Case: East India Tobacco Co Vs. State Of Andhra Pradesh

treatment of the respective coals being within the power conceded by the cases to the State it as logical and legal justification and is necessarily, not unreasonable or arbitrary."8.In our judgment the differences which exist between the Virginia and Natu country tobacco, as found by the learned Judges, are materials on which the State could treat Virginia tobacco as forming a class by itself for purpose of taxation, and the impugned legislation must be held to be not obnoxious to Art. 14 of the Constitution.9. (2) It is next argued that the Amendment Act is ultra vires because in reality it imposes a tax on sales in the course of export and that is hit by Art, 286(1)(b). The course of business followed by the appellants has already been set out. It may be assumed for the purpose of the present discussion that the purchases made by the appellants on which the tax is sought to be imposed were made for the purpose of executing specific orders which they had received from their foreign customers. The question is whether even so the sales in question took place in the course of export for the purpose of Art. 286(1)(b). In support of their contention that they did, the appellants rely on the following observations in State of Travancore-Cochin v. Bombay Co. Ltd., Alleppey, 1952 SCR 1112 at p. 1118; (AIR 1952 SC 366 at pp. 367-368):A sale by export thus involves a series of integrated activities commencing from the agreement of sale with a foreign buyer and ending with the delivery of the goods to a common carrier for transport out of the country by land or sea. Such a sale cannot be dissociated from the export without which it cannot be effectuated, and the sale and resultant export form parts of a single transaction. Of these two integrated activities, which together constitute an export sale, whichever first occurs can well be regarded as taking place in the course of the other."10. Now the contention is that the agreement entered into with the foreign purchasers for sale of the Virginia tobacco, the purchase of the same locally by the appellants for performing the contract and their subsequent export to the foreign purchasers must all be held to form one integrated transaction of sale in the course of export.11. Now the observations quoted above were made in refutation of the contention that the expression "sale in the course of export or import" meant only a sale which takes place while the goods are actually in movement, in the course of export or import, as for example, when shipping documents are endorse and delivered when the goods are in transit. This Court held that this was too narrow an interpretation to put on the words in question and that a sale which actually occasions the export or import would fall within Art. 286(1)(b). The question whether sales which precede export are sales in the course of export within Art. 286(1)(b) arose directly for decision in State of Travancore-Cochin v. Shanmuga vilas Cashew Nut Factory, 1954 SCR 53 : (AIR 1953 SC 333 ) and it was held that they were not. Explaining, in the course of the judgment, the true scope of the observations in State of Travancore-Cochins case, 1952 SCR 1112: (AIR 1952 SC 366 ) quoted above, Patanjali Sastri, C. J. observed:-"The phrase integrated activities was used in the previous decision to denote that such a sale (i.e., a sale which occasions the export cannot be dissociated from the export without which it cannot be effectuated, and the sale and the resultant export form parts of a single transaction. It is in that sense that the two activities - the sale and the export - were said to be integrated. A purchase for the purpose of export like production or manufacture for export, is only an act preparatory to export and cannot, in our opinion, be regarded as an act done in the course of the export of the goods out of the territory of India, and more than the other two activities can be so regarded."12. We may refer to two other decisions of this Court where this question has been considered. In State of Madras v. Gurviah Naidu and Co. Ltd., (S) AIR 1956 SC 158 , the facts were that an assessee secured orders for the supply of untanned hides and skins from London purchasers and then, he purchased them locally in order to implement those orders and exported them, and the question was whether a tax on those purchases was hit by Art. 286 (l)(b). In holding that it was not, this Court observed:-"Such purchases were, it is true, for the purpose of export but such purchases did not themselves occasion the export and consequently did not fall within the exemption of Art. 286(1)(b) of the Constitution as held by this Court in (1952) SCR ll12: (AIR 1952 SC 366 ). Nor did such purchases in the State by the exporter for the purpose of export come within the ambit of Art. 286(1) (b), as held by the decision of the majority in (1954) SCR 53 : (AIR 1953 SC 333 ) "13. The point came up again for consideration before this Court in State of Mysore v. Mysore Spinning and Manufacturing Co., AIR 1958 SC l002 at p. l005 and it was held following the decision cited above that Art. 286(1)(b) could be invoked only in respect of the sale which occasions the export, and not of any sales precedent to it.14. On these authorities the law must be taken to be well settled that it is only the sale under which the export is made that is protected by Art- 286 (1) (b), and that a purchase which precedes such a sale does not fall within its purview though it is made for the purpose of, or with a view to export. The impugned legislation must accordingly be held not to contravene Art. 286 (1)(b).

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]8.In our judgment the differences which exist between the Virginia and Natu country tobacco, as found by the learned Judges, are materials on which the State could treat Virginia tobacco as forming a class by itself for purpose of taxation, and the impugned legislation must be held to be not obnoxious to Art. 14 of theit will be seen that Virginia tobacco has features which distinguish it from country tobacco, and can be treated as a class in itself. It will therefore be within the power of the State to impose a tax on the sales of Virginia tobacco while exempting the countryare unable to agree with this contention. If a state can validly pick and choose one commodity for taxation and that is not open to attack under Art. 14, the same result must follow when the State picks out one category of goods and subjects it to taxation.Now the observations quoted above were made in refutation of the contention that the expression "sale in the course of export or import" meant only a sale which takes place while the goods are actually in movement, in the course of export or import, as for example, when shipping documents are endorse and delivered when the goods are in transit.On these authorities the law must be taken to be well settled that it is only the sale under which the export is made that is protected by Art- 286 (1) (b), and that a purchase which precedes such a sale does not fall within its purview though it is made for the purpose of, or with a view to export. The impugned legislation must accordingly be held not to contravene Art. 286 (1)(b).