Rajagopalan, J.:— The assessee is a spinning mill at Tirupur. It was assessed to sales tax in the assessment year 1951–1952 on its purchases of cotton for spinning under Rule 4-A(iv) of the Turnover and Assessment Rules, which prescribed the single point for the levy of sales tax on transactions in cotton required by section 5(ii) of the Sales-tax Act. The relevant portion of Rule 4-A(iv) as it then stood ran:

“4-A. Subject to the provisions of Sec. 5—

(iv) in the case of cotton (including kapas) the tax under Sec. 3(1) shall be levied in accordance with the following provisions:

(a) in the case of all cotton (including kapas) sold to a spinning mill in the State, the tax shall be levied from the spinning mill on the amount for which it is bought by it;”

2. The Tribunal, agreeing with the Department, held that the assessee's purchases of cotton, which had been imported from abroad, which amounted to Rs. 34,61,213-1-9 were liable to be taxed. It was the correctness of that decision which the assessee challenged before us in its application preferred under Section 12-B of the Act. The nature of the transactions was thus summed up by the Tribunal:

“The import of cotton from Egypt is made by certain dealers in Bombay and the shipping documents are in their names. The assessee intimates the Bombay dealers about his requirements and then the Bombay dealers place orders with suppliers in Africa. The shipments are directed from African ports to Cochin. The ships may or may not touch at Bombay. In the meantime, the assessee obtains the necessary transport licence. The Bombay dealers send the shipping documents to (their) clearing agents at Port Cochin. These clearing agents present the shipping documents, clear the goods through the customs and then despatch the goods to Tirupur to the assessee and the railway receipts are sent through the Bank of Baroda or other banks and the assessee pays the price into the Bank against delivery of railway receipts.”

3. The Tribunal re-stated the position:

“……. The available material shows that the purchases were made direct from the Bombay party, that no privity was established with the African seller, that the Bombay party arranged through the clearing agents to take delivery of the goods at Cochin Harbour, that after the goods were cleared the clearing agents at Cochin Harbour despatched the goods by railway to the assessee, and that the price was paid by the assessee through banks before taking charge of the railway receipts.”

4. On this basis the Tribunal came to the conclusion, that the sale in question to the assessee should be viewed as intra-State sale to which none of the prohibitions imposed by Art. 286 of the Constitution applied.

5. The assessee contended (1) that its purchases were in the course of import and that they were therefore protected from any levy of tax by Art. 286(1)(b) of the Constitution. (2) Alternatively, they were purchases in the course of inter-State commerce, which Madras could not tax as the delivery of the goods purchased was effected outside the State of Madras; and (3) Rule 4-A(iv) of the Turnover and Assessment Rules was ultra vires, and, in the absence of a valid prescription of a single point for the law of tax on sales and purchases of cotton requireo by Section 5(ii) of the Act, an assessee could not be subjected to any tax liability. These contentions which were rejected by the Tribunal have been pressed again before us.

6. On the findings of the Tribunal it seems clear to us that the purchases of the cotton, imported from Egypt, effected by the assessee were made after the cotton had been imported into India by the sellers, who were dealers in Bombay, and after the cotton had crossed the customs frontier in this country. The Tribunal was right in holding that the purchases effected by the assessee were not purchases in the course of import trade within the scope of the ban imposed by Art. 286(1)(b) of the Constitution.

7. Learned counsel for the assessee pointed out that in the case of all the purchases effected by the assessee, it was the assessee that had applied to the authorities for the import quota, though the request of the assessee was that the licence should be issued to the seller at Bombay who had contracted with the assessee to import the cotton and sell it to the assessee. That, in our opinion, does not establish that the sales to the assessee were in the course of import.

8. It is no doubt true the dealer in Bombay ordered the cotton from his vendor abroad only to carry out the importer's contractual obligations to sell the cotton so imported to the assessee. The assessee provided the facilities by arranging for the grant of the import licence to the dealer in Bombay, even as the assessee provided further facilities for the transport of the cotton by rail in this country after the cotton had been imported and after it had been cleared through the customs. The relationship between the assessee and the importer at Bombay was that of buyer and seller, both being principals, and the sale was only after the import of the goods, even where the contract to sell preceded the order to the exporter abroad to ship the goods in India.

9. It was the seller's agent at Cochin that cleared the goods imported, and it was that agent that consigned the goods by rail to the assessee, and, the assessee's contractual obligation was normally to pay for the cotton against delivery of the railway receipt at Tirupur. We agree with the Tribunal that these purchases of the imported cotton effected by the assessee did not fall within the scope of Art. 286(1)(b) of the Constitution. They were not purchases in the course of import, but they were purchases effected after the import had been completed.

10. The next question is, whether it was a case of sales in the course of inter-State commerce which Madras had no right to tax. The goods moved by rail from Cochin Port to Tirupur, and to that extent it was a case of sale and purchase in the course of inter-State commerce. Under the Explanation to Art. 286(1)(a) of the Constitution, Madras could tax the transaction only if the goods were delivered within Madras and the delivery was for consumption with the State. That the consumption tost was satisfied was never in dispute. The contention of the learned counsel for the assessee was that the delivery of cotton was not at Tirupur but at Port Cochin outside the State of Madras.

11. The contract provided for the price F.O.R Tirupur and for payment against the railway receipts. We have pointed out that it was the importer's agent at Cochin that cleared the goods, got them past the customs and consigned them by rail to the assessee as the buyer from the importer. We see no real basis in the evidence on record for the plea of the learned counsel for the petitioner that there was a delivery of the goods to the assessee at Port Cochin itself when the goods were put in the train on its journey to Tirupur. The actual delivery to the assessee as buyer was only at Tirupur. Thus, both the requirements of the Explanation to Art. 286(1)(a) were satisfied, and Madras had the right to tax the sales, once Parliament lifted the ban on taxation on sales and purchases in the course of inter-State commerce.

12. We have to consider next the plea of the assessee, that Rule 4-A(iv) was invalid and unenforceable. The contention was that as the rule stood it contravened the requirements of Section 5(ii) of the Act, which required the prescription by rule to give effect to the statutory requirement of a single point for the levy of tax on transactions in cotton. Learned counsel submitted that, while section 5(ii) required a single point to be prescribed in the series of sales, Rule 4-A(iv) prescribed that the purchaser shall be taxed. The second objection to validity of the rule was that with the rule as it stood it did not really provide for a single point, and that a multi point levy was still possible under the rule. Sec. 5(ii) as it stood in the relevant period ran:

“5. Subject to such restrictions and conditions as may be prescribed……….(ii) the sale of cotton (including kapas)…….shall be liable to tax under Sec. 3, sub-sec. (1), only at such single point in the series of sales by successive dealers as may be prescribed and only at the rate of one-half of one per cent of the turnover at that point.”

13. Rule 4-A(iv) directs that the tax shall be levied on the spinning mill as the purchaser and on the purchase price. Still the transaction taxed is the sale. It is really a case where the immediate economic incidence coincided with the apparent statutory incidence; that is, the incidence was on the purchaser. That the rule directed the purchaser to pay the tax therefore did not in any way conflict with the requirements of Section 5(ii) of the Act.

14. The next question is, whether the rule as it stood permitted a multi point levy. Rule 4-A(iv), it should be remembered, provides that in the case of cotton sold to a spinning mill in the State, the tax shall fall on the spinning mill purchasing the cotton. It should be obvious that despite the wording of the rule, it is a spinning mill as a dealer that can be taxed, and, the expression “sold to a spinning mill” could only mean sold to that dealer which owns a spinning mill for the purpose of spinning that cotton.

15. Learned counsel for the assessee pointed out that with the rule as it stood, a sale by one spinning mill within the State of Madras to another spinning, mill would attract a liability to tax, even though the-first spinning mill, which figures as the seller in the subsequent transactions, had already been taxed under R. 4-A(iv). It should be remembered that despite the monthly returns to be submitted the turnover to be taxed under the Act is the annual turnover.

16. If in the hypothetical case suggested by the learned counsel for the assessee a spinning mill bought yam in the first instance for spinning, but subsequently sold that yarn without spinning, on our interpretation of Rule 4-A(iv), that spinning mill would not be bound to disclose the purchases of yam, because what is taxable is purchase of yam-by a spinning mill for spinning. In that respect it is very much like a sale to a tanner in Rule 16 of the Turnover and Assessment Rules, which has been interpreted by this court to mean, sold to a tanner for purposes of tanning. We are satisfied that with the rule as it stands it prescribes a single point and that single point can be ascertained with precision, and, there is really no possibility of multi-point levy in the series of sales of cotton for spinning.

17. Learned counsel for the assessee pointed out that the amended rule expressly provided for the levy of the tax on the dealer who was the last purchaser, and there was no such express provision in Rule 4-A(iv) as it stood in the relevant period.

18. That in no way really affected the validity of the old Rule 4-A(iv), because, as we said, it prescribed the single point which could be ascertained with precision for the levy of the sales tax on the sale (or purchase) of cotton in the series of such transactions-in relation to that cotton.

19. We hold that Rule 4-A(iv) as it stood in the relevant period was intra vires and that it was I not in conflict with any of the provisions of Section 5(ii) of the Act.

20. All the contentions of the petitioner fail. The Tribunal was right in holding that the assessee was liable to be taxed on the purchase turnover we have mentioned above, Rs. 34,61,213-1-9. The petition fails and is dismissed with costs. Counsel's fee Rs. 100/-.

JD/V.R.B

21. Petition dismissed.