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Report No. 61

Travancore cases

3.15. First Travancore case.-

The ambiguity1 in the language of Article 286 became apparent when the first Travancore case was decided. As is well-known, four alternative constructions were advanced before the Supreme Court in that case as to the meaning of "course of", and the court was circumspect enough to observe that it was confining its decision to the particular situation in the case, namely, what may be described roughly as (i) import-purchase, and (ii) export-sale. These, the court held, were definitely exempt, whatever else may or may not fall within the exemption.

1. Para. 3.14, supra.

3.16. The first Travancore case dealt with sale by export. The second Travancore case also dealt with export sales. But the whole field was covered in the discussion. In the first Travancore case,1 the Supreme Court held as follows:-

"Whatever else may or may not fall within Article 286(1)(b), sales and purchases which themselves occasion the export or the export of the goods, as the case may be, out of or into the territory of India come within the exemption, and that is enough to dispose of these appeals."

"We are clearly of the opinion that the sales here in question, which occasioned the export in each case, fall within the scope of the exemption under Article 286(1)(b). Such sales must of necessity be put through by transporting the goods by rail or ship or both out of the territory of India, that is to say, by employing the machinery of export. A sale by export thus involves a series of integrated activities commencing from the agreement of sale with a foreign buyer and ending with the delivery of the goods to a common carrier for transport out of the country by land or sea. Such a sale cannot be disassociated from the export without which it cannot be effectuated, and the sale and resultant export form parts of a single transaction.

Of these two integrated activities, which together constitute an export sale, whichever first occurs can well be regarded as taking place in the course of the other. Assuming without deciding that the property in the goods in the present cases passed to the foreign buyers and the sales were thus completed within the state before the goods commenced their journey as found by sales tax authorities, the sales must, nevertheless, be regarded as having taken place in the course of the export and are, therefore, exempt under Article 286(1)(b). That clause, indeed, assumes that the sale had taken place within the limits of the State and exempts it if it took place in the course of the export of the goods concerned."

1. State of Travancore-Cochin v. Bombay Co. Ltd., 1952 SCR 1112: AIR 1952 SC 366: 1953 IMLJ 13 STC 434.

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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