Chattanlllho v. Asst. Commissiont'f'

The Appellants in Civil Appeal No. 132 of 1955 are Messrs Ramnarain Sons Ltd., a firm registered as a "dealer" under the Central Provinces and Berar Sales Tax Act, 1947, and carrying on business at Amravati and at other places in Madhya Pradesh. After Cotton Control Order, 1949, came into force on the 12th September, 1949, Agreements with several mills situated outside Madhya Pradesh by which to purchase kapas they undertook their account and on their behalf. The agents on kapas after purchase was to be ginned and pressed into bales and sent to the mills. All volved in the process were to be borne by the mills which were also to be credited with the sale proceeds of the cotton seeds and the Appellants were only en titled to commission on a percentage basis. The Ap pellants worked for the period 1st to 30th September, 1950. By his order October, 1949 the Assistant Commissioner of Sales Tax, Amravati, Respondent No. included the transactions valued at Rs. 72,86,454-5-10 with said mills turnover and ordered the Appellants filed an the Commissioner of Sales Tax, Madhya appeal Pradesh, Respondent No. 2, on the 30th July, 1953. The appeal was, however, entertained by the Deputy C',ommissioner of Sales Tax, Madhya Pradesh, Respon dent No. to pay Rs. 25,000/- by the 31st August, 1953. The Appel lants thereupon filed a petition under Article 226, be in the High Court ing Misc. Petition No. 265 of 1953, of Judicature at Nagpur, asking quashing of the order of 30th June, 1953, passed by Respondent No. 1 and for consequential The the contentions Respondents petition with costs. to pay Rs. 1,13,850-13-6 as transactions. The Appellants the Appellants and praying for the dismissal of filed a return denying in the Appellants' the 30th June, 1953 the said 3, who ordered the Appellants inter alia reliefs. I, 1955 M/s. Ram Narain Sons Ltd. v. Asst. Commissiontr rJj Salts Tax an:! others Rhagwali J. 488 SUPREME COURT REPORTS [1955} during situated the Central The Appellants 1st October, 1949 in Civil Appeal No. 133 of 1955 arc registered as a the Eastern Cotton Company, a firm "dealer" Provinces and Berar Sales Tax Act, 1947 and carrying on business at other places in Madhya Pradesh. Amravati and at They also, the period 30th September, 1950, worKed as agents of certain outside Madhya . Pradesh, procured in Madhya Pradesh and sent it to the kapas for the State. mills for consumption outside By his order dated the 9th September, 1953, the Respondent No. 1 transactions valued at Rs. 33,47,405-5-0 included the Appellants' with the said mills in turn-over and to pay Rs. 52,303-4-0 as tax on ordered the Appellants the said also field a petition under article 226, being Misc. · Petition No. the High Court of Judicature at 348 of 1953, the 9th Septem Nagpur for quashing the order dated for con ber, 1953, passed by Respondent No. 1 and sequential return denying their contentions. transactions. These Appellants reliefs. The Respondents filed a the buyers The Appellants in Civil Appeal No. 137 of 1955 arc the firm, Ramdas Khimji Brothers, Bombay, registered as a "dealer" under the Central Provinces and Berar Sales Tax Act, 1947, and carrying on busine·ss as the period cotton dealers in Madhya Pradesh. During the Appel 1st October, 1950 to 30th September, 1951, to various sold cotton worth Rs. 6,01,949-1-9 persons out side Madhya Pradesh. The cotton was outside delivered Madhya Pradesh as a direct result of such sales. By the Sales his order dated of the Tax Officer, Amravati, the said Appellants and assessed transactions in the Appellants' turn-over filed an appeal l but the same was dismissed by an to Respondent No. order dated the 10th July, 1953. The Appellants filed on 22nd August, 1953, a revision before the Commissioner of Sales Tax, Madhya Pradesh. The Appellants also filed a petition under Article 226, being Misc. Petition in the High Court of Judicature at No. 274 of 1953, the 29th December, 1952, the same period, included thereon. The Appellants for consumption assessment, 2S.C.R. SUPREME COURT REPORTS 489 Nagpur, asking for a writ of certiorari quashing the order of Respondent No. 1 passed by him in Sales Tax Appeal No. 13-A dated the 10th July, 1953, and The Respondents filed a the contentions of the Appellants and return denying asking the petition be dismissed with costs. consequential reliefs. These petitions came up for hearing and final dis posal before the High Court of Judicature at Nagpur along with Misc. Petitions No. 288 of 1953 and No. 132 of 1954. A considered judgment was delivered in Miscellaneous Petition No. 132 of 1954 and the rea governed the decision in the soning contained therein and 348 of 1953. connected Petitions Nos. 265, 274 the Explanation II to sec The High Court held that tion 2(g) of the Central Provinces and Berar Sales Tax Act, 1947, as amended by the Central Provinces and Berar Act XVI of 1949 having been declared in valid from its inception by the High Court in Messrs (I.L.R. 1953 Shriram Gulabdas and by this Court in 1954 S.C.R. 1122, Nagpur 332) the original Explanation 1st April, 1951, when it was amended by the Madhya Pradesh Act IV of 1951. Explanation II originally enacted was in the terms following:- v. Board of Revenue force until remained 1955 M/•. R21nNami11 Sonr lJti. v. Asst. Commis.;iontr of Saks Tax anti othlrs Bhagwati ]. , contrary in respect thereof "Notwithstanding anything the Indian Sale of Goods Act, 1930, the sale of any goods which are actually in the Central Provinces and Berar at the time when the contract of sale as defined in that Act is made, shall wherever the said contract of sale is made, be deemed for purpose of this Act to have taken place in the Central Provinces and Berar". this Explanation The Appellants the Explanation offended article 286(1)(a) read with the same and the State. of Madhya Pradesh was, therefore, not entitled to tax the transactions of sale in which goods had actually been delivered as a direct consumption result of such sale outside Madhya Pradesh. The Respondents, on other hand, contended that the said Explanation was the 31st March, l951, by the Sales Tax protected until Continuation Order No. 7 of 1950 13-83 S. C. India/59. for the purpose of issued by contended 1955 M/1. Ram NaraU. Sons Lid. v. ~ sst. CommP"Sionn- of Saks T """"" Bliagwali]. 490 SUPREME COURT REPORTS [1955] President on proviso to article 286(2). the 26th January, 1950, under the sales for the President the assent of the Constitution The High Court was of the opinion that the original Explanation was validly enacted as the enactment was given on the Governor-General 23rd May, 1947, that under that Explanation ta.x prior to the commencement of the Constitution was the sales of goods wherever the con lawfully levied on tracts of sale took place if the goods were actually the State at the time of contracts of sale were made. This power could be exercised by the State even if the took place during the course of inter-State trade or commerce and the goods were delivered as a direct result of the purpose of consumption out side the State. This was because the situs of the goods constituted a sufficient nexus between transac tions and the taxing State which was the foundation for taxation prior to the commencement of the Con stitution. This positio~ continued until and on the 26th .mencement of January, 1950, the Sales Tax Continuation Order No. 7 of 1950 in exercise of the powers conferred· by to article 286(2). the proviso The sales in question had taken place in the course of inter-State trade or commerce were covered by article 286(2) and would, therefore, ·be the commencement of the ·Constitution Ly virtue of the President's order. Reli ance was further placed on the majority judgment of this Court in The State of Bdmbay v. The United Motors (India) Ltd. (1953 S.C.R. 1069) where it was held that the transaction vis-a.vis inter-State character if it fell within the Explanation (a) and was accordingly made liable to article 286(1) far, however, to taxation by the delivery State. So it retained its as the exporting State was concerned, and would character of not, that State, The President's order, however, removed exporting State was to tax the transaction by virtue of the power entitled the same. On a construction of derived by therefore, article 286(2). this ban the delivery State lost liable to taxation by to tax even after and accordingly an inter-State transaction it from issued liable 2S.C.R. SUPREME COURT REPORTS 491 the relevant provisions of article 286(1) and article the High Court was of 286(2) that it would be making 286(2) the proviso nugatory if it was held that article 286(1) overrides it and takes away the taxing power of all States in delivery inter-State State. The High Court accordingly dismissed the peti tions with costs. the opinion to article or commerce except 1955 M/s. Ram Narain Sons Ltd. v. Asst. Commilsiolltl' of Sales T 41< and others Bhagwati]. The Even far as to levy that so judgment separate and the position is concerned, learned Attorney-General appearing for the Appellants before us contended post-Constitution period governed by our in The Bengal Immunity Co. Ltd. v. The State of Bihar delivered on the 6th the bans in1posed September, 1955. He urged on the powers of the State Legislatures on the sale or purchase of goods in the several clauses of article 286 are independent and the transactions of sale or purchase referred to in the various clauses must be looked. at from different view if a transaction might fall within the points. category of inter-State sale or purchase and the Presi dent's order under the proviso to article 286(2) might the State to levy any tax on such sale or pUT enable levied by the State chase which was being lawfully immediately before the Con stitution, such ban imposed under article 286(1) (a) and the Explana tion thereto so result of such sale, for the purpose of the goods were actually delivered the exporting State in another State, consumption (to use the phraseology of the Nagpur High Court) or the title-State the phraseology some of in The Bengal Immunity Co.'s Appeal) would not be entitled to levy a ta.~ on sud~ sale the transaction being fictionally outside the State by reason of the Explanation and therefore coming within the ban of article 286(1) (a). the commencement of transaction had also to surmount (to use the judgments if, as a direct adopted that, It was, however, urged on behalf of the State of Madhya Pradesh that the President's order not only saved the· transactions from the ban of article 286(2) but also from the ban of article 286 (1) (a), because the transactions covered to article the Explanation 1955 M/s. Ram Narain Sons LJd. v. .4.rst. C<mJmissiontr of Sales Ta. and othtrs Bhagwati]. 492 SUPREME COURT REPORTS [1955] It was the President's order, the same category as trade or commerce. if the transactions covered transactions 286 ( 1 )(a) were of coveted by article 286(2) and were all in the course further of inter-State urged that by the Expla not saved from the nation to article 286(1) (a) were ban by the whole intention of the status in maintaining the Constitution-makers quo qua taxes on sales or purchases of goods which were being the State im the commencement of the Constitu mediately before transactions frustrated, because tion would be the Explanation to article 286( 1 )(a) being covered by necessarily in the course the President's order would be rendered nuga the title State would tory and the exporting State or be restrained from transactions in spite of the ban having been lifted by the presi dent's order. .of inter-State trade or lawfully levied tax on such levying powers tax on the bans We are unable to ac<;.ept this contention. As held by the majority Judges in The Bengal Immunity Co.'s Appeal, imposed by article 286 on the tax of the States are independent and sepa rate and each one of them has to be got over before a State Legislature. can impose transactions of sale or purchase of goods. These bans have been from different view-points, and, even though imposed the transactions of sale or purchase may in conceiv able cases overlap so far as these different view points are ~oncerned, each of those bans is opentive and has to be enforced. So far as article 286( 1) (a) is concerned, fiction created therein the situs of the sale in the case coming within that category and when of transactions a transaction is thus determined to be inside a parti transaction out cl1lar State it necessarily becomes a side all other States. The only relevant enquiry the purposts of article 286(1)(a), therefore, is whether a transaction is outside the State and once it is deter the Explanation that it the State it follows as a matter of course is outside to which the transac St~te with reference to be outside it can never tion can thus be predicated the Explanation . determines by by the application of 1955 M/1. Ram Narain Sons Ltd. v. Asst. Commissionn .,,,,,,, of Saks T OJt an4 Bhagwali]. 2 S.C.R. SUPREME COURT REPORTS 493 286(2) by law reference the category of the Explanation to be essential for in the course of inter-State the transaction may also have tax the transaction. This ban is effective independently of the fact that trade or commerce to goods as have been declared by or with the life of the Parliament community. The ban imposed under article 286 (2) is an independent and separate one and looks at the the point of view of their transactions. entirely the course of inter-State trade having taken place or commerce. Even if such transactions may also fall transactions covered by arti within cle 286(1) (a) and thereto or article 286(3), is attracted by article the moment reason of the transactions being in the course of inter tpe ban under article 286 State trade or commerce, transactions can never be sub (2) operates and such the instance of a State Legislatur.:: jected except in so far as Parliament by law may otherwise provide or such power of taxation is saved by President's order contemplated in The ban under article 286(2) may be saved by the Presi that does not affect or lift the ban dent's order but undQ" article 286 ( 1) (a) read with the Explanation. the construction thus put upon the several clauses of article 286 by the majority of the Immunity Co.'s Appeal as in The Bengal Judges the terms of the proviso itself make it abund above, antly clear ban under article 286(2) and no other. It is a cardinal to a particular interpretation that a proviso rule of provision of a statute only embraces the field which It carves out an is covered by the main provision. exception to the main provision it has been to no other. Even if the enacted as a proviso and non-obi-tante. tax is contrary to the provisions impos1t1on of of this clause": had not been enacted in the proviso, the proviso could only have been construed as operat ing upon the field enacted in article 286(2) and could the other provisions of not be extended however, article makes it abundantly and further clear and states to any of The non-obstante the proviso is meant only to lift "Notwithstanding clause: the proviso. to which clause, Apart

#286. 1955 M/s. Rom Narain Sons IJd. v. bst. Commissionn ef Sale1 T .. and Ot/rns -Bhapati J. / 494 SUPREME COURT REPORTS [1955J to raise the course of immediately before the effect of lifting therefore, only took place the Constitution was to continue it is ·enacted only with reference explicit to "this clause", i.e., article 286(2). The President's order may direct tha~ any tax _on the sale or purchase of goods which was being lawfully levied by the Gov the com ernment of any State mencement of to be levied until 31st March, 1951, but the effect of that order was the ban in so far as it was imposed by the provisions of "this clause". The President's the ban in so far as the lifted order, transactions inter-State trade or commerce and could not be projected the sphere of any other clause of article 286. It had, therefore, not the ban which was the Explanation imposed by article 286(1) (a) and thereto, even though the transactions covered by Explanation to article 286(1) (a) within took place in the rourse of inter-State trade or commerce. The ban imposed by article 286(1)(a) was independent and separate and the President's could. not be lifted by order which had operation only in regard the intcr State- character of transactions were outside was determined the State by virtue of article imposed by article 286(1)(a) 286(1) (a) attached to the same and could not be lifted by President's order which operated only on State of the transactions and saved only character transactions which did not inter-State within the Explanation. by and the category of transactions which transactions. The moment the Explanation is accepted If the contention urged on behalf of the State of Madhya Pradesh it would mean that we should re-write or amend the proviso to article 286(2) to effectuate in order Constitution-makers. The supposed Constitution-makers was alleged to be to preserve to the States all the taxes on sale or purchase of goods which were being them immedi the Constitution ately_ before by having nexus theory. We have no evidence before us of this the supposed intention of intention of the commencement of territorial connection levied by la".l'fully resort 1955 M/s. Ram Naraia Sons .lid. .... ..bst. Commissionu of Salts T OJI and others BhagwatiJ. 2 S.C.R. SUPREME COURT REPORTS 495 is plain intention of themselves used in that behalf. When the Constitution-makers. What supposed ever their intention was can only be gathered they have used and where the the language which language is no scope whatever the Constitution speculation the words "Notwithstanding makers that the imposition of such a tax is contrary provisions of this clause" legitimate for us to go behind the plain words and try to read the proviso something which would involve either a deletion of the non-obstante clause or a re-writing thereof as suggested. Whatever be the effect of our judgment on States we by reading something into the proviso which is not warranted by any canon of construction. The proviso has into any other article 286(2) and cannot be projected clause of article 286. the treasuries of the exporting or cannot assist them it would not be reference only The untenability of dents will be clear from the the goods are the contentions of the Respon illustration:- following in, result of such the property in the contracts of sale of say, the Respondents, the proviso to article 286(2) Suppose the State of Madhya Pradesh at the goods are made the State of Bombay. Sup pose further the goods has by reason of such sales passed in the State of Bombay but the goods as a direct sales have been delivered for consumption in the State of Mad ras. According the President's order made under the ban of article 286(1)(a) read the transactioqs with the Explanation. Then the State of Madras will to tax by virtue of article 286(1) (a) read with be able the Explanation or on theory by reason of the goods being delivered State of Bombay will be able the State of Madhya Pradesh will also be able to tax under the Explana the goods the Act because were in the State of Madhya Pradesh at when the contracts of sale were made in the State of Bombay. Nobody will the Constitution. taxation of intended makers there for consumption; to perpetuate multiple . II to section 2(g) of the goods passed to tax because there; and the nexus _, 1955 Mf•· Ram NMain Son1 l.Jt!. v. Asst. Commissionlr of Sak• T .. and otlins Bhagwati]. 496 SUPREME COURT REPORTS [1955] this kind and yet that will be accede dents. the arguments advanced by the result if we were to the Respon- The result, therefore, that so far as the Post-Con is imposed stitution period is concerned the ban which by article 286(1)(a) and thereto can not be removed by the President's order which was to article 286(2) and the High issued under the proviso Court was in error when it construed the proviso to article 286(2) as projecting the field of article 286(1) (a) and lifting the ban imposed therein. the Explanation On .. the above reasoning, Civil Appeal No. 137 of 1955 filed by the firm of Ramdas Khimji Brothers, relates only to the post-Constitution Bombay, which period will be allowed and the order of assessment dated the 29th December, 1952, will be set aside. The Respondents will pay the costs of the Appellants here as well .as in the Court below. therein the assessments As regards Civil Appeals Nos. 132 of 1955 and 133 relate not of 1955, however, only to the post-Constitution period but also the pre to which different considerations Constitution period would apply. The validity of the assessment in re to be canvassed having gard to the same would have contentions of law and fact the various regard which could be urged the same by the Appel against two Ol!tstanding questions which lants. There are have be~n mooted before us by the learned Attorney to this period, viz., (1) a question General in regard of fact, as to whether the Appellants were agents of transactions which the various miils in regard to were the subject-matter of and (2) a question of law, whether the law under which was levied, viz., Explanation II to section 2(g) of these contentions, Act was validly enacted. Both though to the Post-Constitu tion period were not specifically pressed before us to article because 286(2) was considered sufficient to set aside the assess ment for that period. They would, however, appro priately arise and be urged by the appellants when the pre-Constitution they are also relevant the argument based on the assessment, to assessment the proviso liability 1955 M/s. Ram Narain Suns LJd. v. Asst. Commission# of Salts Tax and others Rhagwati]. 2 S.C.R. SUPREME COURT REPORTS if we were toto. There that the assessment to be determined and that liability we would have tc deal with for doing the fact to deter period is so is, however, ob same. The necessity viated by reason of the pre-Constitution one composite whole relating invalid as well as the post-Constitution periods and is for the proposition that is authority when an assessment consists of a single undivided sum in respect of treated it of certain as assessable, items of property which by virtue of a provision of law were expressly c:xempted from renders the assessment toto. The Privy Council have observed (Calgary) Ld. And Municipal District of Sugar City No. 5 (1951 Appeal Cases, 786 at page 816) :- the totality of the property inclusion in Bennett & White the wrongful invalid in taxation is barred, and it, while affirming it would seem clear "When an assessment is not for an entire sum, for separate sums, dissected and earmarked each of them to a separate assessable item, a court can sever the: items and cut out one or more along with the sum attributed to the residue. the assessment consists of a single· un But where divided respect of the totality of property treated as assessable, and when one component (not dismissible as "de minimis") is on any view not assess able and wrongly included, such a procedure bad wholly. That matter is covered by authority. In Montreal Light, Heat & Power Consolidated v. City the court of Westmount (see especially per Anglin, C. J.) in these conditions that an assessment which was bad in part was infected throughout, and treated it as invalid. Herc their Lordships are of opinion, by parity of reasoning, that the assessment was invalid in toto". therefore, urged that on the facts of this case It was, the assessment was it should be set aside. The learned Deputy Advocate-General of Madhya Pradesh did not seriously contest position and the result, therefore, is that the order of assessment dated , the 30th June, 1953, in Civil Appeal No. 132 of 1955 and the order of assessment dated the the assessment ((1926) S.C.R. (Can.) 515 in toto and invalid 1955 M/1, Ram Narain Son' Ltd. .AsJt. Commissioner of Saler Ta. and otlurs •• Bhagwatij. 498 SUPREME COURT REPORTS [1955] 9th September, 1953, in Civil Appeal No. 133 of 1955 are liable to be set aside. The appeals will therefore the orders of assessment will be set aside be allowed and the matters will go back to the Assessment Offi accordance cer for re-assessment of to urge with law. The Appellants will be at liberty before and fact available to them in the fresh assessment pro to above. The ceedings Respondents will pay these Appellants here as well as in the Court below. adverted the costs of the Assessment Officer the contentions of the Appellants including Petition No. 567 of 1954· involves J.-This petition under article 32 of the BHAGWATI Constitution . also interpretation of the proviso to article 286(2) and raises the same question as to the meaning, scope and operation of the proviso as was in the Civil Appeals Nos. 132, 133 and 137 of 1955 just disposed of. raised petitioners are a partnership The facts giving rise to this Petition may be short stated. The carrying on business of manufacturing bidis at Jabal· pur and registered as a "dealer" under the Central Provinces and Berar Sales Tax Act, 1947. The peti their branches at Lucknow, Kanpur, tioners had Faizabad, Agra, Bombay and Bhopal. They had also their selling agents at various places in Uttar Pradesh the State of Madhya Pradesh. and elsewhere outside Thev also entered transactions direct with mer in ques cha~ts in U ttar Pradesh. The transactions the subject-matter of assessment at tion which were for the the instance of period of assessment 21st October, 1949 to 9th Nov two periods, viz., ( 1) the ember, 1950, and ~pread over period between 21st October, 1949, January, 1950, which may be called the pre-Constitution period, and (2) the period subsequent to the inauguration of the 26th January, 1950, up to the the Constitution on the post 9th November, 1950, which may be called turn-over Constitution period. The petitioned gross was determined the Sales Tax authorities were 49,40,140-6-9 and to 25th be Rs. 1955 M/1. Ram Narain SonsUd. v. Alst. Commission# of Saks T aJt and otlurs Bhagwati]. 2S.C.R. SUPREME COURT REPORTS the appeal unless the 14th July, 1954, amount of Sales Tax assessed on the transactions was Rs. 1,51,291-13-0 as per . the order of the Deputy Commissioner, Sales Tax, Madhya Pradesh, Respon dent No. 3, dated in Sales Tax Appeal No. 6/ A-1.6.54. The petitioners preferred a second appeal the Respondent No. 2 against the said order. The Respondent No. 2, however, refused to admit or register the amount of tax assessed was paid up. The petitioners paid about tax assessed but Rs. 91,000/- towards the amount of finding this Peti the State of Madhya Pradesh, Respon tion against the Commissioner of Sales Tai, Madhya dent No. 1, Pradesh, Respondent No. 2, and the Deputy Com missioner of Sales Tax, Madhya Pradesh, Respon dent No. 3, for a wm of certiorari quashing the said the 14th July, 1954, made by Respon order dated reliefs. The Res dent No. 3 and pondents filed a return denying the contentions of the Sales Tax was petitioners and maintaining lawfully assessed by the petitioners. The position the balance filed it difficult to pay for consequential the petitioners' them against as regards turn-over for the period OE assessment was as stated below :- Nature of tht Parties. (a) Direct to seliing agents on orders. .......... ..... (b) Direct to merchants on orders. ( c) Direct to destinations other than branches or depots but accounted for against branches and depots. (d) Direct to Stations or destinations having branches or depots owned by the proprie tors of this registered firm-Kanpur, Bom bay, Luck:iow and Faizabad. ......... Sales Prices of goods Rs. 6,15,236- 3- o 3,99,450- 2- o 6,20,996- 14- o 31,06,739-13- o 1955 M/s. Ram Narain Son1 Lltf. v. Assl. Commissionn of Saks Tax and others Bhagwati]. 500 SUPREME COURT REPORTS [1955] treated all The Sales Tax authorities tions as transactions of sale coming within nition contained the Act and assessed the petitioners respect of the petitioners effected by them outside desh and therefore, not entitled sactions by virtue (a) and the Explanation thereto. transac the deli· in Explanation II to section 2(g) of the contentions of in any event the State of Madhya Pra the State of Madhya Pradesh was to impose a tax on those the provisions of article 286(1) the same, negativing they were to sales of consumption The learned Attorney-General who ·appeared for the bidis manufac the petitioners contended tured by the petitioners were all actually delivered as the transactions of sale for the pur a direct result of the State of Uttar Pradesh the inauguration of the Constitution the State of on the 26th January, 1950, Uttar Pradesh which was the tax on these trans alone had that under actions to the sale of goods the property general the goods might have passed in the State of Madhya Pradesh. He, that these transactions were sales outside the State of Madhya Pradesh and that the State of Madhya· Pradesh was not entitled impose a tax on such sales. it was only the delivery State notwithstanding therefore, urged impose the right relating The learned Advocate-General of Madhya Pradesh these were purely into by the petitioJl that the actually deli result of such sales for the purpose the State of Uttar Pradesh. He, the post-Consti there was no ban on the State of tax on what were on the other hand contended that entered intra-State transa~tions ers within the State of Madhya Pradesh and Explanation to article 286(1)(a) did not come play at all because vered as a direct of consumption in therefore, maintained tution period Madhya Pradesh purely "inside sales". the goods were not that even imposing the sales It is necessary in view of these the true nature of the transactions in ques the petitioners rival contentions the Petition, In paragraph 15 of ascertain tion. 1955 M/s. Ram Narain Sons Ltd. v. Asst. Commisswnw of Sales Tax and others Bhagwati ]. 2 S.C.R. SUPREME COURT REPORTS 501 that after that State and had alone the right the delivery State, viz., filed by the Respondents, in the State of Uttar Pradesh :.nd from where its right the bidis manufactured by the firm had averred were all delivered the 26th consumption January, 1950, the State of to impose tax on Uttar Pradesh, the sales of the commodity. They had further mitted that the State of Madhya Pradesh where they were bidis were manufactured levy a sent could not any more exercise such transactions of sale taking place elsewhere tax on the inhibition contained in article 286. by reason they did not In the return the firm were Petition for con all delivered In substance, they contended sumption in that State. of Uttar Pradesh being the in spite the Explanation delivery State within transactions to article 286(1)(a), the State of Madhya to sales tax at the Pradesh was saved by the President's order made that the im the State· of position of such Madhya Pradesh was lawful and did not contravene the provisions of article 286(1) (a) read with the Ex planation thereto. the allegation made by the ,Petitioners that the bidis manufactured by to article 286(2) and tax at the instance of the meaning of the liability of the State of Uttar Pradesh instance of of the State the proviso Both the order which was made by the Assistant the original Commissioner of Sales Tax, Jabalpur, the 7th assessment case No. 16 of 1950-51, dated August, 1953, and the order which was made in Sales Tax Appeal No. 6/ A-1.6.54 by the Deputy Commis Sales Tax, Madhya Pradesh, Respondent sioner No. 3, dated question that even transactions of sale where the goods had actually been delivered as a direct result of such sales for the purpose of consumption in the State of Uttar Pradesh order made under the President's article 286(2) saved the transactions also from the ban of article 286(1) (a) and the Explanation thereto and therefore, It \\'.as never entitled to impose a tax on the same. the 14th July, 1954, proceeded on the transactions the State of Madhya Pradesh was, the proviso though 1955 M/1. Ram N"'ain San1 LJd. v. Alll. Cammissionlr of Sain Talt and olWI BhaguiaJi J. 502 SUPREME COURT REPORTS [1955] sales" and the Explanation they were saved from the sales were contended before either of them that purely "inside the Explanation into play at all under article 286(l)(a) did not come the case. The facts as found by the circumstances of the Sales Tax authorities also emphasized transactions fell within the definition of sale contained in the Explanation II to section 2(g) of the Act and that so far as the post-Constitution period was con the ban of article 286 cerned thereto by the President's ( 1) (a) and order made under It the learned Advocate-General was, however, urged by transactions were pure of Madhya Pradesh the petitioners "inside Madhya Pradesh on orders received them from outside petitioners in the State of Madhya Pradesh and goods the property were appropriated to the State of Madhya Pradesh and they were pure State sales or "inside sales" which it was within the State of Madhya Pradesh the competence of to tax. the goods passed within therefore, that, the proviso to article 286(2). the State. These orders were accepted by the · the contracts and sales" entered into by This contention of to the merchants buying learned Advocate-General is untenable. So far as direct of Madhya Pradesh supplies to. selling agents on orders and direct sup to merchants on orders covered by items (a) and. these sup (b) above are concerned, it was found plies were made the goods on commission basis or profit on their previous orders, indents which were either in printed instructions or the sale prices were forms or in ordinary through realised by sending bills and railway receipts the bills some scheduled banks. The very fact the sche- through and the railway receipts were sent to show the petitioners re served the right of ·disposal of goods covered by railway receipts and in the goods passed the relative bills were either accepted or honoured by the pur chasers and scheduled banks receipts delivered by It is clear, therefore, the State of Uttar Pradesh only after railway to them. the property letters and . duled banks went 1955 M/1. Ram Narain Sons LU. v. Aul. Commitsioner of Salts Tax and olhtrs Blaagwati J. 2 S.C.R. SUPREME COURT REPORTS 503 railway for against the orders and the direct supplies the sales were completed respective customers appropriating or depots but accounted or depots being item ( c) above, in those cases in the Stat~ intra-State sales or of Uttar Pradesh and were not the State of Madhya Pradesh. As "inside sales" qua to destinations other than regards branches it was found branches the goods and hilled that the petitioners despatched them to depot npnagers who were responsible for the collection of the railway receipts there. The managers prepared and bills were sent incidental or other charges and other bills adding to the customers to delivered receipts whom the goods were sent from the State of Madhya Pradesh. Here also the despatches of the goods were the State of Madhya Pradesh by the peti made from tioners to their depot managers and it was the depot turn prepared and submitted managers who receipts their own bills and handed over the railway the goods to the contracts of sale which had been themselves entered into by latter and completing the sales the State of Uttar Pradesh. These tran sactions also were, State did not fall within the category of intra-State sales or "inside sales" qua the State of Madhya Pradesh. The direct supplies to Stations or destinations hav the proprietors of ing branches or depots owend by firm, Kanpur, Bombay, Lucknow and Faizabad item (b) above, also were outside sales qua the the branch State of Madhya Pradesh managers asked to send stocks of goods to execute t~ orders which them. the customers to make it was found that several consoli As a matter of fact the depot managers in respect of the previous orders had been collected by them and tlie petitioners the goods to the depots or branches in pursu supplied ance of such indents. the true position qua these supplies, these sales also were completed in indents were placed by the petitioners they had obtained of Uttar Pradesh and their own supplies them with the sales effected the petitioners inasmuch as If this was therefore, 504 SUPREME COURT REPORTS [1955] 1955 M/s. Ram NOTain Sons IJd. v. Asst. Commissioner of Saks Tax and others BhagwatiJ. the State of Uttar Pradesh by the depots or branches supplying the goods in their turn to several customers. There could be no sales as such between the peti tioners on the one hand and their depots or branches the other hand and the State of Madhya Pradesh could certainly not be at all in a position to same. the only transactions were in which as a direct The whole theory, the ground therefore, or "inside sales" falls thing which we are left inter-State with is that result of such sales the actions the purpose of con goods were actually delivered for the State of Uttar Pradesh. The Expla sumption to article 286(1) (a) determined the State of nation Uttar Pradesh to be place and which transactions, the State of Madh}a Pradesh becoming an "outside" State for the purpose. the State in which the sales alone was entitled Apart from the ban imposed on the State of Madhya invalid post-Constitution period, therefore, thereto, these trans2ctions were also in the course of inter-State trade or commerce and were hit by the ban of article 286(2). The President's order no doubt lifted not competent to lift the ban the Explanation diereto under article 286(1)(a) and the State with the result in a position to impose a of Madhya Pradesh was not tax on the post-Constitu tion period. in spite of that order transactions during that ban but was period, to tax The assessment of th.:se transactions therefore, post-Constitution invalid cannot be sustained. The assessment, moreover, is a composite one coverin11: the pre-Constitution period as falls within our judgment in well. The case, Civil Appeals Nos. 132, 133 and 137 of 1955 just deli therein, vered, and following we are of the opinion the 14th July, 1954, made by the Deputy Commissioner, Sales in Sales Tax, Madhya Pradesh, Re&pondent No. 3, Tax Appeal No. 6/ A.-1.654 should be set aside. the reasoning contained the order dated therefore, We accordingly allow the Petition, set aside 2 S.C.R. SUPREME COURT REPORTS 505 go back the petitioners to the Assessment Officer said order dated the 14t.1i July, 1954, and the matter for re-assess in accordance with law. The ment of petitioners will be at liberty the Assess the content; ons of law and fact available ment Officer the fresh assessment proceedings. The Respon<lents will pay the costs of the petition. tu urge before 1955 Mis. Ram Narain Sons Ltd. v. AsJt. Cornmissiorur of Sales TtJJt and ol/urs Bhagwati]. JAGANNADHADAS J.-1 regret I feel constrained differ from the view regards and the effect of the Presidential order under. the construction of proviso taken by my learnt>d brothers as to article 286(2) issued (if to keep lift only then lawful) sales-tax laws thereby also the President the Presidential order It is meant the ban arising There is no' dispute that the proviso has to be con to em strued as part of article 286(2). under in temporary abeyance so the States may continue to levy taxes on sales by virtue of their pre Constitution for a limited period. It is urged, however, that the proviso (meaning under) is effective the ban under article 286(2) and the ban under article 286(l)(a) is operative nonetheless. Now, it may be correct to say from different angles that these two bans are imposed and are ir. that sense independent. But there can be no they are substantially overlapping in ope about an outside ration. A transaction which brings if at (barring, sale is also an all, a few illustrated cases). The effect of each of the bans under article 286 is demarcate the taxing power If, as I conceive, of the States on sales c.tnnot operate. the two bans under articles 286(1) (a) and 286(2), are imposed overlapping, fact . that they arc the result, viz., that different angles cannot obscure they bring about the same-or It taxation. substantially appears the proviso and the Presidential order issued thereunder have to be construed. N'lw, the Presidential order) declares the field covered by sales in the course I .f.-83 S. C. lndia/59. the demarcation of same-field of no it is in this light transaction ingeniously conceived and the fields within which the proviso (with to me that inter-State 1955 M/t, Ram Narain Sons IJd. v. Asst. Contmissian1r of Salts Tiu anJ others JagaftnaJJaada1 J. 506 SUPREME COURT REPORTS [1955] to me the fact to impute If this be so, the commencement of to be levied until to make trade and commerce for the time being, within two bans as of inter-State trade and commerce as taxable for a ited period by stating positively and emphatically "any tax on the sale or purchase of goods which was being lawfully levied by the Government of any State, the Consti immediately before tution shall continue the 31st day of March, 1951". There is no d')ubt the non-obstanti: clause which will be dealt with presently, and which this is a proviso to arti tl1at only emphasises cle 286(2). But there is no mistaking the positive and mandatory terms of the proviso. The effect of this is the whole field of clearly and unequivocally taxable temporarily inter-State in respect of the sales which take place in the course to be implicit it appears thereof. taxation can ope therein that no other ban on such that very field. To rate, independently and cumula construe them some kind of tively operative reality, viz., picturesque potency and is that all the bans under article 286 are meant to serve the same purpose, viz., that of restrictions fields of no taxation. thereby demarcating the proviso are parts of the same arti The bans and to be harmoniously construed. The un cle and have language of one part, cannot equivocal and positive the negative be taken in futility. language of A similar situation as proviso would also arise with reference to the savi·ng If the proviso is to be con clause in article 286(2). strued in tlie way suggested by the learned Attorney General, that when and as the ban under article 286(2), the the Parliament lifts lifting of futile by that ban would equally become virtue "of article 286(1)(a). The Parliament has not latter ban. the power terms been given result This, therefore, will lead terms provided the Constitution has tl1at the ban on taxation of tlie course of trade and commerce can be lifted, by the inter-State for a Parliament generally, and by to lift the the extraordinary to have been obliterated by that contemplated by the other part so as to miss it would seem the President imposing to follow to result though '' 1955 M/1. Ram Narain Soni Lid. v. AW. Commiuion1r o/Sol11 TIJll and JagalUllJdhadas J. I 2S.C.R. SUPREME COURT REPORTS 507 the ban field covered the Parliament to me unreasonable an integral whole, requires It appears intention as It appears that, whether it is by parliamentary these powers the exercise of both limited period, would become ineffective and still-born by virtue of article 286(1) (a). inevitably arising from impute any such the language used. to me, with great res legislation pect, or by the Presidential action the ban on taxing the course of inter-State trade and commerce the principle of harmonious construction of is lifted, article 286 taken as the lifting of is to be construed as laying open for taxation the entire by article 286(2) and to carry with it the implication that no other overlapping ban will be operative. No doubt, it has been suggested that so far as lifting of the ban under article 286(2) by is concerned, the same would be at least partly operative by virtue of article 286(1) (a) taken with the Explanation under the consumption-delivery State may well be free to tax. This was learned dissenting Judge the case in The State of Bombay v. The United Motors (India) Ltd.(1). But the majority the Bengal recent decision Immunity Co. Ltd. v. State of Bihar(2) including the said learned Judge, have left It to the inevit is problematical whether having regard the levy of such a able extra-territorial operation of tax and the business the Explanation will community which not receive receive that construction again strict construction preferred in in State of Travancore-Cochin v. ment in ). The result, Shanmugha Vilas Cashew Nut Factory( 8 the proviso and by parity of therefore, of construing reasoning the saving clause, as merely removing ban of a particular nature leaving another overlap ping ban to operate, would be to render both the saving clause in, and the proviso to, article 286(2) virtually nugatory. the consequent harassment the view expressed by that question open. the dissenting the case large, (ll [1953) S.C.R. 1069. (2) Sup,..,me Court Judgment in Civil Appeal No. 159 of 1953. (3) [1954) S.C.R. 53. 1955 M/s. Ram Narain Sons LJd. v. Asst. CommiJsioner of Sales Tax and others Jagannadhadas ]. 508 SUPREME COURT REPORTS [1955] indicates to be considered. undoubtedly affirms in respect of article 286(2). It intention to be confined The argument based on the non-obstante clause in the proviso, viz. "Notwithstanding that imposi the provisions of this is contrary tion of such is urged clause" remains this clause clearly to the sole operation of the proviso purpose of lifting the ban arising under article 286(2) With respect, I am unable to agree. The non-obstante the pro clause But is operative it does not purport the pro viso, which a thereof may justify. A non-obstante clause does not normally add it is to or subtract from is often enough inserted by way of extra a pa.rt. It limiting caut10n. But the operation of (See Astvini India v. Shrinbai A. Irani(') ). The suggestion Kumar Ghosh v. Arabinda Bose(') and The Dominion of the Presidential action the ban only as regards the inter-State sales would be to read the phrase "not withstanding I can see no warrant for any such reading. limit the efkct of construction that" as meaning "in so far as". it dx> not have the effect of the main provision of which the main provision. reasonable therefore, the extent In my view, the pre-Constitution sales if then lawful, are not hit by article 286( 1) tax laws, (a)-at least to the ban under article 286(1) (a) overlaps with - that under article 286(2). In this view, in these cases can the validity of the relevant pre- Constitution further facts gone into. laws · will have to be considered and the . the orders of assessment be set aside and But it is now not necessary in the view order propo>ed by them will govern these cases. learned brothers and taken by my to do so in these cases Cl) \1953] S.C.R. 1, 21 and 24. (2) 1955] I S.C.R. 206 213.