1. The facts of this case are shortly as follows:
2. The petitioner is the Burma Shell Oil Storage and Distributing Company of India Limited, a well-known company which produces manufactures, distributes and sells mineral oil, petroleum, etc. including aviation spirit. It carries on business inter alia in Calcutta in the distribution and sale of oil. It has a supply station at Dum-Dum Aerodrome, from which motor spirit for aviation purposes called 'aviation spirit' is supplied to aircraft, including foreign-bound aircraft. As is to be expected, most of the aircraft so supplied, proceed beyond Indian territorial limits. The Bengal Motor Spirit Sales Taxation Act, being Bengal Act V of 1951, provides for the levy of a tax on retail sales of motor spirit in Bengal. Under Section 2 of the said Act, 'Motor Spirit' has been defined to be any liquid or admixture of liquids which is ordinarily used directly or indirectly as fuel for any form of motor vehicle or stationary internal combustion engine, having a flash-point below 76 degrees Farenheit. Under Section 4(4), sale of motor spirit for the purpose of aviation had been excluded. By virtue of an amendment introduced by Section 2 of the The Bengal Motor Spirit Sales Taxation (Second Amendment) Act, (Act XXXII of 1954) the tax can now be levied in respect of motor spirit for the purposes of aviation. Under Section 2(a)(i) of the Bengal Motor Spirit Sales Taxation (Second Amendment) Act 1954, motor spirit for aviation purposes is taxable without any distinction as to whether the aircraft 13 operating within Indian territory or proceeding beyond Indian territorial limits.
3. On or about the 9th October, 1054, the petitioner company wrote a letter to the Commissioner of Commercial Taxes West Bengal, enquiring as to whether motor spirit supplied for aviation purposes to foreign-bound aircraft would be taxable under the Bengal Motor Spirit Sales Taxation Act as amended. It was urged that under Article 286(1)(b) of the Constitution, such supplies were not taxable. It was pointed out by letter dated the 23rd April 1954, written by the Collector of Sales Tax, Bombay State, to the petitioner, that sales of goods such as fuel oil and lubricating oil to foreign-bound aircraft for actual consumption during flight are exempted from Bombay sales tax, by virtue of Sub-clause (b) of Article 286(1) of the Constitution, although this exemption would not be granted if foreign-bound aircraft makes a halt at a place within the Indian territory for more than 24 hours. On or about the 9th December 1954, the Commissioner, Commercial Taxes West Bengal, informed the petitioner that all supplies of motor spirit for aviation purposes were taxable in West Bengal at the rate of three annas per gallon, under Section 2(a)(i) of the Bengal Motor Spirit Sales Taxation (Second amendment) Act, 1954, irrespective of whether the aircraft supplied are operating within Indian territory or are proceeding beyond Indian territorial limits. It was further intimated that Article 286 of the Constitution was not considered as a bar to the levy of such a tax.
4. Subsequent to the said correspondence, the petitioner company has been paying taxes under protest and from time to time demand notices were served on it for payment of such tax. On the 7th of March 1956, the petitioner demanded of the respondents that they should cancel and/or recall such notices of demand, since such taxes were not payable. As the respondents have not conceded the demand, the petitioner has made this application. A Rule was issued on the 9th March 1956 upon the respondents to show cause why an order in the nature of a writ of mandamus should not be made commanding the respondents to cancel and/or recall their letter dated the 9th December 1954 and notice dated the 2nd March 1956 in the petition mentioned, and to forbear and refrain from giving effect thereto, and from demanding or imposing any tax on the petitioner in respect of the sales of aviation spirit to foreign-bound aircraft, in the course of such aviation outside India, and of consumption outside the State of West Bengal or India, and for other reliefs.
5. Mr. Das appearing on behalf of the petitioner has taken two points, in order to establish that the respondents are not justified in law in imposing or realising any tax on the sale of aviation spirit to foreign-bound aircraft. Firstly, he says that no law of a State which imposes or authorises the imposition of such a tax is valid by virtue of Article 286(1)(a), because by virtue of the explanation to sub-paragraph (1) of Article 286, the sale of the aviation spirit should be deemed to have taken place outside the State, and as such was exempted by Article 286(1)(a). Secondly he says that no such law is valid by reason of the provisions of Article 286(1)(b), because the sales were in the course of export of goods out of the territory of India.
6. Before we deal with the actual points of law involved, it may be necessary to consider a few facts. Under Section 16 of the Indian Aircraft Act. 1934 (Act XXII of 1934) the Central Government has been given the power by notification in the Official Gazette to declare that any or all the provisions of the Sea Customs Act, 1878 shall with such modification and adaptation as may be specified, apply to the import and export of goods by air. Rules have been framed known as the 'Indian Aircraft Rules, 1920', Part IX whereof relates to Aircraft arriving in 'or departing from British India. Under Rule 63, the provisions of the Sea Customs Act have been made applicable to the import or export of goods by aircraft into or from India. Under Rule 53, the Governor-General in Council is authorised to declare any aerodrome to be a Customs aerodrome. By Notification dated 31st January 1920 as subsequently amended, the civil aerodrome at Dum-Dum, Calcutta has been declared to be a Customs aerodrome. There exists in fact a Customs barrier at the aerodrome.
7. It appears from the petition that a particular procedure has been adopted in respect of the delivery of aviation spirit to foreign-bound aircraft, at the aerodrome. The word 'foreign-bound aircraft' has been used in the petition and the Rule. I must point out, however, that it is not a fact that aviation spirit is only supplied to aircraft, all of which take off from the Dum-Dum Aerodrome and fly directly to foreign countries or foreign destinations. It is also supplied to aircraft which fly inland, as also to aircraft which touch Indian soil before proceeding to a foreign country. It seems, however, that Mr. Das has restricted his application to the case of aircraft which either proceeds straight from Dum Dum to foreign destinations or which might touch Indian soil, but are ultimately foreign-bound. The actual procedure adopted in connection with the supply of aviation spirit is as follows. Before the arrival of a foreign-bound aircraft, the Station Superintendent of the supply station at Dum Dum applies to the Air Port Customs Officer to depute an officer to supervise fuelling immediately after such aircraft lands at Dum Dum. On the landing of such an aircraft, the representatives of the supply station approach the aircraft with fuelling equipment for the supply of aviation spirit. The Captain or the Ground Engineer of the aircraft then gives instructions to such representatives about the quantities of aviation spirit required by the aircraft. Such representatives then ask the permission of the Custom Authorities, at the Air Port for supplying such aviation spirit, which permission is invariably accorded immediately. Thereafter such representatives deliver aviation spirit into the aircraft tank, in the presence of an Aircraft Custom Officer. Details of deliveries are then entered in delivery receipt forms which are signed by the representatives of the petitioner and its customer. Duty draw-back shipping bills are also drawn up indicating the quantities of aviation spirit delivered. Copies of these forms are annexed with the petition and marked 'A'. The shipping bill is headed 'shipping bill for free goods'. It is alleged in the petition that these forms are countersigned by the Customs Authorities and are sent to the petitioner's office who proceed to file claims on the Customs at Calcutta who thereupon refund the customs duty paid by the petitioner. It is clear, therefore, that so far as the Customs Authorities are concerned the aviation spirit or lubricating oils which are delivered to the aircraft for consumption are considered as exportation. In fact, the 'shipping bill' as it has been called, contains headings under which details must be given of the aircraft, its Master or Agents, the port at which goods are to be discharged, the next port of call, and the country of final destination. The whole thing is treated as if it was an uplift of goods by the aircraft in the course of export. There is nothing to show in the shipping bill that aviation spirit or lubricating oil so uplifted was meant for consumption by the aircraft itself.
8. I do not think that it is at all necessary for me in this application to consider as to whether the aviation spirit uplifted and utilised for consumption is entitled to be treated as free goods by the Customs Authorities, or whether the petitioner is rightly claiming or receiving draw-backs. All I am concerned with in this application is as to whether the State Authorities are entitled to levy tax by virtue of the provisions of the Bengal Motor Spirit Sales Taxation Act as amended. In other words, I am not considering as to whether custom duty is payable on the aviation spirit which may happen to be bodily carried over the frontiers of India. What I am concerned with is as to whether a tax under the local Act mentioned above, can be levied on such aviation spirit delivered at the Dum Dum Aerodrome, ' to aircraft which are foreign-bound. Before I proceed further, it will be just as well to visualise the situation, as it must actually happen. The aircraft arrives at the Aerodrome and its tank is either almost empty or partially full. It is then filled up and the aircraft proceeds to its next stop. It Is quite evident that if it proceeds on its scheduled flight in due course, it will sometimes fly only for a short while over Indian territory and in other instances undertake quite a considerable flight over Indian territory. Similarly, it may and does fly over the territories of the various Indian States, for varying lengths of time. It is a fact that physically speaking the oil is delivered beyond what is called the customs barrier. There can be no doubt however that the goods are sold and delivered within the territories of the State of West Bengal. Taken as sale of goods, it is but evident that the seller and the purchaser and/or its agents are both within the State at the time of the sale and delivery. The goods are delivered inside the State, and so far as the seller is concerned, it has its office inside the State where presumably it receives payment. Prima facie, there-fore, the sale and delivery of aviation spirit would be liable to tax. The question is whether the provision of law imposing such a liability is void as infringing the provisions of Article 286 of the Constitution, that is to say Article 286(1)(a) or (b).
9. The relevant provisions of the Constitution are as follows:
'286(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 genera: 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 or a State shall impose or authorise the imposition of a tax 'on the sale or purchase of any goods where such sale or purchase takes place in the course of inter-State trade or commerce.
10. The way that Mr. Das formulated his first point is as follows: He says that the explanation to Article 286(1)(a,) determines the situs of a sale, and determines whether it is inside or outside a particular State. In Order to determine the situs, the goods must have been actually delivered as a direct result of such sale for the purpose of consumption in that State. He argues that in the present case the goods have been delivered for the purpose of consumption outside the State and therefore must be considered as an outside sale, so far as the State of West Bengal is concerned. If it is an 'outside sale', then of course it cannot be made liable to tax. Elaborate arguments were advanced before me to show what was the meaning of the explanation, appended to Article 286(1)(a). It is unnecessary in my opinion to look into the various cases on this point, since the position has now been fully determined by the Supreme Court in the case of Bengal Immunity Co. Ltd. v. State of Bihar, (S) : 2SCR603 (A). In that case, some of the earlier decisions, including the decision of the State of Bombay v. United Motors (India) Ltd., : 4SCR1069 (B) have been dissented from. What had been decided in the United Motors case (B) (Supra) was that if the situs of a sale could be determined as being within a State by virtue of the explanation to Article 286(1)(a), then a local law imposing a tax would be valid, even though it might be an inter-State transaction as contemplated in paragraph (2) of Article 288. In the Bengal Immunity case (A) (Supra), this view has been departed from. It has been held that Paragraph (2) of Article 286 was not controlled by the explanation to paragraph (1)(a) of Article 286. This decision of course does not directly apply to the facts of this case, because it is nobody's case that the transactions in question are inter-State transactions. The decision, however, explains the real meaning of the 'explanation' appended to Article 286(1)(a) and this has a direct bearing on the issue raised. In order to clear the atmosphere, I think I ought to examine whether it can conceivably be called an Inter-State transaction. Das Ag. C. J. (as he then was) points out that ordinarily inter-State trade or commerce is done between the dealer in one State and the dealer in another State. The dealer in the consuming State in his turn sells the goods in retail to the actual consumer (Para 43, p. 685). It is nobody's case that any such thing has happened here. A dealer in the State of West Bengal is not selling any goods to a dealer in another State and there is no question of any goods being delivered outside the State for consumption in another State. Here everything happens inside the State. The parties are inside the State and the goods are sold and delivered inside the State. It may so happen that while the aircraft flies to its next destination over the territories of other States, it continues to consume part of the goods delivered. But this cannot bring it within the term of the explanation. It has not been delivered in any other State for consumption in that state.
11. It has been pointed out that the explanation creates a legal fiction. The learned Judge (at p. 680) states as follows:
'Whichever view is taken of the explanation it should be limited to the purpose the Constitution makers had in view when they incorporated it in Clause (1). It is quite obvious that it created a legal fiction. Legal fictions are created only for some definite purpose. Here the avowed purpose of the explanation is to explain what an outside sale referred to in Sub-clause (a) is.
The judicial decisions referred to in the dissenting judgment in State of Travancore v. Shanmugha Vilas Cashew Nut Factory, : 1SCR53 (C) and the case of East-end, Dwellers Co. Ltd. v. Finsbury Burough Council, (1952) AC 109 at p. 132 (D) clearly indicate that a legal fiction is to be limited to the purpose for which is was created and should not be extended beyond that legitimate field. It should further be remembered that the dominant, if not the sole, purpose of Article 283 is to place restrictions on the legislative powers of the States subject to certain conditions in some cases and with that end in view Article 286 imposes several bans on the taxing power of the States in relation to sales or purchases viewed from different angles and according to their different aspects. * * * The operative provision of the several parts of Article 286 namely Clause (1)(a), Clause (1)(b), Clause (2) and Clause (3) are manifestly intended to deal with different features, and therefore one cannot be projected or read into another.'
12. In other words, the explanation introduces a legal fiction to show what the words 'out-side sale' mean in Article 286(1)(a). If the provisions of the legal fiction are strictly applicable then it is an outside sale and so exempted. If one applies the fiction strictly to the facts of the present case it cannot be called an 'outside sale'. Goods have not been delivered in another State for purposes of consumption in that State. The goods have been delivered in this State. The explanation being out of the way, it is not possible to hold that it is an outside sale, because all we are left with is to apply the Sale of Goods Act or any other law which determines the incidents of the sale. The goods have been sold and delivered Inside the State of West Bengal. The property in the goods passed inside that State and as soon as delivery has been made the sale is complete. It must be taken to be a completed sale as soon as delivery has been made. I therefore, cannot see how the exemption under Article 288(1)(a) applies. In my view it does not. I may also mention that elaborate arguments have been advanced on the incidents of a non-obstante clause in a Statute, but I do not think that it is at all necessary for me to consider this.
13. Article 286(1)(a) being out of the way, the next question is as to whether Article 286(1)(b) applies. ' In fact the major part of the argument of Mr. Das has been directed upon this point.
14. Coming to Article 286(1)(b), Mr. Das argues that the goods have been sold in course of export out of the territory of India. Mr. Das firstly says that it is a direct export or alternatively it has joined the stream of export and the sale and delivery at Dum-Dum airport is one of the integrated processes whereby the export has been effected. The provisions of Article 286(1)(b) are also not easy to explain and have been the subject-matter of many decisions. Particular reference has been made to the case of State of Travancore-Cochin v. Shanmugha Vilas Cashew Nut Factory (C) (Supra). It has been held by the majority judgment in that case that:
(i) Sales and purchases which by themselves occasion the export or import of goods, as the case may be, out of or into the territory of India come within Article 286(1)(b) and are exempt from taxation:
(ii) purchases in the State by the exporter for the purpose of export, as well as sales in the State by the importer after the goods have passed the customs barrier, are not within the exemption. It was further held that the word 'course' etymologically denotes movement from one point to another and the expression 'in the course of' in Article 286(1)(b), not only implies a period of time during which the movement is in progress but postulates also a connected relation. Secondly, a sale in the course of the export out of the country should be understood in the context of Article 285(1)(b) as meaning a sale taking place not only during the activities directed to the end of exportation of the goods out of the country, but also as a part of or connected with such activities. But a purchase of goods for the purpose of export is only an act preparatory to their export and not an act done in the course of the export of the goods. For example, it was held that purchases made in the local markets of the State to implement a contract for export were not exempted under Article 286(1)(b). Das J. (as he then was) held that the last purchase by the exporter with a view to export is in the course of the export. He has pointed out that the course of export out of the territory of India does not commence until the goods cross the customs barrier.
15. Applying the principles laid down above and giving the matter my anxious consideration, I cannot see how the petitioner company can be said to be exporting aviation spirit from India to foreign countries. In order that there should be an export of goods from India, there should be a seller in India and a buyer situate in a foreign country. That however is not the position here. There is no buyer in a foreign country. The aircraft owners are purchasing oil in India and taking it for the purpose of propelling their air-crafts in their flights from India, but this does not amount to an export of the oil to a foreign country. The purchasers might, when they cross the customs barriers and have a load of aviation spirit, be said to be exporting goods under the meaning of the customs laws and may be liable to pay customs duty. In my opinion, however, the petitioner company has nothing to do with the export, in whatever sense the word, is used. The petitioner company is selling aviation spirit to its customers inside the State. As soon as it is sold and delivered its duty and interest ceases and it is not concerned with what use the customer makes of the goods. For example, the customer might not take the goods outside the State at all. For all that the petitioner is concerned, the customer can throw the aviation spirit into the Ganges the very next moment. In fact, it may so happen that the aircraft may develop engine trouble and might have to do so. The aircraft may be diverted to routes and destinations inside the State. While traversing the long route from Dum Dum to Karachi or to the next stop, the aircraft might consume the entire oil delivered, wholly within the territories of India. It is impossible to connect the petitioner company with these actions. In order that there can be an export in the real sense of the term, there must be a seller in India, a buyer outside India and goods are to be sent from India to places outside India. It is only such transactions that are protected. Once the sale is complete inside India, I do not think that the seller is concerned with, or can claim, the protection of Article 280 by virtue of what happens afterwards. Take a simple case. Suppose a motorist is travelling by road throughout the world. He might arrive at Calcutta, go to a fuelling station and fill up the tank. Surely the supplier is not concerned with what use the motorist is going to make of the oil. The motorist might utilise it within the State or might proceed to a neighbouring State or proceed to a foreign country like Eastern Pakistan. That is not the concern of the seller of the fuel. Suppose again a customer is going out of India to a cold country and goes to a shop and buys a warm blanket. He informs the shop-keeper that he intends to use it in England where he is going or in fact uses it for that purpose. Can it be said that the shopkeeper who sells the blanket was exporting the same to England? I do not think that it could be so said by any stretch of imagination.
16. From the point of view of Article 286, I do not think that it can be said at all that anyone was - exporting anything from India to a foreign country. Nobody was sending goods to another country and the aircraft company did not Issue any Bill of lading or shipping document in respect thereof. At the highest it can be said that oil was being supplied to propel a craft from one country to another. This in my view cannot be said to be an export of the oil to a foreign country.
17. Mr. Das has been able to find a somewhat ancient case Muller v. Baldwin, (1874) 9 QB 457 (E). It appears that under the Tyne Coal Dues Act, 1872, the Commissioners for the port of New-Castle-on-Tyne were empowered to levy dues on 'coals exported from the port'. It was held that in the absence of anything in the Act to the contrary, 'Exported from the port' must be taken to be used in its ordinary meaning of 'carried out of the port', and therefore included coals taken out of the port in a steamer to be consumed on board during a distant voyage. I do not think this throws any light on the question We are considering. The learned Judges agreed to the reasonableness of making a distinction between coal taken away for sale and coal taken for the necessary use of the vessel. Lush J. however said that there was nothing in the language of the particular Act to show that the word 'exported' was used in any other than its ordinary sense, namely, 'carried out of the port'. Then again, it was the Master of the steam vessel which carried the coal who was asked to pay the dues of the Commissioner. As I have said above, whether the aircraft company while carrying oil would be held liable for customs dues (or other dues) when it crosses the frontier with a load of oil is quite another matter, and I am not here concerned with such a liability. But there is nothing in the decision quoted above to show that if there was a provision for taxing sales, then the supplier of the coal to the ship would escape liability. It was not held that the supplier was exporting the coal. In the present case, all we are concerned with is the case of the supplier. In my opinion, therefore, the petitioner cannot be said to have been exporting goods out of the territory of India into another country or selling goods in course of such export. Therefore, so far as its actions are concerned, no protection can be derived from the provisions of Article 286(1)(b).
18. It is argued that the protection under Article 286 is on the goods and not on the seller or the purchaser. Even so, it is of no avail to the petitioner. As I have said above, and as has been explained in the Travancore-Cochin case (C) mentioned above, the sale of goods to, or the purchase of goods by, a party for the purpose of export is not necessarily a sale or purchase of the goods in the course of export. Such a transaction is not necessarily to be considered as entering the stream of export at that stage. Consequently there is no exemption. It is true that the Bombay Authorities have decided to grant exemption, but that is not a judicial decision and cannot affect my judgment.
19. For the reasons aforesaid, I am of the opinion that the petitioners have made out ho grounds for avoiding the tax which is sought to be levied on them and no grounds have been made for interference of this Court. The application, therefore, fails. The Rule is discharged and all interim orders are vacated. Regard being had to the complicated question of law involved there will be no order as to costs. The petitioner asks for a certificate under Article 132 of the Constitution to enable it to appeal directly to the Supreme Court. The respondents do not object.
20. I certify under Article 132 that the case involves a substantial question of law as to the interpretation of the Constitution.