The sale of aviation spirit to foreign-bound aircraft was not exempt from tax under Article 286(1)(a) or (b) of the Constitution.

( 1 ) THE facts of this case are shortly as follows:

( 2 ) THE petitioner is the Burma Shell Oil Storage and Distributing Company of India Limited, a well-known company which produces manufactures, distributes and sells mineral oil, petroleum, etc. including aviation spirit. It carries on business inter alia in Calcutta in the distribution and sale of oil. It has a supply station at Dum-Dum Aerodrome, from which motor spirit for aviation purposes called "aviation spirit" is supplied to aircraft, including foreign-bound aircraft. As is to be expected, most of the aircraft so supplied, proceed beyond Indian territorial limits. The Bengal Motor Spirit Sales Taxation Act, being Bengal Act V of 1951, provides for the levy of a tax on retail sales of motor spirit in Bengal. Under Section 2 of the said Act, "motor Spirit" has been defined to be any liquid or admixture of liquids which is ordinarily used directly or indirectly as fuel for any form of motor vehicle or stationary internal combustion engine, having a flash-point below 76 degrees Farenheit. Under Section 4 (4), sale of motor spirit for the purpose of aviation had been excluded. By virtue of an amendment introduced by Section 2 of the The Bengal Motor Spirit Sales Taxation (Second Amendment) Act, (Act XXXII of 1954) the tax can now be levied in respect of motor spirit for the purposes of aviation. Under Section 2 (a) (i) of the Bengal Motor Spirit Sales Taxation (Second Amendment) Act 1954, motor spirit for aviation purposes is taxable without any distinction as to whether the aircraft 13 operating within Indian territory or proceeding beyond Indian territorial limits.

( 3 ) ON or about the 9th October, 1054, the petitioner company wrote a letter to the Commissioner of Commercial Taxes West Bengal, enquiring as to whether motor spirit supplied for aviation purposes to foreign-bound aircraft would be taxable under the Bengal Motor Spirit Sales Taxation Act as amended. It was urged that under Article 286 (1) (b) of the Constitution, such supplies were not taxable. It was pointed out by letter dated the 23rd April 1954, written by the Collector of Sales Tax, Bombay State, to the petitioner, that sales of goods such as fuel oil and lubricating oil to foreign-bound aircraft for actual consumption during flight are exempted from Bombay sales tax, by virtue of Sub-clause (b) of Article 286 (1) of the Constitution, although this exemption would not be granted if foreign-bound aircraft makes a halt at a place within the Indian territory for more than 24 hours. On or about the 9th December 1954, the Commissioner, Commercial Taxes West Bengal, informed the petitioner that all supplies of motor spirit for aviation purposes were taxable in West Bengal at the rate of three annas per gallon, under Section 2 (a) (i) of the Bengal Motor Spirit Sales Taxation (Second amendment) Act, 1954, irrespective of whether the aircraft supplied are operating within Indian territory or are proceeding beyond Indian territorial limits. It was further intimated that Article 286 of the Constitution was not considered as a bar to the levy of such a tax.

( 4 ) SUBSEQUENT to the said correspondence, the petitioner company has been paying taxes under protest and from time to time demand notices were served on it for payment of such tax. On the 7th of March 1956, the petitioner demanded of the respondents that they should cancel and/or recall such notices of demand, since such taxes were not payable. As the respondents have not conceded the demand, the petitioner has made this application. A Rule was issued on the 9th March 1956 upon the respondents to show cause why an order in the nature of a writ of mandamus should not be made commanding the respondents to cancel and/or recall their letter dated the 9th December 1954 and notice dated the 2nd March 1956 in the petition mentioned, and to forbear and refrain from giving effect thereto, and from demanding or imposing any tax on the petitioner in res