Shah, J. - (1.) The Sales-tax Officer, Special Circle Ernakulam assessed the appellants under the Travancore-Cochin General Sales tax Act XI of 1125 M. E. , to pay sales-tax of transaction of sale of tea chests at the auctions held at Fort Cochin in the years 1956-57 to 1958-59, rejecting their contention that the sales were exempt from tax by virtue of Art. 286(1) (b) of the Constitution. The appellants then petitioned the High Court of Kerala for writs of certiorari quashing the orders of assessment and for writs of prohibition restraining the Sale Tax Officer from proceeding with the collection of tax in pursuance of the orders of assessment. Vaidialingam, J., rejected the petitions and his order was confirmed in appeal by Division Bench of the High Court of Kerala. With special leave, the appellants have appealed to this Court.
(2.) The transaction of sale sought to be taxed by the revenue authorities are in tea, which is a controlled commodity. The Parliament enacted the Tea Act 19 of 1953 to provide for the control by the Union of the Tea Industry, including the control of cultivation of tea in, and of export of tea from, India and for that purpose to establish a Tea Board and to levy customs duty on tea exported from India. By S. 3 (f) "export" is defined as taking out of India by land, sea or air to any place outside India other than a country or territory notified in that behalf by the Central Government by notification in the Official Gazette. "Export allotment" is defined by S. 3 (g) as the total quantity of tea which may be exported during any one financial year. Section 17 (1) places an embargo upon exportation of tea unless covered by a licence issued by or on behalf of the board. Section 18 provides that no consignment of tea shall be shipped or waterborne to be shipped for export or shall be exported until the owner has delivered to the Customs-Collector a valid export licence or special export licence or a valid permit issued by or on behalf of the Board or the Central Government as the case may be, covering the quantity to be shipped. Section 19 authorises the Central Government to declare export allotments of tea for each financial year, and by S. 20 it is provided that any tea estate shall, subject to conditions as may be prescribed, have the right to receive under the Act an export quota for each financial year. Section 21 provides that the owner of a tea estate to which an export quota has been allotted for any financial year shall have the right to obtain any time export licences during that year to cover the export of tea upto the amount of the unexhausted balance of the quota. The export quota right is by cl. (2) of S. 21, transferable subject to such conditions as may be prescribed and the transferee of such right may again transfer the whole or any part of his right provided that noting in the sub-section shall operate to restrict the issue of licences for the export of tea expressed to be sold with export rights. The other provisions are not material in deciding this group of appeals.
(3.) Trade in tea in the State of Kerala - internal as well as export-is carried on through certain defined channels. A manufacturer of tea applies for and obtains from the Tea Board allotment of export quota rights on payment of the necessary licence fee. The manufactured tea in chests is then sent to M/s. T. Stanes and Company Ltd., who warehouse the chests at Willingdon Island. Chests of tea are then sold by public auction through brokers at Fort Cochin. With the chests of tea for which export quota rights are obtained, export quota rights are sold by the auctioneer. At the auction sale, bids for tea chests with export quota rights are given by the agents or intermediaries in Cochin of foreign buyers. Tea chests are delivered at the warehouses by M/s. T. Stanes and Company Ltd., to the purchasers whose bids are accepted. The agent or intermediaries of the foreign buyers then obtain licences from the Central Government for export of the tea chest under the export quota rights vested in them under the purchases made at the auction sales.;