sale of the said teas was however effected 
by public auction at Fort Cochin in Madras State under the Rules of the 
Tea Trade Association of Cochin. 
Sales-tax was imposed on the appellants 
by the State of Kerala under the Travancore-Cochin General Sales Tax 
Act (Act 11 of 1125) on the authority of the judgment of the Kerala High 
Court in Deputy Commissioner of Agricultural income-tax & Sales Tax v. 
A. V. Thomas & Co. Ltd. which was on similar facts. According to the 
said decision the sales were completed at the fall of the hammer in Fort 
Cochin but, nevertheless by virtue of explanation 2 to s. 2(j) of the 
Travancore Act they remained 'inside' sates for the purpose of taxation in 
Kerala State. 
Because of this judgment being against them, the appel-
lants also could not succeed before the Sales Tax Appellate Tribunal or 
before the High Court. They were however, granted special leave to 
appeal by the Supreme Court. 
Before the connected appeals came up for hearing the Supreme Court 
.had reversed the judgment of the Kerala High Court in the case of A. V. 
Thomas & Co. Ltd. on the authority of which the appellants had been 
taxed. Counsel for the State of Kerala therefore sought and was given 
permission to defend the imposition of tax on alternative reasoning. 
Relying upon ss. 17 and 18 of the Sale of Goods Act he contended that 
the sale at the auction in Fort Cochin being a sale by sample was not 
completed at the fall of the hammer but remained at that stage only a .. 
conditional sale. It became a completed sale whon the buyer after com-
paring tho bulk with the sample accepted the goods in Willingdon Island. 
The property in the goods thus passed in Kerala State making the sale 
liable to tax in that State. Rules of the Tea Trade Association of Cochin 
were called for and examined by the Court. 
HELD: The title to the goods passed to the buyer under s. ·64(2) of 
the Sale of Goods Act as soon as the sale was completed by the auctioner 
announcing its completion by the fall of the hammer. The initial auction 
cannot be treated as an executory contract which had become a conditionaf 
contract on the fall of the hammer. 
The sale at the auction was in 
respect of ascertained goods and it was concluded in every case on the 
fall of the hammer. The High Court was therefore in error in upholding 
the imposition of sales tax on the appellant by the State of Kerala. 
[814 
E-GJ 
CML APPELLATE JURISDICTION : Civil Appeals Nos. 1084-· 
1088 of 1963. 
L2 Sup./65-8 
-804 
SUPJll!MB COUi.T llEPORTS 
[1965) I S.C.IL 
Appeals by special leave from the judgment and order dated 
A 
November 1961, of the Kerala High Court in T.R.C. Nos. 39-42, 
31 to 34, 45 and 46, 35 to 38 and 47 respectively. 
M. C. Setalvad, Rameshwar Nath, S. N. A.ndley and 
P. L. Vohra, for the appellants (in all the appeals). 
P. Govinda Merion and V. A. Seyid Muhammad, for the res-
B 
pondent (in all the appeals). 
The Judgment of the Court was delivered by 
Gajendragadkar C.J. This is a grouo of fifteen appeals by 
special leave which raise a common question of Jaw. 
The appel-
lants in these respective appeals are Plantation Companies which c 
grow their own tea in Tea Estates and sell ;heir products. 
Under 
the relevant provisions of the Travancore-Cochin General Sales 
Tax Act 11 of 1125 (hereinafter called 'the Travancore Act'), 
Sales-tax Officers had assessed the appellants to several amounts 
of tax in respect of their turn-over for different years. 
The 
appellants had urged before the Safos-tax Officers that the trans-
B 
actions in question were not liable to pay sales-tax, but their 
pleas were rejected and sales-tax was ordered to be imposed in 
respect of the said transactions. 
The appellants then challenged 
the correctness of the.<e orders by preferring appeals before the 
Sales-T
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