Report No. 30
34. Previous reference to the Law Commission.-
The Law Commission, on March 23, 1956, was invited1 to offer its suggestion as for formulating principles for determining when a sale of goods takes place2-
(i) outside a State;
(ii) in the course of the import of the goods into, or export of the goods out of, the territory of India;
(iii) in the course of inter-State trade or commerce.
1. See the letter of the Chairman of the Law Commission forwarding the Second Report.
2. See para. 26, supra.
35. The Law Commission gave its Report on the subject1, after taking into consideratio.-
(i) the two Travancore-Cochin cases above mentioned, in which Article 286(1)(b) was discussed and interpreted;
(ii) The Report of the Taxation Enquiry Commission, in which it was stated that the position arising from the interpretation put by the Supreme Court on Article 286(1)(b) was "perfectly satisfactory so far as foreign trade is concerned"; and
(iii) the views of the Ministry of Finance which had mentioned that all the States had accepted the interpretation of the Supreme Court and no difficulties were reported to have arisen as a result of the judgment of that Court.
The Law Commission, further, referred to and took into account the dissenting judgment of Mr. Justice S.R. Das, as the then was, in the Second Travancore Cochin 2. The view of the Ministry of Commerce and Industry in regard to the last purchase preceding the export was also taken into consideration.
1. Second Report of the Law Commission (Parliamentary Legislations relating to Sales Tax) (July 1956).
2. State of Travancore v. Shanumugh Vilasa Cashewnut Factory, (1954) SCR 53: AIR 1953 SC 333. (Second Travancore case).
36. After a careful review of all these different matters1, the Law Commission recommended as follows2.-
"Under this head, we therefore, recommend the acceptance of the principles laid down by the Supreme Court. We would express them in the following manner.-
A sale or purchase of goods shall be deemed to take place in the course of export of the goods out of the territory of India, only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India. A sale or purchase of goods shall be deemed to take place in the course of import of the goods into the territory of India, only if the sale or purchase either occasions such import or is effected by transfer of documents of title to the goods before the goods have crossed the customs frontiers of India."
The Law Commission, in its Report also dealt with inter-State sales, but, for the present purpose, we need not refer to its recommendations on that topic.
1. Second Report of the Law Commission, paras. 5 to 10.
2. Second Report of the Law Commission, para. 10.