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PETITIONER: THE STATE OF BOMBAY AND ANOTHER

       Vs.

RESPONDENT: THE UNITED MOTORS (INDIA) LTD. AND OTHERS.UNION

DATE OF JUDGMENT: 30/03/1953

BENCH: SASTRI, M. PATANJALI (CJ) BENCH: SASTRI, M. PATANJALI (CJ) MUKHERJEA, B.K. BOSE, VIVIAN HASAN, GHULAM BHAGWATI, NATWARLAL H.

CITATION:  1953 AIR  252            1953 SCR 1069  CITATOR INFO :  R          1953 SC 274  (6)  R          1953 SC 333  (7,24,60)  R          1954 SC 403  (7)  O          1955 SC 661  (5,8,10,16,18,21,23,26,28,29,  RF         1955 SC 765  (6,32)  F          1957 SC 628  (12,15,19,20)  RF         1957 SC 790  (10)  F          1958 SC 328  (22)  E          1958 SC 452  (9,14)  RF         1958 SC 468  (8,9,17,24,28,29,30,31,39,52,  R          1958 SC 560  (14,32)  F          1958 SC 643  (5,17)  E&F        1959 SC 725  (10)  R          1960 SC 378  (3,4,11)  F          1961 SC  65  (5,9,22,45,49,57)  R          1961 SC 232  (57)  D          1961 SC 311  (8)  R          1961 SC 315  (21)  F          1961 SC 347  (7,24,25)  RF         1961 SC 402  (4,5,6,12,13,14,15,17)  F          1961 SC 408  (9)  RF         1961 SC1183  (16)  R          1961 SC1433  (9,10)  RF         1961 SC1438  (2)  R          1961 SC1615  (11)  R          1962 SC1006  (34,81)  R          1962 SC1406  (9)  F          1962 SC1563  (15)  R          1962 SC1621  (12,39,46,165)  RF         1963 SC 906  (19)  F          1963 SC1207  (40)  RF         1964 SC 584  (3)  R          1964 SC 922  (6)  R          1965 SC1636  (24)  R          1965 SC1942  (10)  R          1966 SC1350  (10)  RF         1967 SC 344  (4)  RF         1968 SC 339  (6)  RF         1969 SC 147  (8)  RF         1970 SC 306  (4,7)  RF         1971 SC 946  (8)  RF         1974 SC1505  (3)

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RF         1977 SC2279  (54)  RF         1984 SC1194  (4)  RF         1985 SC 218  (17)  RF         1985 SC 901  (10)  D          1988 SC1531  (191)  RF         1989 SC1371  (5)  R          1989 SC1933  (21)  R          1989 SC2227  (32)

ACT:     Bombay Sales Tax Act (XXIV of 1952), ss.2(14),  5,6,7,11 -Bombay  Sales Tax Rules, 1952, rr. 5,6-State  law  imposing sales  tax -Validity -Power of States to levy tax on  inter- State  sales -Limitations-Rlules-Whether form part  of  Act- Constitution of India, 1950, arts. 286 (2) and (2), 14, 801, 304,  226  -Meaning and scope of art. 286 (1) and  art.  286 (2)-Application  under art. 226 -Duty of High Court to  find whether fundamental rights have been infringed.

HEADNOTE:      The  Legislature  of Bombay passed an Act  entitled  the  Bombay  Sales  Tax  Act, 1952, which imposed  (by  s.  5)  a  general  tax  on every dealer whose turnover in  respect  of  sales  within  the  State of Bombay  during  the  prescribed  period  exceeded Rs. 30,000 and (by s. 10) a special tax  on  every  dealer whose turnover in respect of sales of  special  goods  made  within the State of Bombay exceeded  Rs.  5,000  during  the prescribed period.  The term ’sale’ was  defined  [in s. 2 (14)] as meaning any transfer of property in  goods  for   cash   or   deferred   payment   or   other   valuable  consideration,   and  an  Explanation  to  this   definition  provided that the sale of any goods which have actually been  delivered in the State of Bombay, as a direct result of such  sale for the purpose of consumption in the said State  shall  be  deemed, for the purposes of the Act to have taken  place  in  the  said  State  irrespective of the  fact  to  at  the  property in the goods has, by reason of such sale, passed in  139  1070  another State.  Rules 5 and 6 of the Bombay Sales Tax Rules,  1952, which were brought into force on the same day on which  ss.  5  and 10 of the Bombay Sales Tax Act came  into  force  provided  for  the  deduction  of  the  following  sales  in  calculating  the  taxable turnover, viz., sales  which  take  place (a) in the course of the import of the goods into,  or  the export of the goods out of, the territory of India,  and  (b)  in the course of inter-State trade or  commerce  (being  the  two kinds of sales referred to cl. (1)(b) and  cl.  (2)  respectively  of art. 286 of the Constitution).  Rule 5  (2)  (1),  however,  required, as a condition  of  the  aforesaid  deductions, that the goods should be consigned by a railway,  ’shipping or aircraft company or country boat registered for  carrying  cargo  or  public motor transport  service  or  by  registered  post.  In an application under art. 226  of  the  Constitution challenging the validity of the Act and praying  inter  alia for a writ against the State of Bombay  and  the  Collector  of  Sales  Tax,  Bombay,  restraining  them  from  enforcing  the  provisions  of the Act, the  High  Court  of  Bombay held that the definition of ’sale’ in the Act was  so  wide as to include the three categories of sale exempted  by  art.  286 of the Constitution from the imposition of tax  by  the States, and as the Act imposed a tax on all such  sales,

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it was wholly void.  On appeal       Held,  per (Patanjali Sastri C. J.,  Mukherjea,  Ghulam  Hasan  and Bhagwati JJ.-Bose T. dissenting)-that the  Bombay  Sales  Tax Act (XXIV of 1952) was not ultra vires the  State  Legislature  on  the ground that it contravened art.  14  or  art.  286 of the Constitution.  But clause (1)  of  sub-rule  (2) of Rule 5 of the Bombay Sales Tax Rules, 1952, was ultra  vires  in  so far as it provided that in  order  that  sales  mentioned  in clause (1) (b) and clause (2) of art.  286  of  the Constitution may be exempt from tax, the goods shall  be  consigned  only  through  a railway,  shipping  or  aircraft  company  or  country boat registered for carrying  cargo  or  public motor transport service or by registered post.  These  provisions  of Rule 5 (2) (1) were, however, severable  from  the other provisions of the Act and could be ignored.  Per Bose T.-The Bombay Sales Tax Act, 1952, is wholly  ultra  vires.  Per  Patanjali Sastri C.J., Mukherjea and Ghulam  Hasan  JJ.  -Article  286  (1)  (a) of the Constitution  read  with  the  Explanation  thereto and construed in the light of art,  301  and  art. 304 prohibits the taxation of sales  or  purchases  involving interState elements by all States except the State  in  which  the  goods  are  delivered  for  the  purpose  of  consumption  therein.  The latter State is left free to  tax  such  sales  or purchases and it derives this power  not  by  virtue of the Explanation to art. 286 (1) but under art. 246  (3)  read  with  entry 54 of List II.   The  view  that  the  Explanation does not deprive the State in which the property  in   the  goods  passed,  of  its  taxing  power  and   that  consequently  both  the State in which the property  in  the  goods passes and the State  1O71  in  which the goods are delivered for consumption  have  the  power to tax, is not correct.     (ii)The  expression  "for the purpose of  consumption  in  that State"in the Explanation to el. (1) of art. 286 must be  understood as having reference not merely to the  individual  importer  or  purchaser but  as  contemplating  distribution  eventually to consumers in general within the State. and all  buyers  within  the  State of delivery  from  out-of  -State  sellers, except those buying for re-export out of the State,  would be liable to be taxed. by the State.     (iii)  Clause  (2) of art. 286 does not affect the  power  of  the  State  in which delivery of goods is  made  to  tax  inter-State sales or purchases of the kind mentioned in  the  Explanation  to el. (1).  The effect of the  Explanation  is  that  such  transactions are saved from the ban  imposed  by  art. 286 (2).     (iv)   The  fact that sales which take place (a)  in  the  course  of  the import of the goods into, or export  of  the  goods  out of, the territory of India and (b) in the  course  of inter-State trade or commerce, are not expressly exempted  by  the Bombay Sales Tax Act could not render the Act  ultra  vires inasmuch as the Rules framed under the Act and brought  into force simultaneously must be -read as a part of the Act  and  Rules 5 and 6 of these Rules exempt such sales.   Delhi  Laws Act, In re ([1951] S.C.R. 747) referred to.    (v)     The  fact that the Bombay Sales Tax Act  does  not  expressly  exclude  from  its  operation  the   transactions  mentioned  in  art. 286 (1) (a) of the  Constitution,  viz.,  sales  and purchases outside the State, does not render  the  Act  ultra vires inasmuch as, on a true construction of  the  Explanation  to  art.  286 (1) (a)  sales  or  purchases  in  respect  of goods delivered for consumption  outside  Bombay  are  not  taxable under the Act, even if the  goods  are  in

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Bombay and the sale is effected there.     (vi)   The  provisions of the charging sections 5 and  10  of  the Act fixing Rs. 30,000 and Rs. 5,000 as  the  minimum  taxable   turnover   for  general  tax   and   special   tax  respectively  are not discriminatory and void under art.  14  read with art. 13 of the Constitution as such  classfication  is perfectly reasonable and no discrimination is involved in  it.     (vii)  Taxing statutes imposing tax on subjects divisible  in  their  nature  which do not  exclude  in  express  terms  subjects  exempted by the Constitution, should not for  that  reason be declared wholly ultra vires and void, for, in such  case  it  is  always feasible to separate  taxes  levied  on  authorised  subjects from those levied on exempted  subjects  and  to exclude the latter - in the assessment to  tax.   In  such  cases the statute itself should be allowed  to  stand,  the  taxing  authority being prevented  by  injunction  from  imposing the tax on subjects exempted by the Constitution.  1072 Bowman  v. Continental Co. (256 U. S. 642; 65 L.  Ed.  1130) relied on, Punjab Province v. Daulat Singh and Another  ([1942] F.C.R. 67) distinguished.       (viii)A  sale "in the course of inter-State  trade"  in  art. 286 (2) of the Constitution includes a sale by a trader  in one State to a consumer in another State.  The expression  is not confined to sales between two traders only.      (ix)The expression "for such State or any part thereof"  in art. 246(3) of the Constitution cannot be taken to import  into  entry 54 of List II the restriction that the  sale  or  purchase referred to must take place within the territory of  that  State.   All that it means is that the  laws  which  a  State is empowered to make must be for the purposes of  that  State.       (x)It is always desirable when relief under art. 226 is  sought on allegations of infringement of fundamental rights,  that  the Court should satisfy itself that such  allegations  are well founded before proceeding further with the matter.        Bose J.-(1) Article 286 (2) cannot be construed in the  light  of  art.  304  (1) as  the  two  articles  deal  with  different matters.      (ii)The  basic idea underlying art. 286 is  to  prohibit  taxation in the case of inter-State trade and commerce until  the  ban  under  el. (2) of the said article  is  lifted  by  Parliament,  and always in the case of imports and  exports.  When  the’ ban is lifted, the Explanation to cl. (1) of  286  comes  into play to determine the situs of the  sale.   This  Explanation  does not govern el. (2) of art. 286 and, as  it  can  only apply to transactions which in truth and  in  fact  take place in the course of inter-State trade and  commerce,  there is no need to call it in aid until the ban is removed.       (iii)Explanation (2) to the definition of sale in s.  2  (14) of the Bombay Sales Tax Act, 1952, which embodies  word  for  word the provisions of the Explanation to art. 286  (1)  directly  offends  cl. (2) of the said article  as  the  ban  under el. (2) has not been lifted by the Parliament.  (iv)Assuming that the Bombay Sales Tax Rules exclude  all   sales  which  are  exempt  from  taxation  under   the  Constitution,  they cannot save the Act, for the  Rules  are  made by a subordinate authority which is not the legislature  and the validity of an Act of the legislature cannot be made  to  depend on what a subordinate authority choses to  do  or  not to do.       (v)The good portion of the Act cannot be separated from  the  bad in this case, even if the Explanation to s. 2  (14)  is expunged and the whole Act is therefore ultra vires.

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Bhagwati J.-(1) Under the general law relating to  sale  of goods, a sale must be regarded as having "taken  place"in  the State in which the property in the goods sold has passed  to the  1073  purchaser  and  that State is entitled to tax  the  sale  or  purchase  as  having  taken place  inside  the  State.   The  Explanation  to  art. 286 (1) does not take away  the  right  which  the State in which the property in the  goods  passed  has to tax the sale or purchase but only deems such purchase  or  sale,  by a legal fiction, to have taken  place  in  the  State  in which the delivery of the goods has been made  for  consumption  therein so as to enable the latter State  also,  to  tax the sale or purchase in question.   The  Explanation  only  lifts  the ban imposed by cl. (1) (a) on  taxation  of  sales  or purchases which take place outside the  State,  to  the extent of the transactions mentioned in the  Explanation  to enable the delivery State also to tax them.       (ii) Delivery   of  the  goods  for  the   purpose   of  consumption  in  the delivery State means delivery  for  the  purpose  of  use  by the-consumers,  and  does  not  include  delivery to a dealer purchasing the goods across the  border  for  dealing with or disposing of the same in  the  ordinary  course  of  trade,  and  the Explanation  to  art.  286  (1)  therefore only covers those cases where, as a direct  result  of the sale or purchase, goods are delivered for consumption  in the delivery State by the consumer and the delivery State  can  tax only this limited class of transactions  under  the  Explanation.      (iii) The  general  provision enacted in  art.  286  (2)  against  the imposition -of tax on the sale or  purchase  of  goods in the course of inter-State trade or commerce  should  give  way to the special provision which is enacted  in  the  Explanation to art. 286 (1) (a) enabling the delivery  State  to  tax such sale or purchase in the limited class of  cases  covered by the Explanation, the transactions covered by  the  Explanation  being  thus  lifted  out  of  the  category  of  transactions in the course of inter-State trade or  commerce  and  assimilated to transactions of sale or  purchase  which  take  place  inside  the State and thus  invested  with  the  character  of an intra-state sale or purchase so far as  the  delivery State is concerned.

JUDGMENT:   CIVIL  APPELLATE  JURISDICTION   Civil Appeal No.  204  of 1952.    Appeal under article 132 (1) of the Constitution of India from  the Judgment and Order dated 11th December,  1952,  of the  High  Court of Judicature at Bombay  (Chagla  C.J.  and Dixit J.) in Miscellaneous Application No. 289 of 1952.  The material facts are stated in the judgment.    M. P. Amin, Advocate-General of Bombay, (Ill.  M. Desai and G. N. Joshi, with him) for the appellants.     N.    M.  Seervai  and  J. B. Dadachanji  for  the  res- pondents. 1074       M.  C.  Setalvad, Attorney-General for  India,  (Porus A. Mehta, with him) for the Union of India.     Lal Narain Sinha for the State of Bihar.    V.   K.  T.  Chari,  Advocate-General  of   Madras,   (A. Kuppuswami, with him) for the State of Madras.     A.    R. Somnatha Iyer, Advocate-General of Mysore, (R.  Ganapathy Iyer, with him) for the State of Mysore.

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  B.     Sen for the State of West Bengal.     K. L. Misra, Advocate-General of Uttar Pradesh,     K. B. Asthana, with him) for the State of Uttar Pradesh.     S.    M.  Sikri,  Advocate-General of  Punjab,  (M.   L. Sethi, with him) for the State of Punjab.     T.    N.    Subrahmanya   Iyer,   Advocate-General    of Travancore-Cochin State, (M.  R. Krishita Pillai, with  him) for the State of Travancore-Cochin.     1953.   March 30.  The judgment of Patanjali  Sastri  C. J.,  Mukherjea  and  Ghulain  Hasan  JJ.  was  delivered  by Patanjali  Sastri  C.  J.  Vivian  Bose  and  Bhagwati   JJ. delivered separate judgments.     PATANJALI  SASTRI  C.  J.-This is  an  appeal  from  the judgment and order of the High Court of Judicature at Bombay declaring  the  Bombay  Sales Tax Act, 1952,  (Act  XXIV  of 1952), ultra vires the State Legislature and issuing a  writ in  the nature of mandamus against the State of  Bombay  and the  Collector  of  Sales Tax,  Bombay,  appellants  herein, directing  them  to forbear and desist  from  enforcing  the provisions  of the said Act against the respondents who  are dealers in motor cars in Bombay.     The  Legislature  of  the State of  Bombay  enacted  the Bombay Sales Tax Act, 1952, (hereinafter referred to as ,the Act")  and it was brought into force on October 9, 1952,  by notification  issued under section 1 (3) of the Act,  except sections  5,  9,  10 and 47 which  came  into  operation  on November 1, 1952, as notified under section 2 (3).  On,  the same day the rules made by the State Government in  exercise of  the power conferred by section 45 of the Act  also  came into force. 1075     On  November  3, 1952, the respondents 1 to 6,  who  are companies incorporated under the Indian Companies Act, 1913, and  respondent No. 7, a partnership firm, all of  whom  are carrying  on business in Bombay of buying and selling  motor cars,  presented a petition to the High Court under  article 226 of the Constitution challenging the validity of the  Act on the ground that it is ultra vires the State  Legislature, inasmuch  as  it purported to tax sales  arid  purchases  of goods  regardless  of  the  restrictions  imposed  on  State legislative  power by article 286 of the  Constitution.   It was  also  alleged  that  the provisions  of  the  Act  were discriminatory  in their effect and, therefore,  void  under article  14 read with article 13 of the  Constitution.   The respondents  accordingly prayed for the issue of a  writ  in the  nature  of mandamus against the  appellants  preventing them  from enforcing the provisions of the Act  against  the respondents.   A  further  ground of  attack  was  added  by amendment  of the petition to the effect that the Act  being wholly  ultra  vires  and  void,  the  provisions  requiring dealers  to  apply  for registration in some  cases  and  to obtain  a licence in some others as a condition of  carrying on  their business, infringed the fundamental rights of  the respondents under article 19 (1) (g) of the Constitution.       In  the  affidavit  filed  in  answer  the  appellants traversed  the  allegations in the petition  and  contended, inter  alia, that the Act was a complete code  and  provided for special machinery for dealing with all questions arising under  it,  including questions of  constitutionality,  and, therefore,  the  petition  was not  maintainable,  that  the present  ease was not an appropriate one for the issue of  a writ under article 226 as the validity of the imposition  of a tax was questioned, that no assessment proceedings  having been initiated against the respondents and no demand  notice having been issued, the respondents had no cause of  action,

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and that, properly construed, the Act and the Rules did  not contravene  article  286  or any  other  provisions  of  the Constitution  and did not infringe any fundamental right  of the respondents, 1076 The petition was heard by a Division Bench of the High Court consisting  of Chagla C. J. and Dixit J. Chagla C.  J.,  who delivered  the judgment, Dixit J. concurring, overruled  the preliminary objection disdistinguishing the decisions  cited in support thereof by pointing out that the principle that a court  would not issue a prerogative writ when  an  adequate alternative  remedy was available could not apply where,  as here, a party came to the court with an allegation that  his fundamental  rights  had been infringed  and  sought  relief under  article 226.  The learned Judges however thought,  in view  of the conclusion they had come to on the question  of competency of the State Legislature to pass the Act, it  was "not necessary to consider the challenge that has been  made to  the  Act  under articles 14 and  19"  and  expressed  no opinion  on  the alleged infringement  of  the  respondents’ fundamental rights.      On  the  merits,  the  learned  Judges  held  that  the definition  of "sale" in the Act was so wide as  to  include the  three categories of sale exempted by article  286  from the  imposition  of  sales tax by the States,  and,  as  the definition governed the charging sections 5 and 10, the  Act must  be  taken  to impose the tax’ on such  sales  also  in contravention  of article 286.  The Act must, therefore,  be declared  wholly  void,  it being impossible  to  sever  any specific  offending provision so as to save the rest of  the Act, as "the definition pervades the whole Act and the whole scheme of the Act is bound up with the definition of  sale". The  learned Judges rejected the argument that the  Act  and the Rules must be read together to see whether the State has made  a law imposing a tax in contravention of article  286, remarking  that "if the Act itself is bad,, the rules,  made under  it  cannot have any greater efficacy".  Nor  was  the Government, which was authorised to make rules for  carrying out  the purpose of the Act, under an obligation to  exclude the exempted sales.  The rules, too, did not exclude all the three categories of exempted sales but only two of them, and even such exclusion was hedged 1077     In view of the importance of the issues involved, notice of  the appeal was issued to the AdvocatesGeneral of  States under  Order  XLI, Rule 1, and many of them  intervened  and appeared before us.  The Attorney-General of India, to  whom notice  was also sent, intervened on behalf of the Union  of India.   We have thus had the assistance of a full  argument dealing with all aspects of the case.     The  Advocate-General of Bombay, appearing on behalf  of the appellants, took strong exception to the manner in which the  learned Judges below disposed of the objection  to  the maintainability of the petition.  He complained that, having entertained the petition on the ground that infringement  of fundamental  rights was alleged, and that the  remedy  under article 226 was, therefore, appropriate, the learned  Judges issued a writ without finding that any fundamental right had in  fact been infringed.  Learned counsel for the  State  of West  Bengal  also represented that parties  in  that  State frequently  got  petitions  under article  226  admitted  by alleging violation of some fundamental right, and the  court sometimes issued the writ asked for without insisting on the allegation  being substantiated.  We are of opinion that  it is always desirable, when relief under article 226 is sought

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on  allegations of infringement of fundamental rights,  that the  court should satisfy itself that such  allegations  are well founded before proceeding further with the matter.   In the  present  case,  however, the  appellants  can  have  no grievance, as the respondents’ allegation of infringement of their  fundamental right under article 19 (1) (g) was  based on  their contention that the Act was ultra vires the  State Legislature,  and that contention having been  accepted,  by the  Court  below, there would clearly  be  an  unauthorised restriction  on  the respondents’ right to  carry  on  their trade,  registration  and  licence being  required  only  to facilitate collection of the tax imposed. As Mr. Seervai for the  respondents rightly submitted, the fact that the  Court below  left  the question undecided, though  the  point  was concluded by the 140 1078 decision  of this Court in Mohammad Yasin v. The  Town  Area Committee, Jalalbad (1), which was  brought to the notice of the learned Judges, was not the fault of the respondents and gave no real cause for complaint.    Before considering whether the appellant State has made a law  imposing,  or authorising the imposition of, a  tax  on sales  or purchases of goods in disregard of  constitutional restrictions on its legislative power in that behalf, it  is necessary  to  ascertain  the scope of such  power  and  the nature  and  extent of the restrictions placed  upon  it  by article 286.  The power is conferred by article 246 (3) read with  entry  54 of List 11 of the Seventh  Schedule  to  the Constitution.  The Legislature of any State has, under these provisions, the exclusive power to make laws "for such State or  any part thereof" with respect to "taxes on the sale  or purchase  of goods other than newspapers".   The  expression "for such State or any part thereof" cannot, in our view, be taken to import into entry 54 the restriction that the  sale or purchase referred to must take place within the territory of  that State.  All that it means is that the laws which  a State is empowered to make must be for the purposes of  that State.   As pointed out by the Privy Council in the  Wallace Brothers  case  (2) in dealing with the  competency  of  the Indian  Legislature  to  impose tax on  the  income  arising abroad to a non-resident foreign company, the constitutional validity  of the relevant statutory provisions did not  turn on  the possession by the legislature  of  extra-territorial powers  but  on the existence of  a  sufficient  territorial connection  between  the taxing State and what it  seeks  to tax.  In the case of sales-tax it is not necessary that  the sale  or purchase should take place within  the  territorial limits of the State in the sense that all the ingredients of a  sale  like the agreement to sell, the passing  of  title, delivery  of  the  goods, etc., should  have  a  territorial connection   with  the  State.   Broadly   speaking,   local activities  of buying or selling carried on in the State  in relation  to  local  goods would be a  sufficient  basis  to sustain the taxing power of the State, provided of  course,’ such (1) [1952] S.C.R. 572. (2) [1948] S.C.R. I 1079 activities  ultimately  resulted  in  a  concluded  sale  or purchase to be taxed.    In exercise of the legislative power conferred upon  them in  substantially similar terms by the Government  of  India Act,  1935,  the Provincial Legislatures  enacted  sales-tax laws for their respective Provinces, acting on the principle

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of territorial nexus referred to above; that is to say, they picked  out  one or more of the ingredients  constituting  a sale and made them the basis of their sales-tax legislation. Assam  and  Bengal  made  among  other  things  the   actual existence  of the goods in the Province at the time  of  the contract of sale the test of taxability.  In Bihar the  pro- duction or manufacture of the goods in the Province was made an additional ground.  A net of the widest range perhaps was laid  in Central Provinces and Bert where it was  sufficient if  the goods were actually "found" in the Province  at  any time  after  the  contract of sale or  purchase  in  respect thereof was made.  Whether the territorial nexus put forward as  the  basis  of the taxing power in each  case  would  be sustained  as  sufficient was a matter of doubt  not  having been  tested in a court of law.  And such claims  to  taxing power  led to multiple taxation of the same  transaction  by different  Provinces  and cumulation of the  burden  falling ultimately on the consuming public.  This situation posed to the  Constitution  makers  the problem  of  restricting  the taxing  power  on sales or purchases  involving  inter-State elements,  and alleviating the tax burden on  the  consumer. At the same time they were evidently anxious to maintain the State  power of imposing non-discriminatory taxes  on  goods imported  from  other States, while upholding  the  economic unity  of India by providing for the freedom of  inter-State trade  and  commerce.   In their attempt  to  harmonise  and achieve  these somewhat conflicting objectives they  enacted articles 286, 301 an 304.  These articles read as follows:      286. (1)  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- 1080 (a)  outside the State ; or (b)  in  the  course of the import of the  goods  into,  nor 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 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.     (2)   Except  in  so  far  as  Parliament  may  by   law otherwise  provide,  no  law of a  State  shall  impose,  or authorise  the imposition of, a 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  being lawfully  levied by the Government of any State  immediately before   the  commencement  of  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  a  State  im- posing, or authorising the imposition of, a tax 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.     301,  Subject  to  the other provisions  of  this  Part, trade, commerce and intercourse throughout the territory  of India shall be free.

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    304. Notwithstanding anything in article 301 or article   303, the Legislature of a State may by law-     (a)   impose on goods imported from other States any tax to which similar goods manufactured or 1081 produced  in that State are subject, so, however, as not  to discriminate  between  goods  so imported  and  goods,&,  so manufactured or produced; and     (b)   impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that  State as may be required in the public interest:    Provided  that no Bill or amendment for the  purposes  of clause  (b) shall be introduced or moved in the  Legislature of a State without the previous sanction of the President.    It  will be seen that the principle of freedom of  inter- State  trade  and  commerce  declared  in  article  301   is expressly  subordinated to the State power of  taxing  goods imported from sister States, provided only no discrimination is  made in favour of similar goods of local  origin.   Thus the  States  in India have full power of  imposing  what  in American  State  legislation is -called the use  tax,  gross receipts  tax,  etc. not to speak of the  familiar  property tax, subject only to the condition that such tax is  imposed on  all goods of the same kind produced or  manufactured  in the  taxing  State, although such  taxation  is  undoubtedly calculated  to  fetter inter-State trade and  commerce.   In other  words, the commercial unity of India is made to  give way  before  the State-power of imposing "  any  "  non-dis- criminatory tax on goods imported from sister States.     Having  thus  provided for the  freedom  of  inter-State trade  and commerce subject to the  important  qualification mentioned  above,  the authors of the  Constitution  had  to devise a formula of restrictions to be imposed on the State- power  of  taxing sales or purchases  involving  inter-State elements  which  would  avoid the  doubts  and  difficulties arising  out  of  the imposition of sales-tax  on  the  same transaction  by  several  Provincial  Legislatures  in   the country  before the commencement of the Constitution.   This they did by enacting clause (1) (a) with the Explanation and clause  (2)  of article 286.  Clause (1) (a)  prohibits  the taxation of all sales or purchases which take place  outside the State, 1082 but  a localised sale is a troublesome concept, for, a  sale is  a  composite transaction involving as  it  does  several elements  such as agreement to sell, transfer of  ownership, payment  of the price, delivery of the goods and. so  forth, which may take place at different places.  How, then, is  it to be determined whether a particular sale or purchase  took place within or outside the State ?  It is difficult to  say that  any  one of the ingredients mentioned  above  is  more essential  to a sale or purchase than the others.  To  solve the  difficulty  an easily applicable test  for  determining what  is an outside sale had to be formulated, and  that  is what,  in our opinion, the Explanation was intended  to  do. It  provides by means of a legal fiction that the  State  in which the goods sold or purchased are actually delivered 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 explained  by defining what is an inside sale, and why actual delivery and consumption in the State are made the determining factors in locating a sale or purchase will presently appear.  The test of  sufficient  territorial  nexus was thus  replaced  by  a

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simpler  and  more  easily  workable  test:  Are  the  goods actually  delivered in the taxing State, as a direct  result of  a  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.      It  is,  however, argued on behalf of Bombay  that  the Explanation  does not say that the State of delivery is  the only State in which the sale or purchase shall be deemed  to have taken place.  If that was the intention, it would  have been  easy to say so.  On the other hand,  the  non-obstante clause  in the Explanation is said to indicate  that,  apart from  cases  covered by the legal fiction,  the  passing  of property  in  the goods is to determine the place  of  sale. Thus, both the State of delivery                1083 and the State in which the property in the goods sold passes are,  it  is claimed, empowered to tax.  We  are  unable  to accept this view.  It is really not necessary in the context to use the word " only " in the way suggested, for, when the Explanation says that a sale or purchase shall be deemed  to have  taken place in a particular State, it follows that  it shall  be deemed also to have taken place outside the  other States.   Nor can the non-obstante clause be  understood  as implying that, under the general law relating to the sale of goods,  the  passing  of the property in the  goods  is  the determining factor in locating a sale or purchase.   Neither the  Sale  of Goods Act nor the common law relating  to  the sale of goods has anything to say as to what the situs of  a sale  is,  though  certain rules have  been  laid  down  for ascertaining the intention of the contracting parties as  to when  or under what conditions the property in the goods  is to  pass to the buyer.  That question often raises  ticklish problems for lawyers and courts, and to make the passing  of title  the determining factor in the location of a  sale  or purchase   would  be  to  replace  old   uncertainties   and difficulties  connected with the nexus basis with new  ones. Nor  would the hardship of multiple taxation be obviated  if two  States were still free to impose tax on the same  tran- saction.   In  our  opinion,  the  non-obstante  clause  was inserted  in the Explanation simply with a view to  make  it clear beyond all possible doubt that it was immaterial where the  property in the goods passed, as it might otherwise  be regarded as indicative of the place of sale.    It  is also to be noted in this connection that,  on  the construction  suggested by the Advocate-General  of  Bombay, namely, that the Explanation was not intended to deprive the State  in  which  the property in the goods  passed  of  its taxing power, but only to exclude the sales or purchases  of the kind described in the Explanation from the operation  of clause (1) (a) which prohibits taxation of outside sales  or purchases,   the  Explanation  would  operate,  not  as   an explanation,  but  as  an exception or  a  proviso  to  that clause.  It 1084 may  be  that  the  description of  a  provision  cannot  be decisive  of its true meaning or interpretation  which  must depend   on   the  words  used  therein,   but,   when   two interpretations are sought to be put upon a provision,  that which fits the description which the legislature has  chosen to   apply   to  it  is,  according  to  sound   canons   of construction,  to  be  adopted provided, of  course,  it  is

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consistent with the language employed, in preference to  the one  which  attributes to the provision a  different  effect from what it should have according to its description by the legislature.      It  was  then  said that the formula  of  delivery  for consumption  within  a  State  could  only  cover  the  com- paratively  few  cases of sales or  purchases  taking  place directly  between  the consumers in the delivery  State  and dealers in other States, and inter-State sales or  purchases between  dealers  in either State, which must be  larger  in number  and volume, would still be outside the scope of  the Explanation, which could not, therefore, have been  intended to  empower only one State, namely, the delivery  State,  to tax all inter-State sales or purchases.  We see no force  in this objection.  It is to be noted that the Explanation does not  say  that the consumption should be  by  the  purchaser himself.   Nor  do  the  words "as  a  direct  result"  have reference to consumption.  They qualify " actual delivery ". The  expression  " for the purpose of  consumption  in  that State  "  must,  in our opinion,  be  understood  as  having reference not merely to the individual importer or purchaser but as contemplating distribution eventually to consumers in general within the State.  Thus all buyers within the  State of  delivery from out-of-State sellers, except those  buying for  re-export out of the State, would be within  the  scope of-the  Explanation and liable to be taxed by the  State  on their  inter-State  transactions.  It should  be  remembered here that the Explanation deals only with interState  sales. or   purchases  and  not  with  purely  local  or   domestic transactions.  That these are subject to the taxing power of the State has never been questioned.    We are therefore of opinion that article 286 (1) (a) read with the Explanation prohibits taxation of sales 1085 or  purchases involving inter-State elements by  all  States except  the State in which the goods are delivered  for  the purpose of consumption therein in the wider sense  explained above.   The latter State is left free to tax such sales  or purchases,  which  power  it derives not by  virtue  of  the Explanation but under article 246 (3) read with entry 54  of List II.     We will now consider the effect of article 286(2) on the taxability  of  inter-State sales or purchases of  the  kind envisaged by the Explanation to clause (1) (a).  As both the Explanation  and  clause  (2)  deal  only  with  inter-State transactions,  it  may appear at first blush  that  whatever taxing power the Explanation may have reserved to the  state of  delivery is nullified by clause (2), at any  rate  until Parliament chooses to lift the ban under the power  reserved to  it  by the opening words of clause (2).  As one  way  of avoiding  this  result I it was suggested by  the  Advocate- Gneral of Bombay that the expression "inter-State trade  and commerce" in clause (2) may be construed as meaning dealings between  a trader in one State and a trader in  another,  so that  the  clause  would  be applicable  only  to  sales  or purchases  in the course of dealings between  such  traders. The ban under clause (2) could not in that view, affect  the taxability of a sale by a trader in one State to a  consumer or  user in another.  We cannot agree with this  restrictive interpretation  of  the expression " inter-State  trade  and commerce".   The sale by a trader in one State to a user  in another would be a sale "in the course of inter-State trade" according to the natural meaning of those words, and we  can see  no  reason  for  importing  the  restriction  that  the transaction  should be one between two traders  only.   This

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is,  however,  not  to say that the  ban  under  clause  (2) extends to the taxing power which the delivery State is left free, under the Explanation, to exercise.  We are of opinion that the operation of clause (2) stands excluded as a result of  the  legal fiction enacted in the explanation,  and  the State  in  which  the goods  are;’  actually  delivered  for consumption   can  impose  tax  on;  inter-State  sales   or purchases.  The effect of the 141 1086    Explanation in regard to inter-State dealings is, in  our view,  to invest what, in truth, is an inter-State  transac- tion  with an intrastate character in relation to the  State of  delivery,  and  clause  (2)  can,  therefore,  have   no application.   It  is  true that the  legal  fiction  is  to operate " for the purposes of sub-clause (a) of clause (1)", but  that means merely that the Explanation is  designed  to explain the meaning of the expression "outside the State" in clause  (1) (a).  When once, however, it is determined  with the  aid  of the fictional test that a  particular  sale  or purchase  has  taken  place  within  the  taxing  State,  it follows,  as  a corollary, that the  transaction  loses  its inter-State  character  and  falls outside  the  purview  of clause (2), not because the definition in the Explanation is used for the purpose of clause (2), but because such sale or purchase  becomes  in  the eye of the  law  a  purely  local transaction.  It is said that even though all the  essential ingredients  of a sale took place within one State  and  the sale was, in that sense, a purely intrastate transaction, it might  involve  transport  of the goods  across  the  State- boundary,  and that would be sufficient to bring  it  within the scope of clause (2).  We find it difficult to appreciate this argument.  As already stated, the Explanation envisages sales  or  purchases  under  which  out-of-State  goods  are imported  into  the State.  That is  the  essential  element which makes such a transaction inter-State in character, and if  it  is  turned into an  intrastate  transaction  by  the operation of the legal fiction which blots out from view the inter-State  element  , it is not logical to  say  that  the transaction, though now become local and domestic in the eye of  the law, still retains its inter-State  character.   The statutory fiction completely masks the inter-State character of  the  sale or purchase which, as a collateral  result  of such making, falls out;side the scope of clause (2). It  is  said  that, on this view, clause  (2)  would  become practically  redundant,  as  clause (1) (a)  read  with  the explanation  as  construed  by  us  would  itself   preclude taxation  by other States of inter-State sales or  purchases of the kind referred to in the explanation.  As 1087    We  have  already pointed out, the Explanation  does  not cover  cases of inter-State sales or purchases  under  which the goods are imported into the State for reexport to  other States  and possibly other categories of sales or  purchases which   do   not  satisfy  all  the  requirements   of   the explanation.   Whether  such transactions  are  sufficiently numerous for the Constitution to take note of is a matter of opinion  and it cannot have much bearing on the question  of construction. On  the  other  hand  there are,  in  our  judgment,  cogent considerations  which  tend  to support  the  view  we  have expressed  above that clause (2) was not intended to  affect the power of the delivery State to tax inter-State sales  or purchases  of the kind mentioned in the Explanation.  As  we have  seen, in our Constitution the principle of freedom  of

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inter-State  trade and commerce is made to give  way  before the  State-power  of imposing  non-discriminatory  taxes  on goods  imported from other States.  Now, article  286(2)  is but one phase of the protection accorded to interState trade and commerce from the fettering power of State taxation.  As article  286  deals with restrictions on the  power  of  the States  to impose tax on the sale or purchase of goods,  the Constitution makers evidently thought that it should contain also a specific provision safeguarding sales or purchases of an  inter-State  character against the taxing power  of  the States. It  is however, reasonable to suppose that  this  particular form  of  protection  to  inter-State  trade  and   commerce provided in article 286(2) was not intended to have a  wider operation  than  what  is contemplated in  Part  XIII  which declares  the  general principle of freedom  of  inter-State commerce   and   defines  the  measure   of   constitutional protection it should enjoy.  If such protection is  intended to give way before the State-power of taxing goods  imported from  sister States, subject only to the  condition  against discrimination,  it  is legitimate to suppose that  the  ban under  article  286(2) should not operate so as  to  nullify that   power.   True,  article  304  (a)  deals   with   the restrictions as to imposition of tax on goods, while article 286 1088 deals with the restrictions as to imposition of tax on sales or  purchases  of goods.  But this distinc  tion  loses  its practical importance in the case of sales-tax imposed by the delivery  State  under  the  conditions  mentioned  in   the Explanation,  for,  if  we look behind  the  labels  at  the substance  of  the matter, it becomes clear that  a  tax  on sales  or purchases imposed by the State in which the  goods are   delivered  for  consumption,  in  the  sense   already explained,    is,    in    economic    effect    practically indistinguishable  from a tax on the consumption or  use  of the  goods.   The words " in which the goods  have  actually been  delivered " ensure that the goods have come  into  the State,  and the expression " for the purpose of  consumption in the State" shows that, though the tax is formally laid on sales, its incidence is aimed at the consumers in the State. Discussing the true nature of a duty of excise and a tax  on the  sale  of  goods, Gwyer C. J. observed  in  the  Central Provinces  and  Berar Sales Tax case (1) : "  It  is  common ground  that  the  Court is entitled to  look  at  the  real substance  of the Act imposing it, at what it does  and  not merely  at  what  it says, in order to  ascertain  the  true nature  of the tax.  Since writers on political economy  are agreed  that  taxes on the sale of  commodities  are  simply taxes  on  the  commodities themselves, it  is  possible  to regard  a  tax  on  the retail sale  of  motor  spirit  -and lubricants  as  a  tax on  those  commodities".   Therefore, sales-tax, the incidence of which is really directed against the consumer, is, in substance, a tax on the goods  imposed, no  doubt, on the occasion of the sale as a  taxable  event. It  will now be seen why the Explanation insists  on  actual delivery of the goods in the State and their consumption  in the  State,  and  why  an  "outside"  sale  or  purchase  is explained  by defining what is an inside sale.   The  object clearly  is  to assimilate the conditions, under  which  the delivery  State  is left free to tax  inter-State  sales  or purchases,  to  those under which a State  is  empowered  to impose  tax  on  goods imported into the  State  from  other States under article 304 (a).  If then, a non-discriminatory use or consumption tax imposed under

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(1)  [1939] F.C.R. 18, 42. 1089 article  304  on goods imported from other States  does  not infringe  the  freedom of inter-State commerce  declared  by article 301, parity of reason and policy requires that a tax on  sales  or purchases imposed by the State  in  which  the goods  are actually delivered for consumption in  the  State should not be regarded as violative of the ban under article 286  (2), and that is what the statutory fiction enacted  in the Explanation was, in our judgment, designed to achieve by divesting  the sale or purchase of the kind referred. to  in the Explanation of its inter-State character in relation  to the State of delivery. There  is  another important  consideration  which  strongly supports  the view we have indicated above,  namely  article 286  (2)  does  not  affect the taxation  of  such  sale  or purchase  by the State of delivery.  If both  the  exporting State and the delivery State were entitled,  notwithstanding article 286(2), to tax the inter-State sale or purchase,  as suggested  by the Advocate-General of Bombay, it would  mean that  the  transaction is subjected to  double  taxation  as compared  with a sale by a local dealer which pays only  one tax.   It  is precisely this type of  discriminatory  burden which the principle of freedom of inter-State commerce seeks to avoid, for, it places inter-State trade at a disadvantage in  competition  with local trade.  On the  other  hand,  if neither State could tax such sale or purchase as is referred to  in the explanation, until Parliament lifted the ban,  as the  Advocate-General of Madras was inclined to  think,  the result would be that consumers could get out-of-State  goods more  cheaply  than  local goods, and  local  dealers  would suffer  competitive  disadvantage as compared  with  outside dealers.   Does  the  principle of  freedom  of  inter-State commerce require that a State should foster such commerce to the  detriment of domestic trade ? It is one thing to  avoid impeding  inter-State  commerce by  imposing  discriminatory burdens upon it which internal trade does not have to  bear, but quite another to place local products and local business at  a  disadvantage in competition with  outside  goods  and dealers.  It would be 1090 a  curious  perversion  of  the  principle  of  freedom   of inter-State  commerce  to  drive  local  custom  across  the border  to outside dealers, and that, in our opinion,  could not have been contemplated. The view which we have expressed above avoids either anomaly and would place local trade and interstate trade on an equal footing.   The  delivery  State would  tax  both  local  and out-of-State  goods equally without  discrimination  against either and that, we think, is the only measure of protection which article 286 could reasonably be supposed to accord  to interState  sales or purchases, when it is construed in  the light of articles 301 and 304. The question next arises as to whether the, Act  contravenes all  or any of the restrictions imposed by article 286.   It is  the respondents’ case that the sales and purchases  made by them in Bombay, in the course of their business,  include all  the three categories excluded from the scope of  State- taxation by article 286, and the Act seeking to bring all of them  within  its  scheme  of  taxation  is  bad.   It   is, therefore,  necessary  to make a brief survey  of  the  main provisions  of the Act and of the rules made thereunder,  in order  to  see whether the respondents’ complaint  is  well- founded,  and, if so, whether the whole or any part  of  the Act is to be declared unconstitutional and void.

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The Act provides for levy of two kinds of taxes, called  the "general  tax"  and the "special tax", by the  two  charging sections  5  and 10 respectively.  "Dealer"  is  defined  in section  2  (7) as a person who carries on the  business  of selling goods in the State of Bombay whether for commission, remuneration  or otherwise and includes a  State  Government which  carries  on such business and any  society,  club  or association  which sells goods to its members.   The  Expla- nation  (2) to this definition provides that the manager  or agent  of a dealer who resides outside the State  of  Bombay and carries on the business of selling goods in the State of Bombay shall, in respect of such business, be deemed to be a dealer  for  the purpose of the Act.  "Sale" is  defined  by section 2 (14) with all 1091 its  grammatical  variations  and  cognate  expressions   as meaning  any  transfer  of property in  goods  for  cash  or deferred   payment  or  other  valuable  consideration   and includes any supply by a society, a club, or an  association to   its  members  on  payment  of  price  or  of  fees   or subscriptions    but   does   not   include   a    mortgage, hypothecation,  charge  or  pledge.   The  words  "buy"  and "purchase"  are to be construed accordingly.  There are  two Explanations  attached  to  this  definition  of  which  the second,  which  is  obviously based on  the  Explanation  to clause  (1) (a) of article, 286, provides that the  sale  of any goods which have actually been delivered in the State of Bombay  as a direct result of such sale for the  purpose  of consumption  in  the said State, shall be  deemed,  for  the purposes of this Act, to have taken place in the said State, irrespective of the fact that the property in the goods has, by reason of such sale, passed in another State.  "Turnover" is defined by section 2(21) as the aggregate of the  amounts of sale price received and receivable by a dealer in respect of  any  sale  of goods made during  a  given  period  after deducting  the amount, if any, refunded by the dealer  to  a purchaser in respect of any goods purchased and returned  by the  purchaser  within  the prescribed  period.   Section  5 imposes  the general tax on every dealer whose  turnover  in respect  of sales within the State of Bombay during  any  of the three consecutive years immediately preceding the  first day  of  April,  1952,  has exceeded  Rs.  30,000  or  whose turnover  in  respect of such sales exceeds the  said  limit during the year commencing on the first day of April,  1952. The  tax is to be levied on his taxable turnover in  respect of sales of goods made on or after the appointed day,  i.e., 1st  November,  1952,  at the rate of 3 pies  in  the  rupee (section  6).   By section 7 the taxable turnover is  to  be determined  by  first  deducting from the  turnover  of  the dealer  in  respect  of all his sales of  goods  during  any period  of  his  liability  to pay  the  general  tax,  his’ turnover during that period, in respect of (a) sales of  any goods declared from time to time as tax-free under section 8 and(b) ,’,such other sales as may be prescribed," No dealer 1092 liable  to pay the general tax shall carry on business as  a dealer unless he has applied for registration (section 9). A more  or less similar scheme is provided for the levy  of  a special  tax on the sale of certain special goods  specified in  Schedule II.  By section 10 every dealer whose  turnover in  respect of sales of special goods made within the  State of Bombay has exceeded Rs. 5,000 during the year ended  31st March,  1952,  or  exceeds the said limit  during  the  year commencing  from 1st April, 1952, is charged with a  special tax  at  the rate specified in Schedule 11  on  his  taxable

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turnover in respect of the sales of special goods made on or after  the  appointed  day, i.e., 1st  November,  1952.   By section II the taxable turnover is to be determined by first deducting, from the turnover of the dealer in respect of his sales  of special goods during any period of his  liability, his  turnover  in  respect of (a)  sales  of  special  goods purchased  by him, on or after the appointed day at a  place in the State of Bombay from a dealer holding a licence under section   12  and  (b)  "    such  other  sales  as   may be prescribed."  Every dealer liable to pay the special tax  is required to obtain a licence as a condition of his  carrying on  his  business (section 12).  Then  follow  certain  pro- visions  for  returns, assessment, payment and  recovery  of tax.   Section  18 imposes a purchase tax at the rate  of  3 pies  in the rupee on the purchases of such goods as may  be notified  by  the State Government from time to  time  which have  been  despatched or brought from any -place  in  India outside  the  State of Bombay or are delivered as  a  direct result  of  a sale to a buyer in, the State  of  Bombay  for consumption therein, and also an additional tax if the goods are  special  goods.  Section 21 (2)  prohibits  any  person selling goods from collecting from the purchaser any  amount by way of tax unless he is a registered dealer or a licensed dealer  and  is  liable to pay the tax  under  this  Act  in respect  of such sale.  Chapter VI contains  provisions  for production   of   accounts,  supply   of   information   and cancellation of registration or licence.  Chapter VII  deals with proceedings including appeals                     1093 and  revision and the determination of certain questions  of law by reference to the High Court.  Section 45 empowers the State  Government  to  make  rules  "for  carrying  out  the purposes  of  this  Act."  In  particular,  such  rules  may prescribe, among other things, "the other sales, turnover in respect of which may be deducted from a dealer’s turnover in computing  his taxable turnover as defined in section 7  and in section 11" [sub-section (2) (e)].   In  exercise of the powers conferred by this section,  the State Government made and published rules called the  Bombay Sales Tax Rules, 1952, which were brought into force on  the same day on which the charging sections 5 and 10 of the  Act were also brought into force, namely, November 1, 1952.   Of these,  Rules 5(1) and 6(1) are important, and they  provide for  the  deduction of the following  sales  in  calculating taxable  turnover under section 7 (general tax) and  section 11  (special  tax) : (1) sales which take place (a)  in  the course  of  the import of the goods into or  export  of  the goods out of the territory of India or (b) in the course  of inter-State trade or commerce.  It is to be noted that these are  the  excluded categories of sales  or  purchases  under article  286  (1) (b) and (2) respectively.  Rule  5(2)  (1) requires,  as a condition of the aforesaid deductions,  that the goods should be consigned by certain specified modes  of transport.  Clause (v) lays down a rule of presumption to be acted upon in the absence of evidence of actual  consignment of the goods within three months of the sale, that the  sale has  not  taken place in the course of export or  of  inter- State  trade  as the case may be.  It is  not  necessary  to refer to the provisions of the other rules.    Now, it will be seen from the provisions summarised above that the Act does not in terms exclude from its purview  the sales or purchases taking place outside the State of  Bombay while it does include, by Explanation (2) to the  definition of "sale", the ‘sales or purchases under which the  delivery and consumption take place in Bombay which, by virtue of the

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Explanation  to  article 286(1)(a), are to  be  regarded  as local 142 1094 sales or purchases.  On the construction we have placed upon that  Explanation, sales or purchases effected in Bombay  in respect  of  goods in Bombay but delivered  for  consumption outside  Bombay  are  not  taxable  in  Bombay.   Now,   the respondents  complain that the latter category of  sales  or purchases  thus  held not to be taxable  are  not  expressly excluded  by the Act which, therefore,  contravenes  article 286  (1)(a).   No doubt, there is no provision  in  the  Act excluding  in  express terms sales of the kind  referred  to above,  but  neither is there any  provision  purporting  to impose  tax on such sales or purchases.  On the other  hand, the two charging sections of the Act, section 5 and  section 10,  purport,  in express terms, to impose the  tax  on  all sales  made  "within the State of Bombay", and  section  18, which lays the tax on purchases, is limited in its operation to  purchases of goods delivered to a buyer in the State  of Bombay for consumption therein, that is to say, to purchases which unquestionably are taxable by Bombay according to both parties.  The charging sections cannot, therefore, be  taken to  cover  the  class of sales or purchases  which,  on  our construction  of  the  Explanation, are to  be  regarded  as taking place outside the State of Bombay.  We see no  force, therefore,  in  the argument that the  Act  contravenes  the provisions  of  article 286(1)(a) by  purporting  to  charge sales  or  purchases excluded by that  article  from  State- taxation. As  regards the other two categories of sales  or  purchases excluded  by article 286(1)(b) and (2), it is true that  the Act  taken by itself does not provide for  their  exclusion. But,  as  pointed  out already, rules 5 and  6,  which  deal respectively with deduction of certain sales in  calculating the  taxable turnover under sections 7 and 11 exclude  these two  categories  in  express terms,  and  these  rules  were brought into force simultaneously with the charging sections 5 and 10 on November 1, 1952.  The position, therefore,  was that, on the date -when the general tax and the special  tax became  leviable  under the Act, sales or purchases  of  the kind  described  under article 286(1) (b) and (2)  stood  in fact excluded from taxation, and the State of 1095 Bombay cannot be considered to have made a "law imposing  or authorising  the imposition of a tax" on sales or  purchases excluded  under the aforesaid clauses of article  286.   The Act  and  the  rules  having  been  brought  into  operation simultaneously,  there  is no obvious reason why  the  rules framed in exercise of the power delegated by the Legislature should  not  be regarded as part of the "law"  made  by  the State.  [See observations at page 862 in the Delhi Laws  Act case(1)].  The position might be different if the rules  had come  into  operation  sometime  later  than  the   charging sections of the Act, for, in that case, it is arguable  that if  the  legislation, without excluding the two  classes  of sales  or  purchases,  was  beyond  the  competence  of  the Legislature  at the date when it was passed,  the  exclusion subsequently  effected  by the rules  cannot  validate  such legislation.   But,  as  already stated,  that  is  not  the position  here,  and the learned Judges below fell  into  an error by overlooking this crucial fact when they say "If the Legislature  had  no  competence on the  date  the  law  was passed,   the  rules  subsequently  framed   cannot   confer competence on the Legislature".

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Even  so,  it  was contended, the  exclusion  of  the  sales covered  by clause (1)(b) and clause (2) of article 286  was hedged  round  with  conditions  and  qualifications   which neither  the Legislature nor the rule-making  authority  was competent  to impose on the exclusion and,  therefore,  such rules,  even if read as part of the Act, could not cure  the constitutional    transgression.    The    conditions    and qualifications  complained of are mostly found to relate  to mere  matters  of proof, e.g., rule 5(2),  Explanation  (2), which  insists  on the production of a certificate  from  an appropriate authority, before a motor vehicle, despatched to a  place outside the State of Bombay by road and  driven  by its  own power, could be exempted as an article sold in  the course of interState trade.  No objection can reasonably  be raised  if the taxing authority insists on certain modes  of proof  being  adduced  before a claim to  exclusion  can  be allowed.  Objection was also taken to clause (1) of (1)  [1951] S.C.R. 747. 1096 sub-rule  (2)  of rule 5 as imposing an  unauthorised  limi- tation upon the exemption of sales and purchases allowed  by rule  5(1), that is to say, while rule 5(1)(1)  (allows  the deduction of the sales covered by clause (1) (b) and (2)  of article  286 in calculating taxable turnover,  sub-rule  (2) (1)  of the same rule provides that, in order to claim  such deduction  the  goods  shall be  consigned  only  through  a railway,  shipping  or  aircraft  company  or  country  boat registered  for  carrying cargo or  public  motor  transport service or by registered post.  It is said that there is  no reason  why  sales  of goods despatched by  other  modes  of transport  should  not  also be deducted  from  the  taxable turnover, because article 286 (2) in exempting sales in  the course  of inter-State trade, makes no  distinction  between modes  of transport by which the goods are despatched.  This limitation, it was claimed, was beyond the competence of the rule-making  authority.  The argument is not without  force, and  it  must be held that rule 5(2)(1) is ultra  vires  the rule-making authority and therefore void.  But it is clearly severable from rule 5(1)(1).  The restriction regarding  the mode  of  transport of the goods sold or  purchased  in  the course of inter-State trade, to which alone sub-rule  (2)(1) relates, can be ignored and the exemption under rule 5(1)(1) may well be allowed to stand.    Finally,  Mr.  Seervai  attempted to make  out  that  the provisions  of  the charging sections 5 and  10  fixing  Rs. 30,000  and  Rs. 5,000 as the minimum taxable  turnover  for general tax and special tax respectively were discriminatory and  void  under  article 14 read with  article  13  of  the Constitution,  and  he  gave us several  tables  of  figures showing how the imposition of the tax actually works out  in practice  in  hypothetical cases.  It is unnecessary  to  go into. the details of these cases which have been worked  out in figures, for it must be conceded that the general  effect of fixing these minimum limits must necessarily be to enable traders whose taxable turnover is below those limits to sell their goods at lower prices to their customers than  dealers whose turnover exceeded 1097 those  limits, for the latter have to add the  sales-tax  to the  prices  of  their  goods.   But  no  discrimination  is involved in this classification which is perfectly  reason-, able  when  it  is borne in mind that  the  State  may  not’ consider  it  administratively worthwhile to  tax  sales  by small  traders  who have no  organisational  facilities  for collecting the tax from their buyers and turn it over to the

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Government.   Each  State must, in imposing a  tax  of  this nature, fix its own limits below which it does not  consider it  administratively  feasible or worthwhile to  impose  the tax.   It  is  idle to suggest that  any  discrimination  is involved in such classification.     Apart from the considerations set forth above which tend to  support the constitutional validity of the Act,  it  was broadly  contended before us that taxing  statutes  imposing tax  on  subjects divisible in their nature’  which  do  not exclude   in   express  terms  subjects  exempted   by   the Constitution,  should  not,  for that  reason,  be  declared wholly  ultra  vires  and void, for, in such  cases,  it  is always  feasible  to  separate taxes  levied  on  authorised subjects  from  those  levied on exempted  subjects  and  to exclude  the latter in the assessment of the tax.   In  such cases,  it is claimed, the statute itself should be  allowed to stand, the taxing authority being prevented by injunction from   imposing  the  tax  on  subjects  exempted   by   the Constitution.  Our attention was called to certain  American cases  where this principle has been consistently  followed: (see  Bowman v. Continental Company(1), where all  the  pre- vious cases are collected).  In the present case the tax  is imposed,  in ultimate analysis, on receipts from  individual sales  or purchases of goods effected during the  accounting period,  and  it is therefore possible to  separate  at  the assessment  the  receipts  derived from  exempted  sales  or purchases  and allow the State to enforce the  statute  with respect  to the constitutionally taxable subjects, it  being assumed  that  the State intends naturally to keep  what  it could lawfully tax, even where it purports to authorize  the taxation of what is constitutionally exempt.  The principle, as it (1) 256 U.S. 642 65 L. Ed. 1098 is tersely put in the American case, is that severability in such cases includes separability in enforcement.      Our  attention was drawn to the decision of  the  Privy Council in Punjab Province v. Daulat Singh and Others(1)  as condemnatory  of  this  principle.   The  case  is  however, clearly distinguishable.  Their Lordships were dealing  with a Provincial enactment providing for the avoidance of benami transactions  as  therein  specified and  the  question  was whether  it was ultra vires the Legislature as  contravening section  298(1) of the Government of India Act, 1935,  which forbade  the  prohibition,  inter alia,  of  disposition  of property  by  an  Indian subject on  certain  grounds  which included  "descent".   It was found that in some  cases  the impugned  enactment  would operate as a prohibition  on  the ground  of descent alone.  The Federal Court(1) by  majority expressed the view that the Act could not, for that  reason, be  invalidated  as a whole but that  the  circumstances  in which its provisions would be inoperative must be limited to cases  where the statute actually operated in  contravention of  the  constitutional inhibition.  Disagreeing  with  this view  their Lordships made the following observations  which were strongly relied on before us: "  The  majority  of  the  Federal  Court  appear  to   have contemplated  another  form of severability,  namely,  by  a classification of the particular cases on which the impugned Act  may  happen to operate, involving an inquiry  into  the circumstances  of each individual case.  There are no  words in the Act capable of being so construed, and such a  course would  in  effect  involve an amendment of the  Act  by  the court, a course which is beyond the competency of the court, as has long been well established."

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   The subject of the constitutional prohibition was single and indivisible, namely, disposition of property on  grounds only  of (among other things) descent and if, in its  actual operation, the impugned statute was found to transgress  the constitutional mandate, the whole Act had to be held void as the words used (1) [1946] F.C.R. 1. (2) [1942] F.C.R. 67. 1099 covered both what was constitutionally permissible and  what was  not.  The same principle was applied by this  court  in the  Cross Roads case(1).  It was, indeed, applied  also  in Bowman’s  case(1)  with respect to the licence  tax  imposed generally on the entire business conducted including  inter- State  commerce  as well as domestic business, but  was  not applied,  as stated above, with respect to excise tax  which was  laid  on  every gallon of gasolene sold  and  was  thus divisible  in  its  nature.  It is a sound  rule  to  extend severability to include separability in enforcement in  such cases,  and we are of opinion that the principle  should  be applied in dealing with taxing statutes in this country, We  accordingly set aside the declaration made by the  court below  and quash the writ issued by it except in  regard  to rule  5  (2)  (1).   An  injunction  shall,  however,  issue restraining the appellants from imposing or authorising  the imposition  of  a  tax  on sales  and  purchases  which  are exempted from taxation by article 286 as interpreted above.       Each party will bear its own costs throughout.     BOSE  J.-I  have  had  the  advantage  of  reading   the judgments  of  my  Lord the Chief  Justice  and  my  learned brother  Bhagwati.   I  regret I am  unable  to  agree  with either.   The  range  of  disagreement  is  not  large   but unfortunately it vitally affects the result.      I agree with the construction which my Lord has  placed upon entry No. 54 of List II.  I also agree that the  object of the Explanation is to fix the locus of a sale or purchase by means of a fiction, but with respect I cannot agree  with my brother Bhagwati that the non-obstante clause  enunciates the  general  law on this point.  I know of no  general  law which fixes the Situs of a sale, not even the Sale of  Goods Act.   What the general law does is to determine  the  place where the property passes in the absence of a special agree- ment,  but  the  place  where the  property  passes  is  not necessarily the place where the sale takes place, nor (1) [1950] S.C.R. 594      (2) 256 U.S. 642, 1100 has  that  ever  been regarded as  the  determining  factor. What, in my opinion, happened was this.    Before the passing of the Constitution, different  States (or  Provinces as they then were) claimed the right  to  tax the  same  transaction for a variety of reasons  which  have been  pointed out by my Lord the Chief Justice.  The  result was   that   the  price  of   certain   commodities   became inordinately  high.   Take, for example, the case  of  steel rails  manufactured  by  the Tata Iron and  Steel  Works  at Tatanagar  and purchased by the Government of India for  its railways.   The Central Government found itself called  upon to  pay  a  sale or purchase tax to different  States  on  a single  transaction  of purchase.  I am not  sure  how  many times over it had to pay but on the notions then current  it was  open  to Bihar to claim the right to  tax  because  the goods  were  manufactured  there,  to  Bengal  because   the transaction  of sale took place at Calcutta where  the  head offices of the company were, to a third Province because the goods were delivered there and to a fourth because they were "found" there.  It hardly matters whether all or any of this

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would have stood scrutiny in a court of law because the fact remains  that  various States were actually taxing  the  one transaction  of sale on the nexus theory. and a real  danger existed of more and more of them coming in to claim a  share of the spoils.  It seems to me that the Constitution  makers considered "this detrimental to the development and exercise of trade and commerce and so determined to put a stop to the practice  but at the same time left Parliament a  discretion to  restore a part of the status quo if and when  it  should think it safe and desirable to do so.   The  narrowing of the powers was  accomplished  by stating  in article 286 that no State can impose a tax on  a sale  or  purchase which takes place outside the  State,  by stating that it cannot tax a sale or purchase in the  course of  import or export and by prohibiting taxes on  sales  and purchases  which  take place in the  course  of  inter-State trade or commerce unless Parliament chooses to lift the ban. Reading these together 1101 in  a  simple and straightforward way it seems clear  to  me that the idea was to permit States to tax only what I  might call intra-state sales and purchases, at, any rate, to begin with.     But  in legal enactments simplicity of  language  seldom evokes  clarity of thought.  So long as the ban  imposed  by clause  (2)  remains, there is no  difficulty  because  when parts  of  a  sale  take  place  in  different  States   the transaction  is inter-State and no tax can be  imposed.   On the  other  hand, when all the  ingredients  are  intrastate clause (2) is not attracted.  Complications only arise  when the ban is lifted.  The Constitution makers had before  them the  existing  practice  of the States based  on  the  nexus theory,  and so it became necessary to define just  where  a sale  takes place in order to carry out the main theme  that only intra-astate sales can be taxed.    The  difficulty  is apparent when one begins to  split  a sale  into its component parts and analyse them.  When  this is  done,  a  sale  is  found to  consist  of  a  number  of ingredients  which can be said to be essential in the  sense that  if any one of them is missing there is no  sale.   The following are some of them: (1) the existence of goods which form  the  subject-matter of the sale, (2)  the  bargain  or contract which, when executed, will result in the passing of the  property in the goods for a price, (3) the payment,  or promise  of  payment,  of a price, (4) the  passing  of  the title.  When all take place in one State, there is no diffi- culty.  The situs of the sale is the place in which all  the ingredients  are brought into being.  But when one  or  more ingredients  take place in different States, what  criterion is one to employ ? It is impossible to say that any of these ingredients  is  more essential than any other  because  the result  is  always the same the moment you  take  one  away. There  is then no sale.  Therefore, one either has to  adopt the  ultra logical view and hold that the only  State  which can  tax is the one in which all the ingredients take  place and that no State can tax when a single ingredient 143 1102 takes  place elsewhere, or resort to the old view  and  hold that every State in which any single ingredient -takes place can tax.  The only alternative to these extremes is to  make an  arbitrary  selection  or to introduce  a  fiction.   The Constitution  chose  the  latter  course  and  enacted   the Explanation.      I  have deemed it proper to refer to the then  existing

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practice regarding taxation because in construing a  statute it is legitimate to take into account existting laws and the manner  in  which they were acted upon  and  enforced.  [See Gwyer C. J. in In re The Central Provinces and Berar Act No. XIV  of 1938(1) and Croft v. Dunphy(2)].  I think this  rule is  even  more appropriate in the case of  the  Constitution because the Constitution itself continues in force all  laws which were in existence at the date when it came into  being except those which are inconsistent with itself.      I am with respect unable to agree that article 286  (2) is to be interpreted in the light of article 304 (a).  In my opinion,  the  two  articles  deal  with  different  things. Article  286  is concerned with sales and  purchases,  while article  304  relates to goods imported from  other  States. The stress in the one case is on the transaction of sale  or purchase;  in the other, on the goods themselves and on  the act  of import.  Article 286 is related to Entry No.  54  of List  II and to Entries 41 and 42 in List I. Article  304(a) to  Entries 26 and 27 of List II read with Entry 33 in  List III  and to Entries 51, 52 and 56 of List II.  The  distinc- tion is, I think, clear when it is realised that (apart from the  Explanation)  a sale or a purchase can  be  taxed  even though  the goods are never actually delivered and  even  if they  never reach the taxing State, for the right is to  tax the sale or purchase and that is something quite independent of  actual delivery.  The goods might be destroyed by  flood or fire before there is any chance of actual delivery.  They might, as in the case of the steel rails purchased by the (1) [1939] F.C.R. 18 at 53. (2) [1933] A.C. 156 at 165. 1103 Government  of  India, be delivered in a  totally  different State,  but  the tax could still be levied if there  was  no Explanation  to stop it.  I find it difficult to see  how,,, article  286(2)  could  ever come into  effective  play  if" article  304  is applied to sales and purchases  which  take place  in the course of inter-State trade or commerce. -A  I do not think the change in language, "a tax on the  sale  or purchase  of any goods" in the one case and a tax on  "goods imported  from other States" was accidental, nor do I  think we  will be justified in ignoring the fact that the two  are placed in different parts of the Constitution.  I  therefore prefer to hold that articles 286 and 304 deal with different things and to construe article 286 without reference to 304. In this I agree with my brother Bhagwati.     Coming back to the Explanation, its object is, I  think, to  resolve  the difficulty regarding the situs of  a  sale. The  Constitution having decided that the only  State  which can  tax  a  sale or a purchase is the State  in  which  the transaction  takes place, and having before it the  conflict of views regarding nexus and Situs, resolved the problem  by introducing  the fiction embodied in the  Explanation.   The purpose  of the Explanation is, in my view, to explain  what is not outside the State and therefore what is inside.  With respect  I  cannot agree that the Explanation is  really  an exception, and I do not think the non-obstante clause  means that  under  the  general lay the lace  where  the  property passes was regarded as the place where the sale takes place, for  that  in itself would be a fiction.  There is  no  such law.  In my opinion all it means is that there was a  school of thought which regarded that as the crucial element on the nexus  view  and that the Constitution  has  negatived  that idea.       I am also unable to agree that the Explanation governs clause  (2) of article 286, for it limits itself in  express

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terms  to sub-clause (a) of clause (1).  It says that is  an Explanation  "for the purposes of sub-clause (a)".  In  view of  that  I  do not feet justified in carrying  it  over  to clause (2) and holding that it governs there as well.  In my judgment, the only purpose of the 1104 Explanation  is  to explain where the situ8 of  a  sale  is. clause (2) has a different object.  Its purposes to prohibit taxation  on  sales and purchases which take  place  in  the course of inter-State trade or commerce.      If  the  Explanation is carried over to clause  (2)  it must, in my judgment, be equally applicable to subclause (b) of clause (1).  As I understand the argument, the  reasoning is this.  The Explanation turns an inter-State sale into  an intra-state  sale by means of a fiction.  Having served  its purpose  it follows as a corollary that there is  no  inter- State transaction left and so clause (2) is not called  into play.  In my opinion, by parity of reasoning, if the sale is intra-  state and cannot now be regarded as external to  the State, it equally cannot be said to take place in the course of  export or import in a case of that kind, for export  and import  predicate  the movement of goods across  a  boundary just as surely as inter-State trade and commerce.  But  such a  contention  would militate against our  decision  in  The State of Travancore-Cochin & Others v.  The    Bombay    Co. Ltd.(1).      This  line  of  reasoning does not  appeal  to  me  for another  reason also.  It concentrates on the situs  of  the sale  and does not give sufficient weight to the  words  "in the  course  of ". When we apply a fiction all we do  is  to assume  that the situation created by the fiction  is  true. Therefore, the same consequences must flow from the  fiction as would have flown head the facts supposed to be true  been the  actual facts from the start.  Now, even when the  situs of  a sale is in truth and in fact inside a State,  with  no essential ingredient taking place outside nevertheless if it takes place in the course of inter-State trade and commerce, it -will be hit by clause (2) just as surely as it is hit by sub-clause  (b) when it takes place in the course of  export or  import.  When we examine clause (2) and sub-clause  (b), it  is  not enough, in my judgment, to see where  the.  sale took place. we have also to see (1)  [1952] S.C.R. 1112. whether  it  was  in the course  of  inter-state  trade  and commerce  in  the one case, or in the course  of  export  or import  in the other, for the stream of  inter-State  trade& and commerce, as also that of export and import, will  catch up  in its vortex all sales which take place in  its  course wherever  the  situs  of  the sale may  be.   All  that  the Explanation does is to shift the sutis from point A or B  or C  in the stream to a point X, also in the stream.  It  does not lift the sale out of the stream in those cases where  it forms part of the stream. I have also another criticism to meet.  The Explanation  can only come into play when the transaction is in truth and  in fact  inter-State, and the argument runs that if clause  (2) is  to  ban  taxation in every such  case,  the  Explanation becomes  useless.  The answer to that is  two-fold.   Clause (2)  has a proviso.  Under it the President is empowered  to direct  the  continuation for a period of a  tax  which  was being  lawfully levied at the date of the Constitution  even though the transaction is of an inter- State character;  and we find that in some of the cases which have come before  us that  was done the moment the Constitution came into  force. Therefore,  the Explanation operated from the start on  that

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kind of case.  But of course that means that the  empowering can  only be in favour of the State in which the, goods  are actually  delivered for the purpose of consumption  in  that State as a direct result of a purchase or sale effected  for that  purpose.   It  will be noticed  that  the  proviso  is limited to cases in which the imposition of the tax would be "   contrary to this clause", that is clause (2) and not  to the Explanation to clause (1)(a). In the second place, Parliament is empowered to lift the ban imposed  by clause (2).  So long as the ban exists there  is no need for the Explanation, for the explanation only covers sales  or purchases which are inter-State.  But  the  moment the  ban is lifted, the difficulties I have mentioned  above arise and have to be met.  I am clear that the  Constitution makers envisaged this and resolved the doubts in the manner 1106 I  have  indicated; nor can I see anything  inconsistent  or illogical  in this.  The-basic idea is to prohibit  taxation in  the  case of inter-State trade and commerce  unless  and until the ban under clause (2) is lifted - and always in the case  of exports and ,imports; and when the ban  is  lifted, the Explanation is there to settle a matter of  considerable controversy  regarding the situs of a sale.  It is  true  it makes  an arbitrary selection but then almost any  selection would have to be arbitrary and this is as good as any other. The  question  how ever arises what is to happen  to  clause (1)(a)  while  the  ban lasts if the Explanation  is  to  be ignored  during that period ? How is the situs of a sale  to be  determined in the difficult class of cases  which  arose before  the Constitution and which, in my  view,  occasioned the ban.  My answer is that class of case can only arise  in the course of inter-State trade and commerce, for the moment any  one of the essential ingredients of a sale occurs in  a State  different  from the taxing State and  the  goods  are contracted to move across a boundary, you get a sale in  the course  of inter-State trade and commerce.   Therefore,  the problem  about  situs does not arise.  Sales  and  purchases which  are in truth and in fact intrastate (and the bulk  of sales and purchases in the States are of that character) can of course be taxed.  The ban does not apply and there is  no need  to call in aid the Explanation, for I repeat that  the Explanation  is limited to cases which in truth and in  fact take place in the course of inter-State trade and  commerce. On the view I take the need for the Explanation only  arises when the ban is lifted. I  now come to matters of greater detail What do  the  words "for  the  purpose  of  consumption"  mean?   This  is  best understood  by reference to a concrete case: A, a dealer  in Bombay,  actually delivers goods to B, a dealer  in  Madras, for  the  purpose  of  sale by  B,  the  Madras  dealer,  to purchasers  C, D and E in Madras.  Can either the sale by  A to B or the purchase by B  1107 from  A  be taxed?  In my view, it cannot, for B  is  in  my judgment,  as much a consumer as C, D and E. It is true  the word  can be used in a wide as well as a narrow sense but  I see  no reason to restrict its meaning in the present  case. What  after  all does "consumption" mean?  In  its  economic sense  it is just the use which a purchaser chooses to  make of  the goods purchased for his own purposes.  He  does  not have  to  destroy them nor does he have  to  diminish  their value  or utility.  A man who purchases a valuable piece  of sculpture or painting for preservation in a national  museum does  not destroy it nor does he use it himself  except  for the  purposes of presenting it to the museum.  But he  is  a

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consumer.   In the same way, a man who purchases  goods  for use  in his business so that his business can be carried  on by  the  constant feeding of a stream uses  the  ’goods  and therefore "consumes" them even though he does not keep  them himself.   This of course means that a dealer who  purchases from  another dealer outside the State is a  "consumer"  and can  be taxed if the ban is lifted even if he purchases  for reexport  outside  the State.  But when he  re-exports,  his sale  to  the  outside  consumer  cannot  be  taxed  if  the Explanation is attracted. I  cannot  agree that goods cannot be "consumed"  more  than once.  it  all depends on how you view the  matter.   Little fishes  swallow  smaller  fishes and are in  turn  eaten  by fishes larger than themselves.  In the end, the smallest  of the series is consumed by the biggest.  Consider the case of a  curio  dealer who collects antiques for the  purposes  of sale.  The older they are and the more they have been  used, the  more valuable they become, but that would  not  prevent them  from  being "consumed" over again when  a  "collector" buys  them for display in his house.  Broadly speaking,  the object  here is to stop multiple taxation on any single  act of sale or purchase made in the course of inter-state  trade and  commerce.  I would therefore construe "consumption"  to mean  the usual use made of an article for the  purposes  of trade  and  commerce. When dealer buys from dealer  that  is "consumption" 1108 for  the purposes of the purchaser dealer’s trade;  when  an ultimate  purchaser  buys  from a  retailer,  that  is  also "consumption" for his purposes.  Therefore, in my  judgment, neither  the sale by A to B in the illustration put nor  the purchase  by B from A can be taxed so long as the ban  under clause  (2) remains.  But the sales by t to C, D and  E  can each be taxed by the State of Madras as they are intra-state sales.   If this is found to work hardship on the States  in practice, then Parliament, which has been given the power to regulate  inter-State trade and commerce under Entry  42  of List  1, can step in and lift the ban.  In that  event,  the Explanation  comes  into  play  and  Madras  can  tax   both transactions but Bombay cannot.      On  the  other  hand, if A, the  Bombay  dealer,  sells direct  to the consumers C, D and E in Madras  and  actually delivers the goods to them for the purpose of consumption in Madras, neither State can tax unless the ban is lifted,  and then Madras alone will be able to tax.    Next,  what do the words "actually been delivered"  mean? In  the normal course, a dealer in Bombay, who  sends  goods either to a dealer or consumer in Madras, would put them  on a train or send them by a public or a private carrier.   The cases  in which a dealer would take them himself  to  Madras and  hand  them over in person or send one of  his  own  men there  would be exceptional.  In the former class  of  case, the  carrier would normally be regarded as the agent of  the Madras purchaser and the result would be that delivery would in  that event be deemed to be delivery in Bombay  and  that would  give  Bombay the right to tax and  not  Madras.   See Badische  Anilin  Und Soda Fabrik v. Basle  Chemiral  Works, Bindschedler (1), Badische Anilin Und Soda Fabrik v. Hickson (2).   But  such a construction would make  the  Explanation useless.   I  think  that  is  the  reason  why  the   words "actually" and "consumption" have been used.  If the  normal rule  were  to apply, there would be no need  for  the  word "actual",  as  delivery to the carrier in  Bombay  would  of course (1) [1898] A.C. 200. (2) [1906] A.C. 419.

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1109 be  actual  in the sense that it would be physical  and  not notional.   I  think  therefore  that  the  words  "actually delivered" and "as a direct result" of the sale or  purchase "for the purpose of consumption in the State" have been used to signify that in such a case the carrier must be  regarded as the agent of the Bombay seller.    So  far as the words " in the course of " in  clause  (2) are  concerned,  the  "course" we have to  consider  is  the course  of  the  inter-State  trade  and  commerce.   In  my opinion,  the inter-State character of the course ends  when the  goods  reach the first consumer in  the  taxing  State. When  he  in  turn sells to the ultimate  consumer  in  that State,  a  different  course begins, namely  the  course  of intra-state trade.  It is necessary to draw this distinction because  inter-State trade and commerce is a matter for  the Centre,  intra-state  for  that  of  the  States.   We  have therefore to determine where the inter-State course ends and the intra-state course begins.  I think the point at which I have  drawn  the line is logical and convenient.  I  do  not think the same considerations will apply in the next set  of cases  where  we are dealing with the  TravancoreCochin  law relating  to export and import.  But it is not necessary  to explain why in this case.   It  was contended in argument that the view I take of  the ban on inter-State trade and commerce imposed by clause  (2) would  place the local dealer at a disadvantage.   But  that would  only arise in one class of case and I cannot see  how inequality of this kind can be avoided in every case even on my  Lord  the Chief Justice’s view.  There are bound  to  be some in. equalities, whichever view is taken.     Consider  these concrete cases.  We have A, a dealer  in Bombay,  B,  a dealer in Madras, and C, a consumer  also  in Madras.   If  A  sells directly to C in such  a  way  as  to satisfy the Explanation, then. assuming always that the  ban is still in existence, this sale is not taxable on my  view. But if B in Madras sells to C in, Madras, it is.  Of course, B is then at a disadvantage vis-a-vis A. But so is A  vis-a- vis B with regard to 114 1110 consumers  in  Bombay.  Consequently the  tendency  of  ,the consumer  in one State to buy from a cheaper market  in  the other  evens  up  in the long run.   But  that  apart,  what happens on my Lord the Chief Justice’s view?    A very large volume of the feasibly taxable trade in this country, if not the bulk of it, at any rate in most  States, is  in the hands of retail dealers resident in  the  various States.  They obtain their wares from wholesale importers or large  dealers in other States.  In the illustration I  have put  above, if B in Madras gets his goods from A in  Bombay, then, on the learned Chief Justice’s view, B pays a purchase tax on his purchase from A and again a sales tax on his sale to the consumer C. The consumer is therefore saddled with  a double  tax.   But if C, still in Madras,  purchases  direct from  A in Bombay, there is only one tax in the  transaction on my Lord’s view.  That still gives A an advantage over  B. Therefore,  there  is a large class of cases  in  which  the local dealer is at a disadvantage even on the other view. The only class of case in which the local dealer is not at a disadvantage on my Lord’s view, and is on mine, is when  the goods  are  manufactured  locally.  In that  event,  B,  the manufacturer in Madras, pays no initial sales tax.  He  only pays  when  he sells to the consumer C in  Madras.   If  the goods  can also be manufactured locally in Bombay, then  the

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dealer  A in Bombay does have a theoretical  advantage  over the  dealer  B in Madras.  But if the goods cannot  also  be manufactured  in  Bombay, the advantage disappears,  for  ’A then  pays an initial tax on his purchase from  the  outside State. I do not think considerations of this kind should  influence the  construction  of these articles because, in  the  first place,  some inequalities are inevitable and, in  the  next, the  disadvantage is more theoretical than  practical.   For example,  a  wholesale importer, who also  chooses  to  sell retail  in the State of import, has a theoretical  advantage over retailers who have to buy 1111 through  him.   But  that did not prevent  this  Court  from holding  in The State of Travancore -Cochin & Others v.  The Bombay Co. Ltd.(1) that the sale which occasioned his import is free of tax.  So here.  I do not think this consideration should weigh. But  apart  from  this,  the matter  is,  I  think,  largely theoretical  save  perhaps in a few exceptional  cases.   In this  class  of  case, the trade  usually  adjusts  its  own differences  by  allowing the local dealer  a  discount;  in fact, in the case of many commodities, local dealers have to give  an  undertaking not to sell below a certain  price  in order to maintain a steady price level over the local market and  avoid cut throat competition.  That is how most of  the large  motor agencies work, and the same applies  to  radios and  petrol  and  kerosene  oil.   The  price  the  ultimate consumer  pays is the same wherever he purchases in a  given area.   Also the type of consumer who will take the  trouble to  buy in a cheaper foreign market with all the  annoyances of  delay, transport, octroi and other import  restrictions, is  small.   Most people prefer to pay the extra  price  and save themselves endless trouble. I now come to the impugned legislation-the Bombay Sales  Tax Act (No.  XXIV of 1952).  As mine is a dissenting view which will not affect the result, I will content myself with  very briefly  indicating why I consider the Act, or at  any  rate the  relevant  provisions in it, ultra vires, and  to  begin with  I will ignore the rules altogether and  consider  what would happen if the rules were not there at all or had  been brought into existence after the Act. The  taxing sections 5 and 10 empower a levy of tax  on  all sales  made  within the State of Bombay  when  the  turnover reaches a certain figure.  This would include sales made  in the course of inter-State trade and commerce, sales made  in the course of export and import and sales falling within the Explanation made to consumers in outside States.  As I  have explained  above, the mere fact that a sale is made  in  the State (1)  [1952] S.C.R. 1112, 1112 of Bombay will not prevent it from being a sale effected  in the course of inter-state trade or commerce or in the course of  export  or import.  Even when the whole  transaction  of sale  is  constituted  in Bombay in  the  sense  that  every essential  ingredient necessary to constitute a  sale  takes place  there, (that is to say, even when the Explanation  is not   called  into  play),  the  sale  would,  given   other considerations,  be in the course of export or import or  in the   course   of  inter-State  trade   or   commerce.    An illustration will make my point clear.   A, a Bombay dealer, sells goods to B, a dealer in  Madras, for  consumption in Madras.  I will assume that delivery  is made  to B himself in Bombay and that he carries  the  goods

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across in person.  If that is the normal way in which  trade and  commerce in that particular line of goods flows  across the  boundary, then that would, in my opinion, be a sale  in the  course  of inter-State trade and commerce  despite  the facts,  including  delivery, mentioned  above.   Ordinarily, goods  of  this nature are delivered to a carrier  but  that makes my point all the stronger.  So long as the ban imposed by clause (2) remains the situs of the sale and the place of delivery are not material provided the sale is caught up  in the  vortex  of  inter-State trade  and  commerce.   Similar considerations apply in the case of exports and imports.     On  this  view, the preamble to the Act  and  the  short title which limit the ambit of the law to the levy of tax on sales and purchases of goods in the State of Bombay, do  not serve to save the Act, nor do the definitions of the words " sale  ", " dealer " and " turnover ". Actually,  Explanation (2) to the definition of " sale" directly offends clause (2) of  article  286.  It embodies almost word  for  word  every provision  of  the Explanation to article  286(1)(a).   That would  be unobjectionable if the ban imposed by  clause  (2) had  been  lifted  by Parliament.  But as it  has  not  been lifted,  the  provision is ultra vires on the view  which  I take of the Constitution. 1113    The  Act came into force on 9th October, 1952,  with  the exception of the taxing sections.  The rules were  published in the Gazette on 29th October, 1952, and together with  the taxing  sections,  came into effect  simultaneously  on  1st November,  1952.  It was argued that the rules save the  Act in  the following way.  Under sections 7 and 11 a dealer  is entitled to deduct from his taxable turnover sales which are from.  time to time declared to be tax-free under section  8 and  "  such other sales as may be prescribed." It  is  said that  the  rules have excluded all sales  which  offend  the Constitution, therefore under the " law " (by which is meant the Act and the rules read together), which came into  being on 1st November, 1952, no sale exempted by the  Constitution can be taxed.  It follows that the " law which is sought  to be impugned is intra vires.     I  need not examine the rules for this purpose.  I  will assume without deciding that they do exclude all sales which are  exempt  under the Constitution, nevertheless I  am  not prepared  to  agree that rules can save an Act.   Rules  are made by a subordinate authority which is not the Legislature and  I  cannot  agree  that the validity  of  an  Act  of  a competent  Legislature can be made to depend upon what  some subordinate authority chooses to do or not to do.  The rules were not passed by the Legislature and in theory the  parti- cular  shape they took was not even in  contemplation.   Say the rules were to be amended tomorrow by striking out  these saving  clauses, which would be ultra vires, the Act or  the rules  ? It would be impossible to hold that the  rules  are ultra  vires the Act, for they would not in the event  I  am contemplating travel one whit beyond the Act.  It is the Act which  would  be bad.  And if the Act is held  to  be  ultra vires  in an event like that, would it be competent  to  the rule-making   authority  to  come  to  the  rescue  of   the Legislature  and  rehabilitate the Act  by  re-enacting  the rules which it had deleted a few days before ? It would,  in my  judgment,  be  no  more  competent  for  a   rule-making authority  to do that than it would have been competent  for it to validate this Act if the rules had been brought into 1114 being even one day after sections 5 and 10 came into force. I can understand this court saving to a petitioner:

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You are not yet hurt by this Act nor is there any  immediate likelihood of your being hurt and until. that happens we are not going to entertain your petition, for we are not here to examine hypothetical situations which may never arise."  But that  sort  of  objection cannot lie in this  case  for  the reasons  my  Lord  the  Chief Justice  has  given.   We  are therefore  called upon to determine the validity of the  Act and in doing so we must, in my opinion, ignore the rules. I  have  now  to consider two more  points.   One  is  about severability and the other is whether a taxing statute is to be treated differently from other laws. On  the question of severability, I cannot see how the  good can  be  separated  from the bad in this case  even  if  the Explanation  to  section  2  (14)  be  expunged  unless  the Constitution  be read as part of the Act and we are to  read into the Act some such provision as follows :   "  Notwithstanding anything which is said in any  part  of this  Act,  all sales which the State is prohibited  to  tax under  the Constitution are excluded from the scope of  this Act."     But,  in my opinion, judges are not entitled to  rewrite an Act.  Offending provisions can be struck out but if we do that the whole Act goes because the defect here is that  all sales are permitted to be taxed provided they are within the State  of  Bombay,  and  the  rulemaking  authority  is  not restricted    to   taxation   which   is    constitutionally permissible.   On  the contrary, section 45  says  that  the Government  may make rules for carrying out the purposes  of the  Act and one of the purposes is to tax all  sales  which the State Government wishes to tax.    The  other  matter is based on the  American  view  which treats  taxing  statutes differently from others  and  holds that in a taxing statute one looks to the 1115 individual item of taxation and not to the generality of the powers.   With all respect to the American Judges  who  hold that view, I would prefer not to make exceptions.  When  the question  is  whether  an Act of the  Legislature  is  ultra vires,  the  same principles should  govern  throughout.   I would  therefore  hold that the Bombay Sales Tax  Act,  1952 (Bombay   Act  No.  XXIV  of  1952)  is  ultra   vires   the Constitution of India.       BHAGWATI J.-I had the benefit of reading the  judgment just delivered by my Lord the Chief Justice.  While agreeing in  the  main  with the conclusions  reached  therein  I  am however  unable  to subscribe to the reasoning as  also  the construction put upon the Explanation to article 286(1) (a). I   wish  to  place  on  record  therefore  my   points   of disagreement and the reasons for the same. The  power given to a State Legislature to tax the sales  or purchases of goods is derived from article 246 (3) read with Entry  54  of  List  II  of  the  Seventh  Schedule  of  the Constitution.  That power has got to be widely construed and it would embrace the power to tax the sales or purchases  of goods  by  reason  of a  sufficient  territorial  connection between the taxing State and what it seeks to tax. This  was  also  the  position  which  obtained  before  the Constitution  and  was responsible for  double  or  multiple taxation  of the same transaction by different States.   The Constitution  makers  therefore  thought it  fit  to  impose restrictions on the imposition by the States of taxes on the sales or purchases of goods by enacting article 286.   These restrictions were threefold :-(1) no tax could be imposed on the  sale or purchase of goods where such sale  or  purchase took place outside the State, (2) no tax could be imposed on

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the  sale or purchase of goods where such sale  or  purchase took place in the course of the import of goods into or  the export  of the goods out of the territory of India, and  (3) no tax could be imposed on the sale or purchase of any goods where  such  sale or purchase took place in  the  course  of inter-State trade or 1116 commerce  except  in  so  far as  Parliament  might  by  law otherwise provide.  These were the three categories of sales or  purchases which came within the ban imposed  by  article 286.   The phraseology used in the article  laid  particular stress  on the fact that the sale or purchase should "  take place  so  as  to  fall within one or  the  other  of  these categories.   The  intention was that the sale  or  purchase should take place, i.e., should be completed either  outside the  State  or in the course of import or export or  in  the course of interState trade or commerce.  Whereas before  the Constitution  the taxing power could be exercised by  reason of a sufficient territorial connection involving either  one or  more  of  the  ingredients of a sale  in  the  shape  of agreement  to  sell,  the  payment  of  price,  transfer  of ownership,  delivery  of  goods  etc  the  completion  of  a transaction of sale or purchase by the transfer of ownership or  the passing of the property in the goods was enacted  to be  the sole criterion for taxability in article  286.   The sales   or  purchases  could  be  divided  into  two   broad categories-(1)  sales or purchases which take  place  inside the  State  and  (2) sales or  purchases  which  take  place outside  the  State and those which took place  outside  the State were certainly outside the taxing powers of the State. In regard to the sales or purchases which took place  inside the  State, the sales or purchases which took place  in  the course of import or export and in the course of  inter-State trade  or commerce were also brought within the ban  leaving the  taxing power of the State unfettered in regard  to  the other sales or purchases which took place inside the  State. The restrictions which were thus imposed on the taxing power of the State confined themselves to sales or purchases which took  place outside the State and those sales  or  purchases which  took  place inside the State but took  place  in  the course of import or export and in the course of  inter-State trade  or commerce.  Once the transfer of ownership  or  the passing  of  the property in the goods was accepted  as  the sole criterion of taxability it was not necessary at all  to define what was a sale or purchase which took place 1117 inside  the  State.  Whether a sale or purchase  took  place inside the State could be determined by applying the general law relating to the sale of goods and ascertaining where the transfer  of  ownership took place or the  property  in  the goods  passed.  It was only when the transfer  of  ownership took place or the property in the goods passed that the sale or  purchase  was completed and the sale  or  purchase  took place and the situs or the location of the sale or  purchase was in the place where the transfer of ownership took  place or  the property in the goods passed under the  general  law relating  to  the sale of goods. [See Badische  Aniline  Und Soda  Fabrick v. Basle Chemical Works, Bind Schedler(1)  and Badische  Aniline Und Soda Fabrick v. Hickson (2) The  situs or  location  of the sale or purchase therefore  assumed  an importance under article 286 and the Constitution makers had before them not only the legislative practice prevailing  in the  various  States before the Constitution  but  also  the concept of sale as defined in the Indian Sale of Goods  Act. They  therefore incorporated in article 286 the notion of  a

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sale or purchase taking place, i.e., being completed, by the transfer  of  ownership or the passing of  property  in  the goods  under the general law relating to sale of  goods  and enacted  that  those  sales or purchases  which  took  place outside  the  State  or which even though  they  took  place inside  the State took place in the course of the import  or export  or  in the course of inter-State trade  or  commerce should come within the ban imposed therein.    The  Constitution makers however took count of  the  fact that even though the property in the goods by reason of  the sale  or  purchase passed in a particular  State  the  goods might  as  a  direct  result of such  sale  or  purchase  be delivered in another State for the purpose of consumption in that State.  They wanted to give the delivery State in  that event  the power to tax such sale or purchase and  therefore introduced by the Explanation to article 286 (1)(a) a  legal fiction by which (1) [1898] A. C. 200.     (2) [1906] A. C. 419. 145 1118 the sale or purchase in that event was deemed to have  taken place in the delivery State.  What otherwise would have been a sale or purchase which took place outside the State within the meaning of article 286 (1) (a) was thus by legal fiction deemed  to have taken place inside the delivery State,  thus assimilating  the position to a sale or purchase which  took place inside the delivery State enabling the delivery  State to tax the sale or purchase in question.  This legal fiction was  thus  introduced not for defining what was  a  sale  or purchase which took place inside the State as distinct  from a sale or purchase which took place outside the State.   The purpose  of  the  enactment of the Explanation  was  not  to provide a definition of a sale or purchase which took  place inside the State.  That was determined under the general law relating  to  the sale of goods by  ascertaining  where  the transfer  of  ownership took place or the  property  in  the goods  passed,  which  was  in another  State  and  not  the delivery  State.   What was a sale or  purchase  which  took place outside the State was by reason of the Explanation and the  legal  fiction enacted therein deemed to be a  sale  or purchase  which took place inside the State so as to  enable the delivery State to tax the sale or purchase in question.  The sale or purchase transactions which are covered by  the Explanation are moreover of a limited character, viz., those in  which  as a direct result of such sale or  purchase  the goods have actually been delivered in the delivery State for the  purposes  of consumption in that State.   They  do  not comprise all the transactions of sale or purchase which take place  inside  the State because besides those there  are  a large number of transactions of sale or purchase which  take place  inside  the State and in which no element  of  inter- State  trade  or  commerce  enters  the  transaction.    The transactions  of sale or purchase which take  place  between dealers and dealers and dealers and customers all within the State  are really comprised in the category of  transactions of  sale or purchase which take place inside the  State  and these transactions do not at all fall within the purview  of the Explanation.  It would be surprising 1119 to  find a definition of a transaction of sale  or  purchase which  takes place inside the State given in the  manner  in which  it  is alleged to have been done in  the  Explanation covering  only  those transactions of sale  or  purchase  in which the goods have actually been delivered in the delivery State  as a direct result of such sale or purchase  for  the

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purpose  of consumption in that State.  A definition, if  at all   it  has  any  significance,  should  cover   all   the transactions which come within that particular category  and cannot  be  enacted in the form of a legal  fiction  in  the manner  it  has  been done in the  Explanation.   It  is  no definition  at  all.  It has no reference to  facts  but  it merely enacts a legal fiction under which a sale which under the  general  law  relating to sale of  goods  is  completed outside  the  State  by the transfer  of  ownership  or  the passing  of  the property in the goods in another  State  is deemed to have taken place inside the delivery State because of  the  goods having been actually delivered  as  a  direct result of such sale or purchase for the purpose of  consump- tion  in  the delivery State.  What is otherwise a  sale  or purchase which takes place outside the State is thus  deemed to  have taken place inside the delivery State and  that  is the  only purpose of the enactment of the Explanation.   The contention of the Attorney-General and Shri Seervai that the purpose  of the enactment of the Explanation was  to  define what  was  a sale or purchase which took  place  inside  the State is therefore unsound. The non-obstante clause really takes count of the fact  that under  the  general law relating to the sale  of  goods  the property  in  the goods by reason of such sale  or  purchase would  pass in another State and that the situs or  location of the sale would accordingly be therefore in another State. Notwithstanding  that fact the Explanation enacts the  legal fiction that the particular transaction of sale or  purchase is  deemed  to have taken place within the  delivery  State. The  non-obstante  clause has not been incorporated  in  the Explanation  with a view to emphasise the particular  aspect of the passing of 1120 property  in the goods and negativing the same because  that was  one  of the ingredients which had  been  considered  as important  territorial connection between the  taxing  State and  what it sought to tax.  Besides this  ingredient  there were  various  other ingredients which  had  been  similarly considered   sufficient  territorial  connections   and   to consider  that the ingredient of the passing of property  in the  goods  was  the only ingredient  which  was  considered important  to be mentioned in the non-obstante clause is  to ignore  the  facts and do violence to the  whole  conception underlying  the incorporation of the non-obstante clause  in the Explanation.  It would be a more natural way of  reading the  non-obstante  clause to read into it  an  intention  to state  what  according to the Constitution  makers  was  the basic  idea of fixing the situs or the location of the  sale or  purchase  in the place where the transfer  of  ownership took  place  or  the property in the  goods  passed  and  to indicate  that notwithstanding that fact a sale or  purchase which fell within the category mentioned in the  Explanation was none, the, less to be deemed to have taken place  inside the delivery State.    If the Explanation to article 286(1) (a) is construed  in the  manner indicated above it follows that  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 sale shall be deemed to  have taken place in the delivery State and the  delivery State  would be entitled to tax the sale or purchase.   That does  not  however mean that it is only the  delivery  State which  will be entitled to tax the sale or purchase.   Under the  general law relating to the sale of goods the  property in  the  goods  having by reason of such  sale  or  purchase

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passed in another State that State will no doubt be entitled to tax the sale or purchase as having taken place inside the State.   That position will continue to obtain in  spite  of the  fact that by the enactment of the legal fiction in  the Explanation  such  sale or purchase will be deemed  to  have taken 1121 place  inside  the  delivery  State.   The  object  of   the Explanation  is not and could not be to take away the  right which  the State in which the property in the  goods  passed had to tax the sale or purchase which took place inside that State.  The object and purpose of the Explanation could only to  be to deem such purchase or sale by reason of the  legal fiction  to have taken place in the delivery State so as  to enable  the delivery State also to tax the sale or  purchase in  question.   The  object  of article  286  is  to  impose restrictions on the imposition of tax on sale or purchase of goods  and  the only restriction which has been  imposed  in connection  with the sales or purchases which take place  in this  manner is that a State shall not impose a tax  on  the sale or purchase of goods where such sale or purchase  takes place  outside the State.  That is a general ban  which  has been imposed by article 286(1) (a) and what the  Explanation seeks  to  do  is  to lift the ban  to  the  extent  of  the transactions of sale or purchase covered by the  Explanation and enable the delivery State also to tax such purchases  or sales. It  is no doubt true that in the Explanation the word  only’ has  not been used nor has the word ’also’ been used and  we have  to  gather  the  purpose  of  the  enactment  of   the Explanation  from the words of the Explanation  itself.   In order  to  arrive  at a conclusion whether  the  object  and purpose of the Explanation was to enable the delivery  State to  tax  such sales or purchases either in addition  to  the State  in which the property in the goods had passed  or  in substitution  thereof one has got to bear in mind the  basic idea  that a State would normally be entitled to tax a  sale or  purchase where such sale or purchase took  place  inside the State except in cases covered by article 286(1) (b)  and article 286(2).  If that power of the State to tax the  sale or  purchase where such sale or purchase took  place  inside the State was in any manner whatever sought to be taken away it could only be taken away by an express enactment in  that behalf as in article 286 (1)(b) and article 286 (2) and  not by the backdoor as it were by enacting a legal fiction as it has been done 1122 in  the Explanation.  The two book cases illustration  which was submitted before the court by Shri Seervai in the course of  his arguments is a very specious one.  Merely because  a book  is by a legal fiction deemed to be in the book case  B it does not necessarily cease to exist in the book case ’A’. As a matter of physical fact it is in the book case ’A’.  It continues in the book case ’A’ and the physical fact of  its existence  in  the book case ’A’ can never  be  obliterated. The legal fiction only operates to treat it as if it were in the book case ’B’ and to involve all the consequences of its being  in  the  book case ’B’.  The two  positions  are  not mutually exclusive.  They can co-exist side by side and  the legal  consequences of the actual fact of the book being  in the book case ’A’ can be worked out simultaneously with  the legal consequences of the notional existence of the book  in the  book case ’B’ by reason of the operation of  the  legal fiction.  If this position is borne in mind it is clear that not only would the State in which the property in the  goods

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passed  continue to be entitled to tax the sale or  purchase because  of such sale or purchase having taken place  inside the State, but the delivery State would also be entitled  to tax such sale or purchase by reason of the operation of  the legal  fiction  in so far as the goods  have  actually  been delivered as a direct result of such sale or purchase in the delivery  State  for  the ,purpose of  consumption  in  that State.   According to the position as discussed  above  both the  States  would  thus be entitled to tax  such  sales  or purchases.    Before I proceed to discuss the effect of article 286 (2) on  the taxing powers of both the States it is necessary  to consider what is the exact type of sale or purchase which is covered by the Explanation.  That sale or purchase has to be one as a direct result of which the goods have actually been delivered   in  the  delivery  State  for  the  purpose   of consumption  in  that State.  It is  not  every  transaction which results in the goods being delivered across the border that  comes within this category.  It is only a  transaction of  sale  or purchase directly results in  the  delivery  of goods 1123 for  the purpose of consumption in the delivery  State  that comes  within  the category of transactions covered  by  the Explanation.  A dealer in the delivery State purchasing from a dealer in the State where the property in the goods passes by  reason of such sale or purchase cannot be said  to  have purchased  the goods for the purpose of consumption  in  the delivery  State  because the obvious purpose  for  which  he purchases  the goods is for dealing with those goods in  the ordinary course of trade and not for consuming the same.   A dealer  who deals with the goods after purchasing  the  same does  not consume the goods.  He deals with or  disposes  of the same in the ordinary course of trade and he is a  dealer or  a trader in those goods.  He is not a consumer of  those goods.   The  word "consumption" has been  thus  defined  in Webster’s New International Dictionary, Vol.1  , page 483:- "  Consumption.-(3)  Economics.The use of  (economic)  goods resulting   in  the  diminution  or  destruction  of   their utilities;  opposed to production.  Consumption may  consist in the active use of goods in such a manner as to accomplish their  direct and immediate destruction, as in eating  food, wearing  clothes, or burning fuel; or it may consist in  the mere  keeping, and enjoying the presence or prospect  of,  a thing,  which is destroyed only by the gradual processes  of natural  decay, as in the maintenance of a picture  gallery. Generally,  it  may  be said that  consumption  means  using things, and production means adapting them for use."    In the Oxford New English Dictionary, Vol. 11, page  888, consumption is defined as:    (1)  The  action  or fact of consuming  or  destroying  ; destruction............  (7)  Pol.  Econ.   The  destructive employment or utilisation of the products of industry."   Delivery  of goods for the purpose of consumption  in  the delivery State therefore means the delivery for the  purpose of  using by the consumer and it has no application  to  the case of a dealer purchasing the 1124 goods across the border for dealing with or disposing of the same  in  the  ordinary course of  trade.   The  Explanation therefore covers only those cases where as -a direct  result of the sale or purchase goods are delivered for  consumption in  the delivery State by the consumer and it is  only  that limited  class  of  transactions which are  covered  by  the Explanation  and  which are liable to tax  by  the  delivery

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State.   I do not accept the contention that the words  "for the  purpose  of consumption" must be understood in  a  com- prehensive  sense as having reference both to immediate  and ultimate  consumption  within the State and  excluding  only resale out of the State.  In my opinion they have  reference only  to  immediate  consumption within  the  State  and  no further.    If  the  matters  stood thus and  there  was  no  further provision  to be considered the position would be that in  a transaction  of sale or purchase covered by the  Explanation construed  as above both the State in which the property  in the goods passed and the delivery State would be entitled to tax  such  sale  or purchase, the former by  reason  of  the property  in the goods having passed inside that  State  and the latter by reason of the goods having been delivered as a direct  result of such sale or purchase for the  purpose  of consumption  in  that State.  We have however  got  to  take count of article 286 (2).  The transaction of ,such sale  or purchase  even though it be as between a dealer in  the  one State and the consumer in the delivery State is  nonetheless a  transaction  in  the  course  of  inter-State  trade   or commerce.   I  do  not  agree with  the  contention  of  the Advocate-General  of  Bombay that article 286(2)  should  be interpreted as applying to the cases of transactions of sale or  purchase taking place between dealers and  dealers  only and not as applying to the cases of transactions of sale  or purchase  taking place between dealers on the one  hand  and consumers  on the. other.  Whether a transaction of sale  or purchase takes place between a dealer on the one hand and  a dealer on the other or between a dealer on the one hand  and a consumer on the other in the respective 1125 States  all these transactions are in the course  of  inter- State trade or commerce and therefore hit by article  286(2) and the transactions which are covered by the Explanation to article 286 (1)(a) would also be accordingly hit by the  ban imposed under article 286 (2).     So  far as the State in which the property in the  goods has passed is concerned it could certainly not tax the  sale or  purchase in question because the transaction of sale  or purchase  so far as the particular State is concerned  takes place  in  the course of inter-State trade or  commerce  and could not be subjected to the imposition of tax except in so far  as Parliament might by law otherwise provide.   So  far however  as the delivery State is concerned the  Explanation empowers  the delivery State to tax such transaction and  if article  286(2)  be  construed  as imposing  a  ban  on  the taxation  of such sale or purchase it will be tantamount  to the  giving of the right to tax by one hand and  the  taking away of it by another.      It was contended and rightly so by the  AdvocateGeneral of Bombay that if the transactions which are covered by  the Explanation  to article 286(1) (a) were thus hit by  article 286(2)  in the absence of a provision otherwise  enacted  by Parliament  the Explanation to article 286(1) (a)  would  be rendered  nugatory and the Constitution makers could not  be held  to  have contemplated such a possibility at  the  very inception  of the Constitution leaving it to the  Parliament by having recourse to the provision contained in article 286 (2)  to remedy such a state of affairs.  Such a  possibility could not be contemplated and an effort should therefore  be made  in  so far as it was reasonably possible to do  so  to reconcile  the  provisions  of the  Explanation  to  article 286(1) (a) and article 286(2).    It is a well-known rule of the interpretation of statutes

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that  a "particular enactment is not repealed by  a  general enactment in the same statute". (Beal on the Cardinal  Rules of Legal Interpretation, 3rd Edition, Part VII, Section  IX, page 516).  Reliance is 146 1126 placed in support of the above proposition on the  following observations of Best C. J. in Churchill v. Crease(1).  "The rule is, that where a general intention is  expressed, and   the   Act  expresses  also  a   particular   intention incompatible  with  the general  intention,  the  particular intention   is  to  be  considered  in  the  nature  of   an exception."      To  the same effect also are the observations of  Quain J.  in Dryden v. Overseers of Putney (2) quoted at page  426 of the same work:-       "It may be laid down as a rule for the construction of statutes,  that  where  a special provision  and  a  general provision are inserted which cover the same subjectmatter, a case falling within the words of the special provision  must be  governed  thereby and not by the terms  of  the  general provision." (See  also Craies on Statute Law, 5th Edition (1952)  at  p. 205; Maxwell on the Interpretation of Statutes 9th  Edition. (1946)  at  p.  176  and Crawford  on  the  Construction  of Statutes  (Interpretation of Laws) 1940 Edition, Ch.   XVIII ’Construction  of  Statutes’  at  p.265  section  167).   It therefore  follows  that  the  general  provision  which  is enacted in article 286 (2) against the imposition of tax  on the  sale or purchase of goods in the course of  inter-State trade  or commerce should give way to the special  provision which  is enacted in the Explanation to article 286 (1)  (a) enabling the delivery State to tax such sale or purchase  in the  limited  class  of cases covered  by  the  Explanation, transactions  ,covered by the Explanation being thus  lifted out of the category of transactions, in the course of inter- State  trade  or  commerce covered by article  286  (2)  and assimilated  to transactions of sale or purchase which  take place   inside  the  State  thus  acquiring  an   intraState character so far as the delivery State is concerned.    It was suggested that this result could also be  achieved by   having  resort  to  the  principles  which  have   been enunciated in articles 301 and 304 of the Constitution (1)  (1828) 5 Bing, 177 at p. 180. (2) (1876) 1 Ex.  D.  232 at P 426, 1127 which  are  included in Part XIII  under  the  captionTrade, commerce  and  intercourse within the  territory  of  India. Even  though  these provisions of the  Constitution  may  by analogy  support  the conclusion that a transaction  in  the course  of inter-State trade or commerce is thus lifted  out of that category and assimilated to a transaction of sale or purchase which takes place inside the State the analogy must stop  there  and cannot be worked any further.   One  cannot construe the provisions of article 286 with reference to the provisions  of  article  304 (a) as is sought  to  be  done. Article 286 and article 304 (a) refer to different states of affairs.   Whereas article 286 provides restrictions on  the imposition  of taxes on purchase or sale of  goods,  article 304 (a) gives the State Legislature power to impose on goods imported  from other States any tax to which  similar  goods manufactured  or  produced  in that  State  are  subject  so however as not to discriminate between goods so imported and goods  so  manufactured or produced.   Whereas  article  286 refers to taxes on sales or purchases of goods, article  304

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(a)  refers to tax on imported goods.  The two concepts  are thus  entirely  different.   The  only  argument  which  was addressed  before  us  on  articles  301  and  304  of   the Constitution  was  by the Government Pleader of  Patina  who referred  to these provisions in order to  substantiate  his point that only one State, viz., the delivery State,  should tax  the sales or purchases covered by the Explanantion  and argued  what the results would be if it was held  that  both the States could tax or neither of them could tax such  sale or  purchase.   This  aspect was  however  not  stressed  or presented  during  the course of the arguments and  I  would prefer not to express any opinion on the scope or meaning of article 304.   I would therefore base my, construction of the Explanation to article 286 (1)(a) and article 286 (2) on the rule as  to the  interpretation  of statutes which I  have  referred  to above,  lifting the transaction of sale or purchase  covered by the Explanation to article 286(1) (a) out of the category of  the transactions in the course of inter-State  trade  or commerce and assimilating it to 1128 a  transaction of sale or purchase which takes place  inside the  delivery State thus investing it with the character  of an intrastate sale qua the delivery State.  The result therefore is that the delivery State only  would be  entitled  to  tax the transaction of  sale  or  purchase covered  by  the Explanation.  Such transaction would  be  a transaction of sale or purchase where as a direct result  of such  sale  or  purchase  the goods  are  delivered  in  the delivery State for the purpose of consumption in that State’ i.e., where the transaction is between a dealer in the State in which the property in the goods passes and a consumer  in the delivery State.  The State in which the property in  the goods passes would not be able to tax such sale or  purchase in  the absence of a provision enacted by law by  Parliament within  the  meaning of article 286(2).  Once  that  ban  is lifted  by  the  appropriate  legislation  enacted  by   the Parliament  the  State in which the property  in  the  goods passes  would also be entitled to tax such sale or  purchase but not otherwise.  Save  as above, I agree with the conclusions reached by  my Lord  the Chief Justice in the judgment just  delivered.   I agree  that  the Bombay Sales Tax Act, 1952, and  the  rules made,  thereunder except Rule 5(2)(1) do not contravene  the provisions  of  article 286, that Rule  5(2)(1)  is  clearly severable and can be ignored, that there is no substance  in the contention of Shri Seervai that there is a violation  of the fundamental rights guaranteed under article 14 and  that the taxation statutes should be construed in a manner so  as to  allow the statute itself to stand, the taxing  authority being  prevented  by  injunction from imposing  the  tax  on subjects  excluded by the Constitution from the  purview  of taxation by the State.  In the result the declaration ’Made by the court below will be set aside, the writ issued by it will be quashed and  the State  of  Bombay  will  be  prohibited  from  imposing   or authorising  the imposition of a tax on sales  or  purchases which  according to the interpretation put above on  article 286 are excluded from the purview                     1129 of  taxation by the State of Bombay.  Each party  will  bear and pay its own costs throughout.                       Appeal allowed.

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