M/S. William Jacks & Co. Ltd. Vs.
The State of Bihar  INSC 328 (21 November 1962)
CITATION: 1964 AIR 584 1963 SCR Supl. (2) 352
Sales Tax Sales in the course of inter-state
trade-property passed in Calcutta-Actual delivery given to purchaser in Bihar
for consumption-whether lax could be levied under Bihar Act-Whether the Sales
Tax Continuance Order, 1950 saves such tax-Definition of sale in the Bihar
Sales Tax Act-Whether the sale comes within the definitionConstitution of
India, Art. 206 (1) and (2), Bihar Sales Tax Act,. 1947 (Bihar 19 of 1947) ss.
25, 33-The Sales Tax Continuance Order, 1950-The Sales Tax Laws Validation Act,
1956 (VII of 1956).
Between January 26, 1950, and September 30,
1951, the appellant had sold from Calcutta various goods to parties in Bihar.
These sales had been made in the course of interState trade and were of species
mentioned in the explanation to cl. (1) of Art. 286 of the Constitution on
which, in view of the provisions of cl. (2) of that Article as it stood then
and as interpreted by this Court in Bengal Immunity Co. Ltd. v. State of Bihar,
no tax could be imposed by a State law. The respondent State had however before
the decision by this Court in the Bengal Immunity Co. case imposed tax on these
sales under the Bihar Sales Tax Act, 1947, relying on other decisions since
overruled which interpreted the explanations to Art. 286 (1) in a different manner.
The appellant objected to this imposition.
On the question being referred to the High
Court the respondent sought to justify the tax on other grounds. It contended
that the sales made between January 26, 1950, and March 31, 1951, could be
legally taxed under the Act because of cl. (2) of the Sales Tax Continuance
Order, 1950, made under the proviso to Art. 286 (2) of the Constitution and the
sales made between April 1, 1951, and September 30,1931, could be so taxed
because of the provisions of the Sales Tax Validation Act, 1956. The High Court
accepted the respondents' contention. On appeal to this Court the decision of
the High Court regarding the sales between April 1, 1951, and September 30,
1951, was not challenged.
353 Held, the Sales Tax Continuance Order of
1950 only authorised the continuation after the commencement of the of the
Constitution and up to March 31, 1951, of "any tax on the sale or purchase
of goods which was being lawfully levied by the Government of any State
immediately before the commencement of the Constitution" notwithstanding
the bar imposed against such imposition by Art. 286 (2) of the Constitution.
The tax on the sales made by the appellant between January 26, 1950, and March
31, 1951, were not of the variety which was immediately before the commencement
of the Constitution being lawfully levied by any law of the State of Bihar. The
contention of the respondent that the sale defined in the Act included these
sales and were therefore being taxed under it from before January 26, 1950, was
Section 33 of the Act read with the decision
of this Court in M. P. V. Sundararamier & Co. v. The State of Andhra
Pradesh might on the ban under Art. 236 being lifted be construed as
authorising the imposition of a tax on these sales does not affect the question
in the present case for this section was introduced into the Act by the
adaptation of Laws (Third Amendment) Order, 1951, and came into force from
January 26, 1950, and could not therefore be a law levying a tax immediately
before the commencement of the Constitution.
M.P. V. Sundararamier & Co v. The State
of Andhra Pradesh,  S. C. R. 1422 considered.
CIVIL APPELLATE JURISDICTION : Civil Appeal
Nos. 112 to 113 of 1962.
Appeal from the judgment and order dated
September 21, 1959, of the Patna High Court in Civil Misc. judl, Case No. 593
Rajeshwar Prasad and S. P. Verma, for the
A. V. Viswanatha Sastri, D. P. Singh R. K.
Gary, S. C. Agarwal and M. K. Ramamurthi, for the respondent.
1962. November 21. The judgment of the Court
was delivered by SARKAR, J.-The appellant is a company dealing in various kinds
of machinery. It has its place 354 of business in Calcutta, in the State of
Between January 26, 1950 and September 30,
1951, .it sold diverse machinery to various parties in the State of Bihar.
In respect of these sales the appellant was
assessed to sales tax under the Bihar Sales Tax Act, 1947. These appeals arise
out of such assessments but, as will be seen later, the dispute now is much
narrower than what it was in the beginning.
Before proceeding further we may briefly
refer to the procedure of the sale. The price payable for the goods was F. 0.
R. Calcutta and it is not in dispute that the property in them passed to the
purchaser as soon as the appellant Put the goods on the railway at Calcutta. It
has however been found and is no longer in dispute, that the actual delivery of
the goods was given to the purchasers in Bihar for consumption there. The
arguments in this Court have proceeded on the basis accepted by both sides,
that the sales were in the course of inter-State trade and were of the kind
contemplated in the explanation in Art. 286(1) of the Constitution before its
amendment by the Constitution (Sixth Amendment) Act, 1956. In this judgment we
shall be concerned with Art. 286 as it stood before the amendment.
The contention of the appellant before the
Superintendent of Sales Tax, Patna, who was the assessing authority, was that
the sales were inter State sales and, therefore, the Bihar Act could not tax
such sales in view of cl. (2) of Art. 286 though they were within the
explanation to cl. (1) of that Article. It was contended that so far as the
Bihar Act purported to tax such sales, it was invalid. The Superintendent of
Sales Tax rejected this contention relying on the case of Bengal Immunity
Company Ltd. v. The State of Bihar (1) which held that sales of the variety
described in the explanation to cl. (1)(a) of Art. 286 could be taxed by the
law of the legislature of the State where the goods were actually delivered for
consumption in spite of the ban imposed by (1) (1952) I.L.R. 32 Pat. 19.
355 cl. (2) of that Article on State
legislatures taxing sales made in the course of inter-State trade. He,
therefore, held that the Bihar Act could validly tax the appellant's sales even
though they were inter State sales. The appellant appealed from this decision
to the Deputy Commissioner of Sales Tax, Bihar. By the time that authority
heard the appeal the judgment of' this Court in the State of Bombay v. The
United Motors (1) had been delivered. This judgment confirmed the view taken in
the Patna case earlier mentioned. It said that cl. (2) of Art. 286 does not
affect the power of the State in which delivery of goods is made for consumption
there to tax inter-State sales or purchases and that the effect of the
explanation was that the transactions mentioned in it were outside the ban
imposed by Art. 286(2). In view of this judgment, the Deputy Commissioner
dismissed the appeal. A further revision application by the appellant to the
Board of Revenue, Bihar, also failed. Before the decision by the Board of
Revenue, however, this Court had decided in the appeal from the judgment in the
Patna case, earlier mentioned, that the United Motors case (1) had been wrongly
decided and that until Parliament by law made under Art. 286(2) provided
otherwise, a State could not impose or authorise the imposition of any tax on
sales or purchases of goods when such sales or purchases took place in the course
of interState trade or commerce notwithstanding that the goods under such sales
were actually delivered in that State for consumption there: see Bengal
Immunity Company Ltd. v. State of Bihar (2). Curiously however this case
escaped the attention of the learned member of the Board of Revenue, Bihar, for
if he had noticed it he would not have based himself on the United Motors case
(1) as he had done. The appellant thereafter moved the Board of Revenue under
S. 25 of the Bihar Act for referring two questions to the High Court for
decision and a reference was accordingly made.
(1)  S.C.R. 1069.
(2)  2 S.C. R. 603.
356 The present appeal is against the
judgment of the High Court given on the reference.
There are two appeals before us. They arise
out of two assessment orders made in respect of two different periods.
The High Court heard the two references
together and dealt with them by one judgment. The questions framed in each case
were in identical terms and perhaps, therefore, were not confined to the period
with which each case was concerned.
As we have said earlier, two. questions had
been referred to the High Court but the appellant has not in this Court
challenged the answer given by the High Court to the second question. We are,
therefore, concerned in these appeals only with the first question which is in
these terms :
"Whether the sales by the petitioner of
(sic.) goods which were actually delivered in Bihar as a direct result of such
sales for the purpose of consumption in Bihar during the period January 26,
1950 to September 30, 1.951, were sales which took place in the course of inter
State trade or commerce within the meaning of Article 286(2) of the
Constitution of India (as it stood prior to the passing of the Constitution
(Sixth Amendment) Act, 1956) and as such were not liable to the levy of Bihar
Sales Tax, or whether in view of the subsequent passing by Parliament of the
Sales Tax Laws Validation Act, 1956 (Act VII of 1956) such sales became liable
to the levy of Bihar Sales Tax for any part of the above period, say from April
1, 1951, up to September 30, 1951." The High Court answered this question
in these words :
"As regards the first question, it is
clear that for the period from the January 26, 1950, to March 31, 1951, the
assessment 357 is covered by the Sales Tax Continuance Order, 1950, promulgated
by the President, and the assessment of the tax for this period is not liable
to be attacked on the ground that there is a violation of the provisions of
Article 286(2) of the Constitution. For the second period, namely, from April
1, 1951, to September 30, 1951, the assessment is covered by the provisions of
the Sales Tax Laws Validation Act, 1956, and the imposition of sales-tax for
this period also is legally valid." The question in this appeal is whether
the High Court was right in its view that the assessment between January 26,
1950 to March 31, 1951 is covered by the Sales Tax Continuance Order, 1950.
There is no dispute now that the Sales Tax Validation Act, 1956 validated the
collection of the tax on sales made during the period from April 1, 1951 to
In view of the judgment of this Court in the
Bengal Immunity Company case (1) a dispute as to whether the sales by the
appellant could be taxed by a Bihar law was no longer open.
It was because of this that the dispute took
a different turn and was based on the Sales Tax Continuance Order, 1950.
The contention of the appellant is this : The
Sales Tax Continuance Order, 1950 was made in exercise of the powers conferred
by the proviso to cl. 2 of Art. 286 of the Constitution. That proviso was in
these terms "Provided that the President may by order direct that any tax
on the sale or purchase of goods which was being lawfully levied by the Government
of any State immediately before the commencement of this Constitution shall,
notwithstanding that the (1) 2. S.C.R. 603.
358 imposition of such tax is contrary to the
provisions of this clause, continue to be levied until the thirty-first day of
March 1951." Clause (2) of the Sales Tax Continuance Order, 1950 reads as
"Any tax on the sale or purchase of
goods which was being lawfully levied by the Government of any State
immediately before the commencement of the Constitution of India shall, until
the thirty-first day of March, 1951, continue to be levied notwithstanding that
the imposition of such tax is contrary to the provisions of clause (2) of the
Article 286 of the said Constitution." Clause (2) of Art. 286 of the
Constitution, it will be remembered, prohibited a State law from taxing a sale
in the course of inter-State trade.
Now, a tax which can be legitimately levied
under the Order of 1950 must be a tax which was being lawfully levied by a
State Government immediately before January 26, 1950. It is said by the
appellant that before this date neither the Bihar Sales Tax Act nor any other
Act purported to tax a sale of the kind with which we are concerned. If no Act
did so, then no question of its lawfully levying a tax on such sales could at
all arise. There was no tax as contemplated by the Order and none, therefore,
the levy of which the Order continued.
Learned counsel for the appellant drew our
attention to the definition of sale in the Bihar Act as it stood at the
relevant time. It was only a sale which came within the definition that the Act
purported to tax. Learned counsel's contention is that the sales in this case
do not come within the definition and, therefore, were not taxed by the Bihar
Act at all.
359 Now the definition of sale in the Act is
in these terms :
"sale" means, with all its
grammatical variations and cognate expressions, any transfer of property in
goods for cash or deferred payment or other valuable consideration, including a
transfer of property in goods involved in the execution of contract but does
not include a mortgage, hypothecation, charge or pledge :
Provided that a transfer of goods on hire purchase
or other installment system of payment shall, notwithstanding the fact that the
seller retains a title to any goods as security for payment of the price, be
deemed to be a sale :
Provided further that notwithstanding
anything to the contrary in the Indian Sale of Goods Act, 1930 (III of 1930),
the sale of any goods (i)which are actually in Bihar at the time when, in
respect thereof, the contract of sale as defined in section 4 of that Act is
made, or (ii)which are produced or manufactured in Bihar by the producer or
manufacturer thereof, shall, wherever the delivery or contract of sale in made,
be deemed for the purposes of this Act to have taken place in Bihar :
Provided further that the sale of goods in
respect of a forward contract, whether goods under such contract are actually
delivered or not, shall be deemed to have taken place on the date originally
agreed upon for delivery.
360 It is obvious that the sales with which
this case is concerned did not come within this definition at all nor even
under the last proviso in it and these sales were not taxed by the Bihar Act.
Then there is s. 33. That section provides as
S. 33. (1) Notwithstanding anything contained
in this Act,(a) a tax on the sale or purchase of goods shall not be imposed
under this Act(i)where such sale or purchase takes place outside the State of
(2)The explanation to clause (1) of Article
286 of the Constitution shall apply for the interpretation of sub-clause (i) of
clause (a) of sub-section (1).
Now, it has been held by this Court in M. P.
I,-. Sundararamier & Co. v. The State of Andhra Pradesh (1) that an
enactment of this kind did in fact impose a tax on the class of sales covered
by the explanation to Art. 286(1) (a) but that the imposition was conditional
on the ban mentioned in Art. 286(2) being lifted by law of Parliament as
provided therein. We do not think that the respondent State can derive any
advantage from this provision. It was inserted in the Bihar Act by the
Adaptation of Laws (Third Amendment) Order, 1951, and was brought into force
from January 26, 1950. Even though on the ban being lifted it might have been
possible under (1)  S.C.R. 1422.
361 this provision to tax the explanation
sales, that is, the sales of the kind with which this case is concerned, that
cannot assist the respondent State in this case for since s. 33 only came into
force from January 26, 1950, s. 33 could not be a law levying a tax on any
sales immediately before the commencement of the Constitution and the levy of
tax under it, therefore, could not have been continued under the provisions of
the Sales Tax Continuance Order, 1950.
It follows that the sales were not taxed by
the Bihar Sales Tax Act., 1917 before the Constitution came into force. It is
not contended that the Government of Bihar had been taxing these sales before January 26, 1950, under any other provision. We, therefore, think that the High Court was
in error in holding that the levy of the tax on the sales by the appellant
between January 26, 1950, and March 31, 1951, with which this case is
concerned, was covered by the Sales Tax Continuance Order, 1950. We will set
aside the judgment of the High Court in so far as it so holds and answer the
question which we have earlier set out in so far as it is outstanding, in the
negative. In our view, these sales were not liable to tax.
We think it right here to point out that the
question as framed might suggest that the Court was asked to decide whether the
sales were sales within the meaning of Art.
286(2) of the Constitution. But as we have
said earlier, that was not the point of the question. The courts below have
held that the sales were in the course of inter-State trade in which the goods
were actually delivered in Bihar for consumption there and that view has not
been disputed in this Court.
The appeal will, therefore, be allowed. We do
not make any order as to costs as the appellant abandoned in this Court its
contest to one of the two 362 questions that had been referred and as it had
not in the High Court contended that the Sales Tax Continuance Order, 1950, did
not apply to the sales for the reason on which it based itself in this Court.