Judgment

AYYANGAR, J. :(For himself and Gajendaragadkar C.J.I. 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;

x x x x x x x

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 Ar