JUDGMENT
M.A. Ansari, J.
1. This batch of seven revision petitions arises in the four assessment years for 1951-52, 1952-53, 1953-54 and 1954-55. Three of the aforesaid petitions are by the Deputy Commissioner of Sales Tax, Trivandrum and the remaining four are by a registered dealer. The former set of petitions seeks to vary that part of the order by the Appellate Tribunal, wherein the tax on inter-State sales of tea in the aforesaid assessment years 1952-53, 1953-54 and 1954-55 has been held not to be legal; whereas the dealer petitioner seeks reversal of the remaining parts of the order that has upheld tax on other sales of tea in the four assessment years. In all the cases the dealer is Messrs Malayalam Plantations Ltd. and for the assessment year 1951-52 has been charged Rs. 13,155-3-1 as the tax under the Madras General Sales Tax Act. The amount has been levied on Rs. 25,367-4-0, which is the price of Wynad teas stored in and sold at Fort Cochin to T. Campbell & Co., Ltd., with a view to export to the Australian Tea Control Board; and on Rs. 22,85,177-12-6 which is the price of Travan-core teas similarly sold at the auction held and delivery taken at Fort Cochin. The tax in the next assessment year amounted to Rs. 16,967-15-0 and has been levied on Rs. 29,63,989 which is the price of tea similarly auctioned and delivered; and on Rs. 16,81,883-9-0 being the price of Travancore tea sold to Brooke Bonds (India) Ltd. and Lipton Ltd., for consumption in India. The Tribunal has found the latter to be inter-State sales and therefore legally not then taxable. In the third assessment year the sales tax has been found to be Rs. 18,240-15-0 and has been assessed on Rs. 39,69,213-11-0 and Rs. 5,99,635, these being the sales consideration realised in that year at the auction and sales of tea at Fort Cochin in order to export. The sales of the same commodity to Brooke Bonds (India) Ltd. and Lipton Ltd., for consumption within the country in the year came to Rs. 15,67,512-13-0 which have been exempted by the Tribunal on the ground of not being then taxable. Coming to the last year the prices realised at the auctions held at Fort Cochin of the tea available for export are Rs. 49,05,685-12-0 and Rs. 2,30,797-4-0. For the same year the sales to Brooke Bonds (India) Ltd. and Lipton Ltd., amount to Rs. 16,19,792-4-0.
2. The dealer had appealed to the Commercial Tax Officer, Malabar North, against the assessment orders and succeeded in getting partial reduction in the assessment. Again the dealer had appealed to the Appellate Tribunal of the then Madras State; but these appeals came to be decided by the Sales Tax Appellate Tribunal, Trivandrum. The aforesaid Tribunal, following the majority decision in Shanmugha Vilas Cashew-nut Factory case [1953] 4 S.T.C. 205 has held that purchases in the State by the exporter for the purpose of export are not within the exemption of Article 286(1) (b) of the Constitution and has further refused to accept the argument of the counsel for the dealer that the Explanation in Article 286(1) defines what is inside sale, so that transactions resulting in delivery but not for consumption within the State are extra-State and would not be liable to taxation in exercise of powers under item 54 of List II of Schedule VII of the Constitution. The counsel has urged before us the latter part of the same argument in support of the petitions by the dealer.
3. The Deputy Commissioner of Sales Tax seeks to reverse what the Tribunal has held not to be liable. These are sales in favour of Brooke Bonds (India) Ltd. and Lipton Ltd., in the last three assessment years which the Tribunal has held to be inter-State sales, covered by the Bengal Immunity case [1955] 6 S.T.C. 446 and not saved by Section 2 of the Sales Tax Laws Validation Act of 1956. The reason for holding the Validation Act not to be applicable is that Section 22 of the Madras General Sales Tax Act did not levy any tax and the taxes would not be therefore saved by the enactment. Similar view had been taken in Cochin Coal Co., Ltd. v. The State of Travancore-Cochin [1956] 7 S.T.C. 731 and in Government of Andhra v. Nooney Govindarajulu [1957] 8 S.T.C. 297 and the Tribunal had found it to be preferable. The view, however, has not been upheld by the Supreme Court in Sundararamier & Co. v. State of Andhra Pradesh [1958] 9 S.T.C. 298, where Venkatarama Aiyar J., delivering the majority decision has held that while in the context of Article 286(1)(a) the Explanation thereto can be construed as purely negative in character, though positive in form, it cannot be so construed in its setting in Section 22 of the Madras General Sales Tax Act, 1939. The learned Judge has further held that the Explanation in the section lays down in clear and unambiguous terms about the sales mentioned therein being intended as having taken place in the same State in which goods are delivered for consumption and its operation cannot be cut down by reference to the non-obstante clause. The learned Judge has therefore held that Section 2(h) and Section 22 of the Madras General Sales Tax Act must be read together as defining what sales were taxable and therefore the Explanation meant sales of goods delivered for consumption in the State of Madras to fall within the definition in Section 2 (h) and to be taxable. The Supreme Court authority may not directly cover the revision petitions by the Deputy Commissioner because the sales in favour of Brooke Bonds and Lipton Ltd., are not shown to be governed by Section 22 of the Madras General Sales Tax Act, the delivery in pursuance of the contracts not having been proved to be for consumption within the State of Madras. Nevertheless the Tribunal’s decision that as inter-State sales they are not amenable to sales tax cannot be sustained. It is well known that the construction of the Explanation to Article 286(1) put by the Supreme Court in the United Motors’ case [1953] 4 S.T.C. 133 was that though but for it the sales mentioned therein would be in the course of inter-State trade, its effect was to convert them into intra-State sales, so as to bring them within the taxing power of the delivery State. It is also well known that the Supreme Court in the Bengal Immunity case [1955] 6 S.T.C. 446 had held that the Explanation sales were not divested of their character as inter-State sales as the Explanation to Article 286(i)(a) did not govern Article 286(2) and in the absence of Parliamentary legislation as contemplated by Article 286(2), taxation of sales falling within its purview would be unconstitutional. It is equally well known that acting on the apparent tenor of the Explanation and the construction put upon it in the United Motors’ case [1953] 4 S.T.C. 133, the States had been levying taxes on the sales falling within its purview and by 6th September, 1955, collected large amounts by way of tax on Explanation sales. That apart there were proceedings pending for assessment of tax on such sales as well. To remedy these evils the Sales Tax Validation Ordinance No. 111 of 1956 was enacted which was eventually replaced by the Validation Act. Section 2 of the Act provides that no law of a State imposing a tax on sales which took place in the course of inter-State trade or commerce between 1st April, 1951 and 6th September, 1955, shall be deemed to be invalid or ever to have been invalid merely by reason of the fact that such sales were in the course of inter-State trade. The section further provides that all taxes levied or collected under such a law during the specified period shall be deemed to have been validly levied or collected. It is therefore clear that the effect of the Act is to liberate the States from the fetter placed on them by Article 286(2) and to enable the Madras General Sales Tax Act to operate on its own terms. It is equally clear that because of the Act the taxes not only on those covered by the Explanation but on all inter-State sales had become validated provided they fall within the period. We therefore hold that the Tribunal has incorrectly afforded the dealer the exemption in the three assessment years. It can no longer be disputed that Sections 2(h) and 22 of the Madras General Sales Tax Act are comprehensive enough to cover the exempted sales of tea and the assessment years are within the period mentioned in the Sales Tax Laws Validation Act of 1956. Therefore we allow the revision petitions by the Deputy Commissioner.
4. Coming to the revision petitions of the dealer we think the interpretation placed by the counsel for the dealer on what is intra-State sale is not correct. In support of his arguments, the learned counsel has relied on Birendra Nath Guha v. Commissioner of Taxes [1959] 10 S.T.C. 327, wherein the Assam High Court has held that the State cannot tax sales where delivery has been taken but not for consumption within the State. The counsel for the dealer has, however, fairly conceded that a different view has been taken in Burmah Shell & Co. v. Commercial Tax Officer [1957] 8 S.T.C. 142 and Batchu Subba Rao v. Commercial Tax Officer [1959] 10 S.T.C. 394. We think the latter decisions are supported not only by the observation of the Supreme Court in the Bengal Immunity case [1955] 6 S.T.C. 446, as has been pointed out by Sinha, J., in Burma Shell’s case [1957] 8 S.T.C. 142, but also by the observations of Venkatarama Aiyar, J., in Sundararamier & Co. v. State of Andhra Pradesh [1958] 9 S.T.C. 298. The learned Judge in the latter case while determining the scope of the Explanation to Section 22 of the Madras Sales Tax Act has observed at page 316 that Section 2(h) and Section 22 of the Madras Act must be read together as defining what are sales that are taxable under the Act and what are not and so read, the Explanation really means that in sales in which goods are given for consumption in the State of Madras the property therein shall be deemed to have passed inside that State notwithstanding that it was under the Sale of Goods Act Outside that State. In this connection the learned Judge further observed :-
On this construction, those sales will fall within the definition in Section 2(h) and will be taxable. The contention of the petitioner, highly technical and based on the non-insertion of the Explanation in Section 2(h) must, in our opinion, be rejected as unsound.
5. It follows that the Explanation does not contain any exhaustive definition of intra-State sales and it merely mentions one class of such sales that are taxable under the Act. The comprehensive definition is to be found in Section 2(h) of the Madras General Sales Tax Act and for this purpose the Explanation must also be included therein. We therefore prefer the view taken by the Calcutta High Court in the Burma Shell’s case [1957] 8 S.T.C. 142. In the result, the petitions by the Deputy Tax Officer are allowed while the others stand dismissed. The Judgment covers all the seven cases and the State be entitled to only one set of costs in all the petitions. We fix the counsel’s fee at Rs. 250.
