The Validation Act, 1956 applied to the transactions in question and the assessment on the transactions in question could not now be challenged on the ground alleged by the assessee.

Judgment

S. K. DAS, J. : This is an appeal on a certificate granted by the High Court of Madras. The firm of Messrs. Ashok Leyland Ltd., Ennore, is the appellant before us. For brevity and convenience, we shall hereinafter refer to the firm as the assessee. The State of Madras though the Commercial Tax Officer, Saidapet, is the respondent before us.

2. The assessee is a firm with its factory at Ennore in the State of Madras, where it manufactures, assembles and sells motor vehicles and spare parts and accessories thereof, through an elaborate organisation spread over several States. It is, perhaps, necessary to indicate briefly the organisational set up in order to appreciate the point on which the case was heard in the High Court and argued before us. The system of distribution of its motor vehicles, spare parts and accessories at one uniform price to consumers in the various States which the assessee adopted, consisted of the appointment of a distributor (called a dealer) with a definite territorial jurisdiction, both inside and outside the State of Madras. To every such dealer it granted the sole right of selling the products of the firm within the territory allotted to him. If the territory of the dealer was outside the State of Madras, the agreement entered into by the dealer provided for the delivery of the products of the firm by consignment by rail or steamer or road transport. The agreement specifically stipulated that the dealer must not canvass or sell the products outside the territory allotted to him, and in the event of infringement or breach of the undertaking by the dealer, the assessee was entitled to terminate the agreement forthwith. On such termination, the assessee reserved the right to call upon the dealer to return all or any of the products remaining unsold at the date of such termination. The case set up by the assessee was that a substantial number of motor vehicles and accessories thereof were consigned to the dealers in other States wither by rail or steamer; but due to want of such transport facilities, a number of vehicles were also transported by road.

3. In the year relevant to the assessment year 1952-53, the total turnover of the assessee in respect of all its sales came to Rs. 1,43,67,007/- odd. The Deputy Commercial Tax Officer, Madras, computed the taxable turnover of the assessee for that year by excluding the sum of Rs. 1,12,21,707/- odd which represented the value of vehicles, spare parts, etc., sold outside the State of Madras and consigned by rail or steamer or transported by road. The balance of Rs. 31.45.299/- odd was determined to be the nett assessable turnover of the company. The tax levied thereon was a sum of Rs. 1,45,655-13-3 and this sum was duly paid by the assessee.

4. Sometime thereafter, the commercial Tax Officer, Madras, purporting to act under the powers of revision given to him by S. 12 of the Madras General Sales Tax Act, 1939 (Madras Act IX of 1939), hereinafter called the Act, called upon the assessee to produce its books of account for the purpose of satisfying himself as to the legality or propriety of the assessment made. After scrutinising the accounts and other records produced by the assessee, the Commercial Tax Officer issued a notice proposing to revise the assessment by including a sum of Rs. 42,98,068/- odd on the ground that the delivery of motor vehicles, etc., in respect of sales covered by the aforesaid sum was made within the State of Madras and was therefore liable to tax under the Act. The assessee submitted its objection to the revision of the assessment and contended that on the sum of Rs. 42 lacs odd the assessee was not liable to pay sales tax as the transactions were in the course of inter-State trade and commerce. This objection was, however, overruled by the Commercial Tax Officer except to a very small extent.

5. From the decision of the Commercial Tax Officer, an appeal was taken to the Sales Tax Appellate Tribunal, Madras, and the assessee cont