Ayyangar, J. - (1.) (For himself and Gajendaragadkar C. J., and Wanchoo and Sikri JJ.)The appellant owns several estates wherein inter alia tea is grown and was assessed to sales tax in respect of the tea sold by it during the years 1954-55 and 1955-56, by the Sales Tax Officer, First Circle, Quilon in the State of Travancore-Cochin by his order dated December 23, 1956. In the taxable turnover on which sales tax was computed by the assessing authority has included two items which are the subject of complaint in these two appeals which relate to these two years of assessment. Before the assessing officer the appellant claimed that certain sales of its tea which were conducted by auction at Fort Cochin - a place which at the relevant date was in the Madras State, were sales "outside" the Travancore-Cochin State and that consequently these sales were exempt from taxation by the State of Travancore-Cochin under Art. 286(1)(a) of the Constitution. The Sales Tax Officer rejected this contention and included the sum involved in these sales in the taxable turnover. An appeal filed to the Appellate Assistant Commissioner also failed, this authority holding that as the tea sold was, at the date of the auction, admittedly in godowns in Willingdon Island in the State of Travancore-Cochin, the sales must be deemed to have taken place within the taxing State by virtue of a provision in the State Sales Tax Act to which we shall refer later and hence liable to be included in . the taxable turnover. There was a further appeal taken by the Appellant to the Sales Tax Appellate Tribunal which upheld the appellant's contention and set aside the assessment in so far as it included the turnover relating to the auction sales of tea held at Fort Cochi, this turnover amounting to Rs. 56,43184/11/- in regard to the assessment year 1954-55 and Rs. 62,13,604/ 3/- in regard to the assessment year 1955-56 and remanded the case for fresh disposal by excluding these sums from the computation of the taxable turnover. A revision petition was thereafter filed before the High Court by the State under S. 15(b) of the General Sales Tax Act of Travancore-Cochin and the learned Judges allowed the Revision and upheld the order of the assessing officer and the Appellate Commissioner holding the turnover represented by these auction sales to be validly taxable under the State law relating to sales tax. The appellant thereafter applied to the High Court for a certificate of fitness and this having been granted the appeals are now before us.
(2.) Before proceeding further it is necessary to set out the statutory provision contained in the taxing enactment of the State. The General Sales Tax Act (Act XI of 1125 (ME) 1950) which imposed a sale tax on sales by dealers defines a "sale" by S. 2(j) in these terms: " 'Sale' with all its grammatical variations and cognate expressions means every transfer of the property in goods by one person to another in the course of trade or business for cash or for deferred payment or other valuable consideration and includes also a transfer of property in goods involved in the execution of a works contract, but does not include a mortgage, hypothecation, charge or pleadge; ********** Explanation (2)-Notwithstanding anything to the contrary in the Sale of Goods Act for the time being in force, the sale or purchase of any goods shall be deemed for the purpose of this Act, to have taken place in the State wherever the contract of sale or purchase might have been made (a) if the goods were actually in the State at the time when the contract of sale or purchase in respect thereof was made; or (b) in case the contract was for the sale or purchase of future goods by description, then, if the goods are actually produced in the State at any time after the contract of sale or purchase in respect thereof was made." When the Constitution came into force a new section numbered S.26 was inserted by the Adaptation. Order bringing the Act into line with Art. 286(1) of the Constitution and this read: "No law of a State shall impose, or authorise imposition of a tax on the sale or purchase of goods where such sale of purchase takes place- (a) outside the State or (b) .............. Explanation-For the purposes of subclause (a) a sale or purchase shall be deemed to have taken place in the State in which the goods have actually been delivered as a direct result of such sale or purchase for the consumption in that State, notwithstanding the fact that under the general law relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State." The position, therefore, was that though cl. (a) to Explanation 2 to S. 2(j) enacted that "notwithstanding anything contrary in the Sale of Goods Act, the sale or purchase of goods shall be deemed to take place in the State if the goods were actually in the State at the time the contract for sale or purchase in respect thereof was made" still by the non-obstante provision contanied in S. 26 a tax on the sale of purchase of goods could not be imposed where such sale or purchase took place "outside" the the State of Travancore-Cochin. It is only necessary to add that even if S. 26 were ignored, still by the terms of Art. 286(1)(a) the position would be the same and the State could not validly levy a tax on a sale which is "outside" that State.
(3.) Now the question is can a sales of the tea effected by the Appellant by auction at Fort Cochin and which were included in its taxable turnover be said to be "outside" the State The facts in relation to the transaction relating to the sale of the tea and which the learned Judges of the High Court held not to be an "outside" sale may be stated in their own words: "The sale of teas were concluded at Fort Cochin and the goods were stocked in godowns situated in the Travancore-Cochin State. The deliveries of the goods were also made to the buyers from the godowns in Willingon Island in the Travancore-Cochin State. The Appellate Tribunal has come to the conclusion that the ownership of the commodity having passed in Fort Cochin, the property had not passed within the taxing State, accordingly they would be 'outside' sales for purposes of Art. 286(1) and exempt from taxation." The Appellate Tribunal had recorded a finding that the property in the goods sold passed at Fort Cochin on the fall of the hammer at the auction and the learned Judges of the High Court proceeded on the same basis the point on which the learned Judges differed from the Tribunal was only as regards the effect of the circumstance that the tea sold, was at the point of sale, physically in godowns situated in the State of Travancore-Cochin. The Appellate Tribunal had, in reaching the conclusion in favour of the appellant, as to the taxable character of the turnover represented by these auction sales, referred to a large number of decisions of this Court and to the observations contained in them as well as to several decisions of the various High Courts. When the matter came up before the High Court the position was, that that Court had after a review of most of the earlier cases which had been referred to by the Tribunal, held in Deputy Commissioner of Agricultural Income-tax and Sales-tax, Trivandrum vs. A. V. Thomas and Co., ILR (1960) Kerala 1395 that the word 'outside sale' in Art. 286(1) (a) had no reference exclusively to the transfer of the property in the goods according to the provisions of the Sale of Goods Act, and therefore that Explanation 2 to S. 2 (j) was not violative of Art. 286(1)(a) and that if at the moment when the property passed, it not being very relevant where the property passed, the goods were in the State of Travancore-Cochin, then it was not an "outside" sale quoad Travancore-Cochin and could be subjected to sales-tax by that State. Before the learned Judges a decision of this Court in India Copper Corporation Ltd. vs. State of Bihar, (1961) 2 SCR 276 was however relied on as leading to a different result but the learned Judges held that the decision of this Court could be distinguished on the facts and they held that their previous decision reported in A. V. Thomas's case, (supra) was still good law and entirely covered the point raised.;