CST v Husenali Adamnji & Co. (AIR 1959 SC 887)

This case is about when ownership in goods passes to the buyer under Section 23 of the Sale of Goods Act, 1930. The seller sent timber logs by rail to the buyer’s factory. The factory would inspect the logs and accept only those that met the contract specifications. The Court held that property passed only at the factory upon acceptance and appropriation, not when the logs were handed over to the railway. So, no sales tax could be charged on logs that were not accepted.

• Case Title: CST v Husenali Adamnji & Co.
• Citation: AIR 1959 SC 887
• Core Statute: Section 23, Sale of Goods Act, 1930

Main Issue: Can sales tax be levied on the seller for goods that the buyer did not accept?

Section 23(1), Sale of Goods Act, 1930: If the contract is for unascertained or future goods by description, and goods of that description in a deliverable state are unconditionally appropriated to the contract with the assent of the other party, the property passes to the buyer. Assent may be express or implied and may be given before or after appropriation.

The Supreme Court read the contract as a whole and held that the parties intended inspection and acceptance at Ambernath to decide appropriation. Therefore, property did not pass on railway delivery. It passed only when the factory accepted logs that matched the agreed description and quality. The High Court’s view was upheld, and the department’s appeal was dismissed.

For Respondent Sales tax not payable on unaccepted logs.

Under Section 23(1)unconditionally appropriated to the contract with mutual assent. In this case, appropriation happened after inspection and acceptance at the factory. Until then, ownership remained with the seller; hence, no sales tax on rejected or unaccepted logs.