Full Judgment Text
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PETITIONER:
M.P. V. SUNDARARAMIER & CO.
Vs.
RESPONDENT:
THE STATE OF ANDHRA PRADESH& ANOTHER(with connected petition
DATE OF JUDGMENT:
11/03/1958
BENCH:
AIYYAR, T.L. VENKATARAMA
BENCH:
AIYYAR, T.L. VENKATARAMA
BOSE, VIVIAN
DAS, SUDHI RANJAN (CJ)
DAS, S.K.
SARKAR, A.K.
CITATION:
1958 AIR 468 1958 SCR 1422
ACT:
Sales Tax-Inter-State sales--Sale outside State but goods
delivered for consumption within State- Competence of States
to levy tax-Conditional legislation--Power of Parliament to
authorise such taxation-President’s Adaptation Order-Scope
of--Nature of Retrospective operation-Enactment
unconstitutional in Part-Effect -Madras General Sales Tax
Act, 1939 (Mad. 9 of 1939), as adapted to Andhra, SS. 2(h),
22-Sales Tax Laws Validation Act, 1956 (7 of 1956), S. 2-
Constitution of India, Arts. 246, 286, 301, 372, Sch. VIl,
List 1, Entry 42, List 11, Entry 54.
HEADNOTE:
The petitioners were dealers carrying on business in the
City of Madras in the sale and purchase of yarn. The
dealers in the State of Andhra used to place orders for the
purchase of yarn with the petitioners in Madras, where the
contracts were concluded and the goods were delivered ex-
godown at Madras and thereafter despatched to the purchasers
who would take delivery of them within their State. The
present dispute related to sales in which property in the
goods sold passed outside the State of
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Andhra, but the goods themselves were actually delivered as
a result of the sale for consumption within that State.
After the coming into force of the Constitution of India the
President in the exercise of the powers conferred by Art.
372(2) made Adaptation Orders with reference to the Sales
Tax Laws of all the States, and as regards the Madras
General Sales Tax Act, 1939, he issued an Amendment
inserting a new section, S. 22 in that Act, which was a
verbatim reproduction of the Explanation to Art. 286 (i)(a)
of the Constitution. Oil July 13, 1954, the Board of
Revenue (Commercial Taxes) in the State of Andhra, acting on
the decision in The State of Bombay and another v. The
United Motors (India) Ltd., and others, [1953] S.C.R. 1069,
called upon dealers in the State of Madras to submit returns
of their turnover of sales in which goods were delivered in
the State of Andhra for consumption. Thereupon they filed
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the present petitions under Art. 32 Of the Constitution
challenging the demand on the grounds, inter alia, that the
sales proposed to be taxed were inter-State sales and that
they were immune from taxation under Art. 286(2) Of the
Constitution. While the petitions were pending the Supreme
Court pronounced on September 6, 1955, its judgment in The
Be gal Immunity Company Limited v. The State of Bihar and
others, [1055] 2 S.C.R. 603, according to which the
petitioners were not liable to be taxed. But before final
orders were passed on the petitions Parliament passed Sales
Tax Laws Validation Act, 1956, S. 2 whereof provided that no
law of a State imposing or authorising the imposition of tax
on inter-State sales during the period between April 1,
1951, and September 6, 1955, shall be deeme to be invalid or
ever to have been invalid merely by reason of the fact that
the sales took place in the course of the inter-State trade.
That section further provided that taxes levied or collected
on such sales during the aforesaid period shall be deemed to
have been validly levied or collected. It was the con-
tention of the State of Andhra that by reason of the
aforesaid provision it had the right to impose tax on inter-
State sales during the aforesaid period. On the other hand
the petitioners contended, inter alia, that (I) S. 22 Of the
Madras General Sales Tax Laws Validation Act, 1956, which
gave validity to laws which imposed a tax, did not authorise
the imposition, (2) the Sales Tax Laws Validation Act was
ultra vires Art. 286(2), (3) S. 22 of the Madras Act was not
a "law of a State" within Art. 286(2) and S. 2 of the
impugned Act, (4) the impugned Act only validated levies
already made and did not authorise the initiation of fresh
proceedings for imposing tax, (5) S. 22 having been
unconstitutional when it was enacted and therefore void, no
proceedings could be taken thereunder on the basis of the
Validation Act, as the effect of unconstitutionality of the
law was to efface it out of the statute book, and (6) the
proposed levy was bad as infringing the Rule which provided
that the sale of yarn could be taxed only at one point. It
was also contended that under the Constitution it was only
the Parliament that has the competence to impose tax on
inter-State sales and that the Sales Tax Laws Validation Act
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was bad in that it gave validity, to the laws of the State
to impose the tax :
Held (Sarkar J. dissenting), that S. 22 of the Madras
General Sales Tax Act, 1939, did in fact impose a tax on the
class of sales covered by the Explanation to Art. 286(1)(a)
but that it was conditional on the ban enacted on Art.
286(2) being lifted by law of Parliament as provided
therein, and that it was therefore validated by S. 2 of the
Sales Tax Laws Validation Act, 1956.
The construction put upon the Explanation to Art. 286(1)(a)
of the Constitution in The Bengal Immunity Company case that
it merely prohibited the outside States from imposing a tax
on the class of sales falling within the Explanation and did
not confer on the delivery State any power to impose a tax
on such sales has no application to a taxing statute of a
State the object of which was primarily to confer power on
the State to levy and collect tax.
Section 22 and S. 2(h) of the Madras General Sales Tax Act
must be read together as’ defining the sales which are
taxable under the Act.
Mettur Industries Ltd. v. State of Madras, A.I.R. 1957 Mad.
362, The Mysore Spinning and Manufacturing Co. Ltd. v.
Deputy Commercial Tax Officer, Madras, A.I.R. 1957 Mad. 368
and Dial Das v. P. S. Talwalkay, A.I.R. 1957 Bom. 71,
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approved.
Mathew v. Travancore-Cochin Board of Revenue, A.I.R. 1957 T.
C. 300, Cochin Coal Co. Ltd. v. The State of Travancore-
Cochin, (1956) 7 Sales Tax Cases 731 and The Government of
Andhra v. Nooney Govin arajulu, (1957) 8 Sales Tax Cases
297, disapproved.
Queen v. Burah, (1878) 5 I.A. 178 and In Ye The Delhi Laws
Act, 1912, etc. [1951] S.C.R. 747, relied on :
Held (Per S. R. Das, C. J., Venkatarama Aiyar, S. K. Das and
Vivian Bose, JJ.) that (i) the Sales Tax Laws Validation
Act, 1956, is in substance one lifting the ban on taxation
of interState sales and is within the authority conferred on
Parliament tinder Art. 2 6(2) and further that under that
provision it was competent to Parliament to enact a law with
retrospective operation.
Punjab Province v. Daulat Singh, (1946) L.R. 73 I.A. 59,
distinguished.
The United Province v. Atiqa Bcgum, [1940] F.C.R. 110,
(2) the Adaptation Order made by the President under Art.
372(2) is valid and is not open to attack on the ground that
it goes beyond the limits contemplated by that Article.
(3)the expression " law of a State " in Art. 286(2) and S. 2
of the Sales Tax Laws Validation Act means whatever operates
as law in the State, and that S. 22 of the Madras General
Sales Tax Act is a law within those enactments.
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(4) s. 2 of the Sales Tax Laws Validation Act validates not
only the levies already collected but also authorises the
imposition of tax on sales falling within the Explanation
which had taken place during the period specified in S. 2.
The Act is not a temporary Act though its operation is
limited to sales taking place within a specified period.
Dial Das v. P. S. Talwalkay, A.I.R. 1937 Bom. 71, in so far
as it held that it was not competent to the State to start
fresh proceedings for assessment, disapproved.
(5) though S. 22 of the Madras General Sales Tax Act was
unconstitutional when enacted the effect of the unconstitu-
tionality was not to efface it out of the statute book.
Unconstitutionality might arise either because the law is in
respect of a matter not within the competence of the
legislature or because the matter itself being within the
competence, its provisions offend some constitutional
restrictions. Which a law which is not within the
competence of the legislature is a nullity a law on a topic
within its competence but repugnant to any constitutional
prohibition is only unenforceable. In the latter class of
legislation when once the constitutional prohibition is
removed the law becomes enforceable without re-enactment.
Where an enactment is unconstitutional in part but valid as
to the rest, assuming that the two portions are severable,
it cannot be held to have been wiped out of the statute
book, as admittedly it must remain there for the purpose of
enforcement of the valid portion. Moreover in the view that
the impugned law is conditional legislation it cannot be
held to have become non est.
Behram Khurshed Pesikaka v. The State of Bombay, [1955] I
S.C.R. 6I3 and A. V. Fernandez v. State of Kerala, [1957]
S.C.R. 837, distinguished.
Bhikaji Narayan Dhakras and others v. The State of Madhya
Pradesh and a other, [1955] 2 S.C.R. 589, relied on.
(6) under Entry 42 in List 1, Sch. VII of the
Constitution, legislation with respect to inter-State trade
and commerce is exclusively within the competence of
Parliament. Under Entry 54, List 11, taxes on sale of goods
is within the exclusive competence of the State Legislature,
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and reading the two Entries together Entry 42 must be
construed as excluding the power to tax sale of goods. The
scheme of the Entries in the Lists is that taxation is
regarded as a distinct matter and is separately set out.
Entry 42, List 1, must therefore be construed as not
including the power to impose tax on inter-State sales.
(7) the proposed imposition does not infringe the rule that
the sales of yarns should be subject to taxation at a single
point because the proposed levy is by the State of Andhra
and the rule in question prohibits only multiple taxation in
the same State.
Per Sarkar J.-The Sales Tax Act does not authorise the
taxation of a sale under which goods are delivered in the
State of
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Andhra but the property in them passes outside that State.
The Explanation in S. 22 of the Act only contemplates a
State other than Andhra as the State inside which a sale
shall be deemed to have taken place. The words " for the
purposes of clause (a)(i) " have the same meaning in the
Explanation in Art. 286(1) as in the Explanation in S. 22 of
the Act, and the present case is not distinguishable from
the decision in The Bengal Immunity Company Limited v. The
State of Bihar and others, [1955] 2 S.C.R. 603.
JUDGMENT:
ORIGINAL JURISDICTION: Petitions Nos. 220, 222, 240 and 380
to 395 of 1955.
Petitions under Article 32 of the Constitution of India for
the enforcement of Fundamental Rights.
1957. Dec. 10, 11, 12, 13, 17, 18, 19. 1958. Jan. 7, 8, 9.
D. Narsa Raju, Advocate-General for the State of Andhra
Pradesh and T. M. Sen, for the respondent. The petitions
are premature and incompetent as the facts of each
transaction of sale are yet to be investigated and it is not
possible to know the character of each sale, nor can it be
determined which sales can be and which cannot be taxed by
Andhra Pradesh.
[CHIEF JUSTICE. You should be reasonably satisfied that the
sales are of such a nature that you can levy tax on them
before you issue a notice.
BOSE J. You must state the facts on which you think you can
tax the sales.]
S. K. DAS J. Your stand is that all transactions could be
taxed by the delivery State.]
D. Narsa Raju. My State is taxing under the decision of
this Court in the United Motors case ( [1953]S. C. R.
1069).
[ Upon the counsel for the petitioners stating that he would
confine his arguments to the imposition of tax on
Explanation sales only, which some of the transactions
indisputably were, the Court indicated that it would hear
the petitions. ]
K. S. Krishnaswami Iyengar, N. Srinivasan and R. Ganapathy
Iyer, for the petitioners. The Andhra (Madras) Act does not
seek to tax Explanation sales
1427
at all. It talks of " property passing " only and as such
Andhra can tax only such sales where property passes in
Andhra. See Poppatlal Shah v. State of’ Madras, ( [1953] S.
C. R. 677). Section 22 does not enlarge the definition of
sales; it only restricts the power of the State to tax. The
explanation to s. 22, like the explanation to Art. 236(1),
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is merely for the purpose of defining what is an outside
sale and not for determining what is an inside sale. See
Bengal Immunity Company case ( [1955] 2 S. C. R. 603 at
640). The power of the President under Art. 372(2) being
merely to bring the State laws into conformity with Art.
286, s. 22, which was introduced by the Presidential Adap-
tation Order under Art. 372(2), cannot be construed as
permitting the imposition of tax on Explanation sales which
was prohibited by Art. 286. If s. 22 was construed to
permit such imposition it was unconstitutional, illegal and
void and must be deemed to be non est. See Bengal Immunity
Company case ( [1955] 2 S. C. R. 603 at 667). What did not
exist could not be validated.
The Sales Tax Laws (Validation) Act, 1956, was not valid
legislation under Art. 286(2). Article 286(2) only empowers
Parliament to lift the ban on the imposition of tax on
inter-State -ales and after it has lifted the ban the State
legislature may impose the tax. Parliament is not competent
to impose sales tax; such power is vested only in the State
legislatures. Article 286(2) does not give Parliament power
to validate or ratify laws of the State legislatures. The
power under Art. 286(2) can be exercised only once and
finally and fully, not partially. Parliament can only lift
the ban as from the day the power is exercised and riot
retrospectively. Punjab Province v. Daulat Singh, (73 I. A.
59); Behram Khurshed Pesikaka v. The State of Bombay ( [
1955 ] I S. C. R. 613, 654 and 655). The case of Dialdas v.
Talwalkar (A. 1. R. 1957 Bom. 71) has been wrongly decided.
But even this decision helps the petitioners in so far as it
lays down that where tax had neither been collected nor
levied the Validation Act did not confer power to assess or
levy. The whole
181
1428
policy of the Validation Act was to save the State from
disgorging the, tax illegally collected. Both levy and
collection must be within the period specified in s. 2 of
the, Act. Mettur Industries Ltd. v. The State of Madras (A.
1. R. 1957 Mad. 362) and Mysore Spinning and Manufacturing
Co. Ltd. v. Deputy Commercial Tax Officer (A. 1. R. 1957
Mad. 368) are against the petitioners.
R. Ganapathy Iyer followed. Section 22 of the Andhra
(Madras) Act did riot enlarge the powers of taxation. Mathew
v. Travancore-Cochin Board of Reventue (A. 1. R. 1957 T. C.
300). The validation being for a temporary period which
expired on September 6, 1.955, no action can be taken after
that date under the validated laws. Kesavan Madhava Menon v.
The State of Bombay, ( [1951] S. C. R. 228, 234, 235), S.
Krishnan v. The State of Madras, ( [1951]S. C. R. 62 1,
and State of Punjab v. Mohar Singh,[1955 ] I S. C. R.
893). The tax being a sinole pointtax under the Act, and
the petitioners having already paid the tax at the time of
the purchase of the yarn from the Mills, no second tax was
payable. The Andhra (Madras) Act being a new Act the tax on
yarn is hit by the Essential Commodities Act (52 of 1952)
read with Art. 286(3) of the Constitution. Petitioners are
not dealers in Andhra Pradesh and cannot be assessed. There
are no sales in Andhra; all sales being in Madras.
V.L. Narasimhamoorthy, J. B. Dadachanji and Rameshtvar
Nath, for the Mysore Spinning & Mfg. Co., Ltd., and Minerva
Mills Ltd., (Interveners), supported the petitioners.
Section 22 does not authorise the imposition of tax on
Explanation sales. It could not have been the intention of
the President to allow the State to add a new category of
sales - the Explanation Sales -to be taxed. The language of
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Art. 286(2) indicates that the lifting of the ban is a
condition precedent to legislation by the States imposing
tax on inter-State sales. Alternatively, the power to tax
inter-State sales is with Parliament under Entry 97 of List
I of Schedule VII of the Constitution. Section 22 was wiped
out and obliterated by the judgment in the
1429
Bengal Immunity Company case. See Behram Khurshed Pesikaka
v. The State of Bombay, ([1955] 1 S. C. R. 613); Newberry v.
United States, (65 L. Ed. 913). The same interpretation
must be given to the explanation to s. 22 as has been given
to the explanation to Art. 286(1)(a). The non-obstante
clause in s. 22 has only the effectof subtracting
something from the power to tax andriot of adding to
it. Ram Narain Sons Ltd. v. Asst. Commissioner of Sales
Tax ([1955] 2 S.C..R. 483); Aswini Kumar Ghosh v. Arbinda
Bose ([1953] S.C.R. 1, 22, 24); A. V. Fernandez v. The State
of Kerala, ([1957] S. C. R. 837).
N. A. Palkhiwala, J. B. Dadachanji and Rameshwar Nath, for
Tata Iron & Steel Co., Ltd., (Intervener). There must be a
factual levy before Parliament can validate it. Section
22(ii) removes inter-State sales from the purview of the
Act. Fernandez’s case supports this contention. On a proper
construction of Art. 286(2), according to the decision in
the Bengal Immunity Company case, there was no levy on
interState sales and there was nothing for Parliament to
lift the ban for. ( [ 1955 ] 2 S. C. R. 603, 621, 662, 667).
There is a vital difference between retrospective and
retroactive operation. There is no power in Parliament to
validate ex post facto a violation of Art. 286(2).
Parliament must first lift the ban and then the State
legislation may come imposing tax on inter-State sales.
Parliament is competent to prevent what otherwise would have
been a violation of the Constitution, but it is not
competent to condone an accomplished violation. Section 2
of the Validating Act will operate only where taxes have
already been collected or have been finally assessed.
P. N. Bhagwati and .1. N. Shroff, for Pashebbhai
Patel & Co., Ltd., (Intervener) supported the petitioners.
D. Narsa Raju, Advocate-General of Andhra Pradesh and T.
M. Sen, for the respondents. Article 372(2) must take
regard of the provision of the Constitution to bring the
State laws into conformity with which the power of
adaptation is to be exercised. That provision
1430
is Art. 286. Implicit in Art. 286(1) is the recognition
that the delivery State alone may tax. The -President would
be acting within his power to enable the delivery State to
tax -Such power is in accordance with the provisions of the
Constitution. The power of the legislature to bring the
laws in accordance with the Constitution is conferred upon
the President. Consequently, the explanation to s. 22 can
be read along with the definition of sale and it does add to
that definition by bringing Explanation sales within it.
K. V. Subramania Iyer, D. N. Mukherjee and B. N. Ghosh,
for Madura Mills Co., Ltd., (Intervener). The Adaptation
Order made by tile President is not ’law of a State’ within
the meaning of the Validating Act. ’Law of a State’ in the
Validating Act must mean the same thing as in Art. 286(2).
The President exercising power under Art. 372(2) is not
controlled by Art. 286; he exercises a power which belongs
to the President and not a power on behalf of the State.
Section 22 of the Andhra (Madras) Act is not law made by the
State Legislature and is not validated by the Validating
Act. The power of imposition of sales tax on inter-State
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sales was taken away from the States. The bail under Art.
286(2) is only in respect of existing laws; there is no
power in the States to enact laws imposing tax on interstate
sales. The power to impose tax on inter-State sales is
within the exclusive domain of Parliament under Entry 42 of
List I of the Seventh Schedule of the Constitution and Entry
54 of List 11 must be construed as not including such power.
A reference to Art. 301 reinforces this interpretation. The
freedom under Art. 301 includes freedom from sales tax. See
The Commonwealth v. The State of South Australia, (38 C. L.
R. 408). The Validation Act is not legislation within Entry
42. See Bank of N. S. W. v. The Commonwealth, (76 C. L. R.
1, 381); Robbins v. Taxing District of Shelby County ((1877)
30 L. Ed. 694); McLeod v. Dilworth Co. ((1944) 88 L. Ed.
1304).
C. K. Daphtary, Solicitor-General of India, G. N.
1431
Joshi and T. M. Sen, for the Union of India (Intervener).
The Sales Tax Laws Validation Act, 1956, is valid
legislation tinder Art. 286(2). In effect and in substance
the Validation Act is a law which removes the ban imposed by
Art. 286(2), and is not really a Validating Act. Article
286(2), in respect of existing laws, merely said that they
should not be effective or operative. It did not take away
the competency of the legislatures to make laws providing
for taxes oil inter-State sales. Such a law may be against
the provision of the Constitution, but that does not repeal
or obliterate it. It is only in abeyance. See Bhikaji
Narain Dhakra,s and others v. The State Of Madhya Pradesh
and another, ([ 1955] 2 S.C.R. 589, 600). Legislative power
generally includes the power to legislate retrospectively.
There is no limitation in Art. 286(2) as respects
retrospective legislation. Parliament could, therefore,
lift the ban retrospectively. Section 22 is a piece of
conditional legislation. As soon as the ban under Art.
286(2) was lifted by Parliament it came into operation. The
Validation Act is not a temporary statute. A temporary
statute is one which says that it is to be effective for a
particular period. The Validating Act operates even now and
is effective, though it is in respect of sales of a
particular period. It is open to the States to initiate
proceedings now for taxing the Explanation sales made during
the period mentioned in s. 2 even though no such proceedings
had been taken during that period. Entry 42 of List I which
reads: " Inter-State trade and commerce " does not confer
any power of taxation on Parliament. In the scheme of our
Constitution a general Entry does not include the power of
taxation. Taxes, duties, etc., are enumerated in a separate
group in Entries 82-92 in List I.
V. K. T. Chari, Advocate-General for the State of Madras,
B. R. Gopalakrishnan and T. M. Sen for the State of Madras
(Intervener). In construing s. 22 of the Andhra (Madras)
Act regard must be had to the law as it stood till September
6, 1955, when judgment was delivered in the Bengal Immunity
Company case. In view of the decision in the United Motors
1432
case ([1953] S. C. R. 1069, 1085, 1086, 1093, 1094),
Explanation sales were regarded as ’inside sales’ in the
delivery State, and the delivery State was entitled to tax
sales. The law of a State which imposed tax on Explanation
sales would remain on the statute book, in spite of the
decision in The Bengal Immunity Company case, but could not
be enforced. See Bhikaji Narain Dhakras and others v. The
State of Madhya Pradesh and another ([1955] 2 S.C.R. 589);
Ulster Transport Authority v. James Brown & Sons Ltd.
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((1953) Northern Ireland Reports 79). Section 2 of the
Validating Act refers to such a law.
Mahabir Prasad, Advocate-General for the State of Bihar,
Rajeshwar Prasad and S. P. Varma, for the State of Bihar
(Intervener); G. C. Mathur and C. P. Lal, for the State of
Uttar Pradesh (Intervener) supported the respondents and the
Union of India.
R. Ganapathy Iyer, for the petitioners, replied.
K. V. Subramania Iyer, for Madura Mills Co., Ltd.,
(Intervener), also replied with the permission of the Court.
1958. March II. The judgment of Das C. J., Venkatarama
Aiyar, S. K. Das and Vivian Bose, JJ. was delivered by
Venkatarama Aiyar J. Sarkar J. delivered a separate
judgment.
VENKATARAMA AIYAR J.-The petitioners are dealers carrying on
business in the City of Madras in the sale and purchase of
yarn, and they have filed the present applications under
Art. 32 of the Constitution for the issue of a writ of
prohibition or other appropriate writ restraining the State
of Andhra from taking proceedings for imposing tax on
certain sales effected by them in favour of merchants who
are residing or carrying on business in what is now the
State of Andhra Pradesh, on the ground, inter alia, that the
said sales were made in the course of inter-State trade, and
that no tax could be levied on them by reason of the
prohibition contained in Art. 286(2) of the Constitution.
The course of dealings between the parties resulting
1433
in the above sales has been set out in para. 5 in Petition
No. 220 of 1955. It is therein stated that the dealers in
Andhra would place orders for the purchase of yarn with the
petitioners in Madras, that the contracts would be concluded
at Madras, that the goods would be delivered ex-godown at
Madras and would thereafter be despatched to the purchasers
either by lorries or by rail as might be directed by them,
that when the goods were sent by rail, the railway receipts
would be taken either in the name of the consignees, and
sent to them by post or in the name of the consignor and
endorsed to the purchasers and delivered to them in Madras
or sent to them by post endorsed in favour of a bank and the
purchasers would take delivery of those receipts after
payment to the bank. It is said that in all cases price of
the goods was paid in Madras.
On the above allegations, it is manifest that the sales
mentioned therein are not all of the same kind, and in point
of law, the incidents attaching to them might be different.
A consideration of the validity of the imposition with
reference to the several classes of sales mentioned above
would he wholly airy and pointless without a determination
of the facts relating to them, which, however, have not been
investigated. Counsel for the petitioners, however,
concedes that the, dispute in these proceedings is confined
to the proposed imposition of tax, in so far as it relates
to sales of the character mentioned in the Explanation to
Art. 286(1)(a), that is to say, sales in which the property
in the goods sold passed outside the State of Andhra but the
goods themselves were actually delivered as a result of the
sale for consumption within that State. These sales have
been referred to in the arguments before us as "Explanation
sales ", and it will be convenient to adopt that expression
in referring to them in this judgment.
It will be seen that the above sales would all of them have
been intrastate, so long as the Andhra State formed part of
the composite State of Madras, and questions of the
character now agitated before us could not then have arisen.
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On September 14, 1953,
1434
Parliament enacted the Andhra State Act (30 of 1953),
whereby a separate State called the State of Andhra was
constituted incorporating therein territories which had
previously thereto formed part of the State of Madras, and
this Act came into force on October 1, 1953. Under s. 53 of
the Andhra State Act, the laws in force in the territories
in the Andhra State prior to its constitution are to
continue to be in force even thereafter, and one of those
laws is the Madras General Sales Tax Act (Madras 9 of 1939),
hereinafter referred to as the Madras Act. Section 54 of
the Andhra State Act conferred on the Government a power to
adapt laws for the purpose of facilitating the application
of any law previously made, and in exercise of the power
conferred by this section, an Adaptation Order was passed on
November 12, 1953, whereby the word " Andhra " was
substituted for the word "Madras" in the Madras Act. We
shall hereafter refer to the Madras Act as continued and
applied in the State of Andhra as the Andhra (Madras)
Act.
It will be convenient at this stage to refer to the relevant
provisions of this Act. The preamble to the Act states that
" it is expedient to provide for the levy of a general tax
on the sale of goods in the State of Madras". "Sale" is
defined in s. 2(h), omitting what is not material, as
meaning " 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." Section 2(i) defines " turnover " as " the
aggregate amount for which goods are either bought by or
sold by a dealer, whether for cash or for deferred payment
or other valuable consideration ". Section 3 is the charging
section and provides that every dealer shall pay for each
year tax on his total turnover for such year. By the Madras
General Sales Tax (Amendment) Act No. 25 of 1947, a new
Explanation was added to the definition of " sale ", and it
is as follows:
Explanation 2: " Notwithstanding anything to the contrary in
the Indian Sale of (Goods Act, 1930, the sale or purchase of
any goods shall be deemed, for
1435
the purposes of this Act, to have taken place in this
Province, wherever the contract of sale or purchase might
have been made-
(a) if the goods were actually in this Province at the 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 this Province at any time after the contract of
sale or purchase in respect thereof was made."
This amendment came into force on January 1, 1948.
In Poppatlal Shah v. The State of Madras (1), this Court
had to consider the scope of the definition of " sale " in
s. 2(h) and of Explanation 2, and it was therein held that
though the power to tax a sale was really a power to tax a
transaction of sale and a law imposing such tax would be
competent if any of the ingredients of sale had taken place
within the State, the Madras Act had, by its definition of "
sale " in s. 2(h) prior to the enactment of Explanation 2,
imposed a tax only when the property in the goods passed
within the State, and that in respect of sales which had
taken place prior to the amendment, the tax would be
unauthorised if the property in the goods passed outside the
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State of Madras. It was also observed that after the
amendment came into force, a tax on a sale which came within
Explanation 2 would be valid. That was the position in law
under the Madras Act prior to the enactment of the
Constitution.
It is now necessary to refer to the changes effected in the
law by the Constitution. Article 286, which is relevant for
the present purpose, is as follows:
286(1). " 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) in the course of the import, of the goods into, or
export of the goods out of, the territory of India.
(1) [1953] S.C.R. 677.
182
1436
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
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.
(2) Except in so far as Parliament may by law otherwise
provide, no law of a State shall impose, or authorise the
imposition of, a tax on the sale or purchase of any goods
where such sale or purchase take,,; place in the course of
interstate trade or commerce:
Provided that the President may by order direct that any tax
on the sale or purchase of goods which was being lawfully
levied by the Government of any State immediately before the
commencement of this Constitution shall, notwithstanding
that the imposition of sucli tax is contrary to the
provisions of this clause, continue to be levied until the,
thirty-first day of March, 1951.
(3) No law made by the Legislature of a State imposing, or
authorising the imposition of, a tax on the sale or purchase
of any such goods as have been declared by Parliament by law
to be essential for the life of the community shall have
effect unless it has been reserved for the consideration of
the President and has received his assent." Article 372(2)
enacts that,
" For the purpose of bringing the provisions of any law in
force in the territory of India into accord with the
provisions of this Constitution, the President may by order
make such adaptations and modifications of such law, whether
by way of repeal or amendment, as may be necessary or
expedient, and provide that the law shall, as from such date
as may be specified in the order, have effect subject to the
adaptations and modifications so made, and any such
adaptation or modification shall not be questioned in any
court of law."
In exercise of the power conferred by this provision,
1437
the President made Adaptation Orders with reference to the
Sales Tax Laws of all the States, and as regards the Madras
Act, he issued on July 2, 1952, the Fourth, Amendment
inserting a new section, s. 22 in that Act. It runs as
follows:
" Nothing contained in this Act shall be deemed to impose or
authorise the imposition of a tax on the sale or purchase of
any goods where such sale or purchase takes place-
(a) (i) outside the State of Madras, or
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(ii)in the course of import of the goods into the territory
of India or of the export of the goods out of such
territory, or
(b) except in so far as Parliament may by law otherwise
provide, after the 31st March, 1951, in the course of inter-
State trade or commerce, and the provisions of this Act
shall be read and construed accordingly.
Explanation:-For the purposes of cl. (a) (i) 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
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."
It will be noticed that the Explanation to Art. 286 (1) (a)
is reproduced verbatim in s. 22 of the Madras Act. The true
meaning and scope of this Explanation came up for
consideration before this Court in The State of Bombay and
another v. The United Motors India Ltd., and others (1).
Therein, it was held by a majority that though the sales
falling within the Explanation would, in fact, be in the
course of interState trade, they became, by reason of the
fiction introduced therein, invested with the character of
intra-State sales, and would be liable to be taxed by the
State within which the goods were delivered for consumption.
Acting on this judgment, the Board of Revenue (Commercial
Taxes) Andhra State, issued a
(1) [1953] S.C.R. 1069.
1438
notification on July 13, 1954, calling upon dealers to
submit returns of their turnover of sales in which goods
were delivered in the Andhra State for consumption, and a
copy thereof was sent to the Madras Yarn Merchants’
Association, of which the petitioners are members. The
Association disputed the liability of the Madras dealers to
pay any tax in respect of the sales to the Andhra dealers,
and after some correspondence, the Andhra State finally
issued on June 30, 1955, notices to the petitioners to send
their returns of turnover by July 15, 1955, failing which it
was stated that assessments would be made on the best
judgment basis, and that, further, the dealers would be
liable to the penalties prescribed by the law (Vide Annexure
H to the petition). Thereupon, the petitionera have filed
the present petitions challenging the validity of the demand
made by the Andhra State on the ground, inter alia, that the
sales proposed to be taxed were inter-State sales, and that
they were immune from taxation under Art. 286(2). These
petitions were filed on various dates in July and August,
1955.
While they were pending, the question of the true scope of
the Explanation to Art. 286 (1) (a) came up again for
consideration before this Court in The Bengal Immunity
Company Limited v. The State of Bihar and others (1). By
its judgment dated September 6, 1955, this Court held, again
by a majority, that the sales falling within the Explanation
being inter-State in character, could not be taxed by reason
of Art. 286(2), unless Parliament lifted the ban, that the
Explanation to Art. 286 (1) (a) controlled only that clause
and did not limit the operation of Art. 286 (2), and that
the law had not been correctly laid down in The United
Motors case (2). On the decision in The Bengal Immunity
Company case(1) it cannot be doubted that the claim of the
Andhra State to tax Explanation sales would be
unconstitutional, and indeed, that was admitted by the State
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in a statement filed on October 21, 1955, wherein it was
stated that having regard
(1) [1955]2 S.C.R. 603.
(2) [1953] S.C.R. 1069.
1439
to the decision aforesaid, the petitions might be allowed
but without costs. Before final orders were passed on the
petitions, however, the Sales Tax Validation Ordinance No.
III of 1956, was promulgated on January 30, 1956, and that
was later replaced by the Sales Tax Laws Validation Act (7
of 1956) and that came into force on March 21, 1956.
Section 2 of this Act runs as follows:
" Notwithstanding any judgment, decree or order of any court
no law of a State imposing, or authorising the imposition
of, a tax on the sale or purchase of any goods where such
sale or purchase took place in the course of inter-State
trade or commerce during the period between the 1st day of
April, 1951, and the 6th day of September, 1955, shall be
deemed to be invalid or ever to have been invalid merely by
reason of the fact that such sale or purchase took place in
the course of interstate trade or commerce; and all such
taxes levied or collected or purporting to have been levied
or collected during the aforesaid period shall be deemed
always to have been validly levied or collected in
accordance with law."
On February 19, 1957, the Andhra State which had become the
State of Andhra Pradesh under s. 3 (1) of the States
Reorganisation Act (37 of 1956) filed a fresh statement that
by reason of the Validation Act the State was entitled to
impose a tax on the Explanation sales, which had taken place
during the period between the 1st day of April, 1951, and
the 6th day of September, 1955 (which will hereinafter be
referred to as the specified period), and that the petitions
should therefore be dismissed.
The petitioners challenge the correctness of this position.
They contend that the Andhra (Madras) Act does not, in fact,
impose a tax oh the Explanation sales, and that, in
consequence, the Validation Act can have no effect on it;
that the Validation Act is itself unconstitutional and void;
that the Act even if valid, does not validate s. 22 of the
Andhra (Madras) Act; that it validates only levies and
collections of tax already made, and does not authorise the
initiation
1440
of fresh proceedings for assessment of tax or for realisa-
tion of the same; that even if the Act authorised fresh
imposition of taxes, that could not be done without further
legislation pursuant thereto by the State, and that no
action could be taken on the basis of s. 22 of the Andhra
(Madras) Act, as, being unconstitutional when enacted, it
was for all purposes non est ; that tax on the sale of yarn
could under the Act be levied only at a single point and the
State of Madras having imposed a tax on the sale of goods
now proposed to be taxed, the Andhra State could not impose
a tax once again on the sale of the self-same goods, and
that, further, the tax on yarn would, so far as the Andhra
State is concerned, be bad as being hit by the Essential
Commodities Act (52 of 1952), read with Art. 286 (3).
It must be mentioned that similar to the Adaptation Order
which enacted s. 22 in the Madras Act, there were Adaptation
Orders by the President with reference to the Sales Tax Laws
in all the States, and provisions similar to s. 22 were
enacted therein. As any decision by this Court on the
questions raised in the petitions must conclude similar
questions under the laws of other States, those States
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applied for and obtained permission to intervene in these
proceedings, and we have heard the Advocates-General of
Madras, Uttar Pradesh and Bihar on the questions. As the
main point for determination is the vires of the Sales Tax
Laws Validation Act (which will hereinafter be referred to
as the impugned Act), the Union of India has intervened, and
the learned Solicitor-General has addressed us on the
questions relating to the validity of that Act. Certain
assessees who are interested in the decision of the above
questions also applied for and obtained permission to
intervene, and they are the Mysore Spinning and
Manufacturing Co., the Minerva Mills, Ltd., the Tata Iron
and Steel Co. Ltd., and the Madura Mills Co. Ltd., and
counsel appearing for them have, in general, supported the
petitioners.
Counsel for the Madura Mills Co. Ltd., raised a further
contention different from and inconsistent with
1441
the position taken by the petitioners and other inter.
veners, and that is that under Entry 42 in List I of the
Seventh Schedule to the Constitution, inter-State trade and
commerce is the exclusive domain of the Union Legislature,
that tax on inter-State sales is comprised therein, that the
States have accordingly no power to tax such sales, and that
Parliament is not competent to authorise them to impose such
a tax, and that, accordingly, the impugned Act is wholly
misconceived and inoperative.
On these contentions, the questions that arise for our
determination are:
(I) Whether the Andhra (Madras) Act, in fact, imposes a tax
on the class of sales falling within the Explanation to Art.
286 (1) (a);
(II)Whether the impugned Act is ultra vires the ground that
it is not authorised by the terms of Art. 286(2);
(III) (a) Whether s. 22 of the Andhra (Madras) Act is within
the protection of the impugned Act, and
(III)(b) Whether the impugned Act validates only levies and
collections made during the specified period, or whether it
authorises the imposition and collection of taxes on such
sales in future;
(IV)Whether s. 22 of the Madras Act was null and void on the
ground that it was in contravention of Art. 286 (2), and
whether the proceedings sought to be taken thereunder on the
strength of the impugned Act are incompetent;
(V) Whether tax on inter-State sales is within the
exclusive competence of Parliament, and whether the impugned
Act is, in consequence, bad as authorising the States to
levy tax ;
(VI)Whether the proposed imposition of tax is illegal on the
ground that successive sales of yarn are subject under the
law to be taxed at only one point, and as the State of
Madras has already taxed the present sales, the State of
Andhra cannot again levy a tax on them ; and
(VII)Whether the proposed imposition of tax on yarn by the
Andhra State is hit by the Essential Commodities Act, read
with Art. 286(3), and is illegal?
1442
(1):The first question that falls to be determined is
whether the Andhra (Madras) Act, in fact, imposes a tax on
the Explanation sales. Only if it does that, would the
further questions as to the vires and the operation of the
impugned Act arise for consideration. We have already
referred to the relevant provisions of the Madras Act and to
the decision of this Court in Poppatlal Shah v. The State of
Madras (1), wherein it was held that under the definition of
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" sale " in s. 2(h) of that Act and apart from the
Explanations to it which are not material for the present
discussion, power had been taken by the Province of Madras
to tax only sales in which property in the goods passed
inside the State. It must, therefore, be taken that under
the Act, as it stood prior to the Constitution, the State of
Madras had no power to impose a tax on sales of the kind
mentioned in the Explanation to Art. 286 (1)(a). Now, the
question is whether the Adaptation Order of the President
(Fourth Amendment) dated July 2, 1952, has, by the insertion
of s. 22 in the Madras Act, altered the position. The
contention of the respondent is that it has, because it has
bodily incorporated the Explanation to Art. 286 (1) (a) in
the section itself, and as under that Explanation, all sales
falling within its ambit would be sales inside the State of
Madras, they became taxable as sales within the definition
in s. 2 (h) of the Madras Act; and that accordingly
under s. 22 of the Andhra (Madras) Act the Explanation
sales become taxable by the Andra State as sales within that
State.
The petitioners dispute this position, and contend that that
is not the true effect of the Explanation, and that properly
construed, it does not authorise the in position of any tax
which was not leviable under the provisions of the Act,
prior to its enactment. It is argued that the object of
Art. 286 of the Constitution was merely to impose
restrictions on the power which the States had under Entry
54 in List 11 to enact laws imposing tax on sales, and that,
in that context, the true scope of the Explanation to Art.
286 (1) (a) was that it merely took away from the State its
power to
(1) [1953] S.C.R. 677.
1443
tax a sale in which the property passed inside it if the
goods were actually delivered under the sale for consumption
in another State and not to confer on the delivery State a
power to tax such a sale, and that the Explanation in s. 22
which is, word for word, a reproduction of the Explanation
to Art. 286 (1) (a) must be construed as having the same
import. Reliance is placed in support of this contention on
the following observations of this Court in The Bengal
Immunity Company case(1) at p. 640:
" In clause (1) (a) the Constitution makers have placed a
ban on the taxing power of the States with respect to sales
or purchases which take place outside the State. If the
matter had been left there the ban would have been
imperfect, for the argument would have still remained as to
where a particular -,ale or purchase took place. Does a
sale or purchase take place at the place where the contract
of sale is made, or where the property in the goods passes
or where the goods are delivered ? These questions are
answered by the Explanation. That Explanation is ’for the
purposes of sub-clause (a)’, i.e., for the purpose of
explaining which sale or purchase is to be regarded as
having taken place outside a State. By saying that a Parti-
cular sale or purchase is to be deemed to take in a
particular State the Explanation only indicates that such
sale or purchase has taken place outside all other States.
The Explanation is neither an Exception nor a Proviso but
only explains what is an outside sale referred to in sub-
clause (a). This it does by creating a fiction. That
fiction is only for the purposes of subclause (a) and cannot
be extended to any other purpose. It should be limited to
its avowed purpose. To say that this Explanation confers
legislative power on what for the sake of brevity has been
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called the delivery State is to use it for a collateral
purpose which is not permissible. .Further, it is utterly
illogical and untenable to say that article 286 which was
introduced in the Constitution to place restrictions on the
legislative powers of the States, by a side wind, as it
were,
(1) [1955] 2 S.C.R. 603.
183
1444
gave enlarged legislative powers to the State of delivery by
an explanation sandwiched between two restrictions. This
construction runs counter to the entire scheme of the
article and the explanation and one may see no justification
for imputing such indirect and oblique purpose to this
article."
Now, the contention of the petitioners is that these
observations are decisive of the present controversy,
because the same provision expressed in ipsissima verba
cannot have one meaning in Art. 286(1) (a) and quite a
different one in s. 22 of the Madras Act; and on the
construction put by this Court on the Explanation to Art.
286(1) (a), the Explanation to s. 22 of the, Andhra (Madras)
Act must be interpreted as prohibiting States other than
Andhra from taxing sales under which goods are delivered for
consumption outside those States, even though property
passed inside them and not as authorising the State of
Andhra to tax sales in which goods are delivered therein for
consumption , even though property in the goods passed
outside that State. It is argued that this conclusion is
reinforced by the opening words of s. 22, viz., "Nothing
contained in this Act shall be deemed to impose or authorise
the imposition of a tax on the sale or purchase of any
goods". The effect of this, it is said, is to impose a
restriction on the power which the State previously
possessed, of taxing sales coming within the definition in
s. 2 (h) and not to enlarge it. The decision in Government
of Andhra v. Nooney Govindarajulu (1) is cited in support of
these contentions.
The error in this argument lies in this that it focusses
attention exclusively on the terms in which the Explanations
are couched in Art. 286(1) (a) and in s. 22 and completely
overlooks the fundamental difference in the context and
setting of these two enactments. The scope and purpose of
Art. 286 have been considered at length in the decisions of
this Court in The United Motors case (2) as also in The
Bengal Immunity Company case (3), and it is sufficient to
briefly recapitulate them. Under Entry 48 in List 11 of the
(1) (1957) 8 Sales Tax Cases 297. (2) [1953] S.C.R, 1069.
(3) [1955] 2 S.C.R. 603.
1445
Seventh Schedule to the Government of India Act, 1935, the
Provincial Legislature had the exclusive competence to enact
a law imposing a tax on the sale of goods, and under s. 99
(1), such a law could be made " for the Province or for any
part thereof ". In Wallace Brothers & Co. Ltd. v. Income-tax
Commissioner (1), the question arose as to the validity of
certain provisions of the Indian Income-tax Act, which
sought to tax non-resident foreigners in respect of their
foreign income. The Indian Legislature had under Entry 54
in List I of the Government of India Act power to enact laws
imposing tax on income other than agricultural income, and
under s. 99(1) the law could be made " for the whole of
:British India or for any part thereof ". It was held by the
Privy Council that the requirements of s. 99 were satisfied
if there was sufficient territorial connection between the
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State imposing the tax and the person who was sought to be
taxed, and the receipt of income by the assessees in British
India furnished sufficient nexus to give validity to the
legislation imposing tax on their foreign income. If this
doctrine of nexus is applicable to laws imposing tax on
sales-and it was applied by this Court to those laws in the
United Motors case (2) at p. 1079 and in Poppatlal Shah’s
case (3) at pp. 682-683-then it would be competent to the
State to enact a law imposing a tax on sales not merely when
the property in the goods passed within the State but even
when it (lid not, if there was sufficient connection between
the State and the transaction of sale, such as the presence
of the goods in the State at the date of the agreement, as
was held recently by this Court in Tata Iron & Steel Co.
Ltd. v. State of Bihar (4). In fact, acting on the nexus
theory the Legislatures of the States enacted Sales Tax Laws
adopting one or more of the nexi as the basis of taxation.
This resulted in multiple taxation, as a consequence of
which the free flow of commerce between the States became
obstructed and the larger economic interests of the country
suffered. It was to repair this mischief that the
Constitution, while
(1) (1948) L.R. 75 I.A. 86.
(2) [1953] S.C.R. 1069.
(3) [1953] S.C.R. 677.
(4) [1958] S.C.R. 1355.
1446
retaining the power in the States to tax sales under Entry
54 in List II sought to impose certain restrictions on that
power in Art. 286. One of those restrictions is contained
in Art. 286(1)(a) which prohibits a State from taxing
outside sales. The Explanation now under consideration is
attached to this provision, and it is in this context, viz.,
in its setting in an Article, the object of which was to
impose fetters on the legislative powers of the States, that
this Court observed that though positive in form, it was in
substance negative in character, and that its true purpose
was not to confer any fresh power of taxation on the State
but to restrict the power which it previously had under
Entry 54.
These considerations will clearly be in apposite in
construing a taxing statute like the Madras Act, the object
of which is primarily to confer power on the State to levy
and collect tax. When we find in such a statute a provision
containing a prohibition followed by an Explanation which is
positive in its terms, the true interpretation to be put on
it is that while the prohibition is intended to prevent
taxation of outside sales on the basis of the nexus
doctrine, the Explanation is intended to authorise taxation
of sales falling within its purview, subject of course to
the other provisions of the Constitution, such as Art. 286
(2). It should be remembered that unlike the Constitution,
the law of a State can speak only within its own
territories. It cannot operate either to invest another
State with a power which it does not possess, or divest it
of a power which it does possess under the Constitution.
Its mandates can run only within its own borders. That
being the position, what purpose would the Explanation serve
in s. 22 of the Madras Act, if it merely meant that when
goods are delivered under a contract of sale for consumption
in the State of Madras, the outside State in which property
in the goods passes has no power to tax the sale ? That is
not the concern of the State of Madras, and indeed, the
Legislature of Madras would be incompetent to enact such a
law. In its context and setting, therefore, the Explanation
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to s. 22 must mean that it
1447
authorises the State of Madras to impose a tax on sales
falling within its purview. Thus, while in the context of
Art. 286 (1) (a) the Explanation thereto could be construed
as purely negative in character though positive in form, it
cannot be so construed in its setting in s. 22 of the Madras
Act, where it must have a positive content.
Nor is there much force in the contention that the non-
obstante clause in s. 22 has only the effect of substracting
something from the power to tax conferred on the State by
the charging section, s. 3, read with s. 2 (h) and not of
adding to it. In Aswini Kumar Ghosh and another v. Arabinda
Bose and another (1), It was observed by this Court that "
the enacting part of a statute must, where it is clear, be
taken to control the non-obstante clause where both cannot
be read harmoniously ". Now, as the Explanation lays down in
clear and unambiguous terms that the sales of the character
mentioned therein are to be deemed to have taken place
inside the State in which goods are delivered for
consumption, full effect must be given to it, and its
operation cannot be cut down by reference to the non-
obstante clause. It cannot be put against this construction
that it renders the non-obstante clause ineffective and
useless. According to the definition in s. 2 (h), a sale in
which property passes inside the State of Madras will be
liable to be taxed, even though the goods are delivered for
consumption outside that State, but under the Explanation
such a sale will be deemed to have taken place in the out-
side State in which goods are delivered for consumption, and
therefore the State of Madras will have nO power to tax it:
The purpose which the non-obstante clause serves is to
render the Explanation effective against the definition in
s. 2 (h) and not to render it ineffective in its own sphere,
as determined on its
terms.
But it is contended that in order to reach this result it
was necessary that the Explanation to s. 22 should have been
made a part of the definition of " sale " under s. 2 (h),
because under s. 3, which is the charging
(1) [1953] S.C.R. 1, 24.
1448
section, it is the turnover of sales that is subject to tax,
that sale for the purpose of that section is only what is
defined as " sale " under s. 2 (h), and that the Explanation
sales not having been brought within that definition, no
charge could be imposed thereon. The Explanation in s. 22,
it is argued, cannot override s. 2 (h), and if its object
was to confer on the State a power to tax sales falling
within its ambit, that has not, in fact, been achieved. It
is pointed out by way of contrast that in the Sales Tax Laws
of some other States, such as Bihar and Uttar Pradesh, the
Explanation has been added to the definition of sale. Now,
a contention that what the Legislature intended to bring
about it has failed to do by reason of defective
draftsmanship is one which can only be accepted in the last
resort, when there is no avenue left for escape from that
conclusion. But that clearly is not the position here.
Section 22 opens with the words " Nothing contained in this
Act ", and that means that that section is to be read as
controlling, inter alia, the definition of sale in s. 2 (h).
Otherwise, sales in which property passes in Madras but
delivery is outside that State would be taxable under s. 2
(h) and under s. 3, even though they are within the
prohibition enacted in s. 22. If the provisions of s. 22
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are effective for the purpose of limiting the operation of
s. 2 (h), we do not see any difficulty in construing the
Explanation therein as equally effective for the purpose of
enlarging it. Again, it is a rule of construction well-
establisbed that the several sections forming part of a
statute should be read, unless there are compelling reasons
contra, as constituting a single scheme and construed in
such manner as would give effect to all of them. On this
principle, s. 2 (h) and s. 22 must be read together as
defining what are sales, which are taxable under the Act and
what are not, and so read, the Explanation really means that
in sales in which goods are delivered for consumption in the
State of Madras, the property therein shall be deemed to
have passed inside that State, notwithstanding that it has,
under the Sale of Goods Act, passed outside that State. On
this construction, those
1449
sales will fall within the definition in s. 2 (h) and will
be taxable. The contention of the petitioners highly
technical and based oil the non-insertion of the Explanation
in s. 2 (h) must, in our opinion, be rejected
as unsound.
It is next contended that the power of the President under
Art,. 372 (2) is merely to bring the provisions of the State
laws into conformity with Art. 286, and that having regard
to the interpretation put on that Article in The Bengal
Immunity Company case (1), the Explanation in s. 22 would be
valid in so far as it prohibits the State of Madras from
imposing a tax on sales in which goods are delivered outside
Madras, though property therein passed inside that State,
but that in so far as it makes taxable sales in which
property passes outside the State of Madras but the goods
themselves are delivered for consumption in Madras, it is
much more than bringing the. ,State law into conformity with
Art. 286, and is, in consequence, unauthorised and bad. It
is argued that such a provision could be enacted by the
Legislature of Madras, as was in fact, done by the legis-
latures of many of the States, but the President could not
do it in exercise of the special and limited power conferred
on him by Art. 372(2). That power is merely, it is
contended, to take the definition of " sale " in s. 2(h) of
the Madras Act, strike out therefrom whatever is repugnant
to Art. 286, such as sales in which goods are delivered for
consumption outside Madras, and leave it there and not to
add to it.
We are not satisfied that that is a correct view to take of
the powers of the President under Art. 372(2). It is to be
observed that Art. 286(1)(a) and the Explanation thereto
form, in their setting in a taxing statute, integral parts
of and different facets of the same concept. Sales in which
property passes outside the State of Madras but delivery for
consumption is inside Madras are at once inside sales for
Madras and outside sales for the other States. Now, if in
exercise of the power to adapt, the enactment of the
Explanation is requisite to give effect to one aspect of
that
(1) [1955] 2 S.C.R. 603.
1450
concept, that is, for prohibiting the State of Madras from
taxing sales when goods are delivered outside, we fail to
see why it should not operate to give effect to the other
aspect of the concept which is so integrally connected with
it, viz., taxing of sales in which goods are delivered for
consumption in the State of Madras, if its language is
comprehensive and wide enough to include such sales. We
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find it difficult to hold that the self-same Explanation is
intra vires the powers of the President in so far as it
prohibits the State from taxing gales, in which goods are
delivered Outside the State but is ultra vires in so far as
it authorises that State to tax sales in which goods are
delivered inside it.
It should be remembered in this connection that the power
which the President has under Art. 372(2) to adapt is the
legislative power of the State whose law is adapted, and
that includes the power to repeal and amend any provision.
Provided that the law as adapted is within the legislative
competence of the State and its enactment is in the process
of bringing the State law into conformity with Art. 286, it
seems to us that it is within the ambit of the power con-
ferred by Art. 372(2). The question, however, is of
academic interest, because of the concluding words of Art.
372(2), which enact that no adaptation order made under that
provision shall be liable to be questioned. It was
suggested for the -petitioners that these words would have
no application when the adaptation order went beyond the
terms of Art. 372(2), and that it was open to them to
challenge its validity on the ground that it amounted to
more than bringing the existing law into conformity with
Art. 286. We are unable to agree. If the adaptation order
is within the scope of Art. 372(2), then it is valid of its
own force, and does not require the aid of a clause such as
is contained in the concluding portions thereof. It is only
when the adaptation amounts to something more than merely
bringing the State law into conformity with the
Constitutional provisions that there can arise a need for
such a clause. In our opinion, the effect of the concluding
words of Art. 372(2) is to
1451
render the question of the validity of the adaptation non-
justiciable. The Adaptation Order in question must,
accordingly, be held to be not open to attack on the ground
that it goes beyond the limits contemplated by Art. 372(2).
It is then argued that even though the Adaptation Order of
the President might not be open to question even if it had
imposed for the first time a tax on sales which had not been
previously imposed by the Act, nevertheless in deciding
whether it does, in fact, impose such a tax, it would be
relevant to take into account that the object of Art. 372(2)
was only to bring the State laws into conformity with the
Constitution, and that, in consequence, the Explanation in
s. 22 must be construed as having the same meaning as the
Explanation in Art. 286(1)(a). This would, no doubt, be a
legitimate consideration in interpreting the language of the
Explanation, but then, it must be remembered that at the
time when the Adaptation Order was made, the true
interpretation of the Explanation to Art. 286(1)(a) had not
been the subjectmatter of any decision, and it is therefore
difficult to impute to the framers of s. 22 the construction
put by this Court on the Explanation to Art. 286(1)(a) in
The Bengal Immunity Company case (1) any more than the one
put on it in The United Motors case (2). We are therefore
thrown back on the language of the Explanation itself to
discover its true scope. If, in enacting the Explanation,
the Adaptation Order merely intended to prohibit the State
of Madras from imposing tax on sales under which goods are
delivered for consumption outside that State even though
property therein passed inside that State, it would clearly
have expressed that intention in words to the following
effect: " For the purposes of clause (a)(i), a sale under
which goods are delivered for consumption outside the State
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of Madras shall be deemed to have taken place outside that
State, notwithstanding that property in those goods passed
inside that State ". But the language of the Explanation is
general, and fixes the situs of sales of
(1) [1955] 2 S.C.R. 603.
(2) [1953] S.C.R. 1069.
184
1452
an inter-State character in the State in which goods are
actually delivered for consumption. Under this Explanation,
a sale under which goods are delivered outside the State of
Madras will be an outside sale for that State even though
property in the goods passed inside that State, and
likewise, a sale under which goods are delivered inside the
State of Madras will be an inside sale for that State, even
though property in the goods passed outside that State. As
the language of the Explanation is general and of sufficient
amplitude not merely to restrict but also to add to the
power of the State to tax Explanation sales, and as the
reasons for construing it as purely restrictive in Art.
286(1)(a) are, as already stated, without force in their
application to a taxing statute, we must give full effect to
the words of the enactment, and bold that they operate to
confer on the State a power to tax Explanation sales.
There is one other contention relating to this aspect of the
matter, which remains to be considered, and that is that
even if the Explanation could be construed as authorising
the imposition of a tax on the sales mentioned therein, a
reading of the section as a whole makes it clear that, in
fact, no such tax was imposed, as it expressly enacts that
"Nothing contained in this Act shall be deemed to impose a
tax on inter-State sales ". The argument is that the
Explanation sales being inter-State sales and the section
having exempted them from taxation, they go out of the
statute book altogether, and do not exist for the purpose of
the impugned Act. We are unable to agree with this
contention. Article 286(2) consists of two parts, one
imposing a restriction on the power possessed by the States
to tax sales under Entry 54 in so far as such sales are in
the course of inter-State trade and commerce and another,
vesting in Parliament a power to enact a law removing that
restriction. If s. 22 had merely enacted that portion of
Art. 286(2) which prohibited imposition of taxes on
interstate sales, that might have furnished some plausible
ground for the contention now urged by the petitioners.:but
it enacts both the parts of Art. 286(2),
1453
the restriction imposed therein and also the condition on
which that restriction is to cease, viz., Parliament
providing otherwise by law. Taken along with the admitted
power of the States to impose tax on sales under Entry 54,
the true scope of s. 22 is that it does impose a tax on
the Explanation sales, but the imposition is to take
effect only when Parliament lifts the ban. In other words,
it is a piece of legislation imposing tax in praesenti but
with a condition annexed that it is to come into force in
futuro as and when Parliament so provides. It is not
contended that there is in the Constitution any inhibition
against conditional legislation. In The Queen v. Burah (1),
it was held by the Privy Council that a legislature acting
within the ambit of authority conferred on it by the
Constitution has the power to enact a law either absolutely
or conditionally, and that position has been repeatedly
affirmed in this Court. Vide In The Delhi Laws Act, 1912,
etc. (2) and Sardar Inder Singh v. State of Rajasthan(3).
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It would clearly be within the competence of the Madras
Legislature to enact a law imposing a tax on sales
conditional on the ban enacted in Art. 286(2) being lifted
by Parliamentary legislation, and that, in our opinion, is
all that has been done in s. 22. The Madras Act defines the
event on which the tax becomes payable and the person from
whom and the rate at which it has to be levied, and forms a
complete code on the topic under consideration. It could
have no immediate operation by reason of the bar imposed by
Art. 286(2), but when once that is removed by a law of
Parliament, there is no impediment to its being enforced.
That satisfies all the requirements of a conditional
legislation. But it was argued that s. 22 of the Madras Act
could not be so construed, because it was not open to the
President acting in exercise of the power conferred on him
under Art. 372 (2) to impose a conditional levy ; nor would
it be competent to the Legislature of Madras to make a levy
conditional or otherwise, unless Parliament had authorised
it. We see no force in this argument. As
(1) (1878) L.R. 5 I.A. 178. (2) [1951] S.C.R. 747.
(3) [1957] S.C.R. 605.
1454
Art. 286(2) is itself in two parts, one a restriction on the
power of the State and the other, a condition on which such
restriction will cease to operate, an adaptation made
pursuant thereto must also be similar in its contents. Nor
is there in Art. 286 (2) any prohibition of any legislation
by tile State Legislature against enacting laws imposing tax
on interstate sales. It merely enacts that such law can
have no effect. The words "No law of a State shall impose "
mean only that no such law shall be effective to impose a
tax.
It is also contended that under the Sales Tax Acts, the levy
of tax is annual and the rules contemplate submission of
quarterly returns and payment of taxes every quarter on the
admitted turnover, and that a conditional legislation under
which payment of tax will become enforceable in futuro would
be inconsistent with the scheme of the Act and the rules.
But this argument, when examined, comes to no more than this
that the existing rules do not provide a machinery for the
levy and the collection of taxes which might become payable
in future, when Parliament lifts the ban. Assuming that
that is the true position, that does not affect the factum
of the imposition, which is the only point with which we are
now concerned. That the States will have to frame rules for
realizing the tax which becomes now payable is not a ground
for holding that there is, in fact, no imposition of tax.
It should also be mentioned in this connection that the
Madras Act makes a clear distinction between sales which are
outside the operation of the Act, and sales which are within
its operation but are exempt from taxation. Section 4
provides that the provisions of the Act shall not apply to
the sale of electrical energy, motor spirit, manufactured
tobacco and certain other articles. In contrast to this is
the language of s. 22, which expressly enacts that the Act
shall not be deemed to impose a tax on inter-State sales,
except in so far as Parliament may by law otherwise provide.
We are of opinion that, on the true construction of s. 22 of
the Act, there is an imposition of tax on Explanation sales
but that it could be enforced only when Parliament so
provides.
1455
We have so far considered the question on principle and on
the language of the statute. We may now.,. refer to the
decisions of the High Courts, wherein this question has been
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considered. In Mettur Industries Ltd. v. State of Madras
(1), the point directly arose for decision as to whether s.
22 of the Madras Act did. in fact, levy a tax on the
Explanation sales so as to fall within the protection of the
Sales Tax Laws Validation Act. It was held that the
Explanation to s. 22 had’ the effect of rendering the sale
one inside the State so as to fall within the definition of
that word in s. 2 (h), and that it was taxable. Next in
point of time is the decision of the Bombay High Court in
Dial Das v. P. S. Talwalkar (2) in which the question arose
with reference to s. 46 of the Bombay Sales Tax Act (Bom.
III of 1953), corresponding to s. 22 of the Madras Act. It
was held that it did impose a tax, though it was to operate
only if Parliament so provided. Then, there are two
decisions of the Travancore-Cochin High Court, Mathew v.
Travancore-Cochin Board of Revenue(3) and Cochin Coal Co.,
Ltd. v. State Of Travancore-Cochin(4), in which it was held
that s. 26 of the Travancore-Cochin General Sales Tax Act
corresponding to s. 22 of the Madras Act, had not the effect
of imposing, of its own force, a tax on the Explanation
sales, and the decision in Mettur Industries Ltd. v. Madras
State (supra) was not followed. In The -Mysore Spinning and
Manufacturing Co., Ltd. v. Deputy Commercial Tax Officer,
Madras (5) the Madras High Court re-affirmed the view which
it had taken in Mettur Industries Ltd. v. State of Madras
(supra), and held that s. 22 had the effect of imposing a
tax on the Explanation sales. In The Government of Andhra
v. Nooney Govindarajulu (supra), the true effect of s. 22
of the Madras Act came up for consideration before the
Andhra High Court, and it was held therein, dffering from
Mettur Industries Ltd. v. State of Madras (1) and Dial Das
v. P. S. Talwalkar (2) that in view of the observations of
this Court as to the scope of the
(1) A.I.R. 1957 Mad. 362.
(2) A.I.R. 1957 Bom. 71.
(3) A.I.R. 1957 T.C. 300.
(4) (1956) 7 Sales Tax Cases 731.
(5) A.I.R. 1957 Mad. 368.
1456
Explanation in Art. 286 (1) (a), the Explanation in s. 22
could not be construed as imposing a tax on the sales
mentioned therein, and that that conclusion also followed on
the opening words of the section that " Nothing contained in
this Act shall be deemed to impose, or authorise the impo-
sition of a tax.................. For the reasons already
given, we are unable to agree with the decisions in Mathew
v. Travancore-Cochin Board of Revenue(1), Cochin Coal Co.
Ltd. v. State of Travancore-Cochin(2) and The Government of
Andhra v. Nooney Govindarajulu (3). We are of opinion that
the law has been correctly laid down in Mettur Industries
Ltd. v. State of Madras (4) and Dial Das v. P. S. Talwalkar
(5). We accordingly hold that s. 22 operated to impose a
tax falling within the Explanation, subject to authorisation
by Parliament as provided in Art. 286 (2). In this view,
the contention urged on behalf of the States that the
Explanation to Art. 286 (1) (a), being a provision of the
Constitution, operated by its own force to impose a tax on
the sales covered by it, and did not require to be
supplemented by any State legislation to become effective,
does not call for any detailed consideration. Suffice it to
say that it cannot be maintained if the true scope of Art.
286 is to define and limit the powers of State Legislatures
with reference to imposition of sales tax and not to itself
impose it.
(11) That brings us on to the next question which is whether
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the impugned Act, Sales Tax Laws Validation Act, is ultra
vires on the ground that it is not authorised by the terms
of Art. 286 (2). Now, it is a well-known rule of
interpretation that in order to understand the true nature
and scope of an Act it is necessary to ascertain what the
evils were which were intended to be redressed by it. The
starting point of the trouble which ultimately led to the
enactment of the impugned Act is the Explanation to Art.
286(1)(a), which came into force on January 26, 1950. The
terms in which it is worded undoubtedly suggest that sales
(1) A.I. R. 1957 T.C. 300.
(2) (1956) 7 Sales Tax Cases 731.
(3) (1957) 8 Sales Tax Cases 297.
(4) A.I.R. 1957 Mad. 362.
(5) A.I.R. 1957 Bom. 71.
1457
of the description mentioned therein are to be treated as
sales inside the delivery State for purposes of taxation.
That is how it would seem to have been understood in the
Adaptation Order under which s. 22 was inserted in the
Madras Sales Tax Act and in the Adaptation Orders relating
to the Sales Tax Laws of other States; for, as already
stated, in a taxing statute the language of the Explanation
can only mean that a sale failing within its purview is an
inside sale enabling the State to tax it. In The United
Motors case (1), the construction put by this Court on the
Explanation was that though but for it the sales mentioned
therein would be in the course of interState trade and
commerce, its effect was to convert them into intrastate
sales, so as to bring them within the taxing power of the
delivery State. It was only later that this Court held
finally in The Bengal Immunity Company case (2) that the
Explanation sales were not divested of their character as
inter-State sales as the Explanation to Art. 286 (1) (a) did
not govern Art. 286 (2), and that in the absence of
Parliamentary legislation as contemplated by Art. 286 (2),
taxation of sales falling within its purview would be
unconstitutional. This judgment was delivered on September
6, 1955.
But acting on the apparent tenor and import of the
Explanation and the construction put upon it in The United
Motors case (1), the States in India had been levying taxes
oil the sales falling within its purview. The position on
September 6, 1955, was that the States had imposed and
collected large amounts by way of tax on Explanation sales;
that there were proceedings pending for assessment of tax on
such sales; and that apart from this, the States would have
been entitled to take, but for the decision in The Bengal
Immunity Company case (2), proceedings for the assessment of
tax in respect of those sales. Now, the result of the
decision in The Bengal Immunity Company case (2) was that
the levy of the tax on the Explanation sales became
unauthorised and the States were faced with large claims for
restitution of the
(1) [1953] S.C.R. 1069.
(2) [1955] 2 S.C.R. 603.
1458
amounts realised, involving threat to their economic
stability. It should also be mentioned that quite a large
number of dealers had, acting under provisions of the Sales
Tax Acts which empowered them to pass the tax on, collected
it from their purchasers for the purpose of payment to the
State, and as after the decision in The Bengal Immunity
Company case (1) they could no longer be called upon to pay
it, they stood to make an unjust gain of it.
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These were the evils which called for redress, and it was to
remedy them that Parliament enacted the Sales Tax Validation
Ordinance No. III of 1956, and eventually replaced it by the
impugned Act. Section 2 of the Act provides that no law of
a State imposing a tax on sales which took place in the
course of interState trade or commerce between April 1,
1951, and September 6, 1955, shall be deemed to be invalid
or ever to have been invalid merely by reason of the fact
that such sales were in the course of inter-State trade.
The section further provides that all taxes levied or
collected under such a law during the specified period shall
be deemed to have been validly levied or collected. The
policy behind the Act is obviously to declare the law as
interpreted in The United Motors case (2) as the law
governing sales filling within the Explanation up to the
date of the judgment in The Bengal Immunity Company case(1)
and to give effect to the law as laid down in that decision
for the sales effected subsequent thereto.
The question is whether this Act is unconstitutional as
being ultra vires the powers of Parliament tinder Art’ 286
(2). The petitioners maintain that it is, and put forward
several grounds in support of that position. It is firstly
contended by them that under Entry 54 in List II, the power
to make laws in respect of tax on sales is vested
exclusively in the States, that the power which is conferred
on Parliament under Art. 286(2) is only to enact a law
directing or permitting the States to impose a tax on inter-
States sales and not to itself enact a law with reference
thereto that the impugned Act being one to validate Sales
(1) [1955] 2 S.C.R. 603.
(2) [1953] S.C.R. 1069.
1459
Tax Laws is substantive in character and is not authorised
by the terms of Art. 286 (2) and is, in consequence,
unconstitutional. It is argued that to validate is to
confirm or ratify, and that can be only in respect of acts
which one could have himself performed, and that if
Parliament cannot enact a law relating to sales tax, it
cannot validate such a law either, and that such a law is
accordingly unauthorised and void. The only basis for this
contention in the Act is its description in the Short Title
as the " Sales Tax Laws Validation Act " and the marginal
note to s. 2, which is similarly worded. But the true
nature of a law has to be determined not on the label given
to it in the statute but on its substance. Section 2 of
the impugned Act which is the only substantive enactment
therein makes no mention of any validation. It only
provides that no law of a State imposing tax on sales shall
be deemed to be invalid merely because such sales are in the
course of inter-State trade or commerce. The effect of this
provision is merely to liberate the State laws from the
fetter placed on them by Art. 286 (2) and to enable such
laws to operate on their own terms. The true scope of the
impugned Act is, to adopt the language of this Court in the
decisions in The United Motors case (1) and The Bengal
Immunity Company case (2), that it lifts the ban imposed on
the States against taxing inter-State sales and not that it
validates or ratifies any such law. Considering the
legislation on its substance, we have .no doubt that it is
within the scope of the authority conferred on Parliament by
Art. 286 (2) and is not
ultra vires.
It is next contended that the impugned Act is wholly
retrospective in character in that it operates on sales
which took place during the specified period, and that such
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a legislation is, having regard to the intendment of Art.
286 (2), outside its terms. It is argued that this Article,
to start with, enacts a restriction on the power of the
State to impose taxes on inter-State sales and then vests in
Parliament a power
(1) [1933] S.C.R. 1069.
(2) [1955] 2 S.C.R. 603.
185
1460
to remove that restriction, and that in logical sequence
therefore, there should first be a legislation by Parliament
authorising the States to impose a tax on interState sales
and then a law of the State made in accordance therewith,
and that that order having been reversed in the present
case, the impugned Act is unconstitutional. We do not agree
with this contention. Article 286 (2) merely provides that
no law of a State shall impose tax on inter-State sales "
except in so far as Parliament may by law otherwise provide
". It places no restrictions on the nature of the law to be
passed by Parliament. On the other hand, the words " in so
far as " clearly leave it to Parliament to decide oil the
form and nature of the law to be enacted by it. What is
material to observe is that the power conferred on
Parliament under Art. 286 (2) is a legislative power, and
such a power conferred on a Sovereign Legislature carries
with it authority to enact a law either prospectively or
retrospectively, unless there can be found in the
Constitution itself a limitation on that power. Now, there
is nothing express in Art. 286 (2) imposing a restriction on
the power of Parliament to enact a law with retrospective
operation. But it is argued for the petitioners that such a
restriction is to be implied from the scheme of it, which is
that there is a prohibition on the power of the State to
enact a law imposing tax on inter-State sales, unless
Parliament lifts the ban, and it is said that a prohibition
operates only in futuro and therefore a law removing that
prohibition must also operate in futuro. The decision of
the Privy Council in Punjab Province v. . Daulat Singh (1)
is relied on in support of this proposition. There, the
question arose with reference to the validity of a mortgage
of agricultural lands in the Punjab executed in the year
1933. Section 13-A of the Punjab Alienation of Land Act
which came into force in 1939 enacted that transfer of a
land by a member of an agricultural tribe in favour of
another member of the tribe was void if the transferee was a
benamidar for a person who was not a member of that tribe,
whether such transfer was
(1) (1946) L.R. 73 I.A. 59.
1461
made before or after the Act. The mortgagee instituted a
suit, challenging the vires of this section on the ground
that it contravened s. 298(1) of the Government of India
Act, 1935, which provided that no subject of His Majesty
domiciled in India shall be prohibited from acquiring,
holding or disposing of property on grounds only of
religion, place of birth or descent. The mortgagor in reply
relied on s. 298 (2) which enacted that nothing in that
section shall affect the operation of any law which
prohibits the sale or mortgage of agricultural land situate
in any particular area and owned by a person belonging to
the agriculturist class. In rejecting this contention, the
Privy Council observed that what was saved by s. 298 (2) was
a law prohibiting certain kinds of transfers, that the word
" prohibition " could properly apply only to acts to be done
in futuro, and that the impugned provision, s. 13-A, was
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intra vires the Constitutional provision in so far as it
prohibited transfers after the date of its enactment, but to
the extent that it avoided transfers which had taken place
prior to that date, it was ultra vires. This decision
proceeded solely on the connotation of the word " prohibits
" in s. 298 (2) of the Government of India Act, and can be
of no assistance in the construction of Art. 286 (2),
wherein that word does not occur. And even on the substance
of it, we see no real analogy between the case in Punjab
Province v. Daulat Singh (1) and the present. There, the
law which was authorised by s. 298 (2) was one prohibiting
certain transfers; here the law which Parliament is
authorised to make is one not prohibiting the States from
imposing tax on inter-State sales, but permitting them to do
so. While a law prohibiting transfers must be prospective,
a law authorising imposition of tax need not be. It can be
both prospective and retrospective.
A decision more directly in point is the one in The United
Provinces v. Atiqa Begum(2). There, the question arose on
the construction of s. 292 of the Government of India Act,
1935, which enacted that,
" Notwithstanding the repeal by this Act of the
(1) (1946) I. R. 73 I. A. 59.
(2) [1940] F. C. R. 110.
1462
Government of India Act, but subject to the other provisions
of this Act, all the law in force in British India
immediately before the commencement of Part III of this Act
shall continue in force in British India until altered or
repealed or amended by a competent Legislature or other
competent authority."
The Legislature of the United Provinces had enacted a law
modifying the pre-existing law relating to the payment of
rents by tenants to landlords and giving it retrospective
operation. The question was whether the enactment was
repugnant to s. 292 which had provided that the preexisting
law was to continue in force until it was altered. It was
held that the power of a legislature to pass a law included
a power to pass it retrospectively, and that the words of s.
292 did not operate to impose any restriction on that power,
and that the legislation was intra vires. In our opinion,
the principle of this decision is applicable to the present
case, and the impugned Act cannot be held to be bad on the
ground that it is retrospective in operation.
It is next contended that the impugned Act is ultra vires,
inasmuch as it is much more than a mere retrospective law,
and that it is really a piece of ex post facto legislation,
which is not authorised by Art. 286(2). The argument in
support of this contention may thus be stated : A’ State
legislature is competent under Entry 54 in List II to enact
a law taxing sale of goods, and when such a law is made to
operate retrospectively it may not be open to challenge on
constitutional grounds, though its propriety may be open to
question on grounds of policy. Parliament has no competence
to enact laws in respect of tax on sales filling within
Entry 54 in List 11, but Art. 286(2) confers on it a power
to authorise the States to impose a tax on inter-State
sales. The impugned Act does not do that, but validates ex
post facto laws of States imposing such a tax
retrospectively for the specified period. Such a general
law may be intra vires the States but not Parliament, nor is
it one which can be justified by the power granted to it to
" provide otherwise." It is therefore unconstitutional and
void, In
1463
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our opinion, this argument is only an amalgam of the two
contentions already dealt with, and does not require further
detailed consideration. The impugned Act, though it is in
name a validating Act, is in essence a law lifting the ban
under Art. 286 (2), and if no limitation on the character of
that law could be spelt out of the language of that Article,
then it must be upheld as within the authority conferred by
it.
It is also argued that even if the power to make a law
conferred on Parliament under Art. 286 (2) comprehends a
power to enact a law with retrospective operation, that
power cannot extend to authorising what is unconstitutional,
and that as s. 22 of the, Madras Act and the corresponding
provisions in the statutes of other States were
unconstitutional and illegal when made as contravening the
prohibition enacted in Art. 286 (2), the impugned Act must
be held to be unauthorised and bad in that it seeks to give
effect to those provisions. But this is to beg the very
question which we have to decide. If it is competent to the
legislatures of the States to enact a law imposing a tax on
inter-State sales to take effect when Parliament so
provides, there is nothing unconstitutional or illegal
either in s. 22 of the Madras Act or in the corresponding
provisions in the Acts of other States. If conditional
legislation is valid, as we have held it is, then s. 22 is
clearly intra vires, and the foundation on which this
contention of the petitioners rests, disappears and it must
fall to the ground. In the result, we are of opinion that
the impugned Act is intra vires, and is not open to
challenge on any of the grounds put forward by the
petitioners.
(111) (a). We have now to consider the contention that
even if the impugned Act is valid, that would not give
efficacy to s. 22 of the Madras Act or the corresponding
provisions in the laws of other States which came in by
adaptation under Art. 372 (2). The ground urged in support
of this contention is that the expression " law of a State "
in Art. 286 (2) has a technical import, and means a law
which is enacted by the legislature of a State in the manner
prescribed by the Constitution and open to challenge in
courts if
1464
it is unconstitutional, that that expression occurring ,-in
s. 2 of the impugned Act must bear the same meaning which it
has in Art. 286 (2) as it was enacted, pursuant to the
authority contained therein, and that s. 22 of the Madras
Act is not a law of that description, as it was made by the
President in exercise, of the special power conferred on him
by Art. 372 (2), and is, as provided therein, not open to
attack in a court of law.
We do not see why we should restrict the connotation of the
words " law of a State " in the manner contended above. The
law of a State signifies, in its ordinary acceptation,
whatever is an expression of the legislative, as
distinguished from the executive or judicial power of a
State. Its normal mode under the Constitution is no doubt
that it is enacted by the legislature of the State
constituted in accordance with the procedure prescribed
therein. But that is not the only mode in which the
legislative power of the State could be exercised. Under
Art. 213, the Governor is authorised, subject to the
conditions laid down therein, to issue Ordinances which have
the force of law, and these Ordinances are clearly laws of
the State and not the less so by reason of their not having
been passed by the State legislature. Under Art. 252, it is
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open to Parliament acting on resolutions of the legislatures
of two or more States, to enact laws on subjects which are
within the exclusive competence of the States, a recent
instance of such legislation being Act 42 of 1955, the
validity of which was the subject of consideration in R. M.
D. Charnarbaugwalla v. Union of India(1). Can it, be
contended that these are not laws of the States for which
they were enacted, because they were not passed by the
legislatures of those States ? We entertain no doubt that by
the expression " law of a State " in Art. 286 (2) and s. 2
of the impugned Act is meant whatever operates as law in the
state, and that s. 22 of the Madras Act is a law within
those enactments. Nor does it affect this conclusion that
that law may not be open to challenge in a court of law. A
right to challenge a
(1) [1957] S.C.R. 930.
1465
law must depend on the provisions of the Constitution
governing the matter, and if those provisions enact that it
is not open to question in a court of law or’ that it is
liable to be questioned only on certain specified grounds,
that will not have the effect of depriving a statute duly
enacted of its character as law. We are also not satisfied
that a law as adapted under Art. 372 (2) is not open to
attack on the ground that it contravenes some constitutional
provision. We are disposed to think that the concluding
words of Art. 372 (2) preclude an attack on the Adaptation
Order only on the ground that it does more than merely
bringing the State law into conformity with the Constitution
and is, in consequence, ultra vires the powers conferred by
that article. In the result, we must hold that s. 22 of the
Madras Act is within the protection afforded by s. 2 of the
impugned Act.
(111) (b) : The next contention of the petitioners that
falls to be considered is whether even on the footing that
the impugned Act is intra vires the powers of Parliament
under Art. 286 (2), the proceedings which are proposed to be
taken by the State of Andhra against them for assessment of
tax are incompetent, because the Act validates only levies
or collections made during the specified period but does not
authorise the initiation of fresh proceedings for levy or
collection of tax. It is contended that though s. 2 of the
impugned Act consists of two clauses, one giving effect to
laws of States imposing tax on inter-State sales in so far
as they took place during the specified period and the other
validating levy or collection of tax made during that
period, the first clause has no independent operation, the
only purpose which it serves being to lead up to the second
which is the only effective clause in the section. It is
argued that if the intention of the legislature was not
merely to validate the levies or collections already made
but also to maintain the laws in force so as to enable the
States to take fresh proceedings for assessment and levy of
tax, then there was no need whatsoever for the second
clause, as effectuation of the Act would automatically
validate the levies and collections made thereunder. It is
said
1466
that the object of the legislation was only to see that the
States had not to refund amounts collected by them, and that
for achieving that object it was necessary only to give
effect to the second clause. The decision in Dialdas v. P.
S. Talwalkar (1) already cited, was relied on as supporting
the petitioners on this point.
In our judgment, the language of the enactment is too clear
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and unambiguous to admit of this contention. If the purpose
of the enactment is what the petitioners contend it to be,
then nothing would have been easier for the legislature than
to have so framed the section as to confine its operation to
levies or collections already made, without giving effect to
the law itself. On the contention of the petitioners, the
first clause has to be discarded as wholly inoperative, and
we should be 10th to adopt a construction which leads to
that result. It is true that on the contention of the State
that the first clause has independent operation the second
clause would be unnecessary, as even without it, the result
sought to be achieved by it must follow on the first clause
itself. But it is to be noted that the first clause has
reference to the exercise of legislative power while the
second is concerned with administrative action, and it is
possible that the second clause might have been enacted by
way of abundant caution. It is nothing strange or unusual
for a legislature to insert a provision ex abundanti
cautela, so as to disarm possible objection; but it is in-
conceivable that it should enact a provision which is wholly
inoperative. Of two alternative constructions of which one
leads to the former and the other involves the latter
result, there cannot be any question that it is the former
that is to be preferred. Nor is it permissible to cut down
the plain meaning of the terms of the statute on considera-
tions of policy behind the legislation. But even from that
point of view, there was the fact that there were dealers
who had collected taxes from their purchasers for payment to
the State, but were relieved of
(1) A.I.R. 1957 Bom. 71.
1467
that obligation by the judgment in The Bengal Immunity
Company case (1) and that, further, to validate only levies
and collections made would give an advantage to those who
evaded the law as then understood, over those who loyally
obeyed it. It follows that we are unable to agree with the
decision in Dialdas v. P. S. Talwalkar (2), in so far as it
held that it was not competent to the State to start fresh
proceedings for assessment of tax on the strength of the
impugned Act. In our opinion, the true construction of s. 2
is that the two clauses therein are, as indicated by the
conjunction, distinct and independent in their opera. tion,
and that the laws of the States are kept in force in respect
of sales which had taken place during the specified period,
and that proceedings in respect thereof for assessment are
within the protection of the Act.
It was next argued that the impugned Act is a temporary
statute, as its operation is limited to sales which took
place during the specified period, and that period having
expired, no proceedings could now be taken on the strength
of the provisions of that Act, and reliance was placed on
the observations of this Court in Keshavan Madhava Menon v.
The State of Bombay (3), in support of this position. But
the impugned Act is in no sense a temporary Act. Its life
is not limited to any specified period. It is a permanent
statute operating on all sales which took place during the
specified period. The fallacy in this contention of the
petitioners lies in mixing up the period, the sales during
which are brought within the operation of the Act, with the
period of the operation of the Act itself. The former may
be said to be temporary, but the latter clearly is not.
(IV) It is next contended that even if the impugned Act
authorised starting of fresh proceedings for assessment of
tax on the Explanation sales which had taken place during
the specified period, no action in that behalf could be
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taken under s. 22 of the
(1) [1955] 2 S.C.R. 603. (2) A.I.R. 1957 Bom. 71.
(3) [1951] S.C.R. 228, 235.
186
1468
Andhra (Madras) Act, because it was, when it was enacted,
repugnant to Art. 286(2) of the Constitution, and was
therefore void. It is argued that a statute which is
unconstitutional is a nullity and must be treated as non est
and that the impugned Act could not infuse life into it. It
may be open, it is said, to the Legislature of the State of
Andhra to enact a fresh law giving it even retrospective
operation as provided in the impugned Act, but in the
absence of such a legislation, the provisions of the Act as
they stood prior to the impugned Act are incapable of
enforcement. It would be sufficient answer to this
contention that s. 22 of the Madras Act is only a piece of
conditional legislation, imposing tax on interState sales
when Parliament should enact a law lifting the ban, and if
such legislation is competent as we have held it is, then no
question of unconstitutionality of the section when it was
enacted could arise. But it would be more satisfactory to
decide the point on its own merits, as the question raised
has been, of late, the subject of considerable discussion in
this Court.
Now, in considering the question as to the effect of
unconstitutionality of a statute, it is necessary to re-
member that unconstitutionality might arise either because
the law is in respect of a matter not within the competence
of the legislature, or because the matter itself being
within its competence, its provisions offend some
constitutional restrictions. In a Federal Constitution
where legislative powers are distributed between different
bodies, the competence of the legislature to enact a
particular law must depend upon whether the topic of that
legislation has been assigned by the Constitution Act to
that legislature. Thus, a law of the State on an Entry in
List 1, Sch. VII of the Constitution would be wholly
incompetent and void. But the law may be on a topic within
its competence, as for example, an Entry in List II, but it
might infringe restrictions imposed by the Constitution on
the character of the law to be passed, as for example,
limitations enacted in Part III of the Constitution. Here
also, the law to the extent of the repugnancy will be
1469
void. Thus, a legislation on a topic not within the
competence of the legislature and a legislation within its
competence but violative of constitutional limitations have
both the same reckoning in a court of law; they are both of
them unenforceable. But does it follow from this that both
the laws are of the same quality and character, and stand on
the same footing for all purposes ? This question has been
the subject of consideration in numerous decisions in the
American Courts, and the preponderance of authority is in
favour of the view that while a law on a matter not within
the competence of the legislature is a nullity, a law on a
topic within its competence but repugnant to the
constitutional prohibitions is only unenforceable. This
distinction has a material bearing on the present
discussion. If a law is on a field not within the domain of
the legislature, it is absolutely null and void, and a
subsequent cession of that field to the legislature will not
have the effect of breathing life into what was a still-born
piece of legislation and a fresh legislation on the subject
would be requisite. But if the law is in respect of a
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matter assigned to the legislature but its provisions
disregard constitutional prohibitions, though the law would
be unen. forceable by reason of those prohibitions, when
once they are removed, the law will become effective without
re-enactment.
Willoughby on the Constitution of the United States, Vol. 1,
at p. 11 says :
" The validity of a statute is to be tested by the
constitutional power of a legislature at the time of its
enactment by that legislature, and, if thus tested it is
beyond the legislative power, it is not rendered valid,
without re-enactment, if later, by constitutional amendment,
the necessary legislative power is granted.
However, it has been held that where an act is within the
general legislative power of the enacting body, but is
rendered unconstitutional by reason of some adventitious
circumstance, as for example, when a State legislature is
prevented from regulating a matter by reason of the fact
that the Federal
1470
Congress has already legislated upon that matter, or by
reason of its silence is to be construed as indicating that
there should be no regulation, tile act does not need to be
re-enacted in order to be enforced, if this cause of its
unconstitutionality is removed."
In Cooley on Constitutional Law at p. 201, it is stated that
" a finding of unconstitutionality does not destroy the
statute but merely involves a refusal to enforce it". In
Wilkerson v. Rahrer (1), the State of Kansas had enacted a
law in 1889 forbidding the sale of intoxicating liquor.
This was bad in so far as it related to sales in the course
of interstate trade, as it was in contravention of the
Commerce Clause. But in 1890, the Congress passed a law
conferring authority on the States to enact prohibition
laws. The question was whether a prosecution under the law
of 1889 in respect of a breach of that law subsequent to the
Congress legislation in 1890 was maintainable. Repelling
the contention that the statute of 1889 was a nullity when
it was passed and could not be enforced without reenactment,
the Court observed:
" This is not the case of a law enacted in the unauthorized
exercise of a power exclusively confided to Congress, but of
a law which it was competent for the State to pass, but
which could not operate upon articles occupying a certain
situation until the passage of the Act of Congress. That
Act in terms removed the obstacle, and we perceive no
adequate ground for adjudging that a re-enactment of the
state law was required before it could have the effect upon
imported which it had always had upon domestic property."
It should be noted that in this case the law of 1889 applied
to intrastate sales also, and it was admittedly valid to
that extent. The impugned legislation was therefore
unconstitutional only in part. Rottschafer after referring
to the conflict of authorities on ’this question in the
States, refers to the decision in Wilkerson v. Rahrer (1) as
embodying the better view. Vide American Constitutional
Law, 1939 Edn. p. 39.
A similar view was taken in Ulster Transport
(1) (1891) I40 U.S. 545; 35 L. Ed. 572.
1471
Authority v. James Brown & Sons Ltd. (1). There, construing
s. 5(1) of the Act of 1920 which enacts that " any law made
in contravention of the restrictions imposed by this sub-
section shall so far as it contravenes these restrictions,
be void ", Lord MacDermott
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L. C. J. observed:
" I am not aware of any authority for the view that language
such as this necessarily means that contravention must
produce an actual gap in the statute book in the sense that
the measure concerned, or some specific part thereof, simply
drops out of the authorized text. As well as this vertical
severability, if I may so describe it, I see no reason why,
if the circumstances warrant such a course, the terms of
section 5(1) should not be sufficiently met by what I may
call a horizontal severance, a severance that is which,
without excising any of the text, removes from its ambit
some particular subject-matter, activity or application.
This, I think, would give effect to the words ’ so far as it
contravenes’ without impinging on the meaning or weight to
be attached to the word ’ void ’. "
It will be noted that this decision also deals with a
statute which was in part unconstitutional.
Coming to the authorities of this Court where this question
has been considered: In Behram Khurshed Pesikaka v. The
State of Bombay (2) the question arose with reference to the
Bombay Prohibition Act of 1949 which, subject to certain
exceptions provided therein, prohibited the consumption of
liquor. In The State of Bombay and another v. F. N. Balsara
(3) this Court had held that this provision was obnoxious to
Art. 19(1)(g) of the Constitution in so far as it related to
medicinal and toilet preparations containing alcohol. The
appellant was prosecuted for the offence of consuming
liquor, and his defence was that he had taken medicine
containing alcohol. The point in dispute was whether the
burden was upon the appellant to prove that he had taken
such a medicine or for the prosecution to show that he had
not. This
(1) (1953) Northern Ireland Reports 79.
(2) [1955] 1 S. C. R. 613, 654. (3) [1951] S. C. R. 682.
1472
Court held that the onus was on the prosecution, and the
same not having been discharged, the appellant was entitled
to be acquitted. In the course of the judgment, Mahajan C.
J. made the following observations, which are relied on by
the petitioners:
" The constitutional invalidity of a part of section 13(b)
of the Bombay Prohibition Act having been declared by this
Court, that part of the section ceased to have any legal
effect in judging cases of citizens arid had to be regarded
as null and void in determining whether a citizen was guilty
of an offence."
It must be observed that the question of the constitu-
tionality of the Act did not arise directly for deter-
mination and was incidentally discussed as bearing on the
incidence of burden of proof. And further, these
observations have reference to the enforceability of the
provisions of the Bombay Prohibition Act, while the bar
under Art. 19 continued to operate. There was no question
of the lifting of ban imposed by Art. 19, ’and the question
as to the effect of lifting of a ban did not arise for
decision. In the context in which they occur, the words "
null and void " cannot be construed as implying that the
impugned law must be regarded as non est so as to be
incapable of taking effect, when the bar is removed. They
mean nothing more than that the Act is unenforceable by
reason of the bar.
In A. V. Fernandez v. State of Kerala (1) the question arose
with reference to the Travancore-Cochin General Sales Tax
Act and the Rules made thereunder. Prior to the
Constitution, the assessees were liable to pay tax on the
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total turnover of sales including those inside the State and
those outside the State. Where the sales were of cocoanut
oil, there was a provision for deduction of the price paid
for the purchase of copra from the total turnover. After
the coming into force of the Constitution, a new section, s.
26, corresponding to s. 22 of the Madras Act, was introduced
incorporating therein the provisions of Art. 286, and
consequent thereon, the sales which took place outside the
State were excluded from the turnover. On this,
(1) [1957] S. C. R. 837.
1473
a question arose as to the quantum of deduction to which the
assessee was entitled in respect of his purchase of copra.
He claimed that he was entitled to deduct the price paid for
copra not only in respect of oil which was sold inside the
State but also oil sold outside the State. This contention
was rejected by the High Court, which limited the deduction
to purchase of copra relating to the sales inside’ the
State, and in affirming that decision, this Court observed :
" In our opinion, section 26 of the Act, in cases falling
within the categories specified under Article 286 of the
Constitution has the effect of setting at nought and of
obliterating in regard thereto the provisions contained in
the Act relating to the imposition of tax on the sale or
purchase of such goods and in particular the provisions
contained in the charging section and the provisions
contained in rule 20(2) and other provisions which are
incidental to the process of levying such tax. So far as
sales falling within the categories specified in Article 286
of the Constitution and the corresponding section 26 of the
Act are concerned, they are, as it were, taken out of the
purview of the Act and no effect is to be given to those
provisions which would otherwise have been applicable if
section 26 had not been added to the Act. "
On the strength of the above observations, the petitioners
contend that the provisions relating to inter-State sales
must be treated as non-existent, and that, therefore, a
fresh enactment of the statute would be necessary to bring
them into operation. Here again, the point for decision was
only as to the effect of the ban under Art. 286 on the
transactions which came within its purview. That ban had
not then been lifted and the effect of the lifting of such a
ban on the existing law did not fall to be considered. We
are unable to read the observations relied on by the
petitioners as implying that s. 22 of the Madras Act must be
taken to have been blotted out of the statute book.
A case directly in point is Bhikaji Narayan Dhakras and
others v. The State of Madhya Pradesh and another (1).
There, the question arose with reference
(1) [1955] 2 S. C. R. 589.
1474
to the C. P. & Berar Motor Vehicles (Amendment) Act, 1947
(Act 3 of 1948). That Act had amended s. 43 of the Motor
Vehicles Act, 1939, by introducing provisions which
authorised the Provincial Government " to take up the entire
motor transport business in the Province and run it in
competition with and even to the exclusion of motor
transport operators ". These provisions, though valid at the
time when they were enacted, became void on the coming into
force of the Constitution as infringing the rights of
citizens to carry on business, protected by Art. 19(1)(g).
The Constitution, however, was amended on June 18,1951, and
Art. 19(6) was amended so as to authorise the State to carry
on business " to the exclusion, complete or partial, of
citizens or otherwise ". Subsequent to this amendment, the
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Government issued a notification under s. 43 of the
Amendment Act of 1948, and it was the validity of that
notification that was in issue. The contention was that as
s. 43 of the Act of 1948 had become void at the date of the
Constitution, a notification issued by the Government under
that section after the date of the amendment of the Consti-
tution was not valid, as it must be taken to have become non
est. It was held by this Court that s. 43 of the Act of
1948 could not be held to have been effaced out of the
statute book, because it continued to operate on
transactions prior to the coming into force of the
Constitution, and that even after the Constitution, it would
be operative as against non-citizens, that the consequence
of s. 43 being repugnant to Art. 19(1)(g) was that it could
not be enforced so long as the prohibition contained therein
was in force, but that when once that prohibition had been
removed as it was by the First Amendment, the provisions of
that Act which had been dormant all the time became active
and enforceable.
The result of the authorities may thus be summed up: Where
an enactment is unconstitutional in part but valid as to the
rest, assuming of course that the two portions are
severable, it cannot be held to have been wiped out of the
statute book as it admittedly must remain there for the
purpose of enforcement of
1475
the valid portion thereof, and being on the statute book,
even that portion which is unenforceable on the ground that
it is unconstitutional will operate proprio vigore when the
Constitutional bar is removed, and there is no need for a
fresh legislation to give effect thereto. On this view, the
contention of the petitioners with reference to the
Explanation in s. 22 of the Madras Act must fail. That
Explanation operates, as already stated, on two classes of
transactions. It renders taxation of sales in which the
property in the goods passes in Madras but delivery takes
place outside Madras illegal on the ground that they are
outside sales falling within Art. 286(1) (a). It also
authorises the imposition of tax on the sales in which the
property in the goods passes outside Madras but goods are
delivered for consumption within Madras. It is valid in so
far as it prohibits tax on outside sales, but invalid in so
far as sales in which goods are delivered inside the State
are concerned, because such sales are bit by Art. 286(2).
The fact that it is invalid as to a part has not the effect
of obliterating it out of the statute book, because it is
valid as to a part and has to remain in the statute book for
being enforced as to that part. The result of the enactment
of the impugned Act is to lift the ban under Art. 286(2),
and the consequence of it is that that portion of the
Explanation which relates to sales in which property paws
outside Madras but the goods are delivered inside Madras and
which was unenforceable before, became valid and
enforceable. In this view, we do not feel called upon to
express any opinion as to whether it would make any
difference in the result if the impugned provision was
unconstitutional in its entirety.
There is one other aspect of the question to which reference
must be made. The decisions in Behram Khurshed Pesikaka v.
The State of Bombay (1) and Bhikaji Narain Dhakras and
others v. The State of Madhya Pradesh and another (2) both
turn on the construction of Art. 13 of the Constitution,
which enacts that laws shall be void to the extent they are
(1) [1955] 1 S.C.R. 613. 187
(2) [1955] 2 S.C.R. 589,
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187
1476
repugnant to the provisions of Part III. We are concerned
in these petitions not with infringement of any of the
provisions of Part III but of Art. 286(2), and the point for
our decision is as to the effect of the infringement of that
provision. Art. 286(2) does not provide that a law which
contravenes it is void, and when regard is had to the
context of that provision, it is difficult to draw the
inference that that is the consequence of contravention of
that provision. Art. 372(1) provides for the continuance in
force of all laws existing at the date of the Constitution.
The proviso to Art. 286(2) enacts that the President may by
an order continue the operation of the Sales Tax Laws up to
March 31, 1951, and Art. 286(2) itself enacts that no law of
a State shall impose a tax. In the context in which they
occur, the true meaning to be given to these words is, as
already observed, that no law of a State shall be effective
to impose a tax; that is to say, the law cannot be enforced
in so far as it imposes such a tax. Whether we consider the
question on broad principles as to the effect of un-
constitutionality of a statute or on the language of Art.
286(2), the conclusion is inescapable that s. 22 of the
Madras Act and the corresponding provisions in the other
statutes cannot be held to be null and void and non est by
reason of their being, repugnant to Art. 286(2) and the bar
under that Article having been now removed, there is no
legal impediment to effect being given to them.
(V) We shall now deal with the contention of the learned
counsel for the Madura Mills Ltd., who struck a new path
cutting across the lines on which the petitioners and the
other interveners proceeded. He contended that the decisive
factor in the determination of the question was Entry 42 in
List I of the Seventh Schedule, "Inter-State trade and
commerce", that under that Entry, Parliament had the
exclusive power to enact laws in respect of inter-State
trade and commerce and that included power to impose a tax
on inter-State sales, that the States had therefore no
competence under the Constitution to enact a law imposing
tax on such sales, that the laws passed
1477
by the States after the Constitution imposing such a tax
were ultra vires and void, that the impugned Act purporting
to give effect to such laws was likewise ultra vires and
inoperative, and that, in consequence, the proceedings
sought to be taken under s. 22 of the Madras Act and the
corresponding provisions in the sister Acts of other States
were unauthorised and illegal. The argument in support of
this contention was as follows: Entry 42 in List I is based
on the Commerce Clause of the American Constitution, Art. 1,
s. 8 that " The Congress shall have power to regulate
commerce among the several States ", and that has been
interpreted by the Supreme Court of the United States as
meaning that the States have no power to enact a law
imposing a tax on the carrying on of inter-State trade (Vide
Robins v. Taxing District of Shelby County (1), or imposing
tax on inter-State sales (Vide McLeod v. Dilworth Co. (2)).
The contents of Entry 42 are the same as those of the
Commerce Clause, and it must therefore be construed as of
the same effect. It is also a well-established rule of
construction that the Entries in the Legislative Lists must
be interpreted liberally and in a wide sense. The true
interpretation therefore to be put upon Entry 42 is that
Parliament has, and therefore, in view of the non-obstante
clause in Art. 246(1) and of the words "subject to" in Art.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 36 of 46
246(3), the States have not, the power to impose tax on
inter-State sales. Article 301 which provides that trade
and commerce in the territory of India shall be free is also
intended to achieve the same result. It reproduces s. 92 of
the Commonwealth of Australia Constitution Act, and the
authorities on that section have held that imposition of a
tax on inter-State trade would be obnoxious to that
provision. That the freedom in Art. 301 includes freedom
from taxation is also implicit in Art. 304 (a) in which an
exception to Art. 301 is made in respect of the imposition
of tax on goods imported from other States. The result is,
it is argued, that after the Constitution no law of a State
can impose a tax on
(1) (1887) 120 U.S. 489; 30 L. Ed. 694.
(2) (1044) 322 U.S. 327 ; 88 L. Ed. 1304.
1478
inter-State sales, and in consequence, s. 22 of the Madras
Act, which came into force after the Constitution, would, if
it is construed as imposing a tax, be bad, and the impugned
Act which proceeds on the view that the States have the
power to enact laws imposing a tax on inter-State sales and
seeks to give effect to them would also be unconstitutional
and void.
This contention suffers, in our opinion, from serious
infirmities. It overlooks that our Constitution was not
written on a tabula rasa, that a Federal Constitution had
been established under the Government of India Act, 1935,
and though that has undergone considerable change by way of
repeal, modification and addition, it still remains the
framework on which the present Constitution is built, and
that the provisions of the Constitution must accordingly be
read in the light of the provisions of the Government of
India Act. It fails to give due weight to the setting of
the relevant provisions of the Constitution and the
interpretation which is to be put upon them in their
context. In the Government of India Act, 1935, there was no
Entry corresponding to Entry 42 in List I of the Constitu-
tion. But there was in List II, Entry 48 which corresponds
to Entry 54 in the Constitution. It is not in dispute that
under Entry 48 the States had power to pass a law imposing a
tax on inter-State sales, because the terms of the Entry are
wide and would include inter-State as well as intrastate
sales. It was on this view that the Provinces had enacted
laws imposing tax on inter-State sales. Then the Constitu-
tion came into force, and it included for the first time a
new Entry 42 in List 1. It also reproduced Entry 48 in Entry
54 in List II in terms, for our -purposes, identical.
Having regard to the connotation of that Entry in the
Government of India Act, 1935, one would have expected that
if it was intended by the Constitution-makers that the
States should be deprived of the power to tax interstate
sales which they had under Entry 48 in the Government of
India Act, that would have been made clear in the Entry
itself. It is material to note that while Entry 48 in the
Government
1479
of India Act was "Taxes on the sale of goods and on
advertisement ", Entry 54 in List II of the Constitution as
originally enacted was " Taxes on the’ sale or purchase of
goods other than newspapers". Thus, the Constitution did
limit the scope of Entry 48 by excluding from it newspapers,
and if it was its intention to exclude inter-State sales
from its purview, nothing would have been easier for it than
to have said so, instead of leaving that result to be
inferred on a construction of Entry 42 in List I in the
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light of the American authorities on the Commerce Clause.
This Is strong indication that Entry 42 is not to be read as
including tax on inter-State sales. This conclusion is
further strengthened, when regard is had to the scheme of
the Lists in the Seventh Schedule and the principle
underlying the enumeration of heads of legislation therein.
In List 1, Entries I to 81 mention the several matters over
which Parliament has authority to legislate. Entries 82 to
92 enumerate the taxes which could be imposed by a law of
Parliament. An examination of these two groups of Entries
shows that while the main subject of legislation figures in
the first group, a tax in relation thereto is separately
mentioned in the second. Thus, Entry 22 in List I is "
Railways ", and Entry 89 is " Terminal taxes on goods or
passengers, carried by railway, sea or air; taxes on railway
fares and freights ". If Entry 22 is to be construed as
involving taxes to be imposed, then Entry 89 would be
superfluous. Entry 41 mentions "Trade and commerce with
foreign countries; import and export across customs
frontiers ". If these expressions are to be interpreted as
including duties to be levied in respect of that trade and
commerce, then Entry 83 which is " Duties of customs
including export duties " would be wholly redundant.
Entries 43 and 44 relate to incorporation, regulation and
winding up of corporations. Entry 85 provides separately
for Corporation tax. Turning to List II, Entries I to 44
form one group mentioning the subjects on which the States
could legislate. Entries 45 to 63 in that List form another
group, and they deal with
1480
taxes. Entry 18, for example, is " Land " and Entry 45 is "
Land revenue ". Entry 23 is " Regulation of mines " and
Entry 50 is " Taxes on mineral rights ". The above analysis-
and it is not exhaustive of the Entries in the Lists-leads
to the inference that taxation is not intended to be
comprised in the main subject in which it might on an
extended construction be regarded as included, but is
treated as a distinct matter for purposes of legislative
competence. And this distinction is also manifest in the
language of Art. 248, Cls. (1) and (2), and of Entry 97 in
List I of the Constitution. Construing Entry 42 in the
light of the above scheme, it is difficult to resist the
conclusion that the power of Parliament to legislate on
inter-State trade and commerce under Entry 42 does not
include a power to impose a tax on sales in the course of
such trade and commerce.
Article 286 has a direct bearing on the point now under
discussion. It imposes various restrictions on the power of
the State to enact laws imposing taxes on sale of goods and
one of those restrictions has reference to taxes on inter-
State sales, vide Art. 286(2). It is implicit in this
provision that it is the States that have got the power to
impose a tax on such sales, as there can be no question of a
restriction on what does not exist. That is how Art. 286(2)
has been construed by this Court both in The United Motors
case (1) and in The Bengal Immunity Company case (2). It
was observed therein that under Entry 54, as under Entry 48
of the Government of India Act, the power to tax sales
rested with the States, and that Art. 286(2) was enacted
with the object of avoiding multiple taxation of inter-State
sales in exercise of the power conferred by that Entry.
This again strongly supports the conclusion that Entry 54
must be interpreted as including the power to tax inter-
State sales and Entry 42 as excluding it.
In order to get over this hurdle, learned counsel put
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forward the contention that Art. 286(2) had reference only
to laws which were in existence at the time when the
Constitution came into force, and that the
(1) [1953] S.C.R. 1069.
(2) [1955] 2 S.C.R. 603.
1481
power given to Parliament was one to continue those laws.
Reference was made to the proviso to Art. 286(2) which
authorised the President to direct that the taxes which were
being levied by the State before the commencement of the
Constitution might be continued to be levied until March 31,
1951, and it was said that the power conferred under Art.
286(2) was of the same character, and that it merely enabled
Parliament to continue pre-Constitution laws.
Now, it cannot be disputed that the language of Art. 286(2)
would, in terms, comprehend future legislation. Language
similar to the one used in Art. 286 (2) is also to be found
in Art. 287, and there, it clearly has reference to laws to
be enacted after the Constitution. Indeed, it was conceded
that on the wording of Art. 286(2) both existing and future
legislation would be included. But it was contended that
its operation should be limited to existing laws, because as
Entry 42 in List I includes tax on inter-State sales, any
law of the State subsequent to the Constitution imposing
such a tax would be incompetent. This, however, is petitio
principii. The point for decision is whether tax on inter-
State sales is included within Entry 42. The inference to
be drawn from the plain language of Art. 286(2) is that it
is not. It is no answer to this to say that Entry 42
includes it, and that, therefore, the meaning of Art. 286(2)
should be cut down. We cannot accede to such a contention.
To sum up: (1) Entry 54 is successor to Entry 48 in the
Government of India Act, and it would be legitimate to
construe it as including tax on interState sales, unless
there is anything repugnant to it in the Constitution, and
there is none such. (2) Under the scheme of the Entries in
the Lists, taxation is regarded as a distinct matter and is
separately set out. (3) Article 286(2) proceeds on the basis
that it is the States that have the power to enact laws
imposing tax on inter-State Sales. it is a fair inference to
draw from these considerations that under Entry 54 in List
11 the States are competent to enact laws imposing tax on
inter-State sales.
We must now consider the arguments that have
1482
been put forward as supporting the opposite conclusion. It
is firstly contended that the Entries in the Legislative
Lists must be construed broadly and not narrowly or in a
pedantic manner, and that, in accordance with this
principle, Entry 42 should be construed, there being no
limitation contained therein, as inclusive of the power to
tax sales in inter-State trade and commerce. The rule of
construction relied on is no doubt well-established; but the
question is as to the application of that rule in the
present case. The question here is not simpliciter whether
a particular piece of legislation falls within an Entry or
not. The point in dispute before us is whether between two
Entries assigned to two different Legislatures the
particular subject of legislation falls within the ambit of
the one or the other. If Entry 42 in List I is to be
construed liberally, so must Entry 54 in List II be, and the
point is not settled by reference to Art. 246, Cls. (1) and
(3) and to the principle laid down in Union Colliery Company
of British Columbia v. Bryden (1) that where there is a
conflict of jurisdiction between a Central and a Provincial
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Legislature, it is the law of the Centre that must prevail.
Art. 246, Cls. (1) and (3) have to be invoked only if there
is a conflict as to the scope of two Entries in the two
Lists and not otherwise. What has therefore first to be
decided is whether there is any conflict between Entry 42 in
List I and Entry 54 in List 11. If there is not, the
application of the non-obstante clause in Art. 246(1) or of
the words " subject to " in Art. 246(3) does not arise.
There is another rule of construction also wellsettled that
the Entries in two Legislative Lists must be construed if
possible so as to avoid a conflict. In Province of Madras
v. Boddu Paidanna and Sons (2) the question was as to
whether the first sales by a manufacturer of goods were
liable to be taxed by the Province under Entry 48 in List
II, or whether it was really a tax on excise which was
within the exclusive competence of the Centre under Entry 45
in List 1. It was held by the Federal Court that the
(1) [1899] A. C. 580.
(2) [1942] F.C.R. 90.
1483
correct approach to the question was to see whether it was
possible to effect a reconciliation between the two Entries
so as to avoid a conflict and overlapping,’ and that, in
that view, though excise duty might in a extended sense
cover the first sales by the manufacturer, in the context of
entry 48 in List II it should be held not to include it, and
that therefore the Province had the right to tax the first
sales. This view was approved by the Privy Council in
GovernorGeneral in Council v. Province of Madras (1). If it
is possible therefore to construe Entry 42 as not including
tax on interstate sales, then on the principle enunciated in
Province of Madras v. Boddu Paidanna and Sons (2) and
Governor-General in Council v. Province of Madras (1) we
should so construe it, as that will avoid a conflict between
the two Entries.
It was also argued in support of the contention that Entry
42 in List I must be held to include the power to tax, that
that was the interpretation put by the American authorities
on the Commerce Clause, and that there was no reason why a
different construction ,should be put on Entry 42 in list I
of our Constitution. It is true that our Constitution-
makers bad before them the Commerce Clause and the
authorities thereon, but it is a mistake to suppose that
they intended to bodily transplant that clause in Entry 42.
We had in the Government of India Act, 1935, a fullfledged
Federal Constitution in force in this Country, and what the
Constitution-makers did was to draw from other Federal
Constitutions of the world, adapt and modify the provisions
so as to sent our conditions and fit them in our
Constitution. In this new context, those provisions do not
necessarily mean what they meant in their old setting. The
threads were no doubt taken from other Constitutions, but
when they were woven into the fabric of our Constitution,
their reach and their complexion underwent changes.
Therefore, valuable as the American decisions are as showing
how the question is dealt with in a sister
(1) (1945) L.R. 72 I.A. 91.
(2) [1942] F.C.R. 90.
188
1484
Federal Constitution, great care should be taken in applying
them in the interpretation of our Constitution. We should
not forget that it is our Constitution that we are to
interpret, and that interpretation must depend on the
context and setting of the particular provision which has to
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be interpreted. Applying these principles and having regard
to the features already set out, we must hold that Entry 42
in List I is not to be interpreted as including taxation.
The same remarks apply to the argument based upon s. 92 of
the Commonwealth of Australia Constitution Act and Art. 301
of ’our Constitution. We should also add that Art. 304 (a)
of the Constitution cannot be interpreted as throwing any
light on. the scope of Art. 301 with reference to the
question of taxation, as it merely reproduces s. 297 (1) (b)
of the Government of --India Act, and as there was no
provision therein corresponding to Art. 301, s. 297 (1)(b)
could not have implied what is now sought to be inferred
from Art. 304 (a).
In the result, we are of opinion that if the States had the
power under Entry 54 to impose a tax on inter- State sales
subject only to the restriction enacted in Art. 286 (2),
then by virtue of the impugned Act such law is rendered
operative and proceedings taken thereunder are valid. We
have reached this conclusion on a construction of the
statutory provisions bearing on the question without
reference to the Sixth Amendment of the Constitution which,
proceeding on the view that the States had the power to tax
interState sales under Entry 54, has amended the Constitu-
tion, and has vested the power to tax interstate sales
in the Centre.
(VI) Another contention urged by the petitioners is that the
levy of tax proposed to be made by the Andhra State on the
sale of yarn by them to dealers in the State of Andhra is
illegal, because under the Madras Act and the Rules made
thereunder, where there are successive sales of yarn the tax
can be imposed at only one point, and as the Government of
Madras had already imposed a tax on the sale within that
State, a second levy on the self-same goods by the State of
Andhra is unauthorised. and that therefore
1485
the threatened proceedings for assessment are incompetent.
This contention is clearly untenable. When the Madras Act
provides for a single levy on successive sales of yarn, it
can have only application to sales in the State of Madras,
as it would be incompetent to the Legislature of Madras to
enact a law to operate in another State. But it is argued
that s. 53 of the Andhra State Act, 1953, on its true
interpretation enacts that though for political purposes
Andhra is to be regarded as a separate State, for the
enforcement of laws as they stood on that date it should be
deemed to be a part of the State of Madras. We do not agree
with this interpretation. In our opinion, s. 53 merely
provides that the laws in existence in the territories which
were constituted into the State of Andhra should continue
to, operate as before. In fact, by an Adaptation Order
issued on November 12, 1953, even the name of Andhra was
substituted for Madrts in the Madras General Sales Tax Act.
There is no substance in this contention.
(VII) Lastly, it is argued that the Essential
Commodities Act enacted by Parliament in exercise of the
power conferred by Art. 286 (3) has declared that yarn is an
essential commodity, and that if the Madras Act is to be
construed as a fresh enactment for the Andhra State by
reason of ss. 53 and 54 of the Andhra State Act and the
Adaptation Order dated November 12, 1953, then it would be
bad inasmuch as the procedure prescribed in that provision
had not been followed. The basis of this contention is that
the Madras Act as applied to the Andhra State is a now Act
for purposes of Art. 286 (3), but that is not so. The Madras
Act was in force in the territories which now form part of
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the Andhra State until October 1, 1953, and thereafter that
Act continues to be in operation by force of s. 53 of the
Andhra State Act. Moreover, the Madras Act become operative
in the new State of Andhra not under any law passed by the
Legislature of the State of Andhra but under s. 53 of a law
enacted by Parliament and therefore Art. 286 (3) has no
application. We should add that the Essential Commodities
Act (LII of 1952) has itself
1486
been repealed and is no longer in operation. This
contention of the petitioners also should be rejected.
The petitioners sought to raise certain other contentions
such as that they are not "dealers" in the Andhra State, and
that the Explanation to s. 22 had no application to the
sales sought to be taxed, as the goods were delivered not in
the State of Andhra but in Madras. But these are questions
which ought properly to be raised before the assessing
authorities, and cannot be gone into in these proceedings.
In the result, the petitions fail and are rejected. The
petitions have had a chequered career, their fortures
fluctuating with changes in the interpretation of the law
and in the law itself. In the circumstances, we direct the
parties to bear their own costs.
SARKAR J.-The petitioners who are dealers in cotton yarn
carrying on business in the city of Madras had sold goods to
various persons in the State of Andhra. This State, the
respondent in these petitions, demanded taxes on these sales
under the provisions of the Sales Tax Act applying to its
territories. The petitioners challenged the respondents
right to tax the, sales, and filed these petitions for writs
of prohibition or other suitable writs restraining the
respondent from levying and collecting the tax. The Act
mentioned various kinds of sales which could be taxed under
it. The procedures followed by the petitioners in effecting
the sales were diverse and have not yet been ascertained,
and it is not possible without such ascertainment to decide
whether they are or are not taxable under the provisions of
the Act read with other relevant laws. To avoid this
difficulty it has been agreed between the parties that the
only question that will be decided on these petitions is
whether the respondent can tax a sale under which the pro-
perty in the goods sold passed outside the State of Andhra
but the goods were delivered in that State for consumption
there. Before proceeding to discuss this question it is
necessary to refer to certain antecedent
events.
On January 26, 1950, the Constitution of India was
1487
promulgated. It continued the laws previously in force in
the territories of India subject to its provisions. Article
372(2) of the Constitution provides that,
"For the purpose of bringing the provisions of any law in
force in the territory of India into accord with the
provisions of this Constitution, the President may by order
make such adaptations and modifications of such law, whether
by way of repeal or amendment, as may be necessary or
expedient."
Article 286 of the Constitution as it stood prior to its
amendment in 1956, that being what this case is concerned
with, contained the following provisions :
" Art. 286. (1) 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) in the course of the import of the goods into, or
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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.
(2) Except in so far as Parliament my by law otherwise
provide, no law of a State shall impose, or authorise the
imposition of, a tax on the sale or purchase of any goods
where such sale or purchase talks place in the course of
inter-State trade or commerce : "
In the year 1939 the legislature of Madras had enacted the
Madras General Sales Tax Act and this was continued in force
by the Constitution after its promulgation. In order to
bring its provisions into accord with the Constitution, the
President under his power mentioned earlier, passed on July
2, 1952, the Adaptation of Laws(Fourth Amendment) Order
which
1488
added a new section to the Madras Act, being s. 22. The
terms of this section are important in this case and will be
set out later.
The effect of the Explanation in Art. 286(1)(a) came up for
consideration by this Court in the case of The State of
Bombay v. The United Motors (India) Ltd. (1). This Court
held by its judgment pronounced by a majority, on March 30,
1953, that a State ’could tax a sale under which goods were
delivered within its territories for consumption there
though the property in the goods passed beyond its
territories and a provision in a State statute purporting to
levy such a tax did not contravene Art. 286.
Andhra is a new State which came into existence on October
1, 1953. It was created by the Andhra State Act, 1953,
largely out of territories previously belonging to the State
of Madras. Later, the new State came to be designated as
the State of Andhra Pradesh but I will refer to it as the
State of Andhra or simply Andhra. Section 53 of the Andhra
State Act provided that the laws in force prior to the Con-
stitution of the State of Andhra in the territories included
in it, were thereafter to continue in force there. The
Madras General Sales Tax Act therefor(, became applicable to
the State of Andhra and it became go applicable with the new
s. 22 previously added to it. Subsequently, the Madras Act
as applying in the State of Andhra was, to suit the latter
State, adapted by substituting for the name Madras the name
Andhra wherever it occurred in that Act. I will hereafter
call this Act the Sales Tax Act.
Sometime in the year 1954 the respondent, the State of
Andhra, issued notices to the petitioners demanding taxes
under its Sales Tax Act. As I have earlier stated the
petitioners challenged the right of the respondent to levy
the tax and certain correspondence followed. As the
respondent insisted on collecting the tax, the petitioners
instituted the present proceeding,-, in July and August,
1955.
While these proceedings were pending, the question of the
effect of Art. 286 again came up for consideration
(1) [1953] S.C.R. 1069.
1489
by this Court in the case of the Bengal Immunity Company
Ltd. v. The State of Bihar(1). This Court by its judgment
pronounced, again by a majority, on September 6, 1955, held
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that until Parliament by law made in the exercise of powers
vested in it under Art. 286(2) otherwise provided, no State
could impose any tax on a sale or purchase of goods when
such sale or purchase took place in the course of inter-
State trade or commerce and the majority decision in the
State of Bombay v. The United Motors (India) Ltd. (2) in so
far as it decided to the contrary could not be accepted
andfurther that the explanation in Art. 286(1)(a)did not
confer any right on the State in which the goods were
delivered under a sale, to tax it notwithstanding that the
property in the goods passed in another State.
In view of this decision the respondent was advised that it
could not oppose the petitions and on October 21, 1955, it
actually filed statements in these proceedings submitting
that the petitions might be allowed. Before however the
petitions could be heard and disposed of, an Ordinance
called the Sales Tax Laws Validation Ordinance, 1956, was
promulgated by the President on January 30, 1956. This
Ordinance was later, on March 21, 1956, replaced by the
Sales Tax Laws Validation Act, 1956. Both these enactments
were in identical terms. The operative provision of the
Validation Act is set out below.
2. " Notwithstanding any judgment, decree or order of any
court no law of a State imposing, or authorising the
imposition of, a tax on the sale or purchase of any goods
where such sale or purchase took place in the course of
inter-State trade or commerce during the period between the
1st day of April, 1951, and the 6th day of September, 1955,
shall be deemed to be invalid or ever to have been invalid
merely by reason of the fact that such sale or purchase took
place in the course of interstate trade or commerce ; and
all such taxes levied or collected or purporting to have
been levied or collected during the
(1) [1955] 2 S.C.R. 603.
(2) [1953] S.C.R. 1069.
1490
aforesaid period shall be deemed always to have been validly
levied or collected in accordance with law. "
The respondent was advised that the Validation Act had
changed the situation and in view of it the petitions could
no longer succeed. Thereupon, the respondent on February
19, 1957, filed fresh statements submitting that the
petitions should be dismissed. The petitions have now come
up for hearing in these circumstances.
The validity of the Validation Act itself has been
challenged. But I do not think it necessary to decide that
question. I will assume that that Act is perfectly valid.
It does not however itself levy any tax. Its only effect,
so far as these cases are concerned, is to permit the Sales
Tax Act to operate to tax sales which took place in the
course of trade between Andhra and any other State between
certain dates.I will not refer to these dates hereafter for
what Ihave to say applies to sales between them only.
As has been agreed between the parties, as mentioned at
the commencement of this judgment, the only question that we
have to decide is whether a sale under which the goods were
delivered in Andhra for consumption there though property in
them passed in Madras, can be taxed by the respondent. Such
a sale would no doubt be a sale in the course of trade
between Andhra and Madras. It is said that such a sale
cannot be taxed by the respondent notwithstanding the
Validation Act, because the Sales Tax Act does not- purport
to tax it.
Does the Sales Tax Act then contain any provision taxing
such a sale ? Now the Act authorises the levy of a tax on
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sales as defined in it. A sale is defined in s. 2(h) of the
Act. It is not disputed however that that definition does
not include a sale under which goods are delivered in Andhra
for consumption there but property in them passes in Madras
and no further reference to that section is therefore
necessary. It is however said that the effect of the
Explanation in s. 22 is to make such a sale, a sale within
the meaning of the Act and therefore liable to be taxed
under it. So I proceed to examine that section. Section
22 as it stood at the relevant time reads thus:
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S.22. "Nothing contained in this Act shall be deemed to
impose, or authorise the imposition of, a tax on the sale or
purchase of any goods, where such’ sale or purchase takes
place
(a) (i) outside the State of Andhra, or
(ii) in the course of the import of the goods into the
territory of India or of the export of the goods out of such
territory, or
(b) except in so far as Parliament may by law otherwise
provide, after the 31st day of March 1951 in the course of
inter-State trade or commerce, and the provisions of this
Act shall be read and construed accordingly.
Explanation.-For the purposes of clause (a)(i), 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
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. "
Does the Explanation in this section then say that when
under a sale goods are delivered in Andhra, the sale shall
be deemed to have taken place there though the property in
the goods may have passed in another State, for example,
Madras ? It no doubt says, without specifying any particular
State, that a sale shall be deemed to have taken place in
the State in which the goods were delivered under it though
the property in them has passed in another State. But it
seems to me impossible from the language used to say that it
contemplated a case in which the goods were delivered in
Andhra though property in them passed in another State. For
the sake of clarity I have left out in what I have just said
the term as to consumption in the State in which the goods
were delivered and no question as to such consumption is in
dispute in these cases.
The Explanation opens with the words " For the purposes of
clause (a) (i) ". What then is that clause ?
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It only contains the words "outside the State of -Andhra".
It completes the sentence part of which has preceded it.
The complete sentence says,
Nothing in this Act shall be deemed to impose, or authorise
the imposition of, a tax on the sale or purchase of any
good,,;, where such sale or purchase takes place
(a) (i) outside the State of Andhra.
It then savs that no tax shall be levied under the Act on a
sale which takes place outside Andhra. It is after this
that the Explanation comes and starts with the words " for
the purposes of clause (a) (i)". These words must therefore
mean, for the purpose of explaining which sale is to be
regarded as having taken place outside Andhra. The
Explanation then is for this purpose. I will now turn to
the remaining and the substantive portion of the
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Explanation. That must explain when a sale is to be
regarded as having taken place outside Andhra. The
substantive portion of the Explanation however mentions a
sale which is to be deemed to have taken place inside a
State. Keeping its purpose in mind, it must be taken by
saying that a certain sale is to be deemed inside a State,
to say that it is outside the State of Andhra. It follows
that the Explanation does not contemplate that the State
inside which a sale is to be deemed to have taken place, can
be the State of Andhra. That State cannot be the State of
Andhra, for then the Explanation would not show when a sale
is to be deemed to be outside Andhra and that by its
language is the only purpose for which it is enacted.
Therefore the Explanation can only be read as contemplating
a State other than Andhra as the State inside which a sale
shall be deemed to have taken place. This is the inevitable
result produced by the opening words of the Explanation
understood according to their plain meaning. So the
Explanation, omitting portions of it for the sake of
clarity, can only be read in the manner shown below:
For the purposes of clause (a)(i) a sale or purchase shall
be deemed to have taken place in the State being a State
other than Andhra, in which the goods have
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been actually delivered notwithstanding that the property in
the goods has passed in the State of Andhra.
I therefore find it impossible to say that the Explanation
states that a sale shall be deemed to have taken place
inside Andhra if under it the goods have been delivered
there though the property in them passed in another State.
The Explanation does not hence, in my view, authorise the
taxation of a sale under which goods are delivered in Andhra
though property in them passed in Madras.
The view that I have taken of the purpose of the Explanation
in s. 22 was taken of the purpose of the Explanation in Art.
286(1)(a) in the Bengal Immunity Company case (1). It was
said at p. 646 of the report, " Here the avowed purpose of
the Explanation is to explain what an outside sale referred
to in sub-clause (a) is ". The language of the Explanations
and the setting of each in its respective provision are
identical. That language must therefore have the same
meaning. It is said that the consideration that prevailed
with the Court in the Bengal Immunity Company case (1) in
dealing with Art. 286 cannot apply in dealing with s. 22 for
the latter is a provision in a taxing statute which the
former is not. But I do not see that this comment, even if
justified, would lead to a different meaning being put on
words used when they occur in a taxing statute from that
when they occur in a statute which does not purport to levy
a tax. As a matter of language only, words must have the
same meaning. The words "for the purpose of clause (a)(i)"
must therefore have tile same meaning in the Explanation in
Art. 286(1)(a) as in the Explanation in s. 22. 1 am unable
to distinguish the present case from the Bengal Immunity
Company case (1) for the purpose of determining the meaning
of the words used.
It is then said that the Explanation in i. 22 has two
facets; that when it talks of a sale inside one State, it at
the same time necessarily talks of a sale outside all other
States. Therefore it is said that when under a
(1) [1955] 2 S.C.R. 603.
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sale goods are delivered in Andhra but property in .them
passes outside Andhra, the Explanation at the same time
makes such a sale inside Andhra and outside all other
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States. I do not follow this. Why should the Explanation
in this Andhra Act be concerned with saying when a sale
shall be deemed to have taken place outside all other States
? Andhra cannot of course legislate for any other State.
Nor is there anything in this Act which makes it necessary
for the purposes of it to say when a sale shall be deemed to
be outside all other States. It follows therefore that a
construction cannot be put on the language used in tile
Explanation which produces the result of showing a sale to
be inside Andhra and so outside all other States. Further,
as I have earlier pointed out, the words " For the purposes
of clause (a)(i)" with which the Explanation starts, show
conclusively that it is necessarily confined to a sale under
which goods are delivered in a State other than Andhra and
the property in the goods passes in Andhra. It is no
objection to this reading of the Explanation to say that the
Andhra Act would then be saying when a sale is to be deemed
to have taken place inside another State and it has no power
to do so as it can legislate only for itself and for no
other State. Such an objection would be pointless because
Andhra by saying that a sale shall be deemed to have taken
place inside another State is only legislating for itself
and only saying that such a sale is therefore an outside
sale so far as it is concerned and cannot be taxed in view
of s. 22(a) of its Act. It may be that it is possible in
construing the Explanation in Art. 286(1)(a) to conceive of
two facets because that dealt with all States or any two
States at a time and for all these the Constitution was
fully competent to lay down the law. That however is not
possible when construing a law passed by a State
legislature. Such law cannot regulate the laws of other
States. And in this case the conception is further
impossible because the language shows that the Explanation
is for explaining when a sale is to be deemed to have taken
place outside the State of Andhra. It is not meant to
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explain when it is deemed to have taken place outside any
State whatsoever that State may be. I am therefore unable
to see that the Explanation has any facet showing what would
be a sale inside Andhra.
The conclusion that I reach is that the Sales Tax Act with
which these cases are concerned does not authorise ’.he
taxing of a sale under which goods are delivered in Andhra
but the property in them passes in Madras. In this view of
the matter I do not think it necessary to discuss the
various other grounds on which the respondent’s right to tax
these sales was also challenged.
In the result I would allow these petitions.
BY COURT: In view of the opinion of the majority, the
petitions an dismissed. The parties are to bear their own
costs.
Petitions dismissed.