STATE OF MADRAS versus A. HABIBUR REHMAN SONS

STATE OF MADRAS

A. HABIBUR REHMAN SONS

(With Connected Appeals)

August 30, 1967

[K. N. WANCHOO, C.J., R. S. BACHAWAT, V. [G. K. MITTER AND K. S. HEGDE, JJ.]

BACHAWAT, V. RAMASWAMI,

Constitution of India, 1950, Art. 286(1)(a), Explanation, before amendment by the Constitution (Sixth Amendment) Act, 1956; Madras General Sales Tax Act (9 of 1939) s. 2(h),Explanation (2); and Sales Tax Laws Validat;on Act (7 of 1956), s. 2-Ban on taxation of inter-State Sales lifted-Outside sales, if could be taxed.

Under Explanation (2) to s. 2(hi of the Madras General Sales Tax Act, 1939, sale is deemed to have taken place in that State, wherever the contract of sale might have been made, if the goods were actually in the State at the time when the contract in respect thereof was made. The Constitution, by Art. 286 as it was originally enacted, imposed four bans upon the legislative power of the States to impose sales tax. Clause (l)(a) prohibited every State from imj:Josing or authorising the imposition of, tax on outSide sales. An outsid;e sale was defined by defining an inside sale in the Ex-planation to the clause, as sale which shall be deemd to have taken place in the State in which the goods have actually been delivered as direct result of such sale for the purpose of consumption in that State notwithstandin!I the fact that under the general law re-lating to sale of goods the property in the goods has by reason of such sale passed in another State. Clause (l)(b) prohibited the imposition of tax on sales in the course of import into or export out of, the territory of India. Clause (2) prohibited the imposition of tax on the sale of goods \vhere such sale took place in the course of inter-State trade or comn1erce unless Parliament other\.\.·ise provJded. Clause (3) prohitited the State from imposing or authoris-ing the imposition of tax on the sale of any goods declared by Parliament by law to be essential for the life of the community, unless the legislation vvas reserved for the consideration of the President and had received his assent. This Court, in its judgment in the Bengal Immunity Co. Ltd. Case, [1955] 2 S.C.R. 603 delivered on September 6. 1955, held that because of Art. 286(2), the State legi-slature could not impose sales-tax on inter-State sales until Parlia~ ment provided otherwise. By the Sales Tax Laws Validation Act, 1956, Parliament removed the ban contained in Art. 286(2) retro-spectively, during the period between April !, 1951, and September 6, 1955, with the result that, transactions of sale. even though they were inter-State sales. could, for that period be lawfully charged to tax. [386C-E; 387D, F-H; 388A-D]

The respondent was beedi . manufacturer in the appellant-State. Beed1es, which were w1thm the territory of the appellant-State at the time the contract of sale in respect of them was made were sold to non-resident buyers. On the question whether the sales during the period from April 1, 1955 to September 5 1955 were taxable by virtue of Explanation 2 to s. 2(h) of the Mad~as General Sales Tax Act, 1939, in view of the lifting of the ban on the· 1eyy of tax on mter-State sales by the Sales Tax Laws Validation Act. the High Court relying on additional affidavits filed before it, held

L/S5SCI-ll

that the sales were outside sales and that the State had no jurisdic-tion to impose sales tax.

In appeal by the State;

Held: (1) The restrictions ·imposed by the several clauses of Art. 286 as it stood were cumulative, and the legislative power of the State to tax sale or purchase transactions could be exercised only if it was not hit by any of those limitations. The Validation Act merely lifted the ban under Art. 286(2) but the .ban imposed by Art. 286(l}(a) was still effective, and could not be removed by any legislation of Parliament. Thus, even if the ban under Art. 286 (2) was removed by the Validation Act, no State could tax an inter-state sale or purchase which took place outside its territorial limits. The sales falling within the Explanation to Art. 286(1)(a) were fictionally to be regarded as inside the State in which the goods were actually delivered for consumption and so within the taxing power of that State and as being outside all other States and so, exempt from sales-tax by those other States. Therefore, in the present case, even though the sales fell within Explanation (2) to s. 2(h) of the Madras General Sales Tax Act, it was beyond the competence of the Madras State to tax them as the assessee had delivered the goods for consumption outside the State and were thus outside sales covered by the ban imposed by Art. 286(1)(a). [390E-H]

Ol servations at p. 1082 in State of Bombay v. United Motors, (India} Ltd., [1953) S.C.R. 1069, The Bengal Immunity Co. Ltd. v. State of Bihar and Ors., (1955) 2 S.C.R. 603, Shree Bajrang Jute Mills v. State of Andhra Pradesh, [1964] 6 S.C.R. 691 and Singareni Col-lieries Co. Ltd. v. State of Andhra Pradesh, (1966) 2 S.C.R. 190, fol-lowed.

Messrs.-Ashok Leyland Co. Ltd. v. The State of Madras [1962)

I S.C.R. 607, explained.

(2) The appellant-State, not having raised any objection before

the High Court that the High Court, in exercising the revisional powers under s. 38 ol the Madras General Sales Tax Act could not take the affidavits in evidl!nce could not urge in this Court that the High Court acted illegaly in taking them in evidence. [392E]

CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 495, 539 and 540, 684. 694, 717 and 857 of 1966.

Appea1s oy special leave from the judgment and orders dated

September 23, 1963, April 29, 1963, July 29, 1964, March 13, 1964, June 22, 1964 and June 24, 1964 of the Madras High Court in Tax Cases Nos. 246 of 1962 (Revision No. 96) 202 and 203 of 1961, 67 of 1963 (Appeal No. 6), 43 of 1964 (Revision No. 17), 12 of I 963 (Appeal No. 2) and II 2 of 1964 (Revision No. 64) res-pectively.

. G. Ramanujam and A. V. Rangam, for the appellants (in all the appeals).

T. A. Ramachandran, for respondent (in C.A. No. 495 of

M. S. K. Sastri and M. S. Narasimhan, for respondent (in C. As. Nos. 539 and 540 of 19(i6).

A. N. Sinha.and D. N. Gupta, for respondent (in C. A. No. 684 of 1966).

Karlar Singh Suri and E. C. Agrawala, for the respondent (in C.A. No. 694 of 1966).

Avad Behari, for respondent (in C.A. No. 717 of 1966). G. N. Dikshit, for respondent (in C.A. No. 857 of 1966). Civil Appeal No. 495 of 1966

The Judgment of the Court was delivered by Ramaswami, J. This appeal is brought, by special leave, from the judgment of the Madras· High Court dated September 23, 1963, in Tax Case No. 246 of 1962.

This appeal is brought, by special leave,

The respondent who was 11 Beedi manufacturer in Gudiyat-tam. Madras State was assessed to sales tax on taxable turn-over of Rs. 1,73,502/ ll /10 for the assessment year 1955-56 by the Deputy Commercial Tax Offk.er. Against this order of assess· ment dated February 15, 1957 the respondent appealed to the Appellate Assistant Commissioner of Commercial Taxes, Salem disputing the inclusion of sum of Rs. 1,11,299/- and odd on the ground that the said amount represented either second purchases or purchases made outside the State of Madras. Pending the appeal the Madras General Sales Tax Act, 1959 was passed and the earlier Act of 1939 was repealed and by force of the provisions in the 1959 Act, the appeal was finally disposed of by the Appel-late Assistant Commissioner of Commercial Taxes, Salem. By his order dated July 2, 1960, the Appellate Assistant Commissioner held that the excise duty pa.;d by the respondent could not form part of his purchase turnover but in purported exercise of his powers under the new Act enhanced the assessment of the turnover by including sum of Rs. 1.15,406/14/9 as inter-State purchases from April I, 1955 to September 5, 1955. The respondent t0ok the matter in further appeal to the Sales Tax AppcllDJte Tribunal. The appellant also filed petitions before the Tribunal for enhancement of the assessment by Rs. 3,66.213/12/- on the ground that the amount represented sales of manufactured beedies to non-resident buyers during the period May 12, 1955 to September 5, 1955 and that the goods in question were within the territory of the State at the time the contract of sale in respect thereof was made. It was contended on behalf of the appellant that the sales were taxable by virtue of Explanation (2) to s. 2(h) of the Madras General Sa'les Tax Act, 1939 in view of the lifting of the ban on the levy of tax on inter-State sales by the Sales Tax Laws Validation Act, 1956 (Central Act VII of J 956), here-G inafter called the 'Validation Act', DJnd that it was wrongly exclud-ed from the taxable turnover by the taxing authorities. By its order dated July 13, 1962 the Appellate Tribunal allowed the petition for enhancement and rejected the contention of the res-pondent that the sales were ageT\CY sales through Commission Agents. As regards the alleged second purchases or outside purchases of raw tobacco, the Appellate Tribunal remanded the case to the Appell~te Assistant Oimmissioncr. Against the order of the Appel-late Tribunal the respondent filed petition in the High Court of L;S5SCI-ll(a)

Madras under s. 38 of the Madras General Sales Tax Act, 1959. By its order dated September 23, 1963 the High Court held: ()) that the inclusion of the inter-State purchases from April I, 1955 to September 5, 1955 of Rs. 1,15,406/14/9 was bad as the Appel· late Assistant Commissioner had .no jurisdiction to include that turnover; (2) th~t the turnover of Rs. 3,66,213/12/· included by the. Appellate Tnbunal could not be brought to tax as the beedies, which were the subject of the relevant sales, were delivered out-side the State for purposes of consumption and as the sales there-fore constituted Explanation sales under Art. 286(1) of the Consti· tution as it stood prior to the Sixth· Amendment m:id consequently the Madras State had no jurisdiction to tax the said sales. Being aggrieved by that part of the decision of the Madras High Court on the question of taxability of the said transactions of inter-State sales effected prior to September 6, 1955, the State of Madras has brought the present appeal.

The question presented for consideration in this appeal is whether the Madras State had jurisdiction to levy sales tax on the alleged "Explanation sales" by the respondent during the period between April I, 1955 to September 5, 1955 by virtue of Explana· tion (2) to s. 2(h) of the Madras General Sales Tax Act, 1939. Section 2(h) of the Madras General Sales Talx AOt, 1939 states:

"2. In this Act, unless there is anything repugnant in the subject or context-

(h) 'sale' with all its grammatical variations and cognate expressions means every tr!lllsfer of the property in goods by one person to another in the course of trade or business for cash or for deferred payment or other valuable con-sideration, and includes also transfer of property in goods inolved in the execution of works contract, a111d in the supply or distribution of goods by co-operartive society, club, firm or any association to its members for cash or for deferrea payment or other valuable considera-tion but does not Include mortgage, hypothecation, charge or pledge; . . . . . . Explanation (2)-The sale or purchase of any goods shall be deemed, for the purposes of this Act, to have taken place in this State, wherever the contract of sale or pur-chase might have been made-,-. . (a) if the goods were actually m this State 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 purchase of future goods by description, then, if the goods are actually produced in this State at any time after the any time after the contract of sale or purchase in respect thereof was

. . (a) if the goods were actually m this State 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 purchase of future goods by description, then, if the goods are actually produced in this State at any time after the any time after the contract of sale or purchase in respect thereof was made.

Section 3 which is the charging section provides as follows: "Subject to the provisions of this Act,-

(a) every dealer shall pay for each year tax on his total turnover for such year; and

(b) the tax shall be calculated at the rate of three pies for every rupee in such turnover :

Provided that if and to the extent to which such turn· over relates to articles of food or drink or both sold in hotel, boarding house, restaurant, stall or any other place, the tax shall be calculated at the rate of four and half pies for every rupee, if the turnover relating to those articles is not less than twenty-five thousand rupees.".

Under the Government of India Act, 1935, it was open to every Provincial Legislature to enact legislation authdrising the levy ·of tax on sale of goods in respect of transactions whether within or outside the Province, provided the Province had t~rritorial nexus with one or more elements constituting the sale. This result· ed in levy of sales ,tax by many Provinces in respect of the same transaction'-Cach Province fixing upon one or more elements con· stituting the sale' with which it had territorial nexus. The Consti-tution with view to prevent imposition of manifold taxes on the same transaction of sale, imposed by Art. 286 restrictions on the levy of sale and purchase taxes on certain classes of transactions. Article 286, as it was originally enacted, read as follows:

"(!) No law of State shall impose, or authorise the im· position of, tax on the sale or purchase of goods where such sale or purchase takes place--·

(a) outside .the State; or

(b) in the course of the import of the goods into, or export of the goods out of, the territory of India.

Explanation.-For the purposes of sub-clause (a), sale or purchase shall be deemed tq have taken place in the State in which the goods have actually been delivered as direct result of such sale or purchase for the purpose of consumption in that State, notwithstanding the fact that under the general law relating to sale of goods the property in the goods has by reas<:lll of such sale or pur-chase passed in another State.

(2) Except in so far as Parliament may by law otherwise provide, no law of ·state shall impose, or authorise the imposition of, tax on the sale or purchase of any goods where such sale or purchase takes place in the course of inter-State trade or commerce:

Provided that the President may by order direct that any tax on the sale or purchase of goods which was be-ing lawfully levied by the Government of any State im· mediately before the commencement elf this Constitution shall, notwithstanding that the imposition of such tax is contrary to the provisions of this clause, continue to be levied until the thirty-first day of March, 1951.

(3) No law made by the Legislature of State imposing. or authorising the imposition of, (ax on the sale or purchase of any such goods as have been declared by Parliament by law to be essential for the life of the community shall have effect unless it has been reserved for the consideration of the President and has received his assent.".

Article 286 thus imposed .four bans upon legislative power of the States. Clause (I) prohibited every State from imposing or authori-sing the imposition of, tax Oil outside sales and on sales in the course of import into or export outside the territory of India. By cl. (2) the State was prohibited from imposing tax on the sale of goods where such sale took place in the course of inter.State trade or commerce. But the ban could be removed by the legislation made by the Parliament. By cl. (3) the Legislature of State was incompetent to impose or authorise imposition of tax on the sale or purchase of any goods declared by the Parliament by law to be essential for the life of the community, unless the Jegisla· tion was reserved for the consideration of the President and had received his assent.

In The Bengal Immunity Co. Ltd., v. The State of Bihar and Others('), it was held by this Court that the operative provisions of the several parts of Art. 286, namely cl. (l)(a), cl. (l)(b), cl. (2) and cl. (3), are intended to deal with different topics and one can-not be projected or read into another. and therefore the Explana-tion in cl. (])(a) cannot legitimately be extended to cl. (2) either as an exception or as proviso thereto or read as curtailing or limiting the ambit of cl. (2). It was further held that until the Par-liament by law made in exercise of the powers vested in it by cl. (2) of Art. 286 provides otherwise, no State may impose or autho-rise the imposition of any tax on sales or purchases of goods when such sales or purchases take place in the course of inter.State trade or commerce, and therefore the State Legislature could not charge inter-State sales or purchases until the Parliament had otherwise provided. The judgment of this Court in The Bengal Im-munity Company's(') case was delivered on September 6, 1955. The President then issued the Sales Tax Laws Validation Ordi-nance. 1956. on January 30. 1956, the provisions of which were later embodied in the Sales Tax Laws Validation· Act, 1956. Sec-tion 2 of this Act provided:

-------------~--

"Validation of State laws imposing, or authorising the imposition of, taxes on sale or purchase of goods in the course of inter-State trade or commerce.-Nothwithstand-ing any judgment, decree or order of any Court, no law of State imposing, or authorising the imposition of, tax on the sale or purchase of any goods where such sale or purchase took place in the course of inter-State trade or commerce during the period between the !st day of April 1951, and the 6th day of September, 1955, shall be deem-ed to be invalid or ever to have been invalid merely by reason of the fact that such salt or purchase took place in the course of inter-State trade or commerce; and all such taxes levied or collected or purport-0 ing to have been levied or collected during the aforesaid period shall be deemed always to have been validly levied or collected in accordance with law ............ ".

By this Act therefore the Parliament removed the ban wntained in Art. 286(2) of the Constitution retrospectively but limited only to the period between April I. 1951 and September 6, 1955. All transactions of sale, even though they were inter-State sales could for that period be lawfully charged to tax.

On behalf of the appellant the argument was put forward that the Validation Act having lifted the ban on taxation/ of inter-State sales, the transactions ot the respondent for the period from . April I, 1955 to September 5, 1955 were assessable to tax under the provisions of the Madras General Sales Tax Act, 1939 operat-E ing on its own terms. Counsel for the appellant particularly based his argument on the second Explanation to s.2(h) of that Act and the decision of this Court in Messrs Ashok Leyland Ltd. v. The State of Madras('). In our opinion, the argument put forward on behalf of the appellant is not warriinied. The decision of this Court in Ashok Leyland's(') case has no bearing on the question presented for determination in this case. The reason is that in that case the deliveries of motor vehicles were inside the Madras State and the inter-State sales in question were not "Explanation Sales" falling within Art. 286(1)(a). It is well-settled propl:>sition that the operative provisions of the several parts of Art. 286. namely cl. l(a), cl. Hbl. cl. (2) and cl. (3), are intended to 'deal with different topics and one cannot be projected or read into another, and therefore the Explanation in cl. (!)(a) cannot legiti-G mately be extended to cl. (2) either as an exception or as proviso thereto or read as curtailing or limiting the ambit of cl. (2). In other words, the legislative authority of the States to impose taxes on sales and p•irchases was restricted by four limitations-in res-pect of sales or purchases outside the State, in respect of sales or purchases in the course of imports into or exports out of India, in R respect of sales or purchases which take place in the course ofinter-State trade or commerce and in respect of sales and purchases of goods declared by Parliament to be essential for the life of the community. These limitations overlap to som~ extent, but the legislative power of the State to tax sale or purchase transactions may be exercised only if it is not hit by any c:A. the limitations. The restrictions imposed by Art. 286 are cumulative. It follows therefore that even if the ban under Art. 286(2) is lifted by Parlia· ment by the enactment of the Validation Act, the Madras State cannot still tax inter-State sales or purch~ses which take place outside its territorial limit~ because of the ban under Art. 286(l)(a) of the Constitution. What is an "outside sale" is defined by the Constitution by the explanation to Art. 286(1) which states what should be deemed to be an 'inside sale'. As provided by the Ex· planation to Art. 286(1), sale or purchase shall be deemeq to have taken place in the State in which the goods have actually been delivered as direct result of the sale notwithstanding the fact that under the general law relating to sale of goods the pro-perty in the goods has, by reason of such sale or purchase, passed in another State. The legal position was stated by this Court in The State of Bombay v. The United Motors (India) Ltd.(') as follows:

"It provides by means of legal fiction that the State in which the goods sold or purchased are actually deli-vered for consumption therein is the State in which the sale or purchase is to be considered to have taken place, notwithstanding the property in such goods passed in another State. Why an 'outside' sale or purchase is ex· plained by defining what is an inside sale, and why actual delivery and consumption in the State are made the determining factors in locating sale or purchase will presently appear. The test of sufficient territorial nexus was thus replaced by simpler and more easily workable test: Are the goods actually delivered in the taxing State, as direct result of sale or purchase, for the purpose of consumption therein? Then, such sale or purchase shall be deemed to have taken place in that State and outside all other States. The latter States are .prohibited from taxing the sale or purchase; the former alone is left free to do so. Multiple taxation of the same transaction by different States is also thus avoided."

This observation was not in any way dissented from by the judg· ment of this CO'Urt in the later case-The Bengal Immunity Com· pany's(') case. The result therefore is that if the terms of the Explanation are satisfied such sales are by fiction deemed to be 'inside' the State of delivery-cum-consumption and therefore 'outside' all other States. In such cases therefore only the State 'inside' which the sale is deemed to take place by virtue of the

(2) [1955) 2 S.C.R. 603.

(I) [1953] S.C.R. 1069, 1082.

Explanation is exempt from the ban imposed by Art, 286( !)(a); all other States would be subject to that ban in respect of such sales. This principle underlies the decision of this Court in Shree Bajrang Jute Mills Ltd. v. State of Andhra Pradesh('). In that case, the appellant, carrying on business as manufacturer of jute goods with its factory at Guntur, used to send jute bags by railway to the cement factories cf the A.C.C. ootside the State of Andhra. For securing regular supply of jute bags, the A.C.C. entered into contract with the appellant and under the despatch instruc-tions from that company, the appellant loaded the goods in the railway wagons, obtained railway receipts in the name of the A.C.C. as consignee and against payment of ·the price, delivered the receipts to the Krishna Cement Works, Tadepalli, which was for the purpose of receiving the railway receipt and making paYment, the agent of the A.C.C. From the amounts shown as gross turn-over in the return for the assessment year 1954-55, the appellant claimed reduction of certain amounts in respect of the goods supplied by rail to the A.C.C. outside the State of Andhra Pradesh under its despatch instructions. The Commercial Tax Officer and the Deputy Commissioner of Commercial Taxes disallowed the claim and held that as the railway receipts were delivered to the agent of the buyer within the State of Andhra, and price Vias also realized from the agent of the buyer within the State, goods must be deemed to have been delivered to the buyer in the State of Andhra Pradesh, and the appellant was liable to pay tnx on the sales. The question for determination in this Court was whether the sales by the appellant to the A.C.C. may be regarded as 'non-E Explanation sales', i.e .. falling outside the Explanation to Arl 286(1 ). It was held by this Court that if the goods were delivered pursuant to the contracts of sale outside the State of Andhra for the purpose of consumption in the State into which the goods were delivered, the State of Andhra could have no right ·to tax those sales by virtue of the restriction imposed by Art. 286(1)(a) read with the Explanation. To attract the Explanation, the goods had to be actually delivered as direct result of the sale, for the purpose of consumption in. the State in which they were delivered. The expression 'actually delivered' in the context in whidh it oc-curs, can only mean physical delivery of the goods, or such action as puts the goods in the possession of the purchaser and it does not contemplate mere symbolical or notional delivery. It was accord-ingly held that the State of Andhra had no authority to levy tax in respect of these sale transactions in which the goods were· sent under railway receipts to places outside the St~te ?f Andhra and actually delivered for the purpose of consumption m those States. The same view was reiterated by this Court in Singareni Collieries Co. Ltd. v. State of Andhra Pradesh('). In that case, the appellant company carried oo the business of mi_ni~g coal fro~ its collieries and supplying it to consumers both w1thm and outside the State.In ·proceedings for assessment to Sales tax, the company claimed that it was not liable to pay sales tax under the Hyderabad Gene-ral Sales Tax Act, 1950, on the price of coal supplied to allottees outside the taxing State pursuant to the directions of the Coal Commissioner issued under the Colliery Control Order, 1945. This claim was rejected by the Sales Tax Officer on the ground that the coal in question was sold F.0.R;· colliery siding and was actually delivered to the consumers within the State when it was loaded on their account in railway wagons at the colliery siding. The ap-peals against that decision to the appellate authorities as well as to the High Court were dismissed. It was decided by this Court that so far as the period between April l, 1954 and Seplt:mber 6, 1955 was concerned, sales of coal for delivery to co11sumers out-side the State could not be taxed under the Hyderabad Act because they were covered by the explanation to Art. 286(l)(a) as it stood before amendment. It was held that the Explanation defines the State in which the goods have actually been delivered for con-sumption, as the State in which for the purpose of cl.(l)(a) of Art. 286 the sale shall be deemed to have taken place, and that State alone in which the sale is deemed to take place has the power to tax the sale, and for this purpose it is immaterial that property in the goods has under the general law relating to sale of goods passed in another State in which the allottee resided or carried on busi-ness.

The legal position therefore is that the Validation Act merely lifted the ban under Art. 286(2) of the Constitution on the State's power to legislate but the ban imposed by Art. 286(l)(a) of the Constitutioi:i ~as still effective and coold not be removed by legis-lation of Parliament. In other words, even if the ban under Art. 286(2) is removed by the Validation Act, no State can tax an inter-State sale or purchase which takes place outside its territo-rial limits. What is an "outside sale" is defined by the Constitu· tion as Explanation to Art. 286(1) which states what should be deemed to be an "inside sale". It is well-settled that by Art. 286(1) (as it stood before the Sixth Amendment) sales as direct result of which goods were delivered in State for consumption in such State, i.e .. the sales falling within the Explanation to Art. 286(1) were fictionally to· be regarded as inside that State for the purpose of cl. (!)(a) and so within the taxing power of the State in which such delivery took place and being outside all other States exempt from sales-tax by those other States. As we have already said, the Validation Act has lifted the ban under ArL 286(2) alone but did not remove the ban under Art. 286()) which continued to apply without being affected by the Validation Act. Therefore, even if sale fell within the Explanation under s. 2(hl of the Madras General Sales Tax Act, 1939 it was beyond the ccm-petence of the Madras State to tax if the assessee had delivered th~ goods outside the State for consumption therein. rt follows there-fore in the present case that. the goods sold and delivered outside

the State during the period from April, 1955 to September, 1955 were not liable to tax under the Madras General Sales Tax Act, 1939 and the taxing authorities had no jurisdiction to include Rs. 3,66,213/12/- in the turnover of the respondent.

We proceed to consider the next question raised in this case, • viz .. that the High Court acted illega<lly in entertaining and relying upon the affidavits filed by the respondent while exercising its revisional powers under s. 38 of the Madras General Sales Tax Act, 1959 (Madras Act I of 1959). It was contended for the appel-lant that the High Court could not itself record finding of fact after taking additional evidence and there was no express power conferred by s.- 38 upon the High Court for taking additional evi-c dence. Section 38 of the Madras General Sales Tax Act, 1959 states:

"38. (1) Within ninety days from the date on which copy of the order under sub-section (3) of section 36 is served in the manner prescribed, any person who objects to such order or the Deputy Commissioner may prefer petition to the High Court on the ground that the Ap-pellate Tribunal has either decided erroneously or failed to decide any question of law:

Provided that the High Court may admit petition preferred after the period of ninety days aforesaid if it is satisfied that the petitioner had sufficient cause for not preferring the petition within the said period.

(4)(a) If the High Court does not dismiss the petition summarily, it shall, after giving both the· parties to the , petition reasonable opportunity of being heard, deter-mine the question of law raised and either reverse, affirm or amend the order against which the ·petition was preferred or remit the matter to the Appellate Tri.bunal. with the opinion of the High Court on the question of law raised or pass such ordllr in relation to the matter as the High Court thinks fit.

(b) Where the High Court remits the matter under clause (a) with its opinion on the question of law raised, the. Ap-G pellate Tribunal shall amend the order passed by 1t m conformity with such opinion.

(5) Before passing an order under sub-section (4), the High Court may, if it considers it ~ecessary so t.o do: re-mit the petition to the Appellate Tnbuna\, and d~rect 1t to return the petition with its finding on any specific ques-tion or issue.

(8) (a) The petitioner or the respondent may apply fol' re-view of any order passed by the High Court under clause (a) of sub-section (4) on the basis of the discovery of new and important facts which after the exercise of due diligence were not within his knowledge or could not be produced by him when the order was made.

(b) The application for review shall be preferred within

such time, and in such manner as may be prescribed·, and shall where it is preferred by any party other than the Deputy Commissioner be accompanied by fee of one hundred rupees.

It was argued for the appellant that under s. 38 the High Court was empowered to interfere with the order of the Appellate Tribu-nal only if it had either decided question of law erroneously or had failed to decide any question of law. It was said that in any case the High Court should have remitted the matter to the Ap-pellate Tribunal if it considered it necessary for the proper dis-posal of the case to take in evidence any additional facts under s. 38(5) of the Act before passing an order under sub-s. (4) remitting the matter to the Appellate Tribunal on any specific question or issue. In our opinion there is considerable force in the argument put forward on behalf of the appellant. But we do not wish to ex-press any concluded opinion on this point in the present case. It appears that the appellant did not raise any objection before the High Court when the affidavits were taken into evidence. Having preferred no objection before the High Court it is not now open to the appellant to say that the High Court acted illegally in taking those affidavits in evidence. rt was submitted for the respondent that the transactions themselves took place in 1955, nearly 12 years back and ordinarily accounts of dealings would not be retained beyond five years. Counsel for the respondent referred in this con-nection to rule framed under the Madras General Sales Tax Act. In these circumstances it was hardly worthwhile for the High Court to remand the case for fresh investigation. We therefore reject the argument of the appellant on this aspect of the case.

For the reasons assigned we hold that this appeal has no merit and must be dismissed. In the circumstances of the case we do not propose to make any order as to costs. Civil Appeals Nos. 539 & 540 of 1966, 717 of 1966, 684 of 1966, 694 of 1966 and 857 of 1966.

The main question to be considered in these appeals is whe-ther, after the enactment of the Validation Act, Madras State had the Nnstitutional power to tax "Explanation sales" falling under Art. 286(l)(a) of the Constitution i.e., where goods were delivered for consumption outside the State and whether the ban under Art. 286(l)(a) was an independent ban and whether it could be remov-ed by Parliamentary legislation under Art. 286(2). This question

has been the subject-matter of consideration in Civil Appeal No. 495 of 1966, and for the reasons given in that case, we hold that the Madras State had no authority to levy sales tax on such trans-actions of sale and the High Court was right in holding that the constitutional bar under Art. 286(l)(a) was not lifted by the Vali-dation Act.

In Civil appeals Nos. 539 and 540 of 1966 Counsel for the ap. pellant took an additional point that the High Court ought not to have called for an affidavit from · the respondent "regarding the mode of Sa.le of wool to the Bangalore merchants". It was also said that the High Court had no power to take that affidavit into evidence and come to finding that the sales were . "Explanation sales" within the meaning of Art. 286(l)(a) of the Constitution. It, however, appears that the appellant did not object to the produc-tion of the affidavit in the High Court. It must be taken that the objection was waived and it is not now open to the appellant to argue· that the High Court had no power to take the affidavit into evidence. We accordingly reject the argument of the aooellant on this point.In Civil Appeal No. 717 of 1966 it was argued for the appel· !ant that the High Court erred in assuming that in the u ansactions in question the goods were delivered for consumption outside the Madras State. It was said that the case should have been remanded by the High Court to the Appellate Tribunal for fresh finding on the point. The High Court has. however. taken the view that the transactions took place in 1955-56 and ordinarily accounts of dealings· would not be retained by the assessee beyond five years. The High Court has observed that apart from this the transactions were very large in number. about 4000 and odd and most of them were for comparatively small value. Some of the invoices re-ferred in the assessment order show that they were for small amounts in regard to articles like paint, aluminium, tar and other articles. Jn these circumstances the High Court came to the con-clusion that the goods were delivered to places outsi11.e the Madras State for the purpose of consumption in the delive1 y States. The High Court added that it was hardly worthwhile in these circum-stances to direct remand of the case to the Appellate Tribunal for fresh enquiry. It is manifest that the finding of the High Court on this point is finding on question of fact and as there is proper material to support the finding of the High Court it is 11ot possible to accept the contention of the appellant that the find-G ing is in any way defective in law. We accordingly reject the argu-ment of the appellant on this point.

For the reasons expressed we hold that these appeals have no ,merit and they are accordingly dismissed. In the circumstances of the.case we do not propose to make any order as to costs except in C.A. 717 of 1966. In that appeal, the respondent will be entitl-ll ed to costs as already ordered on 29th July 1965.

Appeals dismissed.