VENKATARAMA AYYAR, J.

This petition raises substantial questions as to the interpretation of Article 286 of the Constitution. The petitioners are merchants carrying on business in the City of Madras as tanners and exporters of tanned hides and skins. This petition arises out of proceedings taken by the State of Madras under the Madras General Sales Tax Act for assessing the tax payable by the petitioners in respect of their dealings for the year 1950-51. The facts as stated before us by agreement of both the parties are that during this period the petitioners purchased 12, 123 pieces of hides and skins from Messrs. Abdul Gani & Company, Dacca, for a price of Rs. 1, 04, 595-4-6; 74, 000 pieces from merchants in Calcutta and Cawnpore for a price of Rs. 7, 18, 042-2-9; and 3, 694 pieces locally for a price of Rs. 43, 575-0-10, in all 89, 817 pieces for a price of Rs. 8, 66, 212-8-1. During the same period the petitioners themselves directly exported to foreign countries 7, 250 pieces on C.I.F. contracts for a price of Rs. 1, 67, 515-15-1; sold to dealers in Madras 60, 627 1/2 pieces for a price of Rs. 8, 55, 396-1-0; and sold locally 22, 807 pieces for a price of Rs. 2, 76, 099-4-11, in all 90, 684 pieces for a price of Rs. 12, 99, 011-5-0. It must be stated that with reference to the sale of 60, 627 1/2 pieces to local dealers, the petitioners claimed that the goods covered by these sales had in fact been exported to foreign countries, while the respondent stated that it could not be definitely ascertained whether those pieces were ultimately exported or not.

On these facts the point in dispute before the taxing authorities was whether the petitioners were liable to pay sales tax on Rs. 8, 66, 212-8-1 under Rule 16(2)(i) and (ii) of the Madras Turnover and Assessment Rules as purchasers of raw hides and skins which were either tanned or exported by them. The petitioners claimed that the goods which they had purchased were all exported to foreign countries either directly or through other dealers and that they must in consequence be regarded as export exempt from taxation under Article 286(1)(b). The Deputy Commercial Tax Officer, Moore Market Division, rejected this contention by his order dated 14th August, 1951, and stated that

"the dealers are not found eligible for any relief under Article 286 of the Indian Constitution as they pay tax on the purchase value of untanned hides and skins bought for tanning, and that all the tanned goods tanned by them and got from others were sold to other dealers in the State, which stages are not one in the course of export outside the Indian territory." *

On this basis, the tax payable was assessed at Rs. 14, 936-2-8 and after deducting advance payments amounting to Rs. 6, 702-7-9, a demand was made for the balance of Rs. 8, 233-10-11. The petitioners preferred an appeal against this order to the Commercial Tax Officer, Madras North, and in the memorandum of appeal they stated their ground of exemption as follows :-

"We have to appeal to you that we have sold goods to the exporters at Madras who have ultimately exported the goods outside India which fact could be verified from their records. For many of the items we have clear proof of the goods being exported by documents and bills which clearly proves that our goods were exported." *

In a further statement filed by them on 29th September, 1951, they again stated that "out of the total, we have sold to exporting houses for the purpose of export outside India Rs. 10, 22, 912-0-1." On 23rd February, 1952, the Commercial Tax Officer, North Madras, dismissed the appeal on the ground that "the appellants sold to exporters or themselves exported through commission agents hides and skins tanned by them." That is to say, it was held that the petitioners did not directly export the goods themselves, but only sold them to dealers who exported them; or that they tanned the raw hides and skins and exported them as tanned goods and therefore, t