http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 7  

PETITIONER: M/S.  WILLIAM JACKS & CO.  LTD.

       Vs.

RESPONDENT: THE STATE OF BIHAR

DATE OF JUDGMENT: 21/11/1962

BENCH: SARKAR, A.K. BENCH: SARKAR, A.K. DAS, S.K. KAPUR, J.L. HIDAYATULLAH, M. DAYAL, RAGHUBAR

CITATION:  1964 AIR  584            1963 SCR  Supl. (2) 352

ACT: Sales Tax Sales in the course of inter-state trade-property passed  in  Calcutta-Actual delivery given to  purchaser  in Bihar  for  consumption-whether lax could  be  levied  under Bihar  Act-Whether  the Sales Tax  Continuance  Order,  1950 saves  such  tax-Definition of sale in the Bihar  Sales  Tax Act-Whether   the   sale  comes   within   the   definition- Constitution of India, Art. 206 (1) and (2), Bihar Sales Tax Act,.  1947  (Bihar  19 of 1947) ss. 25,  33-The  Sales  Tax Continuance  Order, 1950-The Sales Tax Laws Validation  Act, 1956 (VII of 1956).

HEADNOTE: Between  January  26,  1950, and  September  30,  1951,  the appellant had sold from Calcutta various goods to parties in Bihar.   These sales had been made in the course  of  inter- State trade and were of species mentioned in the explanation to cl. (1) of Art. 286 of the Constitution on which, in view of  the  provisions of cl. (2) of that Article as  it  stood then and as interpreted by this Court in Bengal Immunity Co. Ltd.  v. State of Bihar, no tax could be imposed by a  State law.   The respondent State had however before the  decision by this Court in the Bengal Immunity Co. case imposed tax on these sales under the Bihar Sales Tax Act, 1947, relying  on other  decisions  since  overruled  which  interpreted   the explanations  to  Art. 286 (1) in a different  manner.   The appellant objected to this imposition. On  the  question  being  referred to  the  High  Court  the respondent  sought to justify the tax on other grounds.   It contended that the sales made between January 26, 1950,  and March 31, 1951, could be legally taxed under the Act because of  cl. (2) of the Sales Tax Continuance Order,  1950,  made under  the proviso to Art. 286 (2) of the  Constitution  and the sales made between April 1, 1951, and September 30,1931, could be so taxed because of the provisions of the Sales Tax Validation   Act,  1956.   The  High  Court   accepted   the respondents’  contention.   On  appeal  to  this  Court  the decision of the High Court regarding the sales between April 1, 1951, and September 30, 1951, was not challenged.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 7  

353 Held,   the  Sales  Tax  Continuance  Order  of  1950   only authorised the continuation after the commencement of the of the  Constitution and up to March 31, 1951, of "any  tax  on the  sale  or  purchase of goods which  was  being  lawfully levied by the Government of any State immediately before the commencement  of the Constitution" notwithstanding  the  bar imposed  against  such  imposition by Art. 286  (2)  of  the Constitution.   The tax on the sales made by  the  appellant between  January 26, 1950, and March 31, 1951, were  not  of the variety which was immediately before the commencement of the  Constitution  being lawfully levied by any law  of  the State  of Bihar.  The contention of the respondent that  the sale  defined  in  the Act included  these  sales  and  were therefore being taxed under it from before January 26, 1950, was not tenable. Section  33 of the Act read with the decision of this  Court in  M.  P.  V. Sundararamier & Co. v. The  State  of  Andhra Pradesh  might  on the ban under Art. 236  being  lifted  be construed  as authorising the imposition of a tax  on  these sales  does not affect the question in the present case  for this  section was introduced into the Act by the  adaptation of  Laws (Third Amendment) Order, 1951, and came into  force from  January  26, 1950, and could not therefore  be  a  law levying  a  tax immediately before the commencement  of  the Constitution. M.P.  V.  Sundararamier  &  Co v.  The  State  of  Andhra Pradesh, [1958] S. C. R. 1422 considered.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 112 to  113 of 1962. Appeal from the judgment and order dated September 21, 1959, of the Patna High Court in Civil Misc. judl, Case No. 593 of 1957. Rajeshwar Prasad and S. P. Verma, for the appellant. A.   V.  Viswanatha  Sastri, D. P. Singh R. K. Gary,  S.  C. Agarwal and M. K. Ramamurthi, for the respondent. 1962.  November 21.  The judgment of the Court was delivered by SARKAR,  J.-The  appellant is a company dealing  in  various kinds of machinery.  It has its place 354 of  business  in  Calcutta, in the  State  of  West  Bengal. Between  January 26, 1950 and September 30, 1951,  .it  sold diverse machinery to various parties in the State of  Bihar. In  respect  of these sales the appellant  was  assessed  to sales  tax  under  the Bihar Sales  Tax  Act,  1947.   These appeals  arise out of such assessments but, as will be  seen later, the dispute now is much narrower than what it was  in the beginning. Before  proceeding  further  we may  briefly  refer  to  the procedure of the sale.  The price payable for the goods  was F. 0. R. Calcutta and it is not in dispute that the property in them passed to the purchaser as soon as the appellant Put the  goods on the railway at Calcutta.  It has however  been found and is no longer in dispute, that the actual  delivery of  the  goods  was given to the  purchasers  in  Bihar  for consumption  there.   The  arguments  in  this  Court   have proceeded  on  the basis accepted by both  sides,  that  the sales  were in the course of inter-State trade and  were  of the  kind contemplated in the explanation in Art. 286(1)  of the  Constitution before its amendment by  the  Constitution

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 7  

(Sixth  Amendment) Act, 1956.  In this judgment we shall  be concerned with Art. 286 as it stood before the amendment. The contention of the appellant before the Superintendent of Sales Tax, Patna, who was the assessing authority, was  that the  sales were interState sales and, therefore,  the  Bihar Act could not tax such sales in view of cl. (2) of Art.  286 though  they were within the explanation to cl. (1) of  that Article.   It  was contended that so far as  the  Bihar  Act purported   to  tax  such  sales,  it  was   invalid.    The Superintendent of Sales Tax rejected this contention relying on the case of Bengal Immunity Company Ltd. v. The State  of Bihar (1) which held that sales of the variety described  in the explanation to cl. (1)(a) of Art. 286 could be taxed  by the law of the legislature of the State where the goods were actually  delivered  for  consumption  inspite  of  the  ban imposed by (1)  (1952) I.L.R. 32 Pat. 19. 355 cl.  (2) of that Article on State legislatures taxing  sales made  in  the course of inter-State trade.   He,  therefore, held  that the Bihar Act could validly tax  the  appellant’s sales even though they were interState sales.  The appellant appealed  from this decision to the Deputy  Commissioner  of Sales  Tax,  Bihar.  By the time that  authority  heard  the appeal the judgment of’ this Court in the State of Bombay v. The  United  Motors (1) had been delivered.   This  judgment confirmed   the  view  taken  in  the  Patna  case   earlier mentioned.  It said that cl. (2) of Art. 286 does not affect the  power of the State in which delivery of goods  is  made for consumption there to tax inter-State sales or  purchases and  that  the  effect  of  the  explanation  was  that  the transactions mentioned in it were outside the ban imposed by Art.   286(2).   In  view  of  this  judgment,  the   Deputy Commissioner  dismissed  the  appeal.   A  further  revision application by the appellant to the Board of Revenue, Bihar, also  failed.  Before the decision by the Board of  Revenue, however,  this  Court  had decided in the  appeal  from  the judgment  in  the Patna case, earlier  mentioned,  that  the United  Motors  case (1) had been wrongly decided  and  that until  Parliament  by law made under  Art.  286(2)  provided otherwise,  a  State  could  not  impose  or  authorise  the imposition  of any tax on sales or purchases of  goods  when such  sales or purchases took place in the course of  inter- State trade or commerce notwithstanding that the goods under such  sales were actually delivered in that State  for  con- sumption there: see Bengal Immunity Company Ltd. v. State of Bihar   (2).   Curiously  however  this  case  escaped   the attention  of  the learned member of the Board  of  Revenue, Bihar,  for  if he had noticed it he would  not  have  based himself  on the United Motors case (1) as he had done.   The appellant thereafter moved the Board of Revenue under S.  25 of  the  Bihar Act for referring two questions to  the  High Court for decision and a reference was accordingly made. (1) [1933] S.C.R. 1069. (2) [1955] 2 S.C. R. 603. 356 The present appeal is against the judgment of the High Court given on the reference. There  are  two appeals before us.  They arise  out  of  two assessment orders made in respect of two different  periods. The  High Court heard the two references together and  dealt with  them  by one judgment.  The questions framed  in  each case  were in identical terms and perhaps,  therefore,  were not  confined  to the period with which each case  was  con- cerned.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 7  

As we have said earlier, two. questions had been referred to the  High  Court  but the appellant has not  in  this  Court challenged the answer given by the High Court to the  second question.   We  are, therefore, concerned in  these  appeals only with the first question which is in these terms :               "Whether the sales by the petitioner of (sic.)               goods  which were actually delivered in  Bihar               as  a  direct  result of such  sales  for  the               purpose  of  consumption in Bihar  during  the               period  January  26,  1950  to  September  30,               1.951,  were  sales which took  place  in  the               course of interState trade or commerce  within               the   meaning   of  Article  286(2)   of   the               Constitution  of India (as it stood  prior  to               the   passing  of  the   Constitution   (Sixth               Amendment)  Act,  1956) and as such  were  not               liable  to  the levy of Bihar  Sales  Tax,  or               whether  in view of the subsequent passing  by               Parliament  of the Sales Tax  Laws  Validation               Act, 1956 (Act VII of 1956) such sales  became               liable to the levy of Bihar Sales Tax for  any               part  of the above period, say from  April  1,               1951, up to September 30, 1951." The High Court answered this question in these words :               "As  regards the first question, it  is  clear               that for the period from the January 26, 1950,               to March 31, 1951, the assessment               357               is covered by the Sales Tax Continuance Order,               1950,  promulgated by the President,  and  the               assessment  of the tax for this period is  not               liable to be attacked on the ground that there               is  a violation of the provisions  of  Article               286(2)  of  the Constitution.  For  the  second               period,   namely,  from  April  1,  1951,   to               September 30, 1951, the assessment is  covered               by  the  provisions  of  the  Sales  Tax  Laws               Validation  Act, 1956, and the  imposition  of               sales-tax  for  this period  also  is  legally               valid." The  question in this appeal is whether the High  Court  was right  in its view that the assessment between  January  26, 1950  to  March  31,  1951  is  covered  by  the  Sales  Tax Continuance  Order, 1950.  There is no dispute now that  the Sales  Tax Validation Act, 1956 validated the collection  of the  tax on sales made during the period from April 1,  1951 to September 30,1951. In view of the judgment of this Court in the Bengal Immunity Company  case (1) a dispute as to whether the sales  by  the appellant could be taxed by a Bihar law was no longer  open. It  was  because of this that the dispute took  a  different turn and was based on the Sales Tax Continuance Order, 1950. The  contention  of the appellant is this :  The  Sales  Tax Continuance  Order, 1950 was made in exercise of the  powers conferred  by  the  proviso  to cl. 2 of  Art.  286  of  the Constitution.  That proviso was in these terms               "Provided  that  the President  may  by  order               direct that any tax on the sale or purchase of               goods  which was being lawfully levied by  the               Government of any State immediately before the               commencement   of  this  Constitution   shall,               notwithstanding that the               (1)[1955] 2. S.C.R. 603.               358               imposition of such tax is contrary to the pro-

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 7  

             visions of this clause, continue to be  levied               until the thirty-first day of March 1951." Clause (2) of the Sales Tax Continuance Order, 1950 reads as follows:               "Any  tax  on the sale or  purchase  of  goods               which   was  being  lawfully  levied  by   the               Government of any State immediately before the               commencement  of  the  Constitution  of  India               shall,  until the thirty-first day  of  March,               1951,  continue to be  levied  notwithstanding               that the imposition of such tax is contrary to               the  provisions of clause (2) of  the  Article               286 of the said Constitution." Clause  (2)  of  Art. 286 of the Constitution,  it  will  be remembered, prohibited a State law from taxing a sale in the course of inter-State trade. Now, a tax which can be legitimately levied under the  Order of  1950 must be a tax which was being lawfully levied by  a State Government immediately before January 26, 1950.  It is said  by  the appellant that before this  date  neither  the Bihar  Sales  Tax Act nor any other Act purported to  tax  a sale of the kind with which we are concerned.  If no Act did so,  then no question of its lawfully levying a tax on  such sales could at all arise.  There was no tax as  contemplated by  the  Order and none, therefore, the levy  of  which  the Order continued. Learned counsel for the appellant drew our attention to  the definition  of  sale  in the Bihar Act as it  stood  at  the relevant  time.   It was only a sale which came  within  the definition that the Act purported to tax.  Learned counsel’s contention is that the sales in this case do not come within the  definition and, therefore, were not taxed by the  Bihar Act at all. 359 Now the definition of sale in the Act is in these terms :               "sale" means, with all its grammatical  varia-               tions and cognate expressions, any transfer of               property in goods for cash or deferred payment               or  other valuable consideration, including  a               transfer of property in goods involved in  the               execution  of contract but does not include  a               mortgage, hypothecation, charge or pledge :               Provided  that  a transfer of goods  on  hire-               purchase or other instalment system of payment               shall,  notwithstanding  the  fact  that   the               seller  retains  a  title  to  any  goods   as               security  for payment of the price, be  deemed               to be a sale :               Provided further that notwithstanding anything               to  the contrary in the Indian Sale  of  Goods               Act, 1930 (III of 1930), the sale of any goods               (i)which  are  actually in Bihar at  the  time               when, in respect thereof, the contract of sale               as  defined in section 4 of that Act is  made,               or               (ii)which  are  produced  or  manufactured  in               Bihar by the producer or manufacturer thereof,               shall,  wherever the delivery or  contract  of               sale  in made, be deemed for the  purposes  of               this Act to have taken place in Bihar :               Provided  further that the sale of goods  in               respect  of a forward contract, whether  goods               under such contract are actually delivered  or               not,  shall be deemed to have taken  place  on               the date originally agreed upon for delivery.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 7  

             360 It  is  obvious  that  the sales with  which  this  case  is concerned  did  not come within this definition at  all  nor even  under the last proviso in it and these sales were  not taxed by the Bihar Act. Then there is s. 33.  That section provides as follows :               S.    33.    (1)   Notwithstanding    anything               contained in this Act,-               (a)   a  tax on the sale or purchase of  goods               shall not be imposed under this Act-               (i)where  such  sale or purchase  takes  place               outside the State of Bihar;               (2)The  explanation to clause (1)  of  Article               286  of the Constitution shall apply  for  the               interpretation of sub-clause (i) of clause (a)               of sub-section (1). Now,  it  has  been  held  by  this  Court  in  M.  P.  I,-. Sundararamier & Co. v. The State of Andhra Pradesh (1)  that an  enactment of this kind did in fact impose a tax  on  the class of sales covered by the explanation to Art. 286(1) (a) but that the imposition was conditional on the ban mentioned in Art. 286(2) being lifted by law of Parliament as provided therein.   We  do not think that the  respondent  State  can derive  any advantage from this provision.  It was  inserted in the Bihar Act by the Adaptation of Laws (Third Amendment) Order,  1951,  and was brought into force from  January  26, 1950.   Even  though on the ban being lifted it  might  have been possible under (1)  [1958] S.C.R. 1422. 361 this  provision to tax the explanation sales, that  is,  the sales  of the kind with which this case is  concerned,  that cannot assist the respondent State in this case for since s. 33  only came into force from January 26, 1950, s. 33  could not  be a law levying a tax on any sales immediately  before the  commencement  of the Constitution and the levy  of  tax under it, therefore, could not have been continued under the provisions of the Sales Tax Continuance Order, 1950. It follows that the sales were not taxed by the Bihar  Sales Tax Act., 1917 before the Constitution came into force.   It is  not  contended  that the Government of  Bihar  had  been taxing these sales before January 26, 1950, under any  other provision.  We, therefore, think that the High Court was  in error  in holding that the levy of the tax on the  sales  by the appellant between January 26, 1950, and March 31,  1951, with which this case is concerned, was covered by the  Sales Tax Continuance Order, 1950.  We will set aside the judgment of  the High Court in so far as it so holds and  answer  the question  which we have earlier set out in so far as  it  is outstanding, in the negative.  In our view, these sales were not liable to tax. We  think  it right here to point out that the  question  as framed  might  suggest that the Court was  asked  to  decide whether  the  sales were sales within the  meaning  of  Art. 286(2)  of the Constitution.  But as we have  said  earlier, that  was not the point of the question.  The  courts  below have  held that the sales were in the course of  inter-State trade  in which the goods were actually delivered  in  Bihar for consumption there and that view has not been disputed in this Court. The appeal will, therefore, be allowed.  We do not make  any order  as to costs as the appellant abandoned in this  Court its contest to one of the two 362 questions  that had been referred and as it had not  in  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 7  

High  Court contended that the Sales Tax Continuance  Order, 1950, did not apply to the sales for the reason on which  it based itself in this Court.                             Appeal allowed.