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Sramajibi Stores Vs. Union of India - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtDelhi High Court
Decided On
Case NumberFirst Appeal No. 48 of 1973
Judge
Reported inAIR1982Delhi76; 20(1981)DLT459
ActsSale of Goods Act, 1930 - Sections 64A
AppellantSramajibi Stores
RespondentUnion of India
Advocates: R.S. Oberoi,; A.B. Dayal and; R.K. Anand, Advs
Cases ReferredLtd. v. Pitty
Excerpt:
- - the appellant could not supply coats and capes which were merely waterproofed but had to supply waterproofed coats with and without capes, as well as coats, made from cotton canvas of a particular kind. unreal interpretation would defeat the object of a provision like section 64a of the sale of goods act......detachable hoods made from cotton canvas special (chemically) waterproofed mineral khakhi. (b) coats waterproofed, with detachable hoods made from cotton canvas, special (chemically) waterproofed, mineral khakhi. (e) coats, waterproof (without hood), made from cotton canvas, special (chemically) waterproofed. dyed mineral khakhi.'(3) subsequent to the contract being entered upon, it is not disputed, excise duty payable on cotton canvas was increased. the appellant, thereforee, claimed a further sum of rs. 2,21,695. 36 on account of increase in costs of production of the above articles. the respondent disputed its liability to pay the amount. accordingly, the matter was referred to arbitration in terms of the arbitration agreement between the parties. shri p. h. ramchandani, the sole.....
Judgment:

Prakash Narain, C.J.

(1) These appeals- come before me on a difference of opinion between my learned brothers Sachar, J. and Kumar, J.

(2) The appellant had entered into a contract with the respondent to supply the following:

'(A)Gapes waterproofed, with detachable hoods made from Cotton Canvas special (Chemically) waterproofed mineral Khakhi. (b) Coats waterproofed, with detachable hoods made from cotton canvas, special (Chemically) waterproofed, mineral Khakhi. (e) Coats, waterproof (without Hood), made from cotton canvas, special (Chemically) waterproofed. Dyed Mineral Khakhi.'

(3) Subsequent to the contract being entered upon, it is not disputed, excise duty payable on cotton canvas was increased. The appellant, thereforee, claimed a further sum of Rs. 2,21,695. 36 on account of increase in costs of production of the above articles. The respondent disputed its liability to pay the amount. Accordingly, the matter was referred to arbitration in terms of the arbitration agreement between the parties. Shri P. H. Ramchandani, the sole arbitrator, by an award dated January 29, 1972 rejected the claim of the appellant observing that the duty was increased on the raw material, that is, on cotton canvas and not on the finished goods which were required to be supplied under the contract. He further held that the appellant could not take advantage of section 64A of the Sale of Goods Act, 1930. The respondent moved an application under Section 14 of the Arbitration Act, 1940 for filing of the award and making the same a rule of the Court. The appellant filed objections against the award. These two matters were registered as two suits on the Original Side of this Court. The learned Single Judge by his judgment dated April 30, 1973 made the award a rule of the Court and passed a decree in terms thereof. He dismissed the objections Filed by the appellant. In consequence, the appellant filed two appeals F.A.O. (OS) 47 and F.A.O.(OS) 48 of 1973. These came up for hearing before Sachar and Kumar, JJ. As noticed earlier, the two learned Judges have given differing opinions. Sachar, J. has held that Section 64A of ihe Sale of Goods Act would not be attracted and the view expressed by learned Single Judge was correct. Kumar, J on the' other hand, has taken the view that it would be attracted.

(4) Section 64A of the Sale of Goods Act reads as under :-

'(A)Unless a different intention appears from the terms of the contract, in the event of any tax of the nature described in Subsection (2) being imposed, increased, decreased or remitted in respect of any goods after the making of any contract for the sale or purchase of such goods without stipulation as to the payment of lax where tax was not chargeable at the time of the making of the contract, or for the sale on purchase of such goods tax, paid where tax was chargeable at that time,-

(A)if such imposition or increase to takes effect that the tax or increased tax, as the case may be) or any part of such tax is paid or is payable, the seller may add so much to the contract price as will be equivalent to the amount paid or payable in respect of such tax or increase of tax, and he shall be entitled to be paid and to sue for and recover such addition ; and

(B)if such decrease or remission so takes effect that the decreased tax only, or no tax, as the case may be, is paid or is payble, the buyer may deduct so much from the contract price as will be equivalent, to the decrease of tax or remitted tax, and he shall not be liable to pay, or be sued for, or in respect of, such deduction.

(2)The provisions of Sub-section (1) apply to the following taxes, namely :-

(A)any duty of customs or excise on goods ; (b) any tax on the sale or purchase of goods.

(5) Both my learned brothers are agreed that Section 15 of the Sale of Goods Act would govern the contract in question. The goods agreed to be sold by the appellant were goods which were to be identified by description. It is, thereforee, necessary to keep in mind the description of the goods in the contract. What is agreed to be sold by the appellant to the respondent are the items reproduced above. The appellant could not supply coats and capes which were merely waterproofed but had to supply waterproofed coats with and without capes, as well as coats, made from Cotton Canvas of a particular kind. If the appellant merely supplied waterproofed coats and capes, the goods could rightly be rejected. He had to supply water-proofed coats and capes made of cotton canvas, special (Chemically) treated and made waterproofed by this Chemical treatment. Coats and capes of any other material which may be waterproofed could have been rejected as not answering to the description of the goods agreed to be sold. thereforee, though cotton canvas, special (Chemically) waterproofed was no doubt the raw material from which the coats and capes had to be fabricated only these coats and capes which were fabricated from cotton canvas, special (Chemically) waterproofed could answer the description of the contracted goods. In such a situation if the excise on raw material went up, in my opinion, it could not be said that Section 64A of the Sale of Goods Act was not attracted. One may look at it from another point of view. Suppose the ban was imposed on production of cotton canvas, special (Chemically) waterproofed, in such a situtation, it could not be said that the contract had to be performed as there was no ban on the production of coats and capes made of cotton canvas of that type. The contract in such an event would be frustrated. If that be the correct proposition, then increase in the excise duty on the principle or dominent raw material would certainly attracted Section 64A of the Sale of Goods Act.

(6) In interpreting statutes, one does not have to give a literal interpretation. The object of the statute has to be looked into. Unreal interpretation would defeat the object of a provision like Section 64A of the Sale of Goods Act. The interpretation has to be purpose-full.

(7) Learned Counsel for the respondents urges that the contract was for supply of nine items, each made of different materials. It may be so. We are concerned here only with three items, mentioned above.

(8) Reliance was placed on the Single Bench decision of the Bombay High Court in Central Hindusthan Italian Trading Co. {private) Ltd. v. Pitty . Brothers (private) Ltd. : AIR1962Bom222 . That was a case in which clause (b) of Sub-section (1) of Section 64A of the. Sale of Goods Act came up for construction. It only laid down that it is not appropriate or possible to give to the words (deduct and 'deduction' in Sub-section (b) of Section 64A (should be clause (b) of Sub-section (1) of Section 64A), a meaning which relates to the physical act of deduction at the time of payment of price. As the report does not reproduce the entire judgment, it is not possible to take much assistance from it, as the facts are not known.

(9) In my opinion keeping in view Article 14 of the Constitution, a purposeful or a fair approach has to be adopted in contracts between the State and citizens. In any case the purpose for which Section 64A was enacted has to be kept in view. The purpose obviously was that increase or decrease in duty should be taken not of in the case of contracts concluded prior to the increase or decrease. No party should be made to unnecessarily gain or suffer on account of State action in increasing or decreasing duty. I, thereforee, agree with the view expressed by my learned brother Kumar, J. and will, thereforee, accept the appeals. The result would be that the award will be set aside and the objections filed by the appellant would be accepted.

(10) The case will now go back to the Division Bench of Sachar, and Kumar, JJ. to dispose of the appeals in the light of the opinion given by me.


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