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15. Now it seems to us that the categorical pronouncement of the Supreme Court in the Bengal Immunity case [1955] 6 S.T.C, 446 leaves no room for any doubt regarding the true meaning of Article 286. There is a very clear ban imposed by the Constitution restricting the State to impose a tax on sale or purchase of goods, where such sale or purchase takes place outside the State. Not only is the ban clear, but it is also absolute. The Explanation to Article 286(1)(a)-and there cannot be any doubt that it is only in regard to that provision as the opening words of the Explanation are "for the purposes of Sub-clause (a)"-defines a sale which should be deemed to have taken place in the taxing State. Perhaps the framers of the Constitution thought that the words in Clause (a) "outside the State" would prove to be a bone of contention between the taxing State and the subject in the absence of any clear indication as to what is meant by that expression. Obviously the idea was that, if "inside State" can be postulated, all other States would fall within the expression "outside State". "Inside State" is, according to the Explanation, the State in which the goods have actually been delivered as a direct result of a sale or purchase for the purpose of consumption in that State. The scope of Article 286(2) is no doubt general to some extent, as it provides that 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 takes place in the course of inter-State trade or commerce except in so far as Parliament may by law otherwise provide. Article 286(1)(a) read with the Explanation takes in and covers inter-State sale or purchase. The ban imposed on the State to tax sale or purchase taking place outside the taxing State is absolute and independent of the other bans in Article 286, and Article 286(2) is not capable of being interpreted as enabling the Parliament to destroy it. Once it is held that there is a ban on the State to tax sale or purchase outside the State and that the Explanation by its own force would not render even the fictional inside sale subject to taxation and that Article 286(2) governs all sales or purchases taking place in the course of inter-State trade or commerce, the only way to reconcile Article 286(1) and (2) is to hold that Parliament may lift the ban in regard to taxation of "inside sales" or what may be called "Explanation sales". Any other interpretation seems to us to be not merely inconsistent with the clear terms of the Constitution but also repugnant to the avowed principles and objects underlying the State's power to tax goods forming the subject-matter of inter-State sale or purchase. We have no doubt that the Supreme Court has laid down in unmistakable terms that there is an absolute ban in regard to tax on inter-State sales by the States where the sales are outside the taxing State. The stress laid by the Supreme Court in the Bengal Immunity case [1955] 6 S.T.C. 446, on the nature of the restrictions or bans in Article 286, their distinctness and non-interdependence, and the limitation of the States' power to tax, indicates quite clearly, if we may say so with respect, that the Constitution did not impose a fetter in regard to tax on inter-State sale or purchase located by the Explanation outside the taxing State leaving Parliament to unfetter it. Neither the express terms of Article 286 nor any implication therein can sustain the view that this absolute ban can be removed by the Parliament by appropriate legislation.

When the terms of the Explanation were satisfied such sales were by a fiction deemed to be 'inside' the State of delivery-cum-consumption and therefore 'outside' all other States. In such cases, therefore, only the State 'inside' which the sale is deemed to take place by virtue of the Explanation, is exempt from the ban imposed by Article 286(1)(a). All other States should be subject to that ban in respect of such sales.

17. In another case decided by the Supreme Court, Tobacco Manufacturers (India) Ltd. v. Commissioner of Sales Tax [1961] 12 S.T.C. 87, the question of the scope of the Explanation came to be considered. The assessees claimed exemption from tax liability under Article 286(1)(a) of the Constitution in respect of sales effected by them as a direct result of which the goods were delivered outside the State of Bihar (1) for consumption in the State of first delivery, and (2) for consumption not in the State of first delivery but in other States. The Sales Tax Authorities held that all sales were liable to tax under the Bihar Act. The assessees filed an application for revision before the Board of Revenue. The Board held that, according to the decision of the Supreme Court, no tax could be levied on despatches to the places outside the State after 26th January, 1950, and on this point upheld the objection of the assessees and the Sales Tax Officer was directed to re-calculate the amount of tax payable. The assessees claimed that the Board, by its order, has given an exemption from tax with regard to all sales outside Bihar. The taxing department, however, took the view that the Board had given relief only with regard to the first category of transactions and not with regard to the second category. The assessees next moved the High Court of Patna by way of a petition under Article 226 of the Constitution. The High Court held that the order of the Board was ambiguous, that the transactions in the second category were not exempt from tax liability, and that the assessees, in a writ of mandamus, could not insist on a manifestly wrong order being enforced. The assessees, therefore, preferred an appeal to the Supreme Court, The Supreme Court held that the Board did not, by its order, intend to decide the point regarding the tax liability of the second category of transactions, but left it to the officer to decide for himself the relief to which the assessees were entitled on that officer's interpretation of the judgment in the United Motors case [1953] 4 S.T.C. 133, that the judgment in the United Motors case [1953] 4 S.T.C. 133 only dealt with the Explanation sales and did not deal with sales which did not satisfy the requirements of the Explanation, that the first category of transactions would be exempt from the levy of sales tax under the Bihar Act by reason of their being "inside" sales within the State of delivery-cum-consumption and therefore "outside" sales quoad the State of Bihar, and that, in regard to the second category of transactions, the orders of the Board had become final as between the parties and the levy of tax was valid. It must be observed that this case is almost similar to the one earlier cited, India Copper Corporation Ltd. v. State of Bihar [1961] 12 S.T.C. 56. The view taken is that all outside sales, that is, inter-State in respect of which the taxing State is not the "inside" State, the delivery-cum-consumption State, are absolutely prohibited from being taxed by the State Legislature.

18. In a recent decision, A. V. Thomas & Co. v. Deputy Commissioner [1963] 14 S.T.C. 363, the Supreme Court has reiterated the principle laid down in India Copper Corporation Ltd. v. State of Bihar [1961] 12. S.T.C. 56. The question that is now before us did not arise in that case. The simple issue there was whether the Travancore-Cochin State can levy sales tax on tea stored in its territory but in respect of which sales were effected in Madras State where the title to the goods sold passed. The Supreme Court held that the Travancore-Cochin State was not the delivery-cum-consumption State within the Explanation and therefore the sales were "outside sales" qua that State, coming within the constitutional ban. The Validation Act, 1956, is not referred and the reason is plain. It is implicit in their Lordships' judgment that the ban regarding "outside sales" cannot be lifted. The period of assessment in that case was 1952-53 and if the Validation Act were to apply the taxing State could well have taxed the sales. It might be contended that there was no movement of the goods from Fort Cochin to Wellingdon Island as they had remained only in the latter place when they were auctioned at Fort Cochin, and as such there was no inter-State element to attract Article 286(2). This contention cannot have force as the ban on "outside" sale regarding State's power to tax cannot be any the less because it is in the course of inter-State trade or commerce. In William Jacks & Co. v. State of Bihar [1963] 14 S.T.C. 375 the Supreme Court has thus set out the ratio of the Bengal Immunity case [1955] 6 S.T.C. 446 :

28. This has to be read along with the restrictions imposed by the Constitution on States' power to tax sale or purchase in the course of inter-State trade or commerce. Otherwise the provision itself would be ultra vires and unconstitutional. We, therefore, come back to the question whether Clause (2) of Article 286 has conferred a general power on Parliament to lift the ban in respect of sale or purchase in the course of inter-State trade or commerce irrespective of the fact that quoad the taxing State, sales or purchases were really outside its territorial limits. Notwithstanding the fact that there has been a clear elucidation of the scope of the Validation Act, if we may say so with respect, by the Supreme Court, it would not be unreasonable to assume that their Lordships were not departing from the principles already laid down in the Bengal Immunity case [1955] 6 S.T.C. 446. If we have understood the decision in the Bengal Immunity case [1955] 6 S.T.C. 446 correctly, the ban on the States' power to tax outside sales is permanent and irremovable ; and Article 286(2) has to be read only as enabling the Parliament to lift the ban on "inside" sale or purchase of the taxing State. It must be noted that it was held in the Bengal Immunity case [1955] 6 S.T.C. 446, that even "inside sales" or "Explanation sales", as they may be called, should not be taxed by the State, as it was in the chain of inter-State trade or commerce unless the ban is lifted by the Parliament. It seems to us that the Validation Act only provided for lifting of the ban to the extent to which the Parliament was permitted to do so under the clear terms of the Constitution. We are unable to agree with the contention that Article 286(2) completely overrides Article 286(1) leading to the result that provided the Parliament exercises its power, sale or purchase in the course of inter-State trade or commerce could be indiscriminately taxed by all the States. We do not think that such a construction of the constitutional provision is warranted by its phraseology. There was no necessity on the part of the framers of the Constitution to define an "inside" sale with a view to ascertain what is an "outside" sale, if the ban could be removed by reason of the operation Article 286(2). If the plain intendment of the Constitution was merely to indicate a ban in regard to all sales or purchases in the course of inter-State trade or commerce, subject to its removability at the instance of the Parliament, less cumbrous language would have been used. Article 286(1) would have stated that no law of the State shall tax any sale or purchase in the course of inter-State or commerce, and then made it subject to Article 286(2), that is, that the State could levy such tax if the Parliament were to enable to do so. The significance of a ban in respect of sale "outside" the State, as mentioned in Article 286(1), and the punctilious care taken to define what the outside sale is, shows, to our minds, that the intention of the framers of the Constitution was that no law of the State should tax a sale or purchase in the course of inter State trade or commerce which is extra-territorial in character. It is clear that Article 286(1) covers inter-State sale or purchase, though in terms it does not say so. Both the United Motors case [1953] 4 S.T.C. 133 and the Bengal Immunity case [1955] 6 S.T.C. 446 have expressed this view. It is not conceivable that the Constitution enacted a ban on a mere "outside sale" in regard to a taxing State, irrespective of its inter-State character. Even without any constitutional provision, Madras State cannot tax a sale or purchase in Bihar or vice versa. It is, therefore, quite plain, there being no scope for misapprehension, that the Constitution has clamped upon the States' power to tax sale or purchase in the course of inter-State trade or commerce, a fetter, which if such sale or purchase is outside the taxing State is incapable of being loosened except by an amendment of the Constitution.