Report No. 61
Second reference to the Law Commission (1966).- Therefore, within about only six months after the decision the Ministry of Finance raised the query whether the decision in Khosla's case went beyond what the Law Commission in its Second Report intended and thereupon the Ministry of Law referred the matter to the Law Commission on the 18th July, 1966 for its consideration.
After careful consideration of the whole matter at length the Commission was divided in its opinion. The majority view was that "the propositions emerging from Khosla's case are consistent with the two Travancore cases on which the Second Report of the Law Commission was based and do not go beyond the intendment of those decisions. The particular situation involved in Khosla's case was, no doubt, not in issue at that time, but there is nothing in those decisions, which is inconsistent with the test of contractual obligation applied in Khosla's case.
But it is submitted with respect that the general conclusion of the Commission that "the propositions emerging from Khosla's case are consistent with the two Travancore cases " is difficult to accept. If Khosla's case is consistent with the Travancore cases, then why have the States been clamouring and remonstrating against Khosla's decision? Can the States now impose tax on the first sales after import in the face of the Khosla decision? Why then did not the majority recommend that the States might exercise their powers of taxation, the Khosla decision notwithstanding? Why then the Ministry of Finance raised the query at all ? All these questions remained unanswered in the report of the majority.
In my view, correct approach was adopted in the minority reports signed by Shri K.G. Datar and Shri R.P. Mookerjee. Their conclusion was that Khosla's case was inconsistent with the decisions in the Travancore cases. Mr. Datar in his report said-
"For the reasons stated in the foregoing paragraphs, I am of the opinion that the present decision in Khosla's case is not consistent with the previous decisions of the Supreme Court which I have discussed above. In particular, the decision goes beyond the decisions of the Supreme Court in the two Travancore cases and is likely to create uncertainty in the law."
Uncertainty in the law the decision has, no doubt, created. But the small amendments suggested in section 5 by Shri Datar and Shri Mookerjee would not, I am afraid, remove the uncertainty. Shri Datar says in para. 115 of his note-
"At present the section reads ' if the sale or purchase occasions such import ' and 'if the sale or purchase occasions such import ' If only the Travancore cases were to be followed and accepted, it would be only the sale occasioning the export and only the purchase occasioning the import."
But I do not think these small changes using only sale in relation to export and only purchase in relation to import would clear away the uncertainty and doubt. My reason is simple because every sale transaction involves a sale as well as a purchase-sale by the person from whom the property in the goods passes and a purchase by the person to whom such property passes. Sale and purchase may be regarded as the obverse and reverse of the same transaction. Even Article 286 does not appear to have limited sale to export or purchase to import, had it been so, then in clause (1)(b) of that Article the words "export of the goods out of" would have been placed before the words "the import of the goods into". Das, J. also in para. 51 and para. 59 of his judgment in the second Travancore case used the expressions interchangeably.
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