Full Judgment Text
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PETITIONER:
STATE OF TRAVANCORE-COCHIN ANDOTHERS
Vs.
RESPONDENT:
THE BOMBAY CO. LTD.STATE OF TRAVANCORE-COCHIN ANDANOTHERMICH
DATE OF JUDGMENT:
16/10/1952
BENCH:
SASTRI, M. PATANJALI (CJ)
BENCH:
SASTRI, M. PATANJALI (CJ)
MUKHERJEA, B.K.
DAS, SUDHI RANJAN
BOSE, VIVIAN
HASAN, GHULAM
CITATION:
1952 AIR 366 1952 SCR 1112
CITATOR INFO :
F 1952 SC 369 (31)
MV 1953 SC 252 (44)
F 1953 SC 333 (16)
R 1955 SC 661 (35)
F 1956 SC 158 (9)
RF 1957 SC 699 (35)
R 1958 SC 578 (133)
R 1958 SC1006 (11)
F 1959 SC 149 (15,28)
F 1960 SC 595 (10)
R 1961 SC 41 (19)
D 1961 SC 65 (17)
RF 1961 SC 315 (25)
D 1962 SC1733 (9,11,12)
R 1963 SC 980 (9,12)
R 1963 SC1207 (42)
R 1964 SC1752 (5,8,10)
RF 1967 SC1643 (249)
R 1971 SC 477 (4)
RF 1971 SC 870 (19)
RF 1973 SC1461 (184,185,699,700,701,705,1100,
RF 1973 SC2555 (5)
RF 1974 SC1510 (7)
RF 1975 SC1564 (10,12,13,24,49,59)
RF 1980 SC1468 (15)
F 1985 SC1367 (33)
RF 1989 SC 190 (11)
ACT:
Constitution of India, Article 286 (1) (b)--Sales
tax--Exemption of sales in the course of export or
import--Meaning of "in the course of "--Sales where proper-
ty passes and sale is complete before
1113
goods move out of State, whether exempt--Interpretation of
article 286 (1)(b)--Dedsions on Commerce and Import-Export
clauses of American Constitution--Speeches of Members of
Constituent Assembly--Relevancy.
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HEADNOTE:
Whatever else may or may not fall within art. 286 (1) (b)
of the Constitution, sales and purchases which themselves
occasion the export or the import of the goods as the case
may be, out of or into, the territory of India come within
the exemption.
The view that no sale or purchase can be said to take place
in the course of export or import unless the property in the
goods is transferred to the buyer during their actual move-
ment, as instance, where the shipping documents ,are in-
dorsed and delivered within the State by the seller to a
local agent of the foreign buyer after the goods have been
actually shipped or where such documents are cleared on
payment, or on acceptance, by the Indian buyer before the
arrival of the goods within the State, puts too narrow a
construction upon art. 286 (1)(b) and is not correct.
A sale by export involves a series of integrated activi-
ties commencing from the agreement of sale with a foreign
buyer and ending with the delivery of the goods to a common
carrier for transport out of the country by land or sea.
Such a sale cannot be dissociated from the export without
which it cannot be effectuated and the sale and ’the result-
ant export form parts of a single transaction. Of these two
integrated activities which together constitute an export
sale, whichever first occurs can well be regarded as taking
place in the course of the other. Even in cases where the
property in the goods passed to the foreign buyers and the
sales were thus completed, within the State before the goods
commenced their journey from the State, the sales must be
regarded as having taken place in the course of the export
and therefore exempt under art. 286 (1) (b).
The Commerce clause (article 1, section 8 (3)) and the
Import-Export clauses [article I, sections9 (5) and 10 (2)]
of the American Constitution are widely different in lan-
guage, scope and purpose, and a varying body of doctrines
and tests have grown around them interpreting, extending or
restricting from time to time, their operation and applica-
tion in the context of the expanding American commerce and
industry and much help cannot be derived from them in the
solution of the problems arising under article 286 of the
Indian Constitution.
Speeches made by the members of the Constituent Assembly
in the course of the debates on the draft Constitution
cannot be used ’as aids for interpreting the Constitution.
Administrator General of Bengal v. Prem Nath Mullick [22
I.A. 107 at 118], A.K. Gopalan v. The State [(1950) S.C.R.
88], United States v. Trans-Missouri Freight Association
[169 U.S. 290 at 318] referred to.
143
1114
JUDGMENT:
Civil APPELLATE JURISDICTION: Civil Appeal No. 25 of 1952.
Appeals from the Judgment and Order dated the 10th day
of January, 1952, of the High Court of Judicature of
Travancore-Cochin at Ernakulam (Kunhiraman C.J. and Subra-
mania Iyer J.) in Original Petitions Nos. 4, 23and 24 of
1951 respectively.
T.N. Subramania Iyer, Advocate-General of Travancore-
Cochin, (T.R. Balakrishna lyer and M.R. Krishna Pillai, with
him) for the State of Travancore-Cochin.
N.C. Chatterjee (C.R. Pattabhirarnan, with him) for the
respondent in Civil Appeal No. 25 of 1952.
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C. R. Pattabhiraman for the respondent in Civil Appeal
No. 28 of 1952.
N.C. Chatterjee’(Thomas Vellappally, with him) for the
respondent in Civil Appeal No. 29 of 1952.
M. C. Setalvad, Attorney-General for India, and C.K.
Daphtary, Solicitor-General of India (G.N. Joshi, with them)
for the Union of India.
1952. October 16. The Judgment of the Court was delivered
by
PATANJALI SASTRI C.J.--These are connected appeals
from the judgment and order of the High Court of
Travancore-Cochin quashing the assessments under the United
State of Travancore and Cochin Sales Tax Act (No. 11 of 1125
M.E.) (hereinafter referred to as "the Act") on the respond-
ents on the turnover of the sales of the commodities (coif
products in C.A. 25, lemon grass oil in C.A. 28 and tea in
C.A. 29) in which they respectively deal.
The dealings followed more or less the same pattern in
all the cases and consisted of export sales of the respec-
tive commodities to foreign buyers on c.i.f. or f.o.b. terms
as the case may be.
The respondents in each case claimed exemption from
assessment in respect of the sales effected by them on the
ground, inter alia, that such sales took place "in the
’course of the export of the goods out of the territory of
India" within the meaning of article
1115
286(1) (b) of the Constitution. The Sales Tax Authorities
rejected the contention as, in their view, the sales were
completed before the goods were shipped and could not,
therefore, be considered to have taken place in the course
of the export.
Thereupon the respondents by separate petitions applied
to the High Court of the United State of Travancore and
Cochin (hereinafter referred to as the State) under article
226 of the Constitution for issue of writs of certiorari and
prohibition quashing the assessments made On them and pro-
hibiting such assessment in future. The applications were
heard, along with nine other applications for similar re-
liefs by dealers in cashew nuts, by a Division Bench (Kunhi-
raman C.J. and Subramania Iyer J.) who upheld the claim of
exemption and quashed the assessment orders in respect of
the transactions subsequent to the commencement of the
Constitution. From that decision the State has preferred
appeals in all the cases on a certificate granted by the
High Court under article 132 (1) of the Constitution.
As the appeals involved important questions of law which
may have a bearing on the sales tax legislation of the
various States in India, this Court directed notice of these
proceedings to the Attorney-General for India and the Advo-
cates-General of those States, and they have intervened and
participated in the debate at the hearing of these appeals.
When the argument had proceeded for some time, it was
discovered that the material facts relating to the course of
dealings in cashew nuts, which were more complex in charac-
ter, had not been clearly ascertained and consequently the
relative appeals were remitted to the High Court for find-
ings on certain points agreed upon by the parties. These
three appeals were, however, fully heard as they were found
to admit of disposal on the materials on record.
Article 286(1), on which the respondents found their
claim to exemption, runs thus:
1116
No law of a State shall impose, or authorise the imposi-
tion of, a tax on the sale or purchase of goods where such
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sale or purchase takes place.
(a) outside the State; or
(b) in the course of the import of the goods into, or
export of the goods out of, the territory of India.
Explanation.--For the purposes of sub-clause (a), a sale or
purchase shall be deemed to have taken place in the State in
which the goods have actually been delivered as a direct
result of such sale or purchase for the purpose of consump-
tion in that State, notwithstanding the fact that under the
general law relating to sale of goods the property in the
goods has by reason of such sale or purchase passed in
another State.
On the scope and meaning of clause (b), the learned
Judges expressed their view as follows :--
"The words ’in the course of ’ make the scope of this
clause very wide. It is not restricted to the point of time
at which goods are imported into or exported from India.
The series of transactions which necessarily precede export
or import of goods will come within the purview of this
clause. Therefore, while in the course of that series of
transactions, the sale has taken place, such a sale is
exempted from the levy of sales tax. The sale may have
taken place within the boundaries of the State. Even then
sales tax cannot be levied if the sale had taken place while
the goods were in the course of import into India or in the
course of export out of India. We are stressing this point
because both parties in what we may describe as the cashew
nut cases entered into a lengthy discussion as to the exact
point of time when the sale became completed and as to the
exact place where the goods were when the sale became a
completed transaction."
On this interpretation, local purchases "made for the
purpose of export" were held by the learned Judges to be
"integral parts of the process of exporting". In support of
this construction the learned Judges referred
1117
to the debates in the Constituent Assembly on clause 264-A
of the draft Constitution which corresponded to article 286
and quoted from the speech of one of the members who unsuc-
cessfully moved an amendment defining export as meaning the
last transaction and import as meaning the first transac-
tion.
In view of the wide construction thus placed upon clause
(b) of article 286 (1), the arguments before us ranged over
a large field, and as many as four different views as to its
scope and meaning were pressed upon us for our acceptance
:--
(1) The exemption is limited to sales by export and
purchases by import, that is to say, those sales and pur-
chases which occasion the export or import as the case may
be, and extends to no other transactions however directly or
immediately connected, in intention or purpose, with such
sales or purchases, and wheresoever the property in the
goods may pass to the buyer. This is the view put forward on
behalf of the State of Madras. The Advocate-General thought
that a State could not impose sales tax though title passed
within State limits while the goods were still under trans-
port on the high seas and no question of exemption could
therefore arise. He said, however, that no such ease had
actually arisen.
(2) In addition to the sales and purchases of the kind
described above, the exemption covers the last purchase by
the exporter and the first sale by the importer, if any, so
directly and proximately connected with the export sale or
import purchase as to form part of the same transaction.
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This view was sponsored’ by the Attorney-General who was
also inclined to think, as advised at the moment, that sales
or purchases made while the goods were on the high seas
would be exempt, but he would prefer not to go into the
wider question, because, whatever view was taken, sales
such as those involved in the present cases must, in any
event, be exempt.
(3) The exemption covers only those sales and purchases
under which the property in the goods
1118
concerned is transferred from the seller to the buyer during
the course of the transit, that is, after the goods begin to
move and before they reach their foreign destination. This
view is supported by the State of Bombay and certain other
States.
(4) The view which found favour with the learned Judges
of the High Court in the passage already extracted.
It will be seen that the construction first mentioned is
the narrowest and the last mentioned the widest.
We are clearly of opinion that the sales here in ques-
tion, which occasioned the export in each case, fall within
the scope of the exemption under article 286(1)(b). Such
sales must of necessity be put through by transporting the
goods by rail or ship or both out of the territory of India,
that is to say, by employing the machinery of export. A
sale by export thus involves a series of integrated activi-
ties commencing from the agreement of sale with a foreign
buyer and ending with the delivery of the goods to a common
carrier for transport out of the country by land or sea.
Such a sale cannot be dissociated from the export without
which it cannot be effectuated, and the sale and resultant
export form parts of a single transaction of these two
integrated activities, which together constitute an export
sale, whichever first occurs can well be regarded as taking
place in the course of the other. Assuming without deciding
that the property in ’the goods in the present cases passed
to the foreign buyers and the sales were thus completed
within the State before the goods commenced their journey as
found by the Sales Tax Authorities, the sales must, never-
theless, be regarded as having taken place in the course of
the export and are, therefore, exempt under article
286(1)(b). That clause, indeed, assumes that the sale had
taken place within the limits of the State and exempts it if
it took place in the course of the export of the goods
concerned.
In the foregoing discussion we have assumed that the
word "sale" used in the Constitution has the same
1119
meaning as in the law relating to the sale of goods, but it
has been suggested in the course of the argument that it
imports a wider concept than the passing of title from the
seller to the buyer which under that law is determined by
highly technical rules based upon the presumed intention of
the parties and liable to be displaced by their expressed
intention. We leave the point open as it is unnecessary for
the purpose of these appeals to pronounce any opinion upon
it.
It was said that, on the construction we have indicated
above, a "sale in the course of export" would become practi-
cally synonymous with "export", and would reduce clause (b)
to a mere redundancy, because article 246 (1), read with
entry 83 of List I of the Seventh Schedule, vests legisla-
tive power with respect to "duties of customs including
export duties" exclusively in Parliament, and that would be
sufficient to preclude State taxation of such transactions.
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We see no force in this suggestion. It might well be argued,
in the absence of a provision like clause (b) prohibiting in
terms the levy of tax on the sale or purchase of goods where
such sales and purchases are effected through the machinery
of export and import, that both the powers of taxation,
though exclusively vested in the Union and the States re-
spectively, could be exercised in respect of the same sale
by export or purchase by import, the sales tax and the
export duty being regarded as essentially of a different
character. A similar argument induced the Federal Court to
hold in Province of Madras v. Boddu Paidanna and Sons(1)
that both central excise duty and provincial sales tax could
be validly imposed on the first sale of groundnut oil and
cake by the manufacturer or producer as "the two taxes are
economically two separate and distinct imposts". Lest
similar reasoning should lead to the imposition of such
cumulative burden on the export-import trade of this country
which is of great importance to the nation’s economy, the
Constituent Assembly may well have thought it necessary to
exempt
(1) [1942] F.C.R. 90.
1120
in terms sales by export and purchases by import from sales
tax by inserting article 286 (1) (b) in the Constitution.
We are not much impressed with the contention that no
sale or purchase can be said to take place "in the course
of" export or import unless the property in the goods is
transferred to the buyer during their actual movement, as
for instance, where the shipping documents are indorsed and
delivered within the State by the seller to a local agent of
the foreign buyer after the goods have been actually
shipped, or where such documents are cleared on payment, or
on acceptance, by the Indian buyer ’before the arrival of
the goods within the State. This view, which lays undue
stress on the etymology of the word "course" and formulates
a mechanical test for the application of clause(b), places,
in our opinion, too narrow a construction upon that clause,
in so far as it seeks to limit its operation only to sales
and purchases effected during the transit of the goods, and
would, if accepted, rob the exemption of much of its useful-
ness.
We accordingly hold that whatever else may or may not
fall within article 286 (1) (b), sales and purchases which
themselves occasion the export or the import of the goods,
as the case may be, out of or into the territory of India
come within the exemption and that is enough to dispose of
these appeals.
Our attention was called, in the course of the debate, to
various American decisions which hold that the power "to
regulate" inter-State commerce vested exclusively in the
Congress by article 1 section 8(3) of the American Constitu-
tion (the Commerce clause) excludes by implication the
States’ power of taxation only when the goods enter "the
export. stream", and until then such goods form part of "the
general mass of property in the State" subject, as such, to
its jurisdiction to tax, and that this principle was also
applicable to cases arising under article 1 section 9(5) and
section 10(2) (the Import-Export clause), [see e.g., Empresa
Siderurgica v. Merced Co.(1)]. These clauses
(1) 337 U.S. 154.
1121
are widely different in language, scope and purpose, and a
varying body of doctrines and tests have grown around them
interpreting, extending or restricting, from time to time,
their operation and application in the context of the ex-
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panding American commerce and industry, and we are of opin-
ion that not much help can be derived from them in the
solution oil the problems arising under article 286 of
the Indian Constitution.
It remains only to point out that the use made by the
learned Judges below of the speeches made by the members of
the Constituent Assembly in the course of the debates on the
draft Constitution is unwarranted. That this form of ex-
trinsic aid to the interpretation of statutes is not admis-
sible has been generally accepted in England, and the same
rule has been observed in the construction of Indian stat-
utes--see Administrator-General of Bengal v. Prem Nath
Mallick(1). The reason behind the rule was explained by one
of us in Gopalan’s case(2) thus :--
"A speech made in the course of the debate on a bill
could at best be indicative of the subjective intent of the
speaker, but it could not reflect the inarticulate mental
process lying behind the majority vote which carried the
bill. Nor is it reasonable to assume that the minds of all
those legislators were in accord,"
or, as it is more tersely put in an American case-
"Those who did not speak may not have agreed with
those who did; and those who spoke might differ from each
other--United States v. Trans-Missouri Freight
Association(3).’’
This rule of exclusion has not always been adhered to
in America, and sometimes distinction is made between using
such material to ascertain the purpose of a statute and
using it for ascertaining its meaning. It would seem that
the rule is adopted in Canada and Australia --see Craies on
Statute Law, 5th Ed., p. 122.
(1) (895) 22 I.A. Io7,118.
(2)[1950] S.C.R.88.
(3) 169 U.S.290,318.
144
1122
In the result, agreeing with the conclusion of the High
Court, though on different grounds, we dismiss the appeals
with costs.
Appeals dismissed.
Agent for the appellants: P.A. Mehta.
Agent for the respondent in C.A. No. 25 of 52: M.S.K.
Sastri.
Agent for the respondent in C.A. No. 28 of 52: Sardar
Bahadur.
Agent for the respondent in C.A. No. 29 of 52: V.P.K.
Nambiyar.
Agent for the Interveners (Union of India, State of
Bombay, State of Madras, State of Hyderabad, State of
Punjab, State of MysOre, and State of Orissa): P.A. Mehta.
Agent for the State of Uttar Pradesh: C.P. Lal.