Appeal No 380 of 1966
Appeal by special leave from the judgment and order dated August 16 1963 of the Kerala High Court in Tax Revision Case No 17 of 1962
section V Gupte Solicitor General and A G Pudissery for the appellant
O P Malhotra P C Bhartar and 0
C Mathur for the respondent
Sardar Bahadur for the intervener
The Judgment of the Court was delivered by Mitter J
This appeal by special leave is from a judgment and order of the High Court of Kerala dated August 16 1963 passed in Tax Revision Case No 17 of 1962 filed by the respondent Cochin Coal Co Ltd against the order of the Sales Tax Appellant Tribunal Trivandrum
The facts necessary for the disposal of this appeal are as follows
The respondent assessee was a non resident dealer not resident in Travancore Cochin during the year 1955 56
The period we are concerned with here ends on September 4 1955
it used to supply coal to consumers in Travancore Cochin State which later became Kerala
For the assessment year in question 1955 56 the assessee was asked to file statements showing its turnover of supplies of coal made to purchasers in the State of Kerala and in reply to the notice under section 122b of the Travancore Cochin General Sales Tax Act it stated that the sales of coal to steamers arriving and berthed in Travancore Cochin State waters were not taxable because the goods were stored by the steamers for consumption on the high seas
The assessee however did not question its liability to pay tax in respect of supplies made to other consumers in the State of Kerala
On March 7 1959 the Sales Tax Officer Circle 1 Mattancherry assessed the respondent on a turnover of Rs 129352 
The respondent filed an appeal therefrom and the Assistant Commissioner of Agricultural Income Tax and Sales Tax Ernakulam allowed the appeal in part and reduced the turnover by omitting the portion of it after 6th September 1955
In the result the assessee s turnover was reduced to Rs 69407 
There was a further appeal to the Kerala Sales Tax Appellate Tribunal
This was disposed of on January 2 1962 in favour of the assessee
The Tribunal held that the sales being inter State sales were according to the decision of the Kerala High Court in T R Cs 1 2 and 3 of 1961 reported in 14 Sales Tax Cases 850 not taxable
The Tribunal held that section 261b of the General Sales Tax Act as amended by section 13ii of Act 12 of 1957 prohibited the taxation of inter State sales after March 31 1951
The Deputy Commissioner of Agricultural Income Tax and Sales 417 Tax Central Zone Ernakulam went up to the High Court of Kerala under section 15 B1 of the Act
The question of law raised for decision by the High Court was Whether in the light of the amending Act 9 of 1962 the finding of the Tribunal is correct  In rejecting the application the High Court reasoned as follows 1 Central Act 7 of 1956 was intended to validate State laws imposing or authorising the imposition of taxes on the sale or purchase of goods in the course of interState trade or commerce
2 This Court has decided in the State of Kerala and others vs The Cochin Coal Co Ltd1 that section 26 of the General Sales Tax Act 1125 imposed a tax on the sale or purchase of goods in the course of inter State trade or commerce and taxation of such sales during the period between 1 4 1951 and 6 9 1955 was validated by the above Central Act
3 section 26 of the General Sales Tax Act 1125 prior to its amendment by Act 12 of 1957 was in pari materia with section 22 of the Madras General Sales Tax Act which came up for consideration in the case of M P V Sundararamier  Co and others vs The State of Andhra Pradesh and another2
The Supreme Court held that section 22 of the Madras Act intended to authorise taxation of sales falling within the Explanation subject to authorisation by Parliament as provided in article 2862
4 Act 12 of 1957 raised the controversy as to whether Central Act 7 of 1956 could be considered as sabaging the levy of tax on inter State sales after the amendment introduced in section 26
According to the decision in TR Cs 1 2 and 3 of 1961 inter State sales after 3 1st March 1951 were not taxable
5 The Constitution Sixth Amendment Act 1956 made substantial changes as regards levy of tax in inter State sales
As a result of the amendment of article 269 taxes on the sale or purchase of goods other than newspapers where such sale or purchase takes place in the course of inter State trade or commerce were to be levied and collected by the Government of India and it was for Parliament to formulate principles for determining when a sale or purchase of goods takes place in the course of inter State trade or commerce
6 The Validating Act 9 of 1962 was enacted subsequent to the Constitution Sixth Amendment Act which came into force on 11th September 1956
In 1  2  418 view of the amendment of the Constitution in 1956 the Legislature of Kerala had not the competence to pass any legislation on the subject of inter State sales whether prospective or retrospective or both in the year 1962 with the result that the State could not call in aid the provisions of Act 9 of 1962 to tax inter State sales
The appellant s case was argued by the learned Solicitor General
One E J Mathew was allowed to intervene in this matter
In our view the High Court failed to construe the effect of the relevant statutes and apply the decisions of this Court rendered before they heard the matter
Proceeding chronologically the legal position developed as follows
Before the Constitution came into force The Travancore Cochin State General Sales Tax Act XI of 1125 levied a tax on sale of goods under section 3 of the Act
The tax was to be paid by the dealer on his turnover in each year
There was then no question of any exemption of inter State sales from taxation
section 26 was inserted in the main Act by Act 12 of 1951 and it ran as follows 1 Notwithstanding anything contained in this Act a a tax on the sale or purchase of goods shall not be imposed under this Act i where such sale or purchase takes place outside the State or ii where such sale or purchase takes place in the course of import of the goods into or export of the goods out of the territory of India
b a tax on the sale or purchase of any goods shall not after the 31st day of March 1951 be imposed where such sale or purchase takes place in the course of inter State trade or commerce except in so far as Parliament may by law otherwise provide
2 The explanation to clause 1 of article 286 of the Constitution of India shall apply for the interpretation of sub cl
i of cl
a of sub section 1
This was to bring the Act into line with article 286 of the Constitution of India
Then came the judgment in the case of The Bengal Immunity Company Ltd vs The State of Bihar and others1 on September 6 1955
There it was decided that the sales or purchases made by the appellant company in that case which were sought to be taxed by the State of Bihar actually took place in the course of inter State trade or commerce and Parliament not having by law otherwise provided no Bihar law could tax these sales or purchases although they fell within the Explanation to article 2861 and other States could not tax the same by reason of both clause I a read with the Explanation and cl
2 of article 286
This led to 1 419 the passing of Central Act 7 of 1956
The object of the Act was to validate laws of States imposing or authorising the imposition of taxes on the sale or purchase of goods in the course of interState trade or commerce
S 2 of the Act provided that 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 sale or purchase took place in the course of inter State trade or commerce during the period between the 1st day of April 1951 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 validly levied or collected during the aforesaid period shall be deemed always to have been validly levied or collected in accordance with law
A question here arises as to whether this statutory provision served to lift the ban imposed by section 26 of the General Sales Tax Act
Then came the Constitution Sixth Amendment Act 1956 on September 11 1956
It made substantial and important changes in article 286 of the Constitution by deleting the Explanation to article 2861 and by substituting new article 2862 and 2863
It also amended article 269
It inserted item 92A in the Union List of the Seventh Schedule and substituted a new entry 54 in place of the old one in the State List of the said Schedule
As a result of these amendments taxes on the sale or purchase of goods other than newspapers where such sale or purchase took place in the course of interstate trade or commerce could be levied and collected by the Government of India which was empowered to assign the same to the States in terms of cl
2 of article 269
article 2693 empowered Parliament by law to formulate principles for determining when a sale or purchase of goods takes place in the course of inter State trade or commerce
The new item 92A added to the Union List read Taxes on the sale or purchase of goods other than newspapers where such sale or purchase takes place in the course of inter State trade or commerce The old entry 54 in the State List was substituted by a new entry reading Taxes on the sale or purchase of goods other than newspapers subject to the provisions of entry 92A of List I It would therefore appear that after the amendment of the Constitution in 1956 the State Legislatures were not competent to legislate in respect of taxes on the sale or purchase of goods other than newspapers which took place in the course of inter State trade or commerce
420 Next in order of date is the Travancore Cochin General Sales Tax Amendment Act 1957 12 of 1957 which came into force on August 7 1957
section 13 of this Act introduced several changes in section 26 of Act XI of 1125
In the first place it substituted the word State  for the words State of Travancore Cochin in sub cl
i of cl
a of sub section
1 of section 26
It also deleted the words except in so far as Parliament may by law otherwise provide in cl
b of sub section
1 and omitted sub section
2 of the section
By its terms the amendment was only prospective
It did not seek to disturb the position in law obtaining up to that date
It was argued before us that the State Legislature was not competent to legislate in this field after the Constitution Sixth Amendment Act
On March 11 1958 Sundararamier  Co s case1 was decided by this Court
That case dealt with the competence of the States to levy tax on inter State sales and to enact conditional legislation on the subject
The statute which came up for consideration was the Madras General Sales Tax Act 1939 Madras Act 9 of 1939 as adapted to Andhra read with section 2 of the Sales Tax Laws Validation Act 7 of 1956
section 22 of the Madras General Sales Tax Act was inserted in the statute by an Adaptation Order of the President issued on July 2 1952 and cl
a thereof was substantially similar to section 261a of the Travancore Cochin General Sales Tax Act XI of 1125
The effect of cl
b of section 22 was that nothing in the Act Madras Act was to be deemed to 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 except in so far as Parliament may bylaw otherwise provide after 3 1st March 1951 and the provisions of the Act were to be read and construed accordingly
There was an Explanation to this section which is a verbatim reproduction of the Explanation to article 2861a
It was held by this Court tat page 1453 that Taken along with the admitted power of the States to impose tax on sales under Entry 54 the true scope of section 22 is that it does impose a tax on the Explanation sales but the imposition is to take effect only when Parliament lifts the ban
In other words it is a piece of legislation imposing tax in praesenti but with a condition annexed that it is to come into force in futuro as and when Parliament so provides   
It would clearly be within the competence of the Madras Legislature to enact a law imposing a tax on sales conditional on the ban enacted in article 2862 being lifted by Parliamentary legislation and that in our opinion is all that has been done in section 22
The Madras Act defines the event on which the tax becomes payable and the person from whom and the 1   421 rate at which it has to be levied and forms a complete code on the topic under consideration
It would have no immediate operation by reason of the ban imposed by article 2862 but when once that is removed by a law of Parliament there is no impediment to its being enforced
That satisfies all the requirements of a conditional legislation
 Discussing various authorities cited at the Bar this Court approved of the decision in Mettur Industries Ltd vs State of Madras1 and Dial Das vs P section Talwalkar2 and held that section 22 operated to impose a tax on sales failing within the Explanation subject to authorisation by Parliament as provided in Art 2862
At page 1463 the Court went on to observe If it is competent to the legislatures of the States to enact a law imposing a tax on inter State sales to take effect when Parliament so provides there is nothing unconstitut ional or illegal either in section 22 of the Madras Act or in the corresponding provisions in the Acts of other States
If conditional legislation is valid as we have held it is then section 22 is clearly intro vires and the foundation on which this contention of the petitioners rests disappears and it must fall to the ground
 The case of the State of Kerala  Others vs The Cochin Coal Company Ltd was decided on October 31 1960
There the respondent who stocked bunker coal at Candla Island in the State of Madras sold the coal to steamers calling at the port of Cochin in the State of Travancore Cochin and delivered it there
The respondent was assessed to sales tax on such sales for the years 1951 52 and 1952 53
The respondent contended inter alia that the sale being in the course of inter State trade was covered by the ban contained in article 2862 of the Constitution and was not taxable under the Travancore Cochin General Sales Tax Act 1125
The State contended that this claim for exemption was not available in view of the Sales Tax Laws Validation Act 1956
The High Court held that the Validation Act could not avail the State because on their construction of section 26 of the Act no tax had been levied or was leviable on sales in the course of inter State trade or commence and that the Validation Act having validated only taxes already levied could not enable the State to levy tax which had not been imposed by the State Sales Tax Act
This Court rejected the view of the High Court see 7 STC 731 at p 738 and held that the view of the learned Judges of the High Court regarding the construction of section 26 of the Travancore Cochin General Sales Tax Act must now be held to be incorrect in view of  the decision of this Court in M P V Sundararamier  Co vs The State of Andhra Pradesh4
1 ATR 2 AIR 1957 Bom
3  4  422 The position which emerges from the above may be summarised below 1The enactment of the Travancore Cochin General Sales Tax Act as it stood prior to the coming into force of the Constitution imposed a levy of sales tax on transactions of the nature disclosed in this case
2S 26 of the General Sales Tax Act as amended in 1951 imposed a ban on the levy of tax after March 31 1951 subject to any exception which Parliament may by law provide
3Central Act 7 of 1956 was enacted for the purpose of validating the levy and collection of taxes between 1 4 1951 and 6 9 19 55 which would otherwise be invalid by reason of the decision in the Bengal Immunity Co s case1
4In Sundararamier s case2 it was held by this Court that section 22 of the Madras General Sales Tax Act operated to impose a tax subject to authorisation by Parliament as provided in article 286 2
Further this Court did not agree with the view of the Kerala High Court in Cochin Coal Co Ltd vs State of Travancore Cochin3
5In the State of Kerala  Others vs The Cochin Coal Co Ltd4 this Court overruled the decision of the Kerala High Court in the Cochin Coal Co Ltd vs The State of Travancore Cochin3 regarding the construction of section 26 of the Travancore Cochin General Sales Tax Act  further the assessee s claim to relief on the strength of article 2862 of the Constitution was held not to be available to them after the coming into force of the Sales Tax Validation Act 1956 See 1961 2 SCR pp 219 223
The effect of this was that the levy of sales tax up to 4th September 1955 being the last date with which we are concerned in this case was valid
The validity and the scope of the amendment introduced in section 26 of the Travancore Cochin General Sales Tax Act by Act 12 of 1957 do not fall to be considered in this case inasmuch as the Act was only prospective and did not operate to invalidate any levy of tax imposed before
In this view of the matter we are really not concerned to go into the question as to whether the State of Kerala had legislative competence to enact Act 9 of 1962 seeking thereby to amend section 26 of the Travancore Cochin General Sales Tax Act 1125 by substituting the date 6th September 1955 in place of 31st March 1951 and purporting to validate the levy and collection of taxes on sales and purchases falling within the purview of sub section
2A of section 26 of the principal Act as inserted by the Act of 1962
The ban 1 3 7 STC 731
2  4  423 imposed by section 26 of the General Sales Tax Act 1125 having been lifted by the Central Sales Tax Validating Act 1956 the State was competent to collect all taxes in respect of sales in the course of inter State trade and commerce up to September 5 1955
In the result we hold that sales tax was properly leviable by the State of Kerala on the transactions which formed the subject matter of this case up to the 4th September 1955 but the question raised in the application for revision was not correctly framed and should read as follows Whether in the light of the Sales Tax Laws Validation Act 1956 Central Act 7 of 1956 read with the Travancore Cochin General Sales Tax Act as amended up to 1956 the finding of the Tribunal is correct We amend the question accordingly
We allow the appeal and answer the question in the negative
The matter must now go back to the High Court and the High Court should remit the matter to the Appellate Tribunal with our opinion on the question as reframed
In the circumstances of this case we make no order as to costs
VPS Appeal allowed


Summary:
Before the Constitution came into force the Travancore Cochin General Sales Tax Act ME 1125 levied a tax on sale of goods and inter State sales were not exempt from such taxation
By Act 12 of 1951 section 26 was inserted in the Act to bring the Act into line with article 286 of the Constitution as it then stood and imposed a ban on the levy of tax on inter State sales after March 31 1951 unless Parliament otherwise provided under article 2862
On September 6 1955 this Court held in The Bengal Immunity Co Ltd case 19552 SCR 603 that inter State sales could not be taxed by a State even if they were inside sales with respect to that State
This led to the passing by Parliament of the Sales Tax Laws Validation Act 1956 for the purpose of validating the levy and collection of taxes on inside sales between April 1 1951 and September 6 1955
In Sundararamier  Co case  this Court decided that section 22 of the Madras General Sales Tax Act 1939 which was in part materia with section 26 of the Travancore Cochin Act operated to impose a tax subject to authorisation by Parliament as provided in article 2862 in other words it was a piece of legislation imposing tax in praesenti but with a condition annexed that it was to come into force in futuro as and when Parliament so provided and this view was re affirmed by this Court in the Cochin Coal Co s case  with respect to section 26 of the Travancore Cochin Act
418C 422 B F The respondent assessee was a dealer not resident in Travancore Cochin State
It supplied coal to consumers within the State the last of the transactions being on September 4 1955
On the question whether the inter State sales during assess ment year 1955 56 were taxable under the provisions of the Travancore Cochin Act the Sales Tax Appellate Tribunal and the High Court held in favour of the assessee
In appeal by the State to this Court Held The ban imposed by section 26 of the Travancore Cochin Act having been lifted by the Sales Tax Laws Validation Act sales tax could be levied and collected by the State for the period covered by that Act
The Amendment to the section by Kerala Act 12 of 1957 did not fall to be considered in the present case inasmuch as the Amending Act was only prospective and did not operate to invalidate any levy of tax imposed before
The question as to whether the State of Kerala had legislative competence to amend section 26 by Kerala Act 9 of 1962 which purported to validate the levy and collection of taxes before September 6 1955 is also irrelevant for the purpose of this appeal
422G 423A D S5 SCI a13 416