1. This is a reference tinder Section 44(1) of the Madhya Pradesh General Sales Tax Act, 1958, at the instance of the Commissioner of Sales Tax. The questions, which have been posed for our decision, are :
'1. Whether Article 286(1)(a) of the Constitution was applicable to the State of Vindhya Pradesh during the assessment period ?
2. Whether in the facts and circumstances of the case, the sales of Rs. 31,059-12-0 were liable to tax under the V. P. Sales Tax Ordinance No. II of 1949 ?
3. Whether in the facts and circumstances of the case the despatches of goods worth Rs. 4,01,255-4-0 to customers outside the State were liable to tax under the V. P. Sales Tax Ordinance No. II of 1949?'
2. The material facts are that in respect of the period of assessment from 1st April 1950 to 30th June 1950 the assessee-firm, which carries on the business of manufacture and sale of bidis with its head-office atMaihar, claimed that it was not liable to tax in respect of the sales of bidis of the value of Rs. 31,059-12-0 inasmuch as the bidis sold were delivered outside the former Vindhya Pradesh State for consumption; that the transactions of despatches of bidis of the value of Rs. 4,01.255-4-0 from its head-office at Maihar to its various branches in Uttar Pradesh were not sale transactions but merely transfer of goods from the head-office to its brandies; and that, therefore, it could not be assessed to sales tax in respect of those transactions. The Assistant Commissioner of Sales-tax, Rewa, rejected the first claim of the asses-see. He, however, accepted the latter claim and accordingly excluded the amount of Rs. 4,01,255-4-0 from the taxable turnover of the assessee. The Assistant Commissioner of Sales-tax did not, however, make any order for refund of sales-tax paid by the assessee on the amount of Rs. 4,01,255-4-0. The assessee then preferred an appeal before the Deputy Commissioner of Sales-tax, Jabalpur. The Deputy Commissioner rejected the appeal holding that the former State of Vindhya Pradesh was a Part-C State; that Article 286 of the Constitution was not applicable to that State; that under the Vindhya Pradesh Sales Tax Ordinance No. 11 of 1949 sales-tax on goods, delivered at a place outside the State of Vindhya Pradesh as a direct result of sale for purposes of consumption in that State, could validly be assessed; and that the transactions of despatches of bidis of the value of Rs. 4,01,255-4-0 from the assessee-firm's head-office at Maihar to places outside Vindhya Pradesh were not mere transfer of goods from head-office to the branches of the assessee-firm but were sale transactions assessable to tax under the Ordinance.
3. The assessee then preferred an appeal (No. 33 of 1961) before the Sales Tax Tribunal, namely, the Board of Revenue, against the decision of the Deputy Commissioner of Sales Tax. Relying on a decision of the Judicial Commissioner's Court of the former State of Vindhya Pradesh in Firm Matadin Vishwanath v. V. P. Govt., (1951) 2 STC 16 : (AIR 1951 Vin Pra 8) the Tribunal held that Article 286 of the Constitution was applicable to Part-C States and accordingly the sales tax authorities were not justified in assessing sales tax on bidis of the value of Rs. 31,059-12-0 sold and exported outside Vindhya Pradesh for purposes of consumption in outside places. On the question whether the despatches of bidis of the value of Rs. 4,01,255-4-0 from the assessee's head-office at Maihar to certain places outside, Vindhya Pradesh were as a direct result of sale transactions or whether they were merely transfer of goods from the head-office to the assessee-firm's branches in Uttar Pradesh, the Tribunal did not express any opinion except making the general statement that transfer of goods from the head-office to branch outside Vindhya Pradesh would not amount to a sale transaction. In omitting to express opinion on this point, the Tribunal was undoubtedly influenced by the view it expressed that Article 286 was applicable to Vindhya Pradesh and that even if the despatches of bidis of the value of Rs. 4,01,255-4-0 from the head-office to places cut side the State of Vindhya Pradesh amounted to sale transactions, still no sales tax could be validly levied on those transactions under the Ordinance. Accordingly, on 2nd January 1962 the Tribunal allowed the appeal preferred by the assessee. It is on this order of the Tribunal that the questions stated earlier have been referred to us for decision.
4. It is obvious from what has been stated above that the main question that requires an answer in thisreference is the one relating to the applicability of Article 286(1)(a) of the Constitution to the former State of Vindhya Pradesh during the material assessment period. If that question is answered in the way the Tribunal, decided then if the sale transactions referred to in questions Nos. 2 and 3 were transactions of goods actually delivered at places outside the State of Vindhya Pradesh as a direct result of sale transactions for purposes of consumption, no sales tax could be levied, on those transactions in view of the Explanation to Article 286(1), as it stood at the material time, and the second and third questions must be answered in the negative. If, on the other hand, it is held that Article 286(1)(a) of the Constitution had no applicability to the State of Vindhya Pradesh during the assessment period, then no answer can be given to the second and third questions for the simple reasons that the Sales Tax Tribunal did not at all determine whether the transactions of sale of bidis of the value of Rs. 31,059-12-0 were liable to tax under the Ordinance No. II of 1949 or under the relevant sales-tax law operative during the material period. It also did not at all decide the Question whether the despatches of bidis of the value of Rs. 4,01,255-4-0 from the assessee-firm's head-office to its branches were mere transfer of goods from the head-office to the branches or were despatches as a result of sale transactions.
5. The question of the applicability of Article 286 to a Part-C State arises under Article 264 of the Constitution, as it stood before it was amended by the Constitution (Seventh Amendment) Act, 1956. Clause (b) of that article, which is material here, was in the following terms-
'264. In this Part, unless the context otherwise requires--
(b) 'State' does not include a State specified in Part C of the First Schedule;
The words 'In this Part' refer to Part-XII of the Constitution in which is included Article 286. It was argued by the learned Government Advocate, appearing for the Commissioner of Sales-tax, that in construing Article 286 effect must be given to the direction contained in Article 264(b) unless it could be shown that the context of Article 286 made it necessary that the word 'State' as used therein included a Part-C State; that there was nothing in the context of Article 286 to justify a departure from the meaning given to the word by Clause (b) of Article 264; and that for giving due effect to Article 286 it was not essential to read the word 'State' used therein as including a Part-C State.
In reply, Shri Dharmadhikari, learned counsel for the assessee, submitted that when the Constitution came into force, Vindhya Pradesh was not a. Part-C State but was a State specified in Part-B of the First Schedule; that the meaning given to 'State' by Clause (b) of Article 264 could not be applied in the construction of Article 286 as that would have defeated the very object and purpose of Article 286, namely, preventing multiple taxes on one and the same transaction of sale and purchase calculated to hamper and discourage free flow of trade within India regarded as one economic unit; and that having regard to this object of Article 286, the word 'State' as used in that article must be read as including a Part-C State. Learned counsel for the assessee relied on the following observations of Lord Simonds in Att. Gen. v. Prince Ernest Augustus of Hanover, 1957 AC 436 at p. 461 for the meaning of the word 'context', and said that the word should be construed liberally. In the case just referred to, Lord Simonds said--
'I conceive it to be my right and duty to examine every word of a statute in its context, and I use the word 'context' in its widest sense.............. as including not only the enacting provisions of the same statute, but its preamble, the existing state of the law, other statutes in pari materia, and the mischief which I can, by those and other legitimate means, discern the statute was intended to remedy.'
Shri Dharmadhikari also referred us to the Explanation to Section 2 of the Sales Tax Laws Validation Act, 1956, as pointing to the fact that the expression 'Law of 3 State' in Article 286 also meant any law made by the legislature of a Part-C State as also a law extended to 3 Part-C State by a notification issued under Section 2 of the Part-C States (Laws) Act, 1950.
6. Before dealing with the question of the effect of Article 264(b) on the construction of Article 286, it would be convenient to dispose of the contention of the learned counsel for the assessee that at the time of the commencement of the Constitution, Vindhya Pradesh was a State specified in Part-B of the First Schedule. When the Constitution was passed by the Constituent Assembly, Vindhya Pradesh was no doubt included in the list of Part-3 States. But just before the commencement of the Constitution, the Governor-General of the Dominion of India, in the exercise of his powers under Article 392(3) of the Constitution, promulgated on 25th January 1950 the Constitution (Amendment of the First and Fourth Schedules) Order, 1950, by which the State of Vindhya Pradesh was transferred from the category of Part-B States to Part-C States. Thus when the 'Constitution came into force, Vindhya Pradesh was a Part-C State.
7. In the present case, the construction of the interpretation Clause (b) of Article 264 does not present any difficulty. Its language is clear and unambiguous. The meaning given by Clause (b) to the word 'State' is of a restrictive nature, and in Part-XII of the Constitution, which includes Article 286, the word 'State' has to be read as not including a State specified in Part-C of the first Schedule unless, as the opening words of Article 264 say, 'the context otherwise requires'. This is a well settled rule with regard to the applicability of an interpretation clause in a statute. The Privy Council has said in Immigration Board v. Govindasamy, AIR 1920 PC 114 that--
'................. .when the interpretation clause in a statute says that such and such an expression shall include so and so, a Court in construing a statute is bound to give effect to the direction unless it can be shown that the context of the particular passage where the expression is used shows clearly that the meaning is not in this place to be given effect to, or unless there can be alleged some general reasons of weight why the interpretation clause is to be denied its application.'
The Privy Council made the above observations while considering the effect of the definition of the word 'Indian immigrant' given in Section 118 of the Indian Immigration Act of Natal, 1891, which did not contain words like 'unless the context otherwise requires' or 'unless there is anything repugnant in the subject or context.' In Knightsbridge Estates Trust Ltd. v. Byrne, 1940 AC 613,the Lord Chancellor observed that if an interpretation or definition clause in a statute does not contain the qualifying words 'unless the context otherwise requires', little weight is to be attributed to such an omission and
'some such words are to be implied in all statutes where the expressions which are interpreted by a definition clause are used in a number of sections with meanings sometimes of a wide and sometimes of an obviously limited character'.
Here, however, Article 264(b), by using the words 'unless the context otherwise requires', specifically provided that the word 'State' in Part-XII of the Constitution shall be read as not including a Part-C State, unless the context required, that is to say, made it necessary, that the word shall be read 'otherwise' than as pointed out in Clause (b). The words 'unless the context otherwise requires' used in Clause (b) of Article 264 clearly show that the interpretation clause cannot be applied for determining the meaning of the word 'State' used in any article contained in Part XII of the Constitution if there are indications in the context of the article in which the word occurs expanding the meaning of the word beyond that given by the interpretation clause.
8. The word 'requires' in the expression 'unless the context otherwise requires' no doubt connotes that the context must compel the reading of the word 'State' in a different sense than what is borne out by the interpretation Clause (b), The word 'context' is not confined to the context of a particular article in which the word 'State' occurs, but means the context of whole of the Constitution and what precedes or follows the article in which the word 'State' has been used as throwing light on its meaning (see, in re Evans Ex parte Evans, (1891), 1 QB 143). When the meaning of a word or a term has to be determined in the context of a section of an Act, one cannot simply take the language in vacuo, so to speak, of the section in which the term of the word occurs. The true meaning of that word or term has to be determined like the meaning of all other words used in the section in the context relating to the subject-matter dealt with by the section. In this connection it would be pertinent to refer to the observations of Lord Greene, M. R. in Re Bidie, 1948-2 All ER 995. The Master of the Rolls said (at p. 998) that--
'Few words in the English language have a natural or ordinary meaning in the sense that they must be so read that their meaning is entirely independent of their context. The method of construing statutes that I prefer is not to take particular words and attribute to them a sort of prima facie meaning which you may have to displace or modify. It is to read the statute as a whole and ask oneself the question: 'in this state, in this context, relating to this subject-matter, what is the true meaning of that word?''
A reference may also be made to the following statement in paragraph-208 of 'Statutory Construction' by Crawford about the applicability of an interpretation clause inserted in a statute--
'In the event that the definition found in the interpretation clause is at variance with the intention of the law makers as expressed in the plain language of the statute, that intention must prevail over the legislative definition. In other words, the intent of the legislature must control the legislative definition. But the interpretation clause and the statute proper must all be construed together as a part of the same statute. Where this is done, if the definition laid down by the legislature does not conflict with the intent of the legislature, then the former may be given effect. If the two can be harmonized, there can be no objection to allowing the interpretation clause to control the language defined. To give the interpretation clause precedence where the two cannot be harmonized, would operate to make the ancillary portion of the statute superior to the primary portion. The statute's meaning would in all probability be distorted, and the legislative intent defeated.'
The effect of the qualification of repugnance to context contained in a definition clause has been pointed out by Supreme Court in V. F. and G. Insurance Co. v. Fraser and Ross, AIR 1960 SC 971 thus--
'.......... .. .all definitions in statutes generally begin with the qualifying words similar to the words used in the present case, namely, unless there is anything repugnant in the subject or context. Therefore in finding out the meaning of the word 'insurer' in various sections of the Act, the meaning to be ordinarily given to it is that given in the definition clause. But this is not inflexible and there may be sections in the Act where the meaning may have to be departed from on account of the subject or context in which the word has been used and that will be giving effect to the opening sentence in the definition section, namely, unless there is anything repugnant in the subject or context. In view of this qualification, the court has not only to look at the words but also to look at the context, the collocation and the object of such words relating to such matter and interpret the meaning intended to be conveyed by the use of the words under the circumstances.'
9. It is thus plain from the principles stated above that in determining the question whether the context requires that the word 'State', used in Article 286 before it was amended in 1955, should be read 'otherwise' than as indicated in Article 264(b), the subject-matter of Article 264 and its object cannot be ignored. Now, it is true that in the language itself of Article 286, as it was at the material time, there were no words or expressions ruling out expressly or impliedly the applicability of the interpretation clause, that is, Article 264(b). But the context of its subject-matter and its object afforded compelling and sufficient reason for departing from the restricted meaning given to the word 'State' by Clause (b) of Article 264.
Article 286 was analysed in Bengal Immunity Co. Ltd. v. State of Bihar, (1955) 2 SCR 603 : ((S) AIR 1955 SC 661) and it was pointed out in that case that as the imposition of multiple taxes on one and the same transaction of sale and purchase was calculated to hamper and discourage free flow of trade in India, regarded as one economic unit, and foreign trade, the Constitution makers by Article 286 clamped on the legislative power of State Legislatures several fetters, namely, that no law of a State could impose or authorise the imposition of a tax on the sale or purchase of goods where such sale or purchase took place (a) outside the State, or (b) in the course of the import or export, (c) except in so far as Parliament otherwise provided, in the course of inter-Stats trade or commerce, and that no law made by a legislature of a State imposing or authorising imposition' of a tax on the sale or purchase of any goods declared by Parliament by law to be essential for the life of the community shall have effect unless it had been reserved for the consideration of the President and had received hisassent. If the framers of the Constitution thought it necessary to put these restrictions on the legislative powers of the State for preventing impediment and discouragement in the free flow of trade within India, regarded as one economic unit, for the free flow of foreign trade and for preventing commodities essential for the life of the community throughout India from being subjected to sales-tax, then clearly there is no ground whatsoever to differentiate a Part-C State from a Part-A or Part-B State in the matter of restrictions put by Article 286 on the- legislative power of the States.
It is easy to see that if the word 'State' as used in Article 286 had been read in the sense given to it by Article 264(b), then the very object of Article 286 of putting restrictions on the legislative powers of the States would have been defeated to a great extent if not wholly. In that event, the Explanation to Article 286(1) would have been ineffective leaving many loopholes, and the principle that commodities declared as essential for the life of the community throughout India should not be subjected to sales tax would have been difficult of implementation. Article 286, as it was worded, clearly contemplated that the restrictions put by it on the legislative power were in regard to all States and not to any one State entirely independent of the other, and a commodity declared by Parliament by law to be essential for the life of the community was essential for the life of the community throughout India and not for that of any particular State only.
10. In our judgment, in the context relating to the subject-matter of Article 286, the word 'State' used therein must be read 'otherwise than' as limited by Article 264(b) of the Constitution. This conclusion is reinforced by the fact that Section 2 of the Sales Tax Laws Validation Act, 1956, by which State laws imposing or authorising the imposition of tax on sale or purchase of goods in the course of inter-State trade or commerce were validated, contains an Explanation saying that in Section 2 'law of a State' in relation to a Part-C State means any law made by the Legislative Assembly, if any, of that State or extended to that State by a notification issued under Section 2 of the Part-C States (Laws) Act, 1950. The Explanation inserted in the Validation Act, 1956, was no doubt for the purpose of emphasizing that 'law of a State' meant not only a law made by the Legislative Assembly, if any, of a Part-C State, but that the term also included a law extended to that State under the Part-C States (Laws) Act, 1950. It cannot clearly control the construction of Article 286 or affect the operation of Article 264(b). But the point to be noted is that if on the application of Article 264(b) to Article 286 the latter article had no effect at all in Part-C States, then it was wholly unnecessary for Parliament to insert the Explanation to Section 2 of the Validation Act of 1956 and thus provide for the validation of Part-C States' laws imposing or authorising the imposition of a tax on sale or purchase of goods in the course of inter-State trade or commerce.
Learned Government Advocate suggested that the Explanation had been inserted by way of abundant caution and could not, therefore, be taken as indicating that Article 286 applied to Part-C States. The Explanation might have been inserted by way of abundant caution to explain the scope of Section 2. But that does not alter the fact that Section 2 of the Validation Act, 1956, validated the laws of Part-C States also and that could be only on the basis that Parliament thought that Article 286 applied to Part-C States also.
11. Learned Government Advocate suggested that as Parliament had power under Article 246(4) to make laws for Part-C States and that it could do so even after a legislature was established in a Part-C State under Article 240, and as Article 286 did not put any limitation upon the power of Parliament, therefore, it was not thought necessary to put any restriction on the powers exercised by a Part-C State's legislature by using the word 'State' in Article 286 as including a Part-C State. We are unable to accede to this contention. Merely from the fact that Parliament possessed legislative power over Part-C States and that Article 286 did not impose any limitation on the legislative power of Parliament, it does not follow that the power of a Part-C State's legislature should be held to be untrammelled. In fact, the power of Part-C State legislatures was specifically defined by Section 21 of the Government of Part-C States Act, 1951, and was, subject to the provisions of that Act, limited to the making of laws for the whole or any part of the State in respect of any of the matters enumerated in the State-list or the Concurrent-List.
12. For the foregoing reasons, our conclusion is that Article 286 applied to Part-C States. The first question is, therefore, answered in the affirmative. On this answer, the second question, which relates to the assessment sales-tax on bidis of the value of Rs. 31059-12-0 delivered at places outside the former State of Vindhya Pradesh as a direct result of sale transactions for the purpose of consumption in those places must be answered in the negative. The third question must also be answered in the negative whether the despatches of bidis of the value of Rs. 4,01,255-4-0 are regarded as merely transfer of goods from the assessee-firm's head-office at Maihar to its branches outside Vindhya Pradesh or whether they constituted sales falling under the Explanation to Article 286(1).
13. The assessee shall have costs of this reference. Counsel's fee is fixed at Rs. 150/-.