TaxTMI 
TaxTMI 
TaxTMI 
1955 (9) TMI 38
X X X X Extracts X X X X
X X X X Extracts X X X X
....ral of India (A.P. Sen, J.B. Dadachanji and Rajinder Narain, Advocates, with them), for the petitioner. T.L. Shevde, Advocate-General of Madhya Pradesh, (M. Adhikari, Deputy Advocate-General of Madhya Pradesh and I.N. Shroff, Advocate, with him), for the respondents. M. Adhikari, Deputy Advocate-General of Madhya Pradesh and I.N. Shroff, Advocate, for the respondents in all appeals.(Petition No. 567 of 1954). The Judgment of DAS, ACTG. C.J., BHAGWATI, JAFER IMAM and CHANDRASEKHARA AIYAR, JJ., was delivered by BHAGWATI, J.-These 3 appeals with certificate under Article 132 (1) of the Constitution involve the interpretation of the proviso to Article 286(2) and raise a common question as to whether that proviso also saves the transactions of sale or purchase covered by the Explanation to Article 286(1)(a) from the ban imposed therein. The appellants in Civil Appeal No. 132 of 1955 are Messrs Ram-narain Sons Ltd., a firm registered as a "dealer" under the Central Provinces and Berar Sales Tax Act, 1947, and carrying on business at Page No: 629 Amravati and at other places in Madhya Pradesh. After the Cotton Control Order, 1949, came into force on the 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....x on the said transactions. These appellants also filed a petition under Article 226, being Miscellaneous Petition No. 348 of 1953, in the High Court of judicature at Nagpur for quashing the order dated the 9th September, 1953, passed by respondent No. 1 and for consequential reliefs. The respondents filed a return denying their contentions. The appellants in Civil Appeal No. 137 of 1955 are the firm, Ramdas Khimji Brothers, Bombay, registered as a "dealer" under the Central Provinces and Berar Sales Tax Act, 1947, and carrying on business as cotton dealers in Madhya Pradesh. During the period 1st October, 1950, to 30th September, 1951, the appellants sold cotton worth Rs. 6,01,949-1-9 to various persons outside Madhya Pradesh. The cotton was delivered to the buyers for consumption outside Madhya Pradesh as a direct result of such sales. By his order dated the 29th December, 1952, the Sales Tax Officer, Amravati, in the assessment of the appellants for the same period, included the said transactions in the appellants' turnover and assessed sales tax thereon. The appellants filed an appeal to respondent No. 1 but the same was dismissed by an order dated the 10th July, 19....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ected until the 31st March, 1951, by the Sales Tax Continuance Order No. 7 of 1950 issued by the President on the 26th January, 1950, under the proviso to Article 286(2). The High Court was of the opinion that the original Explanation was validly enacted as the assent of the Governor-General to the enactment was given on the 23rd May, 1947, and that under that Explanation the tax prior to the commencement of the Constitution was lawfully levied on the sales of goods wherever the contracts of sale took place if the goods were actually in the State at the time the contracts of sale were made. This power could be exercised by the State even if the sales took place during the course of inter-State trade or commerce and the goods were delivered as a direct result of the sales for the purpose of consumption outside the State. This was because the situs of the goods constituted a sufficient nexus between the transactions and the taxing State which was the foundation for taxation prior to the commencement of the Constitution. This position continued until the commencement of the Constitution and on the 26th January, 1950, the President issued the Sales Tax Continuance Order No. 7 of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nsaction had also to surmount the ban imposed under Article 286 (1)(a) and the Explanation thereto so that, if, as a direct result of such sale, the goods were actually delivered for the purpose of consumption in another State, the exporting State (to use the phraseology of the Nagpur High Court) or the title State (to use the phraseology adopted in some of the judgments in The Bengal Immunity Company's Appeal) would not be entitled to levy a tax on such sale the transaction being fictionally outside the State by reason of the Explanation and therefore coming within the ban of Article 286(1)(a). It was, however, urged on behalf of the State of Madhya Pradesh that the President's order not only saved the transactions from the ban of Article 286(2) but also from the ban of Article 286(1)(a), because the transactions covered by the Explanation to Article 286(1)(a) were of the same category as transactions covered by Article 286(2) and were all in the course of inter-State trade or commerce. It was further urged that if the transactions covered by the Explanation to Article 286(1)(a) were not saved from the ban by the President's order, the whole intention of the Con....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ns may also fall within the category of transactions covered by Article 286(1)(a) and the Explanation thereto or Article 286(3), the moment Article 286(2) is attracted by reason of the transactions being in the course of inter-State trade or commerce, the ban under Article 286(2) operates and such transactions can never be subjected to tax at the instance of a State Legislature except in so far as Parliament by law may otherwise provide or such power of taxation is saved by the President's order contemplated in the proviso. The ban under Article 286(2) may be saved by the President's order but that does not affect or lift the ban under Article 286(1)(a) read with the Explanation. Apart from the construction thus put upon the several clauses of Article 286 by the majority of the judges in the Bengal Immunity Company's Appeal as above, the terms of the proviso itself make it abundantly clear that the proviso is meant only to lift the ban under Article 286(2) and no other. It is a cardinal rule of interpretation that a proviso to a particular provision of a statute only embraces the field which is covered by the main provision. It carves out an exception to the mai....
X X X X Extracts X X X X
X X X X Extracts X X X X
....be to preserve to the States all the taxes on sale or purchase of goods which were being lawfully levied by them immediately before the commencement of the Constitution by having resort to the territorial connection or nexus theory. We have no evidence before us of this supposed intention of the Constitution-makers. Whatever their intention was can only be gathered from the language which they have used and where the language is plain there is no scope whatever for speculation in that behalf. When the Constitution-makers themselves used the words, "notwithstanding that the imposition of such a tax is contrary to the provisions of this clause ", it would not be legitimate for us to go behind the plain words and try to read into the proviso something which would involve either a deletion of the non-obstante clause or a re-writing thereof as suggested. Whatever be the effect of our judgment on the treasuries of the exporting or title States we cannot assist them by reading something into the proviso which is not warranted by any canon of construction. The proviso has reference only to Article 286(2) and cannot be projected into any other clause of Article 286. The untenability o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... have to be canvassed having regard to the various contentions of law and fact which could be urged against the same by the appellants. There are two outstanding questions which have been mooted before us by the learned Attorney-General in regard to this period, viz., (1) a question of fact, as to whether the appellants were agents of the various mills in regard to the transactions which were the subject-matter of the assessment, and (2) a question of law, whether the law under which the tax was levied, viz., Explanation II to section 2(g) of the Act, was validly enacted. Both these contentions, though they are also relevant to the post-Constitution period, were not specifically pressed before us because the argument based on the proviso to Article 286(2) was considered sufficient to set aside the assessment for that period. They would, however, appropriately arise and be urged by the appellants when the liability to assessment for the pre-Constitution period is to be determined and if we were to determine that liability we would have to deal with the same. The necessity for doing so is, however, obviated by reason of the fact that the assessment is one composite whole relating ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ove. The respondents will pay the costs of these appellants here as well as in the Court below. PETITION NO. 567 OF 1954. The Judgment of DAS, ACTG. C.J., BHAGWATI, JAFER IMAM and CHANDRASEKHARA AIYAR, JJ., was delivered by BHAGWATI, J.-This petition under Article 32 of the Constitution also involves the interpretation of the proviso to Article 286 (2) and raises the same question as to the meaning, scope and operation of the proviso as was raised in Civil Appeals Nos. 132, 133 and 137 of 1955 just disposed of. The facts giving rise to this petition may be shortly stated. The petitioners are a partnership firm carrying on business of manufacturing bidis at Jabalpur and registered as a "dealer" under the Central Provinces and Berar Sales Tax Act, 1947. The petitioners had their branches at Lucknow, Kanpur, Faizabad, Agra, Bombay and Bhopal. They had also their selling agents at various places in Uttar Pradesh and elsewhere outside the State of Madhya Pradesh. They also entered into transactions direct with merchants in Uttar Pradesh. The transactions in question which were the subject-matter of assessment at the instance of the Sales Tax Authorities wer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing the contentions of the petitioners that they were in any event sales effected by them outside the State of Madhya Pradesh and that the State of Madhya Pradesh was, therefore, not entitled to impose a tax on those transactions by virtue of the provisions of Article 286(1)(a) and the Explanation thereto. The learned Attorney-General who appeared for the petitioners contended that the bidis manufactured by the petitioners were all actually delivered as a direct result of the transactions of sale for the purpose of consumption in the State of Uttar Pradesh and that after the inauguration of the Constitution on the 26th January, 1950, it was only the State of Uttar Pradesh which was the delivery State that alone had the right to impose the tax on these transactions notwithstanding the fact that under the general law relating to the sale of goods the property in the goods might have passed in the State of Madhya Pradesh. He, therefore, urged that these transactions were sales outside the State of Madhya Pradesh and that the State of Madhya Pradesh was not entitled to impose a tax on such sales. The learned Advocate-General of Madhya Pradesh on the other hand contended t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n question were transactions of sale where the goods had actually been delivered as a direct result of such sales for the purpose of consumption in the State of Uttar Pradesh, the President's order made under the proviso to Article 286(2) saved the transactions also from the ban of Article 286 (1)(a) and the Explanation thereto and that the State of Madhya Pradesh was, therefore, entitled to impose a tax on the same. It was never contended before either of them that the sales were purely "inside sales" and that the Explanation to Article 286(1)(a) did not come into play at all under the circumstances of the case. The facts as found by the Sales Tax Authorities also emphasized that these transactions fell within the definition of sale contained in the Explanation II to section 2(g) of the Act and that so far as the post-Constitution period was concerned they were saved from the ban of Article 286(1)(a) and the Explanation thereto by the President's order made under the proviso to Article 286(2). It was, however, urged by the learned Advocate-General of Madhya Pradesh that the transactions were pure "inside sales" entered into by the petitioners in Madhya Pradesh on ord....
X X X X Extracts X X X X
X X X X Extracts X X X X
....which had been entered into by them with the latter and completing the sales in the State of Uttar Pradesh. These transactions also were, therefore, sales effected in the State of Uttar Pradesh and did not fall within the category of intra-State sales or "inside sales" qua the State of Madhya Pradesh. The direct supplies to stations or destinations having branches or depots owned by the proprietors of the firm, Kanpur, Bombay, Lucknow and Faizabad being item (d) above, also were outside sales qua the State of Madhya Pradesh inasmuch as the branch managers asked the petitioners to send stocks of goods to execute the orders which they had obtained from the customers to make their own supplies to them. As a matter of fact it was found that several consolidated indents were placed by the depot managers with the petitioners in respect of the previous orders which had been collected by them and the petitioners supplied the goods to the depots or branches in pursuance of such indents. If this was the true position qua these supplies, these sales also were completed in the State of Uttar Pradesh by the depots or branches supplying the goods in their turn to several customers. There....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ffer from the view taken by my learned brothers as regards the construction of pro- viso to Article 286(2) and the effect of the Presidential order issued thereunder. There is no dispute that the proviso has to be construed as part of Article 286(2). It is meant to empower the President to keep the ban arising thereunder in temporary abeyance so that the States may continue to levy taxes on sales by virtue of their pre-Constitution sales tax laws (if then lawful) for a limited period. It is urged, however, that the proviso (meaning thereby also the Presidential order there- under) is effective to lift only the ban under Article 286(2) and that the ban under Article 286(1)(a) is operative none the less. Now, it may be correct to say that these two bans are imposed from different angles and are in that sense independent. But there can be no doubt that they are substantially overlapping in operation. A transaction which brings about an outside sale is also an inter-State transaction (barring, if at all, a few ingeniously conceived and illustrated cases). The effect of each of the bans under Article 286 is to demarcate the fields within which the taxing power of the States on sales can....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt has not in terms been given the power to lift the latter ban. This, therefore, will lead to the extraordinary result that though the Constitution has in terms provided that the ban on taxation of sales in the course of inter-State trade and commerce can be lifted, by the Parliament generally, and by the President for a limited period, the exercise of both these powers would become ineffective and still-born by virtue of Article 286(1)(a). It appears to me unreasonable to impute any such intention as inevitably arising from the language used. It appears to me, with great respect, that, whether it is by parliamentary legislation or by the Presidential action that the ban on taxing sales in the course of inter-State trade and commerce is lifted, the principle of harmonious construction of Article 286 taken as an integral whole requires that the lifting of the ban is to be construed as laying open for taxation the entire field covered by Article 286(2) and to carry with it the implication that no other overlapping ban will be operative. No doubt, it has been suggested that so far as lifting of the ban under Article 286(2) by the Parliament is concerned, the same would be at least pa....