Judgment

VENKATARAMA AIYAR, J. : The petitioners are dealers carrying on business in the City of Madras in the sale and purchase of yarn, and they have filed the present applications under Art. 32 of the Constitution for the issue of a writ of prohibition or other appropriate writ restraining the State of Andhra from taking proceedings for imposing tax on certain sales effected by them in favour of merchants who are residing or carrying on business in what is now the State of Andhra Pradesh, on the ground, inter alia, that the said sales were made in the course of inter - State trade, and that no tax could be levied on them by reason of the prohibition contained in Art. 286 (2) of the Constitution.

2. The course of dealings between the parties resulting in the above sales has been set out in para 5 in Petition No. 220 of 1955. It is therein stated that the dealers in Andhra would place orders for the purchase of yarn with the petitioners in Madras, that the contracts would be concluded at Madras, that the goods would be delivered ex-godown at Madras and would thereafter be despatched to the purchasers either by lorries or by rail as might be directed by them, that when the goods were sent by rail, the railway receipts would be taken either in the name of the consignees, and sent to them by post or in the name of the consignees, and sent to them by post or in the name of the consignor and endorsed to the purchases and delivered to them in Madras or sent to them by post endorsed in favour of a bank and the purchasers would take delivery of those receipts after payment to the bank. It is said that in all cases price of the goods was paid in Madras.

3. On the above allegations, it is manifest that the sales mentioned therein are not all of the same kind, and in point of law, the incidents attaching to them might be different. A consideration of the validity of the imposition with reference to the several classes of sales mentioned above would be wholly airy and pointless without a determination of the facts relating to them, which however, have not been investigated. Counsel for the petitioners, however, concedes that the dispute in these proceedings in confined to the proposed imposition of tax, in so far as it relates to sales of the character mentioned in the Explanation to Art. 286 (1) (a), that is to say, sales in which the property in the goods sold passed outside the State of Andhra but the goods themselves were actually delivered as a result of the sale for consumption within that State. These sales have been referred to in the arguments before us as "Explanation sales", and it will be convenient to adopt that expression in referring to them in this judgment.

4. It will be seen that the above sales would all of them have been intra-State, so long as the Andhra State formed part of the composite State of Madras, and questions of the character now agitated before us could not then have arisen. On September 14, 1953, Parliament enacted the Andhra State Act (30 of 1953), whereby a separate State Act (30 of 1953), whereby a separate State called the State of Andhra was constituted incorporating therein territories which had previously thereto formed part of the State of Madras, and this Act came into force on October 1, 1953. Under S. 53 of the Andhra State Act, the laws in force in the territories in the Andhra State prior to its constitution are to continue to be in force even thereafter, and one of those laws is the Madras General Sales Tax Act (Madras IX of 1939). Hereinafter referred to as the Madras Act. Section 54 of the Andhra State Act conferred on the Government a power to adapt laws for the purpose of facilitating the application of any law previously made, and in exercise of the power conferred by this section, an Adaptation Order was passed on November 12, 1953, whereby the word "Andhra" was substituted for the word "Madras" in the Madras Act. We shall thereafter refer to the Madras Act as continued and applied in the