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TMI Blog1961 (3) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court of Madras. The firm of Messrs Ashok Leyland Ltd., Ennore, is the appellant before us. For brevity and convenience, we shall herein- after refer to the firm as the assessee. The State of Madras through the Commercial Tax Officer, Saidapet, is the respondent before us. The assessee is a firm with its factory at Ennore in the State of Madras, where it manufactures, assembles and sells motor vehicles and spare parts and accessories thereof, through an elaborate organisation spread over several States. It is, perhaps, necessary to indicate briefly the organisational set up in order to appreciate the point on which the case was heard in the High Court and argued before us. The system of distribution of its motor vehicles, spare parts and accessories at one uniform price to consumers in the various States which the assessee adopted, consisted of the appointment of a distributor (called a dealer) with a definite territorial jurisdiction, both inside and outside the State of Madras. To every such dealer it granted the sole right of selling the products of the firm within the territory allotted to him. If the territory of the dealer was outside the State of Madras, the agreement ente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay sales tax as the transactions were in the course of inter- State trade and commerce. This objection was, however, overruled by the Commercial Tax Officer except to a very small extent. From that decision of the Commercial Tax Officer, an appeal was taken to the Sales Tax Appellate, Tribunal, Madras, and the assessee contended in that appeal that the revision of the assessment by the Commercial Tax Officer was without jurisdiction and that the inclusion of Rs. 42 lacs odd in the taxable turnover was contrary to the provisions of Article 286 of the Constitution. The Tribunal rejected the plea of absence of jurisdiction, but held on merits that the sum of Rs. 12,48,403 odd representing the value of vehicles driven away on their own motive power through the assessee's own drivers to the places of business of the non-resident dealers was not liable to sales tax. The assessee then preferred a revision to the High Court of Madras under section 12B(1) of the Act and repeated the contention that the sales in question were in the course of inter-State trade and commerce and not liable to sales tax by reason of the provisions of Article 286(2) of the Constitution. In the High Court the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rue scope and effect of Article 286(2) of the Constitution and whether the transactions in question came within the ban imposed thereby. On behalf of an intervener (Tata Locomotive and Engineering Co. Ltd., Bombay) we have been pressed to decide, on merits, whether the transactions under consideration here come within the ban of Article 286(2) of the Constitution, on the ground that such decision will be of assistance in a pending case to which the intervener is party. We do not think that we can do so for the benefit of the intervener. The intervener has no right to ask us to decide a question which does not fall for decision if the Validation Act applies; for it is conceded that if the Validation Act applies, that will be decisive of the whole appeal. We must, therefore, reject the plea of the intervener. We proceed now to consider the main point argued in this appeal, namely, whether the Validation Act applies to the transactions in question. It is convenient to read here section 2, which is the relevant section, of the Validation Act: "Section 2. Notwithstanding any judgment, decree or order of any Court, no law of a State imposing, or authorising the imposition of, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s appeal; it merely imposes a tax on transactions which are generally known as Explanation sales referable to the Explanation to Article 286(1)(a), such as were considered in the decision of this Court in M.P. V. Sundararamier Co. v. The State of Andhra Pradesh and Another [1958] S.C.R. 1422; 9 S.T.C. 298. We shall consider these two arguments one after the other. It appears to us that the first argument does not correctly reflect the true scope and effect of section 2 of the Validation Act. It is necessary, perhaps, to advert to the circumstances which led to the enactment of the Validation Act. The true meaning and scope of the Expla- nation to Article 286(1) of the Constitution came up for consideration before this Court in The State of Bombay and Another v. The United Motors (India) Ltd. and Others [1953] S.C.R. 1069; 4 S.T.C. 133. It was therein held by the majority that though the sales falling within the Explanation would, in fact, be in the course of inter-State trade, they became intra-State sales by the fiction introduced by the Explanation and were liable to be taxed by the State within which the goods were delivered for consumption. Then came the decision in The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies any such law." It should be obvious that in 1939, long before the coming into force of the Constitution, the Act could not have said in express terms that it was taxing sales in the course of inter-State trade. What we have to see is that the fetter under Article 286(2) having been removed, does the Act operating on its own terms affect the transactions in question even though they be in the course of inter-State trade? If it does, the assessment is no longer liable to challenge on the ground of the ban imposed by Article 286(2). This brings us to the second argument of the learned Attorney- General. One has merely to see the definitions of "sale" and "turnover" and section 3, the charging section, to come to the conclusion that the Act operating on its own terms makes the transactions under consideration in this appeal liable to sales tax. Explanation 2 to the definition of "sale" says: "The sale or purchase of any goods shall be deemed, for the purposes of this Act, to have taken place in this State, wherever the contract of sale or purchase might have been made- (a) if the goods were actually in this State at the time when the contract of sale or purchase in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words, of Explanation sales only; therefore, the Act does not operate on sales of an inter-State character other than Explanation sales. We are unable to agree. First of all, sub-section (2) of new section 22 makes it quite clear that the section does not affect the liability to tax of any sale or purchase under any other provision of the Act. Secondly, after Parliament had lifted the ban imposed by Article 286(2), it was unnecessary to repeat the provisions of that Article in the Act and old section 22 in so far as it repeated Article 286(2) became otiose. Therefore, new section 22 has not the effect of subtract- ing something from the power to tax conferred on the State by the charging section, section 3, read with the definition of "sale" in section 2(h). To repeat what we have said earlier: after the removal of the fetter of Article 286(2), the Act operating on its own terms makes the transactions in question liable to tax, and new section 22 makes no difference to that position. For these reasons, we are unable to accept as correct the arguments advanced on behalf of the assessee. In our view, the Validation Act applies and the assessment on the transactions in question ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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