{"id":176341,"date":"1953-05-08T00:00:00","date_gmt":"1953-05-07T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/state-of-travancore-cochin-and-vs-shanmugha-vilas-cashew-nut-on-8-may-1953"},"modified":"2017-12-23T14:42:50","modified_gmt":"2017-12-23T09:12:50","slug":"state-of-travancore-cochin-and-vs-shanmugha-vilas-cashew-nut-on-8-may-1953","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/state-of-travancore-cochin-and-vs-shanmugha-vilas-cashew-nut-on-8-may-1953","title":{"rendered":"State Of Travancore-Cochin And … vs Shanmugha Vilas Cashew Nut … on 8 May, 1953"},"content":{"rendered":"
Supreme Court of India<\/div>\n
State Of Travancore-Cochin And … vs Shanmugha Vilas Cashew Nut … on 8 May, 1953<\/div>\n
Equivalent citations: 1953 AIR 333, \t\t 1954 SCR 53<\/div>\n
Author: M P Sastri<\/div>\n
Bench: Sastri, M. Patanjali (Cj), Mukherjea, B.K., Das, Sudhi Ranjan, Bose, Vivian, Hasan, Ghulam<\/div>\n
           PETITIONER:\nSTATE OF TRAVANCORE-COCHIN AND OTHERS\n\n\tVs.\n\nRESPONDENT:\nSHANMUGHA VILAS CASHEW NUT FACTORYAND OTHERS.\n\nDATE OF JUDGMENT:\n08\/05\/1953\n\nBENCH:\nSASTRI, M. PATANJALI (CJ)\nBENCH:\nSASTRI, M. PATANJALI (CJ)\nMUKHERJEA, B.K.\nDAS, SUDHI RANJAN\nBOSE, VIVIAN\nHASAN, GHULAM\n\nCITATION:\n 1953 AIR  333\t\t  1954 SCR   53\n CITATOR INFO :\n APR\t    1955 SC 661\t (16,26,31,34,63,123,154,169,21\n RF\t    1955 SC 765\t (32)\n F\t    1956 SC 158\t (9)\n E&D\t    1957 SC 790\t (12)\n RF\t    1958 SC 453\t (26)\n F\t    1958 SC1002\t (9,11)\n F\t    1958 SC1006\t (11)\n F\t    1960 SC 595\t (9,10)\n R\t    1961 SC  41\t (19)\n D\t    1961 SC  65\t (17)\n R\t    1961 SC 213\t (10)\n RF\t    1961 SC 315\t (11,26)\n R\t    1961 SC1344\t (5)\n R\t    1962 SC1006\t (77)\n R\t    1962 SC1733\t (11,12)\n R\t    1963 SC 980\t (10)\n R\t    1964 SC1729\t (20,35)\n R\t    1964 SC1752\t (5,11,23,26)\n R\t    1971 SC 477\t (5)\n RF\t    1971 SC 870\t (21)\n R\t    1972 SC  23\t (6)\n RF\t    1974 SC1510\t (8)\n E\t    1975 SC1564\t (10,14,15,16,24,50,59)\n R\t    1979 SC1721\t (7)\n R\t    1980 SC1468\t (15)\n F\t    1992 SC1952\t (10)\n\n\nACT:\n Constitution  of India, 1950, art. 286 (1) (a), (1) (b)  and\n (2)Tax\t on  sale or purchase of goods-Sales  \"\t outside  the\n State \" -Sales \"in the course of \" import or export-Sales  \"\n in the course of inter-State trade or commerce \" -Nature and\n incidents  of--State's power to tax-Scope of  constitutional\n limitations.\n\n\n\nHEADNOTE:\nHeld, by (PATANJALI SASTRI C.J., MUKHERJEA, VIVIAN BOSE\t and\nGHULAM\tHASAN JJ.)-(i) Sales and purchases which  themselves\noccasion the export or import of the goods, as the case\t may\nbe, out of, or into, the territory of India come within art.\n286  (1)  (b)  and  are exempt\tfrom  State  taxation.\t(ii)\nPurchases  in the State by the exporter for the\t purpose  of\nexport\tas well as sales in the State by the importer  after\nthe  goods have crossed the customs barrier are\t not  within\nthe  exemption. (iii) Sales in the State by the exporter  or\nimporter  by transfer of shipping documents while the  goods\nare  beyond  the customs barrier are within  the  exemption,\nassuming  that the State power of taxation extends  to\tsuch\ntransactions.\nThe word \" course \" etymologically denotes movement from one\npoint to another and the expression \" in the course of \"  in\nart.  286 (1) (b) not only implies a period of\ttime  during\nwhich  the  movement is in progress but\t postulates  also  a\nconnected  relation.  Consequently, a sale in the course  of\nexport out of the country\n54\nshould\tbe understood in the context of art. 286 (1) (b)  as\nmeaning\t a sale taking place not only during the  activities\ndirected  to the end of exportation of the goods out of\t the\ncountry,  -but\talso  as  part of  or  connected  with\tsuch\nactivities.   But  a purchase of goods for  the\t purpose  of\nexport is only an act preparatory to their export and not an\nact done in the course of the export of the goods,\nThe  respondents purchased raw cashew nuts within the  State\nof Travancore-Cochin, from the neighbouring states and\talso\nimported such nuts from Africa, for the purpose of  refining\nthem  and  exporting them to America.  Imports\tfrom  Africa\nwere  made  in the following ways: (a) purchases  were\tmade\nthrough\t intermediaries doing business as commission  agents\nat  Bombay who acted as agents for the respondents  charging\ncommission; (b) the commission agents at Bombay indented the\ngoods  on  their  own account and they\tsold  the  goods  as\nprincipals  to\tthe respondents.  In either case  the  goods\nwere shipped direct from Africa to a port in the Travancore-\nCochin\tState.\tIt was found as a fact that the\t process  of\nthe factory was such that the goods were not the same  goods\ncommercially after refinement:\nHeld, (i) as regards purchases made in the local markets  of\nthe  State  they were not exempted under art. 286  (1)\t(b);\n(ii)  as regards purchases made in the neighbouring  States,\nif the purchases were effected and delivery was taken by the\nrespondents'  servants outside the Travancore-Cochin  State,\nthey would be exempt under art. 286, cl. (i) (a), and if the\npurchases were effected by employing firms doing  commission\nbusiness outside the State and deliveries were made  through\nnormal\tcommercial channels the transactions would be of  an\ninter-State character and would fall under cl. (2) but\tthey\nwould be taxable under the Sales Tax Continuance Order\t(No.\n7 of 1950) issued by the President under cl. (2) as such tax\nwas  being levied before the Constitution. (iii) As  regards\nimports from Africa, where the Bombay merchants merely acted\nas  agents,  the  transactions\twould  be  purchases   which\noccasioned the import and would be exempt under art. 286 (1)\n(b),  but where the Bombay merchants did not act  as  agents\nfor  the  respondents, purchases from them would be  on\t the\nsame footing as local purchases and would not be exempt.\nPer  S.R. DAS J.-The Explanation to art. 286 (1) (a) is\t not\nan exception or a proviso but only explains cl. (1) (a).  It\ndoes  not  confer taxing power on any State but\t only  takes\naway  the power of taxation of a State in respect  of  sales\nand  purchases in which delivery does not take place  within\nthe  State  by enacting that such sales shall be  deemed  to\nhave  taken  place outside that State within  cl.  (1)\t(a).\nConsequently,  if a sale or purchase takes place  outside  a\nState,\teither\tunder the general law or by  virtue  of\t the\nfiction created by the Explanation, then that State  cannot,\nunder  (1)  (a), tax such sale or purchase.  If\t a  sale  or\npurchase  takes\t place\twithin a  State,  either  under\t the\ngeneral law or by reason of the Explanation, then, if such a\nsale or purchase takes place\n\t\t\t    55\n\"  in  the course of \" inter-State trade  and  commerce,  no\nState,\tnot even the State where the sale or purchase  takes\nplace  as aforesaid can tax it by reason of (2), unless\t and\nuntil  Parliament  by  law provides otherwise.\t A  sale  or\npurchase  \" in the course of \" import or export\t within\t the\nmeaning\t of (1) (b) includes (i) a, sale or  purchase  which\nitself\toccasions  the import or export as already  held  by\nthis court, (ii) a sale or purchase which takes place  while\nthe  goods  are on the high seas on their import  or  export\njourney. and (iii) the last purchase by the exporter with  a\nview  to  export  and the first sale by the  importer  to  a\ndealer\tafter the arrival of the imported goods.  If a\tsale\nor  purchase  takes place within a State, either  under\t the\ngeneral\t low  or by reason of the Explanation, then,  if  it\ntakes  place in the course of import or export as  explained\nabove,\tno State, not even the State within which such\tsale\nor purchase takes place can tax it by reason of (1) (b).\nAs  regards local purchases, as those purchases\t took  place\nwith. in the State they were not entitled to the  protection\nof  art.  286  (1) (a), since on the findings  of  the\tHigh\nCourt, the goods purchased were so altered that they  cannot\nbe  deemed to be the same as the goods which were  exported,\nand  the purchases cannot be said to have been made \"in\t the\ncourse\"\t of  export so as to be entitled  to  immunity\tfrom\ntaxation under art. 286 (1) (b).  As regards purchases\tfrom\nthe neighbouring States, if the goods were taken delivery of\nby  the\t agents of the respondents outside the\tState,\tsuch\npurchases must, under the Explanation, be regarded as having\ntaken  place  outside  the State and  accordingly  would  be\nexempt\tfrom taxation under art. 286 (1) (a).\tIf  however,\nthe goods were directly delivered to the respondents in\t the\nTravancore-Cochin State the Explanation to art. 286 (1)\t (a)\nwill  apply in view of the finding of the High\tCourt  which\nimplies\t that the goods are also consumed in the State,\t and\nthe  neighbouring States will not be entitled to  tax  these\nsales or purchases, but the purchases are \" in the course of\n\"  inter-State trade and as such will be protected  by\t(2);\nbut as the majority of the Court have taken a different view\nand  as such view must prevail, such purchases will  become,\nas  a result of the Explanation to (1) (a),  an\t intra-state\npurchase and will lose the protection of (2).  Even if\tsuch\npurchases fall within (2), they would be liable to be  taxed\nunder the President's Order of 1950.  They are not protected\nby (1)\t  (b) as the goods exported are different goods.\nAs  regards  purchases\tfrom Africa  (1)  where\t the  Bombay\nmerchants act as agents of the respondents and pay the price\nand  take delivery of the shipping documents in\t Bombay\t the\npurchases  fall within (1) (a) and also (1) (b) and are\t not\nliable\tto tax as they take place outside the  State  within\n(1)  (a) and also \"in the course of import\" within (1)\t(b);\n(ii)  where the African sellers ship the goods on their\t own\ninitiation  or on that of their agents and while  the  goods\nare on the high seas they are\n56\npurchased  by the, respondents' Bombay agents, the  sale  or\npurchase  would be exempt under (1) (a) and under  (1)\t(b);\n(iii)  where the respondents place separate orders with\t the\nsame  commission  agent at Bombay and the  latter  places  a\nconsolidated  order  with  the African\tseller\ton  his\t own\nresponsibility\tand  the Bombay agent after paying  for\t the\nentire\tlot, prepares a separate invoice for each  of  their\nconstituents and the latter receive the delivery orders from\na  Travancore bank against payment and take delivery from  a\nTravancore warehouse the sale takes place in the Travancore-\nCochin State and the goods cannot claim exemption under\t (1)\n(a), (1) (b) or (2) of art. 286.\n\n\n\nJUDGMENT:\n<\/pre>\n
CIVIL APPELLATE, JURISDICTION: Civil Appeals Nos. 26, 27 and
\n30 to 36 of 1952.\n<\/p>\n
These were appeals under article 132 (1) of the Constitution
\nfrom the Judgment and Order dated 10th January, 1952, of the
\nTravancore, Cochin High Court in Original Petitions Nos.  5,
\n19,  34,  35, 71, 83, 88, 89 and 90 of\t1951,  quashing\t the
\nassessments  severally\t made  on the  respondents  in\teach
\nappeal\tunder the Travancore-Cochin General  Sales-Tax\tAct,
\n1124  M.  E.  The respondents who were\tassessed  under\t the
\nTravancore  General Sales Tax Act which came into  force  in
\nMarch, 1949, claimed exemption from sales tax in respect  of
\nthe  purchases made by them after the Constitution  of\t1950
\ncame into force till the end of the accounting year 1950  on
\nthe  ground that under article 286 (1) (b) the State had  no
\npower  to  levy\t tax  on  such\tpurchases.   The  sales\t tax
\nauthorities  having  rejected  the  claim  the\t respondents
\napplied\t to  the High Court under article 226 and  the\tHigh
\nCourt quashed the assessments so far as they related to\t the
\nsaid  period.\tThe  State preferred  the  present  appeals.
\nThese appeals were heard in part with certain other  appeals
\nin September and October, 1952, but as it was found that the
\nmaterial facts had not been clearly ascertained by the\tHigh
\nCourt the cases were remitted to the High Court for  further
\nenquiry\t and findings.\tThe connected appeals were  disposed
\nof  on\tthe  16th  of October, 1952,  and  the\tjudgment  is
\nreported as the State of Travancore-Cochin v. The Bombay Co.
\nLtd. ([1952] S.C.R. 1112).  The hearing of these appeals was
\ncontinued after the High Court had returned the record\tWith
\nits findings.\n<\/p>\n
\t\t\t     57<\/span><\/p>\n
T.   N.\t Subrahmanya Iyer, Advocate-General  of\t Travancore-
\nCochin\tState  (T.  R. Balakrishna Iyer, with him)  for\t the
\nappellants.\n<\/p>\n
M.   K.\t Nambiyar (N.  Palpu, with him) for the\t respondents
\nin Civil Appeals Nos. 26, 27 and 30 to 36.\n<\/p>\n
M.   C. Setalvad, Attorney-General for India and C.    K.
\nDaphtary, Solicitor-General for India (Porus
\nA.   Mehta, with them) for the Union of India.
\nV.   K.\t T.  Chari,  Advocate-General  of  Madras  (V.\t  V.
\nRaghavan, with him) for the State of Madras.
\nV.   Rajaram Iyer, Advocate-General of Hyderabad
\n(B.  N. Sastri,<\/a> with him) for the State of Hyderabad.
\nS.   M. Sikri, Advocate-General of Punjab (M.\tL.Sethi,with
\nhim) for the State of Punjab.\n<\/p>\n
A.   R.\t Somanatha  Iyer,  Advocate-General  of\t Mysore\t (R.
\nGanapathy Iyer, with him) for the State of Mysore.
\nK.   B.\t Asthana for the State of Uttar Pradesh. (States  of
\nBombay and Orissa were not represented.)
\n1953.\tMay  8.\t The  judgment\tof  the\t Chief\tJustice\t and
\nMukherjea, Vivian Bose and Ghulam Hasan JJ. was delivered by
\nthe  Chief  Justice.   S. R. Das  J.  delivered\t a  separate
\njudgment.\n<\/p>\n
PATANJALI  SASTRI C. J.-These are appeals from an  order  of
\nthe High Court of Travancore-Cochin quashing the assessments
\nseverally  made on the respondents in each appeal under\t the
\nTravancore-Cochin General Sales Tax Act, 1124 M. E. (Act No.
\nXVIII of 1124 M.    E.)\t (hereinafter  referred\t to  as\t the
\nAct).\n<\/p>\n
The  Act provided by section 3 for the levy of a tax on\t the
\ntotal turnover of every dealer for each year.  ” Turnover  ”
\nis the aggregate amount for which goods are either bought or
\nsold by a ” dealer” [section 2(d)], who is a person carrying
\non  the business of buying and selling goods [section 2\t (d)
\n]. ” Sale”, with all its grammatical variations and  cognate
\nexpressions,  is  defined as meaning,  among  other  things,
\nevery transfer
\n8<\/span>
\n58<\/span>
\nof  the\t property in goods by one person to another  in\t the
\ncourse of trade or business for cash or for deferred payment
\nor other valuable consideration [section 2(h)]. The sale  or
\npurchase  is to be deemed to have taken place in the  State,
\nwherever  the  contract might have been made, if  the  goods
\nwere actually in the State when the contract was made or, if
\nthe  goods are actually produced in the State, at  any\ttime
\nafter the contract in respect thereof was made.\t By  section
\n3  (4) the turnover is to be determined in  accordance\twith
\nsuch  rules  as may be prescribed, and rule 4 of  the  rules
\nframed under the Act prescribes that, in the case of certain
\ngoods including ” cashew and its kernel”, the gross turnover
\nof a dealer is the amount for which the goods were bought by
\nhim,  and in all other cases the amount for which the  goods
\nwere sold by him.\n<\/p>\n
The respondents are dealers in cashew-nuts in the State, and
\ntheir  business consists in importing raw  cashew-nuts\tfrom
\nabroad and the neighbouring districts in the State of Madras
\nin  addition  to purchases made in the\tlocal  market,\tand,
\nafter  converting  them by means of certain  processes\tinto
\nedible\tkernels, exporting the kernels to  other  countries,
\nmainly\tAmerica.   The oil pressed from the  shells  removed
\nfrom  the  cashewnuts was also exported.   The\tConstitution
\nhaving\tcome into force on January 26, 1950, the  respondent
\nin  each appeal claimed exemption under article 286 (1)\t (b)
\nin respect of the purchases made from that date till May 29,
\n1950,\tthe  end  of  the  account  year.   The\t sales\t tax
\nauthorities  having  rejected  the  claim,  the\t respondents
\napplied to the High Court under article 226, and that  court
\nupheld\tthe claim and quashed the assessments in so  far  as
\nthey  related to the said period.  The State  has  preferred
\nthe appeals.\n<\/p>\n
The  appeals  were heard in part along\twith  certain  other
\nappeals\t from the same order, and as it was found  that\t the
\nmaterial  facts\t relating to the course of business  of\t the
\nrespondents  in\t the present appeals had  not  been  clearly
\nascertained,  these appeals were remitted to the High  Court
\nfor further enquiry and
\n\t\t\t     59<\/span>
\nfindings in regard to those matters.  The connected appeals,
\nhowever,  in  which  the  materials  on\t record\t were  found
\nsufficient for their disposal were finally decided, and\t the
\ndecision  is reported in The State of  Travancore-Cochin  v.
\nThe  Bombay  Co. Ltd. (1) (hereinafter referred\t to  as\t the
\nprevious decision).\n<\/p>\n
Before considering how far the cashew-nut purchases made  by
\nthe  respondents are, on the findings returned by  the\tHigh
\nCourt,\tentitled to the protection of article 286(1)(b),  it
\nis   necessary\tfirst  to  ascertain  the  scope   of\tsuch
\nprotection.   That  clause, so far as it is  material  here,
\nreads thus:\n<\/p>\n
286. (1)  No law of a State shall impose, or  authorise\t the
\nimposition of, a tax on the sale or purchase of goods  where
\nsuch sale or purchase takes place-\n<\/p>\n
(a) *\t\t*\t     *\t\t  *\t     *\t *\n<\/p>\n
(b)in the course of the import of the goods into, or  export
\nof the goods out of, the territory of India.
\nIn  the\t previous  decision  this  Court  referred  to\tfour
\ndifferent  views  then\tadumbrated  in\tthe  course  of\t the
\nargument as to the meaning and scope of the said  sub-clause
\nas follows:\n<\/p>\n
(1)  The  exemption  is\t limited  to  sales  by\t export\t and
\npurchases  by  import,\tthat  is to  say,  those  sales\t and
\npurchases  which occasion the export or import, as the\tcase
\nmay  be,  and  extends\tto  no\tother  transactions  however
\ndirectly or immediately connected, in intention or  purpose,
\nwith  such sales or purchases, and wheresoever the  property
\nin the goods may pass to the buyer.\n<\/p>\n
(2)  In\t addition  to the sales and purchases  of  the\tkind
\ndescribed  above, the exemption covers the last purchase  by
\nthe  exporter and the first sale by the importer if any,  so
\ndirectly  and proximately connected with the export sale  or
\nimport purchase as to form part of the same transaction.
\n(3)  The  exemption  covers only those sales  and  purchases
\nunder\twhich  the  property  in  the  goods  concerned\t  is
\ntransferred from the seller to the buyer during
\n(1)  [1952] S.C.R. 1112.\n<\/p>\n
60<\/span><\/p>\n
the  transit,  that is, after the goods begin  to  move\t and
\nbefore they reach their foreign destination.
\n(4)  The view which found favour with the learned Judges  of
\nthe High Court, namely, “the clause is not restricted to the
\npoint  of time at which goods are imported into or  exported
\nfrom  India;  the series of transactions  which\t necessarily
\nprecede\t export\t or  import of goods will  come\t within\t the
\npurview of this clause.”\n<\/p>\n
This Court, however, found it unnecessary for the purpose of
\nthe cases then before it to go any further than to hold that
\n”  whatever else may or may not fall within article 286\t (1)\n<\/p>\n
(b),  sales  and  purchases which  themselves  occasion\t the
\nexport or import of the goods, as the case may be, out of or
\ninto  the territory of India come within the exemption”\t and
\nthat the third view set out above, which was put forward  on
\nbehalf\tof the State of Bombay and which seeks to limit\t the
\noperation  of the clause exclusively to sales and  purchases
\neffected during the transit of the goods, was too narrow and
\ncould not be accepted.\n<\/p>\n
It  may be mentioned at once, to clear the ground,  that  if
\nthe  Bombay view was considered to be too narrow,  the\tview
\nexpressed  by the Court below cannot but be regarded as\t too
\nwide.\tThis, indeed, was recognised by learned counsel\t who
\nappeared in the cases, none of whom made any serious attempt
\nto  support  it.  Nor was any question\traised\tor  argument
\nadvanced as to the scope and effect of clause (2) of article
\n286,   for,  although  the  respondents\t in  two  of   these
\nappeals(1) purchased cashew-nuts in the adjoining  districts
\nof the State of Madras during the period in question, it was
\nnot  disputed  that such purchases unless they\twere  exempt
\nunder  article 286(1)(a), would fall within the\t explanation
\nto clause (1) (a) as interpreted in the majority  decision’,
\nof  this court in the recent case of The State of Bombay  v.
\nUnited\tMotors\t(India)\t Ltd.<\/a> (2), or under  the  Sales\t Tax
\nContinuance Order, 1950 (C. O. No. 7 of 1950), issued by the
\nPresident  on  January 26, 1950, in exercise of\t the  powers
\nconferred  by the proviso to clause (2) of article 286,\t and
\nwould, in either case, be taxable.\n<\/p>\n
(1) Civil Appeals Nos. 33 and 36 of 1952,  (2) [1953] S.C.R.
\n1069.\n<\/p>\n
61<\/span><\/p>\n
With  reference\t to  the  aforesaid  decision,\tit  may\t  be
\nmentioned  in passing that in order to remedy what was\tfelt
\nto  be the unsatisfactory position in regard to the levy  of
\ntax  by\t the  States  in  America  on  sales  in  interstate
\ncommerce, the North Carolina Department of Revenue  proposed
\nthat Congress should pass legislation authorising the States
\nto  tax certain sales in interstate commerce.  The  proposed
\nbill ran thus:\n<\/p>\n
” That all taxes levied by any State upon sales of  property
\nor  measured  by  sales of property may be  levied  upon  or
\nmeasured by sales of property in inter-state commerce by the
\nstate\tinto  which  the  property  is\tmoved  for  use\t  or
\nconsumption  therein,  in the same manner and  to  the\tsame
\nextent that said taxes are levied upon or measured by  sales
\nof property not in inter-state commerce.  Provided: that  no
\nState shall discriminate against sales of property in inter-
\nstate commerce; nor shall any state discriminate against the
\nsale of the products of any other state.  Provided, further:
\nthat no state shall tax the sale in inter-state commerce  of
\nproperty  transported  for  the purpose\t of  resale  by\t the
\nconsignee  as  a merchant or as a  manufacturer.   Provided,
\nfurther: that no county, city, or town, or other subdivision
\nof  any\t State shall levy a tax upon or measure any  tax  by
\nsales of property in interstate commerce”(1).
\nIt  is\tinteresting to note that the bill  sought  to  bring
\nabout\tsubstantially  the  same  result  as  the   combined
\noperation of article 286 clause (1) (a) explanation,  clause
\n(2) and article 304 as they were interpreted by the majority
\nin  that decision would produce.  It is possible that  these
\nprovisions of our Constitution were inspired by the proposed
\nbill.\n<\/p>\n
The only question debated before us was whether in  addition
\nto  the export-sale and import-purchase, which were held  in
\nthe  previous decision to be covered by the exemption  under
\nclause\t(1)  (b), the following two categories\tof  sale  or
\npurchase   would  also\tfall  within  the,  scope  of\tthat
\nexemption:\n<\/p>\n
  (2)  See Selected Essays on Constitutional Law,  Vol.\t  I,
\nBook V, P. 367 published by the Association of American\t Law
\nSchools, 1938.\n<\/p>\n
62<\/span><\/p>\n
(1)  The last purchase of goods made by the exporter for the
\npurpose\t of  exporting\tthem  to  implement  orders  already
\nreceived  from\ta foreign buyer or expected to\tbe  received
\nsubsequently  in the course of business, and the first\tsale
\nby the importer to fulfil orders pursuant to which the goods
\nwere  imported or orders expected to be received  after\t the
\nimport.\n<\/p>\n
(2)  Sales  or purchases of goods effected within the  State
\nby transfer of shipping documents while the goods are in the
\ncourse of transit.\n<\/p>\n
As  regards the first mentioned category, we are of  opinion
\nthat  the  transactions\t are not within\t the  protection  of
\nclause (1) (b) What is exempted under the clause is the sale
\nor  purchase  of  goods taking place in the  course  of\t the
\nimport\tof the goods into or export of the goods out of\t the
\nterritory  of India.  It is obvious that the  words  “import
\ninto”  and “export out of” in this context do not  refer  to
\nthe   article  or  commodity  imported\tor  exported.\t The
\nreference  to  “the goods” and to “the territory  of  India”
\nmake  it  clear that the words “export out of”\tand  “import
\ninto”\tmean  the  exportation\tout  of\t the   country\t and
\nimportation   into  the\t country  respectively.\t  The\tword
\n“course”  etymologically denotes movement from one point  to
\nanother,  and  the expression “in the course  of”  not\tonly
\nimplies\t a  period of time during which the movement  is  in
\nprogress  but  postulates also a  connected  relation.\t For
\ninstance, it has been held that the words “debts due to\t the
\nbankrupt in the course of his trade” in section 15(5) of the
\nEnglish Bankruptcy Act, 1869, do not extend to all debts due
\nto the bankrupt during the period of his trading but include
\nonly  debts connected with the trade [see In re,  Pryce,  ex
\nparte  Rensburg(1).] A sale in the course of export  out  of
\nthe country should similarly be understood in the context of
\nclause\t(1)(b)\tas  meaning a sale taking  place  not  -only
\nduring the activities directed to the end of exportation  of
\nthe  goods  out\t of  the country but -also  as\tpart  of  or
\nconnected with such activities.\t The time
\n(1)  4 Ch.  D. 685 and Williams on Bankruptcy, 16th Edn., p.\n<\/p>\n
307.
\n\t\t\t     63<\/span>
\nfactor\talone is not determinative.  The  previous  decision
\nproceeded on this view and emphasised the integral  relation
\nbetween the two where the contract of sale itself occasioned
\nthe  export as the ground for holding that such a  sale\t was
\none  taking place in the course of export.  It is,  however,
\ncontended that on this principle of connected or  integrated
\nactivities  a  purchase for the purpose of  export  must  be
\nregarded  as covered by the exemption under clause (1)\t(b).
\nWe are unable to agree.\n<\/p>\n
The phrase “integrated-activities” was used in the  previous
\ndecision  to denote that “such a sale” (i.e., a\t sale  which
\noccasions the export) “cannot be dissociated from the export
\nwithout which it cannot be effectuated, and the sale and the
\nresultant export form parts of a single transaction.” It  is
\nin  that  sense\t that the two activities-the  sale  and\t the
\nexport-were  said  to  be integrated.  A  purchase  for\t the
\npurpose of export like production or manufacture for export,
\nis  only  an act preparatory to export and  cannot,  in\t our
\nopinion,  be regarded as an act done “in the course  of\t the
\nexport of the goods out of the territory of India”,  anymore
\nthan the other two activities can be so regarded.  As point-
\ned  out by a recent writer “From the legal point of view  it
\nis  essential to distinguish the contract of sale which\t has
\nas  its\t object the exportation of goods from  this  country
\nfrom other contracts of sale relating to the same goods, but
\nnot being the direct and immediate cause for the shipment of
\nthe  goods……  When\ta merchant  shipper  in\t the  United
\nKingdom\t buys  for  the\t purpose  of  export  goods  from  a
\nmanufacturer  in the same country the contract of sale is  a
\nhome transaction; but when he resells these goods to a buyer
\nabroad\tthat  contract of sale has to be  classified  as  an
\nexport transaction”(1).\t This passage shows that, in view of
\nthe distinct character and quality of the two  transactions,
\nit  is not correct to speak of a purchase for export  as  an
\nactivity so integrated with the exportation that the  former
\ncould  be regarded as done “in the course of ”\tthe  latter.
\nThe same reasoning applies to the first
\n(1)  Schmittoff-Export Trade, 2nd Edn., P. 3.\n<\/p>\n
64<\/span><\/p>\n
sale  after  import which is a\tdistinct  local\t transaction
\neffected after the importation of the goods into the country
\nhas been completed, and having no integral relation with it.
\nAny  attempt  therefore\t to  invoke  the  authority  of\t the
\nprevious  decision in support of the suggested extension  of
\nthe  protection of clause (1)(b) ‘to the last  purchase\t for
\nthe purpose of export and the first sale after import on the
\nground of integrated activities must fail.
\nNor is it correct to say that it is necessary to extend\t the
\nexemption  to these transactions to avoid  double  taxation.
\nIt  is true that in the previous decision it  was  indicated
\nthat  the object underlying the exemption was the  avoidance
\nof  double  taxation on the foreign trade  of  this  country
\nwhich  is of great importance to the nation’s economy.\t But
\nthe  double taxation sought to be avoided consisted  in\t the
\nimposition of export duty by the Central Government and\t the
\nimposition of sales tax by the State Government on the\tsame
\ntransaction  in\t its different aspects as an  export  and  a
\nsale.\tSuch  double  taxation is  already  avoided  by\t our
\nholding\t that  the export-sale and the\timport-purchase\t are
\nexempt\tunder clause (b) from the levy of sales tax  by\t the
\nState.\t The  foreign  trade of this  country  thus  already
\nenjoys immunity from double tax burden and suffers only\t one
\ntax,  namely, the export or import duty as the case may\t be.
\nThe  claim  now made for extension of  the  exemption  under
\nclause (1)(b) in the name of avoiding double taxation cannot
\nbe supported.\n<\/p>\n
Not the least among the reasons for rejecting the view\tthat
\nthe  last purchase for the purpose of export and  the  first
\nsale  after  import are also within clause (1)\t(b)  is\t the
\npractical  difficulty in giving effect to the  exemption  in
\nregard\tto these transactions, having regard to the  general
\npattern of sale-tax legislation in this country of which our
\nconstitution-makers  must have been well aware.\t The tax  is
\nusually\t levied on the annual turnover of the seller who  is
\nallowed under certain conditions to pass it on to the  buyer
\nby  adding  it to the price charged for the  goods  at\teach
\nindividual sale.  Supposing A is the seller from whom
\n\t\t\t     65<\/span>
\nB  the export merchant purchases the goods for\texport.\t  If
\nthe sale is to be exempt, how is A to be satisfied that\t the
\ngoods would actually be exported subsequently?\tAnd even  if
\nthey were, it must be difficult for A to prove to the  Sales
\nTax  Officer  that they were so exported by B if  proof\t was
\nrequired.  On the other hand, B might be keeping the  goods,
\nwaiting for orders to come, or might change his mind and not
\nexport\tthe  goods at all but sell them\t locally.   In\tthat
\ncase,  what would be the position of A vis a vis  the  Sales
\nTax Officer demanding the tax ? Could A escape liability, if
\nhe failed to collect the tax from B at the time of the\tsale
\n?  Or is A to collect the tax, ignoring B’s  declaration  of
\nhis intention to export and leaving him to apply for  refund
\nby producing- evidence of actual export, whenever that takes
\nplace?\t  Even\tif  a  sales  tax  enactment  provides\t for
\nadjustment on those lines, would not such legislation, in so
\nfar  as\t it compels B to suffer the tax\t until\the  actually
\nexports\t the  goods,  contravene  clause  (1)(b)  which\t  ex
\nhypothesi exempts the transaction from sales tax?  And\twhat
\nwould  be the position if the goods were burnt or  otherwise
\nlost  in  the meanwhile, and the export\t never\ttook  place?
\nAthough,  as pointed out in the previous decision,  American
\ncases are not of much assistance in interpreting article 286
\nbecause of the different wording of the import-export clause
\nof  the Federal Constitution, it is interesting to see\tthat
\nsuch  uncertainties led the American courts to lay down\t the
\nrule that –\n<\/p>\n
“It  is the entrance of the articles into the export  stream
\nthat  marks the start of the process of\t exportation.\tThen
\nthere  is  certainty  that the goods are  headed  for  their
\nforeign\t destination  and will not be diverted\tto  domestic
\nuse.   Nothing less will suffice.”: Empresa Siderurgica,  S.
\nA. v. Merced(1).\n<\/p>\n
Similar\t difficulties and uncertainties are  encountered  in
\nbringing  within the exemption the first sale after  import.
\nHow is the exemption to be applied to the
\n (1) 337 U.S. 154.\n<\/p>\n
9<\/span>
\n66<\/span><\/p>\n
goods imported from abroad after they are mingled with other
\ngoods and lose their distinctive character as imports?\tHere
\nagain, the American courts, with their practical approach to
\nsuch  problems,\t have evolved the doctrine of  “original  or
\nunopened  package” that is to say, the rule that  the  first
\nsale  of imported goods will ‘be exempt from State  taxation
\nprovided only such sale is made in the original packages  in
\nwhich  the goods have arrived.\tAny sale of such goods\tmade
\nafter  the package is opened does not enjoy such  exemption.
\nAre  we\t to  import  the same  doctrine\t here  to  make\t the
\nexemption  workable  ? Even in America, as  pointed  out  in
\nBalsara’s  case(1), difficulties arose from time to time  in
\napplying the doctrine as “sometimes very intricate questions
\narose before the courts such as whether the doctrine applied
\nto  the\t larger\t cases\tonly  or  to  the  smaller  packages
\ncontained  therein  or whether it applied to  smaller  paper
\npackages of cigarettes taken from loose files of packages at
\nthe  factory and transported in baskets.” Hence\t this  court
\nhas  unanimously decided that “the doctrine has no place  in
\nthis  country”\tfollowing  the lead of Gwyer C.\t J.  in\t the
\nearlier case of Boddu- Paidanna(2).\n<\/p>\n
It  was said that clause (1) (b) should be construed in\t the
\nlight  of  the\tconstitutional purpose\tand  the  commercial
\nbackground  and reference was made to the manner in which  a
\nlarge  proportion  of the export trade of  the\tcountry\t was
\ncarried\t on by merchant houses who purchased goods from\t the
\nproducers and manufacturers to resell them to buyers  abroad
\nby  means of contracts concluded with them.  Similarly\twith
\nregard\tto  import  trade,  large  import  houses   imported
\nmachinery  and\tconsumer goods wholesale and  sold  them  to
\nretail\tdealers or, in some cases, to the customers  direct.
\nThis  practice, it was argued, must have been well known  to
\nthe  makers  of our Constitution, and it was  reasonable  to
\nassume\tthat  they realised the importance  of\tthe  foreign
\ntrade  to the well-being of the country and would  not\thave
\ndesired to cripple the same by allowing the States to
\n(1) [1951] S.C.R. 682, 699.\n<\/p>\n
(2) [1942] F.C.R. 90.\n<\/p>\n
67<\/span><\/p>\n
tax  such  purchases  and sales by  the\t export\t and  import
\nmerchants  in  this country.   Such  general  considerations
\nbased  largely on speculation are not of much assistance  in
\nconstruing the scope and effect of a specific constitutional
\nprovision  seeking to restrict the power of State  taxation.
\nIt  is true, as pointed out in the previous  decision,\tthat
\nthe  export-import  trade  is  important  to  our   national
\neconomy,  but  it is no less true that the  State  power  of
\ntaxation  is essential for carrying on\tits  administration,
\nand it must be as much the constitutional purpose to protect
\nthe  one as not unduly to curtail the other.   The  question
\nreally is, how far did the constitution-makers want to go in
\nprotecting  the\t foreign trade by restricting the  power  of
\ntaxing\tsales or purchases of goods which they conferred  on
\nthe  States under entry 54 of List II.\tThe  problem  before
\nthem  was one of balancing and reconciling the rival  claims
\nof  foreign trade in the interests of our  national  economy
\nand of the State’s power of taxation in the interests of the
\nexpanding  social welfare needs of the people  committed  to
\nits  charge, and we have their solution as expressed in\t the
\nterms  of clause (1) (b).  It is for the court to  interpret
\nthe  true meaning and scope of those terms without  assuming
\nthat  the  one constitutional purpose was regarded  as\tmore
\nimportant  than the other.  This court has already  held  in
\nthe  previous  decision\t that clause (1)  (b)  protects\t the
\nexport-import trade of this country from double taxation  by
\nprohibiting  the  imposition of sales tax by  the  State  on
\nexport-sales and import-purchases, and we find no warrant in
\nthe language employed to extend the protection to cover\t the
\nlast purchase before export or the first sale after import.
\nAs  regards  sales  or purchases effected in  the  State  by
\ntransfer of shipping (c.i.f.) documents while the goods\t are
\nstill  in transit, we have already observed that  the  words
\n“in  the  course  of”  imply a\tmovement  or  progress\tand,
\ntherefore,  a  beginning  and an end  of  such\tmovement  or
\nprogress.   As\tclause\t(1)  (b)  is  concerned\t only\twith
\nexempting  certain sales or purchases from taxation  by\t the
\nStates in this country, it is
\n68<\/span>
\nsufficient  to determine where the course of  export  begins
\nand where the course of import ends.  In this connection, it
\nis  useful  to\tremember that the power to  make  laws\twith
\nrespect to duties of customs including export duties  (entry
\n83  of\tList I) and also with respect to import\t and  export
\nacross\tcustoms\t frontiers and the  ‘definition\t of  customs
\nfrontiers (entry 41 of List 1) is vested exclusively in\t the
\nCentral Legislature, and detailed provisions have been\tmade
\nin the Indian Sea Customs Act, 1878, for the levy of customs
\nduties\tby  the officers of the Central Government  who\t are
\nstationed along customs frontiers as defined by the  Central
\nGovernment  where,  after appraising the goods\texported  or
\nimported,  the duties chargeable, if any, are  computed\t and
\nlevied,\t and it is not until this process is completed\tthat
\nthe  goods can be shipped for transportation or\t cleared  by
\nthe  consignee or his representatives as the, case  may\t be.
\nIt would seem, therefore, logical to hold that the course of
\nthe  export out of, or of the import into, the territory  of
\nIndia  does not commence or terminate until the goods  cross
\nthe  customs barrier.  It is, however, to be noted that\t the
\nquestion  of imposing sales tax on transfer of goods in\t the
\ncourse\tof  export would not often arise  in  practice\tfor,
\nwhere  the goods are transported pursuant to a\tcontract  of
\nsale already concluded with a foreign buyer and the shipping
\ndocuments  have been forwarded to him, any further  sale  of
\nsuch goods by the Indian seller is impossible, and where the
\nexport trade is conducted through representatives or  branch
\noffices,  the  sale  by the latter  of\tthe  exported  goods
\nusually\t takes place abroad and would not then be  subjected
\nto  tax by the State in India.\tIt is in relation to  import
\nof goods from abroad that the question of exemption  assumes
\npractical  importance.\t It  is well  known  that  sales  or
\npurchases by transfer of shipping documents while the  goods
\nare in transit are a characteristic feature of foreign trade
\nand  as they take place in the course of import\t as  defined
\nabove,\tand  are -regarded commercially as incident  to\t the
\nimport transaction, they fall within the terms of clause (1)\n<\/p>\n
(b) and would be entitled, in our view, to the protection of
\nthat
\n\t\t\t     69<\/span>
\nclause,\t if the State is constitutionally competent  to\t tax
\nsuch sales, as to which we express no opinion.
\nOur conclusions may be summed up as follows
\n(1)  Sales by export and purchases by import fall within the
\nexemption  under article 286 (1) (b).  This was held in\t the
\nprevious decision.\n<\/p>\n
(2)  Purchases in the State by the exporter for the  purpose
\nof  export  as well as sales in the State  by  the  importer
\nafter  the  goods have crossed the customs barrier  are\t not
\nwithin the exemption.\n<\/p>\n
(3)Sales  in  the  State  by the  exporter  or\timporter  by
\ntransfer  of shipping documents while the goods\t are  beyond
\nthe customs barrier are within the exemption, assuming\tthat
\nthe State power of taxation extends to such transactions.
\nIt  remains  to\t consider  in the  light  of  the  foregoing
\ndiscussion  how\t far the cashew-nut purchases  made  by\t the
\nrespondents are within the exemption under article 286.\t  It
\nwill  be  recalled  that these\tpurchases  fell\t into  three
\ngroups:\n<\/p>\n
I.   Purchases made in the local market,
\nII.  Purchases from the neighbouring districts of the  State
\nof Madras, and
\nIII. Imports from Africa.\n<\/p>\n
As regards Group 1, the High Court finds that the  purchases
\nof raw nuts whether African or Indian are all made with\t the
\nobject\tof exporting their kernels” though there  were\tsome
\nnegligible  sales in the local market of what are  called  ”
\nfactory\t rejects”.   The High Court further finds  that\t the
\nbulk of the kernels were in fact exported by the respondents
\nthemselves,  a small quantity being sold by the\t respondents
\nto other exporters who also subsequently exported the  same.
\nThus,  on  the\twhole, respondents could  be  said  to\thave
\npurchased  the\traw nuts for the purpose  of  exporting\t the
\nkernels and to have actually exported them.  But, it will be
\nseen, the purchases are not covered by the exemption on\t the
\nconstruction  we have placed on clause (1) (b), even if\t the
\ndifference  between  the, raw materials\t purchased  and\t the
\nmanufactured
\n70<\/span>
\ngoods (kernels) exported is to be ignored.  It may, however,
\nbe mentioned here that the High Court has found that the raw
\ncashew-nuts  and  the kernels manufactured out\tof  them  by
\nvarious processes, partly mechanical and partly manual,\t are
\nnot commercially the same commodity.  This finding, which is
\nnot  seriously\tdisputed before us, would be  an  additional
\nground\tfor rejecting the claim to exemption in\t respect  of
\nthese  purchases, as the language of clause (1) (b)  clearly
\nrequires  as  a condition of the exemption that\t the  export
\nmust  be of the goods whose sale or purchase took  place  in
\nthe course of export.\n<\/p>\n
As  regards  Group 11, the High Court has  found  that\tsuch
\npurchases were made only by the respondents in Civil Appeals
\nNos. 33 and 36 of 1952.\t The High Court’s finding as to\t how
\nthese purchases and the deliveries under them were  effected
\nis by no means clear.  The respondent’s contention was\tthat
\nthe  purchases\twere effected and the  deliveries  taken  by
\ntheir  own  paid servants outside the State  of\t Travancore-
\nCochin, and it was thus a case of a person buying goods\t and
\ntaking delivery thereof outside the State and bringing\tthem
\nacross the border after the transaction was completed in all
\nrespects  outside  the\tState.\t On  the  other\t hand,\t the
\ncontention  on\tbehalf\tof the State  was  that\t though\t the
\npurchases  were made outside the State in  the\tneighbouring
\ndistricts  of Madras, deliveries were effected\tthrough\t the
\nordinary commercial channels by employing commission  agents
\nwho  made the purchases and arranged for the  deliveries  at
\nthe respondents’ depots at Trichur or Quilon.  All that\t can
\nbe said here is that, if the transactions took place in\t the
\nmanner alleged by the respondents in these two appeals, they
\nwould  be exempt under clause (1) (a).\tThis indeed was\t not
\ndisputed  by the Advocate-General of the,  appellant  State.
\nOn  the other hand, if, as claimed by the  Advocate-General,
\nthe purchases were effected by the employment of firms doing
\nbusiness  as  commission agents outside the State,  and\t the
\ndeliveries were made through normal commercial channels, the
\ntransactions  would partake of an inter-State character\t and
\nfall under clause (2).\tIn that case, it would be un-\n<\/p>\n
71<\/span><\/p>\n
necessary  to inquire further whether they would be  covered
\nby  the\t explanation  to clause (1)(a),\t as  they  would  be
\nclearly taxable under the President’s Order (C. O . No. 7 of
\n1950)  to which reference has been made already, as  it\t was
\nadmitted that sales tax was validly levied on such purchases
\nbefore\tthe  commencement  of  the  Constitution.   As\t the
\ntaxability  of such purchase,, on either view of  the  facts
\nwas  not disputed, no arguments were addressed to us on\t the
\nscope of clause (2) and the explanation to clause (1)(a), as
\nhas, been stated.\n<\/p>\n
Group  III may be sub-divided into two categories  according
\nto  the\t findings  of the high\tCourt:\t(a)  purchases\tmade
\nthrough\t intermediaries called in these\t proceedings  as”the
\nBombay party” doing business as commission agents at Bombay,
\nwho acted as agents for the respondents charging commission.
\nThe  dealings  are thus described by the  High\tCourt:\t“The
\ngoods  are  purchased  when they are in the  high  seas\t and
\nshipped\t from the African port to Cochin or  Quilon.   Goods
\nare never landed at Bombay.  The Bombay party only  arranges
\nfor  purchases on behalf of the assessees, gets delivery  of
\nthe  shipping documents on payment at Bombay through a\tbank
\nwhich  advances\t money against the  shipping  documents\t and
\ncollects  the same from the assessees at  destination”,\t and\n<\/p>\n
(b) the Bombay party indented the goods on their own account
\nand  sold  the goods as principals to  the  respondents\t and
\nother customers; but the goods were shipped direct to Cochin
\nor  Quilon on c. i. f. terms.  The shipping  documents\twere
\nmade  out in the name of the Bombay party as consignees\t and
\nwere  delivered to them against payment through\t bankers  at
\nBombay.\t  The Bombay party cleared the goods  through  their
\nown  representatives at the port of destination\t and  issued
\nseparate  delivery  orders  to\tthe  respondents  and  other
\ncustomers for the respective quantities ordered.
\nIt  will  be seen that in respect of the  purchases  falling
\nunder  (a), the Bombay party acted merely as the  agents  of
\nthe  respondents,  privity  being  established\tbetween\t the
\nlatter and the African sellers.\t The purchases are
\n72<\/span>
\nthus  purchases which occasioned the import,  and  therefore
\ncome within the exemption.  As regards (b), the Bombay party
\nare the purchasers, and they sell the goods as principals to
\nthe  respondents  at  the port\tof  destination\t by  issuing
\nseparate delivery orders against payment.  No privity  being
\nestablished between the respondents and the African sellers,
\nthe   respondents’  purchases  can  only  be  described\t  as
\npurchases  from\t the Bombay party of the  goods\t within\t the
\nState;\tin other words, they were local purchases and  stand
\non  the\t same  footing as purchases falling  under  Group  I
\nabove, and for the same reasons they do not come within\t the
\nexemption.\n<\/p>\n
It  would appear that the cashew-nuts sold and\texported  to
\nthe  American  buyers were packed in tins placed  in  wooden
\nboxes.\tThe sales tax authorities have included the value of
\nthese  packing\tmaterials in addition to the  value  of\t the
\nkernels\t in  computing the turnover of the  respondents\t for
\npurposes  of assessment.  It was urged that  such  inclusion
\nwas  inadmissible  inasmuch as these articles could  not  be
\nregarded  as  separate\tarticles of,  sale  apart  from\t the
\nkernels which are packed therein, and that even if they were
\nto  be so regarded, their sale to the American buyers was  a
\nsale which occasioned the export just as much as the sale of
\nthe kernels.  The latter contention must prevail in view  of
\nthe  previous  decision, and no sales tax can be  levied  in
\nrespect of these articles.\n<\/p>\n
In  the result, the decison of the High Court  quashing\t the
\nassessments  in question is affirmed but the cases  will  go
\nback  to the Sales Tax Officer concerned in  the  respective
\nappeals for making fresh assessments according to law and in
\nthe  light of this judgment.  Each party will bear  its\t own
\ncosts throughout.\n<\/p>\n
DAS  J.-This and eight other appeals have been filed by\t the
\nState of Travancore-Cochin against the judgment and order of
\nthe  High Court of that State dated the 10th January,  1952,
\nquashing the orders of assessment of sales tax made  against
\nthe  respondents respectively by the Sales Tax\tOfficer\t and
\nupheld\ton  appeal  by the  Assistant  Commissioner.   These
\nappeal*
\n\t\t\t     73<\/span>
\nwere  heard together immediately after the hearing  of\tC.A.
\nNo.  204 of 1952 [The State of Bombay v. The  United  Motors
\n(India)\t Ltd. & Others<\/a>(1)] bad been concluded  and  judgment
\nhad  been  reserved  by\t another  Constitution\tBench.\t The
\nquestion of construction of article 286 of the\tConstitution
\nwhich is involved in the present appeals was also raised  in
\nthe  Bombay  appeal.   That  Constitution  Bench  has  since
\ndelivered  judgments in that appeal.  The majority  of\tthat
\nBench  have put upon clause (1)(a), the Explanation  thereto
\nand clause (2) of that article a meaning which, in spite  of
\nmy  pro\t found respect for their opinions, I  am  unable  to
\naccept\tas  correct.  It is again my misfortune\t that  I  am
\nunable\tto agree to the interpretation my  learned  brethren
\nare now seeking to place upon clause (1)(b) of that article.
\nAs the questions involved in these appeals are of very great
\nimportance  and as the draft of this judgment  was  prepared
\nbefore the judgments in the Bombay appeal had been delivered
\nI consider it right to keep my views on record for  whatever
\nthey  may be worth.  It is, however, needless for me to\t say
\nthat the majority decision in that Bombay appeal, so long as
\nit stands, is binding on me.\n<\/p>\n
The  respondents in each of these appeals carry on  business
\nin what is now the United State of Travancore-Cochin.\tThey
\nbuy  raw cashew-nuts locally and in neighbouring States\t and
\nalso import them from Africa and after putting them  through
\na  certain  process they obtain cashew-nut  oil\t and  edible
\ncashew-nut  kernels.   They  export the\t edible\t kernels  to
\nforeign countries in large quantities.\n<\/p>\n
In  compliance with the requirements of the  relevant  Sales
\nTax  Act then in force the repondents filed returns  in\t the
\nprescribed  forms  of  their respective\t turnovers  for\t the
\nperiod\tbetween\t the 17th August, 1949, and  the  29th\tMay,
\n1950.  Each of the respondents claimed exemption from  sales
\ntax  on\t their respective purchases made  between  the\t26th
\nJanuary,  1950, when the Constitution came into\t force,\t and
\nthe 29th May,
\n(1)  [1953] S.C.R. 1069
\n10<\/span>
\n74<\/span>
\n1950.\tThe  claim, however, was rejected by the  Sales\t Tax
\nOfficer.   On appeal the Assistant Commissioner\t upheld\t the
\nassessment  orders.   The  respondents appeal  to  the\tHigh
\nCourt.\t By its judgment dated the 10th January,  1952,\t the
\nHigh  Court  accepted the appeals,  quashed  the  assessment
\norders in so far as they included tax on the purchases\tmade
\nafter the date of the Constitution and directed a refund  of
\nthe  tax  overpaid.   The State has now come  up  on  appeal
\nbefore us.\n<\/p>\n
As  the questions involved in these appeals are\t of  general
\nimportance  and\t the other States as well as  the  Union  of
\nIndia are interested in the decision, notices were  directed
\nto  be issued by this court to the Advocates-General of\t all
\ninterested  States  and to the Attorney-General\t for  India.
\nMany  of these States as also the Union of India  intervened
\nand  participated  in the general discussion  on  the  legal
\npoints\tinvolved  in  these appeals.   After  several  days’
\nhearing\t before\t us in September and October, 1952,  it\t was
\nfound that the parties were seriously at variance on several
\nmaterial facts and it was felt that the appeals could not be
\nsatisfactorily disposed of without proper findings on  those
\nfacts.\t Accordingly on the 8th October, 1952,\tthe  appeals
\nwere   remitted\t to  the  High\tCourt  with  directions\t  to
\ninvestigate into the disputed facts under certain heads\t set
\nforth  in  the annexure to the order of\t remand.   The\tHigh
\nCourt  has now returned the records with their findings\t and
\nthe -appeals are before us again for final disposal.
\nThe  assessments in question were made under the  Travancore
\nGeneral\t Sales Tax Act, 1124 (Act XVIII of 1124).  That\t Act
\ncame  into force on the 7th March, 1949, and was, after\t the
\ncommencement of the Constitution, continued in force subject
\nto  the other provisions of the Constitution and it  was  in
\noperation  during  the\tperiod\tof  assessment.\t  After\t the
\nintegration  of Travancore and Cochin that Act was  replaced
\nby  the United State of Travancore and Cochin General  Sales
\nTax Act, 1125 (Act XI of 1125) but we are not concerned with
\nthe latter Act, for it came into force
\n75<\/span>
\non the 30th May, 1950, that is to say, immediately after the
\nexpiry\tof  the period relevant for the\t purposes  of  these
\nappeals.\n<\/p>\n
The  relevant  provisions  of Act XVIII of  1124  have\tbeen
\nsummarised  in the judgment just read by my Lord  the  Chief
\nJustice and need not be set forth again.  Suffice it to\t say
\nthat  the rules framed under I the Act’ prescribed  that  in
\nthe  case of cashew and its kernels the gross turnover of  a
\ndealer\twould  be  the amount for  which  those\t goods\twere
\npurchased  by him and, therefore, sales tax was\t payable  on
\nthe purchase and not on the sale of cashew and its kernels.
\nThe  respondents do not contend that it was not\t within\t the
\npower  of H.H. the Maharaja of Travancore to enact that\t law
\nat  the time he did so but they maintain that, as after\t the
\ncommencement of the Constitution Travancore-Cochin became  a
\nPart  B\t State\tand as such amenable to\t and  bound  by\t the
\nConstitution,  that  law, in view of article 286,  could  no
\nlonger\timpose\tor authorise the imposition of\tany  tax  on
\ntheir\tpurchases  of  raw  cashewnuts.\t  This\t contention,
\ntherefore,  raises important questions as to the  extent  of
\nthe  power of the States under the Constitution to impose  a
\ntax on the sale or purchase of goods.  In order, however, to
\ncorrectly appreciate the meaning and import of the  relevant
\nprovisions of the Constitution it will be helpful to bear in
\nmind what the position was prior to the commencement of\t the
\nConstitution.\n<\/p>\n
Under  the  Government\tof  India  Act,\t 1935,\tthe  Federal
\nLegislature alone could make laws, under entry 19 in List I,
\nwith  respect to import and export across customs  frontiers
\nas defined by the Federal Government and, under entry 44  of
\nthe  same List, with respect to duties of  custom  including
\nexport\t duties.    On\tthe  other   hand   the\t  Provincial
\nLegislatures  alone could make laws, under entry 26 in\tList
\nII, with respect to trade and commerce within the  Province,
\nunder  entry  29,  with respect to  production,\t supply\t and
\ndistribution of goods, under entry 48, with respect to taxes\n<\/p>\n
-on  the sale of goods and under entry 49, with respect\t to’
\ncesses on the entry of goods into a
\n76<\/span>
\nlocal  area for consumption, use or sale  therein.   Section
\n297   of  that\tAct,  however,\tprohibited  the\t  Provincial
\nLegislature    or   Governments\t  from\t imposing    certain
\nrestrictions on internal trade and ended by saying that\t any
\nlaw  passed in contravention of that section would,  to\t the
\nextent of the contravention, be invalid.  It should be noted
\nthat  clause  (a)  of sub-section (1) of  that\tsection\t was
\ndirectly   and\texpressly  related  to\tand  constituted   a
\nrestriction  on the legislative power of the Province  under
\nentries 27 and 29 and not entry 48 in List II.\tThat section
\nobviously  was\tinserted  in that Act  for  the\t purpose  of
\nachieving,  as far as possible, free trade within  India  by
\npreventing  the\t Provinces from checking  or  hampering\t the
\ndistribution  of goods or from setting up  barriers  against
\ninternal trade in India regarded as one economic unit.
\nPursuant to the legislative power thus conferred on them the
\nProvincial  Legislatures  enacted Sales Tax Acts  for  their
\nrespective  Provinces.\tIn enacting the Sales Tax Acts,\t the
\nProvincial  Legislatures,  however,  did  not  confine\t the
\noperation  of their legislation to sales or purchases  which
\ntook place exclusively within their respective\tterritories.
\nAlthough  in most of those Acts “sale” was first defined  as
\nmeaning\t a transfer of the property in the goods, so  as  to
\nmake  the  passing of the property within the  Province\t the
\nprincipal basis for the imposition of the tax, yet by  means
\nof  Explanations  to  that definition,\tthey  gave  extended
\nmeanings  to  that word and thereby enlarged  the  scope  of
\ntheir operation.  Thus some of those Acts purported to tax a
\nsale  or  purchase irrespective of the place where  it\ttook
\nplace,\tif  only the goods were within the Province  at\t the
\ntime the contract for sale or purchase was made or the goods
\nwere produced or manufactured within the Province after\t the
\ncontract had been made.\t In short, if any one or more of the
\ningredients of sale, e.g. the contract, delivery, payment of
\nprice, or the passing of property etc., took place within  a
\nparticular   Province\tor  the\t goods\twere   produced\t  or
\nmanufactured  or  otherwise found there that  Province\tfelt
\nfree  to  impose  a  tax on that  transaction  of  -sale  or
\npurchase
\n77<\/span>
\nalthough  all  the  other  ingredients\tthereof\t took  place
\noutside that Province.\n<\/p>\n
The  Indian States were not governed by the distribution  of
\nlegislative powers contained in the Government of India Act,
\n1935,  and were, therefore, generally free to make  whatever
\nlaws they thought fit to make.\tThey, however, enacted Sales
\nTax Acts on the model of the Sales Tax Acts of\tneighbouring
\nProvinces  in British India.  Thus the Travancore Act  XVIII
\nof 1124 was substantially a reproduction of the Madras Sales
\nTax Act.\n<\/p>\n
The result of the imposition of tax on the sale or  purchase
\nof  goods on the basis of a very slight connection or  nexus
\nbetween\t the  sale or purchase and the taxing  Provinces  or
\nStates was that in some cases one single transaction of sale
\nor purchase became liable to be taxed in different Provinces
\nor States.  This imposition of multiple taxes was  certainly
\ncalculated to hamper and discourage free trade within India,
\nwhich section 297 of the Government of India Act, 1935,\t was
\ndesigned  to  achieve.\tThis was  the  position\t immediately
\nbefore\tthe Constitution of India came into operation.\t Our
\nConstitution makers were well aware of this evil.
\n   Articles 245 and 246 distribute legislative power between
\nParliament and the State Legislatures as per three Lists set
\nforth  in  the Seventh Schedule to the\tConstitution.\tThus
\nParliament  alone is empowered to make laws, under entry  41
\nin  the Union List, with respect to trade and commerce\twith
\nforeign\t countries, under entry 42, with respect  to  inter-
\nState trade and commerce and under entry 83, with respect to
\nduties\tof  customs,  including\t export\t duty.\t The   State
\nLegislatures,  on  the other hand, are alone  authorised  to
\nmake laws, under entry 26 in the State List with respect  to
\ntrade  and  commerce within the State, under entry  27\twith
\nrespect\t to  production, supply and distribution  of  goods,
\nunder  entry 52 with respect to taxes on the entry of  goods
\ninto  a local area for consumption, use or sale therein\t and
\nunder entry 54 with respect to taxes on sale or purchase  of
\ngoods other than newspapers.\n<\/p>\n
78<\/span><\/p>\n
It may be mentioned in passing that in List I in the Seventh
\nSchedule to the Government of India Act, 1935, there was  no
\nseparate or specific entry corresponding to entry 42 in\t the
\nUnion  List  in the Seventh Schedule  to  the  Constitution.
\nThis shows  that our Constitution has deliberately  assigned
\ninterState  trade and commerce, like foreign trade,  to\t the
\nexclusive   care  of  Parliament  and,\ttherefore,  out\t  of
\nthe  .reach  of the law-making powers of  the  State  Legis-
\nlatures.  Having thus distributed legislative powers between
\nParliament and the State Legislatures, article 265, which is
\nin  Part  XII  of  the\tConstitution  and  headed  “Finance,
\nProperty, Contracts and Suits” provides that no tax shall be
\nlevied\tor  collected except by authority of  law.   Article
\n286, which is also in Part XII, imposes some restrictions on
\nthe legislative competency of the State Legislatures.\tThat
\narticle runs as follows:\n<\/p>\n
” 286.\tRestrictions as to imposition of tax on the sale  or
\npurchase  of goods. (1) No law of a State shall\t impose,  or
\nauthorise  the imposition of, a tax on the sale or  purchase
\nof goods where such sale or purchase takes place-\n<\/p>\n
(a)  outside the State; or\n<\/p>\n
(b)  in the course of the import of the goods into or export
\nof the goods out of, the territory of India.
\nExplanation.-For  the purposes of sub-clause (a) a  sale  or
\npurchase shall be deemed to have taken place in the State in
\nwhich  the  goods have actually been delivered as  a  direct
\nresult\tof  such  sale\tor  purchase  for  the\tpurpose\t  of
\nconsumption  in\t that State, notwithstanding the  fact\tthat
\nunder the general law relating to sale of goods the property
\nin  the goods has by reason of such sale or purchase  passed
\nin another State.\n<\/p>\n
(2)  Except  in\t so far as Parliament may by  law  otherwise
\nprovide,  no law of a State shall impose, or  authorise\t the
\nimposition  of, a tax on the sale or purchase of  any  goods
\nwhere  such  sale or purchase takes place in the  course  of
\ninter-State trade or commerce:\n<\/p>\n
\t\t\t     79<\/span><\/p>\n
Provided that the President may by order direct that any tax
\non  the sale or purchase of goods which was  being  lawfully
\nlevied by the government of any State immediately before the
\ncommencement  of  this Constitution  shall,  notwithstanding
\nthat  the  imposition  of  such\t tax  is  contrary  to\t the
\nprovisions, of this clause, continue to be levied until\t the
\nthirty-first day of March, 1951.\n<\/p>\n
(3)No  law made by the Legislature of a State  imposing,  or
\nauthorising the imposition of a tax on the sale or  purchase
\nof any such goods as have been declared by Parliament by law
\nto  be\tessential for the life of the community\t shall\thave
\neffect unless it has been reserved for the consideration  of
\nthe President and has received his assent.”
\nIn  these  appeals  we\tare  not  concerned  with  sales  or
\npurchases  of essential commodities and, therefore,  nothing
\nfurther\t need  be said about clause (3).  Leaving  out\tthat
\nclause,\t the rest of the article, broadly speaking,  enjoins
\nthat  no State law shall impose or authorise the  imposition
\nof tax on sale or purchase of goods made-\n<\/p>\n
(a)  outside the State,\n<\/p>\n
(b)  in\t the course of the import of the goods in to or\t the
\nexport of the goods out of India,\n<\/p>\n
(c)  in the course of inter-State trade and commerce.
\nI  may\there  mention that in the  exercise  of\t the  powers
\nconferred on him by the proviso to clause (2) of article 286
\nthe President did, by the Sales Tax Continuance Order, 1950,
\ndirect\tthat  any tax on the sale or purchase of  any  goods
\nwhich  was  being lawfully levied by the Government  of\t any
\nState\timmediately   before   the   commencement   of\t the
\nConstitution should, until the 31st March, 1951, continue to
\nbe levied notwithstanding that such imposition was  contrary
\nto the provisions of clause (2) of article 286.
\nQuite apart from the marginal note to article 286, a cursory
\nperusal of that article will show that its avowed purpose is
\nto put a restriction on the power of the
\n80<\/span>
\nState Legislatures to make a law imposing tax on the sale or
\npurchase of goods under entry 54 in the State List.  It\t may
\nbe  recalled that the Provincial Legislatures purporting  to
\nact under entry 48 in List II of the Seventh Schedule to the
\nGovernment  of\tIndia  Act, 1935,  enacted  Sales  Tax\tActs
\nimposing tax on sales or purchases of goods on the basis  of
\none  or\t more  of  the\tingredients  of\t sale  having\tsome
\nconnection with the Province and that this practice resulted
\nin the imposition of multiple taxes on a single\t transaction
\nof  sale  or  purchase\tthereby raising\t the  price  of\t the
\ncommodity   concerned  to  the\tserious\t detriment  to\t the
\nconsumer.   That evil had to be curbed and that is what\t has
\nbeen done by clause (1)(a) of article 286.  It imposes a ban
\nthat  no  law  of  a State shall  impose  or  authorise\t the
\nimposition  of a tax on the sale or purchase of goods  where
\nsuch  sale or purchase takes place outside the State.\tThis
\nprovision   clearly   indicates\t that  in  making   it\t our
\nConstitution proceeds on the footing that a sale or purchase
\nhas  a location or situs.  The explanation to clause  (1)(a)
\nthen goes on to say that for the purpose of sub-clause (a) a
\nsale or purchase shall be deemed to have taken place in\t the
\nState  in which the goods have actually been delivered as  a
\ndirect\tresult of such sale or purchase for the\t purpose  of
\nconsumption  in\t that State, notwithstanding the  fact\tthat
\nunder the general law relating to sale of goods the property
\nin the goods has, by reason of such sale or purchase, passed
\nin  another  State.  The non obstante clause in\t the  Expla-
\nnation\talso  clearly  implies\tthat  the  framers  of\t the
\nConstitution adopted the view that a sale or purchase has  a
\nsitus  and  further that it ordinarily takes  place  at\t the
\nplace\twhere  the  property  in  the  goods  passes.\t The
\nExplanation,  however,\tprovides  that,\t in  spite  of\tsuch
\ngeneral\t law,  a sale or purchase shall be  deemed  to\thave
\ntaken  place in the State in which the goods  have  actually
\nbeen  delivered as a direct result of such sale or  purchase
\nfor  the purpose of consumption in that State.\t In  effect,
\ntherefore,  the Constitution, by this Explanation to  clause
\n(1)(a), acknowledges that under the general law the sale  or
\npurchase of the kind therein
\n81<\/span>
\nmentioned  may not really take place in the delivery  State,
\nbut  nevertheless  requires it to be treated as if  it\tdid.
\nThat  is  to say, the Explanation creates a  legal  fiction.
\nReference may be made to Income-tax Commissioner, Bombay  v.
\nBombay Trust Corporation<\/a>(1) where Viscount Dunedin  explains
\nthe meaning of a legal fiction.\n<\/p>\n
When a legal fiction is thus created, for what purpose,\t one
\nis  led\t to ask at once, is it so created?  In\tIn  re\tCoal
\nEconomising Gas Company(2) the question arose as to  whether
\nunder  section 38 of the Companies Act, 1867, a\t shareholder
\ncould  get his name removed from the register on the  ground
\nthat  the  prospectus  was fraudulent in  that\tit  did\t not
\ndisclose  certain, facts, or whether his remedy was  against
\nthe promoter only.  James L.J. said at pages 188-9:
\n” The Act says that an omission shall be deemed\t fraudulent.
\nIt provides that something which under the general law would
\nnot  be\t fraudulent shall be deemed fraudulent\tand  we\t are
\ndealing\t with  a case of that kind.  Where  the\t Legislature
\nprovides that something is to be deemed other than it is, we
\nmust  be  careful  to see within what bounds  and  for\twhat
\npurpose\t it  is to be so deemed.  Now the Act does  not\t say
\nthat  the prospectus shall be deemed fraudulent\t simpliciter
\nbut  that it shall be deemed fraudulent on the part  of\t the
\nperson wilfully making the omission as against a shareholder
\nhaving no notice of the matter omitted ; and I am of opinion
\nthat  the  true intent and meaning of that provision  is  to
\ngive  a personal remedy against the wrongdoer in  favour  of
\nthe shareholder.”\n<\/p>\n
So  it was held that the fiction did not operate as  against
\nthe company and there could, therefore, be no  rectification
\nof the register.  Again, in Ex parte Walton(3), referring to
\nsection\t 23 of the English Bankruptcy Act, 1869, James\tL.J.
\nsaid:\n<\/p>\n
“When  a  statute enacts that something shall be  deemed  to
\nhave been done, which in fact and in truth
\n(1) [1929] L.R.57 I.A. 49 at P. 55.  (3) [1881].  L.R. 17 Ch\n<\/p>\n
756.
\n(2)  [1875] L.R. 1 Ch.\tD. 182.\n<\/p>\n
82<\/span><\/p>\n
was  not done, the court is entitled and bound to  ascertain
\nfor  what  purposes and between what persons  the  statutory
\nfiction is to be resorted to.”\n<\/p>\n
The above observations were- quoted with approval by   Lord
\nCairns and Lord Blackburn in Arthur Hill v.  The  East\t and
\nWest  India Dock Company(1).  Lord Blackburn went on to\t add
\nat page 458:\n<\/p>\n
“I   think  the\t words\there  ‘shall  be  deemed   to\thave
\nsurrendered…………….  mean, shall be  surrendered  so
\nfar  as is necessary to effectuate the purposes of  the\t Act
\nand no further;……………..”\n<\/p>\n
In  the\t case  now before us, we  have\tfortunately  not  to
\nspeculate  as to the purpose for which the  Explanation\t has
\nintroduced  the\t fiction.   It\twill  be  noticed  that\t the
\nExplanation  does  not\tsay simpliciter\t that  the  sale  or
\npurchase  is  to  be deemed to take place  in  the  delivery
\nState.\tBy its opening words it expressly says that the sale
\nor  purchase is to be deemed to take place in  the  delivery
\nState  for  the purposes of clause (1)(a).   Therefore,\t the
\nonly effect of this assignment of a fictional location to  a
\nparticular kind of sale or purchase in a particular State is
\nto  attract  the ban of clause (1)(a) and to take  away\t the
\ntaxing power of all other States in relation to such a\tsale
\nor  purchase  even  though the other  ingredients  which  go
\ntowards the making up of a sale or purchase are to be  found
\nwithin\tthese  States or even if under the general  law\t the
\nproperty  in the goods passes in any of those  States.\t The
\npurpose\t of  the  Explanation  ends  there  and\t cannot\t  be
\nstretched or extended beyond that purpose.
\nIt  is said by some of the Advocates-General that a sale  or
\npurchase  which falls within the Explanation is\t subject  to
\nthe  taxing power of the State in which the property in\t the
\ngoods passes under the general law as well as to the  taxing
\npower  of the State in which, by virtue of the\tExplanation,
\nthe  property in the goods is to be deemed to pass.  On\t the
\nother hand some of the other Advocates-General contend\tthat
\nby virtue of the Explanation the latter State alone  becomes
\nentitled  to  tax  such\t a sale\t or  purchase.\t Both  these
\ncontentions
\n(1)  [1884] L.R. 9 App.\t Cas- 448,
\n83<\/span>
\nappear\tto me to be founded on a misapprehension as  to\t the
\nreal purpose of clause (1) (a) and the Explanation  thereto.
\nAs I have already said, the only object of clause (1)(a)  is
\nto prevent the imposition of multiple taxes on a single sale
\nor  purchase  and, therefore, it provides that no law  of  a
\nState  shall  impose a tax on sale or purchase\twhich  takes
\nplace  outside\tthe State.  Thus by one\t stroke\t the  taxing
\npower  of all States outside whose territories the  sale  or
\npurchase  is,  by  the fiction, deemed,\t to  take  place  is
\neliminated.   To say that the effect of clause (1) (a)\tread
\nin  the light of the Explanation is to permit  both  States,
\nnamely,\t the  State  where the\tproperty  passes  under\t the
\ngeneral\t law as well as the State in which, by force of\t the
\nExplanation,  the sale or purchase is deemed to take  place,
\nto tax such sale or purchase is to stultify the very purpose
\nof  that  clause,  for, then it will  fail  to\tprevent\t the
\nimposition of multiple taxes which it is obviously  designed
\nto  prevent.   It is quite clear also that  clause(1)(a)  in
\nterms  only takes away the taxing power of all\tStates\twith
\nrespect\t to  a\tsale or purchase which,\t by  reason  of\t the
\nfiction\t introduced by the Explanation, is to be  deemed  to
\ntake  place  outside  their  respective\t territories.\t The
\npurpose\t of the Explanation is only to explain the scope  of
\nclause\t(1)(a).\t By fictionally locating a sale or  purchase
\nin  a  particular State it, in effect, says  that  it  takes
\nplace outside all other States so as to give it the  benefit
\nof  the\t exemption  of clause (1)(a).\tThe  Explanation  is
\nneither\t an exception nor a proviso.  It is not its  purpose
\nnor  does it purport, substantively and proprio\t vigore,  to
\nconfer\tany  power on any State, not even  on  the  delivery
\nState,\tto impose any tax.  The fiction of  the\t Explanation
\ncannot be extended to any purpose other than the purpose  of
\nclause\t(1)(a),\t that  is, to any  purpose  other  than\t the
\npurpose\t of  taking  away the taxing  power  of\t all  States
\noutside\t whose territories the sale or purchase is,  by\t the
\nfiction,  deemed to take place.\t There its purpose ends\t and
\nit cannot be used for the purpose of giving any taxing power
\non the delivery State, for that is quite outside its  avowed
\npurpose.  Whether the
\n84<\/span>
\ndelivery  State\t can tax the sale or purchase  of  the\tkind
\nmentioned in the Explanation will depend on other provisions
\nof  the\t Constitution.\t Neither  clause  (1)  (a)  nor\t the
\nExplanation has any bearing on that questionl.
\nIt  is\turged that even if by virtue of\t clause\t (1)(a)\t all
\nStates\tin relation to which a sale or purchase is,  by\t the
\nExplanation, to be deemed to take place outside their limits
\nare precluded from taxing such sale or purchase and assuming
\nthat the Explanation does not, by implication or  otherwise,
\npermit even the delivery State to tax such sale or purchase,
\nnevertheless the delivery State has the power under entry 54
\nin   the  State\t List  read  with  article  100(3)  of\t the
\nConstitution  to make a law imposing a tax on such  sale  or
\npurchase.  This certainly would be the position if there was
\nnothing\t else  in the Constitution.  It should be  borne  in
\nmind that the State Legislatures may make laws with  respect
\nto  taxes  on sale or purchase of goods (entry 54).   If  in
\npurported  exercise  of powers under those entries  a  State
\nLegislature  makes a law imposing taxes on sale or  purchase
\nwhich  partakes of the character of a sale or purchase\tmade
\nin  the course of interState trade or commerce it may  quite
\neasily encroach upon the Union Legislative field under entry
\n42  in the Union List and such encroachment may\t conceivably
\ngive  rise  to\tquestions as to the validity  of  the  State
\nlegislation.   It  is in order to protect the free  flow  of
\ninter-State trade, which is placed in the care of Parliament
\nalone,\tagainst\t any interference by State taxation  and  to
\nprevent a recourse to the argument of pith and substance  in
\njustification  of such encroachment by a State on the  Union
\nfield  that  the  Constitution,\t by  article  286  (2),\t has
\nexpressly  placed a restriction on the legislative power  of
\nthe  State  in\trelation  to  tax  on  inter-State  sale  or
\npurchase.   Clause (2) of article 286 provides that,  except
\nin so far as Parliament may by law otherwise provide, no law
\nof  a  State shall impose a tax on the sale or\tpurchase  of
\ngoods when such a sale or purchase takes place in the course
\nof inter-State trade or commerce.  Clause (2),
\n85<\/span>
\ntherefore, places yet another ban on the taxing power of the
\nState under entry 54 read with article 100 (3), in  addition
\nto  the ban imposed by clause (1) (a).\tA sale\tor  purchase
\ncontemplated   by   the\t Explanation  to  clause   (1)\t (a)
\nundoubtedly  partakes  of the nature of a sale\tor  purchase
\nmade  in the course of inter-State trade and, therefore,  no
\nState, whether it is the State in which the property in\t the
\ngoods  passes under the general law or the State  where\t the
\ngoods  are  delivered as mentioned in the  Explanation,\t can
\nimpose\ta  tax on such sale or purchase,  unless  and  until
\nParliament  lifts  this ban.  This appears to me to  be\t the
\npurpose and design of clause (2).\n<\/p>\n
It  is said that if the sale or purchase referred to in\t the
\nExplanation is to be bit by clause (2) then clause (1) (a)
\nwas wholly redundant, for there was no point in exempting it
\nfrom the ban imposed by clause (1)(a)and hittin\t  it\t  by
\nclause\t(2).  As already stated the purposeof clause  (1)(a)
\nis to place a sale or purchase taking place outside a  State
\nbeyond the taxing power of that State.\tThe Explanation only
\nexplains,  by an illustration as it were, the scope of\tthat
\nban.  Clause (1) (a) only contemplates one aspect of a\tsale
\nor  purchase,  namely,\tits  territorial  location,  and  by
\nimposing  a ban on the taxing power of a State with  respect
\nto a sale or purchase, which takes place outside its limits,
\nit  purports  to  remedy the  particular  evil\tof  multiple
\ntaxation founded on the nexus theory to which reference\t has
\nbeen  made.  That is the limited purpose of clause  (1)\t (a)
\nand  that  purpose is fulfilled by placing a  ban  on  those
\nStates in relation to which a sale or purchase is, by reason
\nof  the\t Explanation,  deemed to take  place  outside  their
\nterritories.   Whether the delivery State where the sale  or
\npurchase  is  deemed to take place can tax such\t a  sale  or
\npurchase  is not, as I have said, the concern of clause\t (1)\n<\/p>\n
(a) or the Explanation.\t It is only when the question of the
\ncompetency  of\ta State Legislature under entry\t 54  of\t the
\nState  List  to\t make  a law imposing a tax  on\t a  sale  or
\npurchase  which\t by  the fiction is deemed  to.\t take  place
\nwithin its territory is raised that clause (2) comes
\n86<\/span>
\ninto play. – That clause looks at a sale or purchase in\t its
\ninter-State  character\tand  imposes  another  ban  in\t the
\ninterest  of the freedom of internal trade.   The  immediate
\npurpose\t  of  the  two\tbans  are,  therefore,\t essentially
\ndifferent  and I see Do reason to hold that although  clause
\n(1)(a)\t read  with  the  Explanation  does  not   expressly
\nauthorise  the State, in which the sale or purchase  is,  by
\nthe  Explanation,  to be deemed to take place, to  tax\tsuch
\nsale  or purchase, it must nevertheless, by implication,  be
\nregarded  not only as having authorised that State to do  so
\nbut  as\t having\t also exempted it from the  ban\t imposed  by
\nclause\t(2).   To  adopt this course is\t to  resort  to\t the
\nfiction created by the Explanation for quite a different and
\ncollateral  purpose  which  is entirely\t beyond\t its  avowed
\npurpose.  This, as I have explained, is, on principle and on
\nauthority, not permissible for the court to do.
\nThe  same  argument  is advanced in  a\tdifferent  and\tmore
\nattractive   language.\t It  is\t urged\tthat  once   it\t  is
\ndetermined,  with the aid of the fiction introduced  by\t the
\nExplanation  that  a particular sale or purchase  has  taken
\nplace  within  the  delivery  State, it\t must  follow  as  a
\ncorollary   that  the  transaction  loses  its\t inter-State
\ncharacter  and falls outside the purview of clause (2),\t not
\nbecause\t the definition in the Explanation is used  for\t the
\npurpose\t of  clause (2) but because such  sale\tor  purchase
\nbecomes, in the eye of the law, a purely local\ttransaction.
\nI  am unable to accept this argument which appears to me  to
\noverlook  the declared purposes of clause (1)(a) and of\t the
\nExplanation.   In  all\tinterState  sale  or  purchase\t the
\nproperty passes and the sale or purchase takes place in\t one
\nor  the other State according to the rules laid down in\t the
\nSale of Goods Act and the inter-State character of the\tsale
\nor  purchase is not affected or altered by the fact  of\t the
\nproperty passing in one State rather than in another.\tWhat
\nis  an\tinter-State sale or purchase continues to  be  such,
\nirrespective of the State where the property passes.  While,
\ntherefore, to locate a sale or purchase, by a legal fiction,
\nin a particular State, is to make it appear to be an outside
\nsale or purchase in relation to
\n\t\t\t     87<\/span>
\nall other States, so as to attract the ban of clause  (1)(a)
\non  those  States, such location cannot possibly  alter\t the
\nintrinsic  inter-State\tnature or character of the  sale  or
\npurchase.   A  sale  or\t purchase  which  falls\t within\t the
\nExplanation does not become, in the eye of the law, a purely
\nlocal  sale for all purposes or for all times.\tIt is to  be
\ndeemed\tto  take place in the delivery State  only  for\t the
\npurpose\t of  clause (1)(a), i.e., for taking  ing  away\t the
\ntaxing power of all other States.  I can see no warrant, for
\nthe  argument that the fiction embodied in  the\t Explanation
\nfor  this definitely expressed purpose, can be\tlegitimately
\nused  for  the entirely foreign purpose\t of  destroying\t the
\ninter-State  character of the transaction and converting  it
\ninto an intra-State sale or purchase for all purposes.\tSuch
\nmetamorphosis  appears\tto me to be  completely\t beyond\t the
\npurpose\t and purview of clause (1) (a) and  the\t Explanation
\nthereto. To accede to this argument will mean that the Sales
\nTax Officer of the delivery State will have jurisdiction  to
\ncall  upon dealers outside that State to submit\t returns  of
\ntheir  turnover\t in respect of goods delivered\tby  them  to
\ndealers\t in  that State under transactions of sale  made  by
\nthem with dealers within that State.  Thus a dealer in, say,
\nPepsu  who delivers goods to a dealer in,  say,\t Travancore-
\nCochin\twill become subject to the jurisdiction of the\tlast
\nmentioned  State  and  will have to file  returns  of  their
\nturnover  and support the same by producing their  books  of
\naccount\t there.\t  I cannot imagine  that  our  Constitution-
\nmakers\tintended to produce this anomalous result.   On\t the
\ncontrary, it appears to me that they enacted clauses (1) (a)
\nand (2) for the very purpose of preventing this anomaly.   I
\nrepeat\tthat  it  is not permissible,  on  principle  or  on
\nauthority,  to extend the fiction of the Explanation  beyond
\nits  immediate\tand avowed purpose which  I  have  explained
\nabove.\tIn my judgment, until Parliament otherwise provides,
\nall  sales  or purchases which take place in the  course  of
\ninter-State trade or commerce are, by clause (2) of  article
\n286,  made  immune from taxation by the law  of\t any  State,
\nirrespective  of the place where the sales or purchases\t may
\ntake place, either under the general law or by virtue
\n88<\/span>
\nof  the fiction introduced by the Explanation to clause\t (1)\n<\/p>\n
(a).   If  a particular inter-State sale or  purchase  takes
\nplace  outside a State, either under the general law  or  by
\nvirtue\tof  the fiction created by the\tExplanation,  it  is
\nexempted  from taxation by the law of that State both  under
\nclause (1) (a) and clause (2).\tIf such inter-State sale  or
\npurchase takes place within a particular State, either under
\nthe general law or by reason of the Explanation, it is still
\nexempt\tfrom  taxation even by the law of that\tState  under
\nclause\t(2),  just as a sale or purchase which\ttakes  place
\nwithin a State, either under the general law or by reason of
\nthe  Explanation, cannot be taxed by the law of that  State,
\nif such sale or purchase takes place in the course of import
\nor export within the meaning of clause (1) (b).
\nI  It  is  next contended that the ban\timposed\t by  article
\n286(2)\tis itself subject to the provisions of article\t304.
\nThat  article is one of the seven articles (articles 301  to\n<\/p>\n
307)   grouped\tunder  the  heading  “Trade,  commerce\t and
\nintercourse within the territory of India ” in Chapter XIII.
\nArticle\t 301  proclaims that, subject to the  provisions  of
\nPart  XIII, trade, commerce and intercourse  throughout\t the
\nterritory  of  India shall be free.   Article  302  empowers
\nParliament to impose by law such restrictions on the freedom
\nof  trade,  commerce and intercourse between one  State\t and
\nanother\t as  may be required in\t public\t interest.   Indeed,
\nentry  42  in  the  Union  List\t gives\texclusive  power  to
\nParliament  to make laws with respect to  inter-State  trade
\nand  commerce and clause (2) of article 286 also  recognises
\nthis  power  of\t Parliament.   Article\t303  prohibits\tboth
\nParliament and State Legislatures from showing preference to
\none  State  over  another,  or\tdiscriminating\tbetween\t the
\nStates.\t Then comes article 304 which runs as follows:-
\n “304.\tNotwithstanding anything in article 301\t or  article
\n303,  the  legislature of a State may by  law\n<\/p>\n
(a)  impose on goods imported from other States any  tax  to
\nwhich  similar goods manufactured or produced in that  State
\nare subject, so, however as not
\n\t\t\t     89<\/span>
\nto  discriminate  between  goods so imported  and  goods  so
\nmanufactured or produced, and\n<\/p>\n
(b)impose  such\t reasonable restrictions on the\t freedom  of
\ntrade, commerce or intercourse with or within that State  as
\nmay be required in the public interest:\n<\/p>\n
Provided that no Bill or amendment for the purpose of clause\n<\/p>\n
(b)  shall  be introduced or moved in the Legislature  of  a
\nState Without the previous sanction of the President.”
\nThe  argument  is  that the ban imposed\t by  clause  (2)  of
\narticle\t 286  should, like article 301, be  subordinated  to
\narticle\t 304. 1 am unable to accept the correctness of\tthis
\nargument.   Article  301 is expressly made  subject  to\t the
\nother provisions of Chapter XIII which includes article\t 304
\nbut no part of article 286 is so subjected.  Article 304 (a)
\ngives power to the State Legislatures to put a tax on  goods
\nimported  from\tother States whereas article  286  restricts
\ntheir\ttaxing\tpower  on  sale\t or  purchase,\t i.e.,\t the
\ntransaction itself as distinct from the goods.\tArticle\t 304
\nappears to me to be closely related to entry 52 in the State
\nList  and restricts the State’s powers under that entry\t but
\narticle\t 286 controls the State’s powers under entry  54  in
\nthe  State  List.  In the circumstances article\t 304  cannot
\nproperly be read into article 286.  Article 304, of  course,
\ncan have no bearing whatever upon clause (1) (b) of  article\n<\/p>\n
286.
\nAn  argument  is advanced suggesting that if  all  sales  or
\npurchases that take place in the course of interState  trade
\nand  commerce are put beyond the taxing power of the  States
\nthen that fact will very seriously and prejudicially  affect
\nthe  economy  of  the  States  and  may\t prevent  them\tfrom
\ndischarging  the responsibilities, which all welfare  States
\nare expected to do.  Apart from the benefit that a free flow
\nof  trade  is likely to bring to the  public  generally\t the
\napprehended  danger appears to me, to be more  assumed\tthan
\nreal.\tThe proviso to clause (2) empowers the President  to
\ndirect the continuation, up to the 31st March, 1951, of\t the
\nsales tax which was being levied before the commencement  of
\nthe Constitution and in fact the President, on
\n90<\/span>
\nthe  same day as the Constitution came into force,  actually
\nmade  an  order in exercise of this power as  herein  before
\nstated.\t There was, therefore, no immediate danger to  State
\nrevenue and the status quo was maintained.  Further,  clause
\n(2)  itself empowers Parliament to lift the ban\t imposed  by
\nit,  should  Parliament, in the interest of  State  economy,
\nthink  fit  to\tdo so.\tThe  Constitution  has\tthus  itself
\nprovided  ample\t safeguards and this court need\t not  assume
\nunto itself the functions of Parliament and indirectly under
\nthe  guise  of interpretation seek to secure the  safety  of
\nState  finance which Parliament itself has  adequate  direct
\npower to do.\n<\/p>\n
Finally, it is said that the effect of holding that the\t ban
\nimposed\t by  clause (2) extends to all\tsales  or  purchases
\nwhich  take  place  in the course of  inter-State  trade  or
\ncommerce will be to place at a disadvantage the consumers of
\nsimilar\t goods\tmanufactured or produced  locally,  for\t the
\nactual\tconsumer will have to pay no tax if he buys  similar
\ngoods  manufactured in another State direct from  the  manu-
\nfacturers  or sellers in that other State.  I do  not  think
\nthis  objection has much force.\t Very few  actual  consumers
\ntake   the  trouble  of\t importing  goods  for\t their\t own
\nconsumption direct from the manufacturers or sellers outside
\ntheir  State.\tFurther,  the  cost  of\t carriage,  handling
\ncharges\t and  the risk of loss and damage  in  transit\twill
\neffectively  deter  actual consumers  from  procuring  goods
\ndirect from outside, for in all probability the cost of such
\nenterprise will exceed the sales tax which the consumer will
\nsave by not buying the local goods.  Besides, if India is to
\nbe  regarded as one economic unit there can be no  objection
\nto  a  consumer in one State getting goods  cheaply  from  a
\nneighbouring State.\n<\/p>\n
I  now\tpass on to another important object of\tarticle\t 286
\nwhich  is  to encourage our foreign trade.  Power  is  given
\nexclusively  to Parliament to make laws under entry 41\twith
\nrespect\t to  trade and commerce with foreign  countries\t and
\nunder  entry 83 with respect to duties of  custom  including
\nexport duties.\tIf in addition to the import or export duty,
\nwhich Parliament
\n91<\/span>
\nalone  can impose, the State Legislatures were left free  to
\nmake a law under entry 54 in the State List levying  another
\ntax on a sale or purchase which takes place in the course of
\nthe import of the goods into or the export of the goods\t out
\nof  the\t territory  of\tIndia  such  double  taxation\twill
\nnecessarily   increase\tthe  price  of\tthe   goods.\tSuch
\nimposition  may\t easily result in our not  getting  imported
\ngoods  which may be of everyday requirement at a  reasonable
\nprice  or our not being able to compete in the world  market
\nwith  our exported goods.  This will discourage\t and  hamper
\nour  foreign trade and eventually affect the Union  revenue.
\nIt  is\tto avoid that calamity that article 286(1)  (b)\t was
\nintroduced in the Constitution.\n<\/p>\n
Article 286 (1) (b) has to be construed in the light of\t its
\naforesaid constitutional purpose and against its  commercial
\nbackground.  Import and export trade is principally  carried
\non  by big mercantile houses.  They purchase  goods  locally
\neither\tagainst\t orders secured from overseas buyers  or  in
\nanticipation of such orders and send the goods out of  India
\nby  land or sea to be delivered eventually to  the  overseas
\nbuyers.\t  They purchase goods in foreign  countries  against
\norders secured from local Indian buyers who may be wholesale
\nor  retail  dealers or in anticipation of  such\t orders\t and
\nbring  them  into India by land or sea to  be  delivered  to
\ntheir  constituents.   In some cases  the  manufacturers  or
\nproducers in India may themselves export their goods  direct
\nto  overseas  buyers and the retail dealers or\teven  actual
\nconsumers in India may occasionally import goods direct from
\noverseas  sellers.  Export and import transactions  of\tthis
\nclause\tare,  however, comparatively  speaking,\t smaller  in
\nvolume\tthan the great bulk of foreign trade put through  by
\nthe  big  export  and  import  houses.\t The  constitutional
\npurpose is to foster this foreign trade and to preserve\t the
\nUnion revenue.\tFor achieving that purpose, the Constitution
\nhas  by clause (1) (b) of article 286 imposed a ban  on\t the
\nState  Legislatures preventing them from impinging upon\t the
\nUnion  field of foreign trade and imposing tax on  sales  or
\npurchases  made in the course of import or export under\t the
\nguise or pretence of making laws
\n92<\/span>
\nwith  respect  to taxes on sale or purchase of\tgoods  under
\nentry 54 in the State List.\n<\/p>\n
The  question  arises:\twhat is the scope of  the  ban\tthus
\nimposed\t on  the  States ? The answer  will  depend  on\t the
\nmeaning\t that may be ascribed to the phrase “in\t the  course
\nof”  occurring in clause (1) (b).  It should be\t noted\tthat
\nthe same phrase is also used in clause (2) of that  article.
\nIn  The\t State of Travancore-Cochin v.\tThe  Bombay  Company
\nLtd.(1), this court has held that ” Whatever else may or may
\nnot fall within article 286(1)(b) sales and purchases  which
\nthemselves occasion the exports or imports of the goods,  as
\nthe case may be, out of or into the territory of India\tcome
\nwithin the exemption…….. In other words, this court\t has
\nheld  that sales or purchases which themselves occasion\t the
\nimports or exports are sales or purchases which take place ”
\nin the course of” import or export.  This was sufficient  to
\ndispose of that case and it was not then necessary to decide
\nwhat else might fall within that phrase.  This court is\t now
\ncalled upon to decide that point.\n<\/p>\n
Article\t 286(1)(b) exempts from taxation by a State law\t all
\nsales  or purchases which take place “in the course  of\t the
\nimport\tof the goods into or the export of the goods out  of
\nthe  territory\tof India.” The word “course” conveys  to  my
\nmind the idea of a gradual and continuous flow, an  advance,
\na journey, a passage or progress from one place to  another.
\nEtymologically\tit  means  and\timplies\t motion,  a  forward
\nmovement.   The\t phrase II in the course of  ”\tclearly\t has
\nreference  to a period of time during which the movement  is
\nin  progress.\tTherefore’ the words “in the course  of\t the
\nimport of the goods into and the export of the goods out  of
\nthe  territory of India” obviously cover the period of\ttime
\nduring\twhich  the  goods  are on  their  import  or  export
\njourney.   This view, which has been said to be\t founded  on
\nmechanical test, is accepted by the Advocate-General of\t the
\nappellant State and, indeed, by all Advocates-General  other
\nthan-those  of\tUttar Pradesh and  Mysore.   The  Advocates-
\nGeneral of the two last mentioned States seek to limit the
\n(1)  [1952] S.C.R. 1112.\n<\/p>\n
\t\t\t     93<\/span><\/p>\n
exemption  only\t to such sales or  purchases  as  themselves
\noccasion  the export or import.\t That narrow view,  however,
\nfails  to take note of the etymological meaning of the\tword
\n“course”  and  the very large number of sales  or  purchases
\nthat take place while the goods are on the high seas by\t the
\nendorsement  and\/or  delivery against payment from  hand  to\n<\/p>\n
-hand  of  the relative shipping  documents  covering  goods
\nworth crores of rupees.\t In the case of exports from  India,
\nsuch  sales or purchases in India will not be many  for\t the
\nshipping  documents will ordinarily be sent to\tthe  foreign
\ncountry and the sales or purchases, if any, during  transit,
\nby delivery of the shipping documents will take place there.
\nIn  some cases, however, where the goods are shipped to\t the
\nexporter  himself  or his agent without any  previous  sale,
\nsuch  sale by delivery of shipping documents may take  place
\nin  India.   But  take the case of an  Indian  importer\t who
\nplaces an order or indent with an overseas merchant for\t the
\nsupply of a large quantity of goods.  The goods are  shipped
\nand  the  shipping  documents  are  sent  by  air  mail\t and
\npresented  to the Indian importer by the  overseas  merchant
\nthrough his bank.  The Indian importer receives the shipping
\ndocuments  against payment.  The goods are, however, on\t the
\nhigh seas on their import journey and it will take some time
\nbefore the steamer will arrive.\t The market may fluctuate in
\nthe meantime.  Is the importer to wait patiently with folded
\nhands trusting to luck that the market may be in his  favour
\nwhen the goods actually arrive?\t Is he not to be allowed  to
\nmake  a gain in case there is a rise in the market  rate  or
\ncut  his loss if there is a downward tendency in the  market
\nprice  ? Is he to keep his money locked up all this  time  ?
\nThe  exigencies\t of foreign trade require that\the  must  be
\npermitted  to  sell  the goods by  delivering  the  shipping
\ndocuments  and realise his money and to again invest  it  in
\nfresh  imports.\t This is how foreign trade is done.   It  is
\nstated\tin Halsbury’s Law of England (Hailsham\tEdn.),\tVol.
\n29, p. 210:\n<\/p>\n
“280.\tThe  commercial\t reason for  the  evolution  of\t the
\n‘c.i.f.’ contract lies in the length of the time taken
\n94<\/span>
\nin the carriage of goods by sea.  It is to the advantage  of
\nneither seller nor buyer that the goods, the subject  matter
\nof the contract should remain en dehors commerce while\tthey
\nare  in course of shipment.  It is to the seller’s  interest
\nto  receive  the money equivalent to the goods\tas  soon  as
\npossible  after the date of the contract of sale, and  until
\nhe  has\t received actual payment of the\t price\the  normally
\ndesires to be able, if he wishes, to obtain credit upon\t the
\nsecurity of the transaction.  The buyer, on the other  hand,
\nnormally  desires  to be able to deal with  the\t goods,\t for
\nresale\tor  finance,  as soon as possible.   To\t meet  these
\nbusiness  necessities on the part of both buyer\t and  seller
\nthe ‘c.i.f.’ contract was evolved.”\n<\/p>\n
Such  sales or purchases, by delivery of shipping  documents
\nwhile the goods are on the high seas on their import journey
\nwere  and are well recognised species of  transactions\tdone
\nevery  day  on a large scale in big  commercial\t towns\tlike
\nBombay\tand  Calcutta  and  are\t indeed\t the  necessary\t and
\nconcomitant incidents of foreign trade.\t To hold that  these
\nsales  or  purchases do not take place “in  the\t course\t of”
\nimport\tor export but are to be regarded as purely  ordinary
\nlocal  or home transactions distinct from foreign trade,  is
\nto   ignore  the  realities  of\t the  situation.    Such   a
\nconstruction  will permit the imposition of tax by  a  State
\nover  and  above the customs duty or export duty  levied  by
\nParliament.   Such double taxation on the same lot of  goods
\nwill  increase\tthe price of the goods and, in the  case  of
\nexport,\t may  prevent the exporters from  competing  in\t the
\nworld market and, in the case of import, will put a  greater
\nburden\ton the consumers.  This will eventually\t hamper\t and
\nprejudicially affect our foreign trade and will bring  about
\nprecisely  that\t calamity  which it  is\t the  intention\t and
\npurpose\t of our Constitution to prevent.  It is,  therefore,
\nclear, to my mind, that the ban imposed by article 286(1)(b)
\nprotects  all  sales or purchases of goods that\t take  place
\nduring\tthe  period the goods are on the  high\tseas.\tThis
\nconstruction  appears  to  me  to  be  imperative  not\tonly
\netymologically\tbut also commercially and  constitutionally.
\nIndeed,\t this view is implicit in our judgments in the\tcase
\nof The State Of
\n\t\t\t     95<\/span>
\nTravancore-Cochin v. The Bombay Company Ltd.(1) referred  to
\nabove, in which we said at page 1120:-\n<\/p>\n
“We are not much impressed with the contention that no\tsale
\nor  purchase  can be said to take place in  the\t course\t of’
\nexport\tor  import  unless  the property  in  the  goods  is
\ntransferred to the buyer during the actual movements, as for
\ninstance  where\t the  shipping documents  are  endorsed\t and
\ndelivered within the State by the seller to a local agent of
\nthe foreign buyer after the goods have been actually shipped
\nor  where  such\t documents  are cleared\t on  payment  or  an
\nacceptance  by\tthe Indian buyer before the arrival  of\t the
\ngoods  within the State.  This view which lays undue  stress
\non  the\t etymology  of the word ‘course’  and  formulates  a
\nmechanical test for the application of clause (b) places, in
\nour  opinion, too narrow a construction upon that clause  in
\nso far as it seeks to limit its operation only to sales\t and
\npurchases  effected  during the transit of  the\t goods,\t and
\nwould,\tif  accepted,  rob  the exemption  of  much  of\t its
\nusefulness.”\n<\/p>\n
The question immediately arises as to how the period of time
\ncovering the “course” of import or export is to be measured.
\nWhen  does  it\tbegin and when does  it\t end?\tThe  learned
\nAdvocate-General  of Travancore Cochin contends-and in\tthis
\nhe  is\tsupported by all the  Advocates-General\t other\tthan
\nthose  of  Uttar  Pradesh and  Mysore-that  this  period  is
\nconfined  within two terminii, namely, when the\t journey  of
\nthe  goods begins and when it ends.  They maintain that\t the
\nprocess\t of import or export ordinarily begins and  ends  at
\nwater’s\t edge, although the period of journey of  the  goods
\nfrom  the  port\t to  the  place\t of  the  importer  or\t his
\nrepresentative\tin  case of import or to the port  from\t the
\nplace  of  the\texporter or his representative\tin  case  of
\nexport\tmay be added to the period of the actual  voyage  on
\nthe  high seas.\t This contention cannot be accepted in\tview
\nof our decision in the case of The State of TravancoreCochin
\nv.  The Bombay Co. Ltd.(1) referred to above.  According  to
\nthat decision the phrase “in the course of ” is not  limited
\nwithin these two terminii, i.e., from the point of time\t the
\ngoods are handed over to the carrier
\n(1)  [1952] S.C.R, 1112,
\n96<\/span>
\nupto  the  time\t they  are delivered  by  the  carrier.\t  By
\nadopting  the  principle of integrated\tactivities  we\thave
\nincluded  the agreement for sale to, or purchase  from,\t the
\nforeign merchant as taking place within the period  connoted
\nby  that phrase.  The agreement for sale or purchase,  which
\noccasions  the\texport\tor import as the  case\tmay  be,  is
\nobviously,  in\tpoint of time, anterior to  the\t actual\t and
\nphysical handing over of the goods to the carrier for taking
\nthe  goods out of the country or for bringing them into\t the
\ncountry\t as the case may be, but, nevertheless, such a\tsale
\nor purchase has been held to have taken place “in the course
\nof” export or import and as such exempt from taxation by the
\nStates.\t  The question is how far backward we can trace\t the
\ncommencement  of the “course” of export and how far  forward
\nwe can fix the termination of the “course” of import.
\n In  my\t judgment  the\tpurchase made  by  the\texporter  to
\nimplement  his agreement for sale with the foreign buyer  is
\nto  be\tregarded as having taken place “in  the\t course\t of”
\nexport.\t I take this view, not because I read the words\t “in
\nthe course of” as synonymous with the words “for the purpose
\nof” but because I regard the purchase by the exporter as  an
\nactivity so closely integrated with the act of export as  to
\nconstitute  a  part  of\t the  export  process  itself\tand,
\ntherefore,  as\thaving taken place ” in the  course  of\t the
\nexport.\t The learned Attorney-General accepts this  position
\nbut  the  Advocates-General  of\t the  States  demur.\tThey
\nmaintain that in this view of the matter one cannot stop  at
\nthe  last  purchase by the exporter but has to\tinclude\t the
\npurchase  by  the person who sells to the exporter  and\t all
\nprevious sales or purchases until one reaches the  producer.
\nI  find no substance or cogency in this line  of  reasoning.
\nIn  the last purchase by the exporter we have at  least\t one
\nparty  who is directly concerned with or interested  in\t the
\nactual\texport.\t  The exporter is the connecting  link,\t the
\ncommercial vinculum, as it were,. between the last  purchase
\nand  the  export.   But in the earlier\tsales  or  purchases
\nneither\t the  sellers  nor  the\t purchasers  are  personally
\nconcerned with or interested in the actual
\n\t\t\t     97<\/span>
\nexport of the goods at all.  Therefore the earlier sales  or
\npurchases  may\tbe  too remote and may not  be\tregarded  as
\nintegral parts of the process of export in the same sense as
\nthe  last purchase by the exporter can be so regarded.\t The
\nline of demarcation is easily perceptible.
\nLet  me explain my meaning step by step.  As I have  already
\nstated, in some cases the exporters receive orders from\t the
\nforeign buyers and then export the goods.  It has been\theld
\nby us that these orders themselves occasion the export\tand,
\ntherefore, they take place ” in the course of ” export.\t But
\nthese  orders can occasion the export only if the  exporters
\nhave the goods to export.  The exporters are not necessarily
\nthe producers or manufacturers and in great many cases\tthey
\nhave  to procure the goods to implement the foreign  orders.
\nThe  overseas orders in such cases  immediately\t necessitate
\nthe  purchase  of  the goods  and  eventually  occasion\t the
\nexport.\t The three activities are so intimately and  closely
\nconnected,  like  cause and effect, with the  actual  export
\nthat  they  may well be regarded as integral  parts  of\t the
\nprocess\t of  export itself.  As according  to  our  previous
\ndecision the contract for sale with the foreign buyer starts
\nthe export stream and occasions the export, the purchases by
\nthe  exporter  to implement such contract  necessarily\ttake
\nplace, chronologically speaking, after the export stream has
\nstarted\t and, therefore, must be an activity  undertaken  in
\nthe course of the export.  Logically there can be no getting
\naway  from this conclusion.  Therefore, these  purchases  to
\nimplement the sale which occasions the export must be immune
\nfrom sales tax.\n<\/p>\n
Is  there any compelling reason to confine this immunity  to
\nsales or purchases to implement a foreign order or sale ? It
\ncannot\tbe overlooked that in a great majority of cases\t the
\nexport\tmerchants, who, as I have said, are  not,  generally
\nspeaking,  the actual producers or manufacturers  of  goods,
\nstart purchasing goods in advance, after taking into account
\nthe  estimated quantity of the year’s total production,\t the
\nprevailing  local  prices, the likely  demand  from  foreign
\ncountries
\n13<\/span>
\n98<\/span>
\nand  the  prices  ruling or likely to rule  in\tthe  foreign
\nmarkets.   Such\t anticipatory  purchases  form\tby  far\t the
\nlargest\t part of the activities of the export merchants\t and
\nare  regarded by businessmen as necessary incidents  of\t the
\nexport trade.  Is there any logical reason why purchases  by
\nthe  exporters\tin  anticipation of  future  foreign  orders
\nshould\tnot also be taken as starting the ” course ” of\t the
\nflowing stream of the export trade ?  The goods, it is true,
\nare   stored  in  godowns  for\ta  while   awaiting   actual
\nexportation  but that is like a stream falling into  a\tlake
\nand  getting out by an outlet at the other end so  that\t the
\nundercurrent  of  the  flow, even if  imperceptible  on\t the
\nsurface, is nevertheless continuous.  One cannot overlook or
\nignore these well known preliminary but essential activities
\nof  the export merchants which necessarily precede and\tlead
\nup to and, indeed, occasion or eventually make possible\t the
\nultimate physical movement of the goods.  To hold that these
\npurchases  are independent local purchases totally  distinct
\nfrom the export trade will be to unduly narrow down the wide
\nmeaning of the flexible phrase in the course of”.
\nI  find support for the views I have expressed above by\t the
\nrecent decision of the High Court of Australia in The  Queen
\nv. Wilkinson: Ex parte Brazell, Garlick and Coy (1) to which
\nreference  may\tnow be made.  Section 11(3) of a  New  South
\nWales statute called the Marketing of Primary Products\tAct,
\n1927-1940,  provides, inter alia., that every producer\twho,
\nexcept\tin  the\t course of trade  or  commerce\tbetween\t the
\nStates,\t sells or disposes of or delivers any commodity,  in
\nrespect\t of  which a Board has been  appointed,\t to  persons
\nother than the Board, and every person other than the  Board
\nwho, except as aforesaid, buys, accepts or receives any such
\ncommodity  from\t a producer shall be guilty of\tan  offence.
\nBrazeil,  a  producer  of potatoes in  New  South  Wales  at
\nDorrigo\t in  New  South\t Wales agreed to  sell\t48  bags  of
\npotatoes of Garlick Coy & Co., who were buying agents for J.
\nE. Long & Co., general produce merchants, whose head  office
\nwas at Jennings on the New South Wales side of
\n(1)  (1952) 85 C.L.R. 467.\n<\/p>\n
\t\t\t     99<\/span><\/p>\n
the  border of that State and Queensland and who carried  on
\nbusiness of purchasing and selling potatoes in both  States.
\nIt  was\t a  term of the sale that  the\tpotatoes  should  be
\ndelivered  from Brazell’s lorry on trucks at Dorrigo in\t New
\nSouth  Wales.  The potatoes were loaded at  Dorrigo  railway
\nstation\t into a truck and consigned by Garlick Coy & Co.  to
\nJ.  E. Long & Co. at Wallangarra on the Queensland  side  of
\nthe  border  adjoining Jennings.  The  potatoes\t arrived  at
\nWallangarra and were sold by J. E. Long & Co. to a purchaser
\nin  Queensland.\t  Brazell was charged with  the\t offence  of
\ndisposing  of  and  Garlick and Coy,  the  two\tpartners  of
\nGarlick Coy & Co. were charged with the offence of receiving
\nthe  potatoes in contravention of section 11(3) of the\tAct.
\nThe question was whether the sale by Brazell to Garlick\t Coy
\n&  Co.\tin New South Wales was in the course  of  trade\t and
\ncommerce  between the States.  It was found that it  was  no
\npart of the contract of sale between Brazell and Garlick Coy
\n& Co. that the potatoes would go to any ascertained buyer in
\nNew South Wales or in any other State other than Garlick Coy
\n& Co. who were, as Brazell believed, acting as agents for J.
\nE. Long & Co., that Brazell was only concerned with the sale
\nof  his potatoes and that when he received his money he\t had
\nno  further  interest  in the potatoes, that  there  was  no
\nevidence  that\tat the time Garlick Coy & Co.  received\t the
\npotatoes  from Brazell there was any contract  in  existence
\nfor  sale of them to any person in Queensland or  any  other
\nState  or that J. E. Long & Co. had any definite orders\t for
\nthe supply of them to any ascertained inter-State buyers  or
\nthat  the  potatoes purchased by Garlick Coy & Co.  were  to
\nfill  any  such\t orders.  There\t was  no  binding  agreement
\nbetween\t Brazell and Garlick Coy & Co. or J. E. Long  &\t Co.
\nthat the potatoes would be sold to buyers in Queensland, The
\nMagistrate  answered  the  question  in\t the  negative\t and
\nconvicted Brazell, Garlick and Coy, who thereupon moved\t for
\na  writ\t of prohibition to restrain the informants  and\t the
\nMagistrate from further proceeding on those convictions.  In
\na  joint judgment Dixon, McTierman, Fullager and Kitto,\t JJ.
\nsaid :-\n<\/p>\n
100<\/span><\/p>\n
“In our opinion on the foregoing facts the disposal and\t the
\nreceiving  made the subject of the informations were in\t the
\ncourse of trade and commerce between the States, within\t the
\nmeaning\t of  the  exception in\tsection\t 11(3).\t  Under\t the
\nagreement  for\tthe sale and purchase of  the  potatoes\t the
\nagents\tbuying\twere required to consign the potatoes  to  a
\nrailway station in Queensland, and they did so consign them.
\nFor  the  purpose  of  the exception  the  delivery  of\t the
\npotatoes from the lorry into the railway truck can bear only
\nthe  aspect of an essential and integral, even\tif  initial,
\nstep in the transportation of the potatoes to Queensland.”
\nIn a separate but concurring judgment Williams J. said :-
\n”  It was submitted to the Magistrate that  the\t transaction
\nmust be looked at as a whole and not split up into  separate
\ncontracts  of  sale and purchase.  The\tMagistrate  rejected
\nthis submission.  In doing so he fell into error.  He should
\nhave regarded the transaction as a whole.  On this basis the
\nfacts proved that the acts done by the appellants were\tdone
\nin the course of trade and commerce between the States.”
\nAfter stating the facts shortly Webb J. said:-
\n“The  potatoes\twent  to Queensland and\t were  sold  by\t the
\nprincipal  in  that  State.  It may be\tthat  there  was  no
\nbinding\t stipulation  that  the potatoes would\tbe  sold  in
\nanother\t State, and that they could have been resold in\t New
\nSouth Wales without breach of agreement.  But a legal  nexus
\nwith  inter-State trade, by a contract with the\t grower,  is
\nnot required to secure the immunity given by section 92.  ”
\nReference  was\tmade  in this case to the  earlier  case  of
\nClements  and  Marshall Pty Ltd. v.  -Field  Peas  Marketing
\nBoard (1) where there were two sets of contracts, the  first
\nbeing contracts of sale by the producers to the dealers\t and
\nthe  second contracts of resale by the dealers to buyers  in
\nother  States.\t After\tpointing out that it  was  only\t the
\nsecond set of contracts which in themselves were inter-State
\ntransactions Dixon J. said at page 429:\n<\/p>\n
(1)  (1947) 76 C.L.R- 401,
\n\t\t\t    101<\/span>
\n“We   should   consider\t the  commercial   significance\t  of
\ntransactions  and  whether they form an integral part  of  a
\ncontinuous  flow or course of trade, which, apart  from\t the
\ntheoretical  legal possibilities, must commercially  involve
\ntransfer from one State to another.”\n<\/p>\n
The  reasonings adopted by the learned Judges in  the  above
\ncases apply with full force not only to clause (2) but\talso
\nto  clause (1)(b) of article 286 and we should construe\t the
\nwords “in the course of” in the same way as it has been done
\nin  the\t case of Queen v. Wilkinson(1).\t So  construed,\t the
\npurchases  made\t by the exporter even without  any  previous
\norder  for export form “an essential and integral,  even  if
\ninitial,  step” in the exportation of the goods.  They\tform
\n“an   integral\t part  of  a  continuous  flow”\t  which\t  is
\ncommercially  involved\tin the export  process.\t  No  “legal
\nnexus”\tbetween\t these\tpurchases and  the  actual  physical
\nexport\tis required to secure immunity from State  taxation.
\nIn my judgment the last purchases by the  exporters–whether
\nin  fulfilment\tof  foreign orders  already  secured  or  in
\nanticipation  of future orders-must, in a commercial  sense,
\nbe  “in\t the course of ” the export.  The only way  to\tgive
\nbusiness efficacy to article 286 (1)(b) is to construe it in
\nthis  commercial sense.\t Tax such purchases and you tax\t the
\nexport\titself\tand by that process eventually\tcripple\t our
\nexport\ttrade  and  bring about\t an  adverse  trade  balance
\nagainst us in the long run.  It must always be borne in mind
\nthat with our exports we pay for our imports.
\nThe  same  considerations  apply to the first  sale  by\t the
\nimporters   of\t the  imported\tgoods.\t I  leave   out\t  of
\nconsideration the comparatively few cases of retail  dealers
\nthemselves importing goods direct from overseas sellers\t and
\nthe  still fewer cases of actual consumers  importing  goods
\nfor  their own consumption.  In by far the largest  majority
\nof cases it is the import merchants who bring goods into the
\ncountry\t from  abroad.\tTheir business is to  bring  in\t the
\ngoods  and thereby augment the general mass of goods in\t the
\ncountry.   In  some cases the importers secure\torders\tfrom
\nlocal  dealers\tand pursuant to such  orders  the  importers
\nimport the goods
\n(1)  (1952) 85 C.L.R. 467.\n<\/p>\n
102<\/span><\/p>\n
from foreign lands.  In most cases, however, the  importers,
\nin intelligent anticipation of local demands for such goods,
\nplace  orders or indents with foreign sellers who,  pursuant
\nto such orders, send out the goods.  Each of these orders or
\nindents\t placed\t with the foreign sellers by  the  intending
\nimporters  occasions the import and these purchases  by\t the
\nimporters  are\tcertainly “in the course of” import  of\t the
\ngoods  into  India  within  the\t meaning  of  our   previous
\ndecision,  and as such exempt from sales tax.  We have\talso
\nseen  that the sale or purchase of goods during\t the  period
\nthey are on the high seas is also “in the course of”  import
\nand as such immune from taxation by State law.\tThe question
\nthen arises as to where the course of import ends.  Does  it
\nend at the water’s edge ? If the sale by the importers while
\nthe goods are on the high seas be ,,in the course of” import
\nand not liable to sales tax, there can be no logical  reason
\nwhy  the first sale by the importers to dealers\t should\t not
\nalso be exempted.  If such sale is to be regarded as  purely
\na  local sale and as such liable to taxation by the  States,
\nthen,  in  effect, the tax will be a burden  on\t the  import
\nitself.\t The importers have to pay the customs duty  imposed
\nby  Parliament\tand if again the  States  impose  additional
\ntaxes  on the same goods such multiple taxation\t will  raise
\nthe  price  of\tthe goods to the  detriment  of\t the  actual
\nconsumers and will eventually have an adverse effect on\t our
\nimport trade which it is the purpose of the Constitution  to
\nprevent.  After all the business of the importers who  bring
\nthe  goods  into  our  country is only\tto  make  the  goods
\navailable  to the internal trade, for they are\tnot  usually
\nretail\tdealers\t who  sell to the  consumers  direct.\tThat
\nbusiness  is  completed\t only  by  the\tfirst  sale  by\t the
\nimporters  to the dealers, wholesale or retail.\t It is\tonly
\nafter  that first sale of the goods by the importers to\t the
\ndealers\t that the goods become parts of the general mass  of
\nproperty  in the State concerned and thereafter\t subject  to
\nthe  taxing  power  of that State.  The first  sale  by\t the
\nimporters  to  dealers, therefore, appears to me  to  be  so
\ninextricably wound up with the import itself that it may  be
\ncommercially  regarded\tas  the culmination  of\t the  import
\nactivities and,
\n\t\t\t    103<\/span>
\ntherefore,  the\t end of the course of import.  I  arrive  at
\nthis  conclusion  not by applying the American\tdoctrine  of
\nunopened original package, which has now been abandoned even
\nby  the\t Supreme  Court of America  and\t has  recently\tbeen
\nrejected  by  us  in  the  Prohibition\tCase(1)\t but  on   a
\nconstruction of the phrase “in the course of”‘ in the  light
\nof  its\t etymology,  the purpose  of  the  Constitution\t and
\nagainst the background of the known notions and practices of
\nbusinessmen  engaged  in  foreign trade. ,  If,\t however,  a
\nparticular importer himself happens to be a retail dealer of
\nthe  goods and sells the goods to the  actual  consumers-and
\nsuch cases are comparatively few-then such retail sales may,
\nlike local retail sales of similar goods, be liable to sales
\ntax by the State.  Whether an importer is or is not a retail
\ndealer is a question of fact which is capable of proof\tand,
\ntherefore, need not be regarded as creating any\t insuperable
\ndifficulty in the matter of the assessment of the sales tax.
\nFor  reasons stated above, I find no difficulty\t in  holding
\nthat   just  like  the\tlast  purchases\t by  the   exporters
\nthemselves  for the purpose of sending the goods out of\t the
\ncountry the first sales by the importers to dealers of goods
\nbrought\t by  them  into the country  also  come\t within\t the
\nsomewhat  elastic expression ” in the course of ” export  or
\nimport.\t  As stated above, it is possible to draw  the\tline
\nthere.\n<\/p>\n
Reference  is  made to Clive M. Schmitthoff’s  Export  Trade
\n(2nd Edition, page 3) where the learned lecturer says:-
\n“When a merchant shipper in the United Kingdom buys, for the
\npurpose\t of  export, goods from a manufacturer in  the\tsame
\ncountry the contract of sale is a home transaction, but when
\nhe  resells these goods to a buyer abroad that\tcontract  of
\nsale has to be classified as an export transaction.”
\nThe  argument  formulated  on this authority  is  that\tthis
\npassage\t clearly establishes that the last purchase  by\t the
\nexporters  and\tthe first sales by the\timporters  are\thome
\ntransactions  and cannot be classified as export  or  import
\ntransactions at all, This distinction between
\n(1)  [1951] S.C.R. 682,
\n104<\/span>
\na  home\t transaction and an export transaction made  by\t the
\nlearned\t lecturer  for\tthe purposes of his  book  takes  us
\nnowhere.   Nor do the American decisions  which\t distinguish
\nbetween\t intra-State trade and inter-State trade  throw\t any
\nlight  on the problem of construction of article 286  (1)(b)
\nwhich is couched in language quite different from that\tused
\nin  the American Constitution.\tIn America the\tquestion  is
\nclear  cut, namely, is it an inter-State transaction  or  an
\nintra-State transaction. Our problem, on the other hand,  is
\nto find out whether a given sale or purchase has taken place
\n“in the course of” import or export.  Simply to say that the
\nparticular  sale or purchase is a home transaction does\t not
\nsolve  our  problem,  for to say so is not to  say  that  it
\ncannot have taken place “in the course of” import or export.
\nIndeed,\t article 286 (1)(b) postulates a  home\ttransaction,
\nthat  is, a transaction which takes place within  the  State
\nand then places it beyond the taxing power of that State  on
\nthe  ground  that the transaction, has taken place  “in\t the
\ncourse\tof ” import or export.\tIf the transaction is not  a
\nhome transaction, i.e., if it takes place outside the State,
\nclause\t(1) (b) need not be invoked at all, for then  clause
\n(1)(a)\twill  prevent that State from  taxing  that  outside
\ntransaction.  It is only when a particular transaction is  a
\nhome  transaction in the sense that it take,,; place  within
\nthe State that the further question arises, namely,  whether
\nthat  home  transaction has taken place “in the\t course\t of”
\nimport\tor export within the meaning of clause (1)(b).\t The
\ncircumstance  that a sale or purchase is a home\t transaction
\ndoes not, therefore, conclude the matter and we have yet  to
\nsolve  that further question by the proper  construction  of
\nclause\t(1)(b) according to its natural meaning and  in\t the
\nlight\tof  the\t Constitutional\t purpose  and  against\t the
\ncommercial back-ground as explained above.
\nA  second argument founded on that passage is that if  those
\nhome  transactions  are\t removed from the  sphere  of  State
\ntaxation  then\tthe States will be deprived of\tone  of\t the
\nprincipal and fruitful sources of revenue and the economy of
\nthe States will be crippled and may
\n105<\/span>
\neven collapse.\tIt is pointed out that there is no provision
\nin  clause  (1)(b), such as there is in\t clause\t (2),  under
\nwhich  Parliament may lift the ban and, therefore, to  place
\nthese  home  transactions  beyond the taxing  power  of\t the
\nStates will irretrievably deprive them of a very large\tpart
\nof  revenue which they have been realising from these  sales
\nor purchases made by the big importers or exporters many  of
\nwhom  are foreigners.  There is no reason, it is urged,\t why
\nthey  should  not  be made to pay sales\t tax  like  ordinary
\nsellers\t or  buyers in the States.  As already\tstated,\t the
\nimposition of double taxation may eventually hamper our\t own
\nforeign\t trade.\t  The object of our  Constitution,  apparent
\nfrom the distribution of legislative powers and from article
\n286, is to place our inter-State trade and our foreign trade
\nbeyond the taxing power of the State.  In the case of inter-
\nState trade power is expressly given to Parliament by clause
\n(2)  of\t that  article to lift the ban but in  the  case  of
\nforeign\t trade no such power is given to Parliament by\tthat
\narticle\t to relax or lift the ban imposed by clause (1)\t (b)
\non  the legislative power of the State Legislatures.  It  is
\nfor  Parliament alone to make laws with respect\t to  foreign
\ntrade.\tIf the import or export of particular commodities is
\nnot beneficial to our country then Parliament, which is in a
\nmuch  better position than this court to know and  judge  of
\nsuch matters, will, I am sure, make laws restricting or even
\nprohibiting  such  imports or exports.\tIf  our\t imports  or
\nexports\t may bear the additional burden of taxation  without
\nany  detriment\tto the consumers and our foreign  trade\t and
\nwithout any risk to the Union revenue, Parliament, I have no
\ndoubt  again, will increase the customs or export  duty\t and
\naugment\t the  revenue  of  the Union.\tIf  on\tits  correct
\ninterpretation\tclause (1)(b) of article 286 causes loss  to
\nthe  States’ revenue by depriving them of the taxes on\tsuch
\nsales or purchases then such loss will clearly and solely be
\nattributable  to  the  intention  of  the  Constitution\t  as
\nexpressed  in  that clause.  If that clause results  in\t any
\ndanger\tto  the economy of the States, I have no  manner  of
\ndoubt that Parliament
\n14<\/span>
\n106<\/span>
\nWill make good the loss to the States on the  recommendation
\nof the Finance Commission under some appropriate article out
\nof  articles  268  to  281  grouped  under  the\t heading   ”
\nDistribution of Revenues between the Union and the States  ”
\nin  the\t very chapter in which occurs article 286  which  is
\nengaging  our  attention.   In any  event,  the\t court\tmust
\nconstrue  the  Constitution  as\t it  finds  it\tand  if\t the
\nconstruction   of   the\t  plain\t language   leads   to\t any
\ninconvenience  to the States it will be for authority  other
\nthan this court to rectify and remove the same.
\nIt is said that it will be very difficult for the Sales\t Tax
\nOfficer to ascertain how much of the goods purchased by\t the
\nexporters  had\tactually been exported or how  much  of\t the
\ngoods\timported   by  the  importers  had   actually\tbeen
\ndistributed  amongst  the  dealers  as\topposed\t to   actual
\nconsumers.   It is pointed out that ordinarily sales tax  is
\nlevied on sales and the sellers are permitted to pass on the
\ntax to the purchasers at the time of such sales.  How, it is
\nasked,\tis  the seller to know whether\this  purchaser\twill
\nactually  honour his representation that he wants the  goods
\nfor the purpose of export?  If the seller has no  confidence
\nin  the integrity of his purchaser he will not sell  to\t him
\nwithout\t sales\ttax.  The purchaser who is  really  exporter
\nwill  not then perhaps buy from such a seller or if  in\t the
\ncase  of  urgency he buys on payment of the  sales  tax\t may
\nclaim the refund, if there be any provision in that  behalf,
\non  proof that he actually exported the goods.\tIt  is\tsaid
\nthat  exporters\t may change their minds and sell  the  goods
\nlocally\t after obtaining the exemption or the importers\t may
\nsell  the goods themselves in retail to the consumers  after
\nhaving\tgot  the exemption.  There is no substance  in\tthis
\nline of theoretical reasoning, for these are matters capable
\nof  being proved.  If the exporters or their sellers  cannot
\nprove to the satisfaction of the officer that the  exporters
\npurchased  so much goods for export and did actually  export
\nthe  same or the importers or their purchasers cannot  prove
\nthat the importers imported so much goods and distributed so
\nmuch amongst the dealers as
\n107<\/span>
\nopposed to actual consumers, they will not get the’  benefit
\nof the exemption and that is all.  If the Sales Tax  Officer
\nfinds  no difficulty in ascertaining whether the  goods\t are
\ndelivered  in  a State only for the purpose  of\t consumption
\nwithin\tthat  State or whether they were delivered  for\t the
\npurpose\t of resale out of that State so as to ascertain\t the
\napplicability  of  the Explanation to clause  (1)  (a),\t why
\ncannot\tthe same officer find out what goods were  purchased
\nby  the exporters for the purpose of export or what part  of
\nthe imported goods were sold by the importers to the dealers
\n? If the Income-tax Officer can without difficulty ascertain
\nthe income, profits and gains of a business and work out the
\nprovisions  of, section 10 of the Indian Income-tax Act\t and
\nalso  can ascertain under section 42 of that Act the  income
\ndeemed\tto  accrue or arise within  the\t taxable  territory,
\nthere cannot be any insuperable difficulty in the way of the
\nSales  Tax Officer determining the turnover of a  particular
\ndealer\tand  working out the exemptions he  is\tentitled  to
\nunder\tarticle\t 286(1)\t (b).\tIn  any\t case  the   assumed
\ndifficulty  of the Sales Tax Officer cannot alter or  affect
\nthe correct construction of the constitutional provisions in
\nquestion.\n<\/p>\n
To summarise : The State Legislatures, under entry 54 of the
\nState  List, have power to make laws with respect to tax  on
\nthe  sale  or  purchase of goods.   On\tthis  general  power
\narticle 286 places four restrictions, namely, that no law of
\na  State shall impose or authorise the imposition of tax  on
\nthe  sale  or purchase of goods when such sale\tor  purchase
\ntakes  place  (1) outside the State, (2) in  the  course  of
\nimport or export, (3) in the course of inter-State trade and
\ncommerce  and (4) in respect of essential commodities.\t The
\nExplanation  to\t clause\t (1) (a) only explains\twhat  is  an
\noutside\t sale or purchase, for by saying that  a  particular
\nsale  or  purchase  is\tto be deemed  to  take\tplace  in  a
\nparticular  State it only indicates that it is to be  deemed
\nto take place outside all other States so as to attract\t the
\nban of clause (1) (a) and thereby take away the taxing power
\nof those other States with respect to such sale or purchase.
\nThe Explanation does not operate as an
\n108<\/span>
\nexception  or  a proviso but only explains  sub-clause\t(a).
\nThe,  fiction  created by the Explanation is  only  for\t the
\npurposes  of sub-clause (a), so that sales or  purchases  of
\nthe  kind which fall within the Explanation get the  benefit
\nof  the\t ban  imposed by  sub-clause  (a).   Therefore,\t the
\npurpose of the Explanation read with sub-clause (a) is\tonly
\nto  take  away\tthe power of taxation  of  those  States  in
\nrelation to those sales or purchases which are to be  deemed
\nto  be outside sales or purchases.  Its purpose is not\tand,
\nindeed,\t it does not purport, to confer any taxing power  on
\nany  State,  and  it  cannot be resorted  to  for  any\tsuch
\nextraneous  or collateral purpose.  It does not\t convert  an
\ninter-State  sale or purchase into an intra-State  sale\t for
\nany  purpose  other than the limited purpose  of  sub-clause\n<\/p>\n
(a).   If  a sale or purchase takes place outside  a  State,
\neither\tunder  the general law or by virtue of\tthe  fiction
\ncreated\t by the Explanation, then that State  cannot,  under
\nclause\t(1)  (a), tax such sale or purchase.  If a  sale  or
\npurchase  takes\t place\twithin a  State,  either  under\t the
\ngeneral law or by reason of the Explanation, then, if such a
\nsale  or  purchase takes place ” in the course of  ”  inter-
\nState trade and commerce, no State, not even the State where
\nthe sale or purchase takes place as aforesaid can tax it  by
\nreason\tof  clause (2), unless and until Parliament  by\t law
\nprovides  otherwise.  A sale or purchase “in the course\t of”
\nimport\tor  export  within the meaning\tof  clause  (1)\t (b)
\nincludes  (i) a sale or purchase which itself occasions\t the
\nimport or export as already held by this court, (ii) a\tsale
\nor  purchase  which takes place while the goods are  on\t the
\nhigh seas on their import or export journey and (iii) the .-
\nlast purchase by the exporter with a view to export and\t the
\nfirst sale by the importer to a dealer after the arrival  of
\nthe  imported  goods.\tIf a sale or  purchase\ttakes  place
\nwithin a State, either under the general law or by reason of
\nthe  Explanation, then, if it takes place in the  course  of
\nimport or export as explained above, no State, not even\t the
\nState within which such sale or purchase takes place can tax
\nit by reason of clause (1) (b).\t This, in short, is the true
\nmeaning\t and import of article 286 as I read and  understand
\nit,
\n\t\t\t    109<\/span>
\nI  have already stated, however, that the majority  decision
\nof this court in C. A. No. 204 of 1952 [The State of  Bombay
\nv. The United Motors (India) Ltd.<\/a>(1)] has taken a  different
\nview  of the meaning of clause (1) (a), the Explanation\t and
\nclause\t(2)  of article 286.  In disposing  of\tthe  present
\nappeals,  in  so  far  as such\tdisposal  depends  on  those
\nprovisions,  I\tam  bound to follow  the  majority  decision
\nrather than my own view of them.\n<\/p>\n
Bearing\t in mind the principles laid down by this  court  in
\nThe  State  of\tTravancore- Cochin  v.\tThe  Bombay  Company
\nLtd.(2) and in C. A. No. 204 of 1952 [The State of Bombay v.
\nThe  United  Motors (India) Ltd. and others<\/a> (1)]  and  those
\nexplained above, I now proceed to consider the rival  claims
\non their respective merits.  There is really no\t substantial
\ncontroversy  as to the nature of the business carried on  by
\nthe  respondents.  All of them are exporters  of  cashew-nut
\nkernels on a fairly big scale.\tThey procure raw cashew-nuts
\nfrom  three  sources, namely, (i) from within the  State  of
\nTravancore-Cochin,  (ii) from neighbouring States and  (iii)
\nfrom  Africa.  Then they put the raw cashew-nuts  through  a
\ncertain\t process and obtain oil and edible  kernels.   These
\nedible kernels they export to foreign countries.  It will be
\nrecalled  that\tthe Travancore Sales Tax Act  imposes  taxes
\nonly on the purchase of “cashew and its kernels” but not  on
\nthe  sale  thereof.  The respondents  claim  exemption\tfrom
\nsales  tax  for the period between the 26th  January,  1950,
\nwhen  the  Constitution came into force and  the  29th\tMay,
\n1950, which is the close of the assessment year.  In support
\nof  their claim for exemption they rely oil article  286  of
\nthe Constitution.  It is necessary, therefore, to take\teach
\nof the three categories of purchases and see if they or\t any
\npart  of them come within any of the exemptions provided  by
\nthat article.\n<\/p>\n
As  regards local purchases of raw cashew-nuts there  is  no
\ncontroversy that those purchases take place within the State
\nand  are,  therefore,  not entitled  to\t the  protection  of
\narticle 286 (1) (a).  These purchases do not take place ” in
\nthe course of ” inter-State trade or
\n(1) [1953] S.C.R. 1069.\n<\/p>\n
(2) [1952] S.C.R. 1112.\n<\/p>\n
110<\/span><\/p>\n
commerce  and, therefore, are not within clause (2) of\tthat
\narticle.  The only question is whether these local purchases
\ncan be said to take place ” in the course of ” export within
\nthe  meaning  of article 286 (1) (b).  There is\t no  dispute
\nthat the respondents do not sell the raw cashew-nuts or\t any
\nportion\t of  it within or without the State  of\t Travancore.
\nThey do not sell the edible kernels, which they obtain as  a
\nresult\tof  the manufacturing process or any  part  of\tthem
\nwithin Travancore-Cochin or any other State in India  except
\nwhat have been described as factory rejections of negligible
\nquantity  which are not fit for export.\t All edible  kernels
\nare  exported  to foreign countries.   Therefore,  the\tres-
\npondents  claim\t that  all  their  purchases,  whether\tmade
\nlocally or in neighbouring States or from abroad, are, ”  in
\nthe course of ” export within the meaning of clause (1)\t (b)
\nin the sense explained above.  The appellant State, however,
\nmaintains  that\t commercially  ” the goods  ”  exported\t are
\nentirely different from ” the goods ” purchased by reason of
\nthe  process  of manufacture they are put through  and\tare,
\ntherefore, not entitled to the benefit of the ban imposed by
\nclause (1) (b).\n<\/p>\n
The High Court has, on remand, enquired into the process  of
\nmanufacture  through  which the raw  cashewnuts\t are  passed
\nbefore the edible kernels are obtained.\t The High Court,  in
\nits  judgment  on remand, goes minutely into  the  different
\nprocesses   of\tbaking\tor  roasting,  shelling,   pressing,
\npealing, and so forth.\tAlthough most of the process is done
\nby hand, part of it is also done mechanically by drums.\t Oil
\nis  extracted  out  of\tthe outer  shells  as  a  result  of
\nroasting.   After roasting the outer shells are\t broken\t and
\nthe nuts are obtained.\tThe poison is eliminated by  pealing
\noff  the  inner skin.  By this process\tof  manufacture\t the
\nrespondents  really consume the raw cashew and\tproduce\t new
\ncommodities.\tThe  resultant\tproducts,  oil\tand   edible
\nkernels,  are well recognised commercial commodities.\tThey
\nare  separate articles of commerce quite distinct  from\t the
\nraw   cashewnuts.   Indeed,  it\t is  significant  that\t the
\nrespondents  place orders for “cashew-nuts ” but orders\t are
\nplaced
\n111<\/span>
\nwith them for ” cashew-nut kernels “. In the  circumstances,
\n”  the\tgoods  ”  exported are not the\tsame  as  the  goods
\npurchased.   The goods purchased locally are  not  exported.
\nWhat are exported are new commodities brought into being  as
\na  result of manufacture.  There is a transformation of\t the
\ngoods.\t The raw cashews are consumed by the respondents  in
\nthe sense that a jute’ mill consumes raw jute, or a  textile
\nmill  consumes cotton and yarn.\t The raw cashews  not  being
\nactually exported the purchase of raw cashews cannot be said
\nto  have been made ” in the course of ” export so as  to  be
\nentitled to immunity under clause (1) (b).
\nAs  regards  the  purchases  of\t raw  cashew-nuts  from\t the
\nneighbouring  States,  the position, as found  by  the\tHigh
\nCourt  on  remand, is that the bulk of such  purchases\twere
\nmade by the respondents or their agents from sellers in\t the
\nneighbouring   States  and  the\t goods\tso  purchased\twere
\ndelivered by the sellers to the respondents or their  agents
\nin the States where the purchases took place.  The  contract
\nof purchase was fully implemented when as a direct result of
\nthe  purchase  delivery was given outside  Travancore.\t The
\nrespondents  or their agents thereafter brought, the  goods,
\nwhich  by then had become their own goods, into\t Travancore,
\nby  rail or otherwise.\tThe delivery of the goods under\t the
\ncontract  for  purchase having already taken  place  outside
\nTravancore,  the  subsequent  despatch\tof  those  goods  to
\nTravancore  cannot  possibly be said to have  been  delivery
\nwithin that State as a direct result of the purchase  within
\nthe  meaning  of  the  Explanation.   Indeed,  the   learned
\nAdvocate-General  of  Travancore-Cochin\t concedes  that\t  as
\npurchases  of this type did not fall within the\t Explanation
\nthey  must  be\tregarded  as  having  taken  place   outside
\nTravancoreCochin and must, accordingly, be exempt from taxa-
\ntion by Travancore-Cochin under article 286 (1) (a).  If  it
\ncould  be shown that although such sales or  purchases\ttook
\nplace  entirely\t in those other States yet  they  were\tmade
\nbetween two parties residing or carrying on business in\t two
\nStates and for the purpose of consumption or of sale in\t the
\npurchasers’  State then these sales or purchases might\thave
\nbeen said to have
\n112<\/span>
\nbeen made “in the course of ” inter-State trade and commerce
\nand  as such exempt from taxation by both the  States  under
\narticle 286 (2).  The transactions of sale or purchase\twith
\nwhich we are concerned having taken place within the  period
\ncovered\t by the President’s order made under the proviso  to
\nthat  clause, no protection under clause (2) can be  claimed
\nfor   these  transactions.   Further,  if  the\t cashew-nuts
\npurchased  in  neighbouring States were for the\t purpose  of
\nexporting  them\t out of the territories of  India  and\twere
\nactually so exported, then these purchases would be ” in the
\ncourse of ” export and as such exempt from tax under article
\n286 (1) (b).  As a matter of fact, however, the\t cashew-nuts
\npurchased  in  the  neighbouring States\t were  not  actually
\nexported  but were put through a process of manufacture\t and
\nthe goods that were exported were not the same as those that
\nwere purchased as explained above and, therefore, clause (1)\n<\/p>\n
(b) gives no protection to these purchases.  On the facts of
\nthese  cases, these purchases, however, took  place  outside
\nTravancore-Cochin  and as such are, therefore,\timmune\tfrom
\ntaxation  by  Travancore-Cochin only under  clause  (1)\t (a)
\nwhich  is not affected by the President’s order\t made  under
\nthe proviso to clause (2).\n<\/p>\n
The learned Advocate-General of Travancore-Cochin says\tthat
\nthere  is another type of purchase from neighbouring  States
\nwhere the seller in the neighbouring State directly delivers
\nthe  goods  under the contract for sale or purchase  to\t the
\nrespondents   in  Travancore.\tLearned\t counsel   for\t the
\nrespondents  maintains\tthat there is actually\tno  case  of
\npurchase of this type.\tIt is not necessary at this stage to
\ngo into this controversy, for, the matter having been  fully
\nargued, it is just as well to lay down the correct principle
\napplicable  to such purchases, if any.\tIf there is no\tsuch
\npurchase  where\t the  seller  from  the\t neighbouring  State
\ndelivers  the goods as a direct result of such\tpurchase  to
\nthe  respondents  in  Travancore, no  question\twill  arise.
\nAssuming that there are cases of such purchases, then it  is
\nclear  that  the  first\t condition  of\tthe  Explanation  is
\nsatisfied, namely, the goods are delivered within the  State
\nas a direct result of such purchase.  The next question is
\n113<\/span>\n<\/p>\n
–was  such delivery for the purpose of consumption  in\t the
\nState\t?  The\traw  cashew-nuts,  after  they\t reach\t the
\nrespondents,  are put through a process and new articles  of
\ncommerce,  namely,  cashew-nut\toil  and  edible  cashew-nut
\nkernels, are obtained.\tIt follows, therefore, that the\t raw
\ncashew-nut  is\tconsumed by the respondents in the  sense  I
\nhave  mentioned.   Consequently, such  purchases  will\tfall
\nsquarely  within the Explanation and will be deemed to\ttake
\nplace  in  Travancore  so  that\t under\tclause\t(1)(a)\t the
\nneighbouring  States will not be entitled to impose any\t tax
\non  these sales or purchases.  According to my view, and  on
\nthe  reasonings\t adopted  in  the  Australian  case,   these
\npurchases  are “in the course of” inter-State trade  and  as
\nsuch  will be protected by clause (2) but according  to\t the
\nmajority view in the Bombay appeal, which must prevail, such
\npurchases  will become, as a result of the  Explanation,  an
\nintra-State  purchase in Travancore and consequently out  of
\nthe  protection\t of  clause (2) and liable  to\ttaxation  by
\nTravancore  law.   Even\t if  according\tto  my\tview   these
\npurchases  fall within clause (2) they will nevertheless  be
\nliable\tto  be taxed under the Travancore Act, in  spite  of
\nthat clause, by virtue of the order made by the President in
\nexercise  of the powers conferred on him by the\t proviso  to
\nthat  clause.  These purchases will not get  any  protection
\nunder  clause (1) (b) because the goods purchased  were\t not
\nthe  goods  that were exported.\t These\tpurchases,  if\tany,
\nwill, therefore, be liable to be taxed under the  Travancore
\nAct.\n<\/p>\n
The  third  source from which the respondents  purchase\t raw
\ncashew-nuts is Africa.\tThe respondents place orders for the
\npurchase of raw cashew-nuts with commission agents in Bombay
\nand  the  Bombay agents pass on the orders  to\tthe  African
\nsellers\t or  their agents in Bombay.   The  African  sellers
\ntheft  send  the  goods by steamer and\tsend  the  bills  of
\nlading,\t invoice  etc. to their bank in\t Bombay.   The\tbank
\npresents   the\tdocuments  to  the  Bombay  agents  of\t the
\nrespondents and the Bombay agents pay the price
\n15<\/span>
\n114<\/span>
\nand take delivery of the shipping documents in Bombay.\t The
\nBombay\tagents\tthen prepare their own invoice\tshowing\t the
\namounts paid by them on account of the respondents and their
\nown  commission\t and send their invoice\t together  with\t the
\nshipping documents to their Travancore bank.  The Travancore
\nbank presents all these documents to the respondents who pay
\nthe  Bombay agents’ invoice amount and take delivery of\t the
\nshipping  documents.  All these generally happen  while\t the
\ngoods  are  on the high seas.  On arrival of  the  goods  at
\nTravancore   port,  the\t respondents  clear  the  goods\t  on
\npresenting the bill of lading etc.  This is the main type of
\npurchase  of African raw cashew-nuts.  The  appellant  State
\nconcedes  that\tthese are not liable to tax.  In  the  first
\nplace  the purchases were outside the State and,  therefore,
\nclause\t(1)(a) applies.\t In the next place  these  purchases
\ntook  place  I ‘in the course of ” import and  as  such\t are
\nexempt\tfrom taxation under article 286(1)(b),\tbecause\t (i)
\nthey  themselves  occasioned the import as already  held  by
\nthis court and (ii) the property in the goods passed and the
\npurchases  took place when the goods were on the high  seas.
\nThese purchases, however, cannot be said to have taken place
\n“in the course of” export, for reasons already explained.
\nThere  is  another type of purchase of African\traw  cashew-
\nnuts.\tThere  the African sellers ship raw  cashew-nuts  on
\ntheir  own  initiative or at the instance  of  their  Bombay
\nagents\tand while the goods are on the high seas,  they\t are
\nsold by endorsement and delivery of the bills of lading etc.
\nat  Bombay to the Bombay agents of the respondents and\tthen
\nthe  same procedure is followed as in the first case.\tHere
\nthe purchase by the respondents did not occasion the import,
\nbut,  nevertheless,  the sale or purchase  was\toutside\t the
\nState  and further the goods being on the high seas  at\t the
\ntime when the property passed such sale or purchase must  be
\nregarded as having taken place “in the course of” import  of
\nthe goods according to the mechanical test explained  above.
\nThe learned Advocate-General of the appellant State does not
\ndispute\t that such purchases are also to go free from  sales
\ntax,
\n115<\/span>
\nThe  next type of purchase of African raw cashewnuts  is  as
\nfollows:  The  different respondents place  separate  orders
\nwith  the  same\t Bombay commission  agents  and\t the  Bombay
\ncommission  agents  place  one consolidated  order  for\t the
\nentire quantity of the goods with the African sellers.\t The
\nAfrican sellers thereupon ship the entire lot of goods under
\none  bill  of lading and they send the bill  of\t lading\t and
\ninvoice\t etc.  to  their Bombay bank  and  the\tBombay\tbank
\npresents  the same to the Bombay agents.  The Bombay  agents
\npay  for the entire lot of goods and obtain delivery of\t the
\nshipping  documents and then they prepare separate  invoices
\nfor  each  of their constituents, namely,  the\trespondents,
\nincluding their own commission and split up the\t consignment
\nin the sense that the draw separate delivery orders covering
\nthe respective quantity of goods ordered by each  respondent
\nand send such invoice and delivery orders to the  Travancore
\nbank,  who presents the same to the respondents who  receive
\nthe  delivery  orders against payment.\tThe goods  are\tthen
\ncleared\t on  the original bill of lading on arrival  of\t the
\nsteamer\t at Travancore and thereafter the  respondents\ttake
\ndelivery  of the goods from the warehouse of sellers or\t the
\nBombay\tagents against their respective delivery orders.   A
\npurchase  of this type cannot properly be said\tto  occasion
\nthe  import of the goods.  What really occasions the  import
\nof the goods is the order placed by the Bombay agents.\t The
\nBombay\tagents\tnot having passed the orders placed  by\t the
\nrespondents  separately\t to  the  African  sellers  and\t the
\nAfrican sellers not having shipped the respective quantities
\nof  goods under separate bills of lading none of the  orders
\ncan  be\t said to have occasioned the import, for in  such  a
\ncase there is no privity between the African sellers and the
\nindividual  respondents and the import is referable only  to
\nthe  order placed by the Bombay agents which in the  eye  of
\nthe  law  is not the order of any of the respondents  but  a
\nconsolidated order placed by the Bombay agents on their\t own
\nresponsibility\tand  account with the object  of  eventually
\ndistributing the goods amongst the different respondents  in
\nfulfilment  of their respective orders.\t In the\t next  place
\nthe delivery of the bill of
\n116<\/span>
\nlading covering the entire goods to the Bombay agents cannot
\nbe  said  to be a delivery to the respondents of  the  goods
\nseparately ordered by each of the respondents.\tThe sale  in
\nsuch a case takes place in Travancore on the handing over of
\nthe  delivery orders to the respective respondents  and\t the
\ndelivery  of  the  goods thereunder from  the  warehouse  in
\nTravancore.  These goods, therefore, cannot claim  exemption
\nfrom tax under the provisions of article 286 (1) (a) or\t 286
\n(1) (b) or 286 (2).\n<\/p>\n
The  last type of transaction in African raw  cashewnuts  is
\nwhere the purchase takes place after the cashew-nuts  arrive
\nin Travancore port and are thereafter sold and delivered ex-
\ngodown to the respondents.  This is clearly a case of intra-
\nState  sale and clauses (1) (a) and (2) of the\tarticle\t can
\nhave  no  application to it.  The respondents  cannot  claim
\nexemption under clause (1)(b) for reasons stated above.
\nAs the respondents do not claim any exemption from  taxation
\nwith  respect to pre-Constitution purchases, the  same\tneed
\nnot be discussed separately.\n<\/p>\n
For  reasons  stated above, the decision of the\t High  Court
\nmust  be  upheld  only to the extent  that  the\t assessments
\nshould be quashed.  The matter must, however, go back to the
\nSales Tax Officer who must make a reassessment in the  light
\nof  the\t principles  laid down in  the\ttwo  previous  cases
\nreferred  to regarding clause (1) (a), the  Explanation\t and
\nclause\t(2)  and in the light of  the  principles  discussed
\nabove regarding clause (1)(b).\n<\/p>\n
Agent  for  the\t appellants  in\t all  the  appeals:  G.\t  H.
\nRajadhyaksha.\n<\/p>\n
Agent for the respondents in Appeals Nos. 26 and 33:   Rajinder
\nNarain.\n<\/p>\n
Agent  for the respondents in Appeals Nos. 27, 30 to 32\t and
\n34 to 36: S. Subramanian.\n<\/p>\n
Agent  for  the\t Union of India and the\t States\t of  Madras,
\nHyderabad, Punjab and Mysore: G. H. Rajadhyaksha.
\nAgent for the State of U. P.:\t  C. P.Lal,
\n117<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India State Of Travancore-Cochin And … vs Shanmugha Vilas Cashew Nut … on 8 May, 1953 Equivalent citations: 1953 AIR 333, 1954 SCR 53 Author: M P Sastri Bench: Sastri, M. Patanjali (Cj), Mukherjea, B.K., Das, Sudhi Ranjan, Bose, Vivian, Hasan, Ghulam PETITIONER: STATE OF TRAVANCORE-COCHIN AND OTHERS Vs. RESPONDENT: SHANMUGHA VILAS […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-176341","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nState Of Travancore-Cochin And ... vs Shanmugha Vilas Cashew Nut ... on 8 May, 1953 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/state-of-travancore-cochin-and-vs-shanmugha-vilas-cashew-nut-on-8-may-1953\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"State Of Travancore-Cochin And ... vs Shanmugha Vilas Cashew Nut ... on 8 May, 1953 - 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