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TMI Blog1964 (3) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... handran and J.B. Dadachanji, O.C. Mathur and Ravinder Narain of J.B. Dadachanji and Co., for the appellants in both the appeals. Govinda Menon and Dr. V.A. Seyid Muhammad, for the respondent in both the appeals. G.S. Pathak, Senior Advocate (S.N. Andley, Rameshwar Nath and P.L. Vohra of Rajinder Narain and Co., with him), for the interveners in both the appeals. -------------------------------------------------- The judgment of GAJENDRAGADKAR, C.J., WANCHOO, RAJAGOPALA AYYANGAR and SIKRI, JJ., was delivered by RAJAGOPALA AYYANGAR, J. SHAH, J., delivered a separate judgment. RAJAGOPALA AYYANGAR, J.- The appellant owns several estates wherein inter alia, tea is grown and was assessed to sales tax in respect of the tea sold by it during the years 1954-55 and 1955-56, by the Sales Tax Officer, First Circle, Quilon, in the State of Travancore-Cochin by his order dated December 23, 1956. In the taxable turn- over on which sales tax was computed by the assessing authority were included two items which are the subject of complaint in these two appeals which relate to these two years of assessment. Before the Assessing Officer the appellant claimed that certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (2).- Notwithstanding anything to the contrary in the Sale of Goods Act for the time being in force, the sale or purchase of any goods shall be deemed for the purpose of this Act, to have taken place in the State wherever the contract of sale or purchase might have been made (a) if the goods were actually in the State 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 the State at any time after the contract of sale or purchase in respect thereof was made." When the Constitution came into force a new section numbered section 26 was inserted by the Adaptation Order bringing the Act into line with Article 286(1) of the Constitution and this read: "No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place- (a) outside the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Judges differed from the Tribunal was only as regards the effect of the circumstance that the tea sold was, at the point of sale, physically in godowns situated in the State of Travancore-Cochin. The Appellate Tribunal had, in reaching the conclusion in favour of the appellant, as to the taxable character of the turnover represented by these auction sales, referred to a large number of decisions of this Court and to the observations contained in them as well as to several decisions of the various High Courts. When the matter came up before the High Court the position was, that that Court had after a review of most of the earlier cases which had been referred to by the Tribunal, held in Deputy Commissioner of Agricultural Income-tax and Sales Tax, Trivandrum v. A. V. Thomas and Co. I.L.R. 1960 Ker. 1395. that the words "outside sale" in Article 286(1)(a) had no reference exclusively to the transfer of the property in the goods according to the provisions of the Sale of Goods Act, and therefore that Explanation (2) to section 2(j) was not violative of Article 286(1)(a) and that if at the moment when the property passed, it not being very relevant where the property passed, the good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke the present one the difficulty still remains because the Expla- nation does not operate in the sense that the rival States claiming to tax the same taxable event are not the States of delivery for consump- tion in that State and those where the title in the goods passes." After referring to the decision in the India Copper Corporation Ltd. v. State of Bihar [1961] 2 S.C.R. 276; 12 S.T.C. 56., the Court held that the sale in the case before them was an "outside" sale quoad Travancore-Cochin, because the title passed at Fort Cochin in the State of Madras. On this reasoning this Court reversed the decision in the case of the High Court and held that the sale there in question being an "outside" sale was not taxable by reason of the prohibition contained in Article 286(1)(a). Dealing with the connotation of the expression "outside" in Article 286(1)(a) this Court had observed in India Copper Corporation Ltd. v. State of Bihar [1961] 2 S.C.R. 276; 12 S.T.C. 56. : "If a single State was designed to have the power to tax any particular transaction of sale, the question that next falls to be con- sidered is the determination of that State in regard to which it could be predicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds and hence became complete on the fall of the hammer and that the sales took place within the Madras State." In the revision application which the department filed in the High Court this question whether the property in the goods did pass at Fort Cochin was raised but nevertheless the argument before the High Court proceeded wholly on the basis of the correctness of the finding by the Appellate Tribunal that the property in the tea did pass on the fall of the hammer at Fort. The point about the property not having passed in the Madras State does not appear to have been even argued before the High Court. Even in the statement of the case filed by the respondent it is not stated that this point about the property not having passed at Fort Cochin in Madras was urged before the High Court during the course of the argument. Before concluding it might be mentioned that in A. V. Thomas's case [1963] 14 S.T.C. 363. where, as we have stated earlier, the nature of the transaction was identical with the one in the appeals before us, this Court observed: "It has been found and it has not been disputed that the title to the goods in the present case passed at Fort Cochin." In these circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers [1961] 2 S.C.R. 276 at p. 293; 12 S.T.C. 56: "........................by enacting that a tax shall not be imposed under the Act when the sale takes place outside the State of Bihar ........................,only the power to tax 'Explanation sales' which do not take place within the State of Bihar is taken away, but not the power to tax 'non-Explanation sales' in which though under the general law of sale of goods the property passes outside the State, there exists between the taxing power of the State and the sale a nexus as contemplated by the definition of sale in section 2(g). If the sale is one in which the goods have been delivered outside the State of Bihar, but not as a direct result of the sale or not for the purpose of consumption in the State of first delivery, the sale will not be covered by the Explanation, and the right to tax the sale, if arising otherwise under the Act relying upon the territorial nexus, will not be impaired by the prohibition imposed by clause (1)(a)(i) of section 33." It may be mentioned that section 33 of the Bihar Sales Tax Act was enacted to give effect expressly to the legislative restrictions imposed by Article 286 of the Constitution. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose of determining whether a sale is 'inside' or 'outside' the State. Therefore subject to the operation of the 'Explanation', that State in which the property in the goods passes would be the only State which would have the power to levy a tax on the sale." In A. V. Thomas and Co. Ltd.'s case [1963] 14 S.T.C. 363., chests of tea were stored in warehouses at Willingdon Island in the Travancore-Cochin State, but auctions of the tea chests were held at Fort Cochin which was at the material time within the State of Madras, and after the price was paid at Fort Cochin delivery orders were given to the purchasers addressed to the warehouse-keepers at Willingdon Island and actual delivery was given at the warehouses. The chests of tea were then sent from Willingdon Island for consumption in other parts of India or were exported out of India. It was held by the Court in that case that the property in the goods passed at Fort Cochin and as the goods were delivered not for the purpose of consumption in any particular State, the sales were not inside the State of Travancore-Cochin but were out- side that State and were not liable to be taxed under the Travancore-Cochin General Sales Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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