Territorial nexus for sales tax upheld where goods were in the State at contract time, with no repugnancy to sales law.

Explanation 2 to Section 2(h) of the Madras General Sales Tax Act was upheld as a valid territorial nexus provision because it treated goods being within the State at the time of the contract as sufficient for sales tax. The Sale of Goods Act was not concerned with the situs of sale but only with the time when property passes, so it did not conflict with the sales tax law. Repugnancy under Section 107 of the Government of India Act, 1935, arises only in the concurrent field, and the provincial sales tax law operated under an exclusive legislative entry. The explanation was therefore not void for repugnancy.

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Issues: Whether Explanation 2 to Section 2(h) of the Madras General Sales Tax Act, as inserted in 1947, was repugnant to the Sale of Goods Act and void for want of Governor-General's assent under Section 107 of the Government of India Act, 1935.

Analysis: The amended explanation enabled sales tax to be levied where the goods were actually within the State at the time of the contract of sale, thereby treating that situation as a sufficient territorial nexus for taxation. The Sale of Goods Act was held not to fix the situs of sale; it dealt only with the time when property in goods passes, not the locality of sale. Since the Provincial Legislature derived competence from Item 48 of List II of the Seventh Schedule to the Government of India Act, 1935, its power to legislate on taxes on the sale of goods was exclusive. Repugnancy under Section 107 arises only where two laws operate on the same subject-matter within the Concurrent List. As the sales tax law and the Sale of Goods Act operated in different fields, no repugnancy existed.

Conclusion: The impugned explanation was valid and not repugnant to the Sale of Goods Act or Section 107 of the Government of India Act, 1935.

Final Conclusion: The assessment under the amended sales tax provision was upheld and the petition failed.

Ratio Decidendi: A provincial sales tax law made under an exclusive legislative entry is not void for repugnancy merely because it uses a different criterion for the territorial nexus of sale than the Sale of Goods Act, since the latter does not determine the situs of sale and Section 107 applies only to laws operating in the concurrent field.

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