Full Judgment Text
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PETITIONER:
MALAYALAM PLANTATIONS LTD.
Vs.
RESPONDENT:
THE DEPUTY COMMISSIONER OF AGRICULTURALINCOME-TAX AND SALES
DATE OF JUDGMENT:
20/03/1964
BENCH:
AYYANGAR, N. RAJAGOPALA
BENCH:
AYYANGAR, N. RAJAGOPALA
GAJENDRAGADKAR, P.B. (CJ)
WANCHOO, K.N.
SHAH, J.C.
SIKRI, S.M.
CITATION:
1965 AIR 161 1964 SCR (7) 391
ACT:
Sales Tax-Tea sold by auction at Fort Cochin which was
outside State of Travancore-Cochin-Whether to be included in
turn-over for purposes of Sales-tax-"Outside Sale"-Meaning
of-Doctrine of territorial nexus in Sales Tax legislation-
Point not urged in High Court or taken up in Statement of
case-It can be taken up in Supreme Court-Constitution of
India, Art.286(i)(a) before and after the Constitution
(Sixth Amendment) Act, 1956--Travancore-Cochin General Sales
Tax Act, 1950, s. (J).
HEADNOTE:
The appellant company owns several estates wherein tea is
grown and it was assessed to sales-tax by the Sales Tax
Officer in respect of the tea sold by it during the years
1954-55 and 1955-56. An appeal filed by the appellant was
rejected by the, Appellate Assistant commissioner on the
ground that the tea when sold was admittedly in godowns in
the State of Travancore-Cochin and that consequently the
sales must be deemed to have taken place within the State of
Travancore-Cochin and hence liable to be included in the
taxable turn-over. When a further appeal was taken to the
Sales Tax Appellate Tribunal, it was held that the property
in the goods sold passed at Fort Cochin in Madras State on
the fall of the hammer at the auction and hence the same was
not taxable. The State filed a revision petition to the
High Court. While the High Court accepted the finding of
the Tribunal that the property in the goods sold passed at
Fort. Cochin on the fall of the hammer at the auction, it
differed from the Tribunal as regards the effect of the
circumstance that the tea sold was, at the point of sale,
physically in godowns situated in the State of Travancore-
Cochin and held the sales to be taxable. The appellant came
to this Court after obtaining a certificate of fitness from
the High Court.
The only question argued before this court was whether a
sale of tea effected by the appellant by auction at Fort
Cochin in Madras State was a sale outside the State of
Travancore-Cochin orinside it and whether the same was
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taxable or not.Accepting.the appeal.
HELD: No sales tax was to be levied in this case as the
sales took place outside the State of Travancore-Cochin.
The test for determining whether a sale is inside or outside
a State is where the property in the goods passed and in the
present case the property in the goods passed in Fort Cochin
in Madras State on the fall of the hammer at the auction.
The point about the property not having passed in the Madras
State was not argued before the High Court and was also not
urged in the statement of case filed by respondent and hence
the same was not allowed to be argued in the Supreme Court.
Per Shah. J. The property in the goods passed at Fort
Cochin in Madras State and as the goods were delivered not
for the purpose of consumption in any particular State, the
sales were not inside Travancore-Cochin but were outside the
392
State and were as held by this Court in A. V. Thomas & Co.
v. Deputy Commissioner of Agricultural Income-tax and Sales
Tax Trivandrum, 14 S.T.C. 363, not liable to be taxed under
the Travancore-Cochin General Sales Tax Act, 1950.
The doctrine of territorial nexus had full play in sales tax
legislation under the Government of India, Act, 1935 and was
not abrogated by the enactment of Art, 286 of the
Constitution. It continued to be in operation in the
interregnum between the promulgation of the Constitution and
the amendment of Art. 286 by the Constitution (Sixth
Amendment) Act, 1956. It also applies now subject to
certain modifications. Parliament has been given the power
to formulate principles for determining when a sale or
purchase of goods takes place outside the State or in the
course of the import of the goods into or export of the
goods out of the territory of India. Exercising the power
under cl. (2) Parliament has enacted the Central Sales Tax
Act, 1956 and by s. 4(2) the doctrine of territorial nexus
has been given legislative recognition though in somewhat
limited form.
Deputy Commissioner of Agricultural Income-tax and Salestax,
Trivandrum v. A.V. Thomas & Co., I.L.R. 1960 Kerala 1395;
India Copper Corporation Limited v. State of Bihar, [1961] 2
S.C.R. 276; A. V. Thomas & Co. Ltd. v. Deputy Commissioner
of Agricultural Income-tax and Sales-tax, Trivandrum 1953
Supp. 2 S.C.R. 608 363; Poppat Lal Shah v. The State of
Madras, [1953] S.C.R. 677; and the Tata Iron & Steel Company
Ltd. v. The State of Bihar [1958] S.C.R. 1356, referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 678 and 679
of 1963.
Appeals from the judgment and order dated April 4, 1961 of
the Kerala High Court in Tax Revision Nos. 52 & 53 / 1959.
G.B. Pai, T. N. Ramachandra, J. B. Dadachanji, O. C.
Mathur and Ravinder Narain, for the appellants (in all the
appeals).
Govinda Menon and V. A. Seyid Muhammad, for the respondent
(in both the appeals).
C.S. Pathak, S. N. Andley, Rameshwar Nath and P. L.
Vohra, for the interveners (in both the appeals).
March 20, 1964. The judgment of GAJENDRAGADKAR,C.J.,
WANCHOO, RAJAGOPALA AYYANGAR AND SIKRI, JJ. was delivered by
AYYANGAR J. SHAH, J. delivered a separate Opinion.
AYYANGAR, J.-The appellant owns several estates wherein
inter alia tea is grown and was assessed to sales-tax in
respect of the tea sold by it during the years 1954-55 and
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1955-56, by the Sales Tax Officer, First Circle, Quilon in
the State of Travancore-Cochin by his order dated December
23. 1956. In the taxable turnover on which sales tax was
computed by the assessing authority were included two items
which are the subject of complaint in these two appeals
which relate to these two years of assessment. Before the
assessing officer the appellant claimed that certain sales
of its tea which were
393
conducted by auction at Fort Cochin-a place which at the
relevant date was in the Madras State, were sales "outside"
the Travancore-Cochin State and that consequently these
sales were exempted from taxation by the State of Travan-
core-Cochin under Art. 286(l)-(a) of the Constitution. The
Sales Tax Officer rejected this contention and included the
sum involved in these sales in the taxable turnover. An
appeal filed to the Appellate Assistant Commissioner also
failed, this authority holding that as the tea sold was, at
the date of the auction, admittedly in godowns in Willingdon
Island in the State of Travancore-Cochin, the sales must be
deemed to have taken place within taxing State by virtue of
a provision in the State Sales Tax Act to which we shall
refer later and hence liable to be included in the taxable
turnover. There was a further appeal taken by the Appellant
to the Sales Tax Appellate Tribunal which upheld the appel-
lant’s contention and set aside the assessment in so far as
it included the turnover relating to the auction sales of
tea held at Fort Cochin, this turnover amounting to Rs.
56,43,184/11/in regard to the assessment year 1954-55 and
Rs. 62,13,604/3/in regard to the assessment year 1955-56 and
remanded the case for fresh disposal by excluding these sums
from the computation of the taxable turnover. A revision
petition was thereafter filed before the High Court by the
State under s. 15(b) of the General Sales Tax Act of
Travancore-Cochin and the learned Judges allowed the
Revision and upheld the order of the assessing officer and
the Appellate Commissioner holding the turnover represented
by these auction sales to be validly taxable under the State
law relating to sales tax. The appellant thereafter applied
to the High Court for a certificate of fitness and this
having been granted the appeals are now before us.
Before proceeding further it is necessary to set out the
statutory provision contained in the taxing enactment of the
State. The General Sales Tax Act (Act XI of 1125 (ME) 1950)
which imposed a sales tax on sales by dealers defines a
"sale" by s. 2(j) in these terms: -
"’Sale’ with all its grammatical variations
and cognate expressions means every transfer
of the property in goods by one person to
another in the course of trade or business for
cash or for deferred payment or other valuable
consideration and includes also a transfer of
property in goods involved in the execution of
a works contract, but does not include a
mortgage, hypothecation, charge or pledge;
x x x x
Explanation (2) Notwithstanding anything to
the contrary in the Sale of Goods Act for
the time being in
394
force, the sale or purchase of any goods shall
be deemed for the purpose of this Act, to have
taken place in the State wherever the contract
of sale or purchase might have been made (a)
if the goods were actually in the State at the
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time when the contract of sale or purchase in
respect thereof was made-. or (b) in case the
contract was for the sale or purchase of
future goods by description, then, if the
goods are actually produced in the State at
any time after the contract of sale or
purchase in respect thereof was made."
When the Constitution came into force a new
section numbered s. 26 was inserted by the
Adaptation Order bringing the Act into line
with Art. 286(1) of the Constitution and this
read: -
"No law of a State shall impose. or authorise
the imposition of a tax on the sale or
purchase of goods where such sale or purchase
takes place(a) outside the State or
(b).................................
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
consumption 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."
The position, therefore, was that though cl. (a) to Explana-
tion 2 to s. 2(j) enacted that "notwithstanding anything
contrary in the Sale of Goods Act, the sale or purchase of
goods shall be deemed to take place in the State if the
goods were actually in the State at the time the contract
for sale or purchase of goods thereof was made", still by
the non-obstante provision contained in s. 26 a tax on the
sale or purchase of goods could not be imposed where such
sale or purchase took place "outside" the State of
Travancore-Cochin. It is only necessary to add that even if
s. 26 were ignored still by the terms of Art. 286(1)(a) the
position would be the same and the State could not validly
levy a tax on a sale which is "outside" that State.
Now the question is can a sale of the tea effected by the
Appellant by auction at Fort Cochin and which were included
in its taxable turnover be said to be "outside" the State?
The facts in relation to the transaction relating to the
sale of the tea and which the learned Judges of the High
Court held not to be an "outside" sale may be stated in
their own words: -
"The sales of teas were concluded at Fort
Cochin and the goods were stocked in godowns
situated in the
395
Travancore Cochin State. The deliveries of
the goods were also made to the buyers from
the godowns in Willingdon island in the
Travancore Cochin State. The Appellate
Tribunal has come to the conclusion that the
ownership of the commodity having passed in
Fort Cochin, the property had not passed
within the taxing State, accordingly they
would be ’outside’ sales for purpose of Art.
286(1) and exempt from taxation."
The Appellate Tribunal had recorded a finding that the
property in the goods sold passed at Fort Cochin on the fall
of the hammer at the auction and the learned Judges of the
High Court proceeded on the same basis. The point on which
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the, learned Judges differed from the Tribunal was only as
regards the effect of the circumstance that the tea sold,
was at the point of sale, physically in godowns situated in
the State of Travancore-Cochin. The Appellate Tribunal had,
in reaching the conclusion in favour of the appellant, as to
the taxable character of the turnover represented by these
auction sales, referred to a large number of decisions of
this Court and to the observations contained in them as well
as to several decisions of the various High Courts. When
the matter came up before the High Court the position was,
that that Court had after a review of most of the earlier
cases which had been referred to by the Tribunal, held in
Deputy Commissioner of Agricultural Income-tax and Sales-
tax, Trivandrum v. A.V. Thomas & Co.(1) that the word
’outside sale’ in Art. 286(1)(a) had no reference
exclusively to the transfer of the property in the goods
according to the provisions of the Sales of Goods Act, and
therefore that Explanation 2 to s. 2(j) was not violative of
Art. 286(1)(a) and that if at the moment when the property
passed, it not being very relevant where the property
passed, the goods were in the State of Travancore-Cochin,
then it was not an "outside" sale quoad Travancore Cochin
and could be subjected to salestax by that State. Before
the learned Judges a decision of this Court in India Copper
Corporation Limited v. State of Bihar(2) was however relied
on as leading to a different result but the learned Judges
held that the decision of this Court could be distinguished
on the facts and they held that their previous decision
reported in A.V. Thomas’s case(1) was still good law and
entirely covered the point raised.
The question for consideration in the appeal is the cor-
rectness of the view expressed by the High Court. The
decision in Deputy Commissioner of Agricultural Income-tax
and Salestax, Trivandrum v. A. V. Thomas & Co.(1) was
brought before this Court on appeal and has been reversed
(See A.V. Thomas & CO. Ltd. v. Deputy Commissioner of
Agricultural Income-tax and Sales-tax, Trivandrum(3). In so
doing this Court pointed
(1) I.L.R. [1960] Kerala 1395. (2) [1961] 2 S.C.R. 276.
(2)[1963] supp. 2 S.C.R. 608.
396
out that the decision of this Court in the Indian Copper
Corporation case(1) had settled the law by laying down that
the State (other than a "delivery-cum-consumption" State)
which could tax a ’non-explanation sale’ (to adopt the
phraseology used in these cases to identify a sale falling
outside the explanation to Art. 286(1)(a)) could only be
that State in which the property in the goods passes. Now,
as regards the facts, there is no distinction between the
facts in the A. Y. Thomas’s case(2) and the case now under
appeal and, indeed, the learned Judges of the High Court
have proceeded on that basis. Dealing with the question as
to what is an "outside" sale Kapur, J. speaking for the
Court said in the case of A. Y. Thomas & Co.(2) Ltd.: --
"It has been foundand it has not been
disputed that the title to the goods in the
present case passed at Fort Cochin the
question is whether the sale was ’outside
sale’ or ’inside sale’ as the expressions have
been compendiously used in various judgments
to indicate sales taking place within a State
or without it. The Explanation to Art.
286(1)-(a)explains what a sale outside the
State is where the Explanation applies the
difficultyabout the situs is resolved but in
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a case like the present one the difficulty
still remains because the Explanation does not
operate in the sense that the rival States
claiming to tax the same taxable event are not
the States of delivery for consumption in that
State and those where the title in the goods
passes."
After referring to the decision in the India Copper Corpo-
ration Ltd. v. State of Bihar (1) the Court held that the
sale in the case before them was an "outside" sale quoad
TravancoreCochin, because the title passed at Fort Cochin in
the State of Madras. On this reasoning this Court reversed
the decision in the case of the High Court and held that the
sale there in question being an "outside" sale was not
taxable by reason of the prohibition contained in Art.
286(1)(a).
Dealing with the connotation of the expression ’outside’ in
Art. 286(1)(a) this Court had observed, in India Copper
Corporation Ltd. v. State of Bihar.(1): -
"If a single State was designed to have the
power to tax any particular transaction of
sale, the question that next falls to be
considered is the determination of that State
in regard to which it could be predicated that
the sale in question was not ’outside’ that
State or in other words, the determination of
the
(1) [1961] 2 S.C.R. 276
(2) [1963] Supp.2 S.C.R.698
397
particular State in regard to which it could
be said that the sale was ’inside’ that State.
The key to the problem is afforded by two
indications in the Article itself: (1) the
opening words of Article 286(1) which speak of
a sale or purchase taking place and (2) the
non-obstante clause in the Explanation which
refers to the general law relating to sale of
goods under which property in the goods has,
by reason of such sale or purchase, passed in
another State’. These two together indicate
that it is the passing of property within the
State that is intended to be fastened on, for
the purpose of determining, whether the sale
in question is ’inside’ or outside’ the State,
and therefore subject to the operation of the
’Explanation’ that State in which property
passes would be the only State which would
have the power to levy a tax on the sale. As
was explained in the recent decision of this
Court in Burmah Shell Oil Storage and
Distributing Co. of India Ltd. v. The
Commercial Tax Officer."
It was the principle of law laid down in this passage that
was given effect to by this Court in A. V. Thomas’s case(1)
and it was on this basis that the appeal was allowed. it
would therefore follow that the present appeals which are
wholly dependent on the correctness of the meaning of the
expression ’outside sales’ in Art. 286(1)(a) which High
Court adopted in A. V. Thomas’s case have necessarily to be
allowed.
Learned Counsel for the respondent-State, however, urged
that in the present case a point had been raised before the
High Court as to whether on the facts the property in the
goods -sold by auction conducted at Fort Cochin really
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passed at Fort Cochin in the Madras State or whether it
passed in Willingdon island in Travancore-Cochin when the
goods were actually delivered to the buyer. As regards this
question of fact or of -mixed fact and law the position is
this. The Sales Tax Appellate Tribunal recorded a finding
on this matter in these terms:
"The question whether the sales took place
outside the State or not will have to be
decided on the basis of the general law
relating to sale of goods. We hold that in
the case of auction sales of full lots the
sales were of ascertained goods and hence
became complete on the fall of the hammer and
that the sales took Place within the Madras
State."
In the revision application which the department filed to
the High Court this question Whether the property in the
goods
(1) [1963] Supp. 2 S.C.R. 608.
398
did pass at Fort Cochin was raised but nevertheless the
argument before the High Court proceeded wholly on the
basis; of the correctness of the finding by the Appellate
Tribunal that the property in the teas did pass on the fall
of the hammer at Fort Cochin. The point about the property
not having passed in the Madras State does not appear to
have been even argued before the High Court. Even in the
statement of the case filed by the respondent it is not
stated that this point about the property not having passed
at Fort Cochin in Madras was urged before the High Court
during the course of the argument. Before concluding it
might be mentioned that in A. Y. Thomas’s case (supra)
where, as we have stated earlier, the nature of the trans-
action was identical with the one in the appeals before us
this Court observed: -
"It has been found and it has not been
disputed that the title to the goods in the
present case passed at Fort Cochin."
In these circumstances, we declined to permit learned
Counsel for the respondent to urge any ground relating to
the property in the goods in the teas sold not having passed
in Fort Cochin in the Madras State to be raised, as the
point which is not one of pure law was not urged before the
learned fudges of the High Court.
The appeals are, therefore, allowed’ and the, order of the
High Court reversed and that of the Sales Tax Appellate
Tribunal restored. The appellant will have his costs here
and in the High Court-one hearing fee.
SHAH. J.-If the question raised in these appeals were res
integra, I would hold that the price obtained at auction
sales of tea held at Fort Cochin when the goods were lying
in warehouses in the Travancore-Cochin State was liable to
be taxed under the General Sales Tax Act (11 of 1125 M.E.),
for in my view Art. 286(1)(a) Explanation, before it was
amended by the Constitution (Sixth Amendment) Act, did not
altogether exclude the doctrine of territorial nexus in its
application to salestax legislation. It is settled law in
this Court that under the Government of India Act, 1935, the
Provincial Legislatures could, relying upon the territorial
nexus, levy sales-tax upon transactions of sale, not wholly
completed within their territory, fixing upon one or more
ingredients of a sale furnishing a territorial connection
with the taxing Province: Poppat Lal Shah v. The State of
Madras(1) and The Tata Iron & Steel Company Ltd. v. The
State of Bihar (2). By the Constitution certain
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restrictions were placed upon the power of the States
(1) [1953] S.C.R. 677. (2) [1958] S.C.R. 1356.
399
to legislate in respect of -taxes on sales and purchases.
By Art. 286(1)(a) read with the Explanation, an Explanation
sale i.e. a sale in which goods sold were actually delivered
in a State for the purpose of consumption in that State was
made taxable only by the State in which the goods were
delivered for consumption. But Art. 286 was, in my view,
not intended to exclude the operation of the doctrine of
territorial nexus in the field not covered by the
legislative prohibitions. In dealing with the effect of s.
33 of the Bihar Sales Tax Act which incorporated the
prohibitions imposed by Art. 286(1) & (2). with the
concurrence of S. K. Das J., it was observed by me in Indian
Copper Corporation Ltd. v. The State of Bihar and others(1)
at P. 293:-
" x x x by enacting that a tax shall not be imposed under
the Act when the sale takes place outside the State of Bihar
x x,
"Only the power to tax "Explanation sales" which do not take
place within the State of Bihar is taken away, but not the
power to tax "non-Explanation sales" in which though under
the general law of sale of goods the property passes outside
the State, there exists between the taxing power of the
State and the sale a nexus as contemplated by the definition
of sale in s. 2(g). If the sale is one in which the goods
have been delivered outside the State of Bihar, but not as a
direct result of the sale or not for the purpose of
consumption in the State of first delivery, the sale will
not be covered by the Explanation, and the right to tax the
sale, if arising otherwise under the Act relying upon the
territorial nexus, will not be impaired by the prohibition
imposed by cl. (1)(a)(i) of s. 33."
It may be mentioned that s. 33 of the Bihar Sales Tax Act
was enacted to give effect expressly to the legislative
restrictions imposed by Art. 286 of the Constitution. In
Indian Copper Corporation Ltd.’s case(1) certain
transactions of sale were effected by the assessee after the
promulgation of the Constitution, under which the property
in the goods passed in the State of Bihar but delivery was
effected outside the State of Bihar for consumption also
outside Bihar. In some of these transactions goods were
delivered in the State of first destination for consumption
therein whilst in others the goods were delivered not for
consumption in the State of first delivery. -The assessee
contended that both these categories of transactions were
exempt from tax under Art. 286(1)(a) as they were
(1) [1961] 2 S.C.R. 276.
400
outside sales. This Court unanimously negatived the conten-
tion of the assessee in respect of sales in which delivery
in the State of first destination was not for consumption
therein, and the transactions were on that account not
"Explanation sales". It was held that the State of Bihar
was competent to tax those "Non-explanation sales" in which
the property in the goods had passed in the State of Bihar.
But two different grounds were given in support of the
conclusion in that case. My brethren Hidayatullah, Das
Gupta and Rajagopala Ayyangar, JJ., were of the view that
passing of property within the State alone was intended
after the Constitution to be fastened upon for the purpose
of determining whether the sale is inside or outside the
State, and therefore subject to the operation of the
Explanation that State in which the property passes would be
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the only State, which had the power to tax the sale. S. K.
Das. J., and I were of the view that sale transactions not
falling within the constitutional prohibitions remained
taxable because in adjudging whether a "non-Explanation"
sale-transaction was "outside the State", the doctrine of
territorial nexus could not be wholly excluded from
consideration.
In a recent judgment of this Court in A.V. Thomas & Co. Ltd.
v. Deputy Commissioner of Agricultural Income-tax and Sales-
tax, Trivandrum(1) this Court held in construing Art.
286(1)(a) in the light of the Explanation before that
Article was amended by the Constitution (Sixth Amendment)
Act, that: -
Where the Explanation to Article 286(1)(a) of
the Constitution of India is inapplicable, it
is the ’passing of property within the State’
that is intended to be fastened on for the
purpose of determining whether a sale is
’inside’ or ’outside’ the State. Therefore
subject to the operation of the ’Explanation’,
that State in which the property in the goods
passes would be the only State which would
have the power to levy a tax on the sale."
In A. V. Thomas & Co. Ltd.’s case(1) chests of tea were
stored in warehouses at Willingdon Island in the Travancore-
Cochin State, but auctions of the tea chests were held at
Fort Cochin which was at the material time within the State
of’ Madras, and after the price was paid at Fort Cochin
delivery orders were given to the purchasers addressed to
the warehouse-keepers at Willingdon Island and actual
delivery was given at the warehouses. The chests of tea
were then sent from Willingdon Island for consumption in
other parts of India or were exported out of India. It was
held by the Court in that
(1) [1963] Supp. 2 S.C.R. 608.
401
case that the property in the goods passed at Fort Cochin
and as the goods were delivered not for the purpose of
consumption in any particular State, the sales were not
inside the State of Travancore-Cochin but were outside that
State and were not liable to be taxed under the Travancore-
Cochin General Sales Tax Act (11 of 1125 ME). The Court
observed that in sales which were not "Explanation sales"
passing of property within the State was decisive of the
liability to pay sales-tax. No opinion was expressed on the
question whether the doctrine of territorial nexus as
investing the State with the right to tax a sale transaction
outside the legislative restrictions imposed by Art. 286,
was, since the promulgation of the Constitution, rendered
ineffective. As the fact which give rise to this case are
substantially the same as the facts on which a. V. Thomas &
Co. Ltd.’s case(1) was decided, the decision of the appeals
must be in favour of the assessee.
It is necessary to record this judgment, lest it be assumed
that I agree with the view that the doctrine of territorial
nexus in its application to sales-tax legislation has, since
the enactment of the Constitution, been completely
abrogated. It may be pertinent to note that since the
amendment of the Constitution by the Constitution (Sixth
Amendment) Act, Art. 286(1)(a) (which remains unamended) is
now free from the shackles of the Explanation which is
deleted and by cl. (2) the Parliament is invested with power
to formulate principles for determining when a sale or
purchase of goods takes place in any of the ways mentioned
in cl. (1), namely, outside the State or in the course of
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the import of the goods into, or export of the goods out of,
the territory of India. Exercising the power under cl. (2)
the Parliament has enacted the Central Sales Tax Act (74 of
1956), and by s. 4(2) the doctrine of territorial nexus has
been given legislative recognition, though in somewhat
limited form. That subsection provides:--
"A sale or purchase of goods shall be deemed
to take place inside a State if the goods are
within the State-
(a) in the case of specific or ascertained
goods, at the time the contract of sale is
made; and
(b) in the case of unascertained or future
goods. at the time of their appropriation to
the contract of sale by the seller or by the
buyer, whether assent of the other party is
prior or subsequent to such appropriation.
Explanation.--Where there is a single contract
of sale or purchase of goods situated at more
places than
[1963] Supp. 2 S.C.R. 608.
402
one, the provisions of this sub-section shall
apply as if there were separate contracts in
respect of the goods at each of such places."
The doctrine of territorial nexus had full play in sales-tax
legislation under the Government of India Act, 1935: it also
applies subject to certain modifications since the amendment
of the Constitution by the Constitution (Sixth Amendment)
Act. And I am unable to persuade myself that by the enact-
ment of Art. 286 of the Constitution, it stood abrogated in
the interregnum between the promulgation of the Constitution
and the amendment of Art. 286 by the Constitution (Sixth
Amendment) Act.
Appeal allowed.
403