16 October 1952
Supreme Court
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STATE OF TRAVANCORE-COCHIN ANDOTHERS Vs THE BOMBAY CO. LTD.STATE OF TRAVANCORE-COCHIN ANDANOTHERMI

Bench: SASTRI, M. PATANJALI (CJ),MUKHERJEA, B.K.,DAS, SUDHI RANJAN,BOSE, VIVIAN,HASAN, GHULAM
Case number: Appeal (civil) 25 of 1952


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PETITIONER: STATE OF TRAVANCORE-COCHIN ANDOTHERS

       Vs.

RESPONDENT: THE BOMBAY CO. LTD.STATE OF TRAVANCORE-COCHIN ANDANOTHERMICH

DATE OF JUDGMENT: 16/10/1952

BENCH: SASTRI, M. PATANJALI (CJ) BENCH: SASTRI, M. PATANJALI (CJ) MUKHERJEA, B.K. DAS, SUDHI RANJAN BOSE, VIVIAN HASAN, GHULAM

CITATION:  1952 AIR  366            1952 SCR 1112  CITATOR INFO :  F          1952 SC 369  (31)  MV         1953 SC 252  (44)  F          1953 SC 333  (16)  R          1955 SC 661  (35)  F          1956 SC 158  (9)  RF         1957 SC 699  (35)  R          1958 SC 578  (133)  R          1958 SC1006  (11)  F          1959 SC 149  (15,28)  F          1960 SC 595  (10)  R          1961 SC  41  (19)  D          1961 SC  65  (17)  RF         1961 SC 315  (25)  D          1962 SC1733  (9,11,12)  R          1963 SC 980  (9,12)  R          1963 SC1207  (42)  R          1964 SC1752  (5,8,10)  RF         1967 SC1643  (249)  R          1971 SC 477  (4)  RF         1971 SC 870  (19)  RF         1973 SC1461  (184,185,699,700,701,705,1100,  RF         1973 SC2555  (5)  RF         1974 SC1510  (7)  RF         1975 SC1564  (10,12,13,24,49,59)  RF         1980 SC1468  (15)  F          1985 SC1367  (33)  RF         1989 SC 190  (11)

ACT:    Constitution  of  India,  Article  286  (1)   (b)--Sales tax--Exemption   of  sales  in  the  course  of  export   or import--Meaning of   "in the course of "--Sales where proper- ty passes and sale is complete before 1113 goods  move out of State, whether exempt--Interpretation  of article  286 (1)(b)--Dedsions on Commerce and  Import-Export clauses  of  American Constitution--Speeches of  Members  of Constituent Assembly--Relevancy.

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HEADNOTE:    Whatever else may or may not fall within art. 286 (1) (b) of  the Constitution, sales and purchases  which  themselves occasion  the export or the import of the goods as the  case may  be, out of or into, the territory of India come  within the exemption.  The view that no sale or purchase can be said to take place in the course of export or import unless the property in the goods is transferred to the buyer during their actual  move- ment,  as instance, where  the shipping documents  ,are  in- dorsed  and  delivered within the State by the seller  to  a local  agent of the foreign buyer after the goods have  been actually  shipped  or where such documents  are  cleared  on payment,  or on acceptance, by  the Indian buyer before  the arrival  of  the goods within the State, puts too  narrow  a construction upon art. 286 (1)(b) and is not correct.     A sale by export involves a series of integrated activi- ties  commencing from the agreement of sale with  a  foreign buyer and ending with the delivery of the goods to a  common carrier  for  transport out of the country by land  or  sea. Such  a sale cannot be dissociated from the  export  without which it cannot be effectuated and the sale and ’the result- ant export form parts of a single transaction.  Of these two integrated  activities which together constitute  an  export sale, whichever first occurs can well be regarded as  taking place  in the course of the other.  Even in cases where  the property  in the goods passed to the foreign buyers and  the sales were thus completed, within the State before the goods commenced  their journey from the State, the sales  must  be regarded  as having taken place in the course of the  export and therefore exempt under art. 286 (1) (b).     The  Commerce clause (article 1, section 8 (3)) and  the Import-Export clauses [article I, sections9 (5) and 10  (2)] of  the American Constitution are widely different  in  lan- guage,  scope and purpose, and a varying body  of  doctrines and tests have grown around them interpreting, extending  or restricting from time to time, their operation and  applica- tion  in the context of the expanding American commerce  and industry  and much help cannot be derived from them  in  the solution  of the problems arising under article 286  of  the Indian Constitution.     Speeches made by the members of the Constituent Assembly in  the  course  of the debates on  the  draft  Constitution cannot be used ’as aids for interpreting the Constitution.     Administrator General of Bengal v. Prem Nath Mullick [22 I.A.  107 at 118], A.K. Gopalan v. The State [(1950)  S.C.R. 88],  United  States v. Trans-Missouri  Freight  Association [169 U.S. 290 at 318] referred to. 143 1114

JUDGMENT: Civil APPELLATE JURISDICTION: Civil Appeal No. 25 of 1952.     Appeals  from the Judgment and Order dated the 10th  day of  January,  1952,  of the High  Court  of  Judicature   of Travancore-Cochin  at  Ernakulam (Kunhiraman C.J. and Subra- mania  Iyer  J.) in Original Petitions Nos. 4, 23and  24  of 1951 respectively.     T.N.  Subramania Iyer, Advocate-General  of  Travancore- Cochin, (T.R. Balakrishna lyer and M.R. Krishna Pillai, with him) for the State of Travancore-Cochin.     N.C. Chatterjee (C.R. Pattabhirarnan, with him) for  the respondent in Civil Appeal No. 25 of 1952.

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   C.  R. Pattabhiraman for the respondent in Civil  Appeal No. 28 of 1952.     N.C.  Chatterjee’(Thomas Vellappally, with him) for  the respondent in Civil Appeal No. 29 of 1952.     M.  C. Setalvad,  Attorney-General for India,  and  C.K. Daphtary, Solicitor-General of India (G.N. Joshi, with them) for the Union of India. 1952.  October 16.  The Judgment of the Court was  delivered by     PATANJALI  SASTRI  C.J.--These  are   connected  appeals from   the  judgment  and  order  of  the  High   Court   of Travancore-Cochin quashing the assessments under the  United State of Travancore and Cochin Sales Tax Act (No. 11 of 1125 M.E.) (hereinafter referred to as "the Act") on the respond- ents  on the turnover of the sales of the commodities  (coif products  in C.A. 25, lemon grass oil in C.A. 28 and tea  in C.A. 29) in which they respectively deal.     The  dealings followed more or less the same pattern  in all  the cases and consisted of export sales of the  respec- tive commodities to foreign buyers on c.i.f. or f.o.b. terms as the case may be.     The  respondents  in each case  claimed  exemption  from assessment  in respect of the sales effected by them on  the ground,  inter  alia,  that such sales took  place  "in  the ’course  of the export of the goods out of the territory  of India" within the meaning of article 1115 286(1)  (b) of the Constitution. The Sales  Tax  Authorities rejected  the contention as, in their view, the  sales  were completed  before  the  goods were shipped  and  could  not, therefore,  be considered to have taken place in the  course of the export.     Thereupon the respondents by separate petitions  applied to  the  High Court of the United State  of  Travancore  and Cochin (hereinafter referred to as the State) under  article 226 of the Constitution for issue of writs of certiorari and prohibition  quashing the assessments made On them and  pro- hibiting  such assessment in future.  The applications  were heard,  along with nine other applications for  similar  re- liefs by dealers in cashew nuts, by a Division Bench (Kunhi- raman  C.J. and Subramania Iyer J.) who upheld the claim  of exemption  and quashed the assessment orders in  respect  of the  transactions  subsequent  to the  commencement  of  the Constitution.  From  that decision the State  has  preferred appeals  in  all the cases on a certificate granted  by  the High Court under article 132 (1) of the Constitution.     As the appeals involved important questions of law which may  have  a  bearing on the sales tax  legislation  of  the various States in India, this Court directed notice of these proceedings to the Attorney-General for India and the  Advo- cates-General of those States, and they have intervened  and participated in the debate at the hearing of these appeals.     When  the argument had proceeded for some time,  it  was discovered that the material facts relating to the course of dealings in cashew nuts, which were more complex in  charac- ter,  had not been clearly ascertained and consequently  the relative  appeals were remitted to the High Court for  find- ings  on  certain points agreed upon by the  parties.  These three appeals were, however, fully heard as they were  found to admit of disposal on the materials on record.     Article  286(1),  on which the respondents  found  their claim to exemption, runs thus: 1116     No law of a State shall impose, or authorise the imposi- tion  of, a tax on the sale or purchase of goods where  such

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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), 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 purpose of  consump- tion 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.    On  the  scope  and meaning of clause  (b),  the  learned Judges expressed their view as follows :--     "The  words  ’in the course of ’ make the scope of  this clause very wide. It is not restricted to the point of  time at  which  goods are imported into or exported  from  India. The series of transactions which necessarily precede  export or  import  of goods will come within the  purview  of  this clause.  Therefore,  while in the course of that  series  of transactions,  the  sale  has taken place, such  a  sale  is exempted  from  the levy of sales tax.  The  sale  may  have taken  place within the boundaries of the State.  Even  then sales tax cannot be levied if the sale had taken place while the goods were in the course of import into India or in  the course of export out of India.  We are stressing this  point because  both parties in what we may describe as the  cashew nut cases  entered into a lengthy discussion as to the exact point  of time when the sale became completed and as to  the exact  place  where the goods were when the  sale  became  a completed transaction."     On  this interpretation, local purchases "made  for  the purpose  of  export" were held by the learned Judges  to  be "integral parts of the process of exporting". In support  of this construction the learned Judges referred 1117 to  the debates in the Constituent Assembly on clause  264-A of the draft Constitution which corresponded to article  286 and quoted from the speech of one of the members who  unsuc- cessfully moved an amendment defining export as meaning  the last  transaction and import as meaning the  first  transac- tion.     In view of the wide construction thus placed upon clause (b) of article 286 (1), the arguments before us ranged  over a large field, and as many as four different views as to its scope  and meaning were pressed upon us for  our  acceptance :--     (1)  The  exemption is limited to sales  by  export  and purchases  by import, that is to say, those sales  and  pur- chases  which occasion the export or import as the case  may be, and extends to no other transactions however directly or immediately  connected, in intention or purpose,  with  such sales  or  purchases, and wheresoever the  property  in  the goods may pass to the buyer. This is the view put forward on behalf of the State of Madras. The Advocate-General  thought that a State could not impose sales tax though title  passed within State limits while the goods were still under  trans- port  on  the high seas and no question of  exemption  could therefore  arise.  He said, however, that no such  ease  had actually arisen.     (2)  In addition to the sales and purchases of the  kind described  above, the exemption covers the last purchase  by the exporter and the first sale by the importer, if any,  so directly  and proximately connected with the export sale  or import  purchase  as to form part of the  same  transaction.

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This  view  was sponsored’ by the Attorney-General  who  was also inclined to think, as advised at the moment, that sales or  purchases  made while the goods were on  the  high  seas would  be  exempt, but he would prefer not to  go  into  the wider  question,  because, whatever view  was  taken,  sales such  as  those involved in the present cases must,  in  any event, be exempt.      (3) The exemption covers only those sales and purchases under which the property in the goods 1118 concerned is transferred from the seller to the buyer during the course of the transit, that is, after the goods begin to move and before they reach their foreign destination.   This view  is supported by the State of Bombay and certain  other States.     (4) The view which found favour with the learned  Judges of the High Court in the passage already extracted.     It will be seen that the construction first mentioned is the narrowest and the last mentioned the widest.     We  are clearly of opinion that the sales here in  ques- tion, which occasioned the export in each case, fall  within the  scope  of the exemption under article  286(1)(b).  Such sales  must of necessity be put through by transporting  the goods by rail or ship or both out of the territory of India, that  is  to say, by employing the machinery of  export.   A sale by export thus involves a series of integrated  activi- ties  commencing from the agreement of sale with  a  foreign buyer and ending with the delivery of the goods to a  common carrier  for  transport out of the country by land  or  sea. Such  a sale cannot be dissociated from the  export  without which  it cannot be effectuated, and the sale and  resultant export  form  parts  of a single transaction  of  these  two integrated  activities, which together constitute an  export sale, whichever first occurs can well be regarded as  taking place in the course of the other. Assuming without  deciding that the property in ’the goods in the present cases  passed to  the  foreign buyers and the sales  were  thus  completed within the State before the goods commenced their journey as found  by the Sales Tax Authorities, the sales must,  never- theless, be regarded as having taken place in the course  of the   export  and  are,  therefore,  exempt  under   article 286(1)(b).   That clause, indeed, assumes that the sale  had taken place within the limits of the State and exempts it if it  took  place  in the course of the export  of  the  goods concerned.     In  the  foregoing discussion we have assumed  that  the word "sale" used in the Constitution has the same 1119 meaning as in the law relating to the sale of goods, but  it has  been  suggested in the course of the argument  that  it imports  a wider concept than the passing of title from  the seller  to the buyer which under that law is  determined  by highly technical rules based upon the presumed intention  of the  parties and liable to be displaced by  their  expressed intention.  We leave the point open as it is unnecessary for the  purpose of these appeals to pronounce any opinion  upon it.     It was said that, on the construction we have  indicated above, a "sale in the course of export" would become practi- cally synonymous with "export", and would reduce clause  (b) to  a  mere redundancy, because article 246 (1),  read  with entry  83 of List I of the Seventh Schedule, vests  legisla- tive  power  with respect to "duties  of  customs  including export duties" exclusively in Parliament, and that would  be sufficient to preclude State taxation of such  transactions.

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We see no force in this suggestion. It might well be argued, in the absence of a provision like clause (b) prohibiting in terms the levy of tax on the sale or purchase of goods where such sales and purchases are effected through the  machinery of  export  and import, that both the  powers  of  taxation, though  exclusively vested in the Union and the  States  re- spectively,  could be exercised in respect of the same  sale by  export  or  purchase by import, the sales  tax  and  the export  duty  being regarded as essentially of  a  different character.  A similar argument induced the Federal Court  to hold  in  Province of Madras v. Boddu Paidanna  and  Sons(1) that both central excise duty and provincial sales tax could be  validly imposed on the first sale of groundnut  oil  and cake  by the manufacturer or producer as "the two taxes  are economically  two  separate  and  distinct  imposts".   Lest similar  reasoning  should lead to the  imposition  of  such cumulative burden on the export-import trade of this country which is of great importance to  the  nation’s economy,  the Constituent  Assembly may well have thought it necessary  to exempt (1)    [1942] F.C.R. 90. 1120 in terms sales by export and purchases by import from  sales tax by inserting article 286 (1) (b) in the Constitution.     We  are not much impressed with the contention  that  no sale  or purchase can be said to take place "in  the  course of"  export  or import unless the property in the  goods  is transferred  to the buyer during their actual  movement,  as for instance, where the shipping documents are indorsed  and delivered within the State by the seller to a local agent of the  foreign  buyer  after  the  goods  have  been  actually shipped, or where such documents are cleared on payment,  or on  acceptance, by the Indian buyer ’before the  arrival  of the  goods  within the State. This view,  which  lays  undue stress on the etymology of the word "course" and  formulates a mechanical test for the application of clause(b),  places, in our opinion, too narrow a construction upon that  clause, in  so far as it seeks to limit its operation only to  sales and purchases effected during the transit of the goods,  and would, if accepted, rob the exemption of much of its useful- ness.     We  accordingly hold that whatever else may or  may  not fall  within article 286 (1) (b), sales and purchases  which themselves  occasion the export or the import of the  goods, as  the case may be, out of or into the territory  of  India come  within the exemption and that is enough to dispose  of these appeals. Our  attention was called, in the course of the  debate,  to various  American  decisions which hold that the  power  "to regulate"  inter-State  commerce vested exclusively  in  the Congress by article 1 section 8(3) of the American Constitu- tion  (the  Commerce  clause) excludes  by  implication  the States’  power  of taxation only when the goods  enter  "the export. stream", and until then such goods form part of "the general mass of property in the State" subject, as such,  to its  jurisdiction to tax, and that this principle  was  also applicable to cases arising under article 1 section 9(5) and section 10(2) (the Import-Export clause), [see e.g., Empresa Siderurgica v. Merced Co.(1)]. These clauses (1) 337 U.S. 154. 1121 are  widely different in language, scope and purpose, and  a varying  body of doctrines and tests have grown around  them interpreting,  extending or restricting, from time to  time, their  operation and application in the context of  the  ex-

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panding American commerce and industry, and we are of  opin- ion  that  not  much help can be derived from  them  in  the solution  oil the problems  arising  under article  286   of the Indian Constitution.     It  remains only to point out that the use made  by  the learned Judges below of the speeches made by the members  of the Constituent Assembly in the course of the debates on the draft  Constitution is unwarranted.  That this form  of  ex- trinsic aid to the interpretation of statutes is not  admis- sible  has been generally accepted in England, and the  same rule  has been observed in the construction of Indian  stat- utes--see Administrator-General  of  Bengal  v.  Prem   Nath Mallick(1). The reason behind the rule was explained by  one of us in Gopalan’s case(2) thus :--     "A  speech  made in the course of the debate on  a  bill could at best be indicative of the subjective intent of  the speaker,  but it could not reflect the  inarticulate  mental process  lying  behind the majority vote which  carried  the bill.  Nor is it reasonable to assume that the minds of  all those legislators were in accord," or, as it is more tersely put in an American case-       "Those  who  did not speak may not have   agreed  with those  who did; and those who spoke might differ  from  each other--United     States    v.    Trans-Missouri     Freight Association(3).’’      This  rule of exclusion has not always been adhered  to in America, and sometimes distinction is made between  using such  material  to ascertain the purpose of  a  statute  and using  it for ascertaining its meaning.  It would seem  that the rule is adopted in Canada and Australia --see Craies  on Statute Law, 5th Ed., p. 122. (1) (895) 22 I.A. Io7,118. (2)[1950] S.C.R.88. (3) 169 U.S.290,318. 144 1122     In the result, agreeing with the conclusion of the  High Court,  though on different grounds, we dismiss the  appeals with costs. Appeals dismissed. Agent for the appellants: P.A. Mehta.     Agent  for the respondent in C.A. No. 25 of  52:  M.S.K. Sastri.     Agent  for the respondent in C.A. No. 28 of  52:  Sardar Bahadur.     Agent  for the respondent in C.A. No. 29 of  52:  V.P.K. Nambiyar.     Agent  for  the Interveners (Union of  India,  State  of Bombay,  State  of  Madras, State  of  Hyderabad,  State  of Punjab, State of MysOre, and State of Orissa): P.A. Mehta. Agent for the State of Uttar Pradesh: C.P. Lal.