Report No. 61
First reference to the Law Commission (1966).- The next phase in connection with the matter started in 1956 when the Constitution (Tenth Amendment) Bill was introduced in Parliament and passed by Parliament as the Constitution (Sixth Amendment) Act. In the same year, the Government in the Ministry of Law referred to the Law Commission, the question of the principles that should be formulated by parliamentary legislation for determining when a sale of goods takes place (a) outside a particular state, (b) in the course of import or export, or (c) in the course of inter-State trade or commerce in pursuance of the provisions of clause (2) of Article 286 and clause (3) of Article 269 as inserted by the Constitution Sixth Amendment.
The Law Commission in its Second Report (Parliamentary Legislation relating to Sales tax) dealt with these three matters. The report of the majority covered only about 10 pages and a separate note consisting of four pages was written by Dr. N.C. Sen Gupta, a Member of the Commission. In paragraph 10 of the majority report, the Commission recommended the acceptance of the principles laid down by the Supreme COurt in the two Travancore cases and the language used by the Commission in the aforesaid paragraph 10 was more or less the same as the language used in the decisions of the Supreme Court in the two Travancore cases, specially in the first case.
The Commission did not accept the views expressed by Das, J. in the second Travancore case nor did it accept the suggestion of the Ministry of Commerce and Industry that the last purchase preceding the export should be accepted as a transaction in the course of export on the ground that the exemption of such transactions from sales tax will stimulate exports. As that Ministry did not however suggest that a similar exemption should be granted to the first sale following the import, it appeared to the Commission to be somewhat illogical that the last purchase preceding the export should be exempt whereas the first sale following the import should not be exempted.
With great respect to the views of the Commission in the Second Report, it is felt that the Commission borrowed the language used in the unanimous decision of the Supreme Court in the first Travancore case without critically and carefully examining whether that language would be precise enough to remove all doubts and ambiguities and conflicts, as is evident from the minority judgment of Das, J. in the second Travancore case. Moreover, from the observations of the Court in para. 14 of the judgment in the first Travancore case, it was clear that the Court did not consider the matter in a comprehensive manner. This aspect was specifically mentioned by Das, J. in his minority judgment. Be that as it may, the Government and Parliament accepted the majority views of the Law Commission in the Second Report in relation to sales or purchases in the course of import or export and section 5 of the Central Sales Tax Act, 1956 adopted verbatim the language of the recommendations of the Commission in paragraph 10 of the Report.