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TMI Blog1964 (3) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the tea sold by it during the years 1954-55 and 1955-56, by the Sales Tax Officer, First Circle, Quilon, in the State of Travancore-Cochin by his order dated December 23, 1956. In the taxable turn- over on which sales tax was computed by the assessing authority were included two items which are the subject of complaint in these two appeals which relate to these two years of assessment. Before the Assessing Officer the appellant claimed that certain sales of its tea which were conducted by auction at Fort Cochin-a place which at the relevant date was in the Madras State-were sales "outside" the Travancore-Cochin State and that consequently these sales were exempt from taxation by the State of Travancore-Cochin under Article 286(1)(a) of the Constitution. The Sales Tax Officer rejected this contention and included the sum involved in these sales in the taxable turnover. An appeal filed to the Appellate Assistant Commissioner also failed, this authority holding that as the tea sold was, at the date of the auction, admittedly in godowns in Willingdon Island in the State of Travancore- Cochin, the sales must be deemed to have taken place within the taxing State by virtue of a provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduced in the State at any time after the contract of sale or purchase in respect thereof was made." When the Constitution came into force a new section numbered section 26 was inserted by the Adaptation Order bringing the Act into line with Article 286(1) of the Constitution and this read: "No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place- (a) outside the State, or (b)... ... ... ... ... ... ... ... ... ... ... ... ... Explanation.-For the purposes of sub-clause (a), a sale or purchase shall be deemed to have taken place in the State in which the goods have actually been delivered as a direct result of such sale or purchase for the 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." The position, therefore, was that though clause (a) to Explanation (2) to section 2(j) enacted that "notwithstanding anything contrary in the Sale of Goods Act, the sale or purchase of goods shall be deemed to take place in the State if the goods were ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Tax, Trivandrum v. A. V. Thomas and Co. I.L.R. 1960 Ker. 1395. that the words "outside sale" in Article 286(1)(a) had no reference exclusively to the transfer of the property in the goods according to the provisions of the Sale of Goods Act, and therefore that Explanation (2) to section 2(j) was not violative of Article 286(1)(a) and that if at the moment when the property passed, it not being very relevant where the property passed, the goods were in the State of Travancore-Cochin, then it was not an "outside" sale quoad Travancore-Cochin and could be subjected to sales tax by that State. Before the learned Judges a decision of this Court in India Copper Corporation Limited v. State of Bihar [1961] 2 S.C.R. 276; 12 S.T.C. 56., was however relied on as leading to a different result but the learned Judges held that the decision of this Court could be distinguished on the facts and they held that their previous decision reported in A. V. Thomas's case I.L.R. 1960 Ker. 1395., was still good law and entirely covered the point raised. The question for consideration in the appeal is the correctness of the view expressed by the High Court. The decision in Deputy Com- missioner of Agric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bition contained in Article 286(1)(a). Dealing with the connotation of the expression "outside" in Article 286(1)(a) this Court had observed in India Copper Corporation Ltd. v. State of Bihar [1961] 2 S.C.R. 276; 12 S.T.C. 56. : "If a single State was designed to have the power to tax any particular transaction of sale, the question that next falls to be con- sidered is the determination of that State in regard to which it could be predicated that the sale in question was not 'outside' that State or in other words, the determination of the particular State in regard to which it could be said that the sale was 'inside' that State. The key to the problem is afforded by two indications in the Article itself: (1) the opening words of Article 286(1) which speak of a sale or purchase taking place and (2) the non-obstante clause in the Explanation which refers to the general law relating to 'sale of goods under which property in the goods has, by reason of such sale or purchase, passed in another State'. These two together indicate that it is the passing of property within the State that is intended to be fastened on, for the purpose of determining, whether the sale in question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chin in Madras was urged before the High Court during the course of the argument. Before concluding it might be mentioned that in A. V. Thomas's case [1963] 14 S.T.C. 363. where, as we have stated earlier, the nature of the transaction was identical with the one in the appeals before us, this Court observed: "It has been found and it has not been disputed that the title to the goods in the present case passed at Fort Cochin." In these circumstances, we declined to permit learned counsel for the respondent to urge any ground relating to the property in the goods in the tea sold not having passed in Fort Cochin in the Madras State to be raised, as the point which is not one of pure law was not urged before the learned Judges of the High Court. The appeals are, therefore, allowed and the order of the High Court reversed and that of the Sales Tax Appellate Tribunal restored. The appellant will have his costs here and in the High Court-one hearing fee. SHAH, J.-If the question raised in these appeals were res integra, I would hold that the price obtained at auction sales of tea held at Fort Cochin when the goods were lying in warehouses in the Travancore- Cochin State was lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the State of first delivery, the sale will not be covered by the Explanation, and the right to tax the sale, if arising otherwise under the Act relying upon the territorial nexus, will not be impaired by the prohibition imposed by clause (1)(a)(i) of section 33." It may be mentioned that section 33 of the Bihar Sales Tax Act was enacted to give effect expressly to the legislative restrictions imposed by Article 286 of the Constitution. In India Copper Corporation Ltd.'s case [1961] 2 S.C.R. 276; 12 S.T.C. 56., certain transactions of sale were effected by the asses- see after the promulgation of the Constitution under which the property in the goods passed in the State of Bihar, but delivery was effected outside the State of Bihar for consumption also outside Bihar. In some of these transactions goods were delivered in the State of first destination for consumption therein whilst in others the goods were delivered not for consumption in the State of first delivery. The assessee contended that both these categories of transactions were exempt from tax under Article 286(1)(a) as they were outside sales. This Court unanimously negatived the contention of the assessee in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om Willingdon Island for consumption in other parts of India or were exported out of India. It was held by the Court in that case that the property in the goods passed at Fort Cochin and as the goods were delivered not for the purpose of consumption in any particular State, the sales were not inside the State of Travancore-Cochin but were out- side that State and were not liable to be taxed under the Travancore-Cochin General Sales Tax Act (11 of 1125 M.E.). The Court observed that in sales which were not "Explanation sales" passing of property within the State was decisive of the liability to pay sales tax. No opinion was expressed on the question whether the doctrine of territorial nexus as investing the State with the right to tax a sale transaction outside the legislative restrictions imposed by Article 286 was, since the promulgation of the Constitution, rendered ineffective. As the facts which give rise to this case are substantially the same as the facts on which A. V. Thomas and Co. Ltd.'s case [1963] 14 S.T.C. 363. was decided, the decision of the appeals must be in favour of the assessee. It is necessary to record in this judgment, lest it be assumed that I agree with th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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