Judgement

RAMASWAMI, J.: This appeal is brought on a certificate against the judgment of the Division Bench of the High Court of Jammu and Kashmir at Srinagar dated July 10, 1962 holding that the respondent is not liable to pay sales tax for the period from January, 1955 to May 1959 under the Jammu and Kasmir Motor Spirit (Taxation of Sales) Act, 2005 (1948 A. D.).

2. The Director-General of Supplies, Delhi entered into a contract with General Manager, Caltex India (Ltd.) at Bombay (hereinafter called the respondent) for the supply of petrol, HSD and power Kero to the State Mechanized Farm at Nandpur located in the State of Jammu and Kashmir. In pursuance of this contract the respondent directed its depot at Pathankot situated in the Punjab State to supply petrol to the Nandpur Farm. The procedure adopted was as follows: The Officer in charge of the Nandpur farm placed indents with the Pathankot depot for supply of specified quantities of petrol to the farm and on receipt of the indents, the Pathankot depot transported the petrol in its own tank-lorries to Nandpur and delivered the petrol to the farm. The petrol was measured by means of dipping rods and approved by the indenting officer at Nandpur farm and thereafter the petrol was delivered to the Nandpur farm through pumps which belonged to the respondent. The price of petrol so supplied was paid to the respondent at Delhi by the Director-General of Supplies. The Petrol Taxation Officer at Srinagar considered that the sales of petrol of Nandpur farm were liable to be taxed under the Jammu and Kashmir Motor Spirit (Taxation of Sales) Act, 2005 and called upon the respondent to furnish returns of sales between 1952 to 1959. The respondent, however, furnished returns only for the period January, 1955 to May, 1959. On the basis of the returns the Petrol Taxation Officer assessed the respondent to pay sales tax to the extent of Rs. 39619.75 in respect of sales of petrol from January, 1955 to May, 1959. The respondent thereafter moved the High Court under S. 103 of the Constitution of Jammu and Kasmir for grant of a writ to quash the assessment of sales tax and to restrain the State of Jammu and Kashmir and the Petrol Taxation Authorities (hereinafter called the appellants) from levying the tax. It was contended on behalf of the respondent that the sales tax could not be imposed as the sales took place in the course of inter-State trade and commerce. Syed Murtaza Fazl Ali, J. held that the respondent was liable to pay sales tax in respect of the sales which took place during the period January, 1955 to September, 1955. Regarding the rest of the period of assessment, the learned Judge held that the appellants were not entitled to levy tax and accordingly issued a writ restraining the appellants from levying the tax for the period from October, 1955 to May, 1959. The appellants took the matter in Letters Patent appeal and the respondent also filed Cross-objection with regard to the liability to tax for the period from January, 1955 to September 1955. The Division Bench dismissed the appeal in Letters Patent and allowed the cross-objection of the respondent, holding that the appellants were not entitled to levy sales tax for the entire period from January, 1955 to May, 1959 and accordingly quashed the assessment of sales tax dated October 3, 1960,

3. It is necessary, at this stage, to indicate the legislative development in the State of Jammu and Kashmir which provides the setting for the questions to be investigated in this case.

4. Article 286 of the Constitution, as it was originally enacted, read as follows :

"(1) No law of a State impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place -

(a) outside the State; or

(b) in the course of the import of the goods into, or export of the goods out of the territory of India.

Explanation. For the purpose of sub-clause (a), a sale or purchase shall be deemed to have taken place in the