Appeal No 446 of 1958
Appeal from the judgment and order dated April 18 1956 of the High Court of Judicature at Madras in Tax Revision Case No 93 of 1955
M C Setalvad Attorney General of India section Swaminathan and K L Mehta for the appellants
V K T Chari Advocate General of Madras M M Ismail and T M Sen for the respondent
N A Palkhivala J B Dadachanji section N Andley Rameshwar Nath and P L Vohra for the Intervener Tata Loco  Engineering Co Ltd Bombay
March 28
The Judgment of the Court was delivered by section K DAB J
This is an appeal on a certificate granted by the High Court of Madras
The firm of Messrs Ashok Leyland Ltd Ennore is the appellant before us
For brevity and convenience we shall hereinafter refer to the firm as the assessee
The State of Madras through the Commercial Tax Officer Saidapet is the respondent before us
The assessee is a firm with its factory at Ennore in the State of Madras where it manufactures assembles and sells motor vehicles and spare parts and accessories thereof through an elaborate organisation spread over several States
It is perhaps necessary to indicate briefly the organisational set up in order to appreciate the point on which the case was heard in the High Court and argued before us
The system of distribution of its motor vehicles spare parts and 609 accessories at one uniform price to consumers in the various States which the assessee adopted consisted of the appointment of a distributor called a dealer with a definite territorial jurisdiction both inside and outside the State of Madras
To every such dealer it granted the sole right of selling the products of the firm within the territory allotted to him
If the territory of the dealer was outside the State of Madras the agreement entered into by the dealer provided for the delivery of the products of the firm by consignment by rail or steamer or road transport
The agreement specifically stipulated that the dealer must not canvass or sell the products outside the territory allotted to him and in the event of infringement or breach of the undertaking by the dealer the assessee was entitled to terminate the agreement forthwith
On such termination the assessee reserved the right to call upon the dealer to return all or any of the products remaining unsold at the date of such termination
The case set up by the assessee was that a substantial number of motor vehicles and accessories thereof were consigned to the dealers in other States either by rail or steamer but due to want of such transport facilities a number of vehicles were also transported by road
In the year relevant to the assessment year 1952 53 the total turnover of the asaessee in respect of all its sales came to Rs 14367007 odd
The Deputy Commercial Tax Officer Madras computed the taxable turnover of the assessee for that year by excluding the sum of Rs 11221707 odd which represented the value of vehicles spare parts etc sold outside the State of Madras and consigned by rail or steamer or transported by road
The balance of Rs 3145299 odd was determined to be the net assessable turnover of the company
The tax levied thereon was a sum of Rs 145655 13 3 and this sum was duly paid by the assessee
Sometime thereafter the Commercial Tax Officer Madras purporting to act under the powers of revision given to him by section 12 of the Madras General Sales 77 610 Tax Act 1939 Madras Act IX of 1939 hereinafter called the Act called upon the assessee to produce its books of account for the purpose of satisfying himself as to the legality or propriety of the assessment made
After scrutinising the accounts and other records produced by the assessee the Commercial Tax Officer issued a notice proposing to revise the assessment by including a sum of Rs 4298068 odd on the ground that the delivery of motor vehicles etc in respect of sales covered by the aforesaid sum was made within the State of Madras and was therefore liable to tax under the Act
The assessee submitted its objection to the revision of the assessment and contended that on the sum of
Rs 42 lacs odd the assessee was not liable to pay sales tax as the transactions were in the course of inter State trade and commerce
This objection was however overruled by the Commercial Tax Officer except to a very small extent
From that decision of the Commercial Tax Officer an appeal was taken to the Sales Tax Appellate Tribunal Madras and the assessee contended in that appeal that the revision of the assessment by the Commercial Tax Officer was without jurisdiction and that the inclusion of Rs 42 lacs odd in the taxable turnover was contrary to the provisions of article 286 of the Constitution
The Tribunal rejected the plea of absence of jurisdiction but held on merits that the sum of Rs 1248403 odd representing the value of vehicles driven away on their own motive power through the assessee s own drivers to the places of business of the non resident dealers was not liable to sales tax
The assessee then preferred a revision to the High Court of Madras under section 12B1 of the Act and repeated the contention that the sales in question were in the course of inter State trade and commerce and not liable to sales tax by reason of the provisions of article 2862 of the Constitution
In the High Court the liability to tax was challenged by the assessee in respect of the following four items only 1 A sum of Rs 143072 odd which represented the value of vehicles delivered ex factory to the 611 dealer s drivers
The vehicles were driven away by those drivers after temporary registration of the vehicles in the name of the dealer outside the State of Madras
2 A sum of Rs 2801357 odd which represented the value of vehicles delivered to the drivers of the dealers which were driven away under the trade number of the dealers outside the State of Madras
3 A sum of Rs 7866 odd which represented the value of spare parts or other accessories delivered along with the cars
4 A sum of Rs 15000 which represented the value of spare parts consigned to the dealers
These were delivered to the dealers outside the State of Madras and the consignments were sent by rail or steamer
The High Court repelled the contention of the assessee in respect of the first three item aforesaid holding that they fell outside the purview of the ban imposed by article 2862 of the Constitution
It modified the order of the Tribunal with respect to the fourth item as in its view that item came within the scope of article 2862
The assessee then moved the High Court and obtained the necessary certificate under article 133 of the Constitution
When the learned Attorney General appearing for the assessee opened the appeal he submitted in the forefront of his argument that the High Court was in error in holding that the transactions coming under the three items 1 2 and 3 above were outside the ban imposed by article 2862 of the  Constitution and contended that the transactions were within the purview of the ban
We then drew his attention to the Sales Tax Laws Validation Act 1956 hereinafter called the Validation Act and asked him to consider the question whether the transactions in question came within the protection of the Validation Act an aspect of the case which does not appear to have been considered in the High Court
The argument before us then centered round the question whether the assessment in respect of the three items came within the protection of the Validation Act and it was conceded by the 612 learned Attorney General that if it did no other question would survive and it would be unnecessary to determine in this appeal the true scope and effect of article 2862 of the Constitution and whether the transactions in question came within the ban imposed thereby
On behalf of an intervener Tata Locomotive  Engineering Co Ltd Bombay we have been pressed to decide on merits whether the transactions under consideration here come within the ban of article 2862 of the Constitution on the ground that such decision will be of assistance in a pending case to which the intervener is party
We do not think that we can do so for the benefit of the intervener
The intervener has no right to ask us to decide a question which does not fall for decision if the Validation Act applies for it is conceded that if the Validation Act applies that will be decisive of the whole appeal
We must therefore reject the plea of the intervener
We proceed now to consider the main point argued in this appeal namely whether the Validation Act applies to the transactions in question
It is convenient to read here section 2 which is the relevant section of the Validation Act Section 2
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 interstate 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 levied or collected during the aforesaid period shall be deemed always to have been validly levied or collected in accordance with law
It will be noticed at once that the transactions under consideration in the present appeal came within the period mentioned in the Validation Act
being transactions of a period between April 1 1951 and 613 March 31 1952
Indeed this is not disputed before us
It is also clear that the wording of a 2 is general and wide enough to take in 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
 The section states in effect that notwithstanding any judgment decree or order of any court no law of a State imposing a tax on the sale or purchase of goods referred to therein 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
The learned Attorney General has advanced two arguments in support of his contention that the Validation Act does not apply to the transactions under consideration here
His first argument is that the Validation Act applies only when the law of the State imposes in express terms a tax on the sale or purchase of any goods in the course of inter State trade or commerce
He emphasises the expression where such sale or purchase took place in the course of inter State trade or commerce occurring in the section and from that expression he has drawn the inference that the law must in express terms say that it is taxing transactions in the course of interState trade and commerce
His second argument is that by reason of section 22 of the Act inserted by the amending Act of 1957 being Madras Act I of 1957 the Act imposes no tax on transactions under consideration in this appeal it merely imposes a tax on transactions which are generally known as Explanation sales referable to the Explanation to article 286la such as were considered in the decision of this Court in M P V Sundararamier  Co vs The State Of Andhra Pradesh  Another 1
We shall consider these two arguments one after the other
It appears to us the first argument does not correctly reflect the true scope and effect of section 2 of the Validtion Act
It is necessary perhaps to advert to the circumstances which led to the enactment of 1 1958 Js
SCR 1422 614 the Validation Act
The true meaning and scope of the Explanation to article 2861 of the Constitution came up for consideration before this Court in The State of Bombay and Another vs The United Motors India Ltd and Others 1
It was therein held by the majority that though the sales falling within the Explanation would in fact be in the course of interState trade
they became intrastate sales by the fiction introduced by the Explanation and were liable to be taxed by the State within which the goods were delivered for consumption
Then came the decision in The Bengal Immunity Company Limited vs The State of Bihar and Others 2 where this Court held again by a majority that the sales falling within the Explanation being inter State in character could not be taxed by reason of article 2862 unless Parliament lifted the ban that the Explanation to article 286la controlled only that clause and did not limit the operation of article 2862 and that the law in this respect had not been correctly laid down in the United Motors  case 2
The decision in The Bengal Immunity s case 2 was rendered on September 6 1955
The Sales Tax Validation Ordinance No III of 1956 was promulgated on January 30 1956 and that was later replaced by the Validation Act
The constitutionality of the Validation Act was challenged before this Court and in M P V Sundararami s case 3 this Court upheld its validity though the sales referred to in the arguments in that case were Explanation sales
The Validation Act is legislation by Parliament and it lifts the ban imposed by article 2862
Clause 2 of article 286 as it stood before the Constitution Sixth Amendment Act 1956 in these terms 2
Except in so far as Parliament may by law otherwise provide no law of a State shall imposeor 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 In M P V Sundraramier s case3 this court observed 1  2 1955 2 SCR603 3 615 Section 2 of the impugned Act which is the only substantive enactment therein makes no mention of any validation
It only provides that no law of a State imposing tax on sales shall be deemed to be invalid merely because such sales are in the course of inter State trade or commerce
The effect of this provision is merely to liberate the State laws from the fetter placed on them by article 2862 and to enable such laws to operate on their own terms
The true scope of the impugned Act is to adopt the language of this Court in the decisions in the United Motors case 1 and The Bengal Immunity Company s case 2 that it lifts the ban imposed on the States against taxing inter State sales and not that it vali dates or ratifies any such law
 It should be obvious that in 1939 long before the coming into force of the Constitution the Act could not have said in express terms that it was taxing sales in the course of inter State trade
What we have to see is that the fetter under article 2862 having been removed does the Act operating on its own terms affect the transactions in question even though they be in the course of inter State trade If it does the assessment is no longer liable to challenge on the ground of the ban imposed by article 2862
This brings us to the second argument of the learned Attorney General
One has merely to see the definitions of sale  and turnover  and section 3 the charging section to come to the conclusion that the Act operating on its own terms makes the transactions under consideration in this appeal liable to sales tax
Explanation 2 to the definition of sale  says The sale or purchase of any goods shall be deemed for the purposes of this Act to have taken place in this State wherever the contract of sale or purchase might have been made a if the goods were actually in this State at the time when the contract of sale or purchase in respect thereof was made or b in the case the contract was for the sale on purchase of future goods by description then if the 1  2 616 goods are actually produced in this State at any time after the contract of sale or purchase in respect thereof was made
 There can be no doubt that the Explanation brings the transactions in question within the definition of sale  under the Act
The point now is does section 22 of the Act make any difference  We are clearly of the opinion that it does not
A little history of that section is necessary here
Section 22 of the Act as it stood before the amending Act of 1957 was inserted by the Adaptation of Laws Fourth Amendment Order 1952 made by the President in exercise of the powers conferred on him by article 3722 of the Constitution
The section was then almost a verbatim reproduction of article 286l and 2 of the Constitution
The effect of the section as it stood then was considered in M P V Sundararamier s case 1 and it was held that it had a positive content and the Explanation in the context of section 22 as it then stood authorised the State of Madras to impose a tax on sales falling within its purview
Then came the Validation Act in 1956 which lifted the ban imposed by article 2862
In 1957 new section 22 was inserted in the Act with restrospective effect from January 26 1950 and old section 22 was repealed
The new section reads Section 22
Sale or purchase deemed to have taken place inside the State in certain cases 1 Any sale or purchase which took place on or before the 6th day of September 1955 shall be deemed to have taken place inside the State if the goods have actually been delivered as a direct result of such sale or purchase for the purpose of consumption in the State notwithstanding the fact that under the general law relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State and
be subject to tax under this Act accordingly
2 The provisions of this section shall not affect the liability to tax of any sale or purchase under any other provision of this Act
 The argument of the learned Attorney General is that 11958 SCR 1422
617 the now section which operates retrospectively from January 26 1950 talks of sales in which the goods are delivered for consumption in the State of Madras in other words of Explanation sales only therefore the Act does not operate on sales of an interState character other than Explanation sales
We are unable to agree
First of all sub section
2 of new section 22 makes it quite clear that the section does not affect the liability to tax of any sale or purchase under any other provision of the Act
Secondly after Parliament had lifted the ban imposed by article 2862 it was unnecessary to repeat the provisions of that Article in the Act and old section 22 in so far as it repeated article 2862 became otiose
Therefore new section 22 has not the effect of subtracting something from the power to tax conferred on the State by the charging section section 3 read with the definition of sale  in section 2h
To repeat what we have said earlier after the removal of the fetter of article 286 2 the Act operating on its own terms makes the transactions in question liable to tax and new section 22 makes no difference to that position
For these reasons we are unable to accept as correct the arguments advanced on behalf of the assessee
In our view the Validation Act applies and the assessment on the transactions in question cannot now be challenged on the ground alleged by the assessee
The appeal fails and is dismissed with costs
Appeal dismissed


Summary:
The appellant firm had its factory in the State of Madras where it manufactured assembled and sold motor vehicles spare parts and accessories
For the assessment year 1952 53 the sales tax authority computed the appellant s taxable turnover of sales for that year excluding a sum which represented the value of vehicles etc sold outside the State of Madras but on revision the taxable turnover was increased by including a sum which related to certain transactions with dealers outside the State of Madras on the ground that the sales covered thereby were made within the State of Madras and were therefore liable to tax under the Madras General Sales Tax Act 1939
The appellant claimed that these sales were in the course of inter State trade and commerce and not liable to sales tax by reason of the provi sions of article 2862 Of the Constitution of India
The matter was taken up to the Supreme Court and in the meantime the Sales Tax Laws Validation Act 1956 had been passed by Parliament
The question was whether the transactions in question even if they were considered as having taken place in the course of inter State trade came within the protection of the Validation Act of 1956 and therefore the assessment in the present case was valid
The appellant contended 1 that the Validation Act was applicable only when the law of the State imposed in express terms a tax on the sale or purchase of any goods in the course of inter State trade or commerce and 2 that the new section 22 inserted in the Madras General Sales Tax Act 1939 by Madras Act 1 of 1957 which operated retrospectively from January 26 1950 talked of sales in which the goods were delivered for consumption in the State of Madras and therefore the Validation Act did not operate on sales of an inter State character other than such sales
Held 1 that the effect of the Sales Tax Laws Validation Act 1956 was to liberate the State laws from the fetter placed on them by article 2862 of the Constitution of India and enable such laws to operate on their own terms
Consequently the transactions in question were liable to tax under the provisions 608 of the Madras General Sales Tax Act 1939 and it was not necessary to provide in that Act in express terms that it was taxing sales in the course of the inter State trade
M P V Sundararamier  Co vs The State of Andhra Pradesh and Another  relied on
2 that the transactions in question came within the definition of sale in section 2h of the Madras General Sales Tax Act 1939 and the power to tax conferred on the State by the charging section section 3 was not affected by section 22 in view of sub section
2 therein