1. This is an application for an appropriate writ in order to quash the orders of the Petrol Taxation Officer directing the petitioner to pay tax on retail sales under the Jammu and Kashmir Motor Spirit Act. The facts out of which this application has arisen may be summarised as follows:
2. The Director General of Supplies at Delhi entered into a contract with the General Manager Caltex (India,) Limited Bombay for the supply of petrol, HSD and power Kero to the State Mechanized farm at Nandpur, within the State of Jammu and Kashmir which farm is really a Government of India concern. In pursuance of this contract the petitioner's bulk depot at Pathankot used to supply the said petrol and power Kero to Nandpur farm between the years 1959 to 1960.
3. To begin with the Nandpur farm used to send its tanks to Pathankot depot, which used to collect the supplies and bring them to its farm at Nandpur. As this mode of supply was not convenient, the parties to the contract agreed that a better course would be for the consumer farm at Nandpur to instal a pump with the aid of the petitioner company and the supplies should be made into that pump. The petitioner in February 1953 suggested to the Government of India that a consumer pump at the farm should be installed to ensure cleaner supplies. The petitioner agreed to hire out the pumping apparatus at a nominal cost of Re. 1/-.
4. The suggestion of the petitioner company found favour with the Government of India as would appear from a letter D/- 21-4-1953 maked as Annexure “D” which is at page 59 of the record.
5. Thereafter, the petitioner company got a pump installed in Nandpur farm at a rental of Re. 1/- per month. The ownership of the pump, no doubt, rested with the company but it was used by the consumer on payment of a monthly rent of Re. 1/-. Thus from March 1953 the procedure of the supplies was that the officer in charge of the Central Mechanised Farm at Nandpur ured to send indents for supply to the bulk depot of the petitioner company at Pathankot in State of Punjab. On receipt of the indents the petrol and power kero were taken in the company's trucks from Pathankot to Nandpur and the supplies were decanted into the consumer pump at Nandpur. This state of affairs continued till the year 1959 after which the contract with the petitioner company was put to an end to and the pumping apparatus was taken away by the company.
6. Thus according to the petitioner, between March 1953 to December 1959 the goods in question moved from the Pathankot depot fo Nandpur where these goods were decanted in the consumers pump at Nandpur. By alerter dated 21-5-1959 the Petrol Taxation Officer called upon the petitioner to furnish the return of the Sales made by it to Nandpur farm between the years 1955 to 1959. The petitioner furnished the necessary statements and contested the right of the said officer to demand tax in respect of these sales.
7. By another letter dated 3-10-1960 the petitioner company was called upon to deposit an amount of Rs. 39,619.75 as sale tax payable by the petitioner on the sales made to the farm at Nandpur upto May, 1959. The petitioner's allegation is that he was not given an opportunity to make representations regarding the taxes imposed. By a letter dated 8-10-1960 the petitioner company pointed out to the first respondent that the taxes could not be levied because the sales were in the course of inter-state trade and commerce and were, therefore, exempt from taxation. The petitioner also informed the first respondent that the figures of sale for the period between 1952 to 1959 could not be ascertained as the relevant record had been destroyed. Ultimately by a letter dated 7-12-1960 the first respondent called upon the petitioner to pay the sale tax demanded within a fortnight of the sale failing which the petitioner was threatened with the cancellation of its license in the Jammu and Kashmir State and institution of legal proceedings for recovery of the taxes.
8. The petitioner again replied on 11-12-60 contesting the right of the respondent to levy the taxes. The petitioner was served with a demand notice and was threatened with action under Section 16(C) of the Jammu and Kashmir Motor Spirit Act, if the tax was not paid within 10 days from the date of service. Similarly by another notice dated 21-12-1960 the petitioner was required by respondent No. 2 to appear before him and to show cause why action under Section 9 of the said Act should not be taken against the petitioner company. Thereafter, the petitioner has come up to this court for an appropriate writ.
9. The main point which has been canvassed before me in this petition is as to whether the sales in question are in the course of interstate trade and commerce and, therefore exempt from taxation. The facts narrated above, are more or less admitted and the only dispute between the parties is on the question as to whether the pump at Nandpur was hired by the farm from the petitioner company or whether the pump was installed by the company in order to supply the goods to the farm. In this connection, I might mention that in the original petition filed by the petitioner, the company had taken a clear stand that the pump was hired by Nandpur farm and was in fact the consumers' pump. This allegation by the petitioner found ample support from one of the documents filed by the respondents with their counter-affidavit which is at page 76 of the file and the relevant part of it runs as follows:
“To be delivered free into consumer pump the Mechanized State Farm at Nandpur.”
10. Thereafter, the petitioner applied to this court for an opportunity to file an additional affidavit with certain documents to prove 1116 history as to how the pump was installed at the farm and this opportunity being granted, a further affidavit along with a number of annexures were filed by the petitioner company on 20-11-1961. A perusal of the additional affidavit as also the annexures thereto particularly annexures (C), (D), (E) and (F) clearly show that the stand taken by the petitioner is correct and cannot be doubted for a moment. In tact, the respondents in their counter-affidavit have not specifically denied the state of affairs regarding the installation of pump as alleged by the petitioner but have only contested the allegation of the petitioner on a point of law namely that the sales were not in the course of interstate trade or commerce and, therefore not exempt from taxation.
11. In this connection the petitioner made a clear allegation in para Nos. 6 and 7 of the additional affidavit regarding the circumstances in which the pump was installed and tired by Nandpur farm. Replying to the allegations in these two paragraphs the second respondent in para 6 of their additional affidavit averred as follows:
“Referring to Para 6 of the affidavit I say that the tanks as well as pumps attached to them belonged to the petitioner company and the sales were inside sales. I further say that the petitioner company removed these fixtures after the termination of their contract. In this connection I crave leave to refer and rely on the letter of the officer in charge No Mech 2(61)/1601 Nandpur dated 14-12-1961 to the address of Excise and Taxation Officer Jammu, relevant portion of which is as under:
The H.S.D and power kero pumps installed at the farm belonged to Caltex Co. This farm had got no concern with these pumps from the very beginning. Referring to para 7 of the petition I say that the petitioner company has tried to introduce irrelevant matters merely to cloud the real issues involved in the case. It cannot escape liability by resorting to these subterfuges.
Referring to Para 8 of the petition. I say that there was no hiring out of the pump as such and the mere payment of the rent has no bearing on the case and cannot lift the transactions out of the category of inside sales.”
12. It is, therefore, clear that the respondents did not specifically contest the allegations made by the petitioner in Para Nos. 6 and 7 of their additional affidavit but take the position merely that the pump belonged to the company and that the sale was an inside sale. It is obvious that even if the pump was hired at Mandpur farm, the ownership would, no doubt vest in the petitioner company though the actual possession was with Nandpur farm as long as the lease lasted. It is just like Nandpur Farm having taken a godown on rent from the supplier and ask the supplier to send the supplies into its godown. In these circumstances, therefore, the fact that the pump installed at Nandpur Farm was in possession of Nandpur farm and the petrol and power kero was decanted into it has not been and could not be challenged by the respondents. Even in the course of arguments, the Advocate General has not seriously challenged this fact.
13. It is also admitted in this case that during the relevant period the petitioner company had no pump or any business of its own in the State of Jammu and Kashmir. It is also not disputed that the period during which the taxes are claimed by the respondents is between the years 1955 to 1959 that is to say during the period when the consumer pump at Nandpur farm had already been installed;
14. I would now come to the main points that have been canvassed before me in this petition. Mr. Sen appearing for the petitioner has contended in the first place, that having regard to the circumstances of the case, the transactions were in the course of inter-state trade or commerce and, therefore, were exempt from taxes under Article 286 clause (2) of the Constitution of India. It is conceded that this Article was applied to the State of Jammu and Kashmir in the Year 1954 that is to say before the relevant period. In fact the Article was applied by the Constitution Application to Jammu and Kashmir Order, 1954 dated 14-5-1954.
15. Article 286(2) of the Constitution of India runs as follows:
“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 goods where such sale or purchase takes place in the course of inter-state trade or commerce.”
16. It is, therefore, clear that if the present transaction is held to be one in the course of interstate trade or commerce then as long as the ban referred to in this clause is not lifted no state is entitled to tax such sales. There was a good deal of controversy regarding the explanation to Article 286 and its connection with clause (2) of Article 286 of the Constitution of India.
17. In the State of Bombay v. United Motor's (India) Ltd., AIR 1953 SC 252, the majority judgment of the Supreme Court held that the explanation imports a fiction by which inter state transactions are converted into intra state transactions and the delivery state is, therefore entitled to tax the sales. In other words, the view taken in that case was that in order to avoid multiple taxation by a number of states relying on their territorial nexus the explanation has been incorporated, which notionally fixes the situs of sale by giving the State where goods are actually delivered for consumption in that state and thus the sate where such delivery takes place become entitled to tax the sale.
18. It is not necessary for me to advert to this decision in great detail because the view taken by the majority judgment in this case does not appear to have found favour on this point in a latter decision of the Supreme Court — Bengal Immunity Co. Ltd. v. State of Bihar, (S) AIR 1955 SC 661. This case is really the sheet anchor of the argument of learned counsel for the petitioner. The view taken by the majority judgment in this case is that the explanation is only for a limited purpose of explaining what is an outside sale within the meaning of Article 286(a) and cannot be extended or projected into Clause (2) either as an exception or as a proviso in order to curtail or to limit the ambit of Clause (2). Thus once where a sale or purchase takes place in the course of inter-state trade no state can tax such a sale whether such a transaction falls or not within the explanation. The previous view of the Supreme Court that by a fiction inter-state trade will be converted into a intra state trade by virtue of the explanation was not accepted by his decision.
19. In this connection Das Acting, C.J as he then was observed as follows:
“On a careful and anxious consideration of the matter in the light of fresh arguments advanced and discussions held on the present occasion we are definitely of the opinion that the explanation in cl. (1)(a) cannot be legitimately extended to Cl. (2) either as an exception or as a proviso thereto or read as curtailing or limiting the ambit of clause (2). Indeed in AIR 1953 SC 252 (supra) at p. 258 and again at p. 259 the majority judgment also accepted the position that the explanation was not an exception or proviso either to cl. (1)(a) or to Clause (2). If, therefore, the Explanation cannot be read into cl. (2) because of the express, language of the Explanation and also because of the difference in the subject matter of the operative provisions of the two clauses, then it must follow that, except in so far as Parliament may by law provide otherwise, no state law can impose or authorise the imposition of any tax on sales or purchases when such sales or purchases take place in the course of interstate trade or commerce and irrespective of whether such sales or purchases do or do not fall within the Explanation.”
20. In other words, the view taken in Bengal Immunity case, (S) AIR 1955 SC 661, is that until the Parliament lifts the ban contemplated by Cl. (2) of Article 286 no state whether it is a delivery state or not can tax sales or purchases which are in the course of inter-state trade or commerce. The Advocate General has not controverted this position but he has vehemently argued that the present sale is purely an inside sale and cannot be deemed to be a sale in the course of inter-state trade or commerce. He contended that under the contract of sale, the goods were supplied from Pathankot depot to Nandpur farm into the State of Jammu and Kashmir for purpose of consumption in that state. As the sale had been completed by delivery in the State of J. and K. State, the sale is an inside sale and cannot be deemed to be an inter-state sale.
21. I am unable to agree with this contention because the contention tries to put the same argument which was adopted by the majority judgment in the United Motors Case, AIR 1953 SC 252 and which was not accepted in the later decision of the Supreme Court in Bengal Immunity case, (S) AIR 1955 SC 661, only the argument has been put in a different torn. In fact, we do not have to look to the Explanation at all when we are dating with a case to which Article 286(2) applies directly. In fact, the question of situs of sale or purchase & wholly irrelevant in considering the question as to whether a particular transaction is in the course of inter-state trade or commerce.
22. In Bengal Immunity case (S) AIR 1955 SC 861, Das A.C.J clearly observed as follows:
“The shifting of the ‘situs’ of a sale or purchase from its actual ‘situs’ under the general law to a fictional ‘situs’ under the explanation takes the sale or purchase out of the taxing power of all States other than the State where the ‘situs’ is fictionally fixed. That is all that Cl. (1)(a) and the Explanation do. Whether the delivery State will be entitled to tax such a sale or purchase will depend on the other provisions of the Constitution. The assignment of a fictional ‘situs’ to a sale or purchase e.g its interstate character or its export or import character which are entirely different topics.
This fixing of a ‘situs’ for a sale or purchase is any particular State either under the general law or under the fiction does not conclude the matter. It has yet to be ascertained whether that sale or purchase which by virtue of the explanation had taken place in the delivery State was made in the course of inter-State trade or commerce. For this purpose the explanation can have no relevancy or application at all.”
23. Indeed, the question where a sale is complete is a vexed question and is dependent on various circumstances. One view may be that the sale is complete where the transaction is concluded. Another view is that the sale is complete where the goods pass or where the delivery is made. It is, therefore, rightly held by Das Acting, C.J in the case quoted above, that these questions are irrelevant when we are really considering whether a particular sale or purchase is in the course of inter state trade or commerce.
24. The next question is as to what is meant by the term “in the course of inter-state trade or commerce.” It is true that the term has not been defined either in the Constitution or in any of the decisions of the Supreme Court, but there are ample materials in a number of decisions which clearly indicate the connotation of this term.
25. In the first place, I would refer to the observations made by Das, J. in Bengal Immunity case (S) AIR 1955 SC 661 at p. 685, which runs as under:
“Ordinarily, inter-State trade or commerce is done between a dealer in one State and a dealer in another State. The dealer in the consuming State in his turn sells the goods in retail actual consumers.”……
26. Thus when there is a transaction between a dealer in one State with a dealer in another state and as a result of this sale the goods move from the boundary of one state to another, the transaction would be undoubtedly one in the course of inter-state trade or commerce. Again even in the United Motor case reported in AIR 1953 SC 252 Shastri, C.J observed as follows at page 258, para (17):
“The sale by a trader in one state to a user is 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.”
27. Similarly, Bhagwatt, J. in that case observed as follows in para 79:
“The transaction of such sale or purchase even though it be as between a dealer in one state and the consumer in the delivery state is nonetheless a transaction in the course of interstate trade or commerce.”
28. In State of Travancore-Cochin v. Shanmugha Vilas Cashewnut Factory, AIR 1953 SC 333, Das, J. observed as follows:
“In all interstate sale or purchase the property passes and the sale or purchase takes place in one or the other state according to the rules laid down, in the Sale of Goods Act and the inter-state character of the sale or purchase is not affected or altered by the fact of the property passing in one state rather than in another. What is an inter-state sale or purchase continues to be such, irrespective of the State where the property passes.
Thus a dealer in, say Pepsu who delivers goods to a dealer in say Travancore-Cochin will become subject to the jurisdiction of the last mentioned State and will have to file returns of their turnover and support the same by producing their books of account there. I cannot imagide that our constitution makers intended to produce this anomalous result.”
29. I might mention here that in the State of Travancore-Cochin case, Justice Das, had sounded a note of dissent from the view taken by the majority judgment in the United Motors case, AIR 1953 SC 252 and this dissenting judgment was practically the view taken by the majority judgment in the Bengal Immunity case, (S) AIR 1955 SC 661. I might here state an illustration given by Das, J. in the Bengal Immunity case, (S) AIR SC 661 regarding the circumstances under which a transaction may not be an inter-state sale and the Explanation to Article 286 may yet apply.
30. Das A.C.J pointed out that suppose there are two traders A and B in Gurgeon and A orders B to supply certain goods to him. These two dealers have also godowns at Delhi. As a result of the agreement A direct his godown at Delhi to supply certain goods to godown B also at Delhi. In this case Delhi State alone will be able to tax the sale because the delivery of goods had taken place in Delhi and such a sale will not be an inter-state sale because there has been no movement of goods from Gururgeon (Punjab) to Delhi. Thus this illustration clearly shows that the essential element of an inter State trade is the movement of goods from one state to another, occasioned by the sale. In the instant case, we find that there is a clear movement of goods from Pathankot to Jammu as a result of a contract of sale which was entered into by the petitioner company with the Director General of Supplies at Delhi. Thus the present case clearly falls within the ambit of the terms “in the course of inter-State trade or commerce.”
31. Similarly in a very recent case Endupuri Narasimham and Son v. State of Orissa, AIR 1961 SC 1344, their Lordships of the Supreme Court have held as follows:
“In order that a sale or purchase might be interstate, it is essential that there must be transport of goods from one State to another under the contract of sale or purchase. In 1955-2 SCR 603 at pp. 784-785 : (S) AIR 1955 SC 661 at p. 734 occurs the following observations which are apposite.
A sale could be said to be in the course of interstate trade only if two conditions concur: (1) A sale of goods and (2) a transport of those goods from one state to another under the contract of sale. Unless both these conditions are satisfied, there can be no sale in the course of inter-State trade.”
32. It is, therefore, clear that where there & a transaction of sale or purchase between dealers of more than one state and as a result of such dealings the goods move from the boundary of one state to another, such a transaction is undoubtedly one in the course of inter-state trade or commerce. In the instant case, the following facts are admitted:—
33. That a contract was entered into between the Director General of Supplies at Delhi with the General Manager of the petitioner Company at Bombay. According to the contract a copy of which has been annexed, the price of goods supplied was to be paid in Delhi on the presentation of the bills by the Company duly attested by the authorities at Nandpur farm. It is also clear that as a result of this concluded contract the goods moved from the bulk depot of company at Pathankot (Punjab) in the consumers pump at Nandpur farm in the State of J. and K. Thus all the essential elements of an inter-state trade are completely fulfilled in this case.
34. The Advocate-General, however, submitted that a transaction could be said to be in the course of inter-state trade or commerce only if a sale takes place while the goods are in transit. I am, however, unable to agree with this view, because this will be putting a very narrow interpretation on clause (2) of Article 286 as also on the term “inter-state trade or commerce”. Moreover, a similar argument was put forward in State of Travancore-Cochin v. Bombay Co. Ltd. Alleppey, AIR 1952 SC 360, on construing the words import and export of Article 286 cl. (b) of the Constitution of India and the argument was repelled by Sastri, C.J in the following words:—
“We are not much impressed with the contention that no sale or purchase can be said to take place” in the course of “export or import unless the property in the goods is transferred to the buyer during their actual movement, as for instance, where the shipping documents are indorsed and delivered within the State by the seller to a local agent of the foreign buyer after the goods have been actually shipped, or where such documents are cleared on payment or on acceptance by the Indian buyer before the arrival of the goods within the State. This view, which lays undue stress on the etymology of the word “course” and formulates a mechanical test for the application of cl. (b) places, in our opinion, too narrow a construction upon that clause, in so far as it seeks to limit its operation only to sales and pax chases effected during the transit of the goods, are would, if accepted, rob the exemption of much of its usefulness.”
We accordingly hold that whatever else may or may not fall within Article 286(1)(b) sales and purchases which themselves occasion the export or import of the goods, as the case may be, out of or into the territory of India come within the exemption and that is enough to dispose of these appeals.”
35. I might mention here that in Article 286(b) also the words used are “in the course of” and this argument had really turned upon the interpretation of the words “in the course of”. In clause (2) also the words are “in the course of interstate trade or commerce” hence the same considerations would naturally apply and the argument of the Advocate General on this score cannot be accepted.
36. Moreover in AIR 1953 SC 333 Chief Justice Sastri while interpreting the word “Course” observed as follows:—
“The word ‘course’ etymologically denotes movement from one point to another and the expression “in the course of” not only implies period of time during which the movement is he progress but postulates also a connected relation………….
37. A sale in the course of export out of the country should similarly be understood in the context of cl. (1)(b) as meaning a sale taking place nod only during the activities directed to the end off exportation of the goods out of the country but also as part of or connected with such activities. The time factor alone is not determinative.”
38. Summarising again the position as laid down in the Bengal Immunity case, (S) AIR 1955 SC the position is this:—
(1) The Explanation to Article 286 does no more than define what an outside sale is and the Purpose of the Explanation is exhausted as son as it is held that an inter-state sale cannot be taxed by any state other than the delivery state. The Explanation thus does not attribute any legislative power to the State legislature of the delivery State to tax an inter-state sale.
(2) That where the sale is one in the course of an inter-state trade or commerce, even the delivery state cannot tax the sale until the ban indicated in clause (2) of Article 286 is lifted and a law introducing the State to tax is passed by the Parliament
(3) That Article 286 contains separate and independent restrictions on the power of states to tax sales in order to ensure a free flow of trade or commerce within the country and these restrictions have to be construed independently of the Explanation.
(4) The Explanation is meant only for a limited purpose and it cannot be extended or projected to cl. (2) of Article 286 so as to convert by a fiction an inter-state into a intra-state sale.
(5) That as long as clause (2) of Article 286 remains in operation no State whether it be delivery state or not and no transaction whether it is covered by the Explanation or not can be taxed if it comes within the purview of cl. (2) of Article 286.
(6) That the Article 301 which is subject to the State power of imposing non-discretionary taxes on goods received from another state has no bearing at all on the limitations imposed by cl. (2) of Article 286 on the power of a state to tax sales or purchases in the course of inter-state trade or commerce.
(7) That the mere fact that if the Explanation is considered in this manner then it will become redundant so long as the ban contained in clause (2) of Article 286 is not lifted, will not be a good ground for taking the view that the Explanation nullifies the restriction contained in clause (2) of Article 286 or cuts down its operation.
39. Applying these tests to the present case, it is clear to me that the present transaction is dearly a transaction in the course of infer-state trade or commerce because the commercial activities in the present case extended to various states namely, Delhi where the contract was concluded, Pathankot from where the goods of the petitioner company moved, and the State of Jammu and Kashmir where the goods were delivered. It cannot be argued with any show of force that in view of these diverse activities covering so many states and resulting in a sale which occasioned the movement of goods from Pathankot in the State of Punjab to Nandpur farm in the State of Jammu and Kashmir, the transaction should still be regarded as an intra-state sale and not an inter-state sale merely because the goods have been delivered in the State of Jammu and Kashmir.
40. I might here also refer to another decision of the Supreme Court in which the Bengal Immunity case, (S) AIR 1955 SC 661 was followed. In Messrs Mohanlal Hargovind Das v. The State Of Madhya Pradesh, (S) AIR 1955 SC 786, their Lordships of the Supreme Court held that the transactions in that case took place in the course of inter-state trade or commerce and, therefore the State of Madhya Pradesh had no authority to impose any tax. The facts of the case were that a firm carrying on business in Jabalpur in Madhya Pradesh imported tobacco from the State of Bombay. The procedure was that the firm at Madhya Pradesh first sent the tobacco to Bombay where the supplier in Bombay rolled the Tobacco into bidis. In their own factories and thereafter the finished bidis were sent to Madhya Pradesh for consumption in that the state. Even on these facts their Lordships held that the transaction was one in the course of inter-state sale and commerce and clearly came within the purview of Article 286(2) of the Constitution of India.
41. In this connection, their Lordships observed as follows:—
“We are of the opinion that this contention of the learned Attorney General is sound. It was in fact admitted by the respondents in their return that the petitioners imported tobacco from the State of Bombay in large quantities. The Bombay suppliers processed tobacco in their godowns situated within the State of Bombay and supplied the finished tobacco to the petitioners in Madhya Pradesh. The petitioners imported this finished tobacco into Madhya Pradesh from these suppliers who were carrying on business in the State of Bombay and there was necessity, as a result of these transactions, the movement of the goods across the border.
As a result of the transactions entered into by the petitioners with these suppliers the finished tobacco which was supplied to the petitioners moved from the state of Bombay to the State of Madhya Pradesh and these transactions were, therefore, in the course of inter-state trade or commerce.”
42. Again in Ram Narain Sons Ltd. v. Assistant Commissioner of Sales Tax, referred in the same volume, (S) AIR 1955 SC 765, the fact were very much similar to that of the present case. In that case, certain bidis were manufactured by the petitioner firm in Madhya Pradesh and were sent to Uttar Pradesh where they were delivered for consumption in that State. The State of Madhya Pradesh sought to tax the sales but the Supreme Court held that these were inter-state transactions, and were not taxable. It may be noted that although according to the facts of that case Uttar Pradesh was the state where the goods were delivered for consumption in that state, still the transactions were held to be inter-state transactions and exempt from taxation. Their Lordships of the Supreme Court observed as follows:—
“The whole theory, therefore, of “inside sales” falls to the ground and the only thing which we are left with is that these transactions were inter-state transactions in which as a direct result of such sales the goods were actually delivered for the purpose of consumption in the State of Uttar Pradesh. The Explanation to Article 286(1)(a) determined the state of Uttar Pradesh to be the State in which the sales took place and which alone was entitled to tax these transactions, the State of Madhya Pradesh becoming an outside state for the purpose.
43. Apart from the ban imposed on the State of Madhya Pradesh under Article 286(1)(a) and the-Explanation thereto, these transactions were also in the course of inter-state trade or commerce and were hit by the ban of Article 286(2).
44. It is, therefore, clear that their Lordships held in that case that although the state of Uttar Pradesh would be the state which alone was entitled to tax, yet as these transactions were in the course of inter-state trade or commerce they were clearly hit by the ban of Article 286(2). It has also been held that Madhya Pradesh could not tax as within the Explanation it becomes an outside sale. Tills, case, therefore, completely demolishes the argument of the Advocate General that since the sales actually took place in the State of Jammu and Kashmir, the transactions will not be an interstate transactions even though there may be a movement of goods from one State to another in connection with the sale.
45. It may be noticed that even in the aforesaid case the goods had been supplied from, Madhya Pradesh to Uttar Pradesh for consumption in that State and while holding that Uttar Pradesh was by virtue of the explanation entitled to tax the sale yet their Lordships held that as the sale was in the course of inter-state trade or commerce, it was clearly hit by Article 286(2) of the Constitution of India. This case, therefore, seems to me to be on all fours with the facts of the present case. In the instant case also by virtue of a contract of sale, the goods moved from Panjab to Nandpur farm in the state of Jammu and Kashmir and although the articles supplied were delivered in the State of J. and K. and meant for consumption there, yet as the sale bears all the characteristics of an inter-state sale, Article 286(2) of the Constitution of India clearly applies and the sales are immune from taxation.
46. I might mention here that after the Bengal Immunity case, (S) AIR 1955 SC 661, the Parliament passed an Act validating taxes already levied and the Constitution itself was amended in 1956. So far as this State is concerned, the amendment was applied only in March 1958 and not before that. It is, therefore, clear that Article 286(2) continued to apply in the state with full force till March 1958, and, therefore, the petitioner company was not liable to pay any tax under the Jammu and Kashmir Motor Spirit (Taxation of Sales) Act, 2005 between the period from 1955 to 11958.
47. I might mention here that before the amendment of the Constitution, the Parliament passed an Act validating the taxes already levied by the various states. Section 2 of the Act is as under:—
“Notwithstanding any judgment, decree or order of any court no law of a state imposing or authorising the imposition of a tax on the sale or purchase of any goods where such sales or purchases took place in the course of inter-state trade or commerce during the period between the 1st day of April 1955 and the 6th day of September 1955 shall be deemed to be invalid or ever to have been invalid merely by reason of the fact that such sale or purchase took place in the course of inter-state trade or commerce and all such taxes levied or collected or purporting to have been levied or collected during the aforesaid period shall be deemed always to have been validly levied or collected in accordance with Law.”
48. This Act was applied to this state also but it saves taxation between the period 1-4-1951 to 6-9-1955 and, therefore, in the instant case the taxable period would be only between January 1955 to September 1955, because the petitioner has not been called upon to pay tax before 1955 in this case. Mr. Sen contended that the Act merely saved the actual levies made at the time when the Act was passed and not the liability to pay. I am unable to accede to this argument because Section 2 does not lay down any such limitation. The words “shall be deemed always to have been levied or collected” clearly indicate not only the actual levies but also the right to levy has been saved.
49. It seems to me that what the validating Act has done is to lift the ban imposed on the states by Article 286(2) and once the ban is lifted the power to tax is there and, therefore, the Act would apply not only to the levies already made but even to fresh levies during the period mentioned in the Act and which started even after the Act spent its force.
50. I am fortified in my view by a decision of the Supreme Court, Sundararamier and Co. v. State of Andhra Pradesh, AIR 1958 SC 468. Moreover, learned counsel conceded that in view of this Supreme Court decision his contention on this score could not be accepted. He has, however, put forward another contention which appears to be very attractive. He has submitted that the language of the Act clearly shows that it validates only such provisions as are specifically mentioned in the statutes whereby tax could be levied on inter-state sales. In this connection he has drawn my attention to the Bihar Sales Tax Act and to the Acts of some other states wherein there are specific provisions giving power to the state to tax inter-state sales by incorporating the principle of the Explanation to Article 280 of the Constitution of India. The state Act, however, does not contain any such provision and it is contended, therefore, that the Validating Act does not apply at all to the facts of the present case. It is true that the state Act merely speaks of retail sale and does not at all contain any provision for imposition of tax on inter-state sale.
51. Section 3 of the Jammu and Kashmir Motor Spirit (Taxation of Sales) Act, 2005 rung as under:—
“There shall be levied and paid to the Government on retail sales of motor spirit a tax atl the rate of four annas for each imperial gallon of motor spirit or at such other rate as the government may prescribe from time to time.
“Retail Dealer” has also been defined in Section 2(f) thus:—
“Retail dealer, means any person who on commission or otherwise, sells any motor spirit to a consumer or to any other person for any purpose other than re-sale or keeps any of motor spirit for sale to consumers or to any other person for purpose other than re-sale.”
52. In my opinion, mere absence of a specific provision regarding taxation on inter-state sale does not make any difference. If the effect of the Validating Act is that the ban contemplated by Article 286(2) is completely lifted, then the Explanation operates immediately and by virtue of the Explanation the sale becomes a purely domestic and inside sale, once the delivery has taken place in the State of Jammu and Kashmir. In these circumstances, therefore, the sale of goods in question which would be deemed to be, no doubt, a retail sale in the State of J. and K. will be liable to be taxed under Section 3 between the period from January 1955 to September, 1955.
53. The contention of Mr. Sen on this point is, therefore, over-ruled and it must be held that whatever be the position after September 1955 respondent No. 1 was entitled to tax the petitioner company between the period January to September, 1955 and to that extent the prayer of the petitioner must be disallowed.
54. I might also mention here that after the amendment of Article 286 of the Constitution of India, the Parliament passed Central Sales Tax Act for levy of tax on inter-state sales. This Act was applied to the state of Jammu and Kashmir on 23-3-1958 and under this Act if the sale is one in the course of inter-state trade, tax can be levied only under the Central Sales Tax Act and not under any local Act of the state. In view of my finding that the present transaction is one in the course of an inter-state trade and the sale is an inter-state sale, any tax which would be levied after 23-3-1958 could be leaved on these sales only under the Central Sales Tax Act and not under the Jammu and Kashmir Motor Spirit Taxation of Sales Act, 2005. It is, therefore clear that from March 23 to May, 1959 also the respondents are not entitled to tax the petitioner company's sales. This position was conceded by the Advocate General.
55. As regards the period between October 1955 to May 1959 it is conceded by the Advocate General that if it is held that the present transaction is in the course of inter-state trade or commerce, the respondents are not entitled to levy the tax. In view of my clear finding that the circumstances of the present case clearly disclose that the transaction is one in the course of inter-state trade or commerce; the respondents had no jurisdiction at all to levy tax on the sales of the petitioner company between October 1955 to May 1959.
56. I would now deal with certain contentions raised by the Advocate General, in support of the respondent's plea.
57. In the first place, the Advocate General relied on a decision of the Supreme Court in AIR 1961 SC 1344. The facts of that case are clearly distinguishable from the facts of the present case. What happened in that case was that the petitioner firm at Berhampur in Orissa purchased certain articles like castor seeds, gingili etc., from dealers inside the state and then after having purchased the same sold them to dealers outside the state. The state of Orissa levied a tax on the sales of goods which were purchased by the firm Inside the state of Orissa. The action of the state was challenged on the ground that the sale being inter-state sale was exempted from taxation. The facts of that case clearly show that there were two separate transactions of sale, one of which consisted of sale by the petitioners' firm from Sealers inside the state. This was, no doubt, an Inside sale and tax was sought to be levied on this sale alone. As regards the sale from Orissa to dealers outside that was, no doubt, a sale in the course of inter-state trade and would be immune from taxation. It is, therefore, manifest that in that case the first sale did not contain any element of inter-state trade. Both the dealers were in the state of Orissa. There was no movement of goods from the state of Orissa to any other state with respect to that particular sale, in these circumstances, therefore, the facts of that case could not apply to the present case where by virtue of a contract of sale, the goods actually moved from Pathankot to Jammu. Their Lordships observed in that case as follows:—
“The transactions of sales which have beer taxed were wholly inside the state of Orissa. They were sales by persons in the State of Orissa, of goods which were in Orissa. The fact that the purchaser sold those very goods to dealers outside the state is not relevant, as those sales are distinct and separate from the sales on which the taxes in question have been imposed. The present levy is not on the sales by the petitioner to persons outside the state, but on the purchases by him inside the state. The former sales are in the course of inter-state trade and are not taxable under Article 286(2) but the latter are purely intra-state sales, and a tax imposed thereon does not offend Article 286(2).”
58. Moreover, the following passage in that case supports the case of the petitioner company rather than the case of the Advocate General. Their Lordships at page 1346 observed as follows:—
“In order that a sale or purchase might be-inter-state, it is essential that these must be transport of goods' from one state to another under the contract of sale or purchase. In 1955-2 SCR 603 at pp. 784-785 : ((S) AIR 1955 SC 661 at p. 734) occur the following observations which are apposite:
‘A sale could be said to be in the course inter-state trade only if two conditions, concur: (1) A sale of goods, and (2) a transport of those goods, from one state to another under tile contract of sale Unless both these conditions are satisfied, there can be no sale in the course of inter-state trade.’”
59. I am, therefore, clearly of the opinion, that this case is of no assistance to the Advocate General.
60. Reliance was then placed on Burmah Shell Oil Storage and Distributing Co. of India Ltd. v. Commercial Tax Officer, AIR 1961 SC 315. In that case, also the facts are quite different from the facts of the present case. There also their Lordships came to a finding of fact that the sale was purely an inside sale. In that case what happened was that the appellant in that case carried on Petroleum business at Calcutta and maintained supply depots at Dum Dum Airport from which aviation spirit was sold and delivered to aircraft company proceeding abroad. The position was that the sale of aviation spirit was made from Dum Dum Airport in West Bengal and the petrol was decanted in the aircraft. It was contended in that case that the sale was in the course of export and import and therefore, the State of West Bengal could not tax the sale being hit by Article 286(2). This argument was negatived on the ground that, before the aircraft left the boundaries of the state, aviation spirit was in fact consumed even by the aircraft in the state itself. It is, therefore, clearly a case of inside sale because both the petrol depot and the aircraft where the spirit was put, were in the State of West Bengal and there was no movement of goods from, Bengal to outside India.
61. Their Lordships in this connection observed as follows:—
“‘In the present cases, there is no such rival state. Where the purchaser buys goods in West: Bengal for his own consumption, the test of an ‘inside sale’ is satisfied when the property in the goods passes in the same State and all the elements of the contract of sale also take place inside it. Where the property in the goods passes to at buyer who is also the ultimate consumer, the terms of the Explanation are themselves satisfied.’
Applying these several tests to the cases on hand it is quite plain that aviation spirit loaded on board an aircraft for consumption though taken out of the country is not exported since it has not destination where it can be said to be imported and so long as it does not satisfy this test it cannot be said that the sale was in the course of export. Further, as has already been pointed out, the sales can hardly be said to occasion the export. The seller sells aviation spirit for the use of the aircraft and the sale is not integrally connected with the taking out of aviation, spirit. The sale is not even for the purpose of export as explained above. It does not come within the course of export which requires an ever deeper relation. The sales, thus do not come within Article 286(1)(b). These sales must, therefore, be treated as made within the State of West Bengal.”
62. That case also, therefore, does not appear to be of any assistance to Advocate General. In fact, the main point that was stressed in this case was whether the goods actually moved out of the country as a result of the sale. In other words, it was held in that case that the sale or purchase did not occasion the export which not being an integral part of the same, Article 286(1)(b) does not apply.
63. Lastly, reliance was placed on India Copper Corporation Ltd. v. State of Bihar, AIR 1961 SC 347. That was also a case where their Lordships were considering the effect of the Explanation to Article 286 of the Constitution of India. As I have already observed that the Supreme Court has held in the Bengal Immunity case, that various clauses of Article 286 engraft separate restrictions on taxation and these clauses have to be read separately and independently of each other, even though they may overlap in some cases. It is, therefore, clear that when we are considering a case where the Explanation applies, it is obviously a case which is independent of clause (2) of Article 286.
64. In this case, the facts were quite different and certain arguments were in fact accepted. One of the points decided in that case was whether it should be proved that the goods were delivered in a state for the purpose of consumption. It was held by their Lordships that all that the Explanation requires is that the goods should be meant for consumption and not that they should be actually proved to be consumed by the State concerned. Their Lordships, however, clearly stressed the fact that a case of inter-state sale should be different. In this connection, their Lordships observed as follows:—
“The conclusion reached there is that where the property in the goods passes within a state as a direct result of sale, the sale transaction is not outside the State for the purpose of Article 286(1)(a) unless the Explanation operates. We need also add that the power of the state to impose the tax might still not be available unless the transaction in question is unaffected by the other bans imposed under sub-cl. (1)(b), (2) and (3) of the Article 286.”
65. Their Lordships, in that case, were not considering a case of an inter-state sale at all. Moreover Das and Shah, JJ. clearly held that the State of Bihar in that case was entitled to levy taxation on the basis of the territorial nexus. Their Lordships observed as follows:—
“In other words, by enacting that a tax shall not be imposed under the Act when the sale takes place outside the State of Bihar in S. 33(1)(a) only the power to tax ‘Explanation sales’ which do not take place within the state of Bihar is token away, but not the power to tax “non-Explanation sales” in which though under the general law of sale of goods the property passes outside the state, there exists between the taxing power of the state and the sale a nexus as contemplated by the definition of sale in S. 2(g). If the sale is one in which the goods have been delivered outside the State of Bihar, but not as a direct result of the sale or not for the purpose of consumption in the State of first delivery, the sale will not be covered by the Explanation and the right to tax the sale, if arising otherwise under the Act relying upon the territorial nexus, will not be impaired by the prohibition imposed by cl. (1)(a)(i) of S. 33.”
66. I do not see how that case applies to the facts of the present case.
67. The learned Advocate General, however, laid, very great stress on the fact that while considering the sale we have to see whether a sale is completed sale and not merely an executory one. I have already observed, the question as to whether the place where a sale whether complete or otherwise has taken place is wholly foreign to the consideration of the question as to whether a particular transaction is in the course of inter-state trade or commerce.
68. The essential ingredients of inter-state trade or commerce are:—
(1) That there should be a sale. It may have been completed anywhere.
(2) That the sale must have been between dealers in different states.
(3) That as a result of the sale, goods sold moved from the boundary of one state to another.
69. All these conditions are fully satisfied to the present case, and, therefore the sales in the present case contain all the elements of an inter-state trade.
70. The Advocate General then submitted that the application should be thrown out on the ground that the petitioner has not utilised the machinery of law; namely of the Jammu and Kashmir Sales Tax in filing an appeal against an orders of respondent No. 1 to the prescribed authority, and as this alternative remedy has not been availed of by the petitioner this court should not interfere. I am, however, unable to agree with this contention.
71. It is true that the question whether the Petitioner has got an alternative remedy has to be considered by the court in a proceeding for a writ but where there is an infringement of a fundamental right, the mere fact that there is an alternative remedy is not sufficient to throw out the writ. Moreover, the oppressive machinery provided by Taxing Statutes has been held to be an onerous and burdensome remedy and not an efficacious remedy. In view of my finding, however, that respondent No. 1 had no jurisdiction at all to tax the petitioner company during the relevant period, the action of respondent No. 1 amounted to a threat to and an interference with the fundamental rights of the petitioner company to carry on trade and a writ could certainly be granted in this case, to enforce such a fundamental right, without insisting on the petitioner to avail of his remedy under the Act particularly when the order passed by Respondent No. 1 was not within the ambit of the Act itself but completely outside it.
72. In this connection I might refer to a decision of the Supreme Court Mohammad Yasin v. Town Area Committee Jalalabad, AIR 1952 SC 115 where their Lordships observed as follows:—
“In the absence of any valid law authorising it, such illegal imposition must undoubtedly operate as an illegal restraint and must infringe the unfettered right of the wholesale dealer to carry on his occupation trade or business which is guaranteed to him by Article 19(1)(g) of our Constitution. In this view of the matter the petitioner is entitled to a suitable order for protection of his fundamental right.”
73. Similarly in a later case Himmatlal Harilal v. State of Madhya Pradesh, AIR 1954 SC 403 their Lordships have observed as follows:—
“It is plain that the State evinced an indention that it could certainly proceed to apply the) penal provisions of the Act against the appellant if it failed to make the return or to meet the demand and in order to escape from such serious consequences threatened without authority of law and infringing Fundamental rights, relief by way of a writ of mandamus was clearly the appropriate relief.
74. In AIR 1952 SC 115 it was held by this court that a license fee on a business not only takes away the property of the licensee but also operates as a restriction on his fundamental right to carry on his business and therefore, if the imposition of a license fee is without authority of law it can be challenged by way of an application under Article 32 ‘a fortiori’ also under Article 226. These observations have apposite application to the circumstances of the present case.
75. Explanation II to Section 2(g) of the Act having been declared ultra vires any imposition of sales tax on the appellant in Madhya Pradesh is without the authority of law and that being so a threat by the state by using the coercive machinery of the impugned Act to realise it from the appellant is a sufficient infringement of his fundamental right under Article 19(1)(g) and it was dearly entitled to relief under Article 226 of the Constitution. The contention that because a remedy under the impugned Act was available to the appellant it was disentitled to relief under Article 226 stands negatived by the decision of this court in AIR 1953 SC 252 above referred to.
76. There it was held that the principle that a court will not issue a prerogative writ when an adequate remedy was available could not apply where a party came to the court with an allegation that his fundamental right had been infringed and sought relief under Article 226. Moreover, the remedy provided by the Act is of an onerous and burdensome character. Before the appellant can avail of it he has to deposit the whole amount of the tax. Such a provision can hardly be described as an adequate alternative remedy.”
77. Even in the Bengal Immunity case (S) AIR 1955 SC 661 it was clearly laid down that where a tax is being levied under a statute which is ultra vires, the court would be in error if it insisted on the petitioner to have recourse to the machinery provided by the Act to the same effect is a decision of the Supreme Court reported in Tata Iron and Steel Co. Ltd. Bombay v. S.R Sarkar, AIR 1961 SC 65.
78. It was finally contended by the Advocate General that in the present case, the question as to whether the sale was in the course of interstate trade or commerce was a disputed question of fact and, therefore, this court should decline to interfere. In my opinion, it is not in every case that a court should throw out a writ merely on the ground that a case involves a disputed question of fact. The court is not powerless to embark upon an enquiry into the disputed questions of fact where such an enquiry can be made and resolved on the basis of dosuments and affidavits filed in the court. More particularly when an infringement of a fundamental right is involved in a case, the court should normally resolve the disputed question of fact unless the disputed question is very complicated, I am supported in my view by a decision of the Supreme Court reported in K.K Kochunni v. State of Madras, AIR 1959 SC 725, where their Lordships of the Supreme Court have observed as follows:
“But we do not countenance the proposition that on an application under Article 32 this court may decline to entertain the same on that simple ground that it involves the determination of diluted questions of fact or on any other ground. If we were to accede to the aforesaid contention of learned counsel, we would be failing in our duty as the custodian, and protector of the fundamental rights………….
79. This court found no difficulty in dealing with that application on evidence adduced by affidavit and in upholding the validity of the Act then under challenge. That was also a decision on merits although there were disputed questions of fact regarding the circumstances in which the impugned Act came to be passed.”
80. Moreover, in the instant case there does not seem to be any real dispute about the matter except the fact that Nandpur Farm hired the pump installed by the petitioner. I have already held on a careful consideration of the affidavits that the position is practically admitted that Nandpur Farm had hired the pump from the petitioner company on a rental of Re. 1/- per month. As regards the other facts, namely as to where the contract was concluded, what was the mode of supply of goods, there is no dispute at all.
81. On a consideration, therefore of the entire facts and circumstances of the case, I am clearly of the opinion that Section 3 of the Jammu and Kashmir Motor Spirit (Taxation of Sales) Act, 2005 is ultra vires so far as it provides for levy of taxes on retail sales which bear the elements of inter-state character, and are in the course of inter-state trade or commerce because the Section is clearly hit by Article 286(2) of the Constitution of India. Consequently, the orders of the respondents directing the petitioner company to pay the taxes between October 1955 to May 1959 are clearly without jurisdiction and without any authority of law and must be set aside.
82. As regards the liability of the petitioner to pay taxes between January 1955 to September 1955, the same has been proved beyond doubt in view of the Validating Act, referred to above.
83. As regards the period between March 23, 1958 to May 1959, respondent No. 1 had also no jurisdiction to impose any taxes on the sales in question because those taxes could be levied only under the Central Sales Tax Act as applied to the State of Jammu and Kashmir.
84. In these circumstances, the application is allowed only to the extent that the orders passed by the respondents in realizing the taxes between the period from October 1955 to May 1959 are quashed and by a writ of mandamus the respondents are restrained from realizing these taxes from the petitioner company during this period.
85. The claim of the petitioner company regarding the period from January 1955 to September 1955 is disallowed. In view of the peculiar circumstances of the case, there will be no order as to costs.
CF/R.G.D
86. Order accordingly.