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Report No. 61

3.48. 30th Report.-

The Judgment in Khosla's case led to a reference to the Law Commission by the Government of India in 1967. Attention to this judgment had been drawn by the State Government of West Bengal, since the judgment circumscribed the power of the State Government to impose sales tax on certain types of transactions. The exact question referred to the Law Commission in 1967 was1 the following:-

"Since the provisions of section 5 of the Central Sales Tax Act incorporate verbatim the principles recommended by the Law Commission on the basis of the earlier Supreme Court judgments in Travancore-Cochin cases, the Commission is requested to examine the matter further and consider whether they would recommend any amendments of the Act, so as to exclude transactions of the type hereinbefore discussed from the purview of section 5 of the Central Sales Tax Act."2

1. 30th Report of the Law Commission (Section 5 of the Central Sales Tax Act etc.) (February, 1967), para. 5.

2. Second Report of the Law Commission-Parliamentary legislation relating to Sales Tax (1956).

3.49. The Law Commission1 in the reference took into account the history of the Act of 1956, judicial decisions prior as well as subsequent to that Act relating to the boundaries of the ban under Article 286(1)(b) of the Constitution (imposition of sales tax on import sales), and the judgment under consideration (Khosla's case). The majority of the Commission took the view that the propositions which emerged from the judgment in Khosla's case were consistent with the two Travancore cases on which the earlier Report of the Law Commission was based, and did not go beyond the intendment of these decisions. The minority (Shri K.G. Datar and Shri R.P. Mookerjee) took a contrary view.

The Commission, of course, took care to mention that it was permissible to bring about a suitable modification of the position in such manner as may be legally appropriate, but the Commission did not profess to deal with matters of policy.2 For the sake of convenience, however, the Commission summarised several suggestions3 received by it, and brought them to the notice of the Government. After this Report,4 there have been no notable legislative developments, relevant to the question under consideration.

1. 30th Report of the Law Commission (Section 5 of the Central Sales Tax Act-Taxation by the States on sales in the course of import) (February 1957), para. 130.

2. 30th Report of the Law Commission (Section 5 of the Central Sales Tax Act) Taxation by the States on Sales in the course of (import) (February, 1967), para. 135.

3. See para. 3.11, supra.

4. 30th Report.



Certain Problems connected with Powers of the States to Levy a Tax on the Sale of Goods and with the Central Sales Tax Act, 1956 Back




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