(1) The appellant is the Burmah Shell Oil Storage and Distributing Co. of India Ltd. It carries on business by selling petrol and petroleum products wholesale and retail. It has depots at Ernakulam in the Kerala State and it supplies petrol and petroleum products to purchasers in the Madras State and, in many instances the deliveries are effected from and out of stock held by it at Ernakulam. It is from this storage point that supplies and deliveries are made in fulfilment of the contracts of sale entered into by the appellant with the purchasers inside the Madras State. It is not in dispute that after the deliveries were effected to such purchasers at Ernakulam to the Madras State by the railway. The purchasers take the railway receipts in their own names, clear the goods and obtain delivery from the common carrier at Madras. Such sales, during the years 1953-54 to 1055-56 up to 5-9-1955 were not included in the return submitted by the appellant, for taxation under the Madras Sales of Motor Spirit Taxation Act, 1939. The appellant contended that these sales were not taxable but the Commercial Tax Officer assessed the sales to tax. An appeal was preferred against the imposition of the tax but that failed. The further revision to he Board of Revenue was also dismissed. Thereafter, the appellant filed the writ petition in this court challenging the levy of the tax.
(2) Jagadisan J., who heard the writ petition, accepted the following as the course of the transactions as found by the Board of Revenue and conceded to be correct by both sides:
"Now the transactions of the revision petitioner took place in the years 1953 to 1955 (up to 5-9-1955) the firm had its head office at Madras; it accounts were made at Madras; the buyers were in Madras; they entered into contracts of sale within this State; they made payments at Madras; the goods were delivered to the buyers within this State for consumption in this State, though the property in the goods, passed to the buyers at places outside this State".
The contention of the appellant before the learned Judge was that there was no sale inside the State of Madras, as the property in the goods passed outside the State and that the transaction was really inter-State and fell within the prohibition of Art. 286(2) of the Constitution, as it then stood. The learned Judge, however, thought that though the expression "sale" was not defined in the relevant enactment one has necessarily to apply the definition occurring in the Sale of Goods Act and held that of the several elements which to make up a sale, such as (1) the contract of sale, (2) the payment of the price, (3) delivery of the subject matter of the sale and (4) passing of property, the State has jurisdiction of tax a sale, if even one of the incidents of the sale takes place inside the State. He observed:
"It seems to me that though it is essential that there must have occurred a sale before it is exigible tax under the Act, it is immaterial to ascertain whether the passing of the property under that sale was inside or outside the State". He also thought that "the major activities of the sale had undoubtedly occurred within the taxing State". He rested his conclusion upon the popular concept of sale indicated in the decision of this court in Poppatlal Shah v. State of Madras . Though he was aware that this
decision had been reversed by the Supreme Court in Poppatlal Shah v. State of Madras, the learned Judge thought that
the view taken by the Supreme Court was rested on the explanation to S. 2(h) of the Madras General Sales Tax Act and that but for that explanation, the observations of the Supreme Court did not express any dissent form those of Venkatarama Aiyar J., in the decision of the Madras High Court referred to. The learned Judge in fact expressed himself thus:
"On the other hand, it seems tome that one Supreme Court gave its imprimatur to those observations".
After dealing with the arguments, centering round Art. 286(2) of the Constitution he expressed no final opinion on the question whether the transactions were of inter-State character. In effect, he held that notwithstanding the property in the goods passed outside the State, the State could bring those transactions to tax and dismissed the writ petition. Hence this appeal.
(3) At the outset, we may emphasise that, the sales in the present case have been brought to tax not under the Madras General Sales Tax Act, but under a special enactment, the Madras Sales of Motor Sprit and Taxation Act, 1939. This was intended to provide for the levy of tax on retail sales of motor spirit in the Province of Madras. Retail sale is defined herein as a sale of motor spirit by a retail dealer, for the purpose of consumption by the person by whom or on whose behalf it is or may be purchased and a retail dealer is defined as any person who sells or keeps for sale motor spirit for the purpose of consumption by the person by whom or on whose behalf it is or may be purchased. Apart form these two expressions, there is no definition of a "sale" and it is not disputed by the learned Additional Government Pleader, who appears for the State of Madras, the respondent, that, in such a case, we have to be guided by the definition of sale, as fund in the Indian Sale of Goods Act. What is however argued on behalf of the respondent is that since the retail sale is defined as a sale for the purpose of consumption and since that consumption took place in the Madras State, the goods having been brought into the State after purchase at Ernakulam, the sale is in fact located in the State of Madras and the tax is accordingly exigible on these transactions. Now the charging section is S. 3(1), which provides for the levy of a tax.
"on all retail sales of motor spirit effected after the commencement of this Act............................. and such tax shall be payable by the person effecting the sale".
Thus, the definition of "retail sale" which means a sale by a retail dealer for the purpose of consumption by the purchaser leads us to the position that the place of consumption becomes important in the context of the levy of tax. That in short is the term of argument of the department.
(4) Mr. V. Thyagarajan, learned counsel for the appellant, points out that the reliance on as rendered by this court is
wholly erroneous and that in fact the Supreme Court has laid it down in unambiguous terms that the levy of a tax cannot be justified on any popular notions of a sale. According to learned counsel, the admitted position here is that the sales were effected at Ernakulam outside the State and that the purchaser having taken delivery of the goods in consequence of a completed sale transaction outside the State, the fact that he has subsequently brought the goods into the State of Madras will not confer any power on the State of Madras to tax the sale transaction. What is taxable under the Act is the retail sale for the purpose of conception. That these sales are of that character is not denied. No provision of the Act justifies the levy of a tax on the sites of the consumption. The real import of the definition of retail dealer and retail sale in the Act is only to bring only a articulator category of sales to tax, that is to say, only those sales which are for the purpose of consumption by the purchaser can be brought to sale. It is the sale that is taxed and if the passing of property took place at Ernakulam, the taxable incident began and ended there and it was not any other incident of sale which the relevant enactment purported to fix as the taxable point.
(5) It seems to us that these contentions are sound. It is unnecessary to cite any particular passage from the judgment of the Supreme Court. It would suffice to observe that in so far as the expression "sale" is not defined in any particular manner by the Madras Sales of Motor Spirit Taxation Act, the expression "sale" has to be construed only in the light of the Indian Sale of Goods Act or the legal connotation of that expression as understood. The popular concept has no place in a taxing enactment. It is commonplace that a tax cannot be levied except in accordance with the law and that fundamental principle should suffice to dispose of the contention that the popular concept of a sale can be relied upon to levy a tax.
(6) Under the Sale of Goods Act, it is beyond dispute that it is the passing of property that marks a sale and it dies not also appear to be in dispute that that incident of the sale did take place at Ernakulam.
(7) Learned Additional Government Pleader sought to claim that since the goods were transported to he State of Madras, the delivery in pursuance of the sale must be deemed to have taken place in the State of Madras, and that event could justify the imposition of the tax. As we have pointed out, the enactment does not fix this incident of a sale transaction as a taxable event. In the light of the definition as it stands, it is only the passing of property that can form the taxable event. Even otherwise, it is clear from the facts, as admitted by both sides, that there was an effective delivery to the purchaser at Ernakulam and thereafter the goods were transported to Madras as the property of the purchaser. That he took delivery of the goods from the common carrier at Madras does not make the delivery a component part of the sale transaction.
(8) It seems to us unnecessary to examine the incident in the light of Art. 286(2) of the Constitution. In the facts, as fund and admitted, there was no inter-state element at all. The sale was completed at Ernakulam and the subsequent transmission of the goods, is, as we have pointed out, not a part of the sale transaction.
(9) The Department seems to have been confused between the exigibility to tax of a sale transaction under the Madras General Sales Tax Act and of one under the Madras Sales of Motor Sprit Taxation Act. In the former Act, the expression "sale" has been define very differently and in a more comprehensive manner than it appears in the latter Act, and it is this feature that has induced the Department to overlook the differences in the principles of taxation under the two enactment.
(10) It follows that the appeal has to be allowed; the judgment of the learned Judge has to be set aside. The appellant will be entitled to his costs; counsel's fee Rs. 150.
(11) Appeal allowed.