Territorial fiction in sales tax law can cover contract-based dispatches, but not mere stock transfers outside the State.

Mere movement of goods from one place of business to another, including dispatch to the assessee's own shop outside the State, is a business transfer and not a sale for sales tax purposes. Goods sent to persons, customers, or salesmen outside the State in pursuance of existing contracts of sale may, however, be treated as sales within the Act where the statutory fiction creates a sufficient territorial nexus. Explanation II to section 2(g) of the Central Provinces and Berar Sales Tax Act, 1947 was treated as within legislative competence, but its operation remained subject to constitutional limits and the amended form failed for want of the necessary assent.

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Issues: (i) Whether the sending of goods to the assessee's own shop outside the State constituted a sale under the Sales Tax Act. (ii) Whether the dispatch of goods to persons, customers, or salesmen outside the State in furtherance of contracts of sale could be treated as sales within the meaning of the Act. (iii) Whether Explanation II to clause (g) of section 2 of the Central Provinces and Berar Sales Tax Act, 1947 was beyond the competence of the Provincial Legislature and whether the statutory fiction remained effective subject to the Constitution.

Issue (i): Whether the sending of goods to the assessee's own shop outside the State constituted a sale under the Sales Tax Act.

Analysis: Mere movement of goods from one place of business to another, without a contract of sale in pursuance of which the goods are despatched, is only a business transfer. Such movement does not answer the statutory conception of a sale and cannot be converted into a taxable event merely because the goods are sent outside the State.

Conclusion: This was not a sale and the answer was against taxability on this ground.

Issue (ii): Whether the dispatch of goods to persons, customers, or salesmen outside the State in furtherance of contracts of sale could be treated as sales within the meaning of the Act.

Analysis: The statutory definition and its explanation were construed as creating a taxable nexus where goods were actually within the Province and the transaction had a substantial territorial connection there. Where despatch took place in pursuance of an existing contract of sale, the fiction could validly treat the transaction as having taken place in the Province for the purpose of levy. The answer depended on the circumstances, but where the despatch was in furtherance of a contract, the transaction was taxable under the Explanation.

Conclusion: Such transactions were liable to be treated as sales within the meaning of the Act when they were in furtherance of a contract of sale.

Issue (iii): Whether Explanation II to clause (g) of section 2 of the Central Provinces and Berar Sales Tax Act, 1947 was beyond the competence of the Provincial Legislature and whether the statutory fiction remained effective subject to the Constitution.

Analysis: The charging provision was within legislative competence because entry 48 in List II empowered taxation on the sale of goods. A legislature of limited powers is presumed to act within its jurisdiction, and a fiscal enactment may employ a legal fiction if there is a sufficient territorial nexus with the taxing State. On that footing, the unamended Explanation was validly enacted. However, the amended Explanation, which materially altered the law of sale, was not supported by the required gubernatorial assent and could not operate. The Court also held that Article 286 prevented continued enforcement of the Explanation to the extent that the Constitution reserved sales-tax incidence to the State of delivery for consumption.

Conclusion: Explanation II was not ultra vires the Provincial Legislature, though its enforcement was curtailed by the Constitution and the amended form was invalid.

Final Conclusion: The reference was answered substantially in favour of the taxing authority, with the assessee failing on the core validity challenge and on the principal taxable transactions.

Ratio Decidendi: A sales tax law may validly create a territorial fiction for transactions having a substantial nexus with the taxing State, but its operation is confined by constitutional limits and by any requirement of assent for altering the governing law of sale.

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