220 222 240 and 380 to 395 of 1955
Petitions under Article 32 of the Constitution of India for the enforcement of Fundamental Rights
Dec 10 11 12 13 17 18 19
Jan 7 8 9
D Narsa Raju Advocate General for the State of Andhra Pradesh and T M Sen for the respondent
The petitions are premature and incompetent as the facts of each transaction of sale are yet to be investigated and it is not possible to know the character of each sale nor can it be determined which sales can be and which cannot be taxed by Andhra Pradesh
CHIEF JUSTICE
You should be reasonably satisfied that the sales are of such a nature that you can levy tax on them before you issue a notice
BOSE J You must state the facts on which you think you can tax the sales section K DAS J
Your stand is that all transactions could be taxed by the delivery State D Narsa Raju
My State is taxing under the decision of this Court in the United Motors case  1953S C R 1069
 Upon the counsel for the petitioners stating that he would confine his arguments to the imposition of tax on Explanation sales only which some of the transactions indisputably were the Court indicated that it would hear the petitions  K section Krishnaswami Iyengar N Srinivasan and R Ganapathy Iyer for the petitioners
The Andhra Madras Act does not seek to tax Explanation sales 1427 at all
It talks of  property passing  only and as such Andhra can tax only such sales where property passes in Andhra
See Poppatlal Shah vs State of  Madras  1953 section C R 677
Section 22 does not enlarge the definition of sales it only restricts the power of the State to tax
The explanation to section 22 like the explanation to article 2361 is merely for the purpose of defining what is an outside sale and not for determining what is an inside sale
See Bengal Immunity Company case  at 640
The power of the President under article 3722 being merely to bring the State laws into conformity with article 286 section 22 which was introduced by the Presidential Adap tation Order under article 3722 cannot be construed as permitting the imposition of tax on Explanation sales which was prohibited by article 286
If section 22 was construed to permit such imposition it was unconstitutional illegal and void and must be deemed to be non est
See Bengal Immunity Company case  at 667
What did not exist could not be validated
The Sales Tax Laws Validation Act 1956 was not valid legislation under article 2862
Article 2862 only empowers Parliament to lift the ban on the imposition of tax on inter State ales and after it has lifted the ban the State legislature may impose the tax
Parliament is not competent to impose sales tax such power is vested only in the State legislatures
Article 2862 does not give Parliament power to validate or ratify laws of the State legislatures
The power under article 2862 can be exercised only once and finally and fully not partially
Parliament can only lift the ban as from the day the power is exercised and riot retrospectively
Punjab Province vs Daulat Singh 73 I A 59 Behram Khurshed Pesikaka vs The State of Bombay   1955  I section C R 613 654 and 655
The case of Dialdas vs Talwalkar A 1
R has been wrongly decided
But even this decision helps the petitioners in so far as it lays down that where tax had neither been collected nor levied the Validation Act did not confer power to assess or levy
The whole 181 1428 policy of the Validation Act was to save the State from disgorging the tax illegally collected
Both levy and collection must be within the period specified in section 2 of the Act
Mettur Industries Ltd vs The State of Madras A 1
R and Mysore Spinning and Manufacturing Co Ltd vs Deputy Commercial Tax Officer A 1
R are against the petitioners
R Ganapathy Iyer followed
Section 22 of the Andhra Madras Act did riot enlarge the powers of taxation
Mathew vs Travancore Cochin Board of Reventue A 1
R 1957 T C 300
The validation being for a temporary period which expired on September 6 1955 no action can be taken after that date under the validated laws
Kesavan Madhava Menon vs The State of Bombay    234 235 section Krishnan vs The State of Madras  1951S C R 62 1 and State of Punjab vs Mohar Singh1955  I section C R 893
The tax being a sinole pointtax under the Act and the petitioners having already paid the tax at the time of the purchase of the yarn from the Mills no second tax was payable
The Andhra Madras Act being a new Act the tax on yarn is hit by the Essential Commodities Act 52 of 1952 read with article 2863 of the Constitution
Petitioners are not dealers in Andhra Pradesh and cannot be assessed
There are no sales in Andhra all sales being in Madras
VL Narasimhamoorthy J B Dadachanji and Rameshtvar Nath for the Mysore Spinning  Mfg Co Ltd and Minerva Mills Ltd Interveners supported the petitioners
Section 22 does not authorise the imposition of tax on Explanation sales
It could not have been the intention of the President to allow the State to add a new category of sales the Explanation Sales to be taxed
The language of article 2862 indicates that the lifting of the ban is a condition precedent to legislation by the States imposing tax on inter State sales
Alternatively the power to tax inter State sales is with Parliament under Entry 97 of List I of Schedule VII of the Constitution
Section 22 was wiped out and obliterated by the judgment in the 1429 Bengal Immunity Company case
See Behram Khurshed Pesikaka vs The State of Bombay 1955 1 section C R 613 Newberry vs United States  The same interpretation must be given to the explanation to section 22 as has been given to the explanation to article 2861a
The non obstante clause in section 22 has only the effectof subtracting something from the power to tax andriot of adding to it
Ram Narain Sons Ltd vs Asst
Commissioner of Sales Tax 1955 2 SC R 483 Aswini Kumar Ghosh vs Arbinda Bose 1953 SCR 1 22 24 A V Fernandez vs The State of Kerala 1957 section C R 837
N A Palkhiwala J B Dadachanji and Rameshwar Nath for Tata Iron  Steel Co Ltd Intervener
There must be a factual levy before Parliament can validate it
Section 22ii removes inter State sales from the purview of the Act
Fernandez s case supports this contention
On a proper construction of article 2862 according to the decision in the Bengal Immunity Company case there was no levy on interState sales and there was nothing for Parliament to lift the ban for
  1955  2 section C R 603 621 662 667
There is a vital difference between retrospective and retroactive operation
There is no power in Parliament to validate ex post facto a violation of article 2862
Parliament must first lift the ban and then the State legislation may come imposing tax on inter State sales
Parliament is competent to prevent what otherwise would have been a violation of the Constitution but it is not competent to condone an accomplished violation
Section 2 of the Validating Act will operate only where taxes have already been collected or have been finally assessed
P N Bhagwati and 1
N Shroff for Pashebbhai Patel  Co Ltd Intervener supported the petitioners
D Narsa Raju Advocate General of Andhra Pradesh and T M Sen for the respondents
Article 3722 must take regard of the provision of the Constitution to bring the State laws into conformity with which the power of adaptation is to be exercised
That provision 1430 is article 286
Implicit in article 2861 is the recognition that the delivery State alone may tax
The President would be acting within his power to enable the delivery State to tax Such power is in accordance with the provisions of the Constitution
The power of the legislature to bring the laws in accordance with the Constitution is conferred upon the President
Consequently the explanation to section 22 can be read along with the definition of sale and it does add to that definition by bringing Explanation sales within it
K V Subramania Iyer D N Mukherjee and B N Ghosh for Madura Mills Co Ltd Intervener
The Adaptation Order made by tile President is not law of a State  within the meaning of the Validating Act Law of a State  in the Validating Act must mean the same thing as in article 2862
The President exercising power under article 3722 is not controlled by article 286 he exercises a power which belongs to the President and not a power on behalf of the State
Section 22 of the Andhra Madras Act is not law made by the State Legislature and is not validated by the Validating Act
The power of imposition of sales tax on inter State sales was taken away from the States
The bail under article 2862 is only in respect of existing laws there is no power in the States to enact laws imposing tax on interstate sales
The power to impose tax on inter State sales is within the exclusive domain of Parliament under Entry 42 of List I of the Seventh Schedule of the Constitution and Entry 54 of List 11 must be construed as not including such power
A reference to article 301 reinforces this interpretation
The freedom under article 301 includes freedom from sales tax
See The Commonwealth vs The State of South Australia 38 C L R 408
The Validation Act is not legislation within Entry 42
See Bank of N section W vs The Commonwealth 76 C L R 1 381 Robbins vs Taxing District of Shelby County 1877   McLeod vs Dilworth Co 1944 88 L Ed
1304
C K Daphtary Solicitor General of India G N 1431 Joshi and T M Sen for the Union of India Intervener
The Sales Tax Laws Validation Act 1956 is valid legislation tinder article 2862
In effect and in substance the Validation Act is a law which removes the ban imposed by article 2862 and is not really a Validating Act
Article 2862 in respect of existing laws merely said that they should not be effective or operative
It did not take away the competency of the legislatures to make laws providing for taxes oil inter State sales
Such a law may be against the provision of the Constitution but that does not repeal or obliterate it
It is only in abeyance
See Bhikaji Narain Dhakras and others vs The State Of Madhya Pradesh and another    600
Legislative power generally includes the power to legislate retrospectively
There is no limitation in article 2862 as respects retrospective legislation
Parliament could therefore lift the ban retrospectively
Section 22 is a piece of conditional legislation
As soon as the ban under article 2862 was lifted by Parliament it came into operation
The Validation Act is not a temporary statute
A temporary statute is one which says that it is to be effective for a particular period
The Validating Act operates even now and is effective though it is in respect of sales of a particular period
It is open to the States to initiate proceedings now for taxing the Explanation sales made during the period mentioned in section 2 even though no such proceedings had been taken during that period
Entry 42 of List I which reads  Inter State trade and commerce  does not confer any power of taxation on Parliament
In the scheme of our Constitution a general Entry does not include the power of taxation
Taxes duties etc are enumerated in a separate group in Entries 82 92 in List I V K T Chari Advocate General for the State of Madras B R Gopalakrishnan and T M Sen for the State of Madras Intervener
In construing section 22 of the Andhra Madras Act regard must be had to the law as it stood till September 6 1955 when judgment was delivered in the Bengal Immunity Company case
In view of the decision in the United Motors 1432 case 1953 section C R 1069 1085 1086 1093 1094 Explanation sales were regarded as inside sales  in the delivery State and the delivery State was entitled to tax sales
The law of a State which imposed tax on Explanation sales would remain on the statute book in spite of the decision in The Bengal Immunity Company case but could not be enforced
See Bhikaji Narain Dhakras and others vs The State of Madhya Pradesh and another 1955 2 SCR 589 Ulster Transport Authority vs James Brown  Sons Ltd 1953 Northern Ireland Reports 79
Section 2 of the Validating Act refers to such a law
Mahabir Prasad Advocate General for the State of Bihar Rajeshwar Prasad and section P Varma for the State of Bihar Intervener G C Mathur and C P Lal for the State of Uttar Pradesh Intervener supported the respondents and the Union of India
R Ganapathy Iyer for the petitioners replied
K V Subramania Iyer for Madura Mills Co Ltd Intervener also replied with the permission of the Court
March II
The judgment of Das C J Venkatarama Aiyar section K Das and Vivian Bose JJ was delivered by Venkatarama Aiyar J Sarkar J delivered a separate judgment
VENKATARAMA AIYAR J
The petitioners are dealers carrying on business in the City of Madras in the sale and purchase of yarn and they have filed the present applications under article 32 of the Constitution for the issue of a writ of prohibition or other appropriate writ restraining the State of Andhra from taking proceedings for imposing tax on certain sales effected by them in favour of merchants who are residing or carrying on business in what is now the State of Andhra Pradesh on the ground inter alia that the said sales were made in the course of inter State trade and that no tax could be levied on them by reason of the prohibition contained in article 2862 of the Constitution
The course of dealings between the parties resulting 1433 in the above sales has been set out in para
5 in Petition No 220 of 1955
It is therein stated that the dealers in Andhra would place orders for the purchase of yarn with the petitioners in Madras that the contracts would be concluded at Madras that the goods would be delivered ex godown at Madras and would thereafter be despatched to the purchasers either by lorries or by rail as might be directed by them that when the goods were sent by rail the railway receipts would be taken either in the name of the consignees and sent to them by post or in the name of the consignor and endorsed to the purchasers and delivered to them in Madras or sent to them by post endorsed in favour of a bank and the purchasers would take delivery of those receipts after payment to the bank
It is said that in all cases price of the goods was paid in Madras
On the above allegations it is manifest that the sales mentioned therein are not all of the same kind and in point of law the incidents attaching to them might be different
A consideration of the validity of the imposition with reference to the several classes of sales mentioned above would he wholly airy and pointless without a determination of the facts relating to them which however have not been investigated
Counsel for the petitioners however concedes that the dispute in these proceedings is confined to the proposed imposition of tax in so far as it relates to sales of the character mentioned in the Explanation to article 2861a that is to say sales in which the property in the goods sold passed outside the State of Andhra but the goods themselves were actually delivered as a result of the sale for consumption within that State
These sales have been referred to in the arguments before us as Explanation sales  and it will be convenient to adopt that expression in referring to them in this judgment
It will be seen that the above sales would all of them have been intrastate so long as the Andhra State formed part of the composite State of Madras and questions of the character now agitated before us could not then have arisen
On September 14 1953 1434 Parliament enacted the Andhra State Act 30 of 1953 whereby a separate State called the State of Andhra was constituted incorporating therein territories which had previously thereto formed part of the State of Madras and this Act came into force on October 1 1953
Under section 53 of the Andhra State Act the laws in force in the territories in the Andhra State prior to its constitution are to continue to be in force even thereafter and one of those laws is the Madras General Sales Tax Act Madras 9 of 1939 hereinafter referred to as the Madras Act
Section 54 of the Andhra State Act conferred on the Government a power to adapt laws for the purpose of facilitating the application of any law previously made and in exercise of the power conferred by this section an Adaptation Order was passed on November 12 1953 whereby the word  Andhra  was substituted for the word Madras in the Madras Act
We shall hereafter refer to the Madras Act as continued and applied in the State of Andhra as the Andhra Madras Act
It will be convenient at this stage to refer to the relevant provisions of this Act
The preamble to the Act states that  it is expedient to provide for the levy of a general tax on the sale of goods in the State of Madras
Sale is defined in section 2h omitting what is not material as meaning  every transfer of the property in goods by one person to another in the course of trade or business for cash or for deferred payment or other valuable consideration
 Section 2i defines  turnover  as  the aggregate amount for which goods are either bought by or sold by a dealer whether for cash or for deferred payment or other valuable consideration 
Section 3 is the charging section and provides that every dealer shall pay for each year tax on his total turnover for such year
By the Madras General Sales Tax Amendment Act No 25 of 1947 a new Explanation was added to the definition of  sale  and it is as follows Explanation 2  Notwithstanding anything to the contrary in the Indian Sale of Goods Act 1930 the sale or purchase of any goods shall be deemed for 1435 the purposes of this Act to have taken place in this Province wherever the contract of sale or purchase might have been made a if the goods were actually in this Province at the time when the contract of sale or purchase in respect thereof was made or b in case the contract was for the sale or purchase of future goods by description then if the goods are actually produced in this Province at any time after the contract of sale or purchase in respect thereof was made
 This amendment came into force on January 1 1948
In Poppatlal Shah vs The State of Madras 1 this Court had to consider the scope of the definition of  sale  in section 2h and of Explanation 2 and it was therein held that though the power to tax a sale was really a power to tax a transaction of sale and a law imposing such tax would be competent if any of the ingredients of sale had taken place within the State the Madras Act had by its definition of  sale  in section 2h prior to the enactment of Explanation 2 imposed a tax only when the property in the goods passed within the State and that in respect of sales which had taken place prior to the amendment the tax would be unauthorised if the property in the goods passed outside the State of Madras
It was also observed that after the amendment came into force a tax on a sale which came within Explanation 2 would be valid
That was the position in law under the Madras Act prior to the enactment of the Constitution
It is now necessary to refer to the changes effected in the law by the Constitution
Article 286 which is relevant for the present purpose is as follows 2861
 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 a outside the State or b in the course of the import of the goods into or export of the goods out of the territory of India
1  182 1436 Explanation
For the purposes of Sub clause a a sale or purchase shall be deemed to have taken place in the State in which the goods have actually been delivered as a direct result of such sale or purchase for the purpose of consumption in that State notwithstanding the fact that under the general law relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State
2 Except in so far as Parliament may by law otherwise provide no law of a State shall impose or authorise the imposition of a tax on the sale or purchase of any goods where such sale or purchase take place in the course of interstate trade or commerce Provided that the President may by order direct that any tax on the sale or purchase of goods which was being lawfully levied by the Government of any State immediately before the commencement of this Constitution shall notwithstanding that the imposition of sucli tax is contrary to the provisions of this clause continue to be levied until the thirty first day of March 1951
3 No law made by the Legislature of a State imposing or authorising the imposition of a tax on the sale or purchase of any such goods as have been declared by Parliament by law to be essential for the life of the community shall have effect unless it has been reserved for the consideration of the President and has received his assent
 Article 3722 enacts that  For the purpose of bringing the provisions of any law in force in the territory of India into accord with the provisions of this Constitution the President may by order make such adaptations and modifications of such law whether by way of repeal or amendment as may be necessary or expedient and provide that the law shall as from such date as may be specified in the order have effect subject to the adaptations and modifications so made and any such adaptation or modification shall not be questioned in any court of law
 In exercise of the power conferred by this provision 1437 the President made Adaptation Orders with reference to the Sales Tax Laws of all the States and as regards the Madras Act he issued on July 2 1952 the Fourth Amendment inserting a new section section 22 in that Act
It runs as follows  Nothing contained in this Act shall 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 a i outside the State of Madras or iiin the course of import of the goods into the territory of India or of the export of the goods out of such territory or b except in so far as Parliament may by law otherwise provide after the 31st March 1951 in the course of inter State trade or commerce and the provisions of this Act shall be read and construed accordingly
Explanation For the purposes of cl
a i a sale or purchase shall be deemed to have taken place in the State in which the goods have actually been delivered as a direct result of such sale or purchase for the purpose of consumption in that State notwithstanding the fact that under the general law relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State
 It will be noticed that the Explanation to article 286 1 a is reproduced verbatim in section 22 of the Madras Act
The true meaning and scope of this Explanation came up for consideration before this Court in The State of Bombay and another vs The United Motors India Ltd and others 1
Therein it was held by a majority that though the sales falling within the Explanation would in fact be in the course of interState trade they became by reason of the fiction introduced therein invested with the character of intra State sales and would be liable to be taxed by the State within which the goods were delivered for consumption
Acting on this judgment the Board of Revenue Commercial Taxes Andhra State issued a 1  1438 notification on July 13 1954 calling upon dealers to submit returns of their turnover of sales in which goods were delivered in the Andhra State for consumption and a copy thereof was sent to the Madras Yarn Merchants  Association of which the petitioners are members
The Association disputed the liability of the Madras dealers to pay any tax in respect of the sales to the Andhra dealers and after some correspondence the Andhra State finally issued on June 30 1955 notices to the petitioners to send their returns of turnover by July 15 1955 failing which it was stated that assessments would be made on the best judgment basis and that further the dealers would be liable to the penalties prescribed by the law Vide Annexure H to the petition
Thereupon the petitionera have filed the present petitions challenging the validity of the demand made by the Andhra State on the ground inter alia that the sales proposed to be taxed were inter State sales and that they were immune from taxation under article 2862
These petitions were filed on various dates in July and August 1955
While they were pending the question of the true scope of the Explanation to article 286 1 a came up again for consideration before this Court in The Bengal Immunity Company Limited vs The State of Bihar and others 1
By its judgment dated September 6 1955 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 286 1 a controlled only that clause and did not limit the operation of article 286 2 and that the law had not been correctly laid down in The United Motors case 2
On the decision in The Bengal Immunity Company case1 it cannot be doubted that the claim of the Andhra State to tax Explanation sales would be unconstitutional and indeed that was admitted by the State in a statement filed on October 21 1955 wherein it was stated that having regard 1 19552 SCR 603
2  1439 to the decision aforesaid the petitions might be allowed but without costs
Before final orders were passed on the petitions however the Sales Tax Validation Ordinance No III of 1956 was promulgated on January 30 1956 and that was later replaced by the Sales Tax Laws Validation Act 7 of 1956 and that came into force on March 21 1956
Section 2 of this Act runs as follows  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 interstate 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 On February 19 1957 the Andhra State which had become the State of Andhra Pradesh under section 3 1 of the States Reorganisation Act 37 of 1956 filed a fresh statement that by reason of the Validation Act the State was entitled to impose a tax on the Explanation sales which had taken place during the period between the 1st day of April 1951 and the 6th day of September 1955 which will hereinafter be referred to as the specified period and that the petitions should therefore be dismissed
The petitioners challenge the correctness of this position
They contend that the Andhra Madras Act does not in fact impose a tax oh the Explanation sales and that in consequence the Validation Act can have no effect on it that the Validation Act is itself unconstitutional and void that the Act even if valid does not validate section 22 of the Andhra Madras Act that it validates only levies and collections of tax already made and does not authorise the initiation 1440 of fresh proceedings for assessment of tax or for realisa tion of the same that even if the Act authorised fresh imposition of taxes that could not be done without further legislation pursuant thereto by the State and that no action could be taken on the basis of section 22 of the Andhra Madras Act as being unconstitutional when enacted it was for all purposes non est  that tax on the sale of yarn could under the Act be levied only at a single point and the State of Madras having imposed a tax on the sale of goods now proposed to be taxed the Andhra State could not impose a tax once again on the sale of the self same goods and that further the tax on yarn would so far as the Andhra State is concerned be bad as being hit by the Essential Commodities Act 52 of 1952 read with article 286 3
It must be mentioned that similar to the Adaptation Order which enacted section 22 in the Madras Act there were Adaptation Orders by the President with reference to the Sales Tax Laws in all the States and provisions similar to section 22 were enacted therein
As any decision by this Court on the questions raised in the petitions must conclude similar questions under the laws of other States those States applied for and obtained permission to intervene in these proceedings and we have heard the Advocates General of Madras Uttar Pradesh and Bihar on the questions
As the main point for determination is the vires of the Sales Tax Laws Validation Act which will hereinafter be referred to as the impugned Act the Union of India has intervened and the learned Solicitor General has addressed us on the questions relating to the validity of that Act
Certain assessees who are interested in the decision of the above questions also applied for and obtained permission to intervene and they are the Mysore Spinning and Manufacturing Co the Minerva Mills Ltd the Tata Iron and Steel Co Ltd and the Madura Mills Co Ltd and counsel appearing for them have in general supported the petitioners
Counsel for the Madura Mills Co Ltd raised a further contention different from and inconsistent with 1441 the position taken by the petitioners and other inter
veners and that is that under Entry 42 in List I of the Seventh Schedule to the Constitution inter State trade and commerce is the exclusive domain of the Union Legislature that tax on inter State sales is comprised therein that the States have accordingly no power to tax such sales and that Parliament is not competent to authorise them to impose such a tax and that accordingly the impugned Act is wholly misconceived and inoperative
On these contentions the questions that arise for our determination are I Whether the Andhra Madras Act in fact imposes a tax on the class of sales falling within the Explanation to article 286 1 a IIWhether the impugned Act is ultra vires the ground that it is not authorised by the terms of article 2862 III a Whether section 22 of the Andhra Madras Act is within the protection of the impugned Act and IIIb Whether the impugned Act validates only levies and collections made during the specified period or whether it authorises the imposition and collection of taxes on such sales in future IVWhether section 22 of the Madras Act was null and void on the ground that it was in contravention of article 286 2 and whether the proceedings sought to be taken thereunder on the strength of the impugned Act are incompetent V Whether tax on inter State sales is within the exclusive competence of Parliament and whether the impugned Act is in consequence bad as authorising the States to levy tax  VIWhether the proposed imposition of tax is illegal on the ground that successive sales of yarn are subject under the law to be taxed at only one point and as the State of Madras has already taxed the present sales the State of Andhra cannot again levy a tax on them  and VIIWhether the proposed imposition of tax on yarn by the Andhra State is hit by the Essential Commodities Act read with article 2863 and is illegal 1442 1The first question that falls to be determined is whether the Andhra Madras Act in fact imposes a tax on the Explanation sales
Only if it does that would the further questions as to the vires and the operation of the impugned Act arise for consideration
We have already referred to the relevant provisions of the Madras Act and to the decision of this Court in Poppatlal Shah vs The State of Madras 1 wherein it was held that under the definition of  sale  in section 2h of that Act and apart from the Explanations to it which are not material for the present discussion power had been taken by the Province of Madras to tax only sales in which property in the goods passed inside the State
It must therefore be taken that under the Act as it stood prior to the Constitution the State of Madras had no power to impose a tax on sales of the kind mentioned in the Explanation to article 286 1a
Now the question is whether the Adaptation Order of the President Fourth Amendment dated July 2 1952 has by the insertion of section 22 in the Madras Act altered the position
The contention of the respondent is that it has because it has bodily incorporated the Explanation to article 286 1 a in the section itself and as under that Explanation all sales falling within its ambit would be sales inside the State of Madras they became taxable as sales within the definition in section 2 h of the Madras Act and that accordingly under section 22 of the Andhra Madras Act the Explanation sales become taxable by the Andra State as sales within that State
The petitioners dispute this position and contend that that is not the true effect of the Explanation and that properly construed it does not authorise the in position of any tax which was not leviable under the provisions of the Act prior to its enactment
It is argued that the object of article 286 of the Constitution was merely to impose restrictions on the power which the States had under Entry 54 in List 11 to enact laws imposing tax on sales and that in that context the true scope of the Explanation to article 286 1 a was that it merely took away from the State its power to 1  1443 tax a sale in which the property passed inside it if the goods were actually delivered under the sale for consumption in another State and not to confer on the delivery State a power to tax such a sale and that the Explanation in section 22 which is word for word a reproduction of the Explanation to article 286 1 a must be construed as having the same import
Reliance is placed in support of this contention on the following observations of this Court in The Bengal Immunity Company case1 at p 640  In clause 1 a the Constitution makers have placed a ban on the taxing power of the States with respect to sales or purchases which take place outside the State
If the matter had been left there the ban would have been imperfect for the argument would have still remained as to where a particular ale or purchase took place
Does a sale or purchase take place at the place where the contract of sale is made or where the property in the goods passes or where the goods are delivered  These questions are answered by the Explanation
That Explanation is for the purposes of sub clause a  ie for the purpose of explaining which sale or purchase is to be regarded as having taken place outside a State
By saying that a Parti cular sale or purchase is to be deemed to take in a particular State the Explanation only indicates that such sale or purchase has taken place outside all other States
The Explanation is neither an Exception nor a Proviso but only explains what is an outside sale referred to in sub clause a
This it does by creating a fiction
That fiction is only for the purposes of subclause a and cannot be extended to any other purpose
It should be limited to its avowed purpose
To say that this Explanation confers legislative power on what for the sake of brevity has been called the delivery State is to use it for a collateral purpose which is not permissible
Further it is utterly illogical and untenable to say that article 286 which was introduced in the Constitution to place restrictions on the legislative powers of the States by a side wind as it were 1 183 1444 gave enlarged legislative powers to the State of delivery by an explanation sandwiched between two restrictions
This construction runs counter to the entire scheme of the article and the explanation and one may see no justification for imputing such indirect and oblique purpose to this article
 Now the contention of the petitioners is that these observations are decisive of the present controversy because the same provision expressed in ipsissima verba cannot have one meaning in article 2861 a and quite a different one in section 22 of the Madras Act and on the construction put by this Court on the Explanation to article 2861 a the Explanation to section 22 of the Andhra Madras Act must be interpreted as prohibiting States other than Andhra from taxing sales under which goods are delivered for consumption outside those States even though property passed inside them and not as authorising the State of Andhra to tax sales in which goods are delivered therein for consumption  even though property in the goods passed outside that State
It is argued that this conclusion is reinforced by the opening words of section 22 viz Nothing contained in this Act shall be deemed to impose or authorise the imposition of a tax on the sale or purchase of any goods
The effect of this it is said is to impose a restriction on the power which the State previously possessed of taxing sales coming within the definition in section 2 h and not to enlarge it
The decision in Government of Andhra vs Nooney Govindarajulu 1 is cited in support of these contentions
The error in this argument lies in this that it focusses attention exclusively on the terms in which the Explanations are couched in article 2861 a and in section 22 and completely overlooks the fundamental difference in the context and setting of these two enactments
The scope and purpose of article 286 have been considered at length in the decisions of this Court in The United Motors case 2 as also in The Bengal Immunity Company case 3 and it is sufficient to briefly recapitulate them
Under Entry 48 in List 11 of the 1 1957 8 Sales Tax Cases 297
2  3 1445 Seventh Schedule to the Government of India Act 1935 the Provincial Legislature had the exclusive competence to enact a law imposing a tax on the sale of goods and under section 99 1 such a law could be made  for the Province or for any part thereof 
In Wallace Brothers  Co Ltd vs Income tax Commissioner 1 the question arose as to the validity of certain provisions of the Indian Income tax Act which sought to tax non resident foreigners in respect of their foreign income
The Indian Legislature had under Entry 54 in List I of the Government of India Act power to enact laws imposing tax on income other than agricultural income and under section 991 the law could be made  for the whole of British India or for any part thereof 
It was held by the Privy Council that the requirements of section 99 were satisfied if there was sufficient territorial connection between the State imposing the tax and the person who was sought to be taxed and the receipt of income by the assessees in British India furnished sufficient nexus to give validity to the legislation imposing tax on their foreign income
If this doctrine of nexus is applicable to laws imposing tax on sales and it was applied by this Court to those laws in the United Motors case 2 at p 1079 and in Poppatlal Shah s case 3 at pp
682 683 then it would be competent to the State to enact a law imposing a tax on sales not merely when the property in the goods passed within the State but even when it lid not if there was sufficient connection between the State and the transaction of sale such as the presence of the goods in the State at the date of the agreement as was held recently by this Court in Tata Iron  Steel Co Ltd vs State of Bihar 4
In fact acting on the nexus theory the Legislatures of the States enacted Sales Tax Laws adopting one or more of the nexi as the basis of taxation
This resulted in multiple taxation as a consequence of which the free flow of commerce between the States became obstructed and the larger economic interests of the country suffered
It was to repair this mischief that the Constitution while 1 1948 LR 75 IA 86
2  3  4  1446 retaining the power in the States to tax sales under Entry 54 in List II sought to impose certain restrictions on that power in article 286
One of those restrictions is contained in article 2861a which prohibits a State from taxing outside sales
The Explanation now under consideration is attached to this provision and it is in this context viz in its setting in an Article the object of which was to impose fetters on the legislative powers of the States that this Court observed that though positive in form it was in substance negative in character and that its true purpose was not to confer any fresh power of taxation on the State but to restrict the power which it previously had under Entry 54
These considerations will clearly be in apposite in construing a taxing statute like the Madras Act the object of which is primarily to confer power on the State to levy and collect tax
When we find in such a statute a provision containing a prohibition followed by an Explanation which is positive in its terms the true interpretation to be put on it is that while the prohibition is intended to prevent taxation of outside sales on the basis of the nexus doctrine the Explanation is intended to authorise taxation of sales falling within its purview subject of course to the other provisions of the Constitution such as article 286 2
It should be remembered that unlike the Constitution the law of a State can speak only within its own territories
It cannot operate either to invest another State with a power which it does not possess or divest it of a power which it does possess under the Constitution
Its mandates can run only within its own borders
That being the position what purpose would the Explanation serve in section 22 of the Madras Act if it merely meant that when goods are delivered under a contract of sale for consumption in the State of Madras the outside State in which property in the goods passes has no power to tax the sale  That is not the concern of the State of Madras and indeed the Legislature of Madras would be incompetent to enact such a law
In its context and setting therefore the Explanation to section 22 must mean that it 1447 authorises the State of Madras to impose a tax on sales falling within its purview
Thus while in the context of article 286 1 a the Explanation thereto could be construed as purely negative in character though positive in form it cannot be so construed in its setting in section 22 of the Madras Act where it must have a positive content
Nor is there much force in the contention that the non obstante clause in section 22 has only the effect of substracting something from the power to tax conferred on the State by the charging section section 3 read with section 2 h and not of adding to it
In Aswini Kumar Ghosh and another vs Arabinda Bose and another 1 It was observed by this Court that  the enacting part of a statute must where it is clear be taken to control the non obstante clause where both cannot be read harmoniously 
Now as the Explanation lays down in clear and unambiguous terms that the sales of the character mentioned therein are to be deemed to have taken place inside the State in which goods are delivered for consumption full effect must be given to it and its operation cannot be cut down by reference to the non obstante clause
It cannot be put against this construction that it renders the non obstante clause ineffective and useless
According to the definition in section 2 h a sale in which property passes inside the State of Madras will be liable to be taxed even though the goods are delivered for consumption outside that State but under the Explanation such a sale will be deemed to have taken place in the out side State in which goods are delivered for consumption and therefore the State of Madras will have nO power to tax it The purpose which the non obstante clause serves is to render the Explanation effective against the definition in section 2 h and not to render it ineffective in its own sphere as determined on its terms
But it is contended that in order to reach this result it was necessary that the Explanation to section 22 should have been made a part of the definition of  sale  under section 2 h because under section 3 which is the charging 1   24
1448 section it is the turnover of sales that is subject to tax that sale for the purpose of that section is only what is defined as  sale  under section 2 h and that the Explanation sales not having been brought within that definition no charge could be imposed thereon
The Explanation in section 22 it is argued cannot override section 2 h and if its object was to confer on the State a power to tax sales falling within its ambit that has not in fact been achieved
It is pointed out by way of contrast that in the Sales Tax Laws of some other States such as Bihar and Uttar Pradesh the Explanation has been added to the definition of sale
Now a contention that what the Legislature intended to bring about it has failed to do by reason of defective draftsmanship is one which can only be accepted in the last resort when there is no avenue left for escape from that conclusion
But that clearly is not the position here
Section 22 opens with the words  Nothing contained in this Act  and that means that that section is to be read as controlling inter alia the definition of sale in section 2 h
Otherwise sales in which property passes in Madras but delivery is outside that State would be taxable under section 2 h and under section 3 even though they are within the prohibition enacted in section 22
If the provisions of section 22 are effective for the purpose of limiting the operation of section 2 h we do not see any difficulty in construing the Explanation therein as equally effective for the purpose of enlarging it
Again it is a rule of construction well establisbed that the several sections forming part of a statute should be read unless there are compelling reasons contra as constituting a single scheme and construed in such manner as would give effect to all of them
On this principle section 2 h and section 22 must be read together as defining what are sales which are taxable under the Act and what are not and so read the Explanation really means that in sales in which goods are delivered for consumption in the State of Madras the property therein shall be deemed to have passed inside that State notwithstanding that it has under the Sale of Goods Act passed outside that State
On this construction those 1449 sales will fall within the definition in section 2 h and will be taxable
The contention of the petitioners highly technical and based oil the non insertion of the Explanation in section 2 h must in our opinion be rejected as unsound
It is next contended that the power of the President under Art
372 2 is merely to bring the provisions of the State laws into conformity with article 286 and that having regard to the interpretation put on that Article in The Bengal Immunity Company case 1 the Explanation in section 22 would be valid in so far as it prohibits the State of Madras from imposing a tax on sales in which goods are delivered outside Madras though property therein passed inside that State but that in so far as it makes taxable sales in which property passes outside the State of Madras but the goods themselves are delivered for consumption in Madras it is much more than bringing the State law into conformity with article 286 and is in consequence unauthorised and bad
It is argued that such a provision could be enacted by the Legislature of Madras as was in fact done by the legis latures of many of the States but the President could not do it in exercise of the special and limited power conferred on him by article 3722
That power is merely it is contended to take the definition of  sale  in section 2h of the Madras Act strike out therefrom whatever is repugnant to article 286 such as sales in which goods are delivered for consumption outside Madras and leave it there and not to add to it
We are not satisfied that that is a correct view to take of the powers of the President under article 3722
It is to be observed that article 2861a and the Explanation thereto form in their setting in a taxing statute integral parts of and different facets of the same concept
Sales in which property passes outside the State of Madras but delivery for consumption is inside Madras are at once inside sales for Madras and outside sales for the other States
Now if in exercise of the power to adapt the enactment of the Explanation is requisite to give effect to one aspect of that 1 1450 concept that is for prohibiting the State of Madras from taxing sales when goods are delivered outside we fail to see why it should not operate to give effect to the other aspect of the concept which is so integrally connected with it viz taxing of sales in which goods are delivered for consumption in the State of Madras if its language is comprehensive and wide enough to include such sales
We find it difficult to hold that the self same Explanation is intra vires the powers of the President in so far as it prohibits the State from taxing gales in which goods are delivered Outside the State but is ultra vires in so far as it authorises that State to tax sales in which goods are delivered inside it
It should be remembered in this connection that the power which the President has under article 3722 to adapt is the legislative power of the State whose law is adapted and that includes the power to repeal and amend any provision
Provided that the law as adapted is within the legislative competence of the State and its enactment is in the process of bringing the State law into conformity with article 286 it seems to us that it is within the ambit of the power con ferred by article 3722
The question however is of academic interest because of the concluding words of article 3722 which enact that no adaptation order made under that provision shall be liable to be questioned
It was suggested for the petitioners that these words would have no application when the adaptation order went beyond the terms of article 3722 and that it was open to them to challenge its validity on the ground that it amounted to more than bringing the existing law into conformity with article 286
We are unable to agree
If the adaptation order is within the scope of article 3722 then it is valid of its own force and does not require the aid of a clause such as is contained in the concluding portions thereof
It is only when the adaptation amounts to something more than merely bringing the State law into conformity with the Constitutional provisions that there can arise a need for such a clause
In our opinion the effect of the concluding words of article 3722 is to 1451 render the question of the validity of the adaptation non justiciable
The Adaptation Order in question must accordingly be held to be not open to attack on the ground that it goes beyond the limits contemplated by article 3722
It is then argued that even though the Adaptation Order of the President might not be open to question even if it had imposed for the first time a tax on sales which had not been previously imposed by the Act nevertheless in deciding whether it does in fact impose such a tax it would be relevant to take into account that the object of article 3722 was only to bring the State laws into conformity with the Constitution and that in consequence the Explanation in section 22 must be construed as having the same meaning as the Explanation in article 2861a
This would no doubt be a legitimate consideration in interpreting the language of the Explanation but then it must be remembered that at the time when the Adaptation Order was made the true interpretation of the Explanation to article 2861a had not been the subjectmatter of any decision and it is therefore difficult to impute to the framers of section 22 the construction put by this Court on the Explanation to article 2861a in The Bengal Immunity Company case 1 any more than the one put on it in The United Motors case 2
We are therefore thrown back on the language of the Explanation itself to discover its true scope
If in enacting the Explanation the Adaptation Order merely intended to prohibit the State of Madras from imposing tax on sales under which goods are delivered for consumption outside that State even though property therein passed inside that State it would clearly have expressed that intention in words to the following effect  For the purposes of clause ai a sale under which goods are delivered for consumption outside the State of Madras shall be deemed to have taken place outside that State notwithstanding that property in those goods passed inside that State 
But the language of the Explanation is general and fixes the situs of sales of 1 2  184 1452 an inter State character in the State in which goods are actually delivered for consumption
Under this Explanation a sale under which goods are delivered outside the State of Madras will be an outside sale for that State even though property in the goods passed inside that State and likewise a sale under which goods are delivered inside the State of Madras will be an inside sale for that State even though property in the goods passed outside that State
As the language of the Explanation is general and of sufficient amplitude not merely to restrict but also to add to the power of the State to tax Explanation sales and as the reasons for construing it as purely restrictive in article 2861a are as already stated without force in their application to a taxing statute we must give full effect to the words of the enactment and bold that they operate to confer on the State a power to tax Explanation sales
There is one other contention relating to this aspect of the matter which remains to be considered and that is that even if the Explanation could be construed as authorising the imposition of a tax on the sales mentioned therein a reading of the section as a whole makes it clear that in fact no such tax was imposed as it expressly enacts that Nothing contained in this Act shall be deemed to impose a tax on inter State sales 
The argument is that the Explanation sales being inter State sales and the section having exempted them from taxation they go out of the statute book altogether and do not exist for the purpose of the impugned Act
We are unable to agree with this contention
Article 2862 consists of two parts one imposing a restriction on the power possessed by the States to tax sales under Entry 54 in so far as such sales are in the course of inter State trade and commerce and another vesting in Parliament a power to enact a law removing that restriction
If section 22 had merely enacted that portion of article 2862 which prohibited imposition of taxes on interstate sales that might have furnished some plausible ground for the contention now urged by the petitionersbut it enacts both the parts of article 2862 1453 the restriction imposed therein and also the condition on which that restriction is to cease viz Parliament providing otherwise by law
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 is not contended that there is in the Constitution any inhibition against conditional legislation
In The Queen vs Burah 1 it was held by the Privy Council that a legislature acting within the ambit of authority conferred on it by the Constitution has the power to enact a law either absolutely or conditionally and that position has been repeatedly affirmed in this Court
Vide In The  etc
2 and Sardar Inder Singh vs State of Rajasthan3
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 rate at which it has to be levied and forms a complete code on the topic under consideration
It could have no immediate operation by reason of the bar 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
But it was argued that section 22 of the Madras Act could not be so construed because it was not open to the President acting in exercise of the power conferred on him under article 372 2 to impose a conditional levy  nor would it be competent to the Legislature of Madras to make a levy conditional or otherwise unless Parliament had authorised it
We see no force in this argument
As 1 1878 LR 5 IA 178
2  3  1454 article 2862 is itself in two parts one a restriction on the power of the State and the other a condition on which such restriction will cease to operate an adaptation made pursuant thereto must also be similar in its contents
Nor is there in article 286 2 any prohibition of any legislation by tile State Legislature against enacting laws imposing tax on interstate sales
It merely enacts that such law can have no effect
The words No law of a State shall impose  mean only that no such law shall be effective to impose a tax
It is also contended that under the Sales Tax Acts the levy of tax is annual and the rules contemplate submission of quarterly returns and payment of taxes every quarter on the admitted turnover and that a conditional legislation under which payment of tax will become enforceable in futuro would be inconsistent with the scheme of the Act and the rules
But this argument when examined comes to no more than this that the existing rules do not provide a machinery for the levy and the collection of taxes which might become payable in future when Parliament lifts the ban
Assuming that that is the true position that does not affect the factum of the imposition which is the only point with which we are now concerned
That the States will have to frame rules for realizing the tax which becomes now payable is not a ground for holding that there is in fact no imposition of tax
It should also be mentioned in this connection that the Madras Act makes a clear distinction between sales which are outside the operation of the Act and sales which are within its operation but are exempt from taxation
Section 4 provides that the provisions of the Act shall not apply to the sale of electrical energy motor spirit manufactured tobacco and certain other articles
In contrast to this is the language of section 22 which expressly enacts that the Act shall not be deemed to impose a tax on inter State sales except in so far as Parliament may by law otherwise provide
We are of opinion that on the true construction of section 22 of the Act there is an imposition of tax on Explanation sales but that it could be enforced only when Parliament so provides
1455 We have so far considered the question on principle and on the language of the statute
We may now
refer to the decisions of the High Courts wherein this question has been considered
In Mettur Industries Ltd vs State of Madras 1 the point directly arose for decision as to whether section 22 of the Madras Act did
in fact levy a tax on the Explanation sales so as to fall within the protection of the Sales Tax Laws Validation Act
It was held that the Explanation to section 22 had  the effect of rendering the sale one inside the State so as to fall within the definition of that word in section 2 h and that it was taxable
Next in point of time is the decision of the Bombay High Court in Dial Das vs P section Talwalkar 2 in which the question arose with reference to section 46 of the Bombay Sales Tax Act Bom
III of 1953 corresponding to section 22 of the Madras Act
It was held that it did impose a tax though it was to operate only if Parliament so provided
Then there are two decisions of the Travancore Cochin High Court Mathew vs Travancore Cochin Board of Revenue3 and Cochin Coal Co Ltd vs State Of Travancore Cochin4 in which it was held that section 26 of the Travancore Cochin General Sales Tax Act corresponding to section 22 of the Madras Act had not the effect of imposing of its own force a tax on the Explanation sales and the decision in Mettur Industries Ltd vs Madras State supra was not followed
In The Mysore Spinning and Manufacturing Co Ltd vs Deputy Commercial Tax Officer Madras 5 the Madras High Court re affirmed the view which it had taken in Mettur Industries Ltd vs State of Madras supra and held that section 22 had the effect of imposing a tax on the Explanation sales
In The Government of Andhra vs Nooney Govindarajulu supra the true effect of section 22 of the Madras Act came up for consideration before the Andhra High Court and it was held therein dffering from Mettur Industries Ltd vs State of Madras 1 and Dial Das vs P section Talwalkar 2 that in view of the observations of this Court as to the scope of the 1 AIR 1957 Mad 362
2 AIR 1957 Bom
3 AIR 1957 TC 300
4 1956 7 Sales Tax Cases 731
5 AIR 1957 Mad
1456 Explanation in article 286 1 a the Explanation in section 22 could not be construed as imposing a tax on the sales mentioned therein and that that conclusion also followed on the opening words of the section that  Nothing contained in this Act shall be deemed to impose or authorise the impo sition of a tax  
For the reasons already given we are unable to agree with the decisions in Mathew vs Travancore Cochin Board of Revenue1 Cochin Coal Co Ltd vs State of Travancore Cochin2 and The Government of Andhra vs Nooney Govindarajulu 3
We are of opinion that the law has been correctly laid down in Mettur Industries Ltd vs State of Madras 4 and Dial Das vs P section Talwalkar 5
We accordingly hold that section 22 operated to impose a tax falling within the Explanation subject to authorisation by Parliament as provided in article 286 2
In this view the contention urged on behalf of the States that the Explanation to article 286 1 a being a provision of the Constitution operated by its own force to impose a tax on the sales covered by it and did not require to be supplemented by any State legislation to become effective does not call for any detailed consideration
Suffice it to say that it cannot be maintained if the true scope of article 286 is to define and limit the powers of State Legislatures with reference to imposition of sales tax and not to itself impose it
11 That brings us on to the next question which is whether the impugned Act Sales Tax Laws Validation Act is ultra vires on the ground that it is not authorised by the terms of article 286 2
Now it is a well known rule of interpretation that in order to understand the true nature and scope of an Act it is necessary to ascertain what the evils were which were intended to be redressed by it
The starting point of the trouble which ultimately led to the enactment of the impugned Act is the Explanation to article 2861a which came into force on January 26 1950
The terms in which it is worded undoubtedly suggest that sales 1 AI R 2 1956 7 Sales Tax Cases 731
3 1957 8 Sales Tax Cases 297
4 AIR 1957 Mad
5 AIR 1957 Bom
1457 of the description mentioned therein are to be treated as sales inside the delivery State for purposes of taxation
That is how it would seem to have been understood in the Adaptation Order under which section 22 was inserted in the Madras Sales Tax Act and in the Adaptation Orders relating to the Sales Tax Laws of other States for as already stated in a taxing statute the language of the Explanation can only mean that a sale failing within its purview is an inside sale enabling the State to tax it
In The United Motors case 1 the construction put by this Court on the Explanation was that though but for it the sales mentioned therein would be in the course of interState trade and commerce its effect was to convert them into intrastate sales so as to bring them within the taxing power of the delivery State
It was only later that this Court held finally in The Bengal Immunity Company case 2 that the Explanation sales were not divested of their character as inter State sales as the Explanation to article 286 1 a did not govern article 286 2 and that in the absence of Parliamentary legislation as contemplated by article 286 2 taxation of sales falling within its purview would be unconstitutional
This judgment was delivered on September 6 1955
But acting on the apparent tenor and import of the Explanation and the construction put upon it in The United Motors case 1 the States in India had been levying taxes oil the sales falling within its purview
The position on September 6 1955 was that the States had imposed and collected large amounts by way of tax on Explanation sales that there were proceedings pending for assessment of tax on such sales and that apart from this the States would have been entitled to take but for the decision in The Bengal Immunity Company case 2 proceedings for the assessment of tax in respect of those sales
Now the result of the decision in The Bengal Immunity Company case 2 was that the levy of the tax on the Explanation sales became unauthorised and the States were faced with large claims for restitution of the 1  2 1458 amounts realised involving threat to their economic stability
It should also be mentioned that quite a large number of dealers had acting under provisions of the Sales Tax Acts which empowered them to pass the tax on collected it from their purchasers for the purpose of payment to the State and as after the decision in The Bengal Immunity Company case 1 they could no longer be called upon to pay it they stood to make an unjust gain of it
These were the evils which called for redress and it was to remedy them that Parliament enacted the Sales Tax Validation Ordinance No III of 1956 and eventually replaced it by the impugned Act
Section 2 of the Act provides that no law of a State imposing a tax on sales which took place in the course of interState trade or commerce between April 1 1951 and September 6 1955 shall be deemed to be invalid or ever to have been invalid merely by reason of the fact that such sales were in the course of inter State trade
The section further provides that all taxes levied or collected under such a law during the specified period shall be deemed to have been validly levied or collected
The policy behind the Act is obviously to declare the law as interpreted in The United Motors case 2 as the law governing sales filling within the Explanation up to the date of the judgment in The Bengal Immunity Company case1 and to give effect to the law as laid down in that decision for the sales effected subsequent thereto
The question is whether this Act is unconstitutional as being ultra vires the powers of Parliament tinder Art  286 2
The petitioners maintain that it is and put forward several grounds in support of that position
It is firstly contended by them that under Entry 54 in List II the power to make laws in respect of tax on sales is vested exclusively in the States that the power which is conferred on Parliament under article 2862 is only to enact a law directing or permitting the States to impose a tax on inter States sales and not to itself enact a law with reference thereto that the impugned Act being one to validate Sales 1 2  1459 Tax Laws is substantive in character and is not authorised by the terms of article 286 2 and is in consequence unconstitutional
It is argued that to validate is to confirm or ratify and that can be only in respect of acts which one could have himself performed and that if Parliament cannot enact a law relating to sales tax it cannot validate such a law either and that such a law is accordingly unauthorised and void
The only basis for this contention in the Act is its description in the Short Title as the  Sales Tax Laws Validation Act  and the marginal note to section 2 which is similarly worded
But the true nature of a law has to be determined not on the label given to it in the statute but on its substance
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 286 2 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 case 2 that it lifts the ban imposed on the States against taxing inter State sales and not that it validates or ratifies any such law
Considering the legislation on its substance we have no doubt that it is within the scope of the authority conferred on Parliament by article 286 2 and is not ultra vires
It is next contended that the impugned Act is wholly retrospective in character in that it operates on sales which took place during the specified period and that such a legislation is having regard to the intendment of article 286 2 outside its terms
It is argued that this Article to start with enacts a restriction on the power of the State to impose taxes on inter State sales and then vests in Parliament a power 1 2 185 1460 to remove that restriction and that in logical sequence therefore there should first be a legislation by Parliament authorising the States to impose a tax on interState sales and then a law of the State made in accordance therewith and that that order having been reversed in the present case the impugned Act is unconstitutional
We do not agree with this contention
Article 286 2 merely provides that no law of a State shall impose tax on inter State sales  except in so far as Parliament may by law otherwise provide 
It places no restrictions on the nature of the law to be passed by Parliament
On the other hand the words  in so far as  clearly leave it to Parliament to decide oil the form and nature of the law to be enacted by it
What is material to observe is that the power conferred on Parliament under article 286 2 is a legislative power and such a power conferred on a Sovereign Legislature carries with it authority to enact a law either prospectively or retrospectively unless there can be found in the Constitution itself a limitation on that power
Now there is nothing express in article 286 2 imposing a restriction on the power of Parliament to enact a law with retrospective operation
But it is argued for the petitioners that such a restriction is to be implied from the scheme of it which is that there is a prohibition on the power of the State to enact a law imposing tax on inter State sales unless Parliament lifts the ban and it is said that a prohibition operates only in futuro and therefore a law removing that prohibition must also operate in futuro
The decision of the Privy Council in Punjab Province vs
Daulat Singh 1 is relied on in support of this proposition
There the question arose with reference to the validity of a mortgage of agricultural lands in the Punjab executed in the year 1933
Section 13 A of the Punjab Alienation of Land Act which came into force in 1939 enacted that transfer of a land by a member of an agricultural tribe in favour of another member of the tribe was void if the transferee was a benamidar for a person who was not a member of that tribe whether such transfer was 1 1946 LR 73 IA 59
1461 made before or after the Act
The mortgagee instituted a suit challenging the vires of this section on the ground that it contravened section 2981 of the Government of India Act 1935 which provided that no subject of His Majesty domiciled in India shall be prohibited from acquiring holding or disposing of property on grounds only of religion place of birth or descent
The mortgagor in reply relied on section 298 2 which enacted that nothing in that section shall affect the operation of any law which prohibits the sale or mortgage of agricultural land situate in any particular area and owned by a person belonging to the agriculturist class
In rejecting this contention the Privy Council observed that what was saved by section 298 2 was a law prohibiting certain kinds of transfers that the word  prohibition  could properly apply only to acts to be done in futuro and that the impugned provision section 13 A was intra vires the Constitutional provision in so far as it prohibited transfers after the date of its enactment but to the extent that it avoided transfers which had taken place prior to that date it was ultra vires
This decision proceeded solely on the connotation of the word  prohibits  in section 298 2 of the Government of India Act and can be of no assistance in the construction of article 286 2 wherein that word does not occur
And even on the substance of it we see no real analogy between the case in Punjab Province vs Daulat Singh 1 and the present
There the law which was authorised by section 298 2 was one prohibiting certain transfers here the law which Parliament is authorised to make is one not prohibiting the States from imposing tax on inter State sales but permitting them to do so
While a law prohibiting transfers must be prospective a law authorising imposition of tax need not be
It can be both prospective and retrospective
A decision more directly in point is the one in The United Provinces vs Atiqa Begum2
There the question arose on the construction of section 292 of the Government of India Act 1935 which enacted that  Notwithstanding the repeal by this Act of the 1 I A 59
2 1462 Government of India Act but subject to the other provisions of this Act all the law in force in British India immediately before the commencement of Part III of this Act shall continue in force in British India until altered or repealed or amended by a competent Legislature or other competent authority
 The Legislature of the United Provinces had enacted a law modifying the pre existing law relating to the payment of rents by tenants to landlords and giving it retrospective operation
The question was whether the enactment was repugnant to section 292 which had provided that the preexisting law was to continue in force until it was altered
It was held that the power of a legislature to pass a law included a power to pass it retrospectively and that the words of section 292 did not operate to impose any restriction on that power and that the legislation was intra vires
In our opinion the principle of this decision is applicable to the present case and the impugned Act cannot be held to be bad on the ground that it is retrospective in operation
It is next contended that the impugned Act is ultra vires inasmuch as it is much more than a mere retrospective law and that it is really a piece of ex post facto legislation which is not authorised by article 2862
The argument in support of this contention may thus be stated  A  State legislature is competent under Entry 54 in List II to enact a law taxing sale of goods and when such a law is made to operate retrospectively it may not be open to challenge on constitutional grounds though its propriety may be open to question on grounds of policy
Parliament has no competence to enact laws in respect of tax on sales filling within Entry 54 in List 11 but article 2862 confers on it a power to authorise the States to impose a tax on inter State sales
The impugned Act does not do that but validates ex post facto laws of States imposing such a tax retrospectively for the specified period
Such a general law may be intra vires the States but not Parliament nor is it one which can be justified by the power granted to it to  provide otherwise
 It is therefore unconstitutional and void In 1463 our opinion this argument is only an amalgam of the two contentions already dealt with and does not require further detailed consideration
The impugned Act though it is in name a validating Act is in essence a law lifting the ban under article 286 2 and if no limitation on the character of that law could be spelt out of the language of that Article then it must be upheld as within the authority conferred by it
It is also argued that even if the power to make a law conferred on Parliament under article 286 2 comprehends a power to enact a law with retrospective operation that power cannot extend to authorising what is unconstitutional and that as section 22 of the Madras Act and the corresponding provisions in the statutes of other States were unconstitutional and illegal when made as contravening the prohibition enacted in article 286 2 the impugned Act must be held to be unauthorised and bad in that it seeks to give effect to those provisions
But this is to beg the very question which we have to decide
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 unconstitutional 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 intra vires and the foundation on which this contention of the petitioners rests disappears and it must fall to the ground
In the result we are of opinion that the impugned Act is intra vires and is not open to challenge on any of the grounds put forward by the petitioners
111 a
We have now to consider the contention that even if the impugned Act is valid that would not give efficacy to section 22 of the Madras Act or the corresponding provisions in the laws of other States which came in by adaptation under article 372 2
The ground urged in support of this contention is that the expression  law of a State  in article 286 2 has a technical import and means a law which is enacted by the legislature of a State in the manner prescribed by the Constitution and open to challenge in courts if 1464 it is unconstitutional that that expression occurring  in section 2 of the impugned Act must bear the same meaning which it has in article 286 2 as it was enacted pursuant to the authority contained therein and that section 22 of the Madras Act is not a law of that description as it was made by the President in exercise of the special power conferred on him by article 372 2 and is as provided therein not open to attack in a court of law
We do not see why we should restrict the connotation of the words  law of a State  in the manner contended above
The law of a State signifies in its ordinary acceptation whatever is an expression of the legislative as distinguished from the executive or judicial power of a State
Its normal mode under the Constitution is no doubt that it is enacted by the legislature of the State constituted in accordance with the procedure prescribed therein
But that is not the only mode in which the legislative power of the State could be exercised
Under article 213 the Governor is authorised subject to the conditions laid down therein to issue Ordinances which have the force of law and these Ordinances are clearly laws of the State and not the less so by reason of their not having been passed by the State legislature
Under article 252 it is open to Parliament acting on resolutions of the legislatures of two or more States to enact laws on subjects which are within the exclusive competence of the States a recent instance of such legislation being Act 42 of 1955 the validity of which was the subject of consideration in R M D Charnarbaugwalla vs Union of India1
Can it be contended that these are not laws of the States for which they were enacted because they were not passed by the legislatures of those States  We entertain no doubt that by the expression  law of a State  in article 286 2 and section 2 of the impugned Act is meant whatever operates as law in the state and that section 22 of the Madras Act is a law within those enactments
Nor does it affect this conclusion that that law may not be open to challenge in a court of law
A right to challenge a 1  1465 law must depend on the provisions of the Constitution governing the matter and if those provisions enact that it is not open to question in a court of law or  that it is liable to be questioned only on certain specified grounds that will not have the effect of depriving a statute duly enacted of its character as law
We are also not satisfied that a law as adapted under article 372 2 is not open to attack on the ground that it contravenes some constitutional provision
We are disposed to think that the concluding words of article 372 2 preclude an attack on the Adaptation Order only on the ground that it does more than merely bringing the State law into conformity with the Constitution and is in consequence ultra vires the powers conferred by that article
In the result we must hold that section 22 of the Madras Act is within the protection afforded by section 2 of the impugned Act
111 b  The next contention of the petitioners that falls to be considered is whether even on the footing that the impugned Act is intra vires the powers of Parliament under article 286 2 the proceedings which are proposed to be taken by the State of Andhra against them for assessment of tax are incompetent because the Act validates only levies or collections made during the specified period but does not authorise the initiation of fresh proceedings for levy or collection of tax
It is contended that though section 2 of the impugned Act consists of two clauses one giving effect to laws of States imposing tax on inter State sales in so far as they took place during the specified period and the other validating levy or collection of tax made during that period the first clause has no independent operation the only purpose which it serves being to lead up to the second which is the only effective clause in the section
It is argued that if the intention of the legislature was not merely to validate the levies or collections already made but also to maintain the laws in force so as to enable the States to take fresh proceedings for assessment and levy of tax then there was no need whatsoever for the second clause as effectuation of the Act would automatically validate the levies and collections made thereunder
It is said 1466 that the object of the legislation was only to see that the States had not to refund amounts collected by them and that for achieving that object it was necessary only to give effect to the second clause
The decision in Dialdas vs P section Talwalkar 1 already cited was relied on as supporting the petitioners on this point
In our judgment the language of the enactment is too clear and unambiguous to admit of this contention
If the purpose of the enactment is what the petitioners contend it to be then nothing would have been easier for the legislature than to have so framed the section as to confine its operation to levies or collections already made without giving effect to the law itself
On the contention of the petitioners the first clause has to be discarded as wholly inoperative and we should be 10th to adopt a construction which leads to that result
It is true that on the contention of the State that the first clause has independent operation the second clause would be unnecessary as even without it the result sought to be achieved by it must follow on the first clause itself
But it is to be noted that the first clause has reference to the exercise of legislative power while the second is concerned with administrative action and it is possible that the second clause might have been enacted by way of abundant caution
It is nothing strange or unusual for a legislature to insert a provision ex abundanti cautela so as to disarm possible objection but it is in conceivable that it should enact a provision which is wholly inoperative
Of two alternative constructions of which one leads to the former and the other involves the latter result there cannot be any question that it is the former that is to be preferred
Nor is it permissible to cut down the plain meaning of the terms of the statute on considera tions of policy behind the legislation
But even from that point of view there was the fact that there were dealers who had collected taxes from their purchasers for payment to the State but were relieved of 1 AIR 1957 Bom
1467 that obligation by the judgment in The Bengal Immunity Company case 1 and that further to validate only levies and collections made would give an advantage to those who evaded the law as then understood over those who loyally obeyed it
It follows that we are unable to agree with the decision in Dialdas vs P section Talwalkar 2 in so far as it held that it was not competent to the State to start fresh proceedings for assessment of tax on the strength of the impugned Act
In our opinion the true construction of section 2 is that the two clauses therein are as indicated by the conjunction distinct and independent in their opera
tion and that the laws of the States are kept in force in respect of sales which had taken place during the specified period and that proceedings in respect thereof for assessment are within the protection of the Act
It was next argued that the impugned Act is a temporary statute as its operation is limited to sales which took place during the specified period and that period having expired no proceedings could now be taken on the strength of the provisions of that Act and reliance was placed on the observations of this Court in Keshavan Madhava Menon vs The State of Bombay 3 in support of this position
But the impugned Act is in no sense a temporary Act
Its life is not limited to any specified period
It is a permanent statute operating on all sales which took place during the specified period
The fallacy in this contention of the petitioners lies in mixing up the period the sales during which are brought within the operation of the Act with the period of the operation of the Act itself
The former may be said to be temporary but the latter clearly is not
IV It is next contended that even if the impugned Act authorised starting of fresh proceedings for assessment of tax on the Explanation sales which had taken place during the specified period no action in that behalf could be taken under section 22 of the 1 2 AIR 1957 Bom
3   235
186 1468 Andhra Madras Act because it was when it was enacted repugnant to article 2862 of the Constitution and was therefore void
It is argued that a statute which is unconstitutional is a nullity and must be treated as non est and that the impugned Act could not infuse life into it
It may be open it is said to the Legislature of the State of Andhra to enact a fresh law giving it even retrospective operation as provided in the impugned Act but in the absence of such a legislation the provisions of the Act as they stood prior to the impugned Act are incapable of enforcement
It would be sufficient answer to this contention that section 22 of the Madras Act is only a piece of conditional legislation imposing tax on interState sales when Parliament should enact a law lifting the ban and if such legislation is competent as we have held it is then no question of unconstitutionality of the section when it was enacted could arise
But it would be more satisfactory to decide the point on its own merits as the question raised has been of late the subject of considerable discussion in this Court
Now in considering the question as to the effect of unconstitutionality of a statute it is necessary to re member that unconstitutionality might arise either because the law is in respect of a matter not within the competence of the legislature or because the matter itself being within its competence its provisions offend some constitutional restrictions
In a Federal Constitution where legislative powers are distributed between different bodies the competence of the legislature to enact a particular law must depend upon whether the topic of that legislation has been assigned by the Constitution Act to that legislature
Thus a law of the State on an Entry in List 1 Sch
VII of the Constitution would be wholly incompetent and void
But the law may be on a topic within its competence as for example an Entry in List II but it might infringe restrictions imposed by the Constitution on the character of the law to be passed as for example limitations enacted in Part III of the Constitution
Here also the law to the extent of the repugnancy will be 1469 void
Thus a legislation on a topic not within the competence of the legislature and a legislation within its competence but violative of constitutional limitations have both the same reckoning in a court of law they are both of them unenforceable
But does it follow from this that both the laws are of the same quality and character and stand on the same footing for all purposes  This question has been the subject of consideration in numerous decisions in the American Courts and the preponderance of authority is in favour of the view that while a law on a matter not within the competence of the legislature is a nullity a law on a topic within its competence but repugnant to the constitutional prohibitions is only unenforceable
This distinction has a material bearing on the present discussion
If a law is on a field not within the domain of the legislature it is absolutely null and void and a subsequent cession of that field to the legislature will not have the effect of breathing life into what was a still born piece of legislation and a fresh legislation on the subject would be requisite
But if the law is in respect of a matter assigned to the legislature but its provisions disregard constitutional prohibitions though the law would be unen
forceable by reason of those prohibitions when once they are removed the law will become effective without re enactment
Willoughby on the Constitution of the United States Vol 1 at p 11 says   The validity of a statute is to be tested by the constitutional power of a legislature at the time of its enactment by that legislature and if thus tested it is beyond the legislative power it is not rendered valid without re enactment if later by constitutional amendment the necessary legislative power is granted
However it has been held that where an act is within the general legislative power of the enacting body but is rendered unconstitutional by reason of some adventitious circumstance as for example when a State legislature is prevented from regulating a matter by reason of the fact that the Federal 1470 Congress has already legislated upon that matter or by reason of its silence is to be construed as indicating that there should be no regulation tile act does not need to be re enacted in order to be enforced if this cause of its unconstitutionality is removed
 In Cooley on Constitutional Law at p 201 it is stated that  a finding of unconstitutionality does not destroy the statute but merely involves a refusal to enforce it
In Wilkerson vs Rahrer 1 the State of Kansas had enacted a law in 1889 forbidding the sale of intoxicating liquor
This was bad in so far as it related to sales in the course of interstate trade as it was in contravention of the Commerce Clause
But in 1890 the Congress passed a law conferring authority on the States to enact prohibition laws
The question was whether a prosecution under the law of 1889 in respect of a breach of that law subsequent to the Congress legislation in 1890 was maintainable
Repelling the contention that the statute of 1889 was a nullity when it was passed and could not be enforced without reenactment the Court observed  This is not the case of a law enacted in the unauthorized exercise of a power exclusively confided to Congress but of a law which it was competent for the State to pass but which could not operate upon articles occupying a certain situation until the passage of the Act of Congress
That Act in terms removed the obstacle and we perceive no adequate ground for adjudging that a re enactment of the state law was required before it could have the effect upon imported which it had always had upon domestic property
 It should be noted that in this case the law of 1889 applied to intrastate sales also and it was admittedly valid to that extent
The impugned legislation was therefore unconstitutional only in part
Rottschafer after referring to the conflict of authorities on this question in the States refers to the decision in Wilkerson vs Rahrer 1 as embodying the better view
Vide American Constitutional Law 1939 Edn
p 39
A similar view was taken in Ulster Transport 1 1891 I40 US 545  1471 Authority vs James Brown  Sons Ltd 1
There construing section 51 of the Act of 1920 which enacts that  any law made in contravention of the restrictions imposed by this sub section shall so far as it contravenes these restrictions be void  Lord MacDermott L C J observed  I am not aware of any authority for the view that language such as this necessarily means that contravention must produce an actual gap in the statute book in the sense that the measure concerned or some specific part thereof simply drops out of the authorized text
As well as this vertical severability if I may so describe it I see no reason why if the circumstances warrant such a course the terms of section 51 should not be sufficiently met by what I may call a horizontal severance a severance that is which without excising any of the text removes from its ambit some particular subject matter activity or application
This I think would give effect to the words  so far as it contravenes  without impinging on the meaning or weight to be attached to the word  void 
 It will be noted that this decision also deals with a statute which was in part unconstitutional
Coming to the authorities of this Court where this question has been considered In Behram Khurshed Pesikaka vs The State of Bombay 2 the question arose with reference to the Bombay Prohibition Act of 1949 which subject to certain exceptions provided therein prohibited the consumption of liquor
In The State of Bombay and another vs F N Balsara 3 this Court had held that this provision was obnoxious to article 191g of the Constitution in so far as it related to medicinal and toilet preparations containing alcohol
The appellant was prosecuted for the offence of consuming liquor and his defence was that he had taken medicine containing alcohol
The point in dispute was whether the burden was upon the appellant to prove that he had taken such a medicine or for the prosecution to show that he had not
This 1 1953 Northern Ireland Reports 79
2  654
3  1472 Court held that the onus was on the prosecution and the same not having been discharged the appellant was entitled to be acquitted
In the course of the judgment Mahajan C J made the following observations which are relied on by the petitioners  The constitutional invalidity of a part of section 13b of the Bombay Prohibition Act having been declared by this Court that part of the section ceased to have any legal effect in judging cases of citizens arid had to be regarded as null and void in determining whether a citizen was guilty of an offence
 It must be observed that the question of the constitu tionality of the Act did not arise directly for deter mination and was incidentally discussed as bearing on the incidence of burden of proof
And further these observations have reference to the enforceability of the provisions of the Bombay Prohibition Act while the bar under article 19 continued to operate
There was no question of the lifting of ban imposed by article 19 and the question as to the effect of lifting of a ban did not arise for decision
In the context in which they occur the words  null and void  cannot be construed as implying that the impugned law must be regarded as non est so as to be incapable of taking effect when the bar is removed
They mean nothing more than that the Act is unenforceable by reason of the bar
In A V Fernandez vs State of Kerala 1 the question arose with reference to the Travancore Cochin General Sales Tax Act and the Rules made thereunder
Prior to the Constitution the assessees were liable to pay tax on the total turnover of sales including those inside the State and those outside the State
Where the sales were of cocoanut oil there was a provision for deduction of the price paid for the purchase of copra from the total turnover
After the coming into force of the Constitution a new section section 26 corresponding to section 22 of the Madras Act was introduced incorporating therein the provisions of article 286 and consequent thereon the sales which took place outside the State were excluded from the turnover
On this 1  1473 a question arose as to the quantum of deduction to which the assessee was entitled in respect of his purchase of copra
He claimed that he was entitled to deduct the price paid for copra not only in respect of oil which was sold inside the State but also oil sold outside the State
This contention was rejected by the High Court which limited the deduction to purchase of copra relating to the sales inside  the State and in affirming that decision this Court observed   In our opinion section 26 of the Act in cases falling within the categories specified under Article 286 of the Constitution has the effect of setting at nought and of obliterating in regard thereto the provisions contained in the Act relating to the imposition of tax on the sale or purchase of such goods and in particular the provisions contained in the charging section and the provisions contained in rule 202 and other provisions which are incidental to the process of levying such tax
So far as sales falling within the categories specified in Article 286 of the Constitution and the corresponding section 26 of the Act are concerned they are as it were taken out of the purview of the Act and no effect is to be given to those provisions which would otherwise have been applicable if section 26 had not been added to the Act
 On the strength of the above observations the petitioners contend that the provisions relating to inter State sales must be treated as non existent and that therefore a fresh enactment of the statute would be necessary to bring them into operation
Here again the point for decision was only as to the effect of the ban under article 286 on the transactions which came within its purview
That ban had not then been lifted and the effect of the lifting of such a ban on the existing law did not fall to be considered
We are unable to read the observations relied on by the petitioners as implying that section 22 of the Madras Act must be taken to have been blotted out of the statute book
A case directly in point is Bhikaji Narayan Dhakras and others vs The State of Madhya Pradesh and another 1
There the question arose with reference 1  1474 to the C P  Berar Motor Vehicles Amendment Act 1947 Act 3 of 1948
That Act had amended section 43 of the  by introducing provisions which authorised the Provincial Government  to take up the entire motor transport business in the Province and run it in competition with and even to the exclusion of motor transport operators 
These provisions though valid at the time when they were enacted became void on the coming into force of the Constitution as infringing the rights of citizens to carry on business protected by article 191g
The Constitution however was amended on June 181951 and article 196 was amended so as to authorise the State to carry on business  to the exclusion complete or partial of citizens or otherwise 
Subsequent to this amendment the Government issued a notification under section 43 of the Amendment Act of 1948 and it was the validity of that notification that was in issue
The contention was that as section 43 of the Act of 1948 had become void at the date of the Constitution a notification issued by the Government under that section after the date of the amendment of the Consti tution was not valid as it must be taken to have become non est
It was held by this Court that section 43 of the Act of 1948 could not be held to have been effaced out of the statute book because it continued to operate on transactions prior to the coming into force of the Constitution and that even after the Constitution it would be operative as against non citizens that the consequence of section 43 being repugnant to article 191g was that it could not be enforced so long as the prohibition contained therein was in force but that when once that prohibition had been removed as it was by the First Amendment the provisions of that Act which had been dormant all the time became active and enforceable
The result of the authorities may thus be summed up Where an enactment is unconstitutional in part but valid as to the rest assuming of course that the two portions are severable it cannot be held to have been wiped out of the statute book as it admittedly must remain there for the purpose of enforcement of 1475 the valid portion thereof and being on the statute book even that portion which is unenforceable on the ground that it is unconstitutional will operate proprio vigore when the Constitutional bar is removed and there is no need for a fresh legislation to give effect thereto
On this view the contention of the petitioners with reference to the Explanation in section 22 of the Madras Act must fail
That Explanation operates as already stated on two classes of transactions
It renders taxation of sales in which the property in the goods passes in Madras but delivery takes place outside Madras illegal on the ground that they are outside sales falling within article 2861 a
It also authorises the imposition of tax on the sales in which the property in the goods passes outside Madras but goods are delivered for consumption within Madras
It is valid in so far as it prohibits tax on outside sales but invalid in so far as sales in which goods are delivered inside the State are concerned because such sales are bit by article 2862
The fact that it is invalid as to a part has not the effect of obliterating it out of the statute book because it is valid as to a part and has to remain in the statute book for being enforced as to that part
The result of the enactment of the impugned Act is to lift the ban under article 2862 and the consequence of it is that that portion of the Explanation which relates to sales in which property paws outside Madras but the goods are delivered inside Madras and which was unenforceable before became valid and enforceable
In this view we do not feel called upon to express any opinion as to whether it would make any difference in the result if the impugned provision was unconstitutional in its entirety
There is one other aspect of the question to which reference must be made
The decisions in Behram Khurshed Pesikaka vs The State of Bombay 1 and Bhikaji Narain Dhakras and others vs The State of Madhya Pradesh and another 2 both turn on the construction of article 13 of the Constitution which enacts that laws shall be void to the extent they are 1 187 2   187 1476 repugnant to the provisions of Part III
We are concerned in these petitions not with infringement of any of the provisions of Part III but of article 2862 and the point for our decision is as to the effect of the infringement of that provision
article 2862 does not provide that a law which contravenes it is void and when regard is had to the context of that provision it is difficult to draw the inference that that is the consequence of contravention of that provision
article 3721 provides for the continuance in force of all laws existing at the date of the Constitution
The proviso to article 2862 enacts that the President may by an order continue the operation of the Sales Tax Laws up to March 31 1951 and article 2862 itself enacts that no law of a State shall impose a tax
In the context in which they occur the true meaning to be given to these words is as already observed that no law of a State shall be effective to impose a tax that is to say the law cannot be enforced in so far as it imposes such a tax
Whether we consider the question on broad principles as to the effect of un constitutionality of a statute or on the language of article 2862 the conclusion is inescapable that section 22 of the Madras Act and the corresponding provisions in the other statutes cannot be held to be null and void and non est by reason of their being repugnant to article 2862 and the bar under that Article having been now removed there is no legal impediment to effect being given to them
V We shall now deal with the contention of the learned counsel for the Madura Mills Ltd who struck a new path cutting across the lines on which the petitioners and the other interveners proceeded
He contended that the decisive factor in the determination of the question was Entry 42 in List I of the Seventh Schedule Inter State trade and commerce that under that Entry Parliament had the exclusive power to enact laws in respect of inter State trade and commerce and that included power to impose a tax on inter State sales that the States had therefore no competence under the Constitution to enact a law imposing tax on such sales that the laws passed 1477 by the States after the Constitution imposing such a tax were ultra vires and void that the impugned Act purporting to give effect to such laws was likewise ultra vires and inoperative and that in consequence the proceedings sought to be taken under section 22 of the Madras Act and the corresponding provisions in the sister Acts of other States were unauthorised and illegal
The argument in support of this contention was as follows Entry 42 in List I is based on the Commerce Clause of the American Constitution article 1 section 8 that  The Congress shall have power to regulate commerce among the several States  and that has been interpreted by the Supreme Court of the United States as meaning that the States have no power to enact a law imposing a tax on the carrying on of inter State trade Vide Robins vs Taxing District of Shelby County 1 or imposing tax on inter State sales Vide McLeod vs Dilworth Co 2
The contents of Entry 42 are the same as those of the Commerce Clause and it must therefore be construed as of the same effect
It is also a well established rule of construction that the Entries in the Legislative Lists must be interpreted liberally and in a wide sense
The true interpretation therefore to be put upon Entry 42 is that Parliament has and therefore in view of the non obstante clause in article 2461 and of the words subject to in article 2463 the States have not the power to impose tax on inter State sales
Article 301 which provides that trade and commerce in the territory of India shall be free is also intended to achieve the same result
It reproduces section 92 of the Commonwealth of Australia Constitution Act and the authorities on that section have held that imposition of a tax on inter State trade would be obnoxious to that provision
That the freedom in article 301 includes freedom from taxation is also implicit in article 304 a in which an exception to article 301 is made in respect of the imposition of tax on goods imported from other States
The result is it is argued that after the Constitution no law of a State can impose a tax on 1   2 1044   1478 inter State sales and in consequence section 22 of the Madras Act which came into force after the Constitution would if it is construed as imposing a tax be bad and the impugned Act which proceeds on the view that the States have the power to enact laws imposing a tax on inter State sales and seeks to give effect to them would also be unconstitutional and void
This contention suffers in our opinion from serious infirmities
It overlooks that our Constitution was not written on a tabula rasa that a Federal Constitution had been established under the Government of India Act 1935 and though that has undergone considerable change by way of repeal modification and addition it still remains the framework on which the present Constitution is built and that the provisions of the Constitution must accordingly be read in the light of the provisions of the Government of India Act
It fails to give due weight to the setting of the relevant provisions of the Constitution and the interpretation which is to be put upon them in their context
In the Government of India Act 1935 there was no Entry corresponding to Entry 42 in List I of the Constitu tion
But there was in List II Entry 48 which corresponds to Entry 54 in the Constitution
It is not in dispute that under Entry 48 the States had power to pass a law imposing a tax on inter State sales because the terms of the Entry are wide and would include inter State as well as intrastate sales
It was on this view that the Provinces had enacted laws imposing tax on inter State sales
Then the Constitu tion came into force and it included for the first time a new Entry 42 in List 1
It also reproduced Entry 48 in Entry 54 in List II in terms for our purposes identical
Having regard to the connotation of that Entry in the Government of India Act 1935 one would have expected that if it was intended by the Constitution makers that the States should be deprived of the power to tax interstate sales which they had under Entry 48 in the Government of India Act that would have been made clear in the Entry itself
It is material to note that while Entry 48 in the Government 1479 of India Act was Taxes on the sale of goods and on advertisement  Entry 54 in List II of the Constitution as originally enacted was  Taxes on the  sale or purchase of goods other than newspapers
Thus the Constitution did limit the scope of Entry 48 by excluding from it newspapers and if it was its intention to exclude inter State sales from its purview nothing would have been easier for it than to have said so instead of leaving that result to be inferred on a construction of Entry 42 in List I in the light of the American authorities on the Commerce Clause
This Is strong indication that Entry 42 is not to be read as including tax on inter State sales
This conclusion is further strengthened when regard is had to the scheme of the Lists in the Seventh Schedule and the principle underlying the enumeration of heads of legislation therein
In List 1 Entries I to 81 mention the several matters over which Parliament has authority to legislate
Entries 82 to 92 enumerate the taxes which could be imposed by a law of Parliament
An examination of these two groups of Entries shows that while the main subject of legislation figures in the first group a tax in relation thereto is separately mentioned in the second
Thus Entry 22 in List I is  Railways  and Entry 89 is  Terminal taxes on goods or passengers carried by railway sea or air taxes on railway fares and freights 
If Entry 22 is to be construed as involving taxes to be imposed then Entry 89 would be superfluous
Entry 41 mentions Trade and commerce with foreign countries import and export across customs frontiers 
If these expressions are to be interpreted as including duties to be levied in respect of that trade and commerce then Entry 83 which is  Duties of customs including export duties  would be wholly redundant
Entries 43 and 44 relate to incorporation regulation and winding up of corporations
Entry 85 provides separately for Corporation tax
Turning to List II Entries I to 44 form one group mentioning the subjects on which the States could legislate
Entries 45 to 63 in that List form another group and they deal with 1480 taxes
Entry 18 for example is  Land  and Entry 45 is  Land revenue 
Entry 23 is  Regulation of mines  and Entry 50 is  Taxes on mineral rights 
The above analysis and it is not exhaustive of the Entries in the Lists leads to the inference that taxation is not intended to be comprised in the main subject in which it might on an extended construction be regarded as included but is treated as a distinct matter for purposes of legislative competence
And this distinction is also manifest in the language of article 248 Cls
1 and 2 and of Entry 97 in List I of the Constitution
Construing Entry 42 in the light of the above scheme it is difficult to resist the conclusion that the power of Parliament to legislate on inter State trade and commerce under Entry 42 does not include a power to impose a tax on sales in the course of such trade and commerce
Article 286 has a direct bearing on the point now under discussion
It imposes various restrictions on the power of the State to enact laws imposing taxes on sale of goods and one of those restrictions has reference to taxes on inter State sales vide article 2862
It is implicit in this provision that it is the States that have got the power to impose a tax on such sales as there can be no question of a restriction on what does not exist
That is how article 2862 has been construed by this Court both in The United Motors case 1 and in The Bengal Immunity Company case 2
It was observed therein that under Entry 54 as under Entry 48 of the Government of India Act the power to tax sales rested with the States and that article 2862 was enacted with the object of avoiding multiple taxation of inter State sales in exercise of the power conferred by that Entry
This again strongly supports the conclusion that Entry 54 must be interpreted as including the power to tax inter State sales and Entry 42 as excluding it
In order to get over this hurdle learned counsel put forward the contention that article 2862 had reference only to laws which were in existence at the time when the Constitution came into force and that the 1  2 1481 power given to Parliament was one to continue those laws
Reference was made to the proviso to article 2862 which authorised the President to direct that the taxes which were being levied by the State before the commencement of the Constitution might be continued to be levied until March 31 1951 and it was said that the power conferred under article 2862 was of the same character and that it merely enabled Parliament to continue pre Constitution laws
Now it cannot be disputed that the language of article 2862 would in terms comprehend future legislation
Language similar to the one used in article 286 2 is also to be found in article 287 and there it clearly has reference to laws to be enacted after the Constitution
Indeed it was conceded that on the wording of article 2862 both existing and future legislation would be included
But it was contended that its operation should be limited to existing laws because as Entry 42 in List I includes tax on inter State sales any law of the State subsequent to the Constitution imposing such a tax would be incompetent
This however is petitio principii
The point for decision is whether tax on inter State sales is included within Entry 42
The inference to be drawn from the plain language of article 2862 is that it is not
It is no answer to this to say that Entry 42 includes it and that therefore the meaning of article 2862 should be cut down
We cannot accede to such a contention
To sum up 1 Entry 54 is successor to Entry 48 in the Government of India Act and it would be legitimate to construe it as including tax on interState sales unless there is anything repugnant to it in the Constitution and there is none such
2 Under the scheme of the Entries in the Lists taxation is regarded as a distinct matter and is separately set out
3 Article 2862 proceeds on the basis that it is the States that have the power to enact laws imposing tax on inter State Sales
it is a fair inference to draw from these considerations that under Entry 54 in List 11 the States are competent to enact laws imposing tax on inter State sales
We must now consider the arguments that have 1482 been put forward as supporting the opposite conclusion
It is firstly contended that the Entries in the Legislative Lists must be construed broadly and not narrowly or in a pedantic manner and that in accordance with this principle Entry 42 should be construed there being no limitation contained therein as inclusive of the power to tax sales in inter State trade and commerce
The rule of construction relied on is no doubt well established but the question is as to the application of that rule in the present case
The question here is not simpliciter whether a particular piece of legislation falls within an Entry or not
The point in dispute before us is whether between two Entries assigned to two different Legislatures the particular subject of legislation falls within the ambit of the one or the other
If Entry 42 in List I is to be construed liberally so must Entry 54 in List II be and the point is not settled by reference to article 246 Cls
1 and 3 and to the principle laid down in Union Colliery Company of British Columbia vs Bryden 1 that where there is a conflict of jurisdiction between a Central and a Provincial Legislature it is the law of the Centre that must prevail
article 246 Cls
1 and 3 have to be invoked only if there is a conflict as to the scope of two Entries in the two Lists and not otherwise
What has therefore first to be decided is whether there is any conflict between Entry 42 in List I and Entry 54 in List 11
If there is not the application of the non obstante clause in article 2461 or of the words  subject to  in article 2463 does not arise
There is another rule of construction also wellsettled that the Entries in two Legislative Lists must be construed if possible so as to avoid a conflict
In Province of Madras vs Boddu Paidanna and Sons 2 the question was as to whether the first sales by a manufacturer of goods were liable to be taxed by the Province under Entry 48 in List II or whether it was really a tax on excise which was within the exclusive competence of the Centre under Entry 45 in List 1
It was held by the Federal Court that the 1 2 1483 correct approach to the question was to see whether it was possible to effect a reconciliation between the two Entries so as to avoid a conflict and overlapping  and that in that view though excise duty might in a extended sense cover the first sales by the manufacturer in the context of entry 48 in List II it should be held not to include it and that therefore the Province had the right to tax the first sales
This view was approved by the Privy Council in GovernorGeneral in Council vs Province of Madras 1
If it is possible therefore to construe Entry 42 as not including tax on interstate sales then on the principle enunciated in Province of Madras vs Boddu Paidanna and Sons 2 and Governor General in Council vs Province of Madras 1 we should so construe it as that will avoid a conflict between the two Entries
It was also argued in support of the contention that Entry 42 in List I must be held to include the power to tax that that was the interpretation put by the American authorities on the Commerce Clause and that there was no reason why a different construction should be put on Entry 42 in list I of our Constitution
It is true that our Constitution makers bad before them the Commerce Clause and the authorities thereon but it is a mistake to suppose that they intended to bodily transplant that clause in Entry 42
We had in the Government of India Act 1935 a fullfledged Federal Constitution in force in this Country and what the Constitution makers did was to draw from other Federal Constitutions of the world adapt and modify the provisions so as to sent our conditions and fit them in our Constitution
In this new context those provisions do not necessarily mean what they meant in their old setting
The threads were no doubt taken from other Constitutions but when they were woven into the fabric of our Constitution their reach and their complexion underwent changes
Therefore valuable as the American decisions are as showing how the question is dealt with in a sister 1 1945 LR 72 IA 91
2 188 1484 Federal Constitution great care should be taken in applying them in the interpretation of our Constitution
We should not forget that it is our Constitution that we are to interpret and that interpretation must depend on the context and setting of the particular provision which has to be interpreted
Applying these principles and having regard to the features already set out we must hold that Entry 42 in List I is not to be interpreted as including taxation
The same remarks apply to the argument based upon section 92 of the Commonwealth of Australia Constitution Act and article 301 of our Constitution
We should also add that article 304 a of the Constitution cannot be interpreted as throwing any light on
the scope of article 301 with reference to the question of taxation as it merely reproduces section 297 1 b of the Government of India Act and as there was no provision therein corresponding to article 301 section 297 1b could not have implied what is now sought to be inferred from article 304 a
In the result we are of opinion that if the States had the power under Entry 54 to impose a tax on inter State sales subject only to the restriction enacted in article 286 2 then by virtue of the impugned Act such law is rendered operative and proceedings taken thereunder are valid
We have reached this conclusion on a construction of the statutory provisions bearing on the question without reference to the Sixth Amendment of the Constitution which proceeding on the view that the States had the power to tax interState sales under Entry 54 has amended the Constitu tion and has vested the power to tax interstate sales in the Centre
VI Another contention urged by the petitioners is that the levy of tax proposed to be made by the Andhra State on the sale of yarn by them to dealers in the State of Andhra is illegal because under the Madras Act and the Rules made thereunder where there are successive sales of yarn the tax can be imposed at only one point and as the Government of Madras had already imposed a tax on the sale within that State a second levy on the self same goods by the State of Andhra is unauthorised
and that therefore 1485 the threatened proceedings for assessment are incompetent
This contention is clearly untenable
When the Madras Act provides for a single levy on successive sales of yarn it can have only application to sales in the State of Madras as it would be incompetent to the Legislature of Madras to enact a law to operate in another State
But it is argued that section 53 of the Andhra State Act 1953 on its true interpretation enacts that though for political purposes Andhra is to be regarded as a separate State for the enforcement of laws as they stood on that date it should be deemed to be a part of the State of Madras
We do not agree with this interpretation
In our opinion section 53 merely provides that the laws in existence in the territories which were constituted into the State of Andhra should continue to operate as before
In fact by an Adaptation Order issued on November 12 1953 even the name of Andhra was substituted for Madrts in the Madras General Sales Tax Act
There is no substance in this contention
VII Lastly it is argued that the Essential Commodities Act enacted by Parliament in exercise of the power conferred by article 286 3 has declared that yarn is an essential commodity and that if the Madras Act is to be construed as a fresh enactment for the Andhra State by reason of sections 53 and 54 of the Andhra State Act and the Adaptation Order dated November 12 1953 then it would be bad inasmuch as the procedure prescribed in that provision had not been followed
The basis of this contention is that the Madras Act as applied to the Andhra State is a now Act for purposes of article 286 3 but that is not so
The Madras Act was in force in the territories which now form part of the Andhra State until October 1 1953 and thereafter that Act continues to be in operation by force of section 53 of the Andhra State Act
Moreover the Madras Act become operative in the new State of Andhra not under any law passed by the Legislature of the State of Andhra but under section 53 of a law enacted by Parliament and therefore article 286 3 has no application
We should add that the Essential Commodities Act LII of 1952 has itself 1486 been repealed and is no longer in operation
This contention of the petitioners also should be rejected
The petitioners sought to raise certain other contentions such as that they are not dealers in the Andhra State and that the Explanation to section 22 had no application to the sales sought to be taxed as the goods were delivered not in the State of Andhra but in Madras
But these are questions which ought properly to be raised before the assessing authorities and cannot be gone into in these proceedings
In the result the petitions fail and are rejected
The petitions have had a chequered career their fortures fluctuating with changes in the interpretation of the law and in the law itself
In the circumstances we direct the parties to bear their own costs
SARKAR J
The petitioners who are dealers in cotton yarn carrying on business in the city of Madras had sold goods to various persons in the State of Andhra
This State the respondent in these petitions demanded taxes on these sales under the provisions of the Sales Tax Act applying to its territories
The petitioners challenged the respondents right to tax the sales and filed these petitions for writs of prohibition or other suitable writs restraining the respondent from levying and collecting the tax
The Act mentioned various kinds of sales which could be taxed under it
The procedures followed by the petitioners in effecting the sales were diverse and have not yet been ascertained and it is not possible without such ascertainment to decide whether they are or are not taxable under the provisions of the Act read with other relevant laws
To avoid this difficulty it has been agreed between the parties that the only question that will be decided on these petitions is whether the respondent can tax a sale under which the pro perty in the goods sold passed outside the State of Andhra but the goods were delivered in that State for consumption there
Before proceeding to discuss this question it is necessary to refer to certain antecedent events
On January 26 1950 the Constitution of India was 1487 promulgated
It continued the laws previously in force in the territories of India subject to its provisions
Article 3722 of the Constitution provides that For the purpose of bringing the provisions of any law in force in the territory of India into accord with the provisions of this Constitution the President may by order make such adaptations and modifications of such law whether by way of repeal or amendment as may be necessary or expedient
 Article 286 of the Constitution as it stood prior to its amendment in 1956 that being what this case is concerned with contained the following provisions   article 286
1 No law of a State shall impose or authorise the imposition of a tax on the sale or purchase of goods where such sale or purchase takes place a outside the State  or b in the course of the import of the goods into or export of the goods out of the territory of India
Explanation
For the purposes of sub clause a a sale or purchase shall be deemed to have taken place in the State in which the goods have actually been delivered as a direct result of such sale or purchase for the purpose of consump tion in that State notwithstanding the fact that under the general law relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State
2 Except in so far as Parliament my by law otherwise provide no law of a State shall impose or authorise the imposition of a tax on the sale or purchase of any goods where such sale or purchase talks place in the course of inter State trade or commerce   In the year 1939 the legislature of Madras had enacted the Madras General Sales Tax Act and this was continued in force by the Constitution after its promulgation
In order to bring its provisions into accord with the Constitution the President under his power mentioned earlier passed on July 2 1952 the Adaptation of LawsFourth Amendment Order which 1488 added a new section to the Madras Act being section 22
The terms of this section are important in this case and will be set out later
The effect of the Explanation in article 2861a came up for consideration by this Court in the case of The State of Bombay vs The United Motors India Ltd 1
This Court held by its judgment pronounced by a majority on March 30 1953 that a State could tax a sale under which goods were delivered within its territories for consumption there though the property in the goods passed beyond its territories and a provision in a State statute purporting to levy such a tax did not contravene article 286
Andhra is a new State which came into existence on October 1 1953
It was created by the Andhra State Act 1953 largely out of territories previously belonging to the State of Madras
Later the new State came to be designated as the State of Andhra Pradesh but I will refer to it as the State of Andhra or simply Andhra
Section 53 of the Andhra State Act provided that the laws in force prior to the Con stitution of the State of Andhra in the territories included in it were thereafter to continue in force there
The Madras General Sales Tax Act therefor became applicable to the State of Andhra and it became go applicable with the new section 22 previously added to it
Subsequently the Madras Act as applying in the State of Andhra was to suit the latter State adapted by substituting for the name Madras the name Andhra wherever it occurred in that Act
I will hereafter call this Act the Sales Tax Act
Sometime in the year 1954 the respondent the State of Andhra issued notices to the petitioners demanding taxes under its Sales Tax Act
As I have earlier stated the petitioners challenged the right of the respondent to levy the tax and certain correspondence followed
As the respondent insisted on collecting the tax the petitioners instituted the present proceeding  in July and August 1955
While these proceedings were pending the question of the effect of article 286 again came up for consideration 1  1489 by this Court in the case of the Bengal Immunity Company Ltd vs The State of Bihar1
This Court by its judgment pronounced again by a majority on September 6 1955 held that until Parliament by law made in the exercise of powers vested in it under article 2862 otherwise provided no State could impose any tax on a sale or purchase of goods when such sale or purchase took place in the course of inter State trade or commerce and the majority decision in the State of Bombay vs The United Motors India Ltd 2 in so far as it decided to the contrary could not be accepted andfurther that the explanation in article 2861adid not confer any right on the State in which the goods were delivered under a sale to tax it notwithstanding that the property in the goods passed in another State
In view of this decision the respondent was advised that it could not oppose the petitions and on October 21 1955 it actually filed statements in these proceedings submitting that the petitions might be allowed
Before however the petitions could be heard and disposed of an Ordinance called the Sales Tax Laws Validation Ordinance 1956 was promulgated by the President on January 30 1956
This Ordinance was later on March 21 1956 replaced by the Sales Tax Laws Validation Act 1956
Both these enactments were in identical terms
The operative provision of the Validation Act is set out below
 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 interstate trade or commerce  and all such taxes levied or collected or purporting to have been levied or collected during the 1 2  1490 aforesaid period shall be deemed always to have been validly levied or collected in accordance with law
 The respondent was advised that the Validation Act had changed the situation and in view of it the petitions could no longer succeed
Thereupon the respondent on February 19 1957 filed fresh statements submitting that the petitions should be dismissed
The petitions have now come up for hearing in these circumstances
The validity of the Validation Act itself has been challenged
But I do not think it necessary to decide that question
I will assume that that Act is perfectly valid
It does not however itself levy any tax
Its only effect so far as these cases are concerned is to permit the Sales Tax Act to operate to tax sales which took place in the course of trade between Andhra and any other State between certain dates
I will not refer to these dates hereafter for what Ihave to say applies to sales between them only
As has been agreed between the parties as mentioned at the commencement of this judgment the only question that we have to decide is whether a sale under which the goods were delivered in Andhra for consumption there though property in them passed in Madras can be taxed by the respondent
Such a sale would no doubt be a sale in the course of trade between Andhra and Madras
It is said that such a sale cannot be taxed by the respondent notwithstanding the Validation Act because the Sales Tax Act does not purport to tax it
Does the Sales Tax Act then contain any provision taxing such a sale  Now the Act authorises the levy of a tax on sales as defined in it
A sale is defined in section 2h of the Act
It is not disputed however that that definition does not include a sale under which goods are delivered in Andhra for consumption there but property in them passes in Madras and no further reference to that section is therefore necessary
It is however said that the effect of the Explanation in section 22 is to make such a sale a sale within the meaning of the Act and therefore liable to be taxed under it
So I proceed to examine that section
Section 22 as it stood at the relevant time reads thus 1491 S22
Nothing contained in this Act shall 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 a i outside the State of Andhra or ii in the course of the import of the goods into the territory of India or of the export of the goods out of such territory or b except in so far as Parliament may by law otherwise provide after the 31st day of March 1951 in the course of inter State trade or commerce and the provisions of this Act shall be read and construed accordingly
Explanation
For the purposes of clause ai a sale or purchase shall be deemed to have taken place in the State in which the goods have actually been delivered as a direct result of such sale or purchase for the purpose of consumption in that State notwithstanding the fact that under the general law relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State
 Does the Explanation in this section then say that when under a sale goods are delivered in Andhra the sale shall be deemed to have taken place there though the property in the goods may have passed in another State for example Madras  It no doubt says without specifying any particular State that a sale shall be deemed to have taken place in the State in which the goods were delivered under it though the property in them has passed in another State
But it seems to me impossible from the language used to say that it contemplated a case in which the goods were delivered in Andhra though property in them passed in another State
For the sake of clarity I have left out in what I have just said the term as to consumption in the State in which the goods were delivered and no question as to such consumption is in dispute in these cases
The Explanation opens with the words  For the purposes of clause a i 
What then is that clause  189 1492 It only contains the words outside the State of Andhra
It completes the sentence part of which has preceded it
The complete sentence says Nothing in this Act shall be deemed to impose or authorise the imposition of a tax on the sale or purchase of any good where such sale or purchase takes place a i outside the State of Andhra
It then savs that no tax shall be levied under the Act on a sale which takes place outside Andhra
It is after this that the Explanation comes and starts with the words  for the purposes of clause a i
These words must therefore mean for the purpose of explaining which sale is to be regarded as having taken place outside Andhra
The Explanation then is for this purpose
I will now turn to the remaining and the substantive portion of the Explanation
That must explain when a sale is to be regarded as having taken place outside Andhra
The substantive portion of the Explanation however mentions a sale which is to be deemed to have taken place inside a State
Keeping its purpose in mind it must be taken by saying that a certain sale is to be deemed inside a State to say that it is outside the State of Andhra
It follows that the Explanation does not contemplate that the State inside which a sale is to be deemed to have taken place can be the State of Andhra
That State cannot be the State of Andhra for then the Explanation would not show when a sale is to be deemed to be outside Andhra and that by its language is the only purpose for which it is enacted
Therefore the Explanation can only be read as contemplating a State other than Andhra as the State inside which a sale shall be deemed to have taken place
This is the inevitable result produced by the opening words of the Explanation understood according to their plain meaning
So the Explanation omitting portions of it for the sake of clarity can only be read in the manner shown below For the purposes of clause ai a sale or purchase shall be deemed to have taken place in the State being a State other than Andhra in which the goods have 1493 been actually delivered notwithstanding that the property in the goods has passed in the State of Andhra
I therefore find it impossible to say that the Explanation states that a sale shall be deemed to have taken place inside Andhra if under it the goods have been delivered there though the property in them passed in another State
The Explanation does not hence in my view authorise the taxation of a sale under which goods are delivered in Andhra though property in them passed in Madras
The view that I have taken of the purpose of the Explanation in section 22 was taken of the purpose of the Explanation in article 2861a in the Bengal Immunity Company case 1
It was said at p 646 of the report  Here the avowed purpose of the Explanation is to explain what an outside sale referred to in sub clause a is 
The language of the Explanations and the setting of each in its respective provision are identical
That language must therefore have the same meaning
It is said that the consideration that prevailed with the Court in the Bengal Immunity Company case 1 in dealing with article 286 cannot apply in dealing with section 22 for the latter is a provision in a taxing statute which the former is not
But I do not see that this comment even if justified would lead to a different meaning being put on words used when they occur in a taxing statute from that when they occur in a statute which does not purport to levy a tax
As a matter of language only words must have the same meaning
The words for the purpose of clause ai must therefore have tile same meaning in the Explanation in article 2861a as in the Explanation in section 22
1 am unable to distinguish the present case from the Bengal Immunity Company case 1 for the purpose of determining the meaning of the words used
It is then said that the Explanation in i 22 has two facets that when it talks of a sale inside one State it at the same time necessarily talks of a sale outside all other States
Therefore it is said that when under a 1 1494 sale goods are delivered in Andhra but property in them passes outside Andhra the Explanation at the same time makes such a sale inside Andhra and outside all other States
I do not follow this
Why should the Explanation in this Andhra Act be concerned with saying when a sale shall be deemed to have taken place outside all other States  Andhra cannot of course legislate for any other State
Nor is there anything in this Act which makes it necessary for the purposes of it to say when a sale shall be deemed to be outside all other States
It follows therefore that a construction cannot be put on the language used in tile Explanation which produces the result of showing a sale to be inside Andhra and so outside all other States
Further as I have earlier pointed out the words  For the purposes of clause ai with which the Explanation starts show conclusively that it is necessarily confined to a sale under which goods are delivered in a State other than Andhra and the property in the goods passes in Andhra
It is no objection to this reading of the Explanation to say that the Andhra Act would then be saying when a sale is to be deemed to have taken place inside another State and it has no power to do so as it can legislate only for itself and for no other State
Such an objection would be pointless because Andhra by saying that a sale shall be deemed to have taken place inside another State is only legislating for itself and only saying that such a sale is therefore an outside sale so far as it is concerned and cannot be taxed in view of section 22a of its Act
It may be that it is possible in construing the Explanation in article 2861a to conceive of two facets because that dealt with all States or any two States at a time and for all these the Constitution was fully competent to lay down the law
That however is not possible when construing a law passed by a State legislature
Such law cannot regulate the laws of other States
And in this case the conception is further impossible because the language shows that the Explanation is for explaining when a sale is to be deemed to have taken place outside the State of Andhra
It is not meant to 1495 explain when it is deemed to have taken place outside any State whatsoever that State may be
I am therefore unable to see that the Explanation has any facet showing what would be a sale inside Andhra
The conclusion that I reach is that the Sales Tax Act with which these cases are concerned does not authorise he taxing of a sale under which goods are delivered in Andhra but the property in them passes in Madras
In this view of the matter I do not think it necessary to discuss the various other grounds on which the respondent s right to tax these sales was also challenged
In the result I would allow these petitions
BY COURT In view of the opinion of the majority the petitions an dismissed
The parties are to bear their own costs
Petitions dismissed


Summary:
Civil Appeal No 563 of 1975 filed in the Court was directed against the Judgment of the High Court in an Income tax Reference
The respondent assessee was a registered co operative Society carrying on business of manufacture and sale of sugar
The respondent had established a fund called Loss Equalisation and Capital Redemption Reserve Fund to which it added during the relevant accounting year a sum of Rs515863 by deduction from the price payable by the respondent to its members for the supply of sugarcane received from the members
The deductions were made under bye law 50 of the Byelaws of the society which was amended later
The Income tax Officer in assessing the respondent for the relevant assessment year held that the sum above mentioned represented a revenue receipt and was liable to be included in the taxable income of the assessee
On appeal the Assistant Commissioner affirmed the view of the Income tax Officer holding that the case had to be decided on the basis of the bye law as it stood during the relevant accounting year
The respondent assessee appealed to the Income tax Appellate Tribunal which held that the amended bye law was operative even during the relevant previous year in view of the retrospective amendment thereof and that in view of the said amended bye law 50 the deposits made by the members by way of deductions from the price as contemplated in the bye law 50 were in the nature of permanent liabilities and hence they were capital receipts and not liable to be included in the taxable income of the assessee
The Tribunal directed that the said amount of Rs 515863 be deducted 1035 from the taxable income of the assessee
At the instance of the appellant a reference was made to the High Court for the determination of the question whether the Income tax Appellate Tribunal was right in holding that the amount of Rs515863 was not a revenue receipt liable to tax
The High Court answered the question in the affirmative and in favour of the assessee
The Commissioner of Income tax moved this Court by this appeal against the decision of the High Court
The appellant contended that the amendment of the bye law 50 which was purported to be made with retrospective effect could have no retrospective effect in law
There was no delegation of power to the respondent society to make bye laws with retrospective effect
Allowing the appeal the Court  HELDThe respondent society had no authority in law to amend its bye law 50 with retrospective effect
The amendment of bye law 50 could not have any retrospective effect and the amounts deducted from the amounts payable to members for the supply of sugarcane would have to be dealt with as if they were deducted under the provisions of bye law 50 as it stood in the relevant accounting period
If the provisions of the unamended bye law were applied it was clear that the amounts deducted by the respondent from the price payable to its members on account of supply of sugarcane were deducted in the course of the trading operations of the respondent and these deductions were a part of its trading operations
The receipts by way of these deductions must be regarded as revenue receipts and were liable to be included in the taxable income of the respondent
Those receipts could not be regarded as deposits
The receipts constituted by the deductions were really trading receipts of the assessee society and were liable to be included in its taxable income
The High Court was in error and the question referred must be answered in favour of the revenue
1042A G H1044D E Civil Appeal No 564 of 1975 was filed against the judgment of the High Court in an income tax reference in which the question referred for determination was whether a sum credited during the year of account to the loss equalisation and capital redemption reserve fund by deposits received from producer members of the society under clause 50 of its bye laws was in the nature of a revenue receipt assessable to tax
Allowing the appeal the Court 1036 HELDIn view of its decision in Civil Appeal No 563 of 1975 the Court answered the question referred in the affirmative and in favour of the revenue
1045A Income tax Officer Alleppey vs MC Poonnoose and Ors   Hukam Chand etc
vs Union of India  others   Co operative Central Bank Ltd  Ors
vs Additional Industrial Tribunal Andhra Pradesh  Ors  Dr Indramani Pyarelal Gupta vs WR Nathu and others   Chowringhee Sales Bureau P Ltd vs Commissioner of Income tax West Bengal and Punjab Distilling Industries Ltd vs Commissioner of Income tax Simla  referred to