Judgment

VIVIAN BOSE, J. : This judgment will govern Civil Appeals Nos. 66 to 73 of 1957. They arise out of a certificate granted by the High Court of Mysore against a judgment of that Court delivered on 29-9-1955.

2. The appellant is the State of Mysore. The respondents are the Mysore and Minerva Mills respectively. The appellant sought to impose a sales tax on certain sales made by the two respondents between 31-3-1950, and 31-3-1951. The respondents contended, and still contend that these sales are not taxable because they were made in the course of export and so are exempt under Art. 286(1) (b) of the Constitution. The Sales Tax Officer rejected this contention and imposed the tax. Appeals were filed and failed, and also review petitions to the Commissioner of Sales Tax. The matter then came up to the High Court in the following ways.

3. The assessments were in respect of five quarters. The Commissioner made two references in respect of the first two quarters ending 31-3-1950, and 30-6-1950, respectively. These are Civil Petitions Nos. 110 of 1954 and 112 of 1954. The first related to the Minerva Mills and the second to the Mysore.

4. Writ petitions were filed in the Mysore High Court in respect of the remaining quarters in dispute. Petitions Nos. 26 and 28 of 1954 are against the assessments for the quarter ending 30-9-1950. The former is by the Mysore Mills and the latter by the Minerva. Similarly, Writ Petitions Nos. 27 and 29 were in respect of the quarter ending 31-12-1950, and Nos. 30 and 31 in respect of the one ending 31-3-1951.

5. All these eight petitions were heard together and were disposed of by one judgment, the one under appeal. The High Court held that the sales are not taxable but granted the State of Mysore a certificate to appeal here.

6. The facts are not in dispute. Both Mills are two sister textile mills under a common management. They have their registered offices in Bombay and their factories at Bangalore in the State of Mysore. They carry on business at Bangalore as manufacturers and sellers of textile goods, such as cotton and yarn. The bulk of their trade is with exporters at Bombay & other ports such as Calcutta and Madras, that is, the Mills sell to licensed export dealers who export the goods to foreign buyers. In a few cases, the Mills entered into direct contracts with foreign buyers and exported the goods directly. They have not been taxed on those sales and there is no dispute about them. In the rest of the cases, the Mills had no direct contact with any foreign buyer. The licensed exporters at the ports dealt with them and the Mills dealt with the exporters

7. The procedure for export was as follows. During the period in dispute, only duly licensed exporters were allowed to export. We presume that in the few cases in which the Mills exported direct they had a licence to do so. But we are not concerned with those sales and will limit ourselves to the other kind made through duly licensed exporters whom we shall refer to as exporters. In those cases, the first step was for these exporters to obtain a firm offer from a buyer overseas specifying the quality and quantity of cloth or yarn required by the buyer. The second step was for the exporter to produce this offer before the Export Controller and obtain a provisional export licence from him in respect of the goods ordered. The third step was for the exporter to enquire from the Mills whether they could sell, or manufacture, within a reasonable time, goods of the quality and quantity required by the overseas buyer. If the Mills said "yes", the fourth step was for the exporter to enter into a firm contract with the foreign purchaser and the fifth step was for the exporter to enter into a contract with the Mills for the sale of those goods. The contract had to be marked "for export only" and the prices fixed had to be higher than the inland prices. The specifications and details of the goods had also to be entered. The sixth step was for the exporte