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TMI Blog1967 (8) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... 955. It used to supply coal to consumers in Travancore- Cochin State which later became Kerala. For the assessment year in question (1955-56) the assessee was asked to file statements showing its turnover of supplies of coal made to purchasers in the State of Kerala and in reply to the notice under section 12(2)(b) of the Travancore-Cochin General Sales Tax Act, it stated that the sales of coal to steamers arriving and berthed in Travancore-Cochin State waters were not taxable because the goods were stored by the steamers for consumption on the high seas. The assessee however did not question its liability to pay tax in respect of supplies made to other consumers in the State of Kerala. On March 7,1959, the Sales Tax Officer, Circle I, Mattancherry, assessed the respondent on a turnover of Rs. 1,29,352. The respondent filed an appeal therefrom and the Assistant Commissioner of Agricultural Income-tax and Sales Tax, Ernakulam, allowed the appeal in part and reduced the turnover by omitting the portion of it after 6th September, 1955. In the result, the assessee's turnover was reduced to Rs. 69,407. There was a further appeal to the Kerala Sales Tax Appellate Tribunal. This was disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , made substantial changes as regards levy of tax on inter-State sales. As a result of the amendment of Article 269 taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce were to be levied and collected by the Government of India and it was for Parliament to formulate principles for determining when a sale or purchase of goods takes place in the course of inter-State trade or commerce. (6) The Validating Act 9 of 1962 was enacted subsequent to the Constitution (Sixth Amendment) Act which came into force on 11th September, 1956. In view of the amendment of the Constitution in 1956 the Legislature of Kerala had not the competence to pass any legislation on the subject of inter-State sales whether prospective or retrospective or both in the year 1962 with the result that the State could not call in aid the provisions of Act 9 of 1962 to tax inter-State sales. The appellant's case was argued by the learned Solicitor-General. One E.J. Mathew was allowed to intervene in this matter. In our view, the High Court failed to construe the effect of the relevant statutes and apply the decisions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of, a tax on the sale or purchase of any goods where such sale or purchase took place In the course of inter-State trade or commerce during the period between the 1st day of April, 1951, and the 6th day of September, 1955, shall be deemed to be invalid or ever to have been invalid merely by reason of the fact that such sale or purchase took place in the course of inter-State trade or commerce; and all such taxes levied or collected or purporting to have been levied or collected during the aforesaid period shall be deemed always to have been validly levied or collected in accordance with law. * * *" A question here arises as to whether this statutory provision served to lift the ban imposed by section 26 of the General Sales Tax Act. Then came the Constitution (Sixth Amendment) Act, 1956, on September 11, 1956. It made substantial and important changes in Article 286 of the Constitution by deleting the Explanation to Article 286(1) and by substituting new Article 286(2) and 286(3). It also amended Article 269. It inserted item 92A in the Union List of the Seventh Schedule and substituted a new entry 54 in place of the old one in the State List of the said Schedule. As a res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Laws Validation Act (7 of 1956). Section 22 of the Madras General Sales Tax Act was inserted in the statute by an Adaptation Order of the President issued on July 2, 1952, and clause (a) thereof was substantially similar to section 26(1)(a) of the Travancore-Cochin General Sales Tax Act (11 of 1125). The effect of clause (b) of section 22 was that nothing in the Act (Madras Act) was to be deemed to 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 except in so far as Parliament may by law otherwise provide after 31st March, 1951, and the provisions of the Act were to be read and construed accordingly. There was an Explanation to this section which is a verbatim reproduction of the Explanation to Article 286(1)(a). It was held by this Court (at page 1453) that: "Taken along with the admitted power of the States to impose tax on sales under entry 54, the true scope of section 22 is that it does impose a tax on the Explanation sales, but the imposition is to take effect only when Parliament lifts the ban. In other words, it is a piece of legislation imposing tax in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not taxable under the Travancore-Cochin General Sales Tax Act, 1125. The State contended that this claim for exemption was not available in view of the Sales Tax Laws Validation Act, 1956. The High Court held that the Validation Act could not avail the State because on their con- struction of section 26 of the Act, no tax had been levied or was leviable on sales in the course of inter-State trade or commerce and that the Validation Act having validated only taxes already levied could not enable the State to levy tax which had not been imposed by the State Sales Tax Act. This Court rejected the view of the High Court (see 7 S.T.C. 731 at page 738) and held that "the view of the learned Judges of the High Court regarding the construction of section 26 of the Travancore-Cochin General Sales Tax Act must now be held to be incorrect in view of the decision of this Court in M.P. V. Sundararamier & Co. v. The State of Andhra Pradesh [1958] S.C.R. 1422; 9 S.T.C. 298.." The position which emerges from the above may be summarised below: (1) The enactment of the Travancore-Cochin General Sales Tax Act, as it stood prior to the coming into force of the Constitution, imposed a levy of sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the principal Act as inserted by the Act of 1962. The ban imposed by section 26 of the General Sales Tax Act, 1125, having been lifted by the Central Sales Tax Validating Act, 1956, the State was competent to collect all taxes in respect of sales in the course of inter-State trade and commerce up to September 5, 1955. In the result, we hold that sales tax was properly leviable by the State of Kerala on the transactions which formed the subject-matter of this case up to 4th September, 1955; but the question raised in the application for revision was not correctly framed and should read as follows:
"Whether in the light of the Sales Tax Laws Validation Act, 1956 (Central Act 7 of 1956), read with the Travancore-Cochin General Sales Tax Act as amended up to 1956, the finding of the Tribunal is correct?" We amend the question accordingly. We allow the appeal and answer the question in the affirmative. The matter must now go back to the High Court and the High Court should remit the matter to the Appellate Tribunal with our opinion on the question as reframed. In the circumstances of this case, we make no order as to costs.
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