State of Travancore-Cochin & Ors Vs.
The Bombay Co. Ltd.  INSC 42 (16 October 1952)
SASTRI, M. PATANJALI (CJ) MUKHERJEA, B.K.
DAS, SUDHI RANJAN BOSE, VIVIAN HASAN, GHULAM
CITATION: 1952 AIR 366 1952 SCR 1112
CITATOR INFO :
F 1952 SC 369 (31) MV 1953 SC 252 (44) F 1953
SC 333 (16) R 1955 SC 661 (35) F 1956 SC 158 (9) RF 1957 SC 699 (35) R 1958 SC
578 (133) R 1958 SC1006 (11) F 1959 SC 149 (15,28) F 1960 SC 595 (10) R 1961 SC
41 (19) D 1961 SC 65 (17) RF 1961 SC 315 (25) D 1962 SC1733 (9,11,12) R 1963 SC
980 (9,12) R 1963 SC1207 (42) R 1964 SC1752 (5,8,10) RF 1967 SC1643 (249) R
1971 SC 477 (4) RF 1971 SC 870 (19) RF 1973 SC1461
(184,185,699,700,701,705,1100, RF 1973 SC2555 (5) RF 1974 SC1510 (7) RF 1975
SC1564 (10,12,13,24,49,59) RF 1980 SC1468 (15) F 1985 SC1367 (33) RF 1989 SC
Constitution of India, Article 286 (1)
(b)--Sales tax--Exemption of sales in the course of export or import--Meaning
of "in the course of "--Sales where property passes and sale is
complete before 1113 goods move out of State, whether exempt--Interpretation of
article 286 (1)(b)--Designs on Commerce and Import-Export clauses of American
Constitution--Speeches of Members of Constituent Assembly--Relevancy.
Whatever else may or may not fall within art.
286 (1) (b) of the Constitution, sales and purchases which themselves occasion
the export or the import of the goods as the case may be, out of or into, the
territory of India come within the exemption.
The view that no sale or purchase can be said
to take place in the course of export or import unless the property in the
goods is transferred to the buyer during their actual movement, as instance,
where the shipping documents ,are indorsed and delivered within the State by
the seller to a local agent of the foreign buyer after the goods have been
actually shipped or where such documents are cleared on payment, or on
acceptance, by the Indian buyer before the arrival of the goods within the
State, puts too narrow a construction upon art. 286 (1)(b) and is not correct.
A sale by export involves a series of
integrated activities commencing from the agreement of sale with a foreign
buyer and ending with the delivery of the goods to a common carrier for
transport out of the country by land or sea.
Such a sale cannot be dissociated from the
export without which it cannot be effectuated and the sale and 'the resultant
export form parts of a single transaction. Of these two integrated activities
which together constitute an export sale, whichever first occurs can well be
regarded as taking place in the course of the other. Even in cases where the
property in the goods passed to the foreign buyers and the sales were thus
completed, within the State before the goods commenced their journey from the
State, the sales must be regarded as having taken place in the course of the
export and therefore exempt under art. 286 (1) (b).
The Commerce clause (article 1, section 8
(3)) and the Import-Export clauses [article I, sections9 (5) and 10 (2)] of the
American Constitution are widely different in language, scope and purpose, and
a varying body of doctrines and tests have grown around them interpreting,
extending or restricting from time to time, their operation and application in
the context of the expanding American commerce and industry and much help
cannot be derived from them in the solution of the problems arising under
article 286 of the Indian Constitution.
Speeches made by the members of the
Constituent Assembly in the course of the debates on the draft Constitution
cannot be used 'as aids for interpreting the Constitution.
Administrator General of Bengal v. Prem Nath
Mullick [22 I.A. 107 at 118], A.K. Gopalan v. The State [(1950) S.C.R.
88], United States v. Trans-Missouri Freight
Association [169 U.S. 290 at 318] referred to.
Civil APPELLATE JURISDICTION: Civil Appeal
No. 25 of 1952.
Appeals from the Judgment and Order dated the
10th day of January, 1952, of the High Court of Judicature of Travancore-Cochin
at Ernakulam (Kunhiraman C.J. and Subramania Iyer J.) in Original Petitions
Nos. 4, 23and 24 of 1951 respectively.
T.N. Subramania Iyer, Advocate-General of
Travancore Cochin, (T.R. Balakrishna lyer and M.R. Krishna Pillai, with him)
for the State of Travancore-Cochin.
N.C. Chatterjee (C.R. Pattabhirarnan, with
him) for the respondent in Civil Appeal No. 25 of 1952.
C. R. Pattabhiraman for the respondent in
Civil Appeal No. 28 of 1952.
N.C. Chatterjee'(Thomas Vellappally, with
him) for the respondent in Civil Appeal No. 29 of 1952.
M. C. Setalvad, Attorney-General for India,
and C.K. Daphtary, Solicitor-General of India (G.N. Joshi, with them) for the
Union of India.
1952. October 16. The Judgment of the Court
was delivered by PATANJALI SASTRI C.J.--These are connected appeals from the
judgment and order of the High Court of Travancore-Cochin quashing the
assessments under the United State of Travancore and Cochin Sales Tax Act (No.
11 of 1125 M.E.) (hereinafter referred to as "the Act") on the
respondents on the turnover of the sales of the commodities (coif products in
C.A. 25, lemon grass oil in C.A. 28 and tea in C.A. 29) in which they
The dealings followed more or less the same
pattern in all the cases and consisted of export sales of the respective
commodities to foreign buyers on c.i.f. or f.o.b. terms as the case may be.
The respondents in each case claimed
exemption from assessment in respect of the sales effected by them on the
ground, inter alia, that such sales took place "in the 'course of the
export of the goods out of the territory of India" within the meaning of
article 1115 286(1) (b) of the Constitution. The Sales Tax Authorities rejected
the contention as, in their view, the sales were completed before the goods
were shipped and could not, therefore, be considered to have taken place in the
course of the export.
Thereupon the respondents by separate
petitions applied to the High Court of the United State of Travancore and
Cochin (hereinafter referred to as the State) under article 226 of the
Constitution for issue of writs of certiorari and prohibition quashing the
assessments made On them and prohibiting such assessment in future. The
applications were heard, along with nine other applications for similar reliefs
by dealers in cashew nuts, by a Division Bench (Kunhiraman C.J. and Subramania
Iyer J.) who upheld the claim of exemption and quashed the assessment orders in
respect of the transactions subsequent to the commencement of the Constitution.
From that decision the State has preferred appeals in all the cases on a
certificate granted by the High Court under article 132 (1) of the
As the appeals involved important questions
of law which may have a bearing on the sales tax legislation of the various
States in India, this Court directed notice of these proceedings to the
Attorney-General for India and the Advocates-General of those States, and they
have intervened and participated in the debate at the hearing of these appeals.
When the argument had proceeded for some
time, it was discovered that the material facts relating to the course of
dealings in cashew nuts, which were more complex in character, had not been
clearly ascertained and consequently the relative appeals were remitted to the
High Court for findings on certain points agreed upon by the parties. These
three appeals were, however, fully heard as they were found to admit of
disposal on the materials on record.
Article 286(1), on which the respondents
found their claim to exemption, runs thus:
1116 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
Explanation.--For the purposes of sub-clause
(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.
On the scope and meaning of clause (b), the
learned Judges expressed their view as follows :-"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 taken 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." On this interpretation, local purchases
"made for the purpose of export" were held by the learned Judges to
be "integral parts of the process of exporting". In support of this
construction the learned Judges referred 1117 to the debates in the Constituent
Assembly on clause 264-A of the draft Constitution which corresponded to
article 286 and quoted from the speech of one of the members who unsuccessfully
moved an amendment defining export as meaning the last transaction and import
as meaning the first transaction.
In view of the wide construction thus placed
upon clause (b) of article 286 (1), the arguments before us ranged over a large
field, and as many as four different views as to its scope and meaning were
pressed upon us for our acceptance :-(1) The exemption is limited to sales by
export and purchases by import, that is to say, those sales and purchases which
occasion the export or import as the case may be, and extends to no other
transactions however directly or immediately connected, in intention or
purpose, with such sales or purchases, and where so ever the property in the
goods may pass to the buyer. This is the view put forward on behalf of the
State of Madras. The Advocate-General thought that a State could not impose
sales tax though title passed within State limits while the goods were still
under transport on the high seas and no question of exemption could therefore
arise. He said, however, that no such ease had actually arisen.
(2) In addition to the sales and purchases of
the kind described above, the exemption covers the last purchase by the
exporter and the first sale by the importer, if any, so directly and
proximately connected with the export sale or import purchase as to form part
of the same transaction.
This view was sponsored' by the
Attorney-General who was also inclined to think, as advised at the moment, that
sales or purchases made while the goods were on the high seas would be exempt,
but he would prefer not to go into the wider question, because, whatever view
was taken, sales such as those involved in the present cases must, in any
event, be exempt.
(3) The exemption covers only those sales and
purchases under which the property in the goods 1118 concerned is transferred
from the seller to the buyer during the course of the transit, that is, after
the goods begin to move and before they reach their foreign destination. This
view is supported by the State of Bombay and certain other States.
(4) The view which found favour with the
learned Judges of the High Court in the passage already extracted.
It will be seen that the construction first
mentioned is the narrowest and the last mentioned the widest.
We are clearly of opinion that the sales here
in question, which occasioned the export in each case, fall within the scope of
the exemption under article 286(1)(b). Such sales must of necessity be put
through by transporting the goods by rail or ship or both out of the territory
of India, that is to say, by employing the machinery of export. A sale by
export thus involves a series of integrated activities commencing from the
agreement of sale with a foreign buyer and ending with the delivery of the
goods to a common carrier for transport out of the country by land or sea.
Such a sale cannot be dissociated from the
export without which it cannot be effectuated, and the sale and resultant
export form parts of a single transaction of these two integrated activities,
which together constitute an export sale, whichever first occurs can well be
regarded as taking place in the course of the other. Assuming without deciding
that the property in 'the goods in the present cases passed to the foreign
buyers and the sales were thus completed within the State before the goods
commenced their journey as found by the Sales Tax Authorities, the sales must,
nevertheless, be regarded as having taken place in the course of the export and
are, therefore, exempt under article 286(1)(b). That clause, indeed, assumes
that the sale had taken place within the limits of the State and exempts it if
it took place in the course of the export of the goods concerned.
In the foregoing discussion we have assumed
that the word "sale" used in the Constitution has the same 1119
meaning as in the law relating to the sale of goods, but it has been suggested
in the course of the argument that it imports a wider concept than the passing
of title from the seller to the buyer which under that law is determined by
highly technical rules based upon the presumed intention of the parties and
liable to be displaced by their expressed intention. We leave the point open as
it is unnecessary for the purpose of these appeals to pronounce any opinion
It was said that, on the construction we have
indicated above, a "sale in the course of export" would become practically
synonymous with "export", and would reduce clause (b) to a mere
redundancy, because article 246 (1), read with entry 83 of List I of the
Seventh Schedule, vests legislative power with respect to "duties of
customs including export duties" exclusively in Parliament, and that would
be sufficient to preclude State taxation of such transactions.
We see no force in this suggestion. It might
well be argued, in the absence of a provision like clause (b) prohibiting in
terms the levy of tax on the sale or purchase of goods where such sales and
purchases are effected through the machinery of export and import, that both
the powers of taxation, though exclusively vested in the Union and the States
respectively, could be exercised in respect of the same sale by export or
purchase by import, the sales tax and the export duty being regarded as
essentially of a different character. A similar argument induced the Federal
Court to hold in Province of Madras v. Boddu Paidanna and Sons(1) that both
central excise duty and provincial sales tax could be validly imposed on the
first sale of groundnut oil and cake by the manufacturer or producer as
"the two taxes are economically two separate and distinct imposts".
Lest similar reasoning should lead to the imposition of such cumulative burden
on the export-import trade of this country which is of great importance to the
nation's economy, the Constituent Assembly may well have thought it necessary
to exempt (1)  F.C.R. 90.
1120 in terms sales by export and purchases
by import from sales tax by inserting article 286 (1) (b) in the Constitution.
We are not much impressed with the contention
that no sale or purchase can be said to take place "in the course of"
export or import unless the property in the goods is transferred to the buyer
during their actual movement, as for instance, where the shipping documents are
indorsed and delivered within the State by the seller to a local agent of the
foreign buyer after the goods have been actually shipped, or where such documents
are cleared on payment, or on acceptance, by the Indian buyer 'before the
arrival of the goods within the State. This view, which lays undue stress on
the etymology of the word "course" and formulates a mechanical test
for the application of clause(b), places, in our opinion, too narrow a
construction upon that clause, in so far as it seeks to limit its operation
only to sales and purchases effected during the transit of the goods, and
would, if accepted, rob the exemption of much of its usefulness.
We accordingly hold that whatever else may or
may not fall within article 286 (1) (b), sales and purchases which themselves
occasion the export or the import of the goods, as the case may be, out of or
into the territory of India come within the exemption and that is enough to
dispose of these appeals.
Our attention was called, in the course of
the debate, to various American decisions which hold that the power "to
regulate" inter-State commerce vested exclusively in the Congress by
article 1 section 8(3) of the American Constitution (the Commerce clause)
excludes by implication the States' power of taxation only when the goods enter
"the export. stream", and until then such goods form part of
"the general mass of property in the State" subject, as such, to its
jurisdiction to tax, and that this principle was also applicable to cases
arising under article 1 section 9(5) and section 10(2) (the Import-Export
clause), [see e.g., Empresa Siderurgica v. Merced Co.(1)]. These clauses (1)
337 U.S. 154.
1121 are widely different in language, scope
and purpose, and a varying body of doctrines and tests have grown around them
interpreting, extending or restricting, from time to time, their operation and
application in the context of the expanding American commerce and industry, and
we are of opinion that not much help can be derived from them in the solution
oil the problems arising under article 286 of the Indian Constitution.
It remains only to point out that the use
made by the learned Judges below of the speeches made by the members of the
Constituent Assembly in the course of the debates on the draft Constitution is
unwarranted. That this form of extrinsic aid to the interpretation of statutes
is not admissible has been generally accepted in England, and the same rule has
been observed in the construction of Indian statutes--see Administrator-General
of Bengal v. Prem Nath Mallick(1). The reason behind the rule was explained by
one of us in Gopalan's case(2) thus :-"A speech made in the course of the
debate on a bill could at best be indicative of the subjective intent of the
speaker, but it could not reflect the inarticulate mental process lying behind
the majority vote which carried the bill. Nor is it reasonable to assume that
the minds of all those legislators were in accord," or, as it is more
tersely put in an American case" Those who did not speak may not have
agreed with those who did; and those who spoke might differ from each
other--United States v. Trans-Missouri Freight Association(3).'' This rule of
exclusion has not always been adhered to in America, and sometimes distinction
is made between using such material to ascertain the purpose of a statute and
using it for ascertaining its meaning. It would seem that the rule is adopted
in Canada and Australia --see Craies on Statute Law, 5th Ed., p. 122.
(1) (895) 22 I.A. Io7,118.
(3) 169 U.S.290,318.
144 1122 In the result, agreeing with the
conclusion of the High Court, though on different grounds, we dismiss the
appeals with costs.
Agent for the appellants: P.A. Mehta.
Agent for the respondent in C.A. No. 25 of
52: M.S.K. Sastri.
Agent for the respondent in C.A. No. 28 of
52: Sardar Bahadur.
Agent for the respondent in C.A. No. 29 of
52: V.P.K. Nambiyar.
Agent for the Interveners (Union of India,
State of Bombay, State of Madras, State of Hyderabad, State of Punjab, State of
MysOre, and State of Orissa): P.A. Mehta.
Agent for the State of Uttar Pradesh: C.P.