Judgement

RAMASWAMI, J. :- This appeal is brought, by special leave, from the judgment of the Madras High Court dated September 23, 1963, in Tax Case No. 246 of 1962.

2. The respondent who was a Beedi manufacturer in Gudiyattam, Madras State was assessed to sales tax on a taxable turnover of Rs. 1,73,502-11-10 for the assessment year 1955-56 by the Deputy Commercial Tax officer. Against this order of assessment dated February 15, 1957 the respondent appealed to the Appellate Assistant Commissioner of Commercial Taxes, Salem disputing the inclusion of a sum of Rs. 1,11,299 and odd on the ground that the said amount represented either second purchases or purchase made outside the State of Madras. Pending the appeal the Madras General Sales Tax Act, 1959 was passed and the earlier Act of 1939 was repealed and by force of the provisions in the 1959 Act the appeal was finally disposed of by the Appellate Assistant Commissioner of Commercial Taxes, Salem. By his order dated July 2, 1960, the Appellate Assistant Commissioner held that the excise duty paid by the respondent could not form part of his purchase turnover but in purported exercise of his powers under the new Act enhanced the assessment of the turnover by including a sum of Rs. 1,15,406-14-9 as inter-State purchases from April 1, 1955 to September 5, 1955. The respondent took the matter in further appeal to the Sales Tax Appellate Tribunal. The appellant also filed petitions before the Tribunal for enhancement of the assessment by Rs. 3,66,213-12-0 on the ground that the amount represented sales of manufactured beedies to non-resident buyers during the period May 12, 1955 to September 5, 1955 and that the goods in question were within the territory of the State at the time the contract of sale in respect thereof was made. It was contended on behalf of the appellant that the sales were taxable by virtue of Explanation (2) to Sec.2 (h) of the Madras General Sales Tax Act, 1939 in view of the lifting of the ban on the levy of tax on inter-State sales by the Sales Tax Validation Act, 1956 (Central Act 7 of 1956), hereinafter called the Validation Act , and that it was wrongly excluded from the taxable turnover by the taxing authorities. By its order dated July 13, 1962, the Appellate Tribunal allowed the petition for enhancement and rejected the contention of the respondent that the sales were agency sales through Commission Agents. As regards the alleged second purchases or outside purchases of raw tobacco, the Appellate Tribunal remanded the case to the Appellate Assistant Commissioner. Against the order of the Appellate Tribunal the respondent filed a petition in the High Court of Madras under Section 38 of the Madras General Sales Tax Act, 1959. By its order dated September 23, 1963 the High Court held: (1) that the inclusion of the inter-State purchases from April 1, 1955 to September 5, 1955 of Rs. 1,15406-14-9 was bad as the Appellate Assistant Commissioner had no jurisdiction to include that turnover; (2) that the turnover of Rs. 3,66,213-12-0 included by the Appellate Tribunal could not be brought to tax as the beedies, which were the subject of the relevant sales, were delivered outside the State for purposes of consumption and as the sales therefore constituted Explanation sales under Article 286 (1) of the Constitution as it stood prior to the Sixth Amendment and consequently the Madras State had no jurisdiction to tax the said sales. Being aggrieved by that part of the decision of the Madras High Court on the question of taxability of the said transactions of inter-State sales effected prior to September 6, 1955, the State of Madras has brought the present appeal.

3. The question presented for consideration in this appeal is whether the Madras State had jurisdiction to levy sales tax on the alleged "Explanation sales" by the respondent during the period between April 1, 1955, to September 5, 1955 by virtue of Explanation (2) to Section 2 (h) of the Madras General Sa