Habe6b v. UNIO~ OF INDIA-Iuterveuers & Ors.

MuKH)'RJEA J.-Th~s appeal, which has come be fore us o~ a certificate grauted by the Madras High Court under articles 134(1) (c) and 132(1) of the Constitution, is ~irected agaimt an appellate judg ment of a Division Bench of the High Court of Madras, passed in Criminal Appeal No. 129 of 1952, by which the learned Judges affirmed an order of the Seventh Presidency Magistrate, Madras, dated Febru ary 25, 1952, convicting the appellant of an offence punishable under section 15 of the Madras General Sales 'fax Act and sentencing him to pay a fine of Rs. 1,000; in default to snfler imprisonment for a period of 3 months. The appellant is a partner of a firm of merchants called "Indo-Malayan Trading Company" which has its head office in the city of Madras and carries on the business of selling and purchasing groundnut oil, sago and kirana articles. For the period-April 1, 1947, to December31, 1947-the company was assess ed to sales tax under the Madras Act IX of 1939 for an amount of Hs. 37,771 annas odd on a total turn over of Rs. 37,75,257 and for failure to pay the same proceedings were instituted against him under the provision of section 15 of the Act which resulted in his conviction as mentioned above. The course of business, which is usually followed by the company 6so SUPREME COURT REPOHTS [1953) P Madras. 1968 --;; Shh which assessment is made, .is as follows: appat.~ Th• State of cutta merchants for supply of certain articles. and which was actually followed during the period for 'I'he com· " pany receives orders in its Madras office from Cal· 'l'hese articles are purchased in the local markets and they 'fhe are despatched to Calcutta by rail or steamer. Mukherjea J. railway receipts and bills of lading are taken in the name of the vendor company- and so also a,re the insurance policies, and they are sent to the company's bankers in Calcutta who deliver the same to the con signees on payment of prices and other charges. The sole point that requires consideration is, whether in bhese circumstances the sale transactions were liable to be taxed under the General Sales Tax Act of Madras? to all in regard Before the High Court both the 'partie~ seem to have accepted the position that if on the faQts stated above, which were not disputed by either side, the sales could be held to have taken place within tbe Province of Madras, the tax could legitimately be levied on them but not otherwise. The parties differ· ed, however, as regards the test to be applied, in determining whether the sales did take place within the Province of Madras or not. On behalf of the appellant the contention raised was that the place of the transactions was Cal· cutta, as the property in the goods sold admit tedly passed to the purchasers in that city. 'l1he con tention of the respondent State on the other hand was that the true test for determining the loca lity of the sale was not where the property in the goods sold passed, but where the actual transaction was put through. As the company had its head office in the city of Madras, its accounts were main tained there and the goods were delivered to the com mon carrier in that city, the sale, according to the respondent, must be deemed to have taken place in Madras even though the property in the goods sold passed outside the province. The High Court accepted this contention of the In the opinion of the learned respondent State. s.c.:R. SUPREME COURT REPOi·rrs 6Si Sh h a , . . t h h d h' Th• s:ate of Madras. 1958 - - 1 1 h Poppat a v Judges, the word "sale" has both a legal and 11 popu- Jar meaning. In the legal sense, it imports passing of d , proper y m t e goo s an it is m t is sense t at t e In the popu- word is used in the Sale of Goods Act. Jar sense, however, it signifies the transaction itself which results in the passing of property. As the object of the Legislature in the Sales Tax Act is to Mukherj.a J. impose a tax on the occasion of the sale, it is im- material that the sale has been completed outside the proYince. 'l'he place where the property passes is, it is said, a matter of no concern to the taxing author- ity and iu such context the popular meaning of the word is more appropriate and should be adopted. The further contention raised on behalf of the appellant, that if this view was accepted, the sales tax would have to be regarded as being extra-territorial in its operation and as such ultra vires the Provincial Legis- lature. was repelled by the High Court on the author- the Judicial ity of the well known decision of Committee in Wallace Brothers etc., cf: Company v. Commissioner of Income-tax, Bombay(1). It is the propriety of this decisiun that has been challenged before us and the contentious raised by Mr. Somayya, who appeared in support of the appeal, are of a two-fold character: 'l'he learned counsel has argued in the firnt place that the Provincial Legisla ture functioning under the Government of India Act, 1935, was constitutionally incompetent to enact a legislation of this character which according to the interpretation put upon it by the High Court is capable of operating on sale transactions concluded outside the province. The other contention is that on a proper construction of the relevant provisions of the Madras Sales Tax Act the High Court ought to have held that they do not authorise the imposition of sale tax in respect of a transaction of sale where prop_erty provmce. the goods sold passes outside 'l'he first contention appears to us to be unsustain able. Section 100 (3) ·of the Government of India (I) [1948] F.C.R. I (P.C.). 682 .. SUPREME COURT REPORTS (1953} 1963 Sh -tl 1 Poppa a v. Act, 1935, upon which Mr. Somayya relied and 1 which corresponds to article 246(3) of the Constitu- a i . t10n runs as follows : The State of !iladras. -·- Mukherje1. J. "Subject to the two preceding sub-sections, the Provincial Legislature has and the Federal Legisla ture has not, power to make laws for a province or any part thereof with respect to any of the matters enumerated in List II in the Second Schedule.'' The entry in the Provincial List that is relevant for our purpose is Entry No. 48 and that speaks of "taxes on the sale of goods and on advertisements." The entry does not suggest that a legislation impos ing tax on sale of goods can be made only in respect of sales taking place within the boundaries of the province; and all tbat section 100(3) provides is that a law could be passed by a Provincial Legi'Slature for purposes of the province itself. It admits of no dispute that a Proviucial Legislature could not pass a taxation statute which would be binding on any other part of India outside the limits of the province, but it would be quite competent to enact a legislation imposing taxes on transactions concluded outside the province, provided th&t there was sufficient and a real territorial nexus between such transactions and the taxing prnvince. '!'his principle. which i,; based upon the decision of the Judicial Committee in Wallace Brothers etc. J: Company v. Commissioner of Income tax, Bombay(') has been held by this court to be applicable to sale tax legislation, in its recent deci sion in the Bombay Sales Tax Act case (2 ) and its pro priety is ueyond question. As a matter of fact, the legislative practice in regard to sale tax laws adopted by the Provincial Legislatures prior to the coming into force of the Conatitution has been to authorise imposition of taxes on sales and purchases which were related in some manner with the taxing province by reason of some of the ingredients of the transac tion having taken phce within the province or by (1) [1948] F.C.R. 1 (P.G.). (z) The State of Bombay & Another v. United lrlotors (India) Ltd, cC Othet's-Civil Appeal No. 20• o:f 195i. S.C.R. SUPREME COUR'I.1 REPORTS 683 1958 - reason of the production or location of goods within If in it at the time when the transaction took place. · the Madras Sales 'fax Act the basis adopted for taxa- Popp, tlal Shah tion is the location of the place of business or of the Th• ;;,t, of goods sold, within the Proviuce·of Madras, undoubt- edly it would be a valid piece of legislation to which no objection on constitutiona1 grounds could be taken. Mukherjea J. The controversy, therefore, narrows down to the short point as to what exactly has been adopted as the basis of the levy of sale tax by the Madras Legislature. This leads us to the question of interpretation of the statute which is involved in the second point raised by Mr. Somayya. Madras. It is a settled rale of construction that to ascertain the legislative intent, all the constituent parts of a statute are to be taken together and each word, phrase or sentence is to be considered in the light of the general purpo, se and object of the Act itself. The title of the Madras Sales Tax Act describes it to be an Act, the object of which is to provide for the levy of a general tax on the sale of goods in the Province of Madra~ and the very same words are repeated in the preamble which follows. The title and preamble, what-ever their value might be as aids to the construe· tion of a statute, undoubtedly throw light on the intent and design of the Legislature and indicate the scope and purpose of the legislation itself. The title and preamble of the Madras Sales Tax Act clearly show that its object is to impose taxes on sales that take place within the province, though these words do not necessarily mean that the property in the goods sold must pass within the province., The expression "sale of goods" is a composite expression consisting of various ingredients or elements. Thus, there are the elements of a bargain or contract of sale, the pay ment or promise of payment of price, the delivery of goods and the actual passing of title, and each one of them is essential to a transaction of sale though the sale is not completed or concluded unless the pur chaser becomes the owner of the property. 'rhe ques tion is what element or elements have been accepted 684 SUPREME COURT REPOR'fS [1953] 1958 by the Madras Legislature as constituting a sale in Po ~-;Sh 1 the province upon which it is the object of the statute ppa:. "'to levy tax. Section 2(h) gives the definition of "sale" The State of and it is defined as meaning, "every transfer of the property in goods by one person to another in the course of trade or business for cash or for deferred Mukhorjea J. payment or other valuab'le consideration, but does not include a mortgage, hypothecation, . charge or pledge." Madras. Unmistakably the stress is laid in this definition on the element of transfer of property in a sale and no other. The language gives no indication of the popular meaning of sale in which according to the High Court, the word was used. It is to be noticed that there was no provision by way of explanation of this definition, in operation, at the material time to indicate in what cases a sale would be regarded as taking place within the Province of. Madras, although the property in the goods sold did pass outside the boundaries of the province. Such explanations were added by the Madras Act XXV of 1947 and one of these explanations, namely explanation 2, provides as follows: "Notwithstanding anything to the contrary in the Indian Sale of Goods Act, 1930, the sale or purchase of any goods shall be deemed, for the purposes of in this Province, this Act, to have taken place wherever the contract of sale or purchase might have been·made- (a) if the goods were actually in this Province, at the time when the contract of sale or purchase in respect thereof was made, or (b) in case the contract was for the sale or pnr chase of future goods by description, then, if the goods are actually produced in this Province at any time after the contract of sale or pmchase in respect thereof was made." It would be clear from this that these trnnsacti0ns were not considered by the Legislature to constitute sales within the Province of Madras under the defini. tion itself, but by resort to a legal fiction they were S.C.R. SUPREME COUR'l' REPORTS 685 1958 oppat: The st:,, of declared to be so, notwithstanding any provision in the Sale of Goods Act to the contrary which, it was P ~Sh h assumed, would otherwise be applicable. The expla- a nation further shows that in defining "sale" in sec- tion '2(h), the Legislature had in mind a sale in the Madras. Province of Madras and as these words occur in the title and preamble of the Act it was not deemed uecee- Mu/,herjea J. sary to repeat them in the definition or the charging sections. Section 3 is the charging section in the Act and it provides for the levy of a tax on the total turnover of a dealer for a particular year. A "turn over" is defined to be the aggregate amount for which goods are either bought or sold. The charging section purports .to levy a tax on the sale of goods and the tax is on the sale of goods in the Province of Madras as defined in section 2(h) of the Act read in the light of its title and prea.mble. • In our opinion, the mere fact that the contract for sale was entered into within the Province of Madras does not make the transaction, which was completed admittedly within another province, where the pro perty in the goods passed, a sale within the Province of Madras according to the provisions of the Madras Sales Tali: Act and no tax could be levied upon such a transaction under the provisions of the Act. A contract of sale becomes a sale under the Sale of Goods Act only when the property in the goods is transferred to the buyer under the terms of contract itself. The presence of the goods within the province at the time of the contract would undoubt edly make the s:i.le, if subsequently completed, a sale within the province by reason of the exp \anation added by Act XXV of 1947; but as this explanation was not in operation during the relevant period with which we are concerned, the assessment of sale tax, in our opinion, on the transactions during this period is illegal and not warranted by the provisions of the Act. It is worthwhile to mention in this connection that except for the period in question no tax was . attempted to be levied on similar transactions of the a.ppellant by the taxing authorities in' any of the 89 686 SUPREME COURT REPORTS [1953] 1953 v. previous years, though the Act came iuto operation Poppatlal Shah as early as the ye11r 1939. It is not disputed also that the company is pa.ying sale tax on its transactions The State of with the Calcutta merchants sirice the explanation added by Act XXV of 1947 came into force. In our opinion, the appeal should be allowed and the con- e ow viction and sentence passed by should be set aside. The fine and sale tax, if actually paid, should be refunded to the appellant. the courts Miikhe1·j ea J. b 1 Madras. Appeal allowed. Agent for the a,ppellant: M. S. K. Aiyangar. Agent for the respondent (the State of Madras), the L' nion of India, and the States ~f Punjab, Mysore, Madhya Pradesh and Travancore Cochin (Interveners): G. H. Rajadhyaksha. Agent for the State of Bihar : R. 0. Prasad. Agent for the State of TJ. P. : 0. P. Lal. Agent for Intervener No. 8: Rajinder Narain. • PUNJAB NATIONAL BANK LTD. v. EMPLOYEES OF THE BANK. [PATANJALI 8ASTRI 0. J., MUKHERJEA, S. R. DAS, GHULAM HASAN and BHAGWATI JJ.] Industrial Disp11t'8 Act, 1947, s. 33-lnili; strial dispute-Re ference to Tribunal-Strike on fresh grounds-Dismissal of strikers d·uring pendency of proceedings before Tribunal-Legality-Scope of s. 33. During the pendency of proceedings before an Industrial Tribunal relating to certain disputes between a bank and its work men represented by the ur.ion of its employees, the respondents along with other workmen numbering over a thousand commenced a gerieral strike in connection with a fresh dispute. The strikers were dismissed and on a reference to another Tribunal, it was held by that Tribunal that, the strike was illegal and the dismis sal was legal. The Labom Appellate Tribunal held on appeal that though the strike was illegal the bank had condoned it and the dismissal was therefore illegal ancj ordered reinstatelllent, Oq f1nther appeal ; ·