Manohar Pershad, J.
1. This appeal on behalf of the State arises out of O. S. 95 of 1950 filed by Messrs. Batchu Subbarao and Co., the assesses for a declaration that the assessment of sales tax for the year 1948-49 so tax as the turn-over of Rs. 9,46.104-10-9 is concerned, was ultra vires illegal and void. The plaintiff's case was that to the extent of Rs. 8,27,504-3-3 tie turn-over related to sales of vegetable oils to purchasers outside the Province of Madras. The oils were consigned by the plaintiff 'to self' to places outside the province.
The Railway receipts in respect of these consignments were sent to banks outside the province with Hundis drawn for the price. The purchaser could become entitled to delivery of the goods after paying the hundi and taking delivery of R. Rs. The property in the goods did not therefore pass to the) buyers within the province and as such there were no sales in respect of these transactions within the province to be validly assessable to sales tax here and that explanation 2 of Section 2 (h) introduced by the Amending Act XXV of 1947 in fact altered the law embodied in the Sale of Goods Act which was an Imperial Act and that it was not within the competence of the Provincial Legislature to enact thus.
At any rate, Section 107 of the Government of India Act required the assent of the Governor-General for the Amending Act and that the Provincial Legislature having failed to obtain the assent of the Governor-General, it was void. In the result, the plaintiff stated that the assessment based on this amendment was illegal and void. The second item objected to was the turn-over of Rs. 1,18,600-7-6. This amount related to sales within the province through commission agents. The plaintiff's case was that the commission agents were assessed on this turn-over and they paid sales tax on behalf of their principal. that under the law the commission agents were merely middlemen bringing the seller and the buyer together and they were paid commission for their service, and that they were not dealers as defined by the Madras General Sales Tax Act.
It was further averred that the property in the goods never passed to these commission agents and the assessment of a turn-over of business carried on between the commission agent and the buyer was really assessment for the sales tax on the principal. The defence taken by the appellant was that the sales were completed in the province of Madras and the assessee was validly assessed. It was further contended that the local legislature was competent to enact the Act without the consent of the Governor-General and that the amendment was not repugnant to any subject in the concurrent list.
It was further averred that the amendment was not beyond the competence of the provincial legislature and that it had full powers under Section. 100, Clause 3 to pass any law relating to the subjects in the provincial list; that assessing the plaintiff for this turn-over was not in substance assessing the same turn-over in a single transaction twice over. It was contended that the commission Agents never paid sales tax on behalf of the plaintiff and that the Commission Agents were assessed as 'dealers' by themselves. It was further averred that the transaction between the plaintiff and the so-called agent was really a sale to them and the sale by the alleged agents to others was another sale and therefore the assessment was not illegal.
2. On these averments and pleadings, the trial Court framed 9 issues. After recording the evidence of the parties, the Subordinate Judge held that the property in the goods passed at places outside the State of Madras and hence the sales took place outside the Province. He further held that explanation 2 was ultra vires the Madras Legislature as it was incompetent to the provincial legislature to enact a Statute having extra-territorial operation and that it was void for want of sanction of the Governor-General as required by Section 107 of the Government of India Act. 1935. Holding so, the learned Subordinate Judge declared that the assessment of the sales tax for the year 1948-49 so far as it related to the first item was illegal and void.
As regards the second item, the learned Subordinate Judge held that they were two different sales and therefore the assessing authority was justified in assessing the assessee to that extent. In the result, he dismissed the suit to that extent. The State has now come up in appeal. This appeal is confined only to the first item viz.. tax on the turn over of Rs. 8,27,504-3-3. There is no appeal on behalf of the plaintiff to the extent of Rs. 1,18-600-7-6. amount relating to the second item.
3. It is common ground that at the tune of the transaction goods were in the Province of Madras only.
4. Sri Ramachandra Raju, learned counsel for the appellant contended that the Court below has erred in holding that explanation 2 was repugnant to the provisions of the Indian Sale of Goods Act and void for want of sanction of the Governor-General as required by Section 107 of the Government of India Act. It is next contended that the learned Subordinate Judge has also erred in holding that it was ultra vires the State Legislature to enact a Statute having extra-territorial operation.
5. In this appeal, the constitutionality of the explanation added to Section 2 (h) of the Madias General Sales Tax Act by Act XXV of 1947 is in issue. The amendment came into force on 1-1-1948. Section 2 (h) of the Act defines 'a sale' with all its grammatical variations and cognate expressions as
'every transfer of the property in goods by ona person to another in the course or trade or business for cash or for deferred payment or other valuable consideration, and includes also a transfer of pro-perty in goods involved in the execution of a works contract, but does not include a mortgage, hypothecation, charge or pledge'.
The additions to this section which are impugnedbefore us are to the following effect;
'Explanation 2 ; Notwithstanding anything tothe contrary in the Indian Sale of Goods Act, 1930.the sale or purchase of any goods shall be deemed,for the purposes of this Act, to have taken place inthis State, wherever the contract of sale or purchase might have been made--
(a) If the goods were actually in this State at the time when the contract of sale or purchase in respect thereof was made, or
(b) in case the contract was for the sale or purchase of future goods by description, then, if the goods are actually produced in this State any time after the contract of sale or purchase in respect thereof was made.'
, The validity of this explanation is attacked firstly on the ground that it is ultra vires the power of the State Legislature to enact a Statute having an extra-territorial operation and secondly that this explanation is repugnant to the provisions of the Indian Sale of Goods Act and therefore void to the extent of repugnancy for want of sanction of the Governor-General as required by Section 107 of the Government of India Act, 1935. Both these questions had come up for consideration before a Bench of the Madras High Court in the case of Louis Dreyfus and Co. Ltd., Madras v. State of Madras, : AIR1954Mad932 and a Division Bench of this Court in the case of Pari Kameswara Rao v. State of Madras, : AIR1955AP129 . IB was held in : AIR1954Mad932 (supra) by Satya-narayana Rao and Rajagopalan, JJ. that the provision in Explanation 2 to Section 2 (h) of the Sales Tax Act 1947 was not repugnant to the provisions of the Sale of Goods Act.
It was further observed that the power of legislature to enact law being derived from item 48 in the provincial legislative list No. 2, and not from item 10 of the concurrent list No. 3, and the subject matters of the two enactments being different, the question of repugnancy under Section 107 of the Government of India Act did not arise. In this case, their Lordships have followed the case of the Supreme Court in State of Bombay v. United Motors (India) Ltd., : 4SCR1069 . Meghraj v. Allahl Rakhia, AIR 1947 PC 72 and Lakhi Narayan Das v. Province of Bihar, AIR 1950 FC 59. The Division Bench of this Court referred to above following the above decisions have come to the same conclusion. We fully agree with the view expressed.
In a recent case of the Supreme Court, Tata Iron and Steel Co. Ltd. v. State of Bihar, , their Lordships while considering similar provisions of the Bihar Sales Tax Act have observed that the provisions of Section 4(1) read with Section 2(g) second proviso, were well within the legislative competency of the Province of Bihar. Section 2 (g), which defines 'a sale' is in similar terms as the corresponding Section 2 (h) in the Madras Sales Tax Act. The Explanation 2 in the Madras Sales Tax Act is also similar to the provision in the Bihar Sales Tax Act. It is therefore plain that there is no question of any repugnancy nr legislative incompetency. In view of this, the contention of the respondent that the explanation was ultra vires or was repugnant loses its force. The judgment of the lower Court therefore cannot he upheld.
6. The appeal is allowed, the judgment and decree of the lower Court is set aside to this extent and the plaintiffs suit for declaration is dismissed. The appellant would be entitled to costs throughout.
Manohar Pershad, J.
7. The office is directed to calculate the Advocate's fee only on the amount of the tax involved i.e., on Rs. 13,970-15-6.