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TMI Blog1955 (9) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed and an order shall be issued directing that, until Parliament by law provides otherwise, the State of Bihar do forbear and abstain from imposing sales tax on out- of-State dealers in respect of sales or purchases that have taken place in the course of inter-State trade or commerce even though the goods have been delivered as a direct result of such sales or purchases for consumption in Bihar. The State must pay the costs of the appellant in this Court and in the Court below. - Civil Appeal No. 159 of 1953 - - - Dated:- 6-9-1955 - DAS S.R. ACTG. J. AND VIVIAN BOSE AND BHAGWATI N.H. AND JAGANNADHADAS B. AND VENKATARAMA AIYAR T.L. AND SINHA B.P.C.J. AND SYED JAFER IMAM JJ. Represented by: Porus A. Mehta and P.G. Gokhale, Advocates, for the State of Orissa. N.C. Chatterjee, Senior Advocate (S.N. Mukherjee, V.S. Sawhney and R.R. Biswas, Advocates, with him), for the appellant. K.S. Hajela, Advocate-General of Rajasthan (P.G. Gokhale, Advocate, with him), for the State of Rajasthan. Lachman Das Kaushal, Advocate-General of Pepsu (P.G. Gokhale, Advocate, with him), for the State of Pepsu. T.R. Balakrishnan and Sardar Bahadur Saharya, Advocates, for the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against orders accepted by the appellant company in Calcutta. The appellant company has neither any agent or manager in Bihar nor any office, godown or laboratory in that State. On the 24th October, 1951, the Assistant Superintendent of Commercial Taxes, Bihar, wrote a letter to the appellant company which concluded as follows: "Necessary action may therefore be taken to get your firm registered under the Bihar Sales Tax Act. Steps may kindly be taken to deposit Bihar sales tax dues in any Bihar Treasury at an early date under intimation to this Department." On the 18th December, 1951, a notice was issued by the Superintendent, Commercial Taxes, Central Circle Bihar, Patna, calling upon the appellant company (i) to apply for registration and (ii) to submit returns showing its turnover for the period commencing from the 26th January, 1950, and ending with the 30th September, 1951. This notice was issued under section 13(5) of the Bihar Sales Tax Act, 1947, (hereinafter called the Act) read with rule 28. It was drawn up accord- ing to Form No. 8 prescribed by the rules and was headed "Notice of hearing under section 13(5)". The reason for issuing this notice, as recited therein, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sa, Punjab, Pepsu, Mysore, Travancore-Cochin and Rajasthan applied for and obtained leave to intervene in this appeal. Similar leave was applied for by and was granted to Tata Iron and Steel Company Ltd., and one M.K. Kuriakose. The State of West Bengal, Tata Iron Steel Company Ltd., and M.K. Kuriakose have supported the appellant company while the rest of the interveners have opposed the appeal. Before the High Court the question of maintainability of the petition was raised by the respondents as a preliminary objection and it was answered in their favour by the High Court. In its judgment the High Court noticed that facts had not been investigated nor had the liability of the appellant company been determined and that in fact no order of assessment had been made. It pointed out that it was not a case for the Sales Tax Officer usurping a jurisdiction not vested in him by law or acting in excess of his jurisdiction or acting mala fide. The High Court took the view that the Act undoubtedly conferred jurisdiction on the Sales Tax Officer to investigate the question of liability of a dealer to sales tax under the Act and accordingly he was acting well within his jurisdiction in iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and, therefore, the decisions of this Court referred to above have no application. While it is noteworthy that the second case mentioned above was concerned with the rights of a company, it is, nevertheless, unnecessary, for the purposes of this appeal, to decide whether a juristic person like a company is a citizen as defined in Part II of the Constitution and as such entitled to the benefits of Article 19. Nor is it necessary to consider whether there has been any infraction of the right to equal protection of the laws guaranteed by Article 14 in that being a juristic person it cannot claim any of the rights under Article 19 which only citizens can do. It is also true that Article 31 which protects citizens and non-citizens alike cannot be availed of as it deals with deprivation of property otherwise than by way of levying or collecting taxes as held by this Court in Ramjilal v. Income-tax Officer, Mohindargarh [1951] 2 S.C.R. 127; 19 I.T.R. 174., and that, therefore, the Act does not constitute an infringement of the fundamental right to property under that Article. It is, however, clear from Article 265 that no tax can be levied or collected except by authority of law which m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alternative remedy under the impugned Act by way of appeal or revision. The answer to this plea is short and simple. The remedy under the Act cannot be said to be adequate and is, indeed, nugatory or useless if the Act which provides for such remedy is itself ultra vires and void and the principle relied upon can, therefore, have no application where a party comes to Court with an allegation that his right has been or is being threatened to be infringed by a law which is ultra vires the powers of the legislature which enacted it and as such void and prays for appropriate relief under Article 226. As said by this Court in Himmatlal Harilal Mehta v. The State of Madhya Pradesh [1954] 5 S.C.R. 1122; 5 S.T.C. 115. this plea of the State stands negatived by the decision of this Court in The State of Bombay v. The United Motors (India) Ltd. [1953] 4 S.C.R. 1069; 4 S.T.C. 133. We are, therefore, of the opinion, for reasons stated above, that the High Court was not right in holding that the petition under Article 226 was misconceived or was not maintainable. It will, therefore, have to be examined and decided on merits. Coming then to the merits of the petition, the principal question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d mentioned in the Explanation, the effect of which was to convert such inter-State transactions into intra-State transactions and to take them out of the operation of clause (2) of that Article. It is quite clear that if this majority view is to prevail this ground urged by learned counsel for the appellant company and strongly supported by the learned Attorney-General appearing for the interveners, the State of West Bengal and Tata Iron and Steel Company Ltd., and by learned counsel for M.K. Kuriakose must fail. It has, accordingly, been pressed upon us that we are not bound by the majority decision in that appeal from Bombay and that it is still open to us to examine and ascertain for ourselves the true meaning, import and scope of the Article in question. Learned counsel for some of the interveners question our authority to go behind the majority decision. It is, therefore, necessary at this stage to determine this preliminary question before entering upon a detailed discussion on the question of construction of Article 286. In England, the Court of Appeal has imposed upon its power of review of earlier precedents a limitation, subject to certain exceptions. The limitation th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luding paragraph of his judgment at p. 69 expressed himself thus: "In conclusion, I would say that I have never thought that it was not open to this Court to review its previous decisions upon good cause. The question is not whether the Court can do so, but whether it will, having due regard to the need for continuity and consistency in judicial decisions. Changes in the number of appointed justices can, I take it, never of themselves furnish a reason for review. That the prior decision was that of little more than half their number might be urged with greater fairness, but it cannot be urged against Whybrow's case which was decided by the whole Court then in existence save the justice who as President of the Arbitration Court, was a party respondent to the order nisi. But the Court can always listen to argument as to whether it ought to review a particular decision, and the strongest reason for an overruling is that a decision is manifestly wrong and its maintenance is injurious to the public interest." It is interesting to note that in that case all the judges agreed that the decision in Whybrow's case was to be treated as open to review (Per Griffith, C.J., at p. 58) alth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orce of better reasoning recognising that the process of trial and error, so fruitful in the physical sciences, is appropriate also in the judicial function". In his separate but concurring judgment in Mark Graves v. People of the State of New York 306 U.S. 466; 83 L.Ed. 927. Frankfurter, J., observed: "Judicial exegesis is unavoidable with reference to an Act like our Constitution, drawn in many particulars with purposed vagueness so as to leave room for the unfolding future. But the ultimate touchstone of constitutionality is the Constitution itself and not what we have said about it". In this case two previous decisions were expressly overruled and two more were impliedly overruled. We now come to the Privy Council which, prior to the commencement of our Constitution, was the highest Court of Appeal to hear appeals from the Indian High Courts. In a case about Compensation to Civil Servants [1929] A.C. 242; A.I.R. 1929 P.C. 84 at p. 87., in repelling the contention that the Board was bound in law, and without examination, to follow an earlier decision whether they considered it right or wrong the Marquess of Reading said: "Their Lordships are unable to hold that this pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the House of Lords or eventually by Parliament by a simple majority. The mistakes, if any, made by the High Court of Australia, if not corrected by itself in a subsequent case, could be set right by the Privy Council when appeals were taken there or by the appropriate legislative authority. An error made by the House of Lords or the Privy Council can easily be rectified by Parliament by a simple majority by an amending Statute. But in a country governed by a federal constitution, such as the United States of America and the Union of India are, it is by no means easy to amend the Constitution if an erroneous interpretation is put upon it by this Court. (See Article 368 of our Constitution). An erroneous interpretation of the Constitution may quite conceivably be perpetuated or may at any rate remain unrectified for a considerable time to the great detriment to public well-being. The considerations adverted to in the decisions of the Supreme Court of America quoted above are, therefore, apposite and apply in full force in determining whether a previous decision of this Court should or should not be disregarded or overruled. There is nothing in our Constitution which prevents us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f this Court. The majority decision does not merely determine the rights of the two contending parties to the Bombay appeal. Its effect is far-reaching as it affects the rights of all consuming public. It authorises the imposition and levying of a tax by the State on an interpretation of a constitutional provision which appears to us to be unsupportable. To follow that interpretation will result in perpetuating what, with humility we say, is an error and in perpetuating a tax burden imposed on the people which, according to our considered opinion, is manifestly and wholly unauthorised. It is not an ordinary pronouncement declaring the rights of two private individuals inter se. It involves an adjudication on the taxing power of the States as against the consuming public generally. If the decision is erroneous, as indeed we conceive it to be, we owe it to that public to protect them against the illegal tax burdens which the States are seeking to impose on the strength of that erroneous recent decision. The third circumstance is that there appears to be some vagueness, if not inconsistency, in the majority judgment itself. At page 1084 of the authorised report the majority judgme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , as indeed we have, that the previous majority decision was plainly erroneous then it will be our duty to say so and not to perpetuate our mistake even when one learned Judge who was party to the previous decision considers it incorrect on further reflection. We should do so all the more readily as our decision is on a constitutional question and our erroneous decision has imposed illegal tax burden on the consuming public and has otherwise given rise to public inconvenience or hardship, for it is by no means easy to amend the Constitution. Sometimes frivolous attempts may be made to question our previous decisions but if the reasons on which our decisions are founded are sound they will by themselves be sufficient safeguard against such frivolous attempts. Further, the doctrine of stare decisis has hardly any application to an isolated and stray decision of the Court very recently made and not followed by a series of decisions based thereon. The problem before us does not involve overruling a series of decisions but only involves the question as to whether we should approve or disapprove, follow or overrule, a very recent previous decision as a precedent. In any case, the doctr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erience we have since acquired. In our judgment the majority decision in The State of Bombay v. The United Motors (India) Ltd. [1953] 4 S.C.R. 1069; 4 S.T.C. 133. is, in the circumstances alluded to, open to review and we are entitled to re-examine Article 286 in order to ascertain its true meaning, scope and effect so far as it is necessary for the purposes of this appeal and we proceed on this basis. It is a sound rule of construction of a statute firmly established in England as far back as 1584 when Heydon's case 3 Co. Rep. 7a; 76 E.R. 637. was decided that- ".................for the sure and true interpretation of all Statutes in general (be they penal or beneficial, restrictive or enlarging of the common law) four things are to be discerned and considered: 1st. What was the common law before the making of the Act; 2nd. What was the mischief and defect for which the common law did not provide; 3rd. What remedy the Parliament hath resolved and appointed to cure the disease of the Commonwealth; and 4th. The true reason of the remedy; and then the office of all the judges is always to make such construction as shall suppress the mischief, and advance the remedy, and to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conferred upon them in substantially similar terms by the Government of India Act, 1935, the Provincial Legislatures enacted sales tax laws for their respective Provinces, acting on the principle of territorial nexus referred to above; that is to say, they picked out one or more of the ingredients constituting a sale and made them the basis of their sales tax legislation. Assam and Bengal made, among other things, the actual existence of the goods in the Province at the time of the contract of sale the test of taxability. In Bihar the production or manufacture of the goods in the Province was made an additional ground. A net of the widest range perhaps was laid in Central Provinces and Berar where it was sufficient if the goods were actually 'found' in the Province at any time after the contract of sale or purchase in respect thereof was made. Whether the territorial nexus put forward as the basis of the taxing power in each case would be sustained as sufficient was a matter of doubt not having been tested in a Court of law. And such claims to taxing power led to multiple taxation of the same transaction by different Provinces and cumulation of the burden falling ultimately on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 such 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 286 is in Part XII of the Constitution which deals with "Finance, Property, Contracts and Suits". It is one of the several Articles which are grouped under the heading "Miscellaneous Financial Provisions in Chapter I of that Part. It is to be noted that it has not found a place in Part XI, Chapter I whereof deals with "Legislative Relations" including "Distribution of Legislative Powers" between Parliament and the Legislatures of States. The marginal note to Article 286 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here such sale or purchase takes place, (a) outside the State or (b) in the course of import or export or (c) except in so far as Parliament otherwise provides, in the course of inter-State trade or commerce, and lastly (d) that 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. It should be noted that these are four separate and independent restrictions placed upon the legislative competency of the States to make a law with respect to matters enumerated in Entry 54 of List II. In order to make the ban effective and to leave no loophole the Constitution makers have considered the different aspects of sales or purchases of goods and placed checks on the legislative power of the States at different angles. Thus in clause (1)(a) of Article 286 the question of the situs of a sale or purchase engaged their attention and they forged a fetter on the basis of such situs to cure the mischief of multiple taxation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e.g., that one or other of the ingredients or events which go to make up a sale or purchase was found to exist or had happened within their respective territories. Whether they were right or wrong in so acting is a question which has not been finally decided by the Courts but the fact is that they did so. This resulted in multiple taxation which manifestly prejudiced the interests of the ultimate consumers and also hampered the free flow of inter-State trade or commerce. So the Constitution makers had to cure that mischief. The first thing that they did was to take away the States' taxing power with respect to sales or purchases which took place outside their respective territories. This they did by clause (1)(a). If the matter had been left there, the solution would have been imperfect, for then the question as to which sale or purchase takes place outside a State would vet have remained open. So the Constitution makers had to explain what an outside sale was and this they did by the Explanation set forth in clause (1). The language employed in framing the Explanation, however, has given scope for argument to counsel and presented considerable difficulties to the Court in ascert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 sub-clause (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 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, gave en- larged 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. Had the Constitution makers so desired they could have done so in a more direct and straight-forward way. To hold that the Explanati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r purchases which do not fall within the Explanation. After Parliament lifts the ban under clause (2) which State will tax sales or purchases in which goods are actually delivered in a particular State, not for consumption in that State but, say, for re-export to another State for consumption? One of the suggested answers was that those sales or purchases were not likely to be numerous, for ordinarily a dealer would not actually get the goods imported into a State only for re-exporting the same to another State for consumption in the last mentioned State but would find it more convenient and economical to arrange for the delivery of the goods straight to the last mentioned State. A further suggestion was that it might well be that when Parliament would by law lift the ban of clause (2) it would, by the same law, provide which of the States would tax such inter-State sales or purchases which were not covered by the Explanation and on what basis. This suggested answer, in its turn, raises a question as to the scope and ambit of the legislative power conferred on Parliament by clause (2). The opening words of clause (2), namely, "Except in so far as Parliament may by law otherwise pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les or purchases in the delivery State that State is left free to tax them in exercise of its legislative powers under Article 246(3) read with Entry 54 of List II. The criticism offered against this view is, first of all, that it uses the Explanation for a purpose which is beyond that of sub-clause (a). This view turns the fiction created expressly for sub-clause (a) into a reality fixing the location of such sales and purchases for all purposes. In the next-place this view ignores the existence of clause (2) which imposes a different ban on the legislative power of all States including the delivery State also, so that as long as Parliament does not lift the ban no State, not even the delivery State, may tax sales or purchases which take place in the course of inter-State trade or commerce, even though they may fall within the Explanation. The further objection is that this view also does not completely eliminate the confusion arising from the nexus theory. Suppose Parliament lifts the ban under clause (2), which State will tax sales or purchases which do not come within the Explanation. The same answer was suggested as was done in reply to similar objections to the first view. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake place inside its territory. In short, the result of clause (1)(a) read with the Explanation, according to this view, is that the State which cannot tax such sales or purchases on the ground that they have taken place outside its territory is only that State in which the property in the goods has passed. The criticism is immediately put forward that if clause (1)(a) and the Explanation are limited in their operation only to the two States mentioned above then the other States which also claimed to tax on the strength of the nexus theory, e.g., the State where the contract was made, or the State where the goods were produced or manufactured or were found, will be outside the ban and the mischief of multiple taxation which the Constitution makers were out to curb will continue to be rampant and unabated. This view is also subjected to some of the other criticisms mentioned in connection with the other views of the Explanation. As we have already stated, we do not desire, on this occasion, to express any opinion on the validity claimed for or the infirmities imputed to any of these several views, for, in our opinion, it is not necessary to do so for disposing of this appeal. Whiche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. [1953] 4 S.C.R. 1069; 4 S.T.C, 133. at pp. 1083-1084 and again at p. 1086 the majority judgment also accepted the position that the Explanation was not an exception or proviso either to clause (1)(a) or to clause (2). If, therefore, the Explanation cannot be read into clause (2) because of the express language of the Explanation and also because of the difference in the subject-matter of the operative provisions of the two clauses, then it must follow that, except in so far as Parliament may by law provide otherwise, no State law can impose or authorise the imposition of any tax on sales or purchases when such sales or purchases take place in the course of inter-State trade or commerce and irrespective of whether such sales or purchases do or do not fall within the Explanation. It is not necessary, for the purposes of this appeal, to enter upon a discussion as to what is exactly meant by inter-State trade or commerce or by the phrase "in the course of", for it is common ground that the sales or purchases made by the appellant company which are sought to be taxed by the State of Bihar actually took place in the course of inter-State trade or commerce. Parliament not having by law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt the aforesaid arguments or the conclusions as correct for the reasons we now proceed to state. The situs of an intangible concept like a sale can only be fixed notionally by the application of artificial rules invented either by Judges as part of the judge-made law of the land, or by some legislative authority. But as far as we know, no fixed rule of universal application has yet been definitely and finally evolved for determining this for all purposes. There are many conflicting theories: One, which is more popular and frequently put forward and is referred to and may, indeed, be urged to have been adopted by the Constitution in the non-obstante clause of the Explanation, favours the place where the property in the goods passes, another which is said to be the American view and which was adopted in C. Govindarajulu Naidu Co. v. The State of Madras [1952] 3 S.T.C. 405; A.I.R. 1953 Mad. 116. fixes upon the place where the contract is concluded, a third which prevails in the continental countries of Europe prefers the place where the goods sold are actually delivered, a fourth points to the place where the essential ingredients which go to make up a sale are most densely group ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lause (2) may possibly operate. The argument which leads to this astounding conclusion has only to be stated to be rejected. The truth is that what is an inter-State sale or purchase continues to be so irrespective of the State where the sale is to be located either under the general law when it is finally determined what the general law is or by the fiction created by the Explanation. The situs of a sale or purchase is wholly irrelevant as regards its inter-State character. We find no cogent reason in support of the argument that a fiction created for certain definitely expressed purposes, namely, the purposes of clause (1)(a), can legitimately be used for the entirely foreign and collateral purpose of destroying the inter-State character of the transaction and converting it into an intra- State sale or purchase. Such metamorphosis appears to us to be beyond the purpose and purview of clause (1)(a) and the Explanation thereto. When we apply a fiction all we do is to assume that the situation created by the fiction is true. Therefore, the same consequences must flow from the fiction as would have flown had the facts supposed to be true been the actual facts from the start. Now, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e(1) at pp. 1102-1103 and p. 1127 and also by the dissenting judgment in The State of Travancore-Cochin v. Shanmugha Vilas Cashew- Nut Factory [1954] 5 S.C.R. 53; 4 S.T.C. 205. at p. 89. Nothing that we have heard on the present occasion induces us to depart from the views expressed on this subject in those dissenting judgments. It is next urged that the Explanation in effect operates as an exception or a proviso to clause (2). This view runs directly counter to the express language of the Explanation itself. So the argument is formulated in a slightly different way. It is said that clause (2) contains the enunciation of the general rule and the Explanation embodies a particular or special rule. According to a cardinal rule of construction the particular or special rule must control or cut down the general rule. This view was adopted by the High Court in the judgment under appeal and also found favour with one of the Judges in the Bombay case(1). It appears to us that this argument overlooks the basic fact that clause (1)(a) to which is appended the Explanation and clause (2) deal with different topics altogether. The Explanation is concerned with explaining what is an outside sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and adopt such a construction as will not only give effect to each part of the Article but also make each part applicable in Presenti. That, it is pointed out, can well be done if clause (2) is interpreted in a restricted manner. The argument runs-give full and immediate effect to the Explanation and then leave clause (2) to govern or operate on cases which do not fall within the Explanation. In effect this argument means that we must treat all transactions of sales or purchases falling within the Explanation as outside clause (2). Shorn of its thin veneer of disguise this argument is nothing more than the argument that the Explanation, in effect, operates as an exception to clause (2) and all the criticisms applicable to that construction will apply mutatis mutandis to the argument in the present form. Apart from that there are obvious fallacies which render the argument utterly unacceptable. We now proceed to deal with these fallacies seriatim. (i) In the first place, the mere circumstance that a provision in the Constitution will, on a proper construction, take effect on the happening of a future event can, by itself, be no ground for not giving effect to the plain language ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght Circus for consumption in the State of Delhi. On one view of the law, the situs of such a sale would be Gurgaon. We need not decide that it is, because that type of case is not before us and there may be other views to consider, but it is certainly a possible view. It is also possible to hold that this is not inter-State trade or commerce, because there is no movement of goods across a State boundary. Again, we need not decide that because that also may be controversial. But given these two postulates the transaction would fall squarely within the Explanation and yet it would not come within clause (2), for there is no movement of the goods across the border of any State and both the seller and the buyer are in the same place. Surely, the Explanation will, in Presenti, govern such cases irrespective of whether Parliament has lifted the ban under clause (2). If these postulates are accepted then by virtue of clause (1)(a) read with the Explanation the State of Delhi alone will be entitled to impose a tax on such a sale or purchase and the State of Punjab will be precluded from doing so by reason of the fictional situs assigned to such a sale or purchase by the Explanation, alt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall have to alter the non-obstante clause towards the end of the proviso and substitute the words "of the foregoing clauses" for the words "of this clause". However, we need not rest our decision on this point. It will certainly operate as soon as Parliament, in exercise of the power vested in it by clause (2), lifts the ban imposed on the States. Upon the lifting of the ban by Parliament those inter-State sales or purchases which fall within the Explanation will, by virtue of it, be deemed to take place within the delivery State and such sales or purchases being, as a result of such fiction, outside all other States none of them will be entitled to tax such sales or purchases. Whether the delivery State will be entitled to make a law imposing tax on such sales or purchases in exercise of the legislative powers vested in it by Article 246(3) read with Entry 54 in List II or whether Parliament, while lifting the ban, may also by the same law authorise the delivery State to do so or what is the extent of the authority vested in Parliament by the opening words of clause (2) are questions which will arise for consideration only after the ban under clause (2) is lifted and we need not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sly had of safeguarding sales or purchases of essential commodities by imposing the restriction requiring the reservation of the bill for the President's assent and the obtaining of such assent. When a famine is raging in say Punjab, and sales and purchases are made of wheat which is declared as essential to the life of the community and as a direct result of such sale wheat is delivered in the Punjab for consumption there the State of Punjab may, according to the reasoning underlying the argument, put up the price of these essential goods by imposing a sales tax by making a law to that effect and ignoring the safeguards prescribed by clause (3). An argument which leads us to a result so utterly absurd and untenable in reason cannot for a moment be countenanced. No less than five reasons have been suggested in support of the argument that a restricted construction should be placed on clause (2) of Article 286. It will be convenient to deal with them at this stage one by one. (a) In the first place, it is urged that clause (2) should be construed in a restricted way because the class of sales falling within Article 286(1)(a) forms a special class of inter-State sales and they cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit which the consuming public derives from the free flow of goods from one State to another resulting in lower prices. Further, the argument overlooks the fact that the so-called hardship, if any, is brought about, not really by reason of the liberal construction of clause (2) but by reason of the State of Bihar imposing a sales tax on an intra-State transaction. The State of Bihar is not obliged to levy a sales tax on sales or purchases of goods in respect of which there is competition between out-of-State producers, manufacturers and dealers and the Bihar producers, manufacturers and dealers and, indeed, if it intends to encourage its local manufacturers or producers it should not do so. It will not do for the State of Bihar to say that it must levy a sales tax on intra-State sales or purchases which it is not obliged to do and at the same time that it must protect the Bihar dealers or producers and enable them to compete with outside dealers or producers and, therefore, ask us to construe the Constitution in an unnatural way so as to enable it to have the best of both worlds. It is immediately retorted that the welfare State must have sufficient revenue to run itself, that if i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir large factories at Tatanagar in Bihar to getting their supplies from the Jharia coal fields in Bihar and thereby evade sales tax to the detriment of the revenues of the State of Bihar, then again there is Parliament to mitigate such hardship by making suitable laws in exercise of its power under Article 286(2). Such supposed hardship is, in our view, no ground for putting a forced and unnatural interpretation upon Article 286. (c) The third reason in support of a restricted construction of Article 286(2) is thus formulated: The purpose of Article 286 being to eliminate multiple taxation and Article 286(1)(a) having already achieved that purpose with regard to the class falling within the Ex- planation, it was no longer necessary for that purpose to apply Article 286(2) to that class. This reasoning appears to us to be untenable. It overlooks the patent fact that the different parts of the Article look upon sales and purchases from different perspectives and place different bans on the taxing power of the States at different angles. The circumstance that the bans may in given cases overlap is no justification for concluding that the subject-matter of the different provisions is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate transactions. This, it will be recalled, was the reasoning adopted in the majority decision in The State of Bombay v. The United Motors (India) Ltd.[1953] 4 S.C.R. 1069; 4 S.T.C. 133. We are unable to accept this argument for the reasons given above which need not be repeated here. It is said that the picture of harassment and inconvenience to the traders referred to in the dissenting judgments is more imaginary than real. It is pointed out that it is only big traders who will have sales of their goods in all the States in the Union of India. Those big traders maintain a large staff of clerks and accountants and there can be no difficulty if they are obliged to file returns in each State where they sell their goods. This argument overlooks the practical effects of the different sales tax laws enacted by different States. All big traders will have to get themselves registered in each State, study the Sales Tax Act of each State, conform to the requirements of all State laws which are by no means uniform and, finally, may be simultaneously called upon to produce their books of account in support of their returns before the officers of each State. Anybody who has any practical e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sells or supplies goods to its members." By the Bihar Finance Act, 1950, the words "in Bihar" were omitted from this definition. Clause (g) of the same section defines sale. That definition has undergone various changes from time to time. The period we are concerned with in this appeal is from 26th January, 1950, to the 30th September, 1951. Between 1st October, 1948, and 31st March, 1951, which covers the earlier part of the relevant period the clause stood as follows: "'Sale' means, with all its grammatical variations and cognate expressions, any transfer of property in goods for cash or deferred payment or other valuable consideration, including a transfer of property in goods involved in the execution of contract but does not include a mortgage, hypothecation, charge or pledge: Provided that a transfer of goods on hire-purchase or other instalment system of payment shall, notwithstanding the fact that the seller retains a title to any goods as security for payment of the price, be deemed to be a sale: Provided further that notwithstanding anything to the contrary in the Indian Sale of Goods Act, 1930 (III of 1930), the sale of any goods- (i) which are actually in Biha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd outside Bihar exceeds Rs. 10,000 shall be liable to pay tax under this Act on sales which have taken place in Bihar and from the date of such commencement. It will be noticed that although the long title and the preamble refer to the sale of goods in Bihar the words "in Bihar" were deleted from the definition of the word "sale" in section 2(g). There are various provisions for working out the scheme of the Act to which no detailed reference need be made. It may, however, be pointed out that a new section was inserted by the Adaptation of Laws (Third Amendment) Order, 1951, which substantially reproduced the provisions of Article 286(1) and (2). Although, therefore, the charging section read with the definition of "dealer" and "sale" may be wide enough to cover inter-State sales, the new section 33 makes all those provisions subject to its provisions which are nothing but a reproduction of the corresponding provisions of Article 286. In view of the interpretation we have put upon Article 286 it must follow that the charging section of the Act read with the relevant definitions cannot operate to tax inter-State sales or purchases and it must be held that as Parliament has not oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actory at Baranagore in the District of 24 Parganas in West Bengal and carrying on business of manufacturing and selling various sera, vaccines, biological products and medicines, etc., in Calcutta. The appellant has extensive sales of its products throughout the whole of the Union of India and the goods are despatched by the appellant from Calcutta by rail, steamer or air against orders accepted at Calcutta and all sales take place within the State of West Bengal. The appellant has no offices, agents, managers, godowns or laboratories in the State of Bihar. It is not a resident of Bihar nor has a place of business in Bihar and does not enter into any transaction of sale within the State of Bihar. On the 24th October, 1951, the Assistant Superintendent of Commercial Taxes, headquarters Patna, wrote to the appellant to get itself registered under the Bihar Sales Tax Act and to take necessary steps to deposit the Bihar sales tax dues in any Bihar treasury at an early date, contending that all sales in West Bengal in which the goods had been delivered in the State of Bihar as a direct result of the sale for the purpose of consumption in Bihar were leviable to Bihar sales tax with ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the petition were addressed by the Government Pleader appearing for them before the High Court. The High Court held: (1) That respondent 3 was acting within his jurisdiction in issuing the notice under section 13 (5) and holding that the applicant was liable to pay the tax, that if he made an assessment under section 13 (5) the Act provided a right of appeal whereby any error of law might be corrected by the appellate authorities prescribed under the Act, that sections 24 and 25 of the Act furnished a complete and effective machinery for appeal and revision against assessments made under the Act and that there was therefore no warrant for issuing a writ under Article 226 of the Constitution; (2) That the phrase "sale or purchase in the course of inter-State trade or commerce" in Article 286 (2) must be construed so as to exclude the particular class of sales or purchases described in the Explanation to Article 286(1) and that therefore the amended clauses (c) and (g) of section 2 and section 33 of the Bihar Sales Tax Act were not in conflict with Article 286 (2); (3) That the Bihar Sales Tax Act was in pith and substance not a law with respect to sale of goods but a law im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of Madhya Pradesh: "The learned Advocate-General of the State..................however contended that on the principle enunciated by the Privy Council in Raleigh Investment Co. v. The Governor-General in Council (1947) 74 I.A. 50; 15 I.T.R. 332., jurisdiction to question assessment otherwise than by use of the machinery expressly provided by the Act, was inconsistent with the statutory obligation to pay, arising by virtue of the assessment and that the liability to pay the sales tax under the Act is a special liability created by the Act itself which at the same time gives a special and particular remedy which ought to be resorted to, and therefore the remedy by a writ ought not to be allowed to be used for evading the provisions of the Act, especially a fiscal Act .......................................................................................... In our opinion, the contentions raised by the learned Advocate-General are not well founded. It is plain that the State evinced an intention that it could certainly proceed to apply the penal provisions of the Act against the appellant if it failed to make the return or to meet the demand and in order to escape from such seri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gislature to levy any taxes but was meant to explain only clause (1)(a), i.e., what was an outside sale or purchase and that it did not remove any restrictions or fetters and did not convert any inter-State sale or purchase into an intra-State or local or domestic transaction; (2) That Article 286(2) in Part XII was meant to implement the supremacy of Parliament with regard to inter-State trade or commerce and it put an embargo on the power of State Legislature to levy any tax on sale or purchase with respect to inter-State trade or commerce and that it was only when the embargo was lifted by appropriate Parliamentary legislation that State Legislature could levy any tax on sales or purchases in the course of inter-State trade or commerce; and (3) That legislative competence of a State Legislature was derived from Article 246 read with the lists of the Seventh Schedule to the Constitution, that under Article 245(2) only Parliament was given the power to enact legislation with extra-territorial operation and the State Legislatures had no such power, and that the combined effect of Article 246(3) and Article 245 read with Item 54 of List II was that the State Legislature was only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and Article 286(2) is hedged in with the exception "in so far as Parliament may by law otherwise provide" and the proviso under which the President might direct that any tax which was being lawfully levied by the Government of any State immediately before the commencement of the Constitution may, notwithstanding the provisions of Article 286(2), continue to be levied until the 31st March, 1951. Except for these special dispensations the restrictions laid down by Article 286(1) and (2) prevail and the true scope and extent of these restrictions would have to be culled out of the terms in which these provisions are couched. These provisions came to be considered by this Court in two cases, (1) The State of Bombay and Another v. The United Motors (India) Ltd. and Others [1953] S.C.R. 1069; 4 S.T.C. 133. and (2) The State of Travancore-Cochin and Others v. Shanmugha Vilas Cashew-Nut Factory and Others [1954] S.C.R. 53; 4 S.T.C. 205. The first of these cases was concerned with the constitutionality of the Bombay Sales Tax Act, XXIV of 1952. The High Court of Bombay had declared the Bombay Sales Tax Act, 1952, ultra vires the State Legislature and had issued a writ in the nature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not govern clause (2) of Article 286 and as it can only apply to transactions which in truth and in fact take place in the course of inter-State trade and commerce, there is no need to call it in aid until the ban is removed. The majority judgment as well as Bose, J., recognised that the provisions of Article 286(1) and (2) had been enacted in order to prevent multiple taxation which used to be levied by the States before the commencement of the Constitution having resort to the nexus theory. They however did not discard that theory altogether and were of the opinion that it was sufficient to invest the State Legislature with jurisdiction to impose a tax on sale or purchase of goods, if any of the essential ingredients of sale had taken place within its territory. They did not accept the transfer of ownership in the goods or the passing of property therein as the sole criterion determining the situs of the sale and thus investing the State within whose territories the sale had thus taken place as the only State entitled to impose the tax on sale or purchase of goods. I however held that under the general law relating to sale of goods a sale must be regarded as having taken place i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by various States having resort to the nexus theory there was divergence of opinion as regards the real purpose of the Explanation as also the construction of the non-obstante clause and the true concept of consumption as embodied therein. According to the majority view the Explanation explained what is an outside sale by defining what is an inside sale. Bose, J., was of the opinion that the purpose of the Explanation is to explain what is not outside the State and therefore what is inside. I was of the view that what is otherwise a sale or purchase which takes place outside the State is deemed to have taken place inside the delivery State and the only purpose of the Explanation is to introduce a legal fiction whereby the delivery State is also entitled to tax the transaction of sale or purchase along with the State in which the transfer of ownership has taken place or the property in the goods has passed. The non-obstante clause also was differently interpreted. I took the view that the non-obstante clause is incorporated in the Explanation to state what according to the Constitution makers is the basic idea of fixing the situs or the location of the sale or purchase in the plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases, viz., (1) except in so far as Parliament may by law otherwise provide and (2) provided the President may by order direct that any tax on sale or purchase of goods which was being levied by the Government of any State immediately before the commencement of the Constitution shall continue to be levied until the 31st March, 1951. The Explanation to Article 286(1)(a) though it is specifically stated to be for the purposes of sub-clause (a) was construed by me as an exception or proviso to Article 286(2), thus enabling the delivery State to tax the transactions of sale or purchase taking place in the course of inter-State trade or commerce. The majority judges differed from this view and held that the Explanation converts the inter-State transaction into an intra-State one and therefore there is no scope at all for the operation of Article 286(2) in cases covered by the Explanation. Bose, J., was of the view that Article 286(2) bans the delivery State also from taxing such transactions, because if the transactions were in the course of inter-State trade or commerce the Explanation merely shifts the point from A to B but this shifting is of no consequence at all, because both the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venth Schedule to the Government of India Act, 1935, had enacted the Sales Tax Acts imposing tax on sales or purchases of goods on the basis of one or more of the ingredients of sale having some connection with the Province and that this practice had resulted in the imposition of multiple taxes on a single transaction of sale or purchase thereby raising the price of the commodity concerned to the serious detriment to the consumer, that this evil had to be curbed and that is what has been done by clause (1)(a) of Article 286. He however was of the opinion that in imposing the ban that no law of a State shall impose or authorise the imposition of a tax on the sale or purchase where such sale or purchase takes place outside the State, the Constitution proceeds on the footing that a sale or purchase has a location or situs. He further held that the non-obstante clause in the Explanation also clearly implies that the framers of the Constitution adopted the view that a sale or purchase has a situs and further that it ordinarily takes place at the place where the property in the goods passes. In effect, therefore, the Constitution, by this Explanation to clause (1)(a), acknowledges that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contemplated by the Explanation to clause (1)(a) undoubtedly partakes of the nature of a sale or purchase made in the course of inter-State trade and, therefore, no State, whether it is the State in which the property in the goods passes under the general law or the State where the goods are delivered as mentioned in the Explanation, can impose a tax on such sale or purchase, unless and until Parliament lifts this ban. He differed from the view taken by me that the Explanation to Article 286(1)(a) must be regarded not only as having authorised the delivery State to impose the tax on the sale or purchase covered by the Explanation, but having also exempted it from the ban imposed by clause (2). He also differed from the majority view that what was an inter-State transaction within the ban of Article 286(2) is converted into an intra-State or local or domestic transaction by virtue of the Explanation to Article 286(1)(a). He saw no warrant for the argument that the fiction embodied in the Explanation for this definitely expressed purpose, can be legitimately used for the entirely foreign purpose of destroying the inter-State character of the transaction and converting it into an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1)(b)." It may be observed that the contentions urged before us by the appellant are in conformity with the above observations of S. R. Das, J. Normally speaking the construction put by the majority judgment on Article 286(1), the Explanation thereto and Article 286(2) of the Constitution in the Bombay Sales Tax Appeal would be the law binding on all parties and in the judgment just referred to in the Travancore-Cochin Sales Tax Appeal S.R. Das, J., rightly expressed that decision to be binding on him so long as it stands. The appellant has however sought to urge before us that that decision was erroneous and has attempted to persuade us to reconsider the same and put a construction on Article 286(1)(a), the Explanation thereto and Article 286(2) which is different from that adopted by the majority judges in the Bombay Sales Tax Appeal. The question therefore arises whether we are entitled to reconsider that decision. The House of Lords in England has always considered itself bound by its previous decisions. These decisions, as distinguished from the opinions which are delivered by the judicial Committee of the Privy Council as advice to the Crown, are pronounced in the for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o reconsider its own decisions was discussed in In re Compensation to Civil Servants A.I.R. 1929 P.C. 84. In that case an earlier decision of the Board in Wigg v. Attorney-General of the Irish Free Stale A.I.R. 1928 P.C. 239. was attempted to be reviewed and after discussing the case law on the point the Board came to the conclusion that the Privy Council is not bound in law and without examination to follow the decision in a prior appeal whether they considered it to be right or wrong although the Privy Council would hesitate long before disturbing a solemn decision by a previous Board, which raised an identical or even a similar issue for determination. While laying down this principle the Board discussed the earlier cases and in particular the case of Ridsdale v. Clifton (1877) 2 P.D. 276. which was followed in Tooth v. Power [1891] A.C. 284. and Read v. Bishop of Lincoln [1892] A.C. 644. and the proposition was thus laid down in the last mentioned case: "In the present case their Lordships cannot but adopt the view expressed in Ridsdale v. Clifton (1877) 2 P.D. 276. as to the effect of previous decisions. Whilst fully sensible of the weight to be attached to such decisions, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt of the land and would derive considerable assistance from the practice of the Privy Council set out above. The High Court of Australia is the highest Court of Appeal in the Commonwealth and concerns itself inter alia with deciding constitutional questions. The question whether it is bound by its previous decisions came up for consideration in the Tramways case (No. 1) 18 C.L.R. 54. and the High Court held that it was not bound by its previous decision but would only review a previous decision when that decision was manifestly wrong. Griffith, C.J., in this connection made the following observations at page 58: "In my opinion it is impossible to maintain as an abstract proposition that the Court is either legally or technically bound by previous decisions. Indeed, it may in a proper case be its duty to disregard them. But the rule should be applied with great caution, and only when the previous decision is manifestly wrong Otherwise there would be grave danger of a want of continuity in the interpretation of the law." Barton, J., observed at page 69: "In conclusion, I would say that I have never thought that it was not open to this Court to review its previous decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tical compact of the whole of the people of Australia, enacted into binding law by the Imperial Parliament, and it is the chief and special duty of this Court faithfully to expound and give effect to it according to its own terms, finding the intention from the words of the compact, and upholding it throughout precisely as framed. In doing this, we follow, not merely previous instances in this Court and other Courts in Australia, but also the precedent of the Privy Council in Read v. Bishop of Lincoln [1892] A.C. 644., where the Lord Chancellor, speaking for the judicial Committee in relation to reviewing its own prior decisions, said: 'Whilst fully sensible of the weight to be attached to such decisions, their Lordships are at the same time bound to examine the reasons upon which the decisions rest, and to give effect to their own view of the law.' The ground upon which the Privy Council came to that conclusion we refer to, but need not repeat, adding, however, that as the Commonwealth and State Parliaments and Executives are themselves bound by the declarations of this Court as to their powers inter se, our responsibility is so much the greater to give the true effect to the rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... They have not created a rule of property around which vested interests have clustered. They affect solely matters of a transitory nature. On the other hand, they affect seriously the lives of men, women, and children, and the general welfare. Stare decisis is ordinarily a wise rule of action. But it is not a universal, inexorable command. The instances in which the court has disregarded its admonition are many." The same learned Judge in a dissenting opinion in David Burnet v. Coronado Oil Gas Company 285 U.S. 393. reiterated the same position in the manner following: "Stare decisis is not, like the rule of res judicata, a universal, in-exorable command." After quoting the passage from the judgment of Mr. Justice Lurton in Hertz v. Woodman(1) above cited the learned Judge proceeded: "Stare decisis is usually the wise policy, because in most matters it is more important that the applicable rule of law be settled than that it be settled right...............This is commonly true even where the error is a matter of serious concern, provided correction can be had by legislation. But in cases involving the Federal Constitution, where correction through legislative action is prac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitutional questions. However, when convinced of former error, this Court has never felt constrained to follow precedent. In constitutional questions, where correction depends upon amendment and not upon legislative action this Court throughout its history has freely exercised its power to re-examine the basis of its constitutional decisions. This has long been accepted practice, and this practice has continued to this day." and in United States of America v. South-Eastern Underwriters Association 322 U.S. 533. in the dissenting judgment of Stone, C.J., at p. 579: "This Court has never committed itself to any rule or policy that it will not 'bow to the lessons of experience and the force of better reasoning' by overruling a mistaken precedent.....................This is especially the case when the meaning of the Constitution is at issue and a mistaken construction is one which cannot be corrected by legislative action. To give blind adherence to a rule or policy that no decision of this Court is to be overruled would be itself to overrule many decisions of the Court which do not accept that view. But the rule of stare decisis embodies a wise policy because it is often more impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s through legislative action. They considered it their bounden duty to construe the constitutional provisions and be guided by the provisions of the Constitution itself and not by what had been their earlier decisions on the questions of its construction. The only safeguard which they put on the exercise of such powers of reconsideration was that the earlier decision should be manifestly wrong or erroneous. We here also are concerned with the construction of the provisions of the Constitution which cannot be amended so easily and if we come to the conclusion that the earlier decision was manifestly wrong or erroneous and that public interest demanded that the same should be reconsidered we should not have the slightest hesitation in doing so. We therefore approach the consideration of the earlier decision of this Court in the Bombay Sales Tax Appeal bearing in mind the principles above enunciated. It will be necessary at the outset to take stock of the situation as it obtained before the enactment of Article 286 of the Constitution. The Government of India Act, 1935, contained provisions in regard to the distribution of legislative powers between the Dominion and the Provincial L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... marily legislation of a country is territorial and the general rule is "extra territorium jus dicenti impune non paretur". The laws of a nation apply to all its subjects and to all things and acts within its territories. (See Maxwell on the Interpretation of Statutes-10th Edn., page 144). Craies on Statute Law, 5th Edn. at page 174, contains the following citation from the speech of Lord Cranworth in Jeffreys v. Boosey (1354) 4 H.L.C. 815 at p. 955.: "Prima facie the Legislature of this country must be taken to make laws for its own subjects exclusively." The same principle has been applied also to sales tax and it is stated in American Jurisprudence, Vol. 47, p. 202, para. 5, under the caption "Territorial Jurisdiction" that: "The general rule that a State may not tax persons, property or interests which are not within its territorial jurisdiction is applicable to sales taxes." It would therefore appear that when the State Legislatures enacted laws in respect of taxes on sales or purchases of goods they would only have operation within the territories of the States and the sales or purchases of goods even though they are not specified in the relative entry to be "within th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell. (4) An agreement to sell becomes a sale when the time elapses, or the conditions are fulfilled subject to which the property in the goods is to be transferred." The corresponding provision in section 1 of the English Sale of Goods Act is as follows: "(1) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price. There may be a contract of sale between one part-owner and another. * * * * (3) Where under a contract of sale the property in the goods is transferred from the seller to the buyer the contract is called a sale; but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled the contract is called an agreement to sell. (4) An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred." This being the legislative practice in India as well as in England at the time when the power to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Motor Spirit and Lubricants Taxation Act, 1938 (C.P. Berar Act No. XIV of 1938) [1939] F.C.R. 18 at pp. 86, 87; 1 S.T.C. 1. where their Lordships observed that: "Tax on sale of goods must necessarily be a tax imposed at the time of the sale of goods and must exclude other forms of transfer like mortgages, leases, etc." Similar observations were also to be found in the Province of Madras v. Boddu Paidanna Sons [1942] F.C.R. 90 at p. 101; 1 S.T.C. 104. where it was stated that a tax on the sale of goods is a tax levied on the occasion of the sale of goods and the liability to tax arises on the occasion of the sale. The sale was therefore taken to be the concrete event which gave rise to the power of the State to tax the sale of goods but was taken as not necessarily taking place within the territories of the taxing State, the only thing considered essential for the purpose being the territorial connection or nexus between the taxing State and one or more of the necessary ingredients of sale analysed as above. The territorial connection or nexus theory was sought to be supported by reference to certain decisions of the High Court of Australia, e.g., The Wanganui-Rangitikie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing companies was British Indian and when the attempt was to tax income and not the corpus and the question to be considered was the "source" of that income it was legitimate to take into account the place where the business from which the income was derived was in fact carried on and not to treat the situs of the shares in the eyes of the law as concluding the matter. The Court was therefore of the opinion that the source of the dividends paid to the assessee company by the sterling companies was British Indian and that in making them liable to income-tax on that basis the Indian Legislature was not giving its law any extra-territorial operation. Spens, C.J., who delivered the judgment of the Court further quoted with approval the following passage from the judgment of Evatt, J., in Trustees, Executors Agency Co., Ltd. v. Federal Commissioner of Taxation (1933) 49 C.L.R. 220. at page 236: "The Constitution requires that it must be possible to predicate of every valid law that it is for the peace, order and good government of the Dominion with respect to a granted subject, e.g., customs, taxation, external affairs. In such cases, the presence of non-territorial elements in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sought to be imposed must be pertinent to that connection; but, if these conditions are satisfied it is of no importance on the question of validity that the liability imposed is, or may be, disproportionate to the territorial connection. Kania, C.J., also observed at p. 141: "As mentioned above, the aspect of it affecting persons who are beyond the jurisdiction of the municipal courts cannot be considered sufficient for the Court to hold it ultra vires. The municipal courts are bound to enforce the law. Whether after obtaining the opinion or decree the same is enforceable against the other side or not, is not a matter for the Court's consideration. The Court has only to see that the legislation is within the ambit of the powers of the Legislature." Having resort therefore to the territorial connection or the nexus theory enunciated in the cases above noted and analysing the concept of sale into its necessary ingredients as above the various State Legislatures enacted laws in respect of taxes on sales or purchases of goods spreading their net as wide as they could having regard to the situation obtaining in their respective territories. A transaction of sale or purchase of goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tur to this theory. In the former case the expression "sale of goods" was understood in its popular sense as distinct from its legal sense and it was held that the sales tax could be levied if the transaction substantially took place within the State notwithstanding that the property did not pass within the State. In the latter case it was held that the power of the State to impose taxes was not conditioned on the subject-matter being wholly within its jurisdiction and the exercise of the power was valid if there was sufficient territorial connection with reference to the subject-matter. After discussing the American case law on the subject the Court came to the conclusion that in respect of inter-State sales the State in which the contract was concluded was the only State which had the power to impose a tax. This Court also in the majority judgment in the Bombay Sales Tax Appeal [1953] S.C.R. 1069; 4 S.T.C. 133, at p. 142. while summarising the position as it obtained before the enactment of the Constitution incidentally expressed its opinion in this behalf at page 1078 as under: "As pointed out by the Privy Council in the Wallace Brothers case [1948] F.C.R. 1; 16 I.T.R. 240. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods within it at the time when the transaction took place." It may be observed that in the Bombay Sales Tax Appeal the question of the territorial connection or nexus was not directly in dispute and in Poppatlal's case(2) referred to above it was taken as decided by this Court in the Bombay Sales Tax Appeal that the theory of territorial connection or nexus was applicable to sales tax legislation. It is a moot point whether this theory of territorial connection or nexus which has been mainly applied in income-tax cases is also applicable to sales tax legislation, the spheres of an income-tax legislation and sales tax legislation being quite distinct. Whereas in the case of income-tax legislation the tax is levied either on a person who is within the territory by exercising jurisdiction over him in personam or upon income which has accrued or arisen to him or is deemed to have, accrued or arisen to him or has been derived by him from sources within the territory and it is therefore germane to enquire whether any part of such income has accrued or arisen or has been derived from a source within the territory, in the case of sales tax legislation it is the sale or purchase of goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se took place in the course of the import of the goods into or export of the goods out of the territory of India; (3) The State Legislatures were restrained from imposing 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 except in so far as the Parliament might by law otherwise provide; and (4) The State Legislatures were restrained from imposing a tax on the sale or purchase of any such goods as had been declared by Parliament by law as essential for the life of the community unless such law had been reserved for the consideration of the President and had received his assent. These were the four restrictions which were put upon the powers of the State Legislatures to impose a tax on the sales or purchases of goods and were imposed with different objectives in view. The first restriction was devised to achieve the objective of relieving the consumer of the burden of multiple taxation and put it out of the power of a State to tax the sale or purchase of goods where such sale or purchase took place outside the State. The Sale of Goods Act contained several provisions which determined when a sale or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale or purchase for the purpose of consumption therein. This Explanation was interpreted in various ways, one view being that it defined an outside sale and went no further and that the situs of the sale was determined for the limited purpose of telling the State what it could not tax by telling it that in the cases covered by the Explanation in spite of the property in the goods having passed within its territories it was an outside sale qua that State. The other view was that besides fixing the situs of sale in this manner it also defined what was a sale or purchase which shall be deemed to have taken place in the delivery State and thus fulfilled a double function of investing only the delivery State with the power to tax such sale or purchase to the exclusion of all other States qua whom the sale or purchase was deemed to be an outside sale. The third view was that the Explanation was concerned with fixing the situs of sale in respect of the delivery State only and did not affect the power of the State in which the property in the goods had passed to tax such sale or purchase which it enjoyed by reason of the fact that the property in the goods had passed within its territories ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the situs or location of such sale or purchase within the territories of a particular State and that event could only take place in one State and not in more States than one. There could be only one situs or location of the sale or purchase and if that were so the State in whose territories such sale or purchase took place or in which the property in the goods passed by reason of such sale or purchase was the State which could claim the power to tax such sale or purchase by reason of its having taken place within its territory. It would therefore appear that the Constitution-makers had in enacting the Explanation the one and only motive of negativing the territorial connection or nexus theory and replacing it by the situs theory and fixing the situs or location of the sale or purchase within the State in which the property in the goods passed by reason of such sale or purchase. While doing so they also created a legal fiction whereby in the competition between what may be called the title State and the delivery State the delivery State was given the power to impose a tax on sale or purchase of goods where the goods had actually been delivered as a direct result of such sale or pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xing sales or purchases falling within this category before the commencement of the Constitution. A proviso was therefore enacted 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 the Constitution shall, notwithstanding that the imposition of such tax is contrary to the provisions of Article 286 (2), continue to be levied until the thirty-first day of March, 1951. This proviso enabled the State Governments to levy the taxes which they used to levy before the commencement of the Constitution up to the 31st March, 1951, within which period they were expected to adjust their economies and replenish their treasuries by having resort to their legitimate powers of taxation. By the 31st March, 1951, the States could also make representations to the Centre and induce the Parliament to otherwise provide by appropriate legislation within the meaning of Article 286 (2) and authorise them to impose taxes on the sale or purchase of any goods where such sales or purchases took place in the course of inter- State trade or commerce. But until that ban was lifted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Article 286(1)(a), Article 286(2) and Article 286 (3) though looked at from different view-points may overlap. A transaction which is covered by Article 286(1)(a) may also be covered by Article 286 (2) and both these sets of transactions may be covered by Article 286 (3). Such overlapping would not necessarily mean that the provisions of one particular clause have to be read as fastening upon the transactions falling within the category comprised therein and treating them as lifted out of the ban sought to be imposed by the other clauses of the Article. Each ban has got to be effective and imposed on the transactions falling within its ambit and even though the transaction may be saved out of the ban imposed in one particular clause it may just as well fall within the ban imposed in another clause and thus be excluded from the taxing power of the State Legislatures. It cannot therefore be urged that the Explanation to Article 286(1)(a) lifts the transaction out of the ban imposed by Article 286 (2) or by Article 286 (3) and leaves such transaction of sale or purchase as is covered by the Explanation free to be taxed by the delivery State in spite of the same being of an inter-S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so, Article 286 (2) contained a general provision whereas Article 286(1)(a) and the Explanation thereto contained a special provision having reference to the transactions of sale or purchase falling within that category, with the result that the rule of harmonious construction applied and the special provision was to be read as an exception to the general provision. This argument found favour with the High Court below as well as myself in the Bombay Sales Tax Appeal. This rule of harmonious construction no doubt would apply if the topics covered by both these provisions were the same, and the subject-matters dealt with in both these provisions were identical. There is this difference however between the two provisions, viz., that the transactions covered by both do not fall within the same category and a transaction of sale which is looked at from the point of view of its being an outside or an inside sale my just as well be a sale in the course of inter-State trade or commerce. In Article 286(1)(a) the transaction is looked at from the point of view of its situs or location and in Article 286 (2) it is looked at from the point of view of its being in the course of inter-State t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive even though the transactions might so far as their nature and character be concerned overlap in certain events. Even though therefore a transaction fell within the ban of Article 286(i) (a) it could none the less be subjected to the ban which was imposed by Article 286(2) and it could be taxed only if it survived this scrutiny also, which could be done if the Parliament by law otherwise provided as set out in Article 286(2). As to reason (4): it assumes that the Constitution itself has divided transactions of sale or purchase in the course of inter-State trade and commerce into two distinct categories, one falling within Article 286 (1)(a) and the Explanation thereto and the other falling within Article 286(2). There is no warrant for holding that transactions in the course of inter-State trade or commerce are divided into such distinct categories for the purpose of the imposition of the ban. The transaction of sale or purchase would be one but it is subject to the imposition of distinct bans having regard to the view-point from which it is being looked at. If it is looked at from the view-point of its being an outside or an inside sale it may be caught within the ban of Arti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or a proviso to Article 286(2). This argument no doubt found favour with me in the Bombay Sales Tax Appeal [1953] S.C.R. 1069; 4 S.T.C. 133. and also with the High Court below. If due regard however is had to the purpose of the enactment of Article 286 as a whole and also to the various considerations which have been set out hereinabove it is clear that this argument is untenable. The transactions of sale and purchase covered by the Explanation to Article 286(1)(a) are not necessarily co-extensive or conterminous with the transactions of sale or purchase covered by Article 286(2). There are transactions which would be covered by the Explanation to Article 286 (1)(a) without their being transactions of sale or purchase in the course of inter-State trade or commerce and which therefore would without anything more be covered by the Explanation and would be the subject- matter of taxation by the delivery State by the appropriate exercise of its power of taxation. There is also a further fact to be noted and it is that even though the transactions covered by both these provisions may be conceivably co-extensive or conterminous with each other, the Explanation to Article 286(1)(a) wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chase it is one transaction which has two facets. From the point of view of a seller it is a sale transaction and from the point of view of a purchaser it is a purchase transaction. When therefore the transaction is one on which a tax on sale or purchase can be levied it does not necessarily mean that only a sales tax can be levied and not a purchase tax. The inside dealer may therefore be taxed on his purchases or if he sells in retail to actual consumers in the State he may be taxed on the sales. If the inside dealer is himself the consumer then there will be no difficulty in assessing him for his books will show how much he has imported from other States and how much he has consumed. in any case, the convenience or inconvenience of collecting a sales tax or a purchase tax is not a relevant consideration when one is considering the validity or otherwise of such a tax, as was observed by Kania, C.J., in the case of A.H. Wadia v. Commissioner of Income-tax, Bombay [1948] F.C.R. 121; 17 I.T.R. 63. at page 141. In the very judgment of the majority in the Bombay Sales Tax Appeal(2) there is a passage at page 1084 which indicates that all buyers within the delivery State except those b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions contained in the majority judgment were made with reference to a pure question of the interpretation of Article 286(1)(a) and the Explanation thereto. As a matter of fact the passage above-quoted from the judgment at page 1084 would go to show that they contemplated the purchasers being amenable to tax at the instance of the delivery State in the case of transactions covered by the Explanation to Article 286(1)(a). Even though it is not strictly relevant to consider the consequences of a particular position in law when construing a statutory provision it is none the less necessary to visualise those consequences when one tries to probe into the mind of the legislators and see whether they could have ever contemplated such consequences. If the construction sought to be put upon the Explanation to Article 286(1)(a) and the majority judgment in relation thereto by the State Legislatures were accepted, all outside dealers wheresoever they may be located or residing or carrying on their business all over the Union would be amenable to the levy of sales tax at the instance of the delivery State and one dealer in a particular State who had a very large business and was entering int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the delivery State and no law passed by the delivery State in regard to a levy of sales tax would have any operation against the non-resident businessman who enters into a transaction of sale where as a direct result of such sale the goods are actually delivered for consumption within the taxing State. If however the majority judgment be construed to have said that the seller could be subjected to the levy of a sales tax at the instance of the delivery State in the case of transactions covered by the Explanation to Article 286(1)(a) I am of the opinion that it was clearly erroneous and public interests demand that the same should be reversed. After further and fuller consideration of the matter in the light of the very elaborate arguments which have been addressed before us by the learned counsel for the appellants and the respondents and also the Interveners, I feel that the conclusion reached in the Bombay Sales Tax Appeal(1) needs to be revised and I am of the opinion that Article 286 (2) puts an absolute restriction on the taxing power of the States where transactions of sale or purchase take place in the course of inter-State trade or commerce unless and until the ban is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elf free, in appropriate cases, to reconsider its prior decisions. (Vide In re Transferred Civil Servants (Ireland) Compensation [1929] A.C. 242.. The same is the case with the Supreme Court of the United States of America. (See Willoughby on the Constitution of the United States, Vol. 1, page 74.) Our Constitution which has made detailed provision about various matters relating to the Supreme Court including a matter relating to its practice, such as, whether there can be a dissenting judgment [see Article 145(5)] has not, in terms, made any provision in this behalf. Article 141, no doubt, provides that "the law declared by the Supreme Court shall be binding on all Courts within the territory of India". It has been urged before us that the phrase "all Courts" is comprehensive enough to include the Supreme Court. It is pointed out, that since every decision declares the law, a later decision declaring the law in a contrary sense, would in effect, be the exercise of legislative function which must be taken to have been impliedly prohibited. While these arguments are not without force, it is reasonably clear, in the context of Article 141, that the phrase "all Courts" must refer t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstitution, may be changed only with great difficulty. Hence an error in its interpretation may for all practical purposes be corrected only by the Court's repudiating or modifying its former decision." It would appear, therefore, that the power of reconsideration of a prior decision is somewhat freely exercised by the Supreme Court of America in constitutional cases. The reason for such free exercise, or to the same extent, does not exist under our Constitution. To appreciate this, it is necessary to compare the provisions in the two Constitutions for amendment of the Constitution. The machinery for amendment of the Constitution of the United States is provided in Article V thereof and is as follows: "The Congress, whenever two thirds of both houses shall deem it necessary, shall propose amendments to this Constitution, or, on the application of two thirds of the several States, shall call a convention for proposing amendments, which, in either case, shall be valid to all intents and purposes, as part of this Constitution, when ratified by the Legislatures of three fourths of the several States, or by conventions in three fourths thereof, as the one or the other mode of rati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a condition for the passing of legislation in respect of certain specified items of business is not altogether an unknown feature. However that may be, it is quite clear that while the amendment of the Constitution does not depend upon the ordinary majority rule under which Parliament conducts its business, the machinery therefor is by invoking the very same Parliament and not anything so difficult, cumbrous and dilatory as that envisaged in Article V of the American Constitution. Even as regards the few specified matters for which an additional requirement of ratification by State Legislatures is provided for, our machinery for amendment is clearly much easier and less cumbersome. It does not appear to me, therefore, right to rely upon the American practice as a safe guide to determine our practice on the question as to the binding character of a judicial precedent. Neither are we bound to adopt the very rigid rule which the House of Lords has formulated for its own practice. The problem of interpreting a written Constitution does not generally arise before it. The only other comparable Courts whose practice has been brought to our notice, through citation of cases, are the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eference would have been futile if it did not necessarily involve such reconsideration. (2) The reference itself was granted on account of an alleged material mistake of fact, into which the previous Board of the judicial Committee had fallen. On such reconsideration the previous decision was affirmed. In Attorney-General for Ontario v. Canada Temperance Federation [1946] A.C. 193, the Judicial Committee expressed itself as follows at page 206: "The appellants' first contention is that Russell's case(5) was wrongly decided and ought to be overruled. Their Lordships do not doubt that in tendering humble advice to His Majesty they are not absolutely bound by previous decisions of the Board, as is the House of Lords by its own judgments. In ecclesiastical appeals, for instance, on more than one occasion, the Board has tendered advice contrary to that given in a previous case, which further historical research has shown to have been wrong. But on constitutional questions it must be seldom indeed that the Board would depart from a previous decision which it may be assumed will have been acted on both by Governments and subjects." In this case the Privy Council was invited to recon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and on such reconsideration affirmed it. In so reaffirming the prior decision, one of the learned Judges, Justice Powers, stated his grounds to the following effect: "In Whybrow's case 11 C.L.R. 1., the Court consisted of all the Justices of this Court who could sit on the application. The case was very fully argued. Both parties and two of the States were represented by counsel. The judgments were considered judgments delivered more than two weeks after the preliminary objection was taken..........Under the circumstances I have no hesitation in following the judgment." The same learned Judge at another portion of his judgment stated as follows: "If we do not show some respect to our own Court's decisions, no counsel will feel safe in advising the public, and it will create uncertainty and confusion." The principles so laid down have been reiterated in a recent case of the High Court of Australia in Perpetual Executors and Trustees Association of Australia Ltd. v. Federal Commissioner of Taxation 77 C.L.R. 493 in the following terms: "The Court is not bound by its previous decisions so as absolutely to preclude reconsideration of a principle approved and applied in a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ablished principle or fails to go with a definite stream of authority. It is a recent and well considered decision upon what is evidently a highly disputable question. I do not think that we should reconsider the correctness of that decision. The proper course judicially is to follow and apply that decision." This is a strong case of the year 1951-1952 indicating the most recent practice of that Court, and the above passage aptly summarises almost the very considerations applicable to the present case. A consideration of these cases shows that while the highest Courts other than the House of Lords have reserved to themselves theoretically the competency to reconsider the correctness of a prior decision, they have also carefully confined the actual exercise of that power within very narrow limits. In a number of cases in which they did permit themselves to reconsider, they have ultimately declined to over-rule the prior decision notwithstanding that another view might well have been taken. The only instances brought to our notice where, on a reconsideration, a previous decision was not followed, are two. One is The Amalgamated Society of Engineers v. The Adelaide Steamship Co. Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il was whether a prior decision of the judicial Committee, construing a particular section of the relevant statute applicable in that case in consonance with the above rule, was correct. It will be noticed that the over-ruling of the prior decision in this case was based on the fact that important and relevant material was not placed before the judicial Committee in the earlier case. These cases emphasise under what exceptional circumstances a prior decision of the highest and final Court in a country is treated as not binding on itself. Now what are the grounds in the present case to justify a reconsideration of the prior decision. At this stage, I cannot help noticing that the argument before us-as it appears to me-has taken a somewhat unusual course. I should have thought that when the decision in a case so recent as that in the United Motors case [1953] S.C.R. 1069; 4 S.T.C. 133. given after full consideration is sought to be challenged, the first question to have been considered was whether or not there were circumstances to justify a reconsideration. It is only after the Court came at least to a prima facie conclusion on that preliminary matter that a reargument on the merit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n rehearing. This, however, is sought to be justified on various grounds. It is said that the prior decision does not merely determine the rights of the two contending parties to that case but has far-reaching effects on the rights of the consuming public and that it involves the adjudication, of the taxing power of the States as against the consuming public in general. It is, therefore, said that, if that decision is erroneous, it is our duty not to perpetuate the error. It appears to me, with respect, that this is begging the question. There is no absolute standard by which the erroneous character of a previous decision can be ascertained. What a previous decision has determined, must be presumed to be right unless it can be pronounced to be perverse or manifestly wrong. It is, therefore, a strong thing to characterise a previous decision as erroneous where, even on reconsideration, no unanimity is reached and the previous view is supported by a substantial minority. Nor, can the mere fact of one of the prior learned Judges having gone back on his views be any criterion to determine which out of his two views is erroneous. As regards the suggestion of tax burden on the consuming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or inconsistent with itself by extracting one single passage. The passage relied on is at page 1084 and appears, in the context where the question was being considered, as to whether the phrase "actual delivery for consumption" has reference to "delivery to the actual consumer-purchaser" or delivery also to "a purchaser for eventual distribution to the consumers in the State". The view indicated in the extracted passage was that delivery to a purchaser for eventual distribution to the consumer in the State was also "actual delivery for consumption" and hence the designation of purchaser as liable to tax in that passage. That the extracted passage was not meant to indicate that only such purchaser was taxable and not the seller is quite clear from the various passages in the immediately succeeding paragraph at pages 1084 and 1085 where "taxation of sales or purchases involving inter-State elements by the State in which the goods are delivered for consumption in the sense explained above" is repeatedly referred to. All that can, if at all, be said is that the decision has not, in terms, indicated the choice between the seller or the purchaser as regards taxability but has indicated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Court, therefore, is to adopt the attitude of Justice Dixon in the case in Attorney-General for N. S. W. v. Perpetual Trustee Co. Ltd. 85 C.L.R. 237. wherein notwithstanding that he came to a contrary conclusion, he declined to disturb the prior decision. The case for not disturbing the prior decision is all the stronger, where, as happens in the present case, no unanimous opinion could be reached in favour of overruling the prior decision. Notwithstanding my opinion that. there is no ground for reconsideration of the prior decision of this Court in the United Motors case [1953] S.C.R. 1069; 4 S.T.C. 133. I propose, out of respect for my learned brothers, who are prepared to take the opposite view, to give my reasons why, on a fresh consideration of the question involved, I am clearly in agreement with the decision of the majority in the said case. Having had the benefit of reading the judgments of my learned brothers, Justice S.R. Das and Justice Venkatarama Ayyar, I propose to confine myself mainly to the consideration of the construction of Article 286. There can be no doubt that Article 286 taken as a whole has to be read in the context of the power vested in the States for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he definition of the word "sale" to the effect that, notwithstanding anything to the contrary in the Indian Sale of Goods Act, a sale or purchase of goods "which were actually in the Province" at the time when the contract of sale or purchase is made, shall be deemed to have taken place in the Province, wherever the contract for sale or purchase may have been made. This was, broadly speaking, the common pattern of every one of the sales tax laws just prior to the Constitution, subject to some further additions to the definition of sale by a few of the States, which will be presently noticed. This pattern indicates, that apart from the purely internal sales-in respect of which the power of taxation by the States was undoubted-the States claimed the power to tax sales with an outside element in the following two cases: (1) Where the transfer of ownership in the goods was within the State (assumed to be so) according to the Indian Sale of Goods Act. (2) Where the goods which are the subject-matter of the sale are actually in the Province at the time when the contract of sale is made, i.e., at the crucial moment of transfer of ownership. If I may express this in another way, these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lating to forward contracts which virtually amounted to treating "agreement to sell" itself as being the taxable event. This, it may be seen, had nothing to do with the nexus theory of taxation of sales and has been pronounced invalid by this Court in The Sales Tax Officer, Pilibhit v. Messrs. Budh Prakash Jai Prakash [1955] 1 S.C.R. 243; 5 S.T.C. 193. From the above broad summary it will be seen that the Provinces were deriving sales tax revenues not only in respect of purely internal sales, but also in respect of sales with an outside element. But in the generality of such sales, the tax was leviable at either or both of the above-mentioned two points, i.e., (1) transfer of ownership within the State, (2) actual existence of goods within the State at the moment of such transfer. The ultimate consumer in respect of such sales would normally be not a person within the taxing State. Hence having regard to the structure of the sales tax and the universally accepted machinery therefor which brings about the passing on, of the incidence thereof, to the ultimate consumer, this must have been felt to be inequitable. It appears to me that in the adjustments called for on the passing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way to define an outside sale as the implied negative of a fictional inside sale. Nor can the purpose of the Explanation be readily assumed to be to obviate the supposed chaotic condition arising out of the adoption of the nexus theory in the Sales Tax Acts. This could have been sufficiently and effectively provided for-as in fact it was done-by the ban imposed under Article 286(2). It has been suggested that the Explanation covers some outside sales which do not fall within Article 286 (2) and that therefore the Explanation was necessary. But the possibility of a few ingenuously illustrated cases- like the Gurgaon-Delhi illustration put forward in the course of arguments-as falling outside the ambit of Article 286 (2) and within the scope of Article 286(1)(a) taken with the Explanation, would not have been any adequate reason for the Constitution involving itself in two such provisions, mostly overlapping in effect. It appears to me, therefore, that the reasons for having these two provisions were distinct and different. Article 286(1)(a) with the Explanation was meant to prevent taxation whose ultimate incidence would fall on residents of outside States. Article 286 (2) was mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and commerce if the sale follows the completion of the inter-State transportation of goods, as, for instance, would be the case when a hawking pedlar brings goods across a State boundary and vends it from door to door in another State, then clearly the fiction which brings about the notional inside sale would by itself be sufficient to take such a sale out of the category "of the course of inter-State trade and commerce". Because, in such a situation, while the transportation of goods across State boundaries remains as a fact, the sale itself is deemed to be inside the consuming State, the very purpose of the fiction being to shift the situs of the sale for the purpose of taxability. It is, I think, in this sense that in the earlier decision, the learned then Chief Justice laid down that by virtue of the Explanation this particular category of inter-State sale became an intra-State sale, of course, not for all purposes, but for the limited purposes for which the Explanation was inserted, viz., the purpose of demarcating the taxable field from the non-taxable field. Looked at either on the ground of harmonious construction or on the ground that the notional inside sale brought abou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the successive States for some time. In none except one of the States would the goods be in actual existence at the single crucial point of time of transfer of ownership. Hence, I am clear in my mind that the previous legislation would not have normally involved taxation of the same sale with an outside element, at more than two points. (Whether even this would not get limited by the fact that a "dealer" is defined in all the then Acts as "within the Province" would be a matter for consideration.) Four of the then Provincial Units had, as already stated, an additional criterion for taxation. But, so far as Madras and Mysore were concerned that criterion which relates to future goods cannot be cumulative with criterion two. So far as U.P. and Bihar are concerned which authorised the manufacturing State as such to levy the tax, it appears to me that if it is borne in mind that this is limited to the sale by the very manufacturer, this was also not likely to operate as a cumulative point. Even otherwise these additional criteria might, if at all, have given rise to taxation at a third point, when the sale transaction had to be put through via these particular States. But even so t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t before such a taxation-law can have any affect, it should be reserved for the consideration of the President and receive his assent. In this respect it is in line with what would happen if any other State legislation passed by that Legislature is presented to the Governor for his assent and he reserves the same for the consideration of the President. The only difference is that while in the latter the reservation for the President is optional, in the case of such essential goods the reservation is compulsory. Subject to this even essential goods continue to be, in theory and by Constitution, taxable (by the States themselves) in respect of sales thereof. I am, therefore, unable to see the bearing of this provision on the construction of the other two provisions which bring about a total or contingent ban of taxation in respect of the sales to which they have reference. There is one other matter which has been stressed or implied in the dissenting view and it is this. The assumption is that even a single point tax on a sale arising in the course of inter-State trade would be a burden on the freedom of inter-State trade and commerce guaranteed under the Constitution by Article 30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat a defined geographical part of India constitutes the territory of each unit called the State and that the governance of that unit is committed to that State. But it appears to me that on that account, the territory of one State is not a foreign territory in respect of another State, when freedom of movement and a number of other common fundamental rights are guaranteed. On the other hand, I think it permissible to suggest that where the various States owe their existence to the same Constitution and are subject to its common operation, any taxing power vested in an individual State must carry with it the incidental implication of enforceability, if need be, in any other State within the Union when the very nature of that tax, as contemplated by the Constitution involves it. In this context Article 261(1) which enjoins that full faith and credit shall be given throughout the territory of India to public acts, records and judicial proceedings of the Union and of every State, may well be relied upon to justify such a view. I am aware that this has been generally taken as applicable to judicial and legislative proceedings. But the language of the Article is capable of wider applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. I do not agree. It is similar rather to the service of a notice of dishonour of a bill or of a notice to quit or of a notice requiring payment of calls upon shares as a preliminary to forfeiture in default of payment. It is not a step in Judicial proceeding but a step which will create inter partes a state of things in which judicial proceedings can subsequently be taken in default of compliance." It may be that some or all of the provisions in the Bihar Act which contemplate enforcement out-of-State or create penalties for non-compliance out-of-State may require closer examination when the validity thereof is directly challenged. It may also be that the harassment consequent on such outside operation may require to be remedied either by agreed co-ordination between the States or by appropriate legislation, if need be. These, however, are not relevant considerations for us on the question we have now to deal with. I am accordingly clear in my opinion that this appeal should be dismissed with costs. APPENDIX 1. STATEMENT SHOWING THE DEFINITION OF "SALE" UNDER EACH OF THE SALE TAX ACTS IN OPERATION JUST PRIOR TO THE COMMENCEMENT OF THE CONSTITUTION. (Vide page 55 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay. ASSAM SALES TAX ACT, 1947. "Sale" means any transfer of property in goods by any person for cash or deferred payment or other valuable consideration.......... * * * * Explanation.-Notwithstanding anything to the contrary in the Indian Sale of Goods Act, 1930, the sale of any goods which are actually in the Province at the time when the contract of sale (as defined in that Act) in respect thereof is made, shall, irrespective of the place where the said contract is made, be deemed for the purposes of this Act to have taken place in the Province. BIHAR SALES TAX ACT, 1947. "Sale" means..........any transfer of property in goods for cash or deferred payment or other valuable consideration.......... * * * * Provided further that notwithstanding anything to the contrary in the Indian Sale of Goods Act, 1930, the sale of any goods- (i) which are actually in Bihar at the time when, in respect thereof, the contract of sale as defined in section 4 of that Act is made, or (ii) which are produced or manufactured in Bihar by the producer or manufacturer thereof, shall, wherever the delivery or contract of sale is made, be deemed for the purposes of this Act to have t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... * * * * Explanation 2: Notwithstanding anything to the contrary in the Indian Sale of Goods Act, 1930, the sale of any goods which are actually in East Punjab at the time when the contract of sale (as defined in that Act) in respect thereof is made, shall, wherever the said contract of sale is made, be deemed for the purposes of this Act to have taken place in East Punjab. UNITED PROVINCES SALES TAX ACT, 1948. "Sale" means..........any transfer of property in goods for cash or deferred payment or other valuable consideration.......... * * * * Explanation II.- Notwithstanding anything in the Indian Sale of Goods Act, 1930, or any other law for the time being in force, the sale of any goods- (i) which are actually in the United Provinces at the time when in respect thereof, the contract of sale as defined in section 4 of that Act is made, or (ii) which are produced or manufactured in the United Provinces by the producer or manufacturer thereof, shall, wherever the delivery or contract of sale is made, be deemed for the purposes of this Act to have taken place in the United Provinces. Explanation III.- Where goods under a forward contract are not actually delive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be taxed must be deemed to have taken place by reason of the Explanation to Article 286(1)(a) within Bihar, the provisions of the Act imposing tax on a non-resident seller were neither ultra vires nor unconstitutional. The learned judges of the High Court upheld both these contentions and dismissed the application, and this appeal has been preferred against their judgment on a certificate granted under Article 132(1) of the Constitution. In view of the importance of the issues involved, leave of the Court was sought by and granted to ten States, one commercial firm and one individual dealer. Nine out of the ten States, namely Orissa, Pepsu, Punjab, Madhya Pradesh, Madras, Mysore, Rajasthan, Travancore-Cochin and Uttar Pradesh, have intervened and supported the respondents. One State, West Bengal, represented by the learned Attorney-General, supported the appellant, and so did the Tata Iron and Steel Co., Ltd., and one M. K. Kuriakose. On the arguments addressed before us, the following points arise for determination: - 1.. Whether the application for a writ of prohibition is maintainable. 2. Whether the Explanation to Article 286(1)(a) confers authority on the State Legislatur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res is not in question, and which confers Jurisdiction on any authority to take proceedings if certain facts exist and the enquiry directed by the authority is as to whether those facts exist. The determination in such a case is incidental to the effective exercise by the authority of its undisputed jurisdiction and if, as a result of that enquiry, it came to an erroneous conclusion, there is no error of jurisdiction, and it might well be contended in that case that the remedy of the party aggrieved was to resort to the machinery provided in the statute itself by way of appeal or revision, and that a writ of prohibition would be misconceived. But here, the contention of the appellant is that the statute itself is void in so far as it authorises the imposition of a tax on dealers who are not residents within the State or do not carry on business there, and that, in consequence, the proceedings taken under section 13(5) of the Act should be restrained on the ground of want of jurisdiction. It is no answer to this contention that the appellant should seek redress through the channels provided in the Act therefor. Indeed, the contention that the Act is ultra vires is not one which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in that State in which the goods are delivered for consumption, notwithstanding that title to them passed in another State. The construction which the respondent puts on the Explanation is that if confers on the States proprio vigore, a power to tax sales when the conditions mentioned therein are satisfied. Agreeably to this view, the Bihar Finance Act, 1950, (Act XVII of 1950), substituted for the words "who carries on business of selling or buying goods in Bihar" the words "who sells or supplies any goods". The point to be noted is that the words "in Bihar" which occurred in the previous definition were omitted. In 1951 by the Adaptation of Laws Order, a new section, section 33, was added, and that is as follows: "33. (1) Notwithstanding anything contained in this Act,- (a) a tax on the sale or purchase of goods shall not be imposed under this Act- (i) where such sale or purchase takes place outside the State of Bihar; or (ii) where such sale or purchase takes place in the course of import of the goods into, or export of the goods out of, the territory of India; (b) a tax on the sale or purchase of any goods shall not, after the 31st day of March, 1951, be imposed wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... torial connection with the State. Broadly speaking, local activities of buying or selling carried on in the State in relation to local goods would be a sufficient basis to sustain the taxing power of the State, provided of course, such activities ultimately resulted in a concluded sale or purchase to be taxed." This statement of the law was again adopted by this Court in Poppatlal Shah v. The State of Madras [1953] S.C.R. 677; 4 S.T.C. 188. Vide the observations of Mukherjea, J., (as he then was) at pages 682 and 683. In this view, a law of the State imposing a tax on sales must, to be valid, fulfil two conditions. Firstly, there must be a completed sale involving the transfer of title in the goods to the purchaser. It is only then that the power to tax arises. That was held by this Court in The Sales Tax Officer, Pilibhit v. Messrs. Budh Prakash Jai Prakash [1955] 1 S.C.R. 243; 5 S.T.C. 193. Secondly, there must be sufficient territorial nexus between the transaction and the State which seeks to tax it. This condition undoubtedly introduced an element of uncertainty and vagueness in the law with the result that the power to tax which was linked up with it had indefiniteness whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." It will be convenient hereafter to refer to the State in which title to the goods passes as the selling State, and the State in which goods are delivered for consumption as the delivery State. Now, we may examine how this provision is designed to put an end to multiple taxation. The scheme of the enactment is to fix, what had not been done under the Government of India Act, 1935, the situs of the sale, and for that purpose, to classify it into two categories, sale inside the State and sale outside the State. On what principle the situs was fixed will presently be considered. But when once that is done, the problem is solved. If a sale is inside a State, the power of that State to tax it under Entry 54 remains unaffected. But if the sale is outside a State, Article 286(1)(a) prohibits that State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t among the States as to in which of them the title has passed. But delivery is a matter of fact, about which there ought to be no dispute, and it is consistent with the purpose of Article 286(1)(a) that the Explanation should have chosen delivery as the determining element in the transaction of sale. Now, the question to be decided is whether in the light of the above discussion, the contention of the appellant that the Explanation operates only to deprive the selling State of its power to tax the sale, and that it confers no authority on the delivery State to impose a tax can be accepted. An obvious objection to this view might at once be stated. If the Explanation has no application to any but the selling State, it must follow that all the other States including the delivery State will have power to impose a tax under Entry 54 uncontrolled by the Explanation, and that will bring into play the nexus theory with its attendant evil of multiple taxation. On this contention, therefore, Article 286(1)(a) must be held to have failed to achieve what it set about to do. A construction which leads to such a conclusion cannot be accepted unless there are cogent reasons therefor. What are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... livery State, that is at once a recognition and a declaration by the Constitution that delivery is sufficient nexus on which the State can tax the sale under Entry 54. The object of this declaration was to remove the question from the arena of controversy and settle it once and for all. It is thus a positive enactment and not the less so, because it is declaratory in character and it is also restrictive in that it takes away by necessary implication the power of taxation on the basis of other nexi which other States would have had under Entry 54. No purpose would be served by entering into a subtle disputation as to whether the Explanation conferred a new and substantive power, or whether it affirmed an existing power. In either case, the power of the delivery State to tax could not be challenged. Looking at the form of the Explanation, it is emphatically positive in that it declares that the sale shall be deemed to have taken place in the delivery State, and that is all the more significant in view of the fact that the body of Article 286(1)(a) to which it is appended is negative in form. The change-over from the negative of the body of Article 286(1)(a) to the positive of the E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt or its language, the Explanation must be held to authorise the imposition of tax by the delivery State. 3.. It is next contended by the appellant that the sales covered by the Explanation to Article 286(1)(a) are within the prohibition contained in Article 286(2) and that in consequence the charge sought to be imposed on such sales by the impugned Act is illegal and void. That raises the question as to what the scope of the Explanation to. Article 286(1)(a) is, and whether it is controlled by Article 286(2). The Explanation declaring as it does that the situs of a sale for purposes of taxation is the delivery and not the selling State can apply, by its very terms, only to sales of an inter-State character, and that is the basis on which the argument of both the parties to the appeal has proceeded. Article 286 (2) prohibits the imposition of tax on sales in the course of inter-State trade. Thus, the field on which the Explanation operates falls within the area covered by Article 286 (2), and there is apparently a conflict between them. Now the question is how the power of a State to tax on the basis of the Explanation is affected by the impact of Article 286 (2), and on that, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was no entry relating to trade and commerce among the Provinces though several topics relating to inter-State trade and commerce were specifically enumerated in List 1. Nor was there any provision for regulating inter-State commerce though under section 297 some restrictions were placed on the powers of the Provincial Legislature with reference thereto. The conception of commerce clause, as we now have it, was unknown to the Government of India Act, 1935. It came in for the first time as part of the Constitution. To understand its true scope, it would be legitimate and indeed necessary to examine its bearings and incidents in other systems of law. The American Constitution is the oldest written Federal Constitution in the world, and the problems it had to deal with were what many Federal Governments have had since to face. The commerce clause is one of its notable provisions, and it was before the framers of the British North America Act, 1867, and of the Commonwealth Act of Australia, 1900. Our Constitution also has largely been influenced by it, and it would be useful to examine it to see what light it throws on the present controversy. In America the authority of the Congre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ed. 549. The principle underlying these decisions would appear to be that goods which are transported in inter-State trade must necessarily come to the end of their journey when they are consumed, and that, therefore, sales for consumption take them out of the course of inter-State trade. But if the goods are sold for resale, they are still moving in inter-State journey and therefore the commerce clause applies. In 1938 the Congress enacted a legislation with reference to sales in the course of inter-State trade for purposes of resale. Examining the question whether the States had thereafter the power to enact a law regulating sales which take place in the course of inter-State trade but for local consumption, the Supreme Court held in Panhandle Eastern Pipe Line Co. v. Public Service Commission of India 332 U.S. 507; 92 L. Ed. 128. that they had, and observed: "Prior to that time (1938) this Court in a series of decisions had dealt with various situations arising from State efforts to regulate the sale of imported natural gas. The story has been adequately told and we do not stop to review it again or attempt reconciliation of all the decisions or their groundings. Suffice it t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by side the law on the subject both in America and under the Indian Constitution, it is difficult to avoid the conclusion that the Explanation to Article 286(1)(a) and Article 286(2) have been inspired by the American law on the subject, and that their spheres of operation correspond respectively to the jurisdiction of the State and of the Congress in America as delineated in Missouri ex rel. Barrett v. Kansas Natural Gas Co. 265 U.S. 298; 68 L. Ed. 1027., and Panhandle Eastern Pipe Line Co. v. Public Service Commission of India 332 U.S. 507; 92 L. Ed. 128.. I shall now pass on to consider which of the three views which have been placed before us as to the effect of Article 286(2) on the Explanation to Article 286(1)(a) deserves to be accepted. The first view is that the sales falling within the Explanation are intra-State in character, and are therefore outside the area covered by Article 286 (2). This derives considerable support from the language of the enactment. The scheme of Article 286(1)(a) is, as already stated, that it fixes the situs of the sales with a view to avoid multiple taxation, and for that purpose it divides them into two categories-inside sales and outsid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, the most natural and obvious mode of expressing that intention would be to enact, as it has, that it is "for the purposes of sub-clause (a)." This problem would not have arisen if the two matters had been dealt with in two different clauses as logically they might have been. If that had been done, the Article simplifying it, would run as follows: "286. (1) No law of a State shall impose a tax on a sale, where it takes place outside that State. Explanation : A sale shall be deemed to have taken place within that State where the goods are delivered for consumption as a direct result of the sale. 286.. (4) No law of a State shall impose a tax on a sale in the course of export or import." Article 286(1) as drafted above, relegating sub-clause (b) to a separate clause and omitting the words "for the purposes of sub-clause (a)" in the Explanation would convey precisely the import of Article 286(1)(a) as it now stands with sub-clause (b) and with the words "for the purposes of sub-clause (a)". That would clearly show that the force of the words "for the purposes of sub-clause (a)" becomes spent when Article 286(1)(b) is excluded from the operation of the Explanation. But the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nter-State trade. Explanation to Article 286(1)(a) enacts that sales in the course of inter-State trade in which goods are delivered for consumption in a State shall be deemed to have taken place inside that State. The combined effect of all these provisions is that States can tax sales in the course of inter-State trade if they fall within the Explanation. This conclusion is reached, it will be seen, not by reading the Explanation into Article 286 (2) as a sort of exception but giving to all the provisions the status of independent enactments and determining what, on a construction of the language, their respective spheres of operation are. In this view, the argument that if the Explanation could be read into Article 286(2) it might as well be read into Article 286(1)(b) and Article 286(3) does not call for consideration. As the question is one of determining on a reading of the entire Article the precise operation of the several parts thereof, there can be no objection to examining the scope of Article 286(1) including the Explanation in relation to Article 286(1)(b) and Article 286(3). Article 286(1)(a) relates to sales inside a State, and Article 286(1)(b) to sales in the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmerce. In the same illustration, if X after transporting the goods into State A sells them, then also there is no sale in the course of inter-State trade. It is true that there is a sale, and there is also a movement of goods from one State to another. But that movement has not been under the sale, there having been no sale at the time of transportation. In Rottschaefer on Constitutional Law (1939 edition) sale in the course of inter-State commerce is thus defined: "The activities of buying and selling constitute inter-State commerce if the contracts therefor contemplate or necessarily involve the movement of goods in inter-State commerce." The law is thus stated by Gavit in "Commerce Clause" (1932 Edn.): "The dividing line between an inter-State sale and intra-State sale is rather fine, although clear. If the goods are shipped into a State without a previous sale, any sale within the State is intra-State commerce.................... Thus if the sale succeeds the transportation in point of time, however close, the State may license it." In William T. Wagner v. City of Covington 252 U.S. 95; 64 L. Ed. 157., it was held that local sales of goods brought into the State from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the passage already quoted, and they both refer to the bargain resulting in the sale irrespective of whether it is in the stage of an agreement to sell, or whether it is a sale in which title to the goods has passed to the purchaser. That is also the definition of "contract of sale" in section 5(1) of the Indian Sale of Goods Act. As there can be only one final and concluded bargain in respect of any particular sale, and as that is fixed by the Explanation at Bihar, it follows that there could not be any bargain with reference thereto in Calcutta, and the movement of goods from Bengal to Bihar was not under any contract of sale. The position in law is exactly the same as if the goods had been sent by the seller from Bengal to Bihar on his own account and then sold there and delivered to the purchaser, in which case it would be indistinguishable from William T. Wagner v. City of Covington 252 U.S. 95; 64 L. Ed. 157., and the sale would clearly be intra-State. This conclusion does not negative the factum of inter-State movement of goods, and does not prevent any rights being put forward on that footing under Article 301. It only negatives the notion of a sale in the course of inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opments of modern big business is the agency system under which middlemen enter into contracts with manufacturers, stipulate for monopoly of the distribution rights within a specified area, guarantee a certain volume of business, and are granted liberal commission on the sales. In such cases, retail sellers can get the goods only from the distributors, and even when there is no grant of monopoly, it is nothing unusual in business that large distributors are able to get the goods from the manufacturers on rates more favourable than retail sellers can obtain and that consequently, it is more economical for the latter to buy them from the distributors than from the manufacturers. And it is not without significance that the distinction between the two classes of sales has been recognised in commercially advanced America for now nearly a century and recognised for this very purpose; and how can such a distinction be characterised as unsubstantial. It was finally contended by the learned Attorney-General that if Article 286(2) were to be construed as not comprehending sales falling within the Explanation, then there would be nothing on which it could operate. The argument was thus pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the sales covered by the Explanation are in the course of inter-State trade and they are, therefore, within the purview of Article 286(2), but that as the latter is a general provision covering all sales in the course of inter-State trade, and the former deals only with a special class thereof, the maxim generalia specialibus non derogant applies, and the Explanation prevails as against Article 286(2). It will be noticed that this agrees with the first view in its conclusion but it differs from it on the reasoning by which it reaches it. According to the first view, sales in the course of inter-State trade contemplated by Article 286(2) include only those under which goods are delivered for purposes other than local consumption; whereas according to the second, they include all sales including those in which goods are delivered for consumption within the State and those in which they are delivered for other purposes. According to this view, therefore, there is conflict between the Explanation and Article 286(2), and the solution for it is to be sought in the application of the rule of construction that general provisions do not derogate from the special. As between these two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y dealing with a subject and another dealing particularly with one of the topics comprised therein, the general law is to be construed as yielding to the special in respect of the matters comprised therein. Now, the reason of the rule requires that it should apply whenever there is overlapping of the fields occupied by two conflicting enactments, and when that is shown, it would not be logical to exclude its application on the ground that the enactments have been made with a different purpose. It is the identity of the subject-matter of the conflicting provisions, not the identity of their purpose or angle of vision that is essential for the application of the maxim. No authority was cited for limiting it in the manner contended for by the appellant. Now, it is the appellant's own contention that the sales covered by the Explanation are within the purview of Article 286(1)(a), and are therefore exempt from taxation thereunder, and that such taxation would be permissible only when the hold of Article 286(2) over the Explanation is removed by Parliamentary legislation under that sub-clause. That is to say, the subject-matter of the Explanation is within the coverage of Article 286(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant argues that it can be, and relies firstly on the saving clause in Article 286 (2), and secondly, on the proviso thereto as supporting it. The argument based on the saving clause may thus be stated: The contention that Article 286 (2) controls the Explanation would have resulted in rendering the latter wholly nugatory, if the words "except in so far as Parliament may by law otherwise provide" had not been there. But that result is avoided by the saving clause under which the Explanation can come into operation when there is Parliamentary legislation lifting the ban under Article 286 (2). This construction, it is argued, gives effect to the plain language of the Article and also to both the provisions. But when examined, it will be seen that far from giving effect to both the Explanation and Article 286 (2), this construction results in destroying one or the other of them. The harmonious construction which the law favours is one which gives operation to both the provisions at the same time but in their respective spheres. But according to the appellant, if Article 286 (2) is in force then the Explanation cannot operate, and if the Explanation is to operate, it can only be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty contemplated by Article 307 would have been empowered to deal not merely with the matters mentioned in Articles 301 to 304 but also Article 286(2), and it is also not a little surprising that no legislation should have been enacted on those lines during all these years. In any event, it must be a profitless task to speculate on the scope and effect of a hypothetical legislation under Article 286(2), and it would be unsafe to base any conclusion as to the true scope of the Explanation on the existence of a power in the Parliament to enact a law under Article 286(2). The contention based on the proviso to Article 286(2) must now be considered. It was argued that while the proviso is to have operation notwithstanding anything contained in Article 286 (2) it does not similarly override Article 286(1)(a) and that therefore when the President issued an order under that proviso, the Explanation would have operation, and that therefore it was not useless. To this contention, there are two answers: (1) An order issued by the President under the proviso can operate only to continue existing taxes. It cannot go further, and authorise the imposition of a tax even when the conditions ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here it is executed. Considering the matter with particular reference to the power of a State to impose tax, sale is a practical conception having relation to the right to enjoy and dispose of the goods, and it is a well-settled feature of all sales tax legislation that the power to tax the sale is annexed to the place where the goods are located at the time of the contract. Under the general law also, the position is that title to the goods passes in the State in which the goods are situated at the time of the sale. In Badische Anilin Und Soda Fabrik v. Hickson [1906] A.C. 419., there was a contract of sale signed by both the parties in England with reference to goods situated in Switzerland. The action was laid in England for breach of patent, and the point for decision was whether it was maintainable there. It would have been maintainable there if the sale was in England but not if it was in Switzerland. It was held by the House of Lords that the sale was not in England, and that the action did not lie. The position in law was thus stated by Lord Loreburn, L.C., at page 421: "As I understood him, Mr. Cripps argued that the defendant had 'vended' these goods in England within t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that consistently with this policy, Article 286 (2) should be construed as the controlling provision and the Explanation as an emergency reserve. The reply of the respondent was that the intention of the Constitution as expressed in Article 286(1)(a) was to avoid multiple taxation of sales in the course of inter-State trade, and not to free them from any taxation, that the Constitution did contemplate the levy of one tax on every sale, and that the construction of the appellant, if accepted, must place local sales in a greatly disadvantageous situation as against sales in the course of inter-State trade, and that must result in driving out local trade and business across the borders of the State. The appellant is undoubtedly right in his contention that the Constitution intended trade and commerce within the Union to be free. But the question is whether that requires that there should be no tax at all at any stage even when the goods have come to the end of their journey as a result of sale. That clearly is not the law in America where inter-State commerce is highly developed and jealously protected. That the Constitution did contemplate one tax on a sale in the course of inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of the Constitution. There is, besides, the apprehension expressed by the respondent-and it cannot be brushed aside as fanciful-that if the contention put forward by the appellant is accepted, then it must inevitably result in local trade shifting on to adjacent States. If the scheme of the Constitution is, as I conceive it to be, to put both intra-State sales and sales in the course of inter-State trade on the same footing-and that is manifest on the language of Article 301-it must follow that as the former are liable to be taxed under Entry 54, the latter should also be similarly liable to be taxed, and that is precisely what the Explanation provides for. It was next argued for the appellant that the view that under the Explanation delivery States would be entitled to tax all sales in the course of inter-State trade if goods are delivered for consumption there, would render sellers liable to be taxed in all the States in which their goods are sold, and that would subject them to a perplexing multitude of assessment proceedings in several States and that that must cause great inconvenience and hardship in business circles. Our attention was also invited to the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed only through the seller. No administrative machinery can succeed in reaching the consumers when their name is legion, and as the seller is merely to pass on the tax to the consumer, he is, in fact, constituted collector of the tax on behalf of the State. This is the practice largely adopted in America in the collection of use tax, and its validity has been repeatedly affirmed. A recent decision on the question is that in General Trading Co. v. State Tax Commission of the State of Iowa 332 U.S. 335; 88 L. Ed. 1309. There, the State of Iowa imposed a use tax on a foreign company in respect of goods distributed by it for consumption within the State. In upholding the tax, Frankfurter, J., observed: "To make the distributor the tax collector for the State is a familiar and sanctioned device. Monamotor Oil Co. v. Johnson 292 U.S. 86; 78 L. Ed. 1141 at 1147, 1148., Felt T. Mfg. Co. v. Gallagher 306 U.S. 62; 82 L. Ed. 488.." It was argued by the appellant that in the above case, the foreign company was "a retailer maintaining a place of business" within the State. But as the tax in question was not a sale tax but a use tax payable by the purchaser, it would be wholly irrelevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the States would have lost a substantial source of revenue. What is the substitute that the Constitution has provided therefor. None. In the result, there must be, as argued by the respondent, a financial crisis in the affairs of the States. The position, therefore, is that we have to choose between depriving the States of their power to impose a tax on which their very existence depends, and exposing the sellers having business outside their State to the inconvenience of multiple assessment proceedings. In that situation, can there be any doubt as to what our decision should be? Surely, the claim of the State should have precedence over that of individuals. It is very significant that all the States which have intervened have, with one exception, strongly supported the stand of the respondents. That exception is the State of West Bengal. The learned Attorney-General appearing for this State did not contend for any right in it to tax the sales. His argument was that neither West Bengal nor Bihar was entitled to tax by reason of Article 286 (2). The intervention of West Bengal is, therefore, not for protecting its rights but for the vindication of the law, as it conceives it to be. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claiming what is realised from the consumers resident within its territory. That is precisely the scope of the consumption tax under the Explanation. Thus, the suggestion of the appellant, if acted upon, will not relieve it from the liability to be taxed; it will only reduce the assessment proceedings from many to one. In other words, the relief will be with reference not to substantive rights, but to a matter of procedure. But the contention of the appellant that Article 286 (2) controls the Explanation is directed not against the procedure in the assessment of tax, but against the very liability to be assessed to it, the argumentum ab inconvenienti being availed of as a ground for denying it. The suggestion, therefore, that the taxation of sales in the course of inter-State trade should be left to the Centre lacks substance. Even with reference to the inconvenience that might result from the multiplicity of assessment proceedings, it is one which is capable of being removed without disturbing the existing scheme of the Constitution, by Parliament enacting a law constituting an authority under Article 307 and conferring on it power to receive from the sellers one consolidated sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent given by it on the identical issue. As the point arises for decision for the first time before this Court, and as our pronouncement thereon must be of the highest importance, we have heard arguments as to what the practice is in the highest judicial Tribunals of other countries with reference to this matter. In Street Tramways v. London County Council [1898] A.C. 375., it was held by the House of Lords that its decision on a question of law was conclusive and binding on the House in subsequent cases and that if it was erroneous, it could be set right only by an Act of Parliament. The practice before the Privy Council however has been different. In Ridsale v. Clifton (1877) 2 P.D. 276., Lord Cairns dealing with this question observed as follows: "In the case of decisions of final Courts of appeal on questions of law affecting civil rights, especially rights of property, there are strong reasons for holding the decisions, as a general rule, to be final as to third parties. The law as to rights of property in this country is to a great extent based upon and formed by such decisions. When once arrived at, these decisions become elements in the composition of the law, and the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for this view is that while errors of law not bearing on constitutional provisions could be corrected by ordinary process of legislation, an error on a question of constitutional law could be set right only by resort to the dilatory and cumbersome machinery of amending the Constitution. (Vide Smith v. Allright 321 U.S. 659; 88 L. Ed. 987.). This reasoning will also be applicable to decisions involving interpretation of our Constitution. It was argued for the respondents that Article 141 gives the decisions of this Court the status of law, and that, therefore, if they are to be changed that could be only by process of legislation. Article 141 only enacts that the decisions of this Court are binding on all Courts, and that does not stand in the way of this Court itself, reversing or modifying a previous decision, as when that is done, such decision would thereafter become itself the law under that Article. There is, therefore, good reason for holding that this Court has the power to reconsider, in appropriate cases, a previous decision given by it. The question then arises as to the principles on which and the limits within which this power should be exercised. It is of course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in one sense or the other. That, I conceive, is the reason behind Article 141. There are questions of law on which it is not possible to avoid difference of opinion, and the present case is itself a signal example of it. The object of Article 141 is that the decisions of this Court on these questions should settle the controversy, and that they should be followed as law by all the Courts, and if they are allowed to be reopened because a different view appears to be the better one, then the very purpose with which Article 141 has been enacted will be defeated, and the prospect will have been opened of litigants subjecting our decisions to a continuous process of attack before successive Benches in the hope that with changes in the personnel of the Court which time must inevitably bring, a different view might find acceptance. I can imagine nothing more damaging to the prestige of this Court or to the value of its pronouncements. In James v. Commonwealth 18 C.L.R. 54., it was observed that a question settled by a previous decision should not be allowed to be reopended "upon a mere suggestion that some or all of the Members of the later Court might arrive at a different conclusion i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his question are Articles 245(1) and 246(3) which are as follows: "245. (1) Subject to the provisions of this Constitution, Parliament may make laws for the whole or any part of the territory of India, and the Legislature of a State may make laws for the whole or any part of the State. 246.. (3) Subject to clauses (1) and (2), the Legislature of any State specified in Part A or Part B of the First Schedule has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule (in this Constitution referred to as the 'State List')." The contention of the appellant is that the words "for the whole or any part of the State" in Article 245(1) and "for such State or any part thereof with respect to any of the matters enumerated in List II" in Article 246(3), impose a territorial limitation on the jurisdiction of the State Legislature; that under these provisions it can enact laws only for persons and properties within the State and that the provisions of the Act to the extent that they impose tax on sellers who are outside the State are ultra vires. It was also contended that the impugned provisions were e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act or event within the State. These laws, though intra-territorial, are often loosely described as extra-territorial in operation. In this context the words "extra-territorial operation" connote laws in respect of properties or acts or events within a State but having impact or operation on persons outside the State. There is another sense in which these words are used. When a State enacts a law with reference to an act or event which takes place outside its territory, it is described as extra-territorial, and such legislation is recognised as valid by rules of International Law where it is directed against its own nationals and persons in its service. Thus, in "Conflict of Laws-Restatement of Law" it is observed that "a nation has jurisdiction over its nationals although not present within the territorial limits of the nation". (page 78). In Corpus Juris Secundum, extra-territoriality is defined as "the act by which a State extends its jurisdiction beyond its own boundaries into the territory of another State", and it is added that "the almost self-evident proposition should perhaps also be noted in this connection that a sovereignty has power to make laws regulating the condu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , observed that the jurisdiction of the colonies to enact laws was "confined within their own territories", and that "it would have been beyond the jurisdiction of the Colony" to enact a law in respect of a crime committed outside their territory. These observations refer to extra-territorial operation in the second sense stated above, and have no application when the law of the State is in respect of an act or event taking place within its territories. In Commercial Cable Company v. Attorney-General of Newfoundland [1912] A.C. 820., the question was with reference to a law of Newfoundland imposing a tax on telephone companies in respect of cables landed or established in the Colony. In discussing the scope of these provisions, Lord Macnaghten observed at page 826: "While, of course, it was competent to impose taxation on cables within its territorial jurisdiction, it was not competent for the Government to lay a tax on cables outside its territorial jurisdiction." These observations again have no bearing on the point now under consideration whether a law enacted in respect of an act or event occurring within the State is incompetent, if it seeks to operate on a person concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government of Canada or as being one of the specific subjects enumerated in section 91, British North America Act, their Lordships see no reason to restrict the permitted scope of such legislation by any other consideration than is applicable to the legislation of a fully Sovereign State." The law as settled by this decision may thus be stated: Whether a subordinate Legislature has power to enact laws with extra-territorial operation will depend on the terms of the Constitution Act which creates it and, subject to any limitations contained therein, it has in respect of the topics assigned to it powers of legislation as plenary as the Sovereign Legislature which constitutes it. It was argued by Mr. N.C. Chatterjee that subsequent to the decision in Croft v. Dunphy [1933] A.C. 156. the Privy Council had again to consider in British Coal Corporation v. The King [1935] A.C. 500, 516. the validity of a Canadian law which had extra- erritorial operation, and therein the grounds of the decision in Nadan v. The King [1926] A.C. 482.. were stated at page 516 with apparent approval, and that though the legislation was held to be valid, it was because of the Statute of Westminster, 1931, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) (a) of the Government of India Act, 1915, are based on the theory which was then widely held that a subordinate Legislature had no competence to enact laws with extra-territorial operation. Then came the Government of India Act, 1935. Sections 99(1) and 100(3) which are relevant provisions are as follows: "99. (1) Subject to the provisions of this Act, the Federal Legislature may make laws for the whole or any part of British India or for any Federated State, and a Provincial Legislature may make laws for the Province or for any part thereof. 100.. (3) Subject to the two preceding sub-sections, the Provincial Legislature has, and the Federal Legislature has not, power to make laws for a Province or any. part thereof with respect to any of the matters enumerated in List II in the said Schedule (hereinafter called the "Provincial Legislative List")." The language of these sections marks, it will be noticed, a wide departure from that of section 43 of the Charter Act and section 65(1)(a) of the Government of India Act, 1915. The limitation that the legislation should be for persons or things within the territory has been removed. Instead, it is enacted that it could be "for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrolled from there, and carried on business in British India and earned profits. Dividends in respect of these profits were declared in London and paid to the assessee in London. The Explanation to section 4(i)(c) of the Indian Income-tax Act enacts that a dividend paid outside British India shall be deemed to be income accruing in or arising in British India to the extent to which it has been paid out of profits subjected to tax in British India. The Income-tax authorities claimed that the dividendsreceived by the assessee-company were liable to be taxed under this provision. The company resisted the claim inter alia on the ground that as it was not resident in British India and did not carry on business there, the Indian Legislature had no competence to impose a tax on it, and that the provisions of the Act were ultra vires as extra-territorial in their operation. This contention succeeded before the High Court of Calcutta, the Chief justice observing that the impugned provision amounted to the "Legislature of British India without specific or apparent authority stretching out its legislative arm and physical hand beyond British India into other countries in an attempt to tax p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the strict legal sense". There was an appeal against this judgment to the Privy Council, i.e., Wallace Bros.v. Income-tax Commissioner, Bombay [1948] F.C.R. 1; 16 I.T.R. 240. Affirming the judgment of the Federal Court, Lord Uthwatt observed that the fact that the appellant "was a member of the partnership carrying on business in British India" was irrelevant in considering whether the legislation was intra vires, that it was to be assumed that there was "no connection between the companies and British India except the derivation from British India of the larger part of their income", and that the validity of the legislation should be determined on that basis. He then observed: "There is no rule of law that the territorial limits of a subordinate Legislature define the possible scope of its legislative enactments or mark the field open to its vision. The ambit of the powers possessed by a subordinate Legislature depends upon the proper construction of the statute conferring those powers. No doubt the enabling statute has to be read against the background that only a defined territory has been committed to the charge of the Legislature. Concern by a sub- ordinate Legislature w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, a difference of opinion among the learned Judges as to whether, on the facts, sufficient territorial connection had been established, the majority holding that it had been, while two learned Judges thought otherwise. That, however, is not material to the present discussion. These authorities establish that under section 99(1) and section 100 of the Government of India Act, a law enacted by the Indian Legislature in respect of the matters enumerated in the appropriate list would be valid provided it is for the territory entrusted to their charge; that whether it was so or not would depend on whether there was sufficient territorial connection between the person who is sought to be charged or proceeded against under the law and the country which enacts the law; and that when such connection exists, the law is not strictly speaking extra-territorial, and it is not ultra vires on the ground that the person is not residing within the State which enacts the law. Then, we come to the Constitution. Articles 245(1) and 246 which deal with this subject reproduce sections 99(1) and 100 with only alterations of a formal character. They confer on the Parliament and the State Legislatures ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficult to see why a law enacted by the State in respect of the matters assigned exclusively to its jurisdiction should stand on a different footing from a law passed by Parliament on a matter within its jurisdiction. Both the Legislatures derive their authority from the same source, whether it be the Government of India Act, 1935, or the Constitution of India. Under these Statutes, the State is not subordinate to the Centre, its authority being supreme in respect of the matters entrusted to it. Under the Government of India Act, 1935, when the British Government decided to change what was a unitary into a Federal Government, the process adopted for that purpose was that the Parliament resumed all the powers that had been granted under the previous Constitution Act and redistributed them between the Centre and the Province. The terms on which the redistribution was made were identical both for the Centre and the Province, their authority under sections 99(1) and 100 being to enact laws in respect of the matters mentioned in the appropriate lists and for their respective territory. The extent of this authority must, therefore, be the same both in the case of the Centre and the Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commonwealth Parliament would similarly be deemed unconstitutional and void." These observations are very apposite to the present controversy. The conclusion is inescapable that the powers of the Union and the State under sections 99(1) and 100 of the Government of India Act, as also under Articles 245(1) and 246 in respect of the matters mentioned in their respective lists have the same content and quality, and that if legislation with extra-territorial operation is within the competence of the Union, it is equally within the competence of the State. Coming now to the second contention, the argument of the appellant is that in enacting that "no law of Parliament shall be deemed to be invalid on the ground that it would have extra-territorial operation", Article 245(2) prohibits by implication the enactment of such laws by the States. This contention is unsound. The words "extra-territorial operation" are used, as already stated, in two different senses as connoting firstly, laws in respect of acts or events which take place inside the State but have operation outside, and secondly, laws with reference to the nationals of a State in respect of their acts outside; that in its f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -territorial operation, be deemed to be invalid in so far as it applies- (a) to British subjects and servants of the Crown in any part of India; or (b) to British subjects who are domiciled in any part of India wherever they may be; or (c) to, or to persons on, ships or aircraft registered in British India or any Federated States wherever they may be; or (d) in the case of a law with respect to a matter accepted in the Instrument of Accession of a Federated State as a matter with respect to which the Federal Legislature may make laws for that State, to subjects of that State wherever they may be; or (e) in the case of law for the regulation or discipline of any naval, military, or air force raised in British India, to members of, and persons attached to, employed with or following, that force, wherever they may be." In Governor-General v. Raleigh Investment Co.(1), the question was raised whether these provisions were restrictive of the power of the Indian Legislature to enact laws with extra-territorial operation in respect of matters other than those enumerated in section 99(2). Spens, C.J., held that as the impugned provisions were within the ambit of legislativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proceedings on the ground of want of jurisdiction. That is the one and the only question that now falls to be determined. Even if some of the machinery sections are bad-it is a question to be decided when it arises whether they can be justified on the ground that they are ancillary or incidental to the substantive provisions, as to which see Attorney-General for Canada v. Cain and Croft v. Dunphy that would not affect the power of the State to impose a tax, and it will therefore be foreign to the scope of this appeal to enter into a discussion of their validity. It was urged by the learned Attorney-General that if the machinery sections were bad on the ground that they were extra-territorial in their operation, and if the power to tax was so mixed up with them as to be inseparable from them, then, when they fall it must also fall. A power to tax is a matter of substantive law, whereas the machinery sections providing for the execution of that power, such as assessment, and collection of tax, pertain to the domain of adjectival law, and the two are distinct and separable. It is elementary law that the power to tax does not depend on the ability to realise it. In British Colu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the laws of a State are not intended to operate outside it territory is, as stated by Maxwell, that "Parliament does not design its Statutes to operate on its subjects beyond the territorial limits of the United Kingdom" (Maxwell's Interpretation of Statutes, 10th edition, page 145). That has reference to extra-territorial operation in the second sense. There is no presumption that the laws of a State made with reference to acts and events occurring within its borders are not intended to have operation outside its territory. Moreover, a tax on sale of goods is, as observed in The Province of Madras v. Messrs. Boddu Paidanna Sons "a tax levied on the occasion of the sale of goods" and the liability to tax arises "on the occasion of a sale". In The State of Bombay v. The United Motors (India) Ltd., it was stated that the sales tax was a tax imposed "on the occasion of the sale as a taxable event." It is thus, in essence, a tax levied on the act of buying and selling. Sale is the result of a contract, and is bilateral in character. There can be seller only in relation to a purchaser and vice versa. It therefore follows that the power to impose a tax on sale imports a power to ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne whether they will tax the seller or the buyer, the Explanation has merely given recognition to a familiar principle of taxation laws sanctioned by usage and upheld by authority. This objection must accordingly be overruled. It was then contended that the sales proposed to be taxed did not take place in Bihar as the goods were actually delivered as contemplated by the Explanation not there but in Bengal. The argument is that the words "actual delivery" in the Explanation are used in contrast to constructive or symbolic delivery as meaning physical delivery of goods, that under section 39(1) of the Sale of Goods Act, 1930 (Act III of 1930) the common carrier is the agent of the purchaser, and that therefore delivery of the goods to the railway authorities in Bengal was actual delivery thereof to the purchaser in Bengal. Section 39(1) is as follows: "Where in pursuance of a contract of sale, the seller is authorised or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer, or delivery of the goods to a wharfinger for safe custody is prima facie deemed to be a delivery of the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to actual delivery. He is the agent of the purchaser for transmission of he goods to him. This position was well-established in the common law of England, and was thus stated by Parke, B., in James v. Griffin(1) in the following terms: "The delivery by the vendor of goods sold to a carrier of any description, either expressly or by implication named by the vendee, and who is to carry on his account, is a constructive delivery to the vendee, but the vendor has a right if unpaid, and if the vendee be insolvent, to retake the goods before they are actually delivered to the vendee, or some one whom he means to be his agent, to take possession of and keep the goods for him, and thereby to replace the vendor in the same situation as if he had not parted with the actual possession ...... The actual delivery to the vendee or his agent, which puts an end to the transitus or state of passage, may be at the vendee's own warehouse, or at a place which he uses as his own, though belonging to another, for the deposit of goods: (Scott v. Prettit: Rowe v. Pickford); or at a place where he means the goods to remain until a fresh destination is communicated to them by orders from himself: Dixon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) should be overruled, and of my brother T.L. Venkatarama Ayyar that it should be followed, I have come to the conclusion that the latter view is more acceptable. We are all agreed that the present case is governed by the previous decision of this Court just referred to and that if that case lays down the correct rule of law, this appeal should be dismissed. We are also agreed that the language of Article 286 of the Constitution on which the case depends is not felicitous and free from vagueness, with the result that the interpretation of that Article is not free from doubt and difficulty. The very fact that in the case referred to, as also in the later decision of this Court reported in State of Travancore-Cochin v. Shanmugha Vilas Cashew-Nut Factory involving the construction of Article 286, the Court was divided in its opinion shows that the interpretation of the Article in question is by no means easy. The fact that the Court is sharply divided in the present case also emphasizes the difficulty. The question we have to determine at the outset is whether or not we should follow the previous decision of this Court in The State of Bombay v. The United Motors (India) Ltd. We a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 286(1)(a) of the Constitution has created a legal fiction as a result of which a transaction of sale or purchase partaking of an inter-State character has been treated as a domestic transaction. The fiction has localized sales or purchases contemplated by the Explanation, by converting such transactions as would otherwise have been inter-State sales or purchases into sales or purchases inside one State in a sense in which it is placed in a class distinct and separate from what is referred to as sales or purchases "outside the State" in the main body of Article 286(1)(a) which prohibits imposition of tax by any State. There is a general agreement amongst us, I take it, that the, main purpose of creating the fiction is to prevent multiple taxation of the same transaction, but, it may be added, not altogether to stop the taxation of such transactions. We are also agreed that full effect must be given to the legal fiction on the supposition that the putative state of affairs is the real one. While thus agreeing on the general principle bearing on the question of the purpose and scope of a legal fiction, we are again divided on the question of how far the legal fiction should be carried ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of giving full effect to that fiction. Allied with this question is the controversy as to whether clause (2) of Article 286 is subject to Article 286(1)(a) read with the Explanation or vice versa. In my opinion, for the reasons given by my learned brother Venkatarama Ayyar the better view is that clause (2) of Article 286 of the Constitution is subject to Article 286(1)(a) read with the Explanation. On the whole, therefore, I would agree with the view that the previous decision of this Court in The State of Bombay v. The United Motors (India) Ltd.(1) should continue to hold good and govern the present controversy also. In that view of the matter I would dismiss this appeal with costs. BY THE COURT.- The appeal is allowed and an order shall be issued directing that, until Parliament by law provides otherwise, the State of Bihar do forbear and abstain from imposing sales tax on out- of-State dealers in respect of sales or purchases that have taken place in the course of inter-State trade or commerce even though the goods have been delivered as a direct result of such sales or purchases for consumption in Bihar. The State must pay the costs of the appellant in this Court and in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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