TMI Blog1954 (8) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... les in which the railway receipts were sent to the purchasers through the banks, holding that, in those cases, delivery had taken place outside the State of Uttar Pradesh and the amount of turnover was not liable to sales tax. He, however, held that in respect of sales amounting to Rs. 1,55,073, in which the railway receipts were sent direct to the purchasers, the property in the goods passed to the purchasers within U.P. even though actual delivery took place outside Uttar Pradesh. He was of the view that these sales must be held to have taken place inside U.P. and, consequently, were subject to the U.P. Sales Tax. The petitioner filed an appeal before the judge (Appeals), Sales Tax, Kanpur Range. The learned judge (Appeals) upheld the decision of the Sales Tax Officer and dismissed the appeal. In deciding the appeal, the learned judge held: "The admitted facts are that goods worth Rs. 1,55,073 were actually delivered outside the Province but the transaction of sale was complete within U.P. The contract was entered into in U.P. The goods were delivered in U.P. on payment of the price. The question of actual delivery, as contemplated by Article 286 of the Indian Constitu- tion, sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 86 of the Constitution. This Explanation introduces a fiction of law and lays down that, in cases where goods have actually been delivered in a particular State as a direct result of a sale or purchase for the purpose of consumption in that State, that sale shall be deemed to have taken place 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. In cases, therefore, where delivery of goods in pursuance of a sale or purchase takes place in a particular State for consumption in that State, the sale, by this fiction of law, has to be deemed to take place in that State and, consequently, in no other State. The result is that such a sale or purchase cannot be taxed by another State except the State in which the sale is deemed to have taken place because of the actual delivery of goods for consumption in that State. Clause (2) of Article 286 deals with another aspect. Under that clause, all sales in the course of inter-State trade or commerce are exempt from sales tax except to the extent that Parliament may by law otherwise provide. This limitation on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the State. The place of sale has got to be determined in accordance with the Sale of Goods Act." This view, expressed by the learned judge, is obviously based on misinterpretation of Article 286 of the Constitution. Whenever any sale takes place in which the parties belong to two different States, it will have to be determined where the sale has taken place for purposes of imposing sales tax. The determination of the place of sale for purposes of the Indian Contract Act, or for determining the rights inter parties to the sale may depend on the provisions of the Sale of Goods Act, but when the liability of the sale or purchase to sales tax has to be con- sidered, the place, where the sale takes place, must be determined in accordance with Article 286 of the Constitution for purposes of complying with the provisions of clause (1)(a) of Article 286 of the Constitution, and the place of sale must be determined after taking into account the Explanation appended to that clause. On applying the Explanation to the transaction now in question, it is perfectly clear that all the sales, which are sought to be taxed, took place outside the State of Uttar Pradesh because actual delivery of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hibits taxation of sales or purchases involving inter- State elements by all States except the State in which the goods are delivered for the purpose of consumption therein in the wider sense explained above. The latter State is left free to tax such sales or pur- chases, which power it derives not by virtue of the Explanation but under Article 246(3) read with Entry 54 of List II." After having thus clearly interpreted the effect of Article 286(1)(a) of the Constitution, their Lordships then proceeded to examine the extent of the power of the State, in which the goods are actually deli- vered for consumption therein, to tax such sales and, for that purpose, they proceeded to consider whether that State was barred from taxing such sales under clause (2) of Article 286. Learned counsel for the State relied on this later part of the judgment of their Lordships of the Supreme Court for his contention that a State, from which the goods are sent, can tax a sale though the goods may be delivered in another State for consumption therein in pursuance of that sale. Obviously, no (1) [1953] 4 S.T.C. 133; A I.R. 1953 S.C. 252. such inference can follow from the decision of their Lordships. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the commencement of this Constitution shall, notwithstanding that the imposition of such tax is contrary to the provisions of this clause, continue to be levied until the thirty-first day of March, 1951." It was contended by learned counsel that an order was made by the President on 26th January, 1950, by which the President directed that the tax on sale or purchase of goods under the U.P. Sales Tax Act shall, notwithstanding that such imposition of tax was contrary to the provisions of clause (2) of Article 286 of the Constitution, continue to be levied until 31st March, 1951. Learned counsel's argument was that once the President had passed an order, continuing the levy of tax upto 31st March, 1951, in exercise of the powers conferred on him under this proviso, the levy of the tax would be valid even though the tax may be banned by clause (1)(a) of Article 286 of the Constitution. Obviously, this argument is based on an incomplete reading of the language of the proviso. The proviso includes in it the clause "notwithstanding that the imposition of such tax is contrary to the provisions of this clause" and this makes it perfectly clear that the only power, which the Presid- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Article 13 thus places a ban on the State making any law which takes away or abridges the rights conferred by Part III of the Constitution. In clauses (1) and (2) of Article 31 of the Constitution, there is no mention of any law being Made and the language indicates that those provisions were meant to govern the exist- ing laws as well as future laws. This is clarified by clause (5) of Article 31 of the Constitution in which the laws mentioned in clause (2) have been divided into two classes, viz., existing laws and any laws which the State may hereafter "make". These examples clearly show that where the words used are "law of a State", these words are comprehen- sive enough to cover existing laws as well as laws made after the com- mencement of the Constitution. Existing laws were continued in force by Article 372 of the Constitution but that Article, in continuing the existing laws, clearly provided that the existing laws were to continue in force "subject to the other provisions in the Constitution". The effect of this provision in Article 372 is that, if any law happens to be con- trary to any provision of the Constitution, to that extent that law would cease to continue in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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