BHAGWATI J.: - (1.) 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.
(2.) THE Appellants in Civil Appeal No. 132 of 1955 are Messrs Ramnarain Sons Ltd., a firm registered as a As. `dealer` under the central Provinces and Berar Sales Tax Act, 1947, and carrying on business at Amravati and at other places in Madhya Pradesh. After the Cotton Control Order, 1949, came into force on the 12/09/1949, the Appellants entered into agreements with several mills situated outside Madhya Pradesh by which they undertook to purchase kapas in the various markets in Madhya Pradesh as their agents on their account and on their behalf THE kapas after purchase was to be ginned and pressed into bales and sent to the mills. All the expenses involved in the process were to be borne by the mills which were also to be credited with the sale proceeds of the cotton seeds and the Appellants were only entitled to commission on a percentage basis. THE Appellants worked as such agents for the period 1/10/1949 to 30/09/1950. By his order dated the 30/06/1953 the Assistant Commissioner of Sales Tax, Amravati, Respondent No. 1, included the transactions valued at Rs. 72,86,454-5-10 with the said mills in the Appellants' turnover and ordered the Appellants to pay Rs. 1,13,850-13-6 as sales tax on the said transactions. THE Appellants filed an appeal to the Commissioner of Sales Tax, Madhya Pradesh, Respondent No. 2, on the 30/07/1953. THE appeal was, however, entertained by the Deputy Commissioner of Sales Tax, Madhya Pradesh, Respondent No. 3, who ordered the Appellants to pay Rs. 25,000.00 by the 31/08/1953. THE Appellants thereupon filed a petition under Article 226, being Misc. Petition No. 265 of 1953, in the High court of Judicature at Nagpur, asking inter alia for the quashing of the order of 30/06/1953, passed by Respondent No. 1 and for consequential reliefs. THE Respondents filed a return denying the contentions of the Appellants and praying for the dismissal of the petition with costs. The Appellants in Civil Appeal No. 133 of 1955 are the Eastern Cotton Company, a firm registered as a `dealer` under the central Provinces and Berar Sales Tax Act, 1947, and carrying on business at Amravati and at other places in Madhya Pradesh. They also, during the period 1/10/1949 to 30/09/1950, worked as agents of certain mills situated outside Madhya Pradesh, procured kapas for them in Madhya Pradesh and sent it to the mills for consumption outside the State. By his order dated the 9/09/1953, the Respondent No. 1 included the transactions valued at Rs. 33,47,405-5-6 with the said mills in the Appellants' turn-over and ordered the Appellants to pay Rs. 52,303-4-0 as tax on the said transactions. These Appellants also filed a petition under article 226, being Misc. Petition No. 348 of 1953, in the High court of Judicature at Nagpur for quashing the order dated the 9/09/1953, 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 1/10/1950 to 30/09/1951, 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 29/12/1952, the Sales Tax Officer, Amravati, in the assessment of the Appellants for the same period, included the said transactions in the Appellants' turn-over and assessed sales tax thereon. The Appellants filed an appeal to Respondent No. 1 but the same was dismissed by an order dated the 10/07/1953. The Appellants filed on 22/08/1953, a revision before the Commissioner of Sales Tax, Madhya Pradesh. The Appellants also filed a petition under Article 226, being Misc. Petition No. 274 of 1953, in the High court of Judicature at Nagpur, asking for a writ of certiorari quashing the order of Respondent No. 1 passed by him in Sales Tax Appeal No. 13-A dated the 10/07/1953, and for consequential reliefs. The Respondents filed a return denying the contentions of the Appellants and A asking that the petition be dismissed with costs. These petitions came up for hearing and final disposal before the High court of Judicature at Nagpur along with Misc. Petitions No. 288 of 1953 and No. 132 of 1954. A considered judgment was delivered in Miscellaneous Petition No. 132 of 1954 and the reasoning contained therein governed the decision in the connected Petitions Nos. 265, 274 and 348 of 1953. The High court held that the Explanation II to section 2(g) of the central Provinces and Berar Sales Tax Act, 1947, as amended by the central Provinces and Berar Act XVI of 1949 having been declared invalid from its inception by the High court in Messrs Shriram Gulabdas v. Board of Revenue (I.L.R. 1953 Nagpur 332) and by this court in 1954 S.C.R. 1122, the original Explanation remained in force until the 1/04/1951, when it was amended by the Madhya Pradesh Act IV of 1951. Explanation II originally enacted was in the terms following:`Notwithstanding anything to the contrary in the Indian Sale of Goods Act., 1930, the sale of any goods which are actually in the central Provinces and Berar at the time when the contract of sale as defined in that Act in respect thereof is made, shall wherever the said contract of sale is made, be deemed for the purpose of this Act to have taken place in the central Provinces and Berar`. The Appellants contended that this Explanation offended article 286(1) (a) read with the Explanation to the same and the State of Madhya Pradesh was, therefore, not entitled to tax the transactions of sale in which goods had actually been delivered as a direct result of such sale for the purpose of consumption outside Madhya Pradesh. The Respondents, on the other hand, contended that the said Explanation was protected until the 31/03/1951, by the Sales Tax Continuation Order No. 7 of 1950 issued by the President on' the 26/01/1950, 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, 1,947, 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 26/01/1950, the President issued the Sales Tax Continuation Order No. 7 of 1950 in exercise of the powers conferred by the proviso to article 286(2). The sales in question had taken place in the course of inter-State trade or commerce and accordingly they were covered by article 286(2) and would, therefore, be liable to tax even after the commencement of the Constitution by virtue of the President's order. Reliance was further placed on the majority judgment of this court in The State of Bombay v. The United Motors (India) Ltd. 1953 S.C.R. 1069) where it was held that the transaction vis-a- vis the delivery State lost its inter-State character if it fell within the Explanation to article 286(1) (a) and was accordingly made liable to taxation by the delivery State. So far, however, as the exporting State was concerned, it retained its character of an inter-State transaction and would not, therefore, be liable to taxation by that State, vide article 286(2). The President's order, however, removed this ban and. the exporting State was entitled to tax the transaction by virtue of the power derived by it from the same. On a construction of the relevant provisions of article 286(1) and article 286(2) the High court was of the opinion that it would be making the proviso to article 286(2) nugatory if it was held that article 286(1) overrides it and takes away the taxing power of all States in inter-State trade or commerce except the delivery State. The High court accordingly dismissed the petitions with costs.
(3.) THE learned Attorney-General appearing for the Appellants before us contended that so far as the post-Constitution period is concerned, the position is governed by our judgment in THE Bengal Immunity Co. Ltd. v. THE State of Bihar delivered on the 6/09/1955. He urged that the bans imposed on the powers of the State Legislatures to levy taxes on the sale or purchase of goods in the several clauses of article 286 are independent and separate and that the transactions of sale or purchase referred to in the various clauses must be looked at from different viewpoints. Even if a transaction might fall within the category of inter-State sale or purchase and the President's order under the proviso to article 286(2) might enable the State to levy any tax on such sale or purchase which was being lawfully levied by the State immediately before the commencement of the Constitution, such transaction 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 Co.'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 Expla nation to article 286 (1) (a) were not saved from the ban by the President's order, the whole intention of the Constitution-makers in maintaining the status quo qua the taxes on sales or purchases of goods which were being lawfully levied by the State immediately before the commencement of the Constitution would be frustrated, because the transactions covered by the Explanation to article 286(1) (a) being necessarily in the course of inter-State trade or commerce the President's order would be rendered nugatory and the exporting State or the title State would' berestrained from levying tax on such transactions in spite of the ban having been lifted by the President's order. We are unable to accept this contention. As held by the majority Judges in The Bengal Immunity Co.'s Appeal, the bans imposed by article 286 on the taxing powers of the States are independent and separate and each one of them has to be got over before a State Legislature can impose tax on transactions of sale or purchase of goods. These bans have been imposed from different view-points, and, even though the transactions of sale or purchase may in conceivable cases overlap so far as these different viewpoints are concerned, each of those bans is operative and has to be enforced. So far as article 286(1) (a) is concerned, the Explanation determines by the legal fiction created therein the situs of the sale in the case of transactions coming within that category and when a transaction is thus determined to be inside a particular State it necessarily becomes a transaction outside all other States. The only relevant enquiry for the purposes of article 286(1) (a), therefore, is whether a transaction is outside the State and once it is determined by the application of the Explanation that it is outside the State it follows as a matter of course that the State with reference to which the transaction can thus be predicated to be outside it can never tax the transaction. This ban is effective independently of the fact that the, transaction may also have taken place in the course of inter-State trade or commerce or with reference to goods as have been declared by Parliament by law to be essential for the life of the community. The ban imposed under article 286(2) is an independent and separate one and looks at the transactions entirely from the point of view of their having taken place in the course of interState trade or commerce. Even if such transactions 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 interState 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. ;