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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 ..... Advocate, with him), for the State Madhya Pradesh. T.N. Subramanya Iyer, Senior Advocate (T.V.R. Tatachari, Advocate, with him), for M.K. Kuriakose. K.B. Asthana and C.P. Lal, Advocates, for the State of Uttar Pradesh. Lal Narain Sinha, Senior Advocate (B.K.P. Sinha and R.C. Prasad, Advocates, with him), for the respondents. M.C. Setalvad, Attorney-General of India (B. Sen and P.K. Bose, Advocates, with him), for the State of West Bengal. S.M. Sikri, Advocate-General of Punjab (Jindra Lal and P.G. Gokhale, Advocates, with him), for the State of Punjab. V.K.T. Chari, Advocate-General of Madras (K. Veeraswami and P.G. Gokhale, Advocates, with him), for the State of Madras. M.C. Setalvad, Attorney-General of India (Rajeswari Prasad and S.P. Varma, Advocates, with him), for Tata Iron & Steel Co., Ltd. The judgment of DAS, ACTG. C.J., BOSE and JAFER IMAM, JJ., was delivered by DAS, ACTG. C.J.-This appeal, filed under a certificate of fitness granted by the High Court of Patna, is directed against the judgment of that High Court pronounced on the 4th December, 1952, whereby it dismissed the application made by the appellant company under Article 226 of the Constitution praying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ihar Sales Tax Authorities to which it is not necessary to refer in detail. Suffice it to say that while the appellant company denied its liability on the ground, inter alia, that it was not resident in Bihar, it carried on no business there, none of its sales took place in Bihar and that it did not collect any sales tax from any person of that State, the Bihar Sales Tax Authorities maintained that under section 33, which was substantially-based on Article 286 of the Constitution and was inserted in the Act by the President's Adaptation Order promulgated on the 4th April, 1951, all sales in West Bengal or any other State under which the goods had been delivered in the State of Bihar as a direct result of the sale for the purpose of consumption in that State were liable to Bihar sales tax. Eventually on the 29th May, 1952, the Assistant Superintendent of Sales Tax, Bihar, called upon the appellant company to comply with the notice by the 14th June, 1952, and threatened that, in default of compliance, he would proceed to take steps for assessment to the best of his judgment. The appellant company by its letter dated the 7th June, 1952, characterised the notice under section 13( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vertheless, be a decision within the ambit of his jurisdiction and the High Court cannot interfere with it by a writ of prohibition or certiorari to quash. The High Court accordingly held that the petition was not maintainable and was liable to be dismissed. We are unable to agree with the above conclusion. In reaching that conclusion the High Court appears to have overlooked the fact that the main contention of the appellant company, as set forth in its petition, is that the Act, in so far as it purports to tax a non-resident dealer in respect of an inter-State sale or purchase of goods, is ultra vires the Constitution and wholly illegal. In the impugned Act there are various provisions laying down conditions which dealers must comply with or submit to, namely, to give only a few instances, compulsory registration of dealers (section 10), filing of returns (section 12), attendance and production of evidence in support of the return (section 13), production, inspection and seizure of books of account or documents and search of premises (section 17). Section 26 prescribes penalties for contravention of the provisions of the Act. These and other like pro- visions in the Act undoubte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If, therefore, this contention be well founded, the remedy by way of a writ must, on principle and authority, be available to the party aggrieved. It has been argued that the application was premature, for there has, so far, been no investigation or finding on facts and no assessment under section 13 of the Act. The appellant company, contending, as it does, that the Act is ultra vires and void, should have ignored the notice served on it and should not have rushed into Court at this stage. This line of argument appears to us to be utterly untenable. In the first place, it ignores the plain fact that this notice, calling upon the appellant company to forthwith get itself registered as a dealer, and to submit a return and to deposit the tax in a treasury in Bihar, places upon it considerable hardship, harassment and liability which, if the Act is void under Article 265 read with Article 286, constitute, in presenti, an encroachment on and an infringement of its right which entitles it to immediately appeal to the appropriate Court for redress. In the next place, as was said by this Court in Commissioner of Police, Bombay v. Gordhandas Bhanji [1952] 3 S.C.R. 135 at pp. 148, 149., wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the following grounds, namely: (A) that the sales sought to be taxed having taken place in the course of inter-State trade or commerce and Parliament not having by law provided otherwise, all States are debarred from imposing tax on such sales by reason of Article 286(2); (B) that even if the ban under Article 286(2) did not apply, the State of Bihar is not competent to impose tax on such sales on a correct reading of Article 246(3) read with Entry 54 of List II in the Seventh Schedule and Article 286(1); (C) that the Bihar Sales Tax Act, 1947, can have no extra-territorial operation and cannot, therefore, impose tax on such sales by a non-resident seller; (D) that on a true construction of the Act itself, it does not apply to the sales sought to be taxed. Re (A): The main controversy in this appeal has centred round this ground. It raises a question of construction of Article 286 of the Constitution. In the judgment under appeal the High Court took the view that sales or purchases in the course of inter-State trade or commerce referred to in Article 286(2) must be construed so as to exclude the particular class of sales or purchases described in the Explanation to clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and bound to decide which of the two conflicting decisions of its own it Will follow; (2) the Court is bound to refuse to follow a decision of its own which, though not expressly overruled, cannot, in its opinion stand with a decision of the House of Lords; and (3) the Court is not bound to follow a decision of its own, if it is satisfied that the decision was given per incuriam, e.g., where a Statute or a rule having statutory effect which would have affected the decision was not brought to the attention of the earlier Court. [See Young v. Bristol Aeroplane Co. Ltd. [1944] K.B. 718 C.A. which, on appeal to the House of Lords, was approved by Viscount Simon in L.R. 1946 A.C. 163 at p. 169]. A decision of the House of Lords upon a question of law is conclusive and binds the House in subsequent cases. An erroneous decision of the House of Lords can be set right only by an Act of Parliament. [See Street Tramways v. London County Council [1898] A.C. 375. This limitation was repeated by Lord Wright in Radcliffe v. Ribble Motor Services Ltd. [1939] A.C. 215 at p. 245.] The High Court in Australia, which is the highest Court in that Commonwealth, has not adopted such a rigid ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt of Australia departed from its previous decision. In the United States of America there have been a considerable number of cases in which the Supreme Court has explicitly and avowedly overruled its prior decisions but there have been more instances in which the doctrines declared in prior cases have been in part evaded or modified without explicit repudiation. (Willoughby- onstitution of the United States, 2nd Edn., Vol. 1, pp. 74-75). In State of Washington v. Dawson & Co. 264 U.S. 646; 68 L.Ed. 219., Brandies, J., in his dissenting judgment said: "The doctrine of stare decisis should not deter us from overruling that case and those which follow it. The decisions are recent ones. They have not been acquiesced in. 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 Courts have disregarded its admonition are many". In a foot-note to this judgment the learned Jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n all circumstances, bound to follow a previous decision, as it were, blindfold, they are unable to discover any adequate authority. In other words, no inflexible rule, which falls in all circumstances to be applied, has been laid down ". In Attorney-General of Ontario v. The Canada Temperance Federation (1946) 50 C.W.N. 535; A.I.R. 1946 P.C. 88., Viscount Simon stated the practice of the Board in the following terms: "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 upon both by Governments and subjects". Finally, in Phanindra Chandra Neogy v. The King Lord Simonds (1939) L.R. 76 I.A. 10; 1939 Bom. L.R. 87 (P.C.). said at p. 88: "Their Lordships then have before them a decision upon fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efers to Courts other than this Court. The corresponding provision of the Government of India Act, 1935, also makes it clear that the Courts contemplated are the Subordinate Courts. There are several circumstances relating to the majority decision of the Court in The State of Bombay v. The United Motors (India) Ltd. [1953] 4 S.C.R. 1069; 4 S.T.C. 133, to which reference must be made. That appeal was heard immediately before the hearing of the appeal reported as The State of Travancore-Cochin v. Shanmugha Vilas Cashew-Nut Factory [1954] 5 S.C.R. 53; 4 S.T.C. 205 commenced. The two appeals were, as a matter of fact, heard one after the other and judgments were reserved in both of them. The Constitution of the Benches was, however, different. In the first appeal one of the Judges of that Bench expressly differed from the majority decision and another learned Judge did not accept the majority decision on many points. In the second appeal one judge of the Bench, who was not a party to the first appeal, differed from the majority decision in the first appeal. The result, therefore, was that the majority decision was definitely differed from by two Judges. Bhagwati, J., has now in the jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs within the State of delivery from out-of-State sellers, except those buying for re-export out of the State, would be within the scope of the Explanation and liable to be taxed by the State on their inter-State transactions." This passage seems to suggest that it is only the buyers falling within the Explanation who are liable to be taxed by what has been called in the discussion before us as the delivery State. According to this passage, read by itself, the out-of-State sellers are not considered liable to be taxed on the sales. The whole trend of the rest of the majority judgment and the actual decision therein run counter to Ibis conclusion, for the out-of-State sellers were, by reason of the Explanation, subjected to the taxing power of the delivery State. Indeed, Bihar is claiming to tax the appellant company, an out-of-the-State seller, by virtue of the majority decision and all other States intervening and supporting Bihar read the judgment in that way and none of them accepts the quoted passage as containing the actual ratio decidendi of the majority judgment. This confusion, we consider, is also a cogent reason for re-examining that decision. Reference is made to the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchases of goods where the goods are actually delivered for consumption within their respective boundaries on the faith of our previous decision and a reversal of that decision will upset the economy of the States and will indeed render them liable to refund moneys already collected by them as taxes. This circumstance, it is pressed upon us, should alone deter us from differing from the previous decision. We are not impressed by this argument. It has not yet been decided by this Court that moneys paid under a mutual mistake of law induced by a wrong judicial interpretation of a statute or the Constitution must necessarily be refundable as money had and received. If, as contended, moneys so paid are in law refundable the States cannot complain any more than a private individual in similar circumstances could do. Finally, if the State economy is upset the appeal must be to Parliamentwhich under Article 286(2) itself has ample power to make suitable legislation. The impugned decision is a recent one. The judicial opinion was divided, if not evenly balanced. One of the four Judges who formed the majority has revised his opinion as stated above. The decision on the point noted above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p. 35. Lindley, M. R., in 1898 found the rule "as necessary now as it was when Lord Coke reported Heydon's case 3 Co. Rep. 7a; 76 E.R. 637.". In Eastman Photographic Material Company v. Comptroller General of Patents, Designs and Trade Marks [1898] A.C. 571 at p. 576., Earl of Halsbury reaffirmed the rule as follows: "My Lords, it appears to me that to construe the Statute in question, it is not only legitimate but highly convenient to refer both to the former Act and to the ascertained evils to which the former Act had given rise, and to the later Act which provided the remedy. These three being compared I cannot doubt the conclusion." It appears to us that this rule is equally applicable to the construction of Article 286 of our Constitution. In order to properly interpret the provisions of that Article it is, therefore, necessary to consider how the matter stood immediately before the Constitution came into force, what the mischief was for which the old law did not provide and the remedy which has been provided by the Constitution to cure that mischief. The position with respect to taxation on sales or purchases of goods that prevailed in the country had better be stated in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the State power of imposing non-discriminatory taxes on goods imported from other States, while upholding the economic unity of India by providing for the freedom of inter-State trade and commerce. In their attempt to harmonise and achieve these somewhat conflicting objectives, they enacted Articles 286, 301 and 304." Leaving out, for the moment, the question as to whether Articles 301 and 304 have any bearing on the question of construction of Article 286, as to which we entertain a contrary opinion, the above passage quite adequately depicts the picture of chaos and confusion that was brought about in inter-State trade or commerce by indiscriminate exercise of taxing power by the different Provincial Legislatures founded on the theory of territorial nexus between the respective Provinces and the sales or purchases sought to be taxed. It was to cure this mischief of multiple taxation and to preserve the free flow of inter-State trade or commerce in the Union of India regarded as one economic unit without any provincial barrier that the Constitution makers adopted Article 286 in the Constitution which runs as follows: "286. (1) No law of a State shall impose, or authorise the imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Article. Apart from the marginal note, the very language of that Article makes it abundantly clear that its object is to place restrictions on the legislative power of the States with respect to the imposition of taxes on the sales or purchases of goods. It will be recalled that section 100(3) of the Government of India Act, 1935, read with Entry 48 of List II of the Seventh Schedule to that Act gave power to the Provincial Legislatures to make laws with respect to "Taxes on the sale of goods and on advertisements". Pursuant to the legislative power thus conferred on them the Provincial Legislatures enacted Sales Tax Acts for their respective Provinces. Although in most of those Acts "Sale" was first defined as meaning transfer of the property in the goods, so as to make the passing of the property within the Province the principal basis for the imposition of the tax, yet by means of Explanations to that definition, those Acts gave extended meanings to that word and thereby enlarged the scope of their operation. The imposition of tax on the sales or purchases of goods on the basis of a very slight territorial connection or nexus resulted in what has been graphically des ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by way of a tax impost. In clause (2) they looked at sales or purchases in their inter-State character and imposed another ban in the interest of the freedom of internal trade. Finally, in clause (3) the Constitution makers' attention was rivetted on the character and quality of the goods themselves and they placed a fourth restriction on the States' power of imposing tax on sales or purchases of goods declared to be essential for the life of the community. These several bans may overlap in some cases but in their respective scope and operation they are separate and independent. They deal with different phases of a sale or purchase but, nevertheless, they are distinct and one has nothing to do with and is not dependent on the other or others. The States' legislative power with respect to a sale or purchase may be hit by one or more of these bans. Thus, take the case of a sale of goods declared by Parliament as essential by a seller in West Bengal to a purchaser in Bihar in which goods are actually delivered as a direct result of such sale for consumption in the State of Bihar. A law made by West Bengal without the assent of the President taxing this sale will be unconstitutional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te, notwithstanding the fact, etc., etc.", then none of the difficulties would have arisen at all. But why, it is asked, did the Constitution makers seek to explain what was an outside sale or purchase by saying that a sale or purchase was to be deemed to take place inside the particular State mentioned in the Explanation. Was the purpose of the Explanation only to explain what was an outside sale or purchase or was it also its purpose to allot or assign a particular class of sales or purchases of the kind mentioned therein to a particular State so as to put the question of situs of the sales or purchases of that description beyond the pale of controversy. These are questions which arise and are raised because of the somewhat involved language of the Explanation. Four different views as to the true meaning and effect of the Explanation have been suggested for our consideration and arguments have been advanced for and against the correctness of each of them. In the view we have taken, it is not necessary for us to express any final opinion in the matter. We propose accordingly to note the possible views and record very briefly the criticisms relating to each of those views and the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Explanation and although it does not purport substantively and proprio vigore to confer any legislative power on any State. Its only purpose is to explain what an outside sale is, so that; by one stroke, as it were, it takes away the taxing power, in respect of sales or purchases of the kind referred to in the Explanation, of all States other than the State where such sales or purchases are, by the Explanation, to be deemed to have taken place. This view of the Explanation was taken in the dissenting judgment in the case of The State of Travancore-Cochin v. Shanmugha Vilas Cashew-Nut Factory [1954] 5 S.C.R. 53; 4 S.T.C. 205. The view that the Explanation is only for the purposes of sub-clause (a) of clause (1) and cannot be carried over to clause (2) was also taken in the dissenting judgment in The State of Bombay v. The United Motors (India) Ltd.[1953] 4 S.C.R. 1069 at p. 1103; 4 S.T.C. 133. The criticism that has been levelled against this strict view of the Explanation is that it will not entirely eliminate the claims of the States to tax sales or purchases on the basis of the nexus theory. Suppose, it is said, Parliament lifts the ban placed on inter-State trade or com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emembered that under Entry 42 of List I Parliament alone may make law with respect to inter-State trade or commerce. It is, therefore, conceded that in exercise of its legislative powers under that entry read with Article 286 (2) Parliament may make a law permitting the States to tax inter-State sales or purchases of certain commodities only. It is also not questioned that Parliament may, by way of regulating inter-State trade or commerce, fix a ceiling rate of tax on sales or purchases of goods which the law made by the States under Entry 54 of List II, may not exceed. Can Parliament also override the Explanation? If not, cannot Parliament at least provide which of the States may tax inter-State sales or purchases of goods which do not fall within the Explanation? These are some of the questions which may arise as and when Parliament will choose to make a law in exercise of the powers conferred on it and it will then be time enough to discuss and decide those questions. It is not for the Courts to advise Parliament in advance as to the scope of its legislative competency under clause (2) and, therefore, we only note those questions and leave them here. The second view as to the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. The United Motors (India) Ltd.[1953] 4 S.C.R. 1069; 4 S.T.C. 133., is that the Explanation concerns itself with notionally fixing the situs of sales or purchases in the delivery State only but in no way affects the taxing power of the State in which, under the general law relating to the sale of goods, the property in the goods has passed. The result of this view is said to be that the State in which the sales or purchases are to be deemed to have taken place may tax them but the State in which, under the general law relating to the sale of goods, the property in the goods has passed may also tax them if and when Parliament lifts the ban of clause (2). This view, it is said, is open to all the criticisms to which the second view is subject and in addition to that a further objection has been suggested against this view, namely, that it will perpetuate double, if not multiple, taxation on one and the same transaction of sale or purchase at least after Parliament lifts the ban. A fourth view has also been suggested before us as a possible view although it was not put forward on the previous occasion. It is founded on the non-obstante clause in the Explanation. It is said that cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te purpose. Here the avowed purpose of the Explanation is to explain what an outside sale referred to in sub- clause (a) is. The judicial decisions referred to in the dissenting judgment in The State of Travancore-Cochin v. Shanmugha Vilas Cashew-Nut Factory [1954] 5 S.C.R. 53 at pp. 81 and 82; 4 S.T.C. 205. and the case of East End Dwellings Co. Ltd. v. Finsbury Borough Council [1952] A.C. 109 at p. 132. clearly indicate that a legal fiction is to be limited to the purpose for which it was created and should not be extended beyond that legitimate field. It should further be remembered that the dominant, if not the sole, purpose of Article 286 is to place restrictions on the legislative powers of the States, subject to certain conditions in some cases and with that end in view Article 286 imposes several bans on the taxing power of the States in relation to sales or purchases viewed from different angles and according to their different aspects. In some cases the ban is absolute as, for example, with regard to outside sales covered by clause (1)(a) read with the Explanation, or with regard to imports and exports covered by clause (1)(b) and in some cases it is conditional, e.g., in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Explanation and clause (2). This conclusion leads us now to consider the arguments by which the respondent State and the intervening States which support the respondent State seek to get over this position. In the forefront is placed the argument that found favour with the majority of the Bench which decided the case of The State of Bombay v. The United Motors (India) Ltd. [1953] 4 S.C.R. 1069; 4 S.T.C. 133. That argument is to be found in the majority judgment at pp. 1085-1086. Shortly put, the majority opinion was that the operation of clause (2) stood excluded as a result of the legal fiction enacted in the Explanation. In their view the effect of the Explanation in regard to inter-State dealings was to invest what, in truth, was an inter-State transaction with an intra-State character in relation to the State of delivery and clause (2) could, therefore, have no application. They recognised that the legal fiction was to operate "for the purposes of sub-clause (a) of clause (1)" and that that meant merely that the Explanation was designed to explain the meaning of the expression "outside the State" in clause (1)(a). They, nevertheless, came to the conclusion that when once it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be noted, does not say that an inside sale may be taxed. It only says that no outside sale shall be taxed. Now if a State claims that the sale is inside because part of its ingredients lies within its boundaries, by the same logic it is also an outside sale because the remaining parts are outside its territories and if it is an outside sale it cannot be taxed whether or not it can be deemed to be inside for some particular purpose. The prohibition of Article 286(1) (a) is against taxing an outside sale and if the sale is outside even partially it may well be argued that no State Legislature can override the Constitution by deeming it to be an inside sale. Therefore, if the last of the aforesaid theories were to be adopted, then either no State would be able to tax, or all having the requisite nexus would be able to do so. But this, in our opinion, is the very mischief which the Constitution makers wished to avoid and that, as we understand the majority judgment in the Bombay case, was their view also. So that view can be placed on one side. On any one of the other views the situs would have to be fixed artificially in one place and then one would have to apply the logic of the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are in the course of inter-State trade or commerce the stream of inter-State trade or commerce will catch up in its vortex all such sales or purchases which take place in its course wherever the situs of the sales or purchases may be. All that the Explanation does is to shift the situs from point A in the stream to point X also in the stream. It does not lift the sales or purchases out of the stream in those cases where they form part of the stream. The shifting of the situs of a sale or purchase from its actual situs under the general law to a fictional situs under the Explanation takes the sale or purchase out of the taxing power of all States other than the State where the situs is fictionally fixed. That is all that clause (1)(a) and the Explanation do. Whether the delivery State will be entitled to tax such a sale or purchase will depend on the other provisions of the Constitution. The assignment of a fictional situs to a sale or purchase has no bearing or effect on the other aspects of the sale or purchase, e.g., its inter-State character or its export or import character which are entirely different topics. This fixing of a situs for a sale or purchase in any particular St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of many inter-State transactions but that is only for ascertaining, for the purposes of clause (1)(a), whether it has taken place inside or outside a particular State. The inter-State aspect of the sales or purchases is not within the purview of clause (1)(a) which looks at sales or pur- chases from the point of view of their location only. Clause (2), on the other hand, takes note of the inter-State character of sales or purchases which is an entirely different topic. The two provisions do not relate to the same subject and, therefore, it is not possible to hold that one is the enunciation of a general rule and the other the enunciation of a particular or special rule on one and the same subject. The principle of construction relied upon cannot, in our opinion, be called in aid in construing clause (2) and the Explanation of clause (1)(a). If the Explanation cuts down clause (2), it must also, on a parity of reasoning, cut down clause (3) which, as will hereinafter be explained more fully, could not possibly have been intended by the Constitution makers. It must also cut down clause (1)(b) dealing with import and export; but to hold that would run counter to the decision in The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the community. The fact that the Explanation, in so far as it relates to inter-State sales, may not have an immediate operation until Parliament lifts the ban under clause (2) need not unnecessarily oppress us or lead us to adopt a forced construction only to give the whole of it an immediate and present operation. (ii) In the second place, it is not correct to say that the Explanation, construed as suggested above, can have no immediate operation at all. It certainly has immediate operation to render sales and purchases which fall within the Explanation to be outside sales and purchases so as immediately to take away the taxing power of all States other than the delivery State with respect to them. Further cases may, arise in which purchases or sales which are outside clause (2) may, nevertheless, fall within and be immediately governed by the Explanation. We do not wish to express any opinion on hypothetical cases but the following illustration will show that on a given view of the law the Explanation would be called into play despite the fact that clause (2) was not attracted. Take, for instance, a case where both the seller and the buyer reside and carry on business in Gurg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lause (1)(a) read with the Explanation is wholly useless. It may well be argued that there was scope for the operation of clause (1)(a) and the Explanation as and when the President exercised the powers vested in him by the proviso to clause (2). It will be noticed that under that proviso the President's order was to take effect "notwithstanding that the imposition of such tax is contrary to the provisions of this clause ". This non-obstante clause does not, in-terms, supersede clause (1) at all and, therefore, prima facie, the President's order was subject to the prohibition of clause (1)(a) read with the Explanation. It is, however, pointed out that the proviso says that any tax which was being lawfully levied by the States immediately before the commencement of the Constitution will continue to be levied until the date therein specified. It is said that before the Constitution sales tax was levied by the different States on the basis of the nexus theory irrespective of the situs of the sales or purchases and, therefore, this very proviso clearly indicates that the intention of the Constitution makers was that all taxes imposed on the basis of the nexus theory must continue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin their terms and leave clause (2) to govern only those cases which are outside clause (1)(a) read with the Explanation then, on a parity of reasoning, we shall have to give effect to clause (1)(a) and the Explanation and leave clause (1)(b) and also clause (3) to govern only those cases which do not fall within clause (1)(a) read with the Explanation. To illustrate this point, take clause (3). Suppose under clause (3) Parliament by law declares certain goods, say wheat, to be essential for the life of the community. Suppose there is a sale of such essential goods by a seller in the State of Delhi to a buyer in Gurgaon in the State of Punjab in which as a direct result of such sale the goods are delivered in Gurgaon in Punjab for consumption in that State. According to the argument we have to give full effect first to clause (1)(a) and the Explanation and accordingly we must hold that the transaction is wholly covered by the Explanation and, therefore, Punjab will be entitled to tax it and clause (3) must be left to govern only cases other than those which fall within the Explanation. If the argument were sound it must follow that the State of Punjab will be perfectly justified i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axing power of the States with respect to sales or purchases in their different aspects viewed from entirely different angles which we have heretofore already explained. The subject-matters of the different parts of Article 286 are, therefore, different and distinct and the principle of interpretation, namely, the special provision cutting down the general provision cannot be properly invoked. (b) The second reason urged is that if Article 286 (2) applies to the class of sales or purchases falling within Article 286(1)(a) then it will result in discrimination against local trade and in favour of inter- State trade and this will be inconsistent with the provisions of Part XIII of the Constitution. It is said that when a Bihar dealer sells certain goods to a Bihar purchaser the former is obliged to pay sales tax which he passes on to the Bihar purchaser but when the Bihar purchaser directly imports into Bihar similar goods from say a West Bengal dealer for consumption in Bihar that transaction will not be liable to Bihar sales tax as it will be an inter-State transaction. This, it is said, will prejudice the Bihar seller for all Bihar purchasers will then be driven to purchasing go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Judges who were parties to the majority, decision. It is, therefore, necessary to examine the matter a little more closely. Ordinarily, inter-State trade or commerce is done between a dealer in one State and a dealer in another State. The dealer in the consuming State in his turn sells the goods in retail to actual consumers. There can be no objection to insisting upon all inside dealers getting themselves registered and submitting returns showing goods imported and sold by them and bringing their annual turnovers to tax which they will pass on to the actual consumers. Call it a purchase tax vis-a-vis the earlier transaction under which the goods were delivered in Bihar for consumption in that State or call it a sales tax vis-a-vis the subsequent local sales by the Bihar dealer to actual consumers in Bihar, the State will get the full revenue on these local sales or purchases from the local sellers. There can be no doubt that sales or purchases of this kind to or from one dealer to another dealer actually form the bulk of inter-State trade or commerce. To take them out of clause (2) will be to make the protection of inter-State trade or commerce wholly illusory and to rob c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elf read in the light of the contemporary history of the legislative activities of the different States with respect to taxes on sales or purchases of goods and the chaos and confusion that arose and the havoc that ensued as a result of those activities. There was multiple taxation which imposed a heavy burden on the consumers and which was also calculated to impede and hinder the free flow of inter-State trade or commerce. The Constitution makers, therefore, imposed several bans on the taxing power of the States with respect to sales or purchases, namely, first on the basis of their situs, secondly and thirdly on the basis of the character of the transactions, e.g., foreign trade or inter-State trade and fourthly on the basis of the nature or quality of the goods sold or purchased, i.e., whether they have been declared to be essential to the life of the community. As regards inter-State trade or commerce the clear intention of the Constitution makers was to place an absolute ban for the time being, subject to the proviso, and to give some time to Parliament to study the situation and to evaluate the result of the ban and to lift the ban to such extent as it thought fit in the inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellate and revisional and there will be as many proceedings under each heading as there are States where the goods are sold. The harassment to traders is quite obvious and needs no exaggeration. On the other hand if any risk to the economy of the States ensues from the construction of Article 286 which commends itself to us, the appeal must be to Parliament which can by law made under the opening words of clause (2) mitigate that risk. For all the foregoing reasons we are definitely of opinion that, until Parliament by law made in exercise of the powers vested in it by clause (2) provides otherwise, no State can impose or authorise the imposition of any tax on sales or purchases of goods when such sales or purchases take place in the course of inter-State trade or commerce and the majority decision in The State of Bombay v. The United Motors (India) Ltd. [1953] 4 S.C.R. 1069; 4 S.T.C. 133. in so far as it decides to the contrary cannot be accepted as well founded on principle or authority. In the view we have taken on question (A) it is not necessary for us, on this occasion, to discuss the other questions (B), (C) or (D). All that remains to be seen is whether as a result of ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract of sale is made, be deemed for the purposes of this Act to have taken place in Bihar: Provided further that the sale of goods in respect of a forward contract, whether goods under such contract are actually delivered or not, shall be deemed to have taken place on the date originally agreed upon for delivery." This definition was amended and between the 1st April, 1951, and the 31st March, 1952, which covers the latter part of the relevant period it read 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 the sale of goods in respect of a forward contract, whether goods under such contract are actually delivered or not, shall be deemed to have taken place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in toto or is bad only in so far as it offends the provisions of Article 286 as construed above. It appears to us that the Act imposes tax on subjects divisible in their nature but does not exclude in express terms subjects exempted by the Constitution. In such a situation the Act need not be declared wholly ultra vires and void, for it is feasible to separate taxes levied on authorised subjects from those levied on exempted subjects and to exclude the latter in the assessment of the tax. In these circumstances it is difficult to say that the scheme of taxing inter-State sales forms such an integral part of the entire scheme of taxation on sales or purchases of goods as to be inextricably inter-woven with it. There is no reason to presume that had the Bihar Legislature known that the provisions of the Act might be held bad in so far as they imposed or authorised the imposition of a tax on inter-State trade or commerce even though Parliament had not by law pro- vided otherwise it would, nevertheless, not have passed the rest of the Act. The result, therefore, is that this appeal must be allowed and we issue an order directing that, until Parliament by law provides otherwise, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice under section 13(5) of the Bihar Sales Tax Act to the appellant calling upon it to apply for registration and to submit the return, showing its turnover for the period from the 26th January, 1950, to the 30th September, 1951. Correspondence thereafter ensued in which both the parties made futile attempts to convince each other of the legality of the stand taken by it. The appellant asserted that it was not liable to assessment under the Bihar Sales Tax Act and denied the authority of the State of Bihar to levy sales tax upon the appellant. The Assistant Superintendent of Commercial Taxes, Central Circle, Bihar, ultimately by his letter dated the 28th May, 1952, rejected the contention of the appellant and asked it to comply with the notice under section 13 (5) of the Bihar Sales Tax Act failing which he threatened to proceed to take steps for assessment to the best of his judgment. The appellant thereupon by its letter dated the 7th June, 1952, called upon the Superintendent of Commercial Taxes, Central Circle, Bihar, to forthwith rescind and cancel the notice issued under section 13 (5) of the Bihar Sales Tax Act as the said notice was ultra vires of the Constitution and also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invalid under Article 254; (4) That the Bihar Sales Tax Act had been enacted for the purpose of imposing tax on the sale of goods and not for regulating inter-State or intra-State trade and commerce and that therefore the Act did not contravene in any may Article 304; and (5) That the Act was also not invalid on the ground that it was extra-territorial in operation, that the jurisdiction to tax existed not only in regard to persons or property but also as regards the business done within the State, that it was not necessary for the purposes of jurisdiction that the entire transaction of sale should have taken place within the territories, that on the other hand the fact that the goods were delivered in Bihar for consumption constituted sufficient nexus or territorial connection which conferred jurisdiction upon the Bihar Legislature to impose the tax and that the Explanation to Article 286 (1)(a) expressly conferred upon the State power to tax sales or purchases of goods which were actually delivered for consumption inside the State. The High Court therefore dismissed the petition with costs. The appellant applied for leave to appeal to this Court and the High Court granted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt that a licence fee on a business not only takes away the property of the licensee but also operates as a restriction on his fundamental right to carry on his business and therefore if the imposition of a licence fee is without authority of law it can be challenged by way of an application under Article 32, a fortiori also under Article 226. These observations have apposite application to the circumstances of the present case. Explanation II to section 2(g) of the Act having been declared ultra vires, any imposition of sales tax on the appellant in Madhya Pradesh is without the authority of law, and that being so a threat by the State by using the coercive machinery of the impugned Act to realize it from the appellant is a sufficient infringement of his fundamental right under Article 19(1)(g) and it was clearly entitled to relief under Article 226 of the Constitution. The contention that because a remedy under the impugned Act was available to the appellant it was disentitled to relief under Article 226 stands negatived by the decision of this Court in The State of Bombay v. The United Motors (India) Ltd. [1953] S.C.R. 1069; 4 S.T.C. 133., above referred to. There it was held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect. These provisions read as follows: "Article 286. (1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place- (a) outside the State; or (b) in the course of the import of the goods into, or export of the goods out of, the territory of India. Explanation-For the purposes of sub-clause (a), a sale or purchase shall be deemed to have taken place in the State in which the goods have actually been delivered as a direct result of such sale or purchase for the purpose of consumption in that State, notwithstanding the fact that under the general law relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State. (2) Except in so far as Parliament may by law otherwise provide, no law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of any goods where such sale or purchase takes place in the course of inter-State trade or commerce: Provided that the President may by order direct that any tax on the sale or purchase of goods which was being lawfully levied by the Government of any State immediately b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Act purported to tax sales and purchases of goods regardless of restrictions imposed on the State legislative power by Article 286 of the Constitution and in that connection the provisions of Article 286(1) and (2) came to be considered by this Court. The majority judgment of this Court delivered by Patanjali Sastri, C.J., with which Mukherjea, J., and Ghulam Hasan, J., concurred held that Article 286(1)(a) of the Constitution read with the Explanation thereto and construed in the light of Articles 301 and 304 prohibits the taxation of sales or purchases involving inter-State elements by all States except the State in which the goods are delivered for the purpose of consumption therein. The latter State is left free to tax such sales or purchases, and it derives this power not by virtue of Article 286(1) but under Article 246(3) read with Entry 54 of List II. The majority judgment differed from the view which was taken by me that the Explanation does not deprive the State in which the property in the goods passed of this taxing power and that consequently both the State in which the property in the goods passes and the State in which the goods are delivered for consump ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the right which the State in which the property in the goods passed has to tax the sale or purchase but only deems such purchase or sale, by a legal fiction, to have taken place in the State in which the delivery of the goods has been made for consumption therein so as to enable the latter State also to tax the sale or purchase in question. The Explanation only lifts the ban imposed by clause (1)(a) on taxation of sales or purchases which take place outside the State, to the extent of the transactions mentioned in the Explanation to enable the delivery State also to tax them. I also held that the general provision enacted in Article 286(2) against the imposition of tax on the sale or purchase of goods in the course of inter-State trade or commerce should give way to the special provision which is enacted in the Explanation to Article 286(1) (a) enabling the delivery State to tax such sale or purchase in the limited class of cases covered by the Explanation, the transactions covered by the Explanation being thus lifted out of the category of transactions in the course of inter-State trade or commerce and assimilated to transactions of sale or purchase which take place inside the Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be deemed to have taken place inside the delivery State. The majority judgment stated that the non-obstante clause is inserted in the Explanation simply with a view to make it clear beyond all possible doubt that it is immaterial where the property in the goods passes as it might otherwise be regarded as indicative of the place of sale. Bose, J., stated that the object of the Explanation is to fix the location of a sale or purchase by means of a fiction, but he disagreed with the view expressed by me that the non-obstante clause enunciates the general law on this point. He stated that there was no general law which fixed the situs of a sale, not even the Sale of Goods Act, that what the general law does is to determine the place where the property passes in the absence of a special agreement, but the place where the property passes is not necessarily the place where the sale takes place, nor has that ever been regarded as the determining factor. As regards the concept of consumption the majority were of the view that it should be understood as having reference not merely to the individual importer or purchaser but as contemplating distribution eventually to consumers in general ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the Explanation is there to settle a matter of considerable controversy regarding the situs of a sale. The argument that on this construction being put on the Explanation to Article 286(1) and on Article 286(2) the Explanation would become nugatory though accepted by me was rejected by Bose, J., by pointing out that once the Parliament by law otherwise provided or the President by order gave the direction within the meaning of the proviso the Explanation would come into operation and would determine the situs of the sale thus enabling the appropriate State to impose a tax on such transaction of sale or purchase. The second case concerned itself with the construction of Article 286(1)(b) in connection with the sales tax levied by the State of Travancore-Cochin upon certain dealers in cashew-nuts within its territory under the provisions of the Travancore-Cochin General Sales Tax Act, 1124 M.E. (Act No. XVIII of 1124 M.E.) and the question for the consideration of the Court was whether certain sales and purchases could be said to be in the course of the import of the goods into or the export of the goods out of the territory of India. The High Court had put a very wide constr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creates a legal fiction. So far he agreed with me, but he differed from me in holding that the only effect of this assignment of a fictional location to a particular kind of sale or purchase in a particular State is to attract the ban of clause (1)(a) and to take away the taxing power of all other States in relation to such a sale or purchase even though the other ingredients which go towards the making up of a sale or purchase are to be found within these States or even if under the general law the property in the goods passes in any of those States. The purpose of the Explanation ends there and cannot be stretched or extended beyond that purpose. He therefore held that the effect of clause (1)(a) read in the light of the Explanation is not to permit both States, viz., the State where the property passes under the general law as well as the State in which, by force of the Explanation, the sale or purchase is deemed to take place, to tax such sale or purchase, because in that event it will stultify the very purpose of that clause and it will fail to prevent the imposition of multiple taxes which it is obviously designed to prevent. In his opinion clause (1)(a) in terms only takes a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing observations which are very apposite to the appeal before us: "To accede to this argument will mean that the Sales Tax Officer of the delivery State will have jurisdiction to call upon dealers outside that State to submit returns of their turnover in respect of goods delivered by them to dealers in that State under transactions of sale made by them with dealers within that State. Thus a dealer in, say, Pepsu who delivers goods to a dealer in, say, Travancore-Cochin will become subject to the jurisdiction of the last mentioned State and will have to file returns of their turnover and support the same by producing their books of account there. I cannot imagine that our Constitution makers intended to produce this anomalous result. On the contrary, it appears to me that they enacted clauses (1)(a) and (2) for the very purpose of preventing this anomaly. I repeat that it is not permissible, on principle or on authority, to extend the fiction of the Explanation beyond its immediate and avowed purpose which I have explained above. In my judgment, until Parliament otherwise provides, all sales or purchases which take place in the course of inter-State trade or commerce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rule or depart from them in subsequent cases was considered in Street Tramways v. London County Council [1898] A.C. 375. Earl of Halsbury, L.C., who delivered the judgment of the House observed at page 379: "A decision of this House once given upon a point of law is conclusive upon this House afterwards, and that it is impossible to raise that question again as if it was res integra and could be reargued, and so the House be asked to reverse its own decision. That is a principle which has been, I believe, without any real decision to the contrary, established now for some centuries, and I am therefore of opinion that in this case it is not competent for us to rehear and for counsel to reargue a question which has been recently decided." The reason of the rule was thus stated at page 380: "Of course I do not deny that cases of individual hardship may arise, and there may be a current of opinion in the profession that such and such a judgment was erroneous; but what is that occasional interference with what is perhaps abstract justice as compared with the inconvenience-the disastrous inconvenience-of having each question subject to being reargued and the dealings of mankind re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivy Council in Attorney-General of Ontario and Others v. Canada Temperance Federation and Others A.I.R. 1946 P.C. 88. The Board was there concerned with the consideration of a constitutional question. An earlier decision of the Board in Russell v. Reg (1882) 7 App. Cas. 829. had upheld the validity of the impugned statute. That decision had stood unreversed for 63 years and had moreover received express approval of the Board in subsequent cases between 1883 and 1937. It was contended that the case had been wrongly decided and ought to be overruled and their Lordships repelled that contention: "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 upon both by Governments and subjects. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 an earlier case 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." Powers, J., at page 86 referred to an earlier decision given by him in the case of The Australian Agricultural Co. v. Federated Engine-Drivers and Firemen's Association of Australasia 17 C.L.R. 261 at p. 292.: "I am at all times prepared to consider the review of any decision of this Court, by a Full Bench called to consider that question, and to reverse any decision if it is shown to be clearly wrong, subject to the well-known considerations to be applied to the particular case in ques- tion at the time, according to the well-known judicial policy of British, Australian and American Courts, and I think of all Courts of Appeal in English-speaking communities"-except the House of Lords........ "I d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l has nothing to do with the policy of any Act which it may be called upon to interpret. That may be a matter for private judgment. The duty of the Court, and its only duty, is to expound the language of the Act in accordance with the settled rules of construction'." Higgins, J., at page 160 added: "But the decision is now directly impugned by the claimant; and it is our duty to reconsider the subject, and to obey the Constitution and the Act rather than any decision of this Court, if the decision be shown to have been mistaken." The High Court of Australia has therefore considered itself free to review its own decisions just as much as the Judicial Committee of the Privy Council, examine the reasons upon which the decisions rest and to give effect to its own views of the law, in other words to reconsider the subject and to obey the Constitution and the Act rather than any decision of the Court if the decision be shown to have been mistaken. Our Constitution has drawn freely inter alia upon the Constitution of the United States and it would be helpful to consider what is the position in the United States in regard to the re-consideration of its previous decisions by the Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of trial and error, so fruitful in the physical sciences, is appropriate also in the judicial function...................................Recently, it overruled several leading cases, when it concluded that the States should not have been permitted to exercise powers of taxation which it had theretofore repeatedly sanctioned. In cases involving the Federal Constitution the position of this Court is unlike that of the highest Court of England, where the policy of stare decisis was formulated and is strictly applied to all classes of cases. Parliament is free to correct any judicial error; and the remedy may be promptly invoked." It will be instructive at this juncture to note the following passages to be found in foot-note 3 at p. 825 in the report of this case 76 L. Ed. 815. : "Compare Taney, Ch. J., in Passenger Cases, 7 How. 283, 470, 12 L. Ed., 702, 780: 'After such opinions judicially delivered, I had supposed that question to be settled, so far as any question upon the construction of the Constitution ought to be regarded as closed by the decision of this Court. I do not, however, object to the revision of it, and am quite willing that it be regarded hereafter as the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is not whether an earlier decision should ever be overruled, but whether a particular decision ought to be. And before overruling a precedent in any case it is the duty of the Court to make certain that more harm will not be done in rejecting than in retaining a rule of even dubious validity." The position has been thus summarised by Willoughby on the Constitution of the United States, Vol. I, Second Edition, at p. 74: "There are indeed good reasons why the doctrine of stare decisis should not be so rigidly applied to the constitutional as to other laws. In cases of purely private import, the chief desideratum is that the law remain certain, and, therefore, where a rule has been judicially declared and private rights created thereunder, the Courts will not, except in the clearest cases of error, depart from the doctrine of stare decisis. When, however, public interests are involved, and especially when the question is one of constitutional construction, the matter is otherwise. An error in the construction of a statute may easily be corrected by a legislative Act, but a Constitution, and particularly the Federal Constitution, may be changed only with great difficulty. Hence an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Provincial Legislatures were competent to make laws for the Province or for any part thereof. The legislative heads in respect of which the laws could be made by the respective Legislatures were enumerated in the lists of the Seventh Schedule to the Act and the demarcation between the powers of the Dominion Legislature and the Provincial Legislatures in that behalf was to be found in section 100. Entry 48 in List II of the said Schedule gave the power to the Provincial Legislatures in respect of "taxes on the sale of goods and on advertisements". Even though the entry mentioned taxes on sale of goods that head was construed to mean in reality a power to tax the transaction and the power to tax the transaction carried with it the power to tax either party thereto. The expression "taxes on sale" was therefore construed to include also a tax on purchases of goods, as the transaction resulted in change of ownership from one person to another and was from its very nature a bilateral transaction with a seller on the one hand and the purchaser on the other. (Vide V.M. Syed Mohamed & Co. v. State of Madras[1952] 3 S.T.C. 367; A.I.R. 1953 Mad. 105.). The same distribution of legisla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be construed with reference to the connotation of the term "sale" as it was understood in the legislative practice of the country at the time when the power was conferred. As was observed by their Lordships of the Privy Council in Croft v. Dunphy [1933] A.C. 156 at p. 165.: "When a power is conferred to legislate on a particular topic it is important, in determining the scope of the power, to have regard to what is ordinarily treated as embraced within that topic in legislative practice and particularly in the legislative practice of the State which has conferred the power." The expression "sale of goods" in Entry 48 in List II of the Seventh Schedule to the Government of India Act, 1935, came to be construed by this Court in Sales Tax Officer v. Budh Prakash Jai Prakash [1954] 5 S.T.C. 193; A.I.R. 1954 S.C. 459. in relation to an attempt by the State of Uttar Pradesh to tax forward contracts of sale and this Court held: "There having existed at the time of the enactment of the Government of India Act, 1935, a well-defined and well-established distinction between a sale and an agreement to sell it would be proper to interpret the expression 'sale of goods' in Entry 48 in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respective Sales of Goods Acts and the State Legislatures would have had the power to tax sales or purchases of goods in which the property in the goods passed within the respective territories of the States. This was not a power to tax a seller or a purchaser in personam. It was a power to tax the sale or purchase of goods which took place within the territories of the State and was to be exercised in those cases where the property in the goods which were the subject matter of the sale or purchase passed within the territories of the State. This position however was not acceptable to the various States which wanted to enlarge the scope of their power to tax sales or purchases of goods. There was therefore an attempt made to analyse the concept of sale into its various ingredients and to fasten upon any one of the ingredients as conferring upon them the power to tax the sale or purchase of goods by having resort to the theory of territorial connection or nexus. As was observed by Bose, J., in The State of Bombay and Another v. The United Motors (India) Ltd. & Others [1953] S.C.R. 1069; 4 S.T.C. 133. at p. 1101: "The difficulty is apparent when one begins to split a sale into its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mstance which provided some relation or connection with New South Wales, and adopted this as the ground of its interference, the validity of an enactment reducing interest would not be open to challenge." and the dissenting judgment of Rich, J., in Broken Hill South Ltd. v. Commissioner of Taxation (N.S.W.) (1937) 56 C.L.R. 331 at p. 361. which stated that: "I do not deny that once any connection with New South Wales appears the legislature of that State may make that connection the occasion or subject of the imposition of a liability. But the connection with New South Wales must be a real one and the liability sought to be imposed must be pertinent to that connection." These observations of the learned Judges of the High Court of Australia were referred to with approval by our Federal Court in Governor-General in Council v. Raleigh Investment Co., Ltd. [1944] F.C.R. 229; A.I.R. 1944 It was an income-tax case and the dispute related to the claim of the Indian Government to levy income-tax and super-tax on the dividends paid to the assessee company (which was a joint stock company incorporated under the English Companies Act having its registered offices in the Isle of Man and its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstance dealt with by the legislation, but that the concern or interest is of such a nature that the challenged law is truly one with respect to an enumerated subject-matter." Two more decisions of the Federal Court reiterating the same principle may be noted in this context: Wallace Bros. & Co., Ltd. v. Commissioner of Income-tax, Bombay City [1948] F.C.R. 1; 16 I.T.R. 240. and A.H. Wadia v. Commissioner of income-tax, Bombay [1948] F.C.R. 121; 17 I.T.R. 63.. In the former case the Court held that where the Imperial Parliament has conferred a power to legislate on a particular topic it is permissible and important in determining the scope and meaning of the power to have regard to what is ordinarily treated as embraced within that topic in the legislative practice of the United Kingdom. The general conception as to the scope of the legislative practice in the United Kingdom with regard to income-tax is that given a sufficient territorial connection between the person sought to be charged and the country seeking to tax him, income-tax may properly extend to that person in respect of his foreign income. That general conception, both on a consideration of the British legislation an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ho ever counted in the scramble for taxes on sales or purchases of goods and even the free flow of inter-State trade and commerce was affected. The state of affairs was thus graphically described by Patanjali Sastri, C.J., in his judgment in the Bombay Sales Tax Appeal [1953] 4 S.C.R. 1069; 4 S.T.C. 133, at p. 142. at p. 1079: "In exercise of the legislative power 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 purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt statutory provisions did not turn on the possession by the Legislature of extraterritorial powers but on the existence of a sufficient territorial connection between the taxing State and what it seeks to tax. In the case of sales tax it is not necessary that the sale or purchase should take place within the territorial limits of the State in the sense that all the ingredients of a sale like the agreement to sell, the passing of title, delivery of the goods, etc., should have a territorial 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." In another case decided immediately thereafter Poppatlal Shah v. The State of Madras [1953] S.C.R. 677; 4 S.T.C. this Court understood this expression of opinion in the majority judgment as laying down the principle of territorial connection or nexus: "It admits of no dispute that a Provincial Legislature could not pass a taxation statute which would be binding on any other part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be located. The theory of territorial connection or nexus was not put to the test at any time prior to the enactment of the Constitution and it is not necessary also for us to give a definite pronouncement on the subject. Suffice it to say that there was this evil which was rampant in the pre-Constitution period by reason of the various States fastening upon one or more ingredients of the sale and arrogating to themselves the power to tax sales or purchases of goods by reason of the territorial connection or nexus which they claimed to have with one or more of the ingredients of the sale provided however that a sale or purchase ultimately did take place either within their territories or anywhere else. It was this evil amongst others which was sought to be remedied by the Constitution-makers when they came to enact Article 286 of the Constitution. The Constitution-makers enacted several provisions in Part XIII relating to trade, commerce and intercourse within the territory of India with an eye towards India as an economic unit and enacted in Article 301 that trade, commerce and intercourse throughout the territory of India shall be free and by Article 302 they empowered the Parli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase took place. There was no rule of law enacted therein which determined the situs or location of such sale or purchase and resort was therefore had to the general law of the land for the purpose. The territorial connection or nexus theory had an eye over the various ingredients of a sale or purchase and if anyone or more of these ingredients fixed the situs or the location of the sale it would mean that a sale had more situses or locations than one. This state of affairs could not be allowed to continue any further having regard to the interests of the consumer and it was therefore thought necessary, when the State Legislatures were restrained from imposing a tax on sale or purchase of goods where such sale or purchase took place outside the State, also to determine when such sale or purchase could be said to take place outside the State. It was for this purpose that the Explanation to Article 286(1)(a) was enacted and it was enacted for the express purpose therein mentioned, viz., "for the purposes of sub-clause (a)". The Explanation was thus enacted for the express purpose of determining what sales or purchases could be said to have taken place outside the State and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the property in the goods had passed leaving open to the other States to tax such sales or purchases by having resort to the power which they possessed under Article 246 (3) and Entry 54 of List II of the Seventh Schedule to the Constitution. Whatever be the correct view to take of this Explanation one fact remained that Article 286(1)(a) and the Explanation thereto were enacted with the one and only motive to relieve the consumer of the burden of multiple taxation to which he was subjected by having resort to the territorial connection or nexus theory and to replace the nexus theory by what may be described as the situs theory fixing the situs or the location of the sale or purchase and putting a restriction on the taxing power of the States qua which it could be predicated that such sale or purchase took place outside the State, thus leaving only one State in which the goods have been actually delivered as a direct result of such sale or purchase for the purpose of consumption therein free to tax the sale or purchase having resort to the powers vested in the State Legislature by Article 246 (3) and Entry 54 of List II of the Seventh Schedule to the Constitution. If therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject could only be achieved by subjecting him totaxation at the instance of one State only and not by more States than one and to that extent the view that both the title State and the deli- very State would be entitled to impose the tax on the sale or purchase falling within the Explanation was clearly erroneous, the only State which would be in a position to tax the sale or purchase in question being the State in which the goods had been actually delivered as a direct result of such sale or purchase for the purpose of consumption therein. The second restriction on the taxing power of the State Legislatures was devised to safeguard the import and export trade of the country and embraced transactions of sale or purchase of goods where such sales or purchases took place in the course of the import of the goods into or export of the goods out of the territory of India, vide Article 286(1)(b). It is significant to observe that the Explanation to Article 286(1)(a) was definitely put for the purposes of sub-clause (a) and it had therefore no application to the cases which were covered by Article 286(1)(b). This concept was quite distinct from the concept which was dealt with in Article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re such sale or purchase took place in the course of inter-State trade or commerce could ever be made the subject-matter of taxation at the instance of a State Legislature. The Explanation to Article 286(1)(a) being expressly for the purpose of sub-clause (a), i.e., for the purpose of determining what transaction of sale or purchase was outside the State or inside the State as above stated, could not be read into Article 286 (2) nor could it be read as an exception or proviso to Article 286 (2). Reading it as such exception or proviso would be contrary to the express terms of the Explanation and would also stultify the purpose of the enactment of Article 286 (2) thus taking a large slice out of the transactions falling within that category. The rule as to the exclusion of the general provision by a special provision would also not apply for the simple reason that the object of Article 286(1)(a) and the Explanation thereto is quite distinct from the object of Article 286 (2) and the objects being quite different these provisions do not cover the same subject-matter and therefore there would be no occasion for the application of that rule of construction. To this extent the vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme of Article 286 is that four different restrictions are put on the taxing power of the State Legislatures in regard to the sales or purchases of goods and each one of these restrictions has got to be considered separately by itself and it is only those transactions of sale or purchase which do not fall within any of those categories that can be taxed by the State Legislatures by having resort to their powers under Article 246 (3) and Entry 54 of List II of the Seventh Schedule to the Constitution. The learned Government Advocate for Bihar however urged five distinct reasons why Article 286 (2) cannot apply to the transactions of sale or purchase covered by Article 286(1)(a) and the Explanation thereto and they were: (1) The class of sales falling under Article 286(1)(a) form a special class of inter-State sales which on general principles ought not to be affected by the general provisions of Article 286 (2); (2) If Article 286 (2) applies to the class of sales covered by Article 286(1)(a) and the Explanation thereto it would result in discrimination against local trade in favour of inter-State trade and it will be inconsistent with the provisions of Part XIII of the Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which are dealt with by both these provisions are the same or that the subject- matters thereof are identical. The ban which is imposed by Article 286(1)(a) and the rule of harmonious construction and the exception of the special provisions from the general one as indicated above would have no application in the matter of the construction of both these provisions. As to reason (2): there is no question of discrimination against local trade in favour of inter-State trade if Article 286 (2) applied to the class of sales covered by Article 286(1)(a) and the Explanation thereto. The local trade would certainly be liable to the levy of intra- State sales tax which could be avoided if a transaction takes place in the course of inter-State trade or commerce. For the working of the Union as an economic unit and for the free flow of trade, commerce and intercourse throughout the territory of India it is necessary that no fetter should be placed on the course of inter-State trade or commerce. The consumers within a State who would resort to transactions of pur- chase across the border with a view to avoid the payment of the intra-State sales tax would be comparatively few and could in conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be caught within the ban imposed by Article 286(2). These bans are mutually exclusive and may have to be applied to the same transaction of sale or purchase, one ban not neces- sarily excluding the other. As to reason (5): the argument totally ignores the purpose and efficacy of a legal fiction. A legal fiction pre-supposes the correctness of the state of facts on which it is based and all the consequences which flow from that state of facts have got to be worked out to their logical extent. But due regard must be had in this behalf to the purpose for which the legal fiction has been created. If the purpose of this legal fiction contained in the Explanation to Article 286(1)(a) is solely for the purpose of sub-clause (a) as expressly stated it would not be legitimate to travel beyond the scope of that purpose and read into the provision any other purpose howsoever attractive it may be. The legal fiction which was created here was only for the purpose of determining whether a particular sale was an outside sale or one which could be deemed to have taken place inside the State and that was the only scope of the provision. It would be an illegitimate extension of the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as certainly lifted up to the 31st March, 1951, by the President directing the continuance of the operation of the sales tax laws which previously existed in the various States. It could not therefore be stated that the construction put upon Article 286(1)(a) and the Explanation thereto and Article 286(2) as above would render the Explanation nugatory. If the States thought that the operation of the ban under Article 286(2) prevented them from taxing transactions of sale or purchase which take place in the course of inter-State trade and commerce and which are also covered by the Explanation to Article 286(1) (a) it was open to them to adopt proper measures for lifting the ban under Article 286(2) and making themselves free to tax the transactions of sale or purchase covered by the Explanation. Parliament would in that event consider the proposals made by the respective States in their proper perspective having regard to the provisions of the Constitution in regard to the freedom of trade, commerce and intercourse throughout the territory of India, the convenience or inconvenience of the public and the needs of the respective States and lift the ban in the manner and to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate on such transactions, and it would be an unwarranted assumption on the part of anyone who read that judgment to say that the delivery State was entitled to levy a tax on the sale or purchase of goods falling within the Explanation to Article 286(1)(a) on the seller alone. The seller would be outside the territories of the taxing State and would primarily not be liable to the jurisdiction of the Sales Tax Act enacted by the taxing State. It would be by adopting the theory of the territorial connection or nexus as it was being done prior to the enactment of the Constitution that the taxing State would seek to reach the non-resident businessmen outside its territories and if regard be had to the fact that the taxation is either in personam or in relation to the transaction of sale or purchase which takes place within its territory there is no warrant at all for taxing the outside businessmen on the transactions of sale or purchase covered by the Explanation to Article 286(1)(a). All the provisions contained in the Bihar Sales Tax Act with regard to the registration of the outside dealer, the maintenance of the books of account, submission of returns by him to the Sales Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diction of several States in the matter of his transactions of sale of his goods. There are as many as 21 Sales Tax Acts to be found in the Manual of Sales Tax Acts and if a dealer in one State was going to be held amenable to the levy of sales tax at the instance of all the other States it would mean that he would have to ascertain from the purchaser in each of the transactions of sale which he enters into the State to which the purchaser belongs, whether the purchaser is purchasing the goods for the purpose of consumption within that State, to get himself registered as a dealer in that State, to maintain his books of account with a view to produce them and subject them to inspection by the Sales Tax Authorities in that State, to submit returns of the sales tax recovered by him from the purchasers in that State before the Sales Tax Authorities of that State and make himself liable for the non-observance of the various requirements of the Sales Tax Act enacted by that State. The task of fulfilling the requirements qua one State would be formidable enough. But when one visualises that the dealer who enters into such transactions of sale with the various customers may be subjected to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the meaning of the Explanation to Article 286(1)(a) much less the other States are in a position to impose a tax on transactions of sale or purchase covered by the Explanation. The appeal should therefore be allowed and a direction should issue against the State of Bihar to refrain from taxing the sales or purchases of goods which take place in the course of inter-State trade or commerce even though the goods as a direct result of such sale or purchase are actually delivered in Bihar for consumption in that State until Parliament otherwise provides within the meaning of that expression in Article 286 (2). The appellant should get its costs throughout from the State of Bihar, the rest of the parties appearing before us to bear and pay their respective costs of this appeal. JAGANNADHA DAS, J.-The first, and to my mind, the most important, point that requires careful consideration in this case is whether, and if so within what limits, this Court will observe the rule as to the binding character of a judicial precedent with reference to its own prior decisions. Admittedly the question that has been raised in this case as to the construction of Article 286 of the Constitution is one th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Constitution and in view of the fact that this Court has historically succeeded to the preexisting Federal Court and the judicial Committee of the Privy Council, we cannot deny to this Court, the competence to reconsider its prior decisions. But, it does not follow that such power can be exercised without restriction or limitation or that a prior decision can be reversed on the ground that, on later consideration, the Court disagrees with the prior decision and thinks it erroneous. The necessity for certainty and continuity in the declaration of law by the highest Courts in the country is recognised on all hands. That necessity is all the greater, and not the less, by reason of the Constitution itself having formally provided that the decisions of this Court are declaratory of the law. The rule as to the binding character of a judicial precedent is based on a juristic principle of universal application. The reason for its adoption is "the disastrous inconvenience of subjecting each question decided by a previous judgment to reargument, thereby rendering the dealings of mankind doubtful by different decisions; so that in truth and in fact there would be no real final court of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mal procedure provided for amendment, except in respect of specified matters to be presently enumerated, is as follows: "An amendment of this Constitution may be initiated only by the introduction of a Bill for the purpose in either House of Parliament, and when the Bill is passed in each House by a majority of the total membership of that House and by a majority of not less than two-thirds of the members of that House present and voting, it shall be presented to the President for his assent and upon such assent being given to the Bill, the Constitution shall stand amended in accordance with the terms of the Bill." In respect, however, of a limited number of matters specified in the Constitution, an additional step is required, namely, that "before the Bill making provision for such amendment is presented to the President for assent, the amendment shall also require to be ratified by the Legislatures of not less than one-half of the States specified in Parts A and B of the First Schedule by resolutions to that effect passed by those Legislatures". Now the special matters where amendment is conditional on this additional requirement relate to the election of President (Articles 54 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case in this Court wherein this question arises, it is desirable to consider that practice carefully for our guidance, though it is not necessary to lay down any absolutely rigid or inelastic formula. It is worthwhile at this stage to notice what, according to the Constitution of Australia, is the machinery for the alteration of their Constitution. This is to be gathered from section 128 of the Commonwealth Act of 1900 which- broadly speaking-shows that what is required there is an absolute majority in each of the Houses and the approval of each State to be obtained by a referendum to the electors of each State. This is definitely much more difficult, cumbersome and dilatory than what obtains in our Constitution. Therefore, there can be no reason for our adopting a less rigid standard than that adopted by the High Court of Commonwealth of Australia, nor is there any reason for our adopting a standard less rigid than that of the judicial Committee of the Privy Council, who while feeling themselves free not to follow the very strict rule of the House of Lords, were under no constitutional limitations in this behalf. The practice of the judicial Committee as to the limits withi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 829. but they declined to do so on two grounds, viz., (1) on constitutional questions the Board seldom departs from its previous decisions, and (2) the prior decision stood unchallenged for over 60 years. In Phanindra Chandra Neogy v. The King (1939) 76 I.A. 10. the Privy Council stated that it is only "in the most exceptional cases" that they would tender advice to His Majesty inconsistent with a previous decision and reaffirmed the decision in Gill's case. Three cases of the High Court of Australia out of those brought to our notice are instructive. In the Tramways case 18 C.L.R. 54. the position was expressed in the following terms. Griffith, C.J., observed as follows: "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, as, for instance, if it proceeded upon the mistaken assumption of the continuance of a repealed or expired statute, or is contrary to a decision of another Court which this Court is bound to f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ptions which should be allowed only with great caution and in clear cases." Then the above quotation from the judgment of Justice Barton in the Tramways case 18 C.L.R. 54. was repeated and the principle indicated therein was reaffirmed. In this case the Court was asked to overrule their prior decision in Trustees Executors and Agency Co. Ltd. v. Federal Commissioner of Taxation 69 C.L.R. 270.. The learned Judges declined to reconsider it with the following observations: " The decisions of a superior Court have a double aspect. They determine the controversy between the parties, and in deciding the case they may include a statement of principle which it is the duty of that Court and of all subordinate Courts to apply in cases to which that principle is relevant. Continuity and coherence in the law demand that, particularly in this Court, which is the highest court of appeal in Australia, the principle of stare decisis should be applied, save in very exceptional cases". The criterion, viz., that of manifest error Plus injury to public interest by maintenance of previous decision, laid down in the above cases as being the ground on which a reconsideration can be granted was r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as to the power of State Legislature to encroach on the field of the Commonwealth Legislature by virtue of a rule of construction laid down in an earlier case, viz., Railway Servants' case 4 C.L.R. 488.. The learned Judges were of the opinion that that was a question of far-reaching public importance and that the Prior decision being manifestly wrong and opposed to the rules of construction laid down by the Privy Council in a number of cases, should be reconsidered and overruled. It would be seen that in this case the Court acted upon the limitations which they have laid down in the course of their decisions, that reconsideration and overruling of a prior decision is to be confined to cases where the prior decision is manifestly wrong and its maintenance is productive of great public mischief. The second is the case in Gideon Nkambule v. The King [1950] A.C. 379., where the Privy Council declined to follow its prior decision in Tumahole's case [1949] A.C. 253. In this case, the Privy Council, while it reaffirmed the proposition that a prior decision upon a given set of facts ought not to be reopened without the greatest hesitation, explained why they, in fact, differed from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the correctness of the prior decision was straightaway canvassed before us and the question as to the competency or the desirability of such reconsideration occupied a later and subordinate part in the arguments. I must confess to the feeling that this all important question has accordingly suffered for want of due consideration thereof at the stage of arguments before us. Now, let us see what are the facts relating to the prior decision. The decision was given on the 30th March, 1953. The case itself was heard for 12 working days, i.e., from the 9th February to the 25th February, 1953. The Union of India and as many as eight States were permitted to intervene and their arguments were also heard. A perusal of the judgments then given shows that every possible aspect had been fully presented and considered. The decision was that of a majority as against that of one dissenting Judge. One of the learned Judges in the majority, though concurring on the main point, was prepared to go further on one point than what the majority held (though, as appears now, he is prepared to go back on his concurrence). It is true that in a later decision in State of Travancore-Cochin v. Shanmugha Vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the prior decision can only be by legislative action of the very State in which the consuming public are residents. The removal of the burden, if called for, is a matter which, under the Constitution, can be brought about by democratic process which is available to the consuming public, through its representatives in the State Legislature. It appears to me that that is not a matter for our consideration. I may be permitted to add that in the course of the arguments there has been no serious grievance made about the alleged burden on the consuming public. But there has been a good deal of emphasis on the harassment to the business community, i.e., to the out-of-State dealers, from whom the tax is primarily collected and passed on, under the law, to the consumer. We are not, however, concerned with any question arising from such alleged hardship. The hardship such as it is, is one that may have to be obviated by the adoption of a common and agreed machinery by all the States for the assessment (as distinguished from levy) and collection of the tax from out-of-State dealers, or if necessary, by the passing of the requisite legislation enabling this to be done. But that hardship, if an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a recent one and that "judicial opinion was divided, if not evenly balanced". It is no doubt true that the prior decision is only two years old. But that is not by itself a ground for reconsideration. On the other hand, I should have thought that the very fact of its being recent should militate against reconsideration. The real test to my mind, as indicated by Justice Dixon in Attorney-General for N.S.W. v. Perpetual Trustee Co. Ltd. 85 C.L.R. 237, is whether it was a fully considered judgment and whether any fresh material has been brought to the notice of the Court. In considering the question whether a decision is open to reconsideration on account of its being recent, it is of importance to observe that our decisions become declarations of law under Article 141 and must be treated normally as final from the very moment they are pronounced. The finality of the decisions of this Court, which is the Court of last resort, will be greatly weakened and much mischief done if we treat our own judgments, even though recent, as open to reconsideration. It has next been suggested that rectification of the error, if any, in the view taken by the previous decision, is difficult and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Entry 54 of List II of the Seventh Schedule taken with Article 246(3). Entry 54 does not, in terms, say that the sales or purchases of goods contemplated thereby as taxable are to be sales or purchases "within the State". In this respect it is in contrast with Entry 26 which vests in the State the power to legislate in respect of trade and commerce "within the State". The apparently wide language of Entry 54 is in recognition of the theory that in substance a tax on sale or purchase of goods is a tax on the goods with reference to the event of sale or purchase thereof. (See the United Motors case [1953] S.C.R. 1069; 4 S.T.C. 133. Article 286 appears in Part XII of the Constitution relating to finance, property, contracts and suits and is in Chapter I thereof relating to finance. This is mainly concerned with the problem of allocation of finances between the Centre and the States in order to enable each to carry on the respective governmental functions allotted to it under the Constitution. Keeping this context in view as also the avowed purpose of the Article as indicated by the marginal note, it may be taken that Article 286 was intended to indicate clearly the ambit of the taxi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to (1) situs (as assumed) under the Sale of Goods Act, and (2) situs (as probably assumed to be) under the general law. It is possible that this general law was so assumed with reference to the dictum of Lord Loreburn in Badische Anilin Und Soda Fabrik v. Hickson [1906] A.C. 419. which suggests that the situs of the goods at the time of appropriation of the goods to a particular sale is the situs of the sale. Whether the underlying assumptions as regards both these criteria were right or wrong is not material at this stage. While this was the general pattern, four of the States claimed the taxing power with reference to some additional criteria. Madras and Mysore had an additional Explanation as follows: "In case the contract was for the sale or purchase of future goods by description, then, if the goods are actually produced in the Province at any time, after the contract of sale or purchase in respect thereof was made, the sale or purchase shall be deemed to have taken place in the Province, wherever the contract of sale or purchase might have been made, notwithstanding anything to the contrary in the Indian Sale of Goods Act." Bihar and United Provinces had the following addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or being remedied by the imposition of a ban on taxation of sales with an outside element. But that very consideration would equally indicate the permissibility of taxing an outside sale where the ultimate burden of it could be passed on to the resident of the very taxing State. This could be done by making the consuming State the taxing State. This, in my opinion, was the background with reference to which Article 286 was incorporated in the Constitution. The Constitution wanted to put a ban on taxation of sales with an outside element on account of the inequity of making the residents of other States contribute towards the resources of the selling State. But in doing so it could not have intended to confine the resources of the State under this head to the comparatively small field of purely internal sales. Having regard to the expanding needs of a social-welfare State and the limited taxing powers allocated to it, the Constitution could not have meant to limit an elastic source of taxation payable by its own consumers to the very small field of purely internal sales. It, therefore, selected and took out one category of sale with an outside element from the field of restriction, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... freedom of inter-State trade and commerce which, for the first time, the Constitution declared by Article 301. In this context it also became necessary to provide that the foreign trade of the country should not be affected at all by the sales tax structure of the States, while at the same time indicating that the internal trade could be permitted to bear a limited burden of taxation. It is in reconciliation of these various ideas that Article 286(1) and (2) were drafted. Judged in this light the following is the only reasonable construction of Article 286(1)(a) taken with the Explanation. This provision, while intended to prohibit taxation by States on outside sales, was also meant to demarcate the boundary between inside sales and outside sales and to assimilate one particular category of outside sales into the field of inside sales and to make it available for taxation by the consuming State. The underlying aim of this demarcation was (sic) to obviate the inequity of one State levying a tax whose ultimate incidence was on the residents of another State but to provide instead an elastic source of taxation which in its effect was to be against its own residents. The field of exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trade and commerce for taxation purposes, the only proper construction of Article 286(2) would be that it cannot override Article 286(1)(a) taken with the Explanation. Having indicated the broad lines on which I have, on independent consideration of the construction of Articles 286(1) and (2), arrived at the same construction as that adopted in the United Motors case [1953] S.C.R. 1069; 4 S.T.C. 133., it is unnecessary for me to deal with all the various aspects raised before us in the course of the arguments, except to express my general agreement with a good deal of the reasoning of my learned brother, Justice Venkatarama Ayyar, on this part of the case. It is, however, necessary to refer to a few matters referred to in the contrary view. The contrary opinion adopted by my learned brothers is based almost entirely on the view that Article 286 is inspired by the anxiety of the Constitution makers to prevent the mischief of multiple taxation, which arose from the operation of the pre-existing sales tax laws. It is said that this result was achieved by covering all loopholes from various angles, Articles 286(1)(a), 286(1)(b), 286(2) and 286(3) being said to be the four pluggi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefrom which has been assumed. There is no evidence before us that prior to the Constitution there was in fact multiple taxation of sales in operation, at any rate at more than the two points as explained by me above. Hence in the light of the detailed scrutiny of the provisions in the various Sales Tax Acts which were in force prior to the Constitution, I cannot help feeling that the mischief of multiple taxation which might if at all have existed in a limited measure as pointed out above, has been overstated. No doubt, the future prevention of such multiple taxation by invoking the nexus theory recognised by the Privy Council in Wallace's case [1948] F.C.R. 1; 16 I.T.R. 240. may well be one of the results of Article 286. But I am unable to think that the main purpose underlying each and every one of the provisions of Article 286 was to prevent the continuance of pre-existing chaotic conditions of multiple taxation by virtue of the nexus theory. I cannot help feeling that a wholly wrong impression of the pre-existing state of law in this respect has been created by over-looking that the existence of goods in a particular State has been taken as a taxing point only if that existe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade, commerce and intercourse throughout the territory of India shall be free." Now it is not disputed that a tax on a purely internal sale which occurs as a result of the transportation of goods from a manufacturing centre within the State to a purchasing market within the same State is clearly permissible and not hit by anything in the Constitution. If a sale in that kind of trade can bear the tax and is not a burden on the freedom of trade, it is difficult to see why a single point tax on the same kind of sale where a State boundary intervenes between the manufacturing centre and the consuming centre need be treated as a burden, especially where that tax is ultimately to come out of the residents of the very State by which such sale is taxable. Freedom of trade and commerce applies as much within a State as outside it. It appears to me again, with great respect, that there is no warrant for treating such a tax as in any way contrary either to the letter or the spirit of the freedom of trade, commerce and intercourse provided under Article 301. For all the above reasons, I am quite clear in my mind that the view taken in the prior decision, viz., that the consuming State has the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if in the course of the administration of sales tax, of the kind permissible, in the view of Article 286 which the prior decision has accepted, there emerges the element of extra-territorial operation of such a tax, that by itself can be no reason for negativing the construction of Article 286(1) and (2) above indicated. In this context it is necessary to bear in mind the following clear dictum of the Privy Council in British Columbia Electric Railway Co., Ltd. v. The King [1946] A.C. 527 at p. 542. "A legislature which passes a law having extra-territorial operation may find that what it has enacted cannot be directly enforced, but the Act is not invalid on that account, and the Courts of its country must enforce the law with the machinery available to them." The question, therefore, of extra-territoriality is not germane for construction of Article 286. At the present stage we are not concerned with the enforcement of the levy of the assessed tax but with the assessment of the tax. All that we are concerned with is the validity of the steps so far taken by the assessment authorities and particularly of the notice dated the 29th May, 1952, which intimates that on no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations and cognate expressions) means every transfer of the property in goods by one person to another in the course of trade or business for cash or for deferred payment or other valuable consideration, (and includes also a transfer of property in goods involved in the execution of a works contract, but does not include a mortgage, hypothecation, charge or pledge;) (Explanation 1: A transfer of goods on the hire-purchase or other instalment system of payment shall, notwithstanding the fact that the seller retains the title in the goods as security for payment of the price, be deemed to be a sale.) Explanation 2: Notwithstanding anything to the contrary in the Indian Sale of Goods Act, 1930, the sale or purchase of any goods shall be deemed, for the purposes of this Act, to have taken place in this Province, wherever the contract of sale or purchase might have been made- (a) if the goods were actually in this Province at the time when the contract of sale or purchase in respect thereof was made, or (b) in case the contract was for the sale or purchase of future goods by description, then, if the goods are actually produced in this Province at any time after the contract o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods under such contract are actually delivered or not, shall be deemed to have taken place on the date originally agreed upon for delivery. CENTRAL PROVINCES AND BERAR SALES TAX ACT, 1947. "Sale"..........means any transfer of property in goods for cash or deferred payment or other Valuable consideration.......... * * * * Explanation 2: Notwithstanding anything to the contrary in the Indian Sale of Goods Act, 1930, the sale of any goods which are actually in the Central Provinces and Berar 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 purpose of this Act to have taken place in the Central Provinces and Berar. ORISSA 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 which are actually in Orissa at the time when, in respect thereof, the contract of sale as defined in section 4 of that Act is made, shall, wherever the said contract of sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d portions in the definitions other than those in the Madras Act are to the same effect as those shown within brackets in the Madras definition. VENKATARAMA AYYAR, J.-The appellant is a company registered under the Indian Companies Act carrying on business in the manufacture and sale of sera, biological products and medicines. Its registered office is at No. 153, Dharamtalla Street, Calcutta, and its laboratory and factory are situated at Baranagar, 24 Paraganas, West Bengal. The first respondent is the State of Bihar, and respondents 2 and 3 are respectively the Secretary and the Assistant Secretary of Commercial Taxes. On the 18th December, 1951, the second respondent issued a notice under section 13 (5) of the Bihar Sales Tax Act, 1947, (Act XIX of 1947) (hereinafter referred to as the Act) calling upon the appellant to register itself as a dealer under the Act and to submit a return for assessment of sales tax. To this the appellant sent a reply on the 8th January, 1952, disputing its liability on various grounds, and after further correspondence between the parties which it is needless to set out, the third respondent sent a notice on the 29th May, 1952, that if the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibition contained in Article 286 (2). 4.. Whether the Bihar Sales Tax Act, 1947, is invalid on the ground that it is extra-territorial in its operation, and ultra vires the power of the State Legislature. 5.. Whether the assessment proposed to be made on the appellant is not authorised by the Explanation to Article 286(1)(a). 1.. On the question of the maintainability of the application for a writ of prohibition, it was observed by the learned Judges that under section 13(5) of the impugned Act, the Commissioner was competent to decide whether the appellant was a person liable to pay tax under the Act, that even if he came to an erroneous conclusion on the merits, that did not affect his jurisdiction over the subject-matter, that the Act itself provided in sections 24 and 25 a complete and effective machinery by way of appeal and revision for correction of such errors, and that accordingly a writ of prohibition was not the proper remedy. If the learned Judges intended to lay down that a writ of prohibition should not issue because another remedy was open under the Act, that cannot be supported. The existence of another remedy is a very material circumstance to be taken into acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was argued by Mr. N. C. Chatterjee that if the tax was illegal, as contended by the appellant, then the proceedings taken for imposing the same would amount to unconstitutional interference with the funda- mental right of the appellant to carry on business guaranteed under Article 19(1)(g), and that the Courts were bound to interfere under Article 226. He relied on the decisions of this Court in Mohammad Yasin v. The Town Area Committee, Jalalabad [1952] S.C.R. 572., The State of Bombay v. The United Motors (India) Ltd. [1953] S.C.R. 1069; 4 S.T.C. 133, and Himmatlal Harilal Mehta v. The State of Madhya Pradesh [1954] S.C.R. 1122; 5 S.T.C. 115. That is undoubtedly the position in law, but as the appellant is a company registered under the Indian Companies Act and the question whether a juristic person is a citizen for the purpose of Article 19(1)(g) is still an open one, I would prefer not to rest my decision on this ground. It is sufficient for the purpose of this appeal to hold that a writ of prohibition should issue, if the appellant establishes that the proceedings taken against it under section 13(5) of the Act are without jurisdiction. The contentions urged in support of tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) The Explanation to clause (1) of Article 286 of the Constitution shall apply for the interpretation of sub-clause (i) of clause (a) of sub-section (1)." The contention of the respondent is that the appellant has become liable to be taxed under these provisions. The appellant replies that Article 286(1)(a) is restrictive in its scope, that it merely takes away a power to tax which the State might otherwise possess, but that it does not positively confer on a State a power to tax where it did not previously exist, and that on its true construction, it would operate to divest Bengal of its power to tax but not to vest it in Bihar. To decide which of these two contentions is the correct one, it is necessary to examine what the law was prior to the enactment of Article 286(1)(a) and the Explanation, what the defect was which was disclosed in the working of that law, and how it was proposed to remedy it. Under the Government of India Act, 1935, the power to enact a law imposing tax on sale of goods was conferred on the Provincial Legislature by Entry 48 in List II. Under sections 99(1) and 100(3) that law must be for the Province, and as interpreted in Wallace Bros. v. Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cibly brought out by Bose, J., in the following observations in The State of Bombay v. The United Motors (India) Ltd. [1953] S.C.R. 1069 at p. 1101; 4 S.T.C. 133 at p. 158.: "The difficulty is apparent when one begins to split a sale into its component parts and analyse them. When this is done, a sale is found to consist of a number of ingredients which can be said to be essential in the sense that if any one of them is missing there is no sale. The following are some of them: (1) the existence of goods which form the subject-matter of the sale, (2) the bargain or contract which, when executed, will result in the passing of the property in the goods for a price, (3) the payment, or promise of payment, of a price, (4) the passing of the title. When all take place in one State, there is no difficulty. The situs of the sale is the place in which all the ingredients are brought into being. But when one or more ingredients take place in different States, what criterion is one to employ? It is impossible to say that any of these ingredients is more essential than any other because the result is always the same the moment you take one away. There is then no sale." Many were the prob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if it is inside one State it must be outside all other States. In this respect, Article 286(1)(a) effected a fundamental alteration in the law under Entry 48 in List II and section 100(3) of the Government of India Act, 1935, as construed by the Courts. Whereas under these provisions a State could tax irrespective of where a sale took place, provided there was sufficient territorial nexus, under Article 286(1)(a) that power can be exercised only when it takes place inside the State, mere nexi being insufficient to support such a power. The theory of nexus as a source of jurisdiction to tax was thus abandoned, and the power to tax was annexed to the situs of the sale to be exercised by the State wherein it is fixed and as a given sale can take place only in one State and in no other, it must follow that the power of taxing that sale is capable of exercise only by one State and not others. The foundation on which this scheme rests is the location of a sale in a particular State. But how is this to be done? When all the essential elements of a sale take place within one State, the question presents no difficulty. But what, if they are distributed over several States. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , that, on the other hand, it assumes the pre-existence of such a power in the State, and then proceeds to restrict it, that the substantive provisions which confer power to tax are Entry 54 in List II and Article 246 (3), that when a State has no power to tax under those provisions, then Article 286(1)(a) could have no application as there could be no question of restricting what does not exist, and that it could not, therefore, operate to confer on it such a power. In support of this position, reliance is placed on the form of Article 286(1) (a) that no law of a State shall impose a tax on outside sale. This prescription, it is argued, is merely negative and destructive and not positive and creative in its content. But this contention does not give sufficient effect to the Explanation which is in substance and form positive, and it also fails to take adequately into consideration the purpose of the enactment. The object of Article 286(1)(a)-and there is no dispute about it-is to avoid multiple taxation and that, as already stated, was sought to be achieved by fixing the situs of sale in one State in accordance with the Explanation. The scheme of the enactment must, by its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liness on the part of the draftsman. The marginal note to Article 286 was also referred to as showing that the Explanation was merely restrictive in character. In Thakurain Balraj Kunwar v. Rae Jagat Pal Singh 31 I.A. 132 at 142, 143. Lord Macnaghten observed: "It is well-settled that marginal notes to the sections of an Act of Parliament cannot be referred to for the purpose of construing the Act. The contrary opinion originated in a mistake, and it has been exploded ong ago. There seems to be no reason for giving the marginal notes in an Indian statute any greater authority than the marginal notes in an English Act of Parliament." The reason on which this rule rests was thus stated by Baggallay, L.J., in Attorney-General v. G. E. Ry. [1879] 11 Ch. D. 449, 461. : "I never knew an amendment set down or discussed upon marginal notes to a clause. The House of Commons has nothing to do with a marginal note." Vide also the observations of Lord Hanworth, M.R., in Nixon v. Attorney-General [1930] 1 Ch. 566 at 593. This reasoning applies with equal force to marginal notes in Indian Statutes. In my opinion, the marginal note to Article 286(1)(a) cannot be referred to for construi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a sale inside that State and outside all other States. It accordingly ceases to be a sale in the course of inter-State trade and becomes an intra-State sale and is, therefore, outside the purview of Article 286 (2); and the power of the delivery State to tax under the Explanation remains unaffected. That was the view taken by the majority of the learned Judges in The State of Bombay v. The United Motors (India) Ltd.(1), and according to it, there is no conflict between the Explanation and Article 286(2). (b) The sales to which the Explanation applies are in the course of inter-State trade, and fall within the coverage of Article 286 (2), and there is thus a conflict between the two provisions, but the Explanation deals with a special topic, and therefore prevails against Article 286 (2) on the principle of generalia specialibus non derogant, and the power to tax thereunder is unaffected. That was the view taken by Bhagwati, J., in The State of Bombay v. The United Motors (India) Ltd. [1953] S.C.R. 1069; 4 S.T.C. 133. (c) The sales to which the Explanation applies are in the course of inter-State trade, and are hit by Article 286(2) and unless Parliament lifts the ban as provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sess plenary powers of legislation subject to the inhibitions contained in the Constitution. It is in exercise of these powers that the States enact laws regulating sales and imposing tax on them. Under section 8 of Article 1 of the Constitution, the power "to regulate commerce among the States" is vested in the Congress. Thus, while intra-State commerce is within the exclusive jurisdiction of the States, inter-State commerce is within the exclusive jurisdiction of the Congress. A question which came up frequently for decision before the Courts was whether the States had the power to enact laws with reference to goods which had come into a State in the course of inter-State trade, and it was settled on the highest authority that if the sale was for the purposes of consumption within the State it became domestic in its character, and fell within the power of the State to regulate and to tax, but that if it was for purposes other than consumption such as resale, then that was in the course of inter-State commerce, and Congress alone had the jurisdiction to legislate in respect of it. In Pennsylvania Gas Co. v. Public Service Commission 252 U.S. 23; 64 L. Ed. 434.the question was as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tates could not intrude. The former included inter-State direct sales to local consumers, the latter, service inter-State to local distributing companies, for resale." It further held that the Congress legislation was itself a recognition of the distinction established by the decisions "between sales for resale and direct sale for consumption". This decision was followed quite recently in Panhandle Eastern Pipe Line Co. v. Michigan Public Service Commission 341 U.S. 329; 95 L. Ed. 993. Four propositions might accordingly be taken as well- settled in American law: (i) The States have plenary and exclusive power of legislation in respect of intra-State sales. (ii) Regulation of inter-State commerce is a topic within the exclusive jurisdiction of the Congress. (iii) Sales which take place in the course of inter-State trade are local in character and within the jurisdiction of the State, if they are for consumption within the State. (iv) Where such sales are for other purposes than consumption such as resale, they retain their character as sales in the course of inter-State trade and are within the exclusive jurisdiction of the Congress. The provisions of the Indian Constitution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale in the course of inter-State trade-that this is its scope is common ground-must be deemed to have taken place in the State in which the goods are delivered for consumption, its purpose is clearly to take it out of inter-State trade and stamp it with the character of an intra-State sale. Under Entry 26 in List II, it is the State that has jurisdiction in respect of trade and commerce within the State, and reading that with the language of the Explanation that the sales covered by it are deemed to take place in the State, the inference is irresistible that the intention of the Constitution-makers was to bring those sales within the exclusive jurisdiction of the State for purposes of taxation under Entry 54. The result is that with reference to sales for local consumption made in the course of inter-State trade, the law under the Constitution is exactly what it is in America and indeed, the similarity is too striking to be merely accidental. The position may thus be summed up: Article 286 (2) applies to sales in the course of inter-State trade. The sales which fall within the Explanation are intra-State sales. The grounds covered by the two provisions are distinct and separate. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )(a) and projected into Article 286(2), and that unless that was done, it was not possible to hold that the sales falling within the Explanation are taken out of the purview of Article 286 (2). In my opinion, this argument proceeds on a misconception of the real reasoning on which the conclusion that the Explanation and Article 286 (2) relate to two different subjects is based. In view of the insistence with which this contention was pressed by the appellant, it seems desirable to examine the position in some detail. To start with, the two relevant provisions to be considered are Article 286(1)(a) with the Explanation and Article 286 (2). Omitting what is not material, they 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 in the course of inter-State trade is inside that State in which goods are actually delivered for consumption. (2) No law of a State shall impose tax on a sale in the course of inter-State trade." The argument of the appellant that Article 286(2) is comprehensive and includes all sales in the course of inter-State trade and that therefore the sales covered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antly clear by the words "for the purposes of sub-clause (a)" in the Explanation. Likewise, reading Article 286(1)(a) including the Explanation along with Article 286(3), the result is that the power to tax which the State otherwise possesses has to be exercised subject to the conditions mentioned in the latter, when there is a Parliamentary declaration thereunder. The impact of Article 286 (3) is, it should be noted, not confined to the Explanation but extends to the whole of Article 286(1)(a). It operates not only on the inter-State sales falling within the Explanation but also on sales which are indisputably intra-State, and it controls both of them on the principle of generalia specialibus non derogant. It is next contended that the sales to which the Explanation applies, takes place as a fact in the course of inter-State trade, and that the Explanation could not be construed as altering that fact, and that its true scope was merely to shift the situs of the sale from the selling to the delivery State. Conceiving inter-State trade as a stream flowing from point A in the selling State to a point B in the delivery State, it was argued that what the Explanation did was to sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... might be quoted: "Of course the transportation of plaintiffs' goods across the State line is of itself inter-State commerce; but it is not this that is taxed by the City of Covington, nor is such commerce a part of the business that is taxed, or anything more than a preparation for it. So far as the itinerant vending is concerned the goods might just as well have been manufactured within the State of Kentucky; to the extent that plaintiffs dispose of their goods in that kind of sales, they make them the subject of local commerce; and this being so, they can claim no immunity from local regulation, whether the goods remain in original packages or not." In the light of the above principles, what is the legal character of the sales effected by the appellant and sought to be taxed by the respondent. There is firstly the fact that the goods were actually delivered in Bihar, and secondly, there is the fiction enacted by the Explanation that the sale had taken place not in Bengal but in Bihar. If both sale and delivery are in Bihar, it is difficult to see how the sale can be said to be in the course of inter-State trade. The argument of the appellant that there was, in fact, a movement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acted a legal fiction, and that it being a well-established rule of construction that legal fictions should be limited to the purpose for which they are enacted, it would be contrary to this rule to hold that the Explanation not merely shifted the situs of the sale but also obliterated the course of inter-State commerce. But the conclusion that the sales covered by the Explanation cease to be in the course of inter-State trade is not the result of any extension of the fiction because, as already stated, the factum of inter-State transportation is not ignored. That is the legal consequence of the fictional shifting of the situs. It will be useful in this connection to quote what Lord Asquith observed in dealing with a similar contention in East End Dwellings Co., Ltd. v. Finsbury Borough Council [1952] A.C. 109, 132.: "If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it. One of these in this case is emancipation from the 1939 level of rents. The statute says ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Explanation, it becomes an outside sale, and if Article 286(2) is to be construed as not barring the delivery State, in the instant case Bihar, from taxing the sale, then there is no sale to which it can apply, and it will serve no purpose. The error in this argument lies in taking the illustration as exhausting the entire range of inter-State trade. But that is not correct. Inter-State commerce consists in a flow of goods not merely from one State to another but in its continuous flow through several States, and Article 286(2) is designed to protect such a flow without being burdened by State taxes. Thus, if A in Bengal sells to B in Bihar, and if in his turn B sells the same goods to C in U. P. for local consumption, there will be inter-State commerce under Article 286(2) and in the course thereof, there will be two sales. Taking first the sale from Bengal to Bihar, Bengal can tax it under Article 286(1)(a) because the Explanation thereto is not applicable as the delivery to Bihar is not for local consumption. But Article 286(2) would interpose a bar. Bihar cannot tax the sale under Article 286(1)(a), because that is an outside sale, the Explanation being inapplicable. Coming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies both to sales in which goods are delivered for local consumption and those in which they are delivered for other purposes is correct, then it is difficult to see how the appellant can escape the conclusion reached by Bhagwati, J., in The State of Bombay v. The United Motors (India) Ltd. [1953] S.C.R. 1069; 4 S.T.C. 133. The appellant is plainly in the horns of a dilemma. Sales in which goods are delivered for local consumption fall either outside Article 286(2) or inside it. If they fall outside Article 286(2), then the appellant can claim no immunity from taxation under that provision. In case they fall inside Article 286(2), then the Explanation must prevail as against it on the principle generalia specialibus non derogant, and the sales will be liable to be taxed. To get out of this difficulty, the appellant contended that Article 286(2) and the Explanation related to two different matters, and therefore the maxim in question had no application. The argument was that Article 286 imposed a number of restrictions on the power of the State to tax sale of goods from different angles, e.g., when they were outside the State, Article 286(1)(a); in the course of export or import, Ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant could resist the application of the maxim aforesaid. It is true that Bhagwati, J., who took that view in The State of Bombay v. The United Motors (India) Ltd. [1953] S.C.R. 1069; 4 S.T.C. 133. has now retreated from that position. But with respect, there is irrefragable logic in his reasoning in that decision, and that commends itself to me. Then, there is the third view that the sales to which the Explananation applies are in the course of inter-State trade, and therefore fall within the purview of Article 286(2), and that, in consequence, the power of the delivery State to tax those sales is incapable of exercise, as it is within the prohibition contained in that Article, and that when the Parliament enacts a law in terms of Article 286(2) lifting the ban thereunder, then and not until then could the Explanation have any operation. That was the view expressed by Bose, J., in The State of Bombay v. The United Motors (India) Ltd. [1953] S.C.R. 1069; 4 S.T.C. 133. and by Das, J., in State of Travancore-Cochin v. Shanmugha Vilas Cashew-Nut Factory [1954] S.C.R. 53; 4 S.T.C. 205. Briefly, according to this view Article 286(2) controls the Explanation. Can this be sustained on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e two provisions and giving operation to both of them, renders them uncompromisingly hostile, and makes their co-existence and co-operation impossible. It is also open to question whether the saving clause could be referred to for the purposes of determining the respective spheres of operation of the Explanation and the body of Article 286(2). The scope of a saving clause or an exception is that it operates within the area covered by the main provision on which it is engrafted. It cannot add to it though, when in force, it can detract from it. It would, therefore, be inadmissible for enlarging what would otherwise be the sphere in which Article 286(2) would operate. If the view that Article 286(2) controls the Explanation cannot be maintained on a construction of the body of Article 286(2) and the Explanation, it cannot properly be adopted on the strength of the saving clause annexed thereto. There was considerable discussion before us as to the nature and scope of the law that could be enacted under Article 286(2). It must be confessed that the matter is not free from doubts and difficulties. But about one thing, there can be no dispute. The law to be enacted by Parliament cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on can have no practical effect on the operation of the proviso. If, in fact, a delivery State had been levying a tax before the commencement of the Constitution, that would continue to be valid under the proviso, not by the operation of the Explanation but by reason of the fact that it had been levied before. Thus, the Explanation as such has no operation. (2) It should also be mentioned that prior to the Constitution no State was actually levying a tax on the basis of delivery and therefore the Explanation could have no practical effect even when the President made the order. The Constitution-makers presumably had before them the sales tax legislation of all the States, and it is a legitimate inference that they could not have thought of the Explanation as deriving any force or operation by reason of an order of the President under the proviso. Mr. Taikad Subrahmanya Iyer, counsel for M.K. Kuriakose, one of the interveners, arguing in support of the contention of the appellant that Article 286 (2) is the controlling provision, suggested a third category of cases wherein the Explanation could operate apart from a law under the saving clause in Article 286 (2) or the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in sense equivalent and in use more familiar, selling. But he maintained that if the contract to sell was made in England, and, in pursuance of it goods were, by the consent of buyer and seller, appropriated to meet the contract, then the transaction became a sale completed in England, and that it did not signify whether the goods were at the time of such appropriation in England or abroad. I cannot accept that view. A contract to sell unascertained goods is not a complete sale, but a promise to sell. There must be added to it some act which completes the sale, such as delivery or the appropriation of specific goods to the contract by the assent, express or implied, of both buyer and seller. Such appropriation will convert the executory agreement into a complete sale. In my opinion, if you must decide in what country an appropriation of goods by consent takes place, it takes place not where the consent is given, but where the goods are at the time situate". In view of these observations, it cannot be contended that the title to the goods passed in State A and that State B gets the right to tax by reason of the Explanation. State B gets the power to tax the sale not under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om taxation under Article 286(2) is the normal condition, and that taxation under the Explanation is an exception is to beg the very question that we have got to decide. No other provisions of the Constitution have been cited as expressive of that intention. On the other hand, such indication as there is tends in the opposite direction. Article 304 (a) which is an exception to Article 301 authorises the imposition of a tax on imported goods when similar goods locally manufactured are subject to a State tax provided that such imposition is not discriminatory. It is true, as contended by the learned Attorney-General, that under Article 304 (a) the tax, is levied on the goods whereas under Article 286 (2) it is laid on the transaction of buying and selling. But on a question of policy, what difference would it make whether the tax is imposed on the transaction of sale or on the import of goods, as in either case it must fall on the consumers. That clearly is the reasoning of the majority of the learned Judges in The State of Bombay v. The United Motors (India) Ltd. [1953] S.C.R. 1069,1088; 4 S.T.C. 133., and there has been no satisfactory answer to it by the appellant. On the other h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... result in considerable harassment of the assessees. As against this, the respondent contended that the sellers had really no grievance in the matter as the tax would be ultimately paid by the consumers, and that, on the other hand, if the contention of the appellant were to be accepted, the States would have to lose a substantial portion of the revenue derived from sales tax and that must seriously affect their economy. It must be conceded that in the view that the Explanation authorises the imposition of tax on all sales in the course of inter-State trade falling within its purview, non-resident sellers will be liable to be taxed in every State in which the goods are sold for consumption, and that they must in consequence be exposed to multiple assessment proceedings in different jurisdictions and that that must cause inconvenience. But then, that is necessarily inherent in the Explanation whether it operates when the ban under Article 286 (2) is lifted by Parliamentary legislation as contended for by the appellant, or even without such law, as the respondent maintains. That does not, therefore, appear to be very material in construing the scope of the Explanation. The right whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the judgment itself. Even looking at the matter from the practical standpoint, it is easy to exaggerate the inconvenience which the Explanation might cause. If sellers have trade and commerce all over the States, theirs must undoubtedly be a big business. That means that they would have, for the purpose of the business, adequate clerical establishment-accountants, correspondence clerks and so forth. Regular account books would be maintained showing the dispatch of goods to dealers and purchasers in other States. And thus, all the materials on which returns have to be made would be already there. The additional burden will consist in this that in posting the entries in the ledger accounts, separate folios will have to be opened for the several States. This is no doubt additional work thrown on the sellers, but viewed in its true perspective, it is too unsubstantial to deny the States a substantive power to tax. It is said that there would be considerable harassment of the sellers under the provisions of the impugned Act. But why should there be? It must be presumed that Sales Tax Officers will do nothing unfair or oppressive, and the correspondence between the parties p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over the subject of tax on sales in the course of inter-State trade, provision being made for distribution of the receipts among the States under Article 269 after making the necessary amendments to the Constitution. Our duty is to construe the provisions as they stand and not to discuss questions of policy which it is for the Legislature to decide; and if I examine the suggestion of the appellant, it is only for the purpose of finding out what light it throws on the present controversy, and how far it will be an improvement on the present position under the Constitution. Under Entry 48 in List II of the Government of India Act, 1935, the States had the power to impose tax on sale of goods and advertisements. When dealing with this topic, the Constitution-makers took over advertisement of newspapers to the Union List, the residue being left to the States. Thus, the decision to entrust the power to tax sales to the States was deliberate, and there is good reason for it. Sales might take place either in the course of inter-State trade or be intra-State. There can be no question of the Centre taking over taxation of intra-State sales. To confer a power on the Centre to tax sales in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in the several States and making that determination final for purposes of assessment by the States. That would, on the one hand, secure to the States the finance legitimately due to them under the Explanation, and at the same time, save the sellers from the harassment of multiplicity of proceedings. Such a law cannot be impugned as trespassing on the exclusive domain of the States to impose sales tax under Entry 54, as the authority to impose the tax would continue to be the States. It is the law of the several States that will determine the conditions under which, and the rate at which, the tax will be chargeable. It is the machinery set up by the States that will make the assessment and collect the taxes, and these realisations will find their way into the coffers of the States. The effect of the Act would be only to enact a rule of evidence, on which the assessing authorities have to act. Such a law would not conflict with any of the provisions of the Constitution. It is scarcely necessary to add that this suggestion is only by way of answer to the one put forward by the appellant, and even if there are constitutional difficulties in the way of acting on it, that would not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perhaps be difficult to say that they were, as to third parties, under all circumstances and in all cases absolutely final, but they certainly ought not to be reopened without the very greatest hesitation." The case before the Board was one involving questions of ecclesiastical law, and it was held that in such cases their Lordships were free to examine for themselves the reason on which the prior decision rested and to decide on their own view of the matter. The authorities bearing on this question were reviewed by the Privy Council at some length in Re: Transferred Civil Servants (Ireland) Compensation [1929] A.C. 242. , and the result was thus summed up: "There is no inherent incompetency in ordering a rehearing of a case already decided by the Board, even when a question of a right of property is involved, but such an indulgence will be granted in very exceptional circumstances only. It is of the nature of an extraordi- narium remedium." This opinion was reiterated in Attorney-General of Ontario v. Canada Temperance Federation A.I.R. 1946 P.C. 88. wherein Viscount Simon said: "Their Lordships do not doubt that in tendering humble advice to His Majesty they are not ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed into rigid and inflexible rules. But one principle stands out prominently above the rest, and that is that in general, there should be finality in the decisions of the highest Courts in the land, and that is for the benefit and protection of the public. In this connection, it is necessary to bear in mind that next to legislative enactments, it is decisions of Courts that form the most important source of law. It is on the faith of decisions that rights are acquired and obligations incurred, and States and subjects alike shape their course of action. It must greatly impair the value of the decisions of this Court, if the notion came to be entertained that there was nothing certain or final about them, which must be the consequence if the points decided therein came to be reconsidered on the merits every time they were raised. It should be noted that though the Privy Council has repeatedly declared that it has the power to reconsider its decisions, in fact, no instance has been quoted in which it did actually reverse its previous decision except in ecclesiastical cases. If that is the correct position, then the power to reconsider is one which should be exercised very ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the interpretation of the law". (per Griffiths, C.J., at page 58). It is for this reason that Article 141 invests decisions of this Court with special authority, but the weight of that authority can only be what we ourselves give to it. It was suggested as a ground for reconsidering the correctness of the decision in The State of Bombay v. The United Motors (India) Ltd.[1953] S.C.R. 1069; 4 S.T.C. 133. that it had caused great hardship to the business world. I have already held that there is not much of substance in this complaint. On the other hand, acting on the view that the Explanation confers on the delivery States power to tax the sales, several States amended their Sales Tax Acts in 1951 by inserting appropriate provisions and it is represented before us that for some years, taxes have been collected by the States on the basis of these provisions. If we are now to hold that the view taken in The State of Bombay v. The United Motors (India) Ltd. is erroneous, the consequences will be to render the amended provisions inoperative and the collections of taxes made thereunder illegal. The States will then be not merely powerless to tax sales falling within the Explanation in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The questions thus raised are of great importance involving the determination of the nature and extent of the power which a State has to make laws in respect of the matters enumerated in List II. It is necessary, to begin with, to define the precise meaning of the words "extra-territorial operation". A sovereign State has plenary jurisdiction to enact laws for its own territory. Such laws may be in respect of persons within the territory whether citizens or not, of property, immovable or movable, situated within the State; or of acts and events which occur within its borders. In Maxwell on Interpretation of Statutes (10th Edn., page 144) the law is thus stated: "Primarily, the legislation of a country is territorial. The general rule is that 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." In "Conflict of Laws-Restatement of the Law" by the American Law Institute, the position is thus summed up: "47. A State has jurisdiction over a person: (a) if he is within the territory of the State, (b) if he is domiciled in the State although not present there, (c) if he has consente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 868-869). "Extra-territorial Legislation", says Wheare, "simply means legislation which attaches significance for courts within the jurisdiction to facts and events occurring outside the jurisdiction". (Statute of Westminster and Dominion Status by Wheare, 4th Edition, page 167). A typical illustration of this class of legislation is furnished by section 4, Indian Penal Code, which enacts that "the provisions of this Code apply also to any offence committed by- (1) any citizen of India in any place without and beyond India; (2) any person on any ship or aircraft registered in India whereever it may be. Explanation: In this section the word 'offence' includes every act committed outside (India) which, if committed in (India) would be punishable under this Code. Illustration: A (who is a citizen of India) commits a murder in Uganda. He can be tried and convicted of murder in any place in (India) in which he may be found." In this connection, extra-territorial legislation means a law of a State with reference to its own citizens in respect of acts or events which take place outside the State. In discussing questions relating to extra-territorial operation, it is desirable that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was as to the validity of section 1025 of the Criminal Code of the Dominion of Canada which enacted that "no appeal shall lie in criminal case to any authority in the United Kingdom by way of appeal or petition to His Majesty in Council". It was held by Viscount Cave, L.C., that that section was repugnant to the Privy Council Acts of 1833 and 1844, and was therefore void under the Colonial Laws Validity Act, 1865, and that accordingly the appeal to the Privy Council was competent. He also observed that however widely the powers of the Dominion Parliament be construed, they were confined to action to be taken in the Dominion, and could not extend to annulling the prerogative right of the King in Council to grant special leave to appeal. As the law in question was in respect of crimes committed within the State, these observations are capable of the construction which the appellant seems to put on them that such a law would be incompetent to the extent that it is to have operation outside the State. But it must be mentioned that the vires of the action to be taken under the Act within the State itself was affirmed in unqualified terms, and that is what we are concerned with in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... try had only the limited powers recognised in Nadan v. The King [1926] A.C. 482., and that extra-territorial legislation was incompetent. But there is nothing in the observations in British Coal Corporation v. The King [1935] A.C. 500, 516 relied on by the appellant to support the contention that the view expressed in Nadan's case(1) was adopted in preference to that taken in Croft v. Dunphy [1933] A.C. 156.; in fact, there, was no decision at all on this point. Nor does the fact that the Statute of Westminster has conferred an express power on the Colonial Legislature to enact laws with extra-territorial operation affect the weight to be attached to the conclusions come to in Croft v. Dunphy(3), because they were reached, not with reference to the Statute of Westminster about the applicability of which retrospectively to the case before the Board there was controversy, but on general principles, and what is more to the present case, it was the law as declared in Croft v. Dunphy(3) that was before the framers of the Constitution when they enacted sections 99 and 100 of the Government of India Act, 1935. Turning now to the Constitutional provisions under the Indian law, this topic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince or part thereof in the case of Provincial Legislature ", and under section 100(3), the power is to make laws for a Province or a part thereof with respect to the matters enumerated in List II. Under sections 99(1) and 100, the legislative power of the Centre or the Province is determined by two conditions. It must be for the territory specified, and it must be in respect of the topics enumerated in the respective lists. If these conditions are satisfied, then the law is valid notwithstanding that it may have impact or operation outside the State. The scope of the legislative power conferred by sections 99(1) and 100 is precisely the same as that conferred on the Legislatures of Canada under sections 91 and 92 of the British North America Act. That was also a power conferred on the Dominion Parliament or the Provincial Legislature to make laws for the Dominion or the Province in respect of the matters mentioned in sections 91 and 92 respectively. It is on the construction of these provisions that Lord Macmillan held in Croft v. Dunphy [1933] A.C. 156. that the Dominion Legislature was competent to enact laws in respect of those matters even if they had extra-territorial o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terising it as a "piece of extra-territorial legislation not by a superior or Dominion Legislature but by a subordinate Legislature". On appeal, this decision was reversed by the Federal Court. Spens, C.J., who delivered the judgment of the Court held firstly that as the source of the income which was subjected to tax was Indian, it was competent for the Indian Legislature to impose a tax thereon, and no question of extra-territorial operation arose. That is to say, Entry 54 in List I gave power to the Indian Legislature to tax income which arises from British India, even though the person to be taxed was not resident within British India. He also held that even if an element of extra-territoriality was involved, the legislation was not bad on that account, because section 99(1) and section 100 of the Government of India Act, 1935, were intended to embody the law as declared in Croft v. Dunphy [1933] A.C. 156. and to confer on the Indian Legislature plenary powers of legislation in respect of matters mentioned in the lists, departing in this respect from the position under section 65(1)(a) of the Government of India Act, 1915. In Wallace Brothers & Co. Ltd. v. Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e suggest a query whether the Legislature is in truth minding its own business. It does not compel the conclusion that it is not. The enabling statute has to be fairly construed." He then referred to section 99(1) and section 100 of the Govern- ment of India Act under which the Indian Legislature had power to enact laws for the whole or part of British India with respect to tax on incomes, and concluded: "The resulting general conception as to the scope of income-tax is that given a sufficient territorial connection between the person sought to be charged and the country seeking to tax him income-tax may properly extend to that person in respect of his foreign income............... The principle-sufficient territorial connection-not the rule giving effect to that principle-residence-is implicit in the power conferred by the Government of India Act, 1935. The result is that the validity of the legislation in question depends on the sufficiency for the purpose for which it is used of the territorial connection set forth in the impugned portion of the statutory test." It is the contention of the respondent that the present question is concluded by this decision. In A.H. Wadia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the respective lists to be exercised for the territory over which they have jurisdiction. It is a well-settled rule of construction that when a statute is repealed and re-enacted and words in the repealed statute are reproduced in the new statute, they should be interpreted in the sense which had been judicially put on them under the repealed Act, because the Legislature is presumed to be acquainted with the construction which the Courts have put upon the words, and when they repeat the same words, they must be taken to have accepted the inter- pretation put on them by the Court as correctly reflecting the legislative mind. On a construction of Articles 245(1) and 246, therefore, it will be difficult to come to any other conclusion than that a sales tax legislation of a State which is otherwise valid is not ultra vires on the ground that the person proposed to be taxed is not resident within the territorial limits of the State. Three other contentions urged in opposition to this conclusion must now be considered: .. It is only the Central or Federal Legislature that has the power to enact laws with extra-territorial operation, and that the Legislatures of the States form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n sphere. The principle laid down in Croft v. Dunphy(1) that a subordinate Legislature has plenary powers in respect of the topics assigned to it will apply as much to the State with reference to the matters enumerated in List II as to the Centre with reference to the topics mentioned in Lists I and III. In Hodge v. The Queen(2) which is one of the cases on which the decision in Croft v. Dunphy(1) was based, the law under challenge was that of the Province of Ontario in Canada in respect of a topic enumerated in section 92 of the British North America Act of 1867. The question whether States as distinct from the Commonwealth have competence to enact laws with extra-territorial operation has also been considered in some of the decisions of the Australian High Court. In Broken Hill South Limited v. The Commissioner of Taxation(3), Evatt, J., in discussing this question observed as follows at page 378: "Some of the cases also illustrate the fact, occasionally overlooked, that, constitutionally speaking, the status of the States of Australia is equal to, or co-ordinate with, that of the Commonwealth itself. Sovereignty is not attributable to one authority more than to the others ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... speaking intra-territorial though loosely termed "extra-territorial", and that under Article 245(1) it is within the competence of the Parliament and of the State Legislatures to enact laws with extra-territorial operation in that sense. The words "laws with extra-territorial operation" in Article 245(2) must be understood in their second and strict sense as having reference to the laws of a State for their nationals in respect of acts done outside the State. Otherwise, the provision would be redundant as regards legislation by Parliament and inconsistent as regards laws enacted by States. This conclusion is placed beyond doubt when regard is had to the history of legislation on this topic. Section 43 of the Charter Act, 1833, while restricting the scope of legislative authority to persons and things within the State thus denying the power to enact laws with extra-territorial operation in the first sense, conferred a power to make laws "for all servants of the company within the Dominion of Princes and States in alliance with the said company". This was a power to enact extra-territorial legislation in the second sense for servants of the company. Section 65(1) of the Government o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Government of India Act, 1935, they were not extra-territorial in operation and that even if they were, the words "without prejudice to the generality of the powers conferred by the preceding sub-section" occurring in section 99 (2) posited the existence of a power aliunde, and that the enumeration of the specified topics in that sub-clause was by way of abundant caution. On the 14th August, 1947, acting under section 9 of the Indian Independence Act the Governor-General issued an Adaptation Order, and therein, for the words "for the whole or any part of British India or for any Federated State" were substituted the words "including laws having extra-territorial operation for the whole or any part of the Dominion", and sub-section (2) was omitted. When the Constitution was enacted, the words "including laws having extra-territorial operation for the whole or any part of the Dominion" were omitted, and in their place, Article 245(2) was enacted. Thus, Article 245(2) is a successor to section 65(1), sub-clauses (b), (c), (d) and (e) of the Government of India Act, 1915, and section 99(2) of the Government of India Act, 1935, and its scope is extra-territorial legislation in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. The King(3) Viscount Simon observed: "A legislature which passes a law having extra-territorial operation may find that what it has enacted cannot be directly enforced, but the Act is not invalid on that account, and the courts of its country must enforce the law with the machinery available to them." Without expressing any opinion, therefore, on the validity of the machinery sections, I must hold that the impugned Act in so far as it authorises the imposition of tax on sales falling within the Explanation to Article 286(1)(a) is neither ultra vires the powers of the State Legislature nor bad on the ground that it is extra-territorial in its operation. 5.. Then there remains the contention of the appellant that even assuming that the States could, under the Explanation, enact a law imposing a tax on a non-resident and that such law would not be hit by Article 286(2), the impugned Act must even then be held to be bad for the reason that it was not authorised by the terms of the Explanation. Two grounds were urged in support of this contention: (1) that under the Explanation truly construed, a seller could be taxed only if he is within the State, and (2) that the goods were ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In V.M. Syed Mohammad & Co. v. The State of Andhra(3), the question was raised for decision whether Entry 48 in the Provincial List of the Government of India Act, 1935, "tax on sale of goods", included a power to impose a tax on the purchaser. It was held that it did, and it was observed that when Entry 54 in List II of the Seventh Schedule of the Constitution substituted for the words "tax on sales" occurring in Entry 48 the words "tax on sale or purchase", it did not thereby enlarge the powers previously conferred by Entry 48 but "merely expressed in clearer language what was implicit in that corresponding entry". When Article 286(1)(a) and the Explanation refer to a sale or purchase, they merely conform to the terms of Entry 54, and these words cannot therefore be construed as splitting up the power to tax sales into two parts, one available against the purchaser at all times, as in the very nature of it he must be within the State, and the other against a seller if he is within jurisdiction. The power is one and indivisible to be exercised when the conditions mentioned in the Explanation are satisfied against either a seller or buyer as the Legislature might determine. The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to see what there is in this section to support the contention that delivery to a common carrier is actual delivery to the purchaser. The section does not say so. On the other hand, it proceeds on the assumption that there was, in fact, no delivery to the purchaser, actual or otherwise, a thing being deemed to be something only, when as a fact it is not that, and then enacts on that basis a fiction that delivery to a common carrier shall be deemed prima facie to be delivery to the buyer. What is the purpose of this fiction? It is, as will be clear from section 39(2), to fix on whom the loss is to fall in case the goods are lost or damaged in course of transit. But where no such question arises, the fiction has to be ignored, and the matter will have to be decided on the factual basis whether the goods were actually delivered. A reference to section 51(1) of the Sale of Goods Act is very instructive. It runs as follows: "Goods are deemed to be in course of transit from the time when they are delivered to a carrier or other bailee for the purpose of transmission to the buyer, until the buyer or his agent in that behalf takes delivery of them from such carrier or other bailee." I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee's taking possession by himself or agent at some point short of the original intended place of destination." In Ex Parte Rosevar China Clay Company, In Re Cock(4) James, L.J., said: "The authorities show that the vendor has a right to stop in transitu until the goods have actually got home into the hands of the purchaser, or of some one who receives them in the character of his servant or agent." In the same case, the position was stated even more fully by Brett, L.J., in the following terms: "As soon as the clay was appropriated by the vendors to this contract and was placed on board the ship, the property in it passed to the purchaser and at the same time as between the vendor and the purchaser, there was a delivery of the claim to the latter. But it was a constructive not actual delivery." The same learned Judge again observed in Kendal v. Marshall(5) as follows: "Where the goods have been appropriated by the vendor, and have been delivered by him to a carrier to be transmitted to the vendee, a constructive Possession exists in the vendee." The law as declared in the above decisions was embodied in section 32(1) of the English Sale of Goods Act, which has been reproduce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble for this Court to go back upon its previous decision; but we are again divided as to whether this is a fit occasion for reviewing its previous decision. For the reasons given by my brothers, Jagannadhadas and Venkatarama Ayyar, I would agree with them in holding that sufficient grounds have not been made out for overruling that decision which had been taken after hearing all the parties interested in the result of the case. Not only the parties directly concerned with the case but a number of States by way of interveners as in the present case were also heard. After giving a very full hearing the Court gave its judgment which is a very elaborate one,-the report of the case running into 60 pages in print. It is true that much can be said for the opposite view as adumbrated in the judgment of my brother S.R. Das; but, in my opinion, simply because another view may be taken of the points in controversy is not a sufficient justification for our reviewing the previous judgment of this Court. It has not been suggested that any relevant provisions of the Indian Constitution or any other provision of law had been overlooked by this Court when it pronounced its previous ruling; nor has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons given by my brother Venkatarama Ayyar, I agree with him that the fiction created by the Explanation brings such a sale within the taxing power of the State within which such a sale is said to have taken place. Such a result is brought about not by holding that the Explanation has conferred positively the power on the relevant State to impose sales tax, but by holding that such an inside sale is beyond the scope of the prohibition contained in the main body of Article 286(1)(a) which interdicts the imposition of a tax on a sale "outside the State". The Explanation has got to be read as an integral part of Article 286(1)(a) and thus read, it means negatively that a sale or purchase outside a State cannot be taxed; and by necessary implication, that a sale or purchase inside a State may be taxed by that State as falling outside the mischief of the prohibition directed against the imposition of a tax on a sale or purchase of goods outside a State; in other words, as soon as a sale or purchase of goods is declared to be outside the pale of the prohibition contained in Article 286(1)(a), the State's power of imposing a tax contained in Article 246 read with item 54 of List II of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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