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1952 Supreme(Ker) 3
Judges : KUNHI RAMAN,SUBRAMONIA IYER
Bombay Co.Ltd. - Appellant
Versus
State - Respondent
Case No : O. P. No. 4, 5, 19, 23, 24, 34, 35, 71, 83, 88, 89, 90 of 1951
Decided On : 01/10/1952
Advocates Appeared :
For the Petitioner: M. K. Nambiyar; N. Varadaraja Iyengar; K. P. Abraham; K. T. Ninan; N. K. Narayana Pillai; T. K. Narayana Pillai, Advocate. For the Respondent: Government Pleader; T. N. Subramania Iyer; T. R. Balakrishna Iyer, Advocate.
Exemption of sales tax on transactions in the course of import or export under Art.286(1)(b) and S.26 of the Sales Tax Act.
Headnote:
Sales Tax - Writs of Certiorari and Prohibition - Art.226 - Art.286 - S.26 of Sales Tax Act - Summary of Acts and Sections: Art.286(1)(b), S.26 of Sales Tax Act - The court discussed the scope and interpretation of Art.286(1)(b) and S.26 of the Sales Tax Act, emphasizing the exemption of sales tax on transactions in the course of import or export. The court also highlighted the intention of the Legislature to prevent interference with imports, exports, and interstatal trade and commerce, and the significance of the phrase 'in the course of' in Art.286(1)(b). The judgment granted the writs prayed for, emphasizing the exemption of sales tax on transactions in the course of import or export.
Fact of the Case:
The petitions sought writs of certiorari and prohibition to quash sales tax orders, contending that the levy of sales tax was illegal under Art.286 of the Constitution of India. The main point of contention was the construction of Art.286, specifically whether the transactions were exempted from sales tax under its provisions.
Finding of the Court:
The court found that the transactions were exempted from the levy of sales tax under Art.286(1)(b) and S.26 of the Sales Tax Act. It emphasized that the intention of the merchants was to export the goods, and therefore, the purchases were an integral part of the process of exporting. The court granted the writs prayed for and ordered a refund of any amounts paid to or collected by the State.
Issues: The main issue was the construction and interpretation of Art.286 of the Constitution of India, specifically whether the transactions were exempted from the imposition of sales tax.
Ratio Decidendi: The court's decision was based on the exemption of sales tax on transactions in the course of import or export as provided in Art.286(1)(b) and S.26 of the Sales Tax Act. It emphasized the intention of the merchants to export the goods and the integral nature of the purchases in the process of exporting.
Final Decision: The court granted the writs prayed for, quashing the proceedings of the original and appellate tribunals that sanctioned the levy of sales tax on exempted transactions. It also ordered a refund of any amounts paid to or collected by the State and granted costs to the petitioners.
The prayers in all these petitions are for the issue of writs of certiorari and prohibition under Art.226 (1) of the Constitution of India for the purpose of quashing the orders passed by the Sales Tax authorities of the State. The State is impleaded as the common respondent with the authority concerned as additional respondent. The contention of the petitioner in each of these petitions is that the levy of the sales tax is illegal being in contravention of the provisions of Art.286 of the Constitution of India. This contention seems to us to be superfluous in view of the fact that the article is bodily incorporated in the local Sales Act as S.26, and, therefore, the question resolves itself into whether the levy of the sales tax is opposed to the provisions of this section. The main point arising from the arguments in each of these applications relates, therefore, to the construction of this article which is incorporated as S.26 of the Sales Tax Act. The case of the petitioners is that the transactions in respect of which the sales tax has been imposed by the second respondent are exempted under these provisions from the imposition of such a tax.
2. It would be convenient in the circumstances to consider the scope of the provisions of Art.286 with the object of deciding whether its provisions would be attracted to save the transactions from the imposition of sales tax, Art.286 is worded as follows
"286 (1) No law of a State shall 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-cl. (a), a sale or purchase shall be deemed to have taken place in the State in which the goods have actually been delivered as a direct result of such sale or purchase for the purpose of consumption in that State, notwithstanding the fact that under the general law relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State"
(2) x x x x x x x
(3) x x x x x x x It is not necessary to read Cls. (2) and (3) of the Article which do not apply to the facts of these cases.
3. It will be seen from the wording of Cl. (1) of the Article that two classes of sales are exempted from the imposition of sales tax. The first is a sale which has taken place outside the State, subject to the limitation imposed by the explanation. The second is a sale that has taken place in the course of the import of the goods into or the export of the goods out of the territory of India. The important words to remember in this clause are the words 'in the course of'. While the goods are in the course of import into the territory of India or while the goods are in the course of export out of the territory of India, if a sale takes place, sales tax cannot be levied. The words "in the course of" make the scope of this clause very wide. It is not restricted to the point of time at which goods are imported into or exported from India. The series of transactions which necessarily precede export or import of goods will come within the purview of this clause. Therefore, while in the course of that series of transactions the sale has taken place, such a sale is exempted from the levy of sales tax. The sale may have taken place within the boundaries of the State. Even then sales tax cannot be levied if the sale had take place while the goods were in the course of import into India or in the course of export out of India. We are stressing this point because both parties in what we may describe as the cashew-nut cases entered into a lengthy discussion as to the exact point of time when the sale became completed and as to the exact place where the goods were when the sale became a completed transaction.
4. For the purposes of these cases we are satisfied from the facts that have been brought to our notic
