STATE OF KERALA Vs. COCHIN COAL COMPANY LIMITED
LAWS(SC)-1960-10-22
SUPREME COURT OF INDIA
Decided on October 31,1960

STATE OF KERALA Appellant
VERSUS
COCHIN COAL COMPANY LIMITED Respondents





Cited Judgements :-

SPARES CORPORATION VISAKHAPATNAM VS. STATE OF A P [LAWS(APH)-1994-12-57] [REFERRED TO]
GANPAT PANNALAL VS. COMMISSIONER OF SALES TAX [LAWS(MPH)-1967-1-11] [REFERRED TO]
E J MATHEW VS. STATE OF KERALA [LAWS(SC)-1968-8-3] [REFERRED TO]
MADRAS MARINE AND CO VS. STATE OF MADRAS [LAWS(SC)-1986-7-30] [DISTINGUISHED]
BAVA CHERIYAN VS. MUNICIPAL COUNCIL KOTTAYAM [LAWS(KER)-1966-12-22] [REFERRED TO]
NARANG HOTELS AND RESORTS PVT LTD VS. STATE OF MAHARASHTRA [LAWS(BOM)-2003-10-18] [REFERRED TO]
BUJARANG JUTE MILLS LIMITED GUNTUR VS. STATE OF ANDHRA PRADESH [LAWS(SC)-1964-2-24] [REFERRED]
WILLIAM JACKS AND COMPANY LIMITED VS. STATE OF ORISSA [LAWS(SC)-1968-8-9] [REFERRED TO]
VERIZON COMMUNICATION INDIA PVT. LTD. VS. ASSISTANT COMMISSIONER [LAWS(DLH)-2017-9-98] [REFERRED TO]
COMMISSIONER OF SERVICE TAX, MUMBAI VS. A.T.E. ENTERPRISES PVT. LTD. [LAWS(BOM)-2017-7-380] [REFERRED TO]
ATIN KRISHNA VS. U.O.I.THRU SECY. MINISTRY OF FINANCE [LAWS(ALL)-2019-5-347] [REFERRED TO]
NIRMAL KUMAR PARSAN VS. COMMISSIONER OF COMMERCIAL TAXES [LAWS(SC)-2020-1-54] [REFERRED TO]


JUDGEMENT

Ayyangar, J. - (1.)This is an appeal from the judgment of the High Court of Travancore-Cochin on a certificate of fitness granted by it under Art. 133(1) of the Constitution and raises for consideration the liability of the respondent- The Cochin Coal Company Ltd-to sales-tax under the United State of Travancore and Cochin General Sales Tax Act 1125 (1950).
(2.)The following are briefly the facts which it is necessary to state in order to appreciate the points in controversy in the appeal. The Cochin Coal Company Ltd. which will be referred to as the respondent-company are, as their name indicates, dealers in coal. The commodity, the sales of which have given rise to the dispute in this appeal is what is known as 'Bunker coal'. The company have their offices at a place called Fort Cochin which was formerly within the State of Madras. They import and keep stocks of "bunker coal" stacked at a place called Candle Island which at the date relevant to these proceedings was also within the State of Madras. Part of the activities of the respondent-company consist in the supply of "bunker coal" from their depots in Candle Island to steamers arriving in or calling at, the port of Cochin (in the State of Travancore-Cochin) for the outward voyage of the steamers from the said port. The usual procedure by which "bunker coal" was thus supplied by the respondent-company was briefly this:Before the arrival of the steamers, the steamer agents would enter into contracts with the respondent-company for trimming coal into the bunker of the steamer. As soon as a steamer arrived in Cochin port, the steamer-agents would inform the respondent-company and those agents after securing the necessary papers from the customs and the port authorities for the loading of the coal into the steamer, would take these papers to the respondent-company's office in Fort Cochin for enabling the latter to perform their part of the contract. The respondent-company would thereupon send the goods ordered to the steamer through their transport contractor. Delivery orders would be issued to the transport contractor on the strength of which goods would be released from their stock in Candle Island. Coal would then be taken to the steamer berthed in the port in Travancore-Cochin State waters. The Chief Engineer of the steamer would inspect the coal and when the same was to his satisfaction as regards quality, the coal would be permitted to be trimmed into the bunkers of the ships. The price of the coal would thereafter be paid to the respondent-company on bills drawn on the steamer-agent. The above being the nature of the transactions conducted by the respondent-company, sales-tax was claimed on the sales of bunker coal by the Travancore-Cochin State. The assessment years with which this appeal is concerned are 1951-52 and 1952-53, and the assessment therefor was completed on February 2, 1954, by the sales-tax officer, I Circle, Mattancherry. The respondent-company's contention that no sales-tax could be levied on the value of the "bunker Coal" supplied, since the sale was either "in the course of export', or "in the course of inter-State trade" and therefore exempted from taxation by the State under sub-cl. (1) (b) or (2) of Art. 286 was rejected by the assessing officer for the reason that the sales in question fell within the Explanation to Art. 286 (1)(a) and were therefore "inside" the State of Travancore-Cochin, since the delivery in pursuance of the sale took place within the State and the goods were delivered for the purpose of consumption within the State and that notwithstanding that there was an inter-State element involved in the sale, by the goods being moved from Candle island, the same did not affect the power of the delivery State to levy the tax. The point urged by the company, that the same sales had been assessed to tax in Madras State as sales actually taking place there, was also rejected as irrelevant. The respondent-company thereafter filed an appeal to the Appellate Assistant Commissioner who allowed the appeal of the company holding that the sales were "in the course of export" within Art. 286(1)(b), and that even if they were not such but were "inside" sales falling within the Explanation to Art. 286(1)(a) of the Constitution, still a notification by the State Government dated February 5, 1954, exempting such sales from tax, operated for the benefit of the assessee. Thereafter the Deputy Commissioner of sales-tax who was the Revisional authority took up the matter suo motu, called upon the assessee to show cause why the appellate order should not be set aside and the entire turnover assessed to sales-tax as the sales had taken place inside the State only. After hearing the assessee-company the order of the appellate Assistant Commissioner was set aside and that of the Sales-tax Officer restored. The respondent-company then moved the High Court of Travancore-Cochin under Arts. 226 and 227 of the Constitution to set aside the order in revision and the learned Judges of the High Court ordered accordingly. They, however, granted a certificate under Arts. 133(1) of the Constitution to enable the State Government to file an appeal to this Court and that is how the matter is now before us.
(3.)Though the respondent-company appear to have presented before the High Court several lines of argument in support of their contention that they were entitled to exemption from sales-tax in respect of "bunker coal" trimmed by them into steamers in the waters of Travancore-Cochin, the learned Judges rested their decision in favour of the respondent-company on practically a single ground. Their reasoning was briefly as follows:Following the Bengal Immunity Co. Ltd. vs. State of Bihar, (1955) 2 SCR 603 the learned Judges held that, the bans imposed by cls. 1 (a) and 2 of Art. 286 were independent and that the sale of the coal by the respondent-company which was in the course of inter-State trade was covered by the ban contained in Art. 286(2) of the Constitution notwithstanding that the sale might satisfy the terms of the Explanation to sub-cl. 1(a). The learned Government Pleader, however, had submitted that if the exemption was derived from Art. 286(2), the same would not assist the assessee, since the validity of the tax was saved by the Sales-tax Law Validation Act, 1956. The learned Judges however held that the Validation Act could not avail the State because on their construction of S. 26 of the Travancore-Cochin General Sales-tax Act, 1125 (corresponding to S. 22 of the Madras Sales-tax Act, 1939) 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 a tax which had not been imposed by the State's Sales-tax Act.
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