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PETITIONER: MALAYALAM PLANTATIONS LTD.

       Vs.

RESPONDENT: THE DEPUTY COMMISSIONER OF AGRICULTURALINCOME-TAX AND SALES

DATE OF JUDGMENT: 20/03/1964

BENCH: AYYANGAR, N. RAJAGOPALA BENCH: AYYANGAR, N. RAJAGOPALA GAJENDRAGADKAR, P.B. (CJ) WANCHOO, K.N. SHAH, J.C. SIKRI, S.M.

CITATION:  1965 AIR  161            1964 SCR  (7) 391

ACT: Sales  Tax-Tea  sold  by auction at Fort  Cochin  which  was outside State of Travancore-Cochin-Whether to be included in turn-over  for purposes of Sales-tax-"Outside  Sale"-Meaning of-Doctrine  of territorial nexus in Sales Tax  legislation- Point  not urged in High Court or taken up in  Statement  of case-It  can  be taken up in Supreme  Court-Constitution  of India,  Art.286(i)(a)  before  and  after  the  Constitution (Sixth Amendment) Act, 1956--Travancore-Cochin General Sales Tax Act, 1950, s. (J).

HEADNOTE: The  appellant company owns several estates wherein  tea  is grown  and  it was assessed to sales-tax by  the  Sales  Tax Officer  in respect of the tea sold by it during  the  years 1954-55  and 1955-56.  An appeal filed by the appellant  was rejected  by  the, Appellate Assistant commissioner  on  the ground  that the tea when sold was admittedly in godowns  in the  State  of Travancore-Cochin and that  consequently  the sales must be deemed to have taken place within the State of Travancore-Cochin  and  hence liable to be included  in  the taxable  turn-over.  When a further appeal was taken to  the Sales Tax Appellate Tribunal, it was held that the  property in  the goods sold passed at Fort Cochin in Madras State  on the fall of the hammer at the auction and hence the same was not  taxable.   The State filed a revision petition  to  the High  Court.  While the High Court accepted the  finding  of the  Tribunal that the property in the goods sold passed  at Fort.   Cochin on the fall of the hammer at the auction,  it differed  from  the Tribunal as regards the  effect  of  the circumstance  that the tea sold was, at the point  of  sale, physically  in godowns situated in the State of  Travancore- Cochin and held the sales to be taxable.  The appellant came to this Court after obtaining a certificate of fitness  from the High Court. The  only  question argued before this court was  whether  a sale  of  tea effected by the appellant by auction  at  Fort Cochin  in  Madras  State was a sale outside  the  State  of Travancore-Cochin orinside it and whether the same  was

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taxable or not.Accepting.the appeal. HELD:     No sales tax was to be levied in this case as  the sales  took  place outside the State  of  Travancore-Cochin. The test for determining whether a sale is inside or outside a State is where the property in the goods passed and in the present case the property in the goods passed in Fort Cochin in Madras State on the fall of the hammer at the auction. The point about the property not having passed in the Madras State was not argued before the High Court and was also  not urged in the statement of case filed by respondent and hence the same was not allowed to be argued in the Supreme Court. Per  Shah.   J.  The property in the goods  passed  at  Fort Cochin  in Madras State and as the goods were delivered  not for the purpose of consumption in any particular State,  the sales were not inside Travancore-Cochin but were outside the 392 State  and were as held by this Court in A. V. Thomas &  Co. v.  Deputy Commissioner of Agricultural Income-tax and Sales Tax Trivandrum, 14 S.T.C. 363, not liable to be taxed  under the Travancore-Cochin General Sales Tax Act, 1950. The doctrine of territorial nexus had full play in sales tax legislation under the Government of India, Act, 1935 and was not   abrogated  by  the  enactment  of  Art,  286  of   the Constitution.   It  continued  to be  in  operation  in  the interregnum between the promulgation of the Constitution and the  amendment  of  Art.  286  by  the  Constitution  (Sixth Amendment)  Act,  1956.   It also  applies  now  subject  to certain modifications.  Parliament has been given the  power to  formulate  principles  for determining when  a  sale  or purchase  of goods takes place outside the State or  in  the course  of  the import of the goods into or  export  of  the goods  out of the territory of India.  Exercising the  power under  cl. (2) Parliament has enacted the Central Sales  Tax Act,  1956 and by s. 4(2) the doctrine of territorial  nexus has  been given legislative recognition though  in  somewhat limited form. Deputy Commissioner of Agricultural Income-tax and Salestax, Trivandrum  v. A.V. Thomas & Co., I.L.R. 1960  Kerala  1395; India Copper Corporation Limited v. State of Bihar, [1961] 2 S.C.R.  276; A. V. Thomas & Co. Ltd. v. Deputy  Commissioner of  Agricultural Income-tax and Sales-tax,  Trivandrum  1953 Supp.  2  S.C.R. 608 363; Poppat Lal Shah v.  The  State  of Madras, [1953] S.C.R. 677; and the Tata Iron & Steel Company Ltd. v. The State of Bihar [1958] S.C.R. 1356, referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 678 and 679 of 1963. Appeals  from the judgment and order dated April 4, 1961  of the Kerala High Court in Tax Revision Nos. 52 & 53 / 1959. G.B.  Pai,  T. N. Ramachandra, J. B.  Dadachanji,  O.  C. Mathur  and Ravinder Narain, for the appellants (in all  the appeals). Govinda  Menon and V. A. Seyid Muhammad, for the  respondent (in both the appeals). C.S.  Pathak,  S.  N. Andley, Rameshwar Nath  and  P.  L. Vohra, for the interveners (in both the appeals). March 20, 1964.  The judgment of GAJENDRAGADKAR,C.J., WANCHOO, RAJAGOPALA AYYANGAR AND SIKRI, JJ. was delivered by AYYANGAR J. SHAH, J. delivered a separate Opinion. AYYANGAR,  J.-The  appellant owns  several  estates  wherein inter  alia  tea is grown and was assessed to  sales-tax  in respect  of the tea sold by it during the years 1954-55  and

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1955-56,  by the Sales Tax Officer, First Circle, Quilon  in the  State of Travancore-Cochin by his order dated  December 23.  1956.  In the taxable turnover on which sales  tax  was computed by the assessing authority were included two  items which  are  the subject of complaint in  these  two  appeals which  relate to these two years of assessment.  Before  the assessing  officer the appellant claimed that certain  sales of its tea which were 393 conducted  by  auction at Fort Cochin-a place which  at  the relevant date was in the Madras State, were sales  "outside" the  Travancore-Cochin  State and  that  consequently  these sales  were exempted from taxation by the State  of  Travan- core-Cochin under Art. 286(l)-(a) of the Constitution.   The Sales Tax Officer rejected this contention and included  the sum  involved  in these sales in the taxable  turnover.   An appeal  filed to the Appellate Assistant  Commissioner  also failed, this authority holding that as the tea sold was,  at the date of the auction, admittedly in godowns in Willingdon Island in the State of Travancore-Cochin, the sales must  be deemed to have taken place within taxing State by virtue  of a  provision  in the State Sales Tax Act to which  we  shall refer  later and hence liable to be included in the  taxable turnover.  There was a further appeal taken by the Appellant to the Sales Tax Appellate Tribunal which upheld the  appel- lant’s contention and set aside the assessment in so far  as it  included the turnover relating to the auction  sales  of tea  held  at Fort Cochin, this turnover  amounting  to  Rs. 56,43,184/11/in  regard to the assessment year  1954-55  and Rs. 62,13,604/3/in regard to the assessment year 1955-56 and remanded the case for fresh disposal by excluding these sums from  the computation of the taxable turnover.   A  revision petition  was thereafter filed before the High Court by  the State  under  s.  15(b)  of the General  Sales  Tax  Act  of Travancore-Cochin   and  the  learned  Judges  allowed   the Revision  and upheld the order of the assessing officer  and the Appellate Commissioner holding the turnover  represented by these auction sales to be validly taxable under the State law relating to sales tax.  The appellant thereafter applied to  the  High Court for a certificate of  fitness  and  this having been granted the appeals are now before us. Before  proceeding  further it is necessary to set  out  the statutory provision contained in the taxing enactment of the State.  The General Sales Tax Act (Act XI of 1125 (ME) 1950) which  imposed  a sales tax on sales by  dealers  defines  a "sale" by s. 2(j) in these terms: -               "’Sale’  with all its  grammatical  variations               and  cognate expressions means every  transfer               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               consideration and includes also a transfer  of               property in goods involved in the execution of               a  works  contract,  but does  not  include  a               mortgage, hypothecation, charge or pledge;               x       x        x        x               Explanation  (2) Notwithstanding  anything  to               the contrary in the Sale of Goods Act for               the time being in               394               force, the sale or purchase of any goods shall               be deemed for the purpose of this Act, to have               taken place in the State wherever the contract               of  sale or purchase might have been made  (a)               if the goods were actually in the State at the

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             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 the  State  at               any  time  after  the  contract  of  sale   or               purchase in respect thereof was made."               When  the Constitution came into force  a  new               section  numbered  s. 26 was inserted  by  the               Adaptation  Order bringing the Act  into  line               with Art. 286(1) of the Constitution and  this               read: -               "No law of a State shall impose. or  authorise               the  imposition  of  a  tax  on  the  sale  or               purchase of goods where such sale or  purchase               takes   place(a)   outside   the   State    or               (b).................................               Explanation-For the purposes of sub-clause (a)               a  sale  or purchase shall be deemed  to  have               taken  place in the State in which  the  goods               have  actually  been  delivered  as  a  direct               result  of  such  sale  or  purchase  for  the               consumption in that State, notwithstanding the               fact  that under the general law  relating  to               sale of goods the property in the goods has by               reason  of  such sale or  purchase  passed  in               another State." The position, therefore, was that though cl. (a) to Explana- tion  2  to s. 2(j) enacted that  "notwithstanding  anything contrary  in the Sale of Goods Act, the sale or purchase  of goods  shall  be deemed to take place in the  State  if  the goods  were actually in the State at the time  the  contract for  sale or purchase of goods thereof was made",  still  by the  non-obstante provision contained in s. 26 a tax on  the sale  or purchase of goods could not be imposed  where  such sale   or  purchase  took  place  "outside"  the  State   of Travancore-Cochin.  It is only necessary to add that even if s. 26 were ignored still by the terms of Art. 286(1)(a)  the position  would be the same and the State could not  validly levy a tax on a sale which is "outside" that State. Now  the question is can a sale of the tea effected  by  the Appellant by auction at Fort Cochin and which were  included in  its taxable turnover be said to be "outside" the  State? The  facts  in relation to the transaction relating  to  the sale  of  the tea and which the learned Judges of  the  High Court  held  not to be an "outside" sale may  be  stated  in their own words: -               "The  sales  of teas were  concluded  at  Fort               Cochin  and the goods were stocked in  godowns               situated in the               395               Travancore  Cochin State.  The  deliveries  of               the  goods were also made to the  buyers  from               the  godowns  in  Willingdon  island  in   the               Travancore   Cochin  State.    The   Appellate               Tribunal  has come to the conclusion that  the               ownership  of the commodity having  passed  in               Fort  Cochin,  the  property  had  not  passed               within  the  taxing  State,  accordingly  they               would  be ’outside’ sales for purpose of  Art.               286(1) and exempt from taxation." The  Appellate  Tribunal  had recorded a  finding  that  the property in the goods sold passed at Fort Cochin on the fall of  the hammer at the auction and the learned Judges of  the High Court proceeded on the same basis.  The point on  which

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the,  learned Judges differed from the Tribunal was only  as regards  the effect of the circumstance that the  tea  sold, was at the point of sale, physically in godowns situated  in the State of Travancore-Cochin.  The Appellate Tribunal had, in reaching the conclusion in favour of the appellant, as to the  taxable character of the turnover represented by  these auction  sales, referred to a large number of  decisions  of this Court and to the observations contained in them as well as  to several decisions of the various High  Courts.   When the  matter came up before the High Court the position  was, that  that Court had after a review of most of  the  earlier cases  which had been referred to by the Tribunal,  held  in Deputy  Commissioner of Agricultural Income-tax  and  Sales- tax,  Trivandrum  v.  A.V. Thomas &  Co.(1)  that  the  word ’outside   sale’   in  Art.  286(1)(a)  had   no   reference exclusively  to  the transfer of the property in  the  goods according  to the provisions of the Sales of Goods Act,  and therefore that Explanation 2 to s. 2(j) was not violative of Art.  286(1)(a) and that if at the moment when the  property passed,  it  not  being very  relevant  where  the  property passed,  the goods were in the State  of  Travancore-Cochin, then  it was not an "outside" sale quoad  Travancore  Cochin and  could be subjected to salestax by that  State.   Before the learned Judges a decision of this Court in India  Copper Corporation Limited v. State of Bihar(2) was however  relied on  as leading to a different result but the learned  Judges held that the decision of this Court could be  distinguished on  the  facts and they held that  their  previous  decision reported  in  A.V. Thomas’s case(1) was still good  law  and entirely covered the point raised. The  question  for consideration in the appeal is  the  cor- rectness  of  the  view expressed by the  High  Court.   The decision  in Deputy Commissioner of Agricultural  Income-tax and  Salestax,  Trivandrum  v. A. V.  Thomas  &  Co.(1)  was brought  before this Court on appeal and has  been  reversed (See  A.V.  Thomas  & CO.  Ltd. v.  Deputy  Commissioner  of Agricultural Income-tax and Sales-tax, Trivandrum(3).  In so doing this Court pointed (1) I.L.R. [1960] Kerala 1395.  (2)  [1961] 2 S.C.R. 276. (2)[1963] supp. 2 S.C.R. 608. 396 out  that  the decision of this Court in the  Indian  Copper Corporation case(1) had settled the law by laying down  that the  State (other than a  "delivery-cum-consumption"  State) which  could  tax  a ’non-explanation sale’  (to  adopt  the phraseology  used in these cases to identify a sale  falling outside  the  explanation to Art. 286(1)(a)) could  only  be that State in which the property in the goods passes.   Now, as  regards the facts, there is no distinction  between  the facts in the A. Y. Thomas’s case(2)  and the case now  under appeal  and,  indeed, the learned Judges of the  High  Court have proceeded on that basis.  Dealing with the question  as to  what  is an "outside" sale Kapur, J.  speaking  for  the Court said in the case of A. Y. Thomas & Co.(2) Ltd.: --               "It has been foundand   it  has  not   been               disputed that the title to the goods  in   the               present  case  passed  at  Fort  Cochin    the               question  is  whether the  sale  was  ’outside               sale’ or ’inside sale’ as the expressions have               been  compendiously used in various  judgments               to indicate sales taking place within a  State               or  without  it.   The  Explanation  to   Art.               286(1)-(a)explains  what  a sale  outside  the               State is   where  the Explanation applies  the               difficultyabout the situs is resolved but  in

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             a  case  like the present one  the  difficulty               still remains because the Explanation does not               operate  in  the sense that the  rival  States               claiming to tax the same taxable event are not               the States of delivery for consumption in that               State  and those where the title in the  goods               passes." After  referring to the decision in the India Copper  Corpo- ration  Ltd. v. State of Bihar (1) the Court held  that  the sale  in  the case before them was an "outside"  sale  quoad TravancoreCochin, because the title passed at Fort Cochin in the State of Madras.  On this reasoning this Court  reversed the decision in the case of the High Court and held that the sale  there  in  question being an "outside"  sale  was  not taxable  by  reason  of the prohibition  contained  in  Art. 286(1)(a). Dealing with the connotation of the expression ’outside’  in Art.  286(1)(a)  this Court had observed,  in  India  Copper Corporation Ltd. v. State of Bihar.(1): -               "If  a single State was designed to  have  the               power  to  tax any particular  transaction  of               sale,  the  question  that next  falls  to  be               considered is the determination of that  State               in regard to which it could be predicated that               the  sale in question was not  ’outside’  that               State or in other words, the determination  of               the               (1)  [1961]  2 S.C.R. 276               (2)  [1963] Supp.2 S.C.R.698               397               particular  State in regard to which it  could               be said that the sale was ’inside’ that State.               The  key  to the problem is  afforded  by  two               indications  in  the Article itself:  (1)  the               opening words of Article 286(1) which speak of               a  sale or purchase taking place and  (2)  the               non-obstante  clause in the Explanation  which               refers to the general law relating to sale  of               goods  under which property in the goods  has,               by reason of such sale or purchase, passed  in               another  State’.  These two together  indicate               that it is the passing of property within  the               State that is intended to be fastened on,  for               the  purpose of determining, whether the  sale               in question is ’inside’ or outside’ the State,               and therefore subject to the operation of  the               ’Explanation’  that  State in  which  property               passes  would  be the only State  which  would               have the power to levy a tax on the sale.   As               was  explained in the recent decision of  this               Court   in  Burmah  Shell  Oil   Storage   and               Distributing   Co.  of  India  Ltd.   v.   The               Commercial Tax Officer." It  was the principle of law laid down in this passage  that was given effect to by this Court in A. V. Thomas’s  case(1) and  it  was on this basis that the appeal was  allowed.  it would  therefore follow that the present appeals  which  are wholly  dependent on the correctness of the meaning  of  the expression  ’outside  sales’ in Art.  286(1)(a)  which  High Court adopted in A. V. Thomas’s case have necessarily to  be allowed. Learned  Counsel  for the respondent-State,  however,  urged that in the present case a point had been raised before  the High  Court as to whether on the facts the property  in  the goods  -sold  by  auction conducted at  Fort  Cochin  really

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passed  at  Fort Cochin in the Madras State  or  whether  it passed  in Willingdon island in Travancore-Cochin  when  the goods were actually delivered to the buyer.  As regards this question  of fact or of -mixed fact and law the position  is this.   The Sales Tax Appellate Tribunal recorded a  finding on this matter in these terms:               "The  question  whether the sales  took  place               outside  the  State  or not will  have  to  be               decided  on  the  basis  of  the  general  law               relating  to sale of goods.  We hold  that  in               the  case  of auction sales of full  lots  the               sales  were  of ascertained  goods  and  hence               became complete on the fall of the hammer  and               that  the sales took Place within  the  Madras               State." In  the revision application which the department  filed  to the  High  Court this question Whether the property  in  the goods (1)  [1963] Supp. 2 S.C.R. 608. 398 did  pass  at Fort Cochin was raised  but  nevertheless  the argument  before  the  High Court proceeded  wholly  on  the basis;  of the correctness of the finding by  the  Appellate Tribunal that the property in the teas did pass on the  fall of the hammer at Fort Cochin.  The point about the  property not  having  passed in the Madras State does not  appear  to have  been even argued before the High Court.  Even  in  the statement  of  the case filed by the respondent  it  is  not stated that this point about the property not having  passed at  Fort  Cochin in Madras was urged before the  High  Court during  the  course of the argument.  Before  concluding  it might  be  mentioned  that in A. Y.  Thomas’s  case  (supra) where,  as we have stated earlier, the nature of the  trans- action  was identical with the one in the appeals before  us this Court observed: -               "It  has  been  found  and  it  has  not  been               disputed  that the title to the goods  in  the               present case passed at Fort Cochin." In  these  circumstances,  we  declined  to  permit  learned Counsel  for the respondent to urge any ground  relating  to the property in the goods in the teas sold not having passed in  Fort  Cochin in the Madras State to be  raised,  as  the point which is not one of pure law was not urged before  the learned fudges of the High Court. The  appeals are, therefore, allowed’ and the, order of  the High  Court  reversed and that of the  Sales  Tax  Appellate Tribunal  restored.  The appellant will have his costs  here and in the High Court-one hearing fee. SHAH.   J.-If the question raised in these appeals were  res integra,  I  would hold that the price obtained  at  auction sales  of tea held at Fort Cochin when the goods were  lying in  warehouses in the Travancore-Cochin State was liable  to be taxed under the General Sales Tax Act (11 of 1125  M.E.), for  in  my view Art. 286(1)(a) Explanation, before  it  was amended  by the Constitution (Sixth Amendment) Act, did  not altogether exclude the doctrine of territorial nexus in  its application  to salestax legislation.  It is settled law  in this Court that under the Government of India Act, 1935, the Provincial Legislatures could, relying upon the  territorial nexus, levy sales-tax upon transactions of sale, not  wholly completed  within their territory, fixing upon one  or  more ingredients  of a sale furnishing a  territorial  connection with  the taxing Province: Poppat Lal Shah v. The  State  of Madras(1)  and  The Tata Iron & Steel Company  Ltd.  v.  The State   of   Bihar  (2).   By   the   Constitution   certain

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restrictions were placed upon the power of the States (1) [1953] S.C.R. 677.           (2) [1958] S.C.R. 1356. 399 to  legislate in respect of -taxes on sales  and  purchases. By Art. 286(1)(a) read with the Explanation, an  Explanation sale i.e. a sale in which goods sold were actually delivered in a State for the purpose of consumption in that State  was made  taxable  only  by the State in which  the  goods  were delivered  for consumption.  But Art. 286 was, in  my  view, not  intended  to exclude the operation of the  doctrine  of territorial   nexus  in  the  field  not  covered   by   the legislative prohibitions.  In dealing with the effect of  s. 33  of  the  Bihar  Sales Tax  Act  which  incorporated  the prohibitions  imposed  by  Art.  286(1)  &  (2).  with   the concurrence of S. K. Das J., it was observed by me in Indian Copper Corporation Ltd. v. The State of Bihar and  others(1) at P. 293:- " x  x  x by enacting that a tax shall not be imposed  under the Act when the sale takes place outside the State of Bihar x  x, "Only the power to tax "Explanation sales" which do not take place  within the State of Bihar is taken away, but not  the power  to tax "non-Explanation sales" in which though  under the general law of sale of goods the property passes outside the  State,  there exists between the taxing  power  of  the State and the sale a nexus as contemplated by the definition of  sale in s. 2(g).  If the sale is one in which the  goods have been delivered outside the State of Bihar, but not as a direct  result  of  the  sale or  not  for  the  purpose  of consumption  in the State of first delivery, the  sale  will not be covered by the Explanation, and the right to tax  the sale,  if arising otherwise under the Act relying  upon  the territorial  nexus, will not be impaired by the  prohibition imposed by cl. (1)(a)(i) of s. 33." It  may be mentioned that s. 33 of the Bihar Sales  Tax  Act was  enacted  to give effect expressly  to  the  legislative restrictions  imposed by Art. 286 of the  Constitution.   In Indian    Copper   Corporation   Ltd.’s   case(1)    certain transactions of sale were effected by the assessee after the promulgation  of the Constitution, under which the  property in  the goods passed in the State of Bihar but delivery  was effected  outside  the State of Bihar for  consumption  also outside  Bihar.   In some of these transactions  goods  were delivered in the State of first destination for  consumption therein  whilst in others the goods were delivered  not  for consumption  in the State of first delivery.  -The  assessee contended  that both these categories of  transactions  were exempt from tax under Art. 286(1)(a) as they were (1)  [1961] 2 S.C.R. 276. 400 outside sales.  This Court unanimously negatived the conten- tion  of the assessee in respect of sales in which  delivery in  the State of first destination was not  for  consumption therein,  and  the  transactions were on  that  account  not "Explanation  sales".  It was held that the State  of  Bihar was competent to tax those "Non-explanation sales" in  which the property in the goods had passed in the State of  Bihar. But  two  different  grounds were given in  support  of  the conclusion  in  that case.  My  brethren  Hidayatullah,  Das Gupta  and Rajagopala Ayyangar, JJ., were of the  view  that passing  of  property within the State  alone  was  intended after  the Constitution to be fastened upon for the  purpose of  determining  whether the sale is inside or  outside  the State,  and  therefore  subject  to  the  operation  of  the Explanation that State in which the property passes would be

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the only State, which had the power to tax the sale.  S.  K. Das.  J., and I were of the view that sale transactions  not falling  within  the  constitutional  prohibitions  remained taxable  because  in adjudging whether  a  "non-Explanation" sale-transaction  was "outside the State", the  doctrine  of territorial   nexus  could  not  be  wholly  excluded   from consideration. In a recent judgment of this Court in A.V. Thomas & Co. Ltd. v. Deputy Commissioner of Agricultural Income-tax and Sales- tax,  Trivandrum(1)  this  Court  held  in  construing  Art. 286(1)(a)  in  the  light of  the  Explanation  before  that Article  was amended by the Constitution  (Sixth  Amendment) Act, that: -               Where the Explanation to Article 286(1)(a)  of               the Constitution of India is inapplicable,  it               is the ’passing of property within the  State’               that  is  intended to be fastened on  for  the               purpose  of  determining  whether  a  sale  is               ’inside’  or ’outside’ the  State.   Therefore               subject to the operation of the ’Explanation’,               that State in which the property in the  goods               passes  would  be the only State  which  would               have the power to levy a tax on the sale." In  A.  V. Thomas & Co. Ltd.’s case(1) chests  of  tea  were stored in warehouses at Willingdon Island in the Travancore- Cochin  State, but auctions of the tea chests were  held  at Fort Cochin which was at the material time within the  State of’  Madras,  and after the price was paid  at  Fort  Cochin delivery  orders were given to the purchasers  addressed  to the  warehouse-keepers  at  Willingdon  Island  and   actual delivery  was  given at the warehouses.  The chests  of  tea were  then  sent from Willingdon Island for  consumption  in other parts of India or were exported out of India.  It  was held by the Court in that (1)  [1963] Supp. 2 S.C.R. 608. 401 case  that the property in the goods passed at  Fort  Cochin and  as  the  goods were delivered not for  the  purpose  of consumption  in  any particular State, the  sales  were  not inside the State of Travancore-Cochin but were outside  that State and were not liable to be taxed under the  Travancore- Cochin  General  Sales Tax Act (11 of 1125  ME).  The  Court observed  that in sales which were not  "Explanation  sales" passing  of  property within the State was decisive  of  the liability to pay sales-tax.  No opinion was expressed on the question  whether  the  doctrine  of  territorial  nexus  as investing the State with the right to tax a sale transaction outside  the legislative restrictions imposed by  Art.  286, was,  since the promulgation of the  Constitution,  rendered ineffective.   As the fact which give rise to this case  are substantially the same as the facts on which a. V. Thomas  & Co. Ltd.’s case(1) was decided, the decision of the  appeals must be in favour of the assessee. It is necessary to record this judgment, lest it be  assumed that I agree with the view that the doctrine of  territorial nexus in its application to sales-tax legislation has, since the   enactment   of  the  Constitution,   been   completely abrogated.   It  may  be pertinent to note  that  since  the amendment  of  the Constitution by the  Constitution  (Sixth Amendment) Act, Art. 286(1)(a) (which remains unamended)  is now  free  from  the shackles of the  Explanation  which  is deleted and by cl. (2) the Parliament is invested with power to  formulate  principles  for determining when  a  sale  or purchase  of goods takes place in any of the ways  mentioned in  cl. (1), namely, outside the State or in the  course  of

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the import of the goods into, or export of the goods out of, the territory of India.  Exercising the power under cl.  (2) the Parliament has enacted the Central Sales Tax Act (74  of 1956), and by s. 4(2) the doctrine of territorial nexus  has been  given  legislative  recognition,  though  in  somewhat limited form.  That subsection provides:--               "A  sale or purchase of goods shall be  deemed               to take place inside a State if the goods  are               within the State-               (a)   in  the case of specific or  ascertained               goods,  at  the time the contract of  sale  is               made; and               (b)   in  the case of unascertained or  future               goods.  at the time of their appropriation  to               the  contract of sale by the seller or by  the               buyer,  whether assent of the other  party  is               prior or subsequent to such appropriation.               Explanation.--Where there is a single contract               of sale or purchase of goods situated at  more               places than               [1963] Supp. 2 S.C.R. 608.               402               one, the provisions of this sub-section  shall               apply  as if there were separate contracts  in               respect of the goods at each of such places." The doctrine of territorial nexus had full play in sales-tax legislation under the Government of India Act, 1935: it also applies subject to certain modifications since the amendment of  the Constitution by the Constitution  (Sixth  Amendment) Act.  And I am unable to persuade myself that by the  enact- ment of Art. 286 of the Constitution, it stood abrogated  in the interregnum between the promulgation of the Constitution and  the  amendment of Art. 286 by the  Constitution  (Sixth Amendment) Act.                            Appeal allowed. 403