Under Section 16(1) of the Mysore Sales Tax Act the Deputy Commissioner has referred to this Court at the instance of the assesses the following questions for decision :
1. Whether the sale of the value of Rs. 5,76,73,424-7-5 during the three Quarters ending December 50 was not complete as per explanation 2 Clause (1) Sub-clause (a) of Section 2 of the Mysore Sales Tax Act which was in force in 1950-51 and which reads as follows 'Notwithstanding anything to the contrary in the Sale of Goods Act 1939 the sale or purchase of any goods shall be deemed for the purpose of this Act to have taken place in Mysore, wherever the contract of sale might have been made (a) if the goods were actually in Mysore at me time when the contract of sale or purchase in respect thereof was made' and hence whether such sales being complete in Mysore do not attract Mysore Sales Tax..
2. Whether the petitioner is not liable to Sales Tax on the said quantity of tobacco and cigarettes of the total value of Rs. 5,76,10,424-7-5 which were sold and exported outside the state of Mysore for the purposes of consumption outside the State under Clause (2) of Article 286 of the Constitution of India under the Sales Tax Continuance Order of the President issued in October, 1950 stating inter alia that the tax on the sale or purchase of goods which was being lawfully levied by the Government of any state immediately before the commencement of the Constitution of India shall until 31-3-51 continue to be levied notwithstanding that the imposition of such tax is contrary to the provisions of Clause (2) of Article 286 of the Constitution as such sales take place in the course of Inter State trade or commerce as contemplated in Clause (2) of the said article. The assessee is a company having its registered office in the Isle of Man and carrying on business of manufacturing cigarettes and other tobacco goods in Bangalore and other places in India. Part of the goods manufactured in Bangalore is sold and consumed within this State and part of these is sold and exported and consumed outside the State.
(2) There is an agreement dated 9-8-1943 regarding goods manufactured for export and for consumption outside the State between the asses-see and the Imperial Tobacco Company of India, Ltd., Calcutta. Clause 7 of the agreement states:
''The Manufacturing Company shall consign all cigarettes and tobacco manufactured pursuant to orders placed by the Brand-owning Company that is the Calcutta Company) (packed ready for the trade) in accordance with the directions of the Brand-owning Company.
The property in such cigarettes and tobacco shall pass from the Manufacturing Company to the Brand Owning Company when such cigarettes and tobacco are delivered to the carrier at the Manufacturing Company's factory for despatch to the Brand Owing Company or to such other person as the Brand Owning company may direct, etc.
Clause 10 is:
The Manufacturing Company shall invoice all goods manufactured for the Brand-owning Company to the Brand Owning company or as the Brand Owning Company may direct and the amount of each such invoice shall be taken up to the credit Of the Manufacturing Company in the books of the Brand Owning Company in Calcutta.
3. Relying on the accounts of the assessee for the transactions during the three quarters ending on 30th of June, of September and of December 1950, tax was levied on the value of goods sold in Mysore as well as of those sold to outsiders. There Is dispute only about the liability for payment of the tax with respect to sales outside Mysore. The Taxing Officers have disallowed the claim for exempting this from assessment.
In the appellate order the assessment is stated to be in accordance with the instructions of the Secretary, Finance Department, in a letter dated 38-6-1950 which expressed that 'The levy of Sales Tax in respect of transactions outside the State but within India may be continued as before.'
4. Sri Nambiyar, learned Counsel for the assessee, frankly represented that the decision in the case depends on the interpretation of the provisions of Article 286 of the Constitution of India and stressed upon the conditions to be satisfied when sales to persons outside the State were involved. Article 286 states:
(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 purpose 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 Cakes place in the course of inter-State 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 such 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.
5. It was argued that State Legislation is subjected by the said Article to a threefold restriction and the tax is leviable only if it is not of the kind or category prohibited in any of the Sub-articles. The instructions of the Financial Secretary refer only to Clause (b) of Sub-article (1). Particular emphasis was laid on the explanation to Sub-article (1) and the construction of this by the Supreme Court.
The nature and extent of what is forbidden under the Article has been a matter of controversy and divergence of opinion in cases before the Supreme Court. There is an elaborate and critical examination of this in Bengal Immunity Co Ltd. v. State of Bihar, (S) : 2SCR603 and the decision according to the view of the majority Was that
'four separate and independent restrictions are placed by Article 286 on the legislative authority of the State to make a law with respect to matters enumerated in Entry 54 of list II of 7th schedule. These several bans may overlap in some cases but in their respective scope and operation they are separate and independent.
They deal with different phases of the sale or purchase but nevertheless they are distinct and one has nothing to do with and is not dependent on the other or others. The State's legislative power with respect to a sale or purchase may be hit by one or more of these bans.'
6. In Ram Narain Sons Ltd. v. Asst. Commr. Of Sales Tax : 2SCR483 , the same View has been reiterated and it was held that the President's order referred to in the proviso to Sub-article 2 had the effect of lifting the ban under that sub-section and not the ban under Sub-article (1)(a) and the explanation thereto. The claim for exempting sales of articles exported for consumption outside the State rests on Sub-article 1 and the explanation. The grounds alleged are that the goods were not actually delivered for the purpose of consumption within Mysore.
That consumption of the goods was and was Intended to be outside the state is undisputed. As regards delivery being 'actual' there is some doubt, since the goods were not taken by any one of Bangalore company and handed over to other outside the State and no one on behalf of the Calcutta company or others outside received or got the goods in Mysore from the assessees. These were put in wagons at Bangalore for being conveyed to outside destinations and Sri D. M. Chandrasekhar on behalf of the learned Advocate-General contended that this is sufficient to constitute 'actual delivery' to the outsider and cited A. M. Mohammed Isok v. State of Madras : AIR1955Mad502 as supporting this.
The assesses in that case was a licensed dealer carrying on business in Pollachi. The goods were sent by rail on instructions by the buyers to Emakulam and were consumed there. The contract between the parties was that the goods had to be delivered at Pollachi station and the buyer was mentioned in the contract as Messrs. Tata Oil Mills, Ltd., Coimbatore. It was held
'in these circumstances and on the terms of the contract the delivery of goods at Pollachi station was delivery to the purchaser and if the goods Were transported from Pollachi to Emakulam it was really by or on behalf of a buyer who had taken delivery of the goods that the journey was performed.'
The explanation to Article 286(1) was therefore considered, not to help the dealer in Pollaeni to claim exemption from liability with respect to transactions under which goods were sent to Ernakulam.
7. : 2SCR603 . Venkatarama Iyer J. observes :
'The fact is that while for some purposes delivery to the common carrier is treated as delivery to the purchaser there is delivery in fact and to its popular sense only when the purchaser obtains, possession of the goods and it is this that is connoted by the words 'actual delivery',....... It must accordingly be held that the expression 'actual delivery' in the explanation to Article 286(1)(a) means delivery of the goods to the purchaser or his agent and delivery to the common carrier is not actual delivery.'
The goods sold by the assessee to persons outside the State cannot therefore be considered to have been actually delivered to them within the State of Mysore and are exempt from being taxed.
8. The liability for taxation cannot be decided solely by answering the questions formulated as only the provision of the Sales Tax Act is referred to in one and Sub-article (2) of Article 286 is referred to in the other. . The Supreme Court has laid down that the validity of the imposition depends on its not being hit by any of the four conditions mentioned in Article 286 and that these are independent of one another.
In our opinion the ban under the first clause read with the Explanation applies to the case and so the assessees are not liable to pay sales tax with respect to goods sold and exported outside the State of Mysore and that the continuance order of the president under Sub-clause (2) will not lift the ban placed by Clause (1). The answers to the questions are therefore in the negative.
9. As the conclusion arrived at is due to the decision of the Supreme Court subsequent to the reference, we direct parties to bear their own costs.
10. Questions answered in the negative.