# [1955] 2 S.C.R. 483

- **Citation:** [1955] 2 S.C.R. 483
- **Court:** Supreme Court of India
- **Decided:** 1955
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1955-2-s-c-r-483-1504
- **Pages:** 26

## Headnote

2 S.C.R.
SUPREME COURT REPORTS
483
K.rishnaswami was
anxious to support his
son,
the
present
appellant,
and
that
many of the witnesses
whom the respondent was obliged to examine;,
were
really
anxious to help the appellant. (Vide para 12).
We do not, however, desire to express any opinion on
these contentions, as we propose to leave them to the
decision of the Tribunal.
We accordingly set aside the order ~f the Tribunal,
and direct that the Election
Commission do reconstitute the Tribunal to hear and decide
the question
whether
Krishnaswami Karayalar entered
into
the
contract with
the Government of
Travancore-Cochin
on behalf of
the joint family · or for his own personal
benefit, on a consideration of the evidence on record.
It is made
clear
that
no further evidence will be
allowed. The parties will bear their own costs in this
Court.
Appeal allowed.
Case remitted for hearing.
M/S. RAM NARAIN SONS LTD.
"·
ASST. COMMISSIONER OF SALES TAX
AND OTHERS
(and other cases)
(S. R. DAS, ACTING c. J., BHAGWATI, JAGANNADHADAS, JAFER IMAM and CHANDRASEKHARA AIYAR JJ. l
Constitution of India-Article 286(2)-Pro11iso thereto-Whether the proviso is meant to lift the ban only under Article 286(2) an4
no other-And thus does not lift the ban under Article 286{1)(a)
read with the Explanation-Assessment consisting of a single undi11idetl
sum in respect of totality of property-Wrongful inclusion therein of
certain item of property expressly
exempted from
taxation-Legnl
effect thereof-Central Pro11inces and Berar Act 1947 (XXI of J.947)
-Explanation II to Section 2(g) as
originally enacted-before its
amendment by Madhya Pradesh' Act IV of 1951-Whether offended
Article 286(1)(a) read with the Explanation-Whether the Presidents
order issued under the proviso to Article 286(2) protected the same.
Held,
per S. R. DAs
ACTING CHIEF
JusTICE,
BHAGWa\TI,
JAFER IMAM and
CHANDRASEKHARA
AIYAR JJ.
(JAGANNADHADAS J.
1953
Chattanlllho.
Karo,>alar
, ..
R(JtnJJ(;handra
l)'ar and another
Venkatarama
/glr].
1955
~20
1955
M/s. R4m Nar.O.
Sons IJd.
Yo
~'J'· CommissiOIJl'I'
.t S.US T.,, and
o//ws
484
SUPREME COURT REPORTS
[19551
dissenting). The bans imposed by Article 286 of the Constitution
on the taxing powers of the States are independent and separate and
each one of them has to be got over before a State Legislature can
impose tax on transactions of sale or purchase of g~s. The Expla~
nation to Article 286(i)(a) determines by the legal fiction created
therein the situs of the sale in the case of transactions coming with~
in that category and once it is deterl'nined by the application of the
Explanation that a transaction is outside the State it follows as a
matter of course that the State, with reference to which the transac~
tion can thus be predicated to be outside it, can never tax the trans--
action.
The ban under Article 286(i)(a) read with the Explanation is
effective independently of the fact that the transaction may have
taken place in the course of inter-State trade or commerce or with
reference 'lo goods as have been declared by
Parliament by law to bet
essential for the life of the community.
The ban imposed
under
Article 286(2) is an independent and separate one and looks at the
transactions entirely from the point of view of their having taken
place in the course of inter-State trade or commerce.
Even if such
transactions may also fall within the category of transactions covered
by Article 286( I) (a) and the
Explanation thereto or
Article 286( 3)
the moment Article 286(2) is attracted by reason of the ·transactions
being in the course of inter-State trade or commerce, the ban under
Article 286(2) operates and such transactions can never be subjected
to tax at the instance of a
State
Legislature except in so far as
Parliament by law may otherwise provide or such power of taxation
is saved by the President's order conten1plated in the proviso.
The
ban under Article 286(2) may be saved by the President's order hue
that does not affect or lift the ban under

## Text

_Characters 0–39,843 of 58,465. This is a partial read: ask again with offset=39843 for what follows._

2 S.C.R.
SUPREME COURT REPORTS
483
K.rishnaswami was
anxious to support his
son,
the
present
appellant,
and
that
many of the witnesses
whom the respondent was obliged to examine;,
were
really
anxious to help the appellant. (Vide para 12).
We do not, however, desire to express any opinion on
these contentions, as we propose to leave them to the
decision of the Tribunal.
We accordingly set aside the order ~f the Tribunal,
and direct that the Election
Commission do reconstitute the Tribunal to hear and decide
the question
whether
Krishnaswami Karayalar entered
into
the
contract with
the Government of
Travancore-Cochin
on behalf of
the joint family · or for his own personal
benefit, on a consideration of the evidence on record.
It is made
clear
that
no further evidence will be
allowed. The parties will bear their own costs in this
Court.
Appeal allowed.
Case remitted for hearing.
M/S. RAM NARAIN SONS LTD.
"·
ASST. COMMISSIONER OF SALES TAX
AND OTHERS
(and other cases)
(S. R. DAS, ACTING c. J., BHAGWATI, JAGANNADHADAS, JAFER IMAM and CHANDRASEKHARA AIYAR JJ. l
Constitution of India-Article 286(2)-Pro11iso thereto-Whether the proviso is meant to lift the ban only under Article 286(2) an4
no other-And thus does not lift the ban under Article 286{1)(a)
read with the Explanation-Assessment consisting of a single undi11idetl
sum in respect of totality of property-Wrongful inclusion therein of
certain item of property expressly
exempted from
taxation-Legnl
effect thereof-Central Pro11inces and Berar Act 1947 (XXI of J.947)
-Explanation II to Section 2(g) as
originally enacted-before its
amendment by Madhya Pradesh' Act IV of 1951-Whether offended
Article 286(1)(a) read with the Explanation-Whether the Presidents
order issued under the proviso to Article 286(2) protected the same.
Held,
per S. R. DAs
ACTING CHIEF
JusTICE,
BHAGWa\TI,
JAFER IMAM and
CHANDRASEKHARA
AIYAR JJ.
(JAGANNADHADAS J.
1953
Chattanlllho.
Karo,>alar
, ..
R(JtnJJ(;handra
l)'ar and another
Venkatarama
/glr].
1955
~20
1955
M/s. R4m Nar.O.
Sons IJd.
Yo
~'J'· CommissiOIJl'I'
.t S.US T.,, and
o//ws
484
SUPREME COURT REPORTS
[19551
dissenting). The bans imposed by Article 286 of the Constitution
on the taxing powers of the States are independent and separate and
each one of them has to be got over before a State Legislature can
impose tax on transactions of sale or purchase of g~s. The Expla~
nation to Article 286(i)(a) determines by the legal fiction created
therein the situs of the sale in the case of transactions coming with~
in that category and once it is deterl'nined by the application of the
Explanation that a transaction is outside the State it follows as a
matter of course that the State, with reference to which the transac~
tion can thus be predicated to be outside it, can never tax the trans--
action.
The ban under Article 286(i)(a) read with the Explanation is
effective independently of the fact that the transaction may have
taken place in the course of inter-State trade or commerce or with
reference 'lo goods as have been declared by
Parliament by law to bet
essential for the life of the community.
The ban imposed
under
Article 286(2) is an independent and separate one and looks at the
transactions entirely from the point of view of their having taken
place in the course of inter-State trade or commerce.
Even if such
transactions may also fall within the category of transactions covered
by Article 286( I) (a) and the
Explanation thereto or
Article 286( 3)
the moment Article 286(2) is attracted by reason of the ·transactions
being in the course of inter-State trade or commerce, the ban under
Article 286(2) operates and such transactions can never be subjected
to tax at the instance of a
State
Legislature except in so far as
Parliament by law may otherwise provide or such power of taxation
is saved by the President's order conten1plated in the proviso.
The
ban under Article 286(2) may be saved by the President's order hue
that does not affect or lift the ban under Article 286(1)(a) read with
the Explanation.
Apart from
the aforesaid construction
put upon
the several
clauses of Article 286 in The Bengal Immunity Co. case the terms of
the proviso to Article 286(2) itself make it abundantly clear that the
proviso is meant only to lift the ban under
Article 286(2) and no
other.
It is a carJinal rule of interpretation that a proviso carves
out an exception to the main provision to which it is enacted as a
proviso and to no other.
This is made further clear by the
nonohstante clause which states in express terms that it is enacted only
with reference to "this clause" i.e. Article 286(2).
The proviso cannot be extended to any of the other provisions
-0£ Article 286 and it has, therefore, not the effect of lifting the ban
which is imposed by Article 286( I) (a) and the Explanation thereto.
Therefore, so far as the post.Constitution period is concerned
the ban impose<l by Article 286(l)(a) and the
Explanation _thereto
could not be ri.;moved by the
President's order which was issued
under the proviso to Article 286(2) in the present case.
Expianation II to Section 2(g) of the. Central l'rovmces
and
Berar Sales Tax Act, 1947 offended Article 286(I)(a) read with the
2 S.C.R.
SUPREME COURT REPORTS
485
Explan<1tion to the same and the State of Madhya Pradesh was therefore, not entitled tO\ tax the transactions of sale in which goods had
actually been delivered as a direct result of such sale for purposes of
consumption outside Madhya Pradesh and the said Explanation was
not protected by the President's order issued under the proviso to
Article 286(2).
Where an assessment consists of a single undivided sum in res-
. pect of the totality of the property treated as assessable, the wrongful inclusion in it of certain items of property which by virtue of a
provision of law were expressly exempted from taxation, renders the
assessment invalid in toto.
Bennett &
White (Calgary) Ltd. and Municipal District
of
Sugar City No. 5 (1951 Appeal Cases 786 at.p. 816), referred to.
JAGANNADHADAS J. (Dissenting)-The two bans under Articles
286(1) (a) and 286(2) arc overlapping and the fact that they arc imposed from different angles cannot obscure the result, 11iz., that they
bring about the demarcation of the same--or substantially the same
-field of no taxation.
To construe the two bans as independently and cumulatively
operative is to impute to them some kind of picturesque potency and
is to miss the reality, viz.,. that all the bans under Article 286 are
meant to serve the same purpose, 11iz., that of imposing restrictions
and thereby demarcating the fields of no taxation.
The bans and the
proviso are parts of the same Article and have to be harmoniously
construed. The unequivocal and positive language of one part, cannot be taken to have been obliterated by the negative language of
the other part so as to result in futility.
The result of cons~ruing the proviso and by parity of reasoning
the saving clause, as
merely removing the ban of a particular na-.
turc leaving another overlapping ban to operate, would be to render
both the saving clause in, and the proviso to, Article 286(2) virtually
nugatory.
A non-obstante clause does not normally add to or substract from
the main provision of which it is a part. It is often enough inserted
by way of extra caution.
But it does not have the effect of limiting
the operation of the main provision. The suggestion that the Presidential
action lifts the ban only as
regards the inter-State sales
would be to read the phrase "notwithstanding that" as meaning "in
so far". There is no warrant for any such reading.
CIVIL
Nos. 132,
of 1954.
APPELLATE
JuR1so1cTION :
Civil Appeals
133 and 137 of 1955 and Petition No. 567
Appeals under Article 132(1)
of the Constitution
of India from the Judgment and Order dated
the 18th
October 1954 of the Nagpur High Court in Misc. Pcti·
1955
M/s. Ram NaraiR
Sons Ltd.
v .
.Asst. Commission<'
of Sales Tax anli
others
1955
M/s. Ram Narain
Sons Ltd.
v •
• 4Jrt. 0Jtnmissioner
11l Salts Tax and
.,,,,,,
486
SUPREME COURT REPORTS
[1955}
tions Nos. 265, 348 and 275 of 1953 respectively and
Petition under Article 32 of the Comritutic:n for the
enforcement of fundamental rights.
M.
C. Setalvad,
Aitorney-General of India (R. M.
Hajarnavis and G. C. Mathur, with him) for the- appellant in C. A. No. 132 of 1955.
N. C. Chatterji, (R. M. Hajarnavis
and G. C.
Mathur, with him) for Intervener No. 1 in (;. A. No. 132
of 1955.
R. M. Hajarnavis
and G. C.
Mathur, for
Intervener No. 2 in C. A. No. 132 of 1955.
R. M. Hajarnavis and G. C. Mathur, for the appellant in C. A. No. 133 of 1955
R. M. Hajarnavis and G. C. Mathur, for the appellant in C. A. No. 137 of 1955.
M. Adhikari, Deputy
Advocate-General of Madhya
Pradesh
and
I.
N.
Shroff, for respondents in all
.appeals.
M. C. Setalvad, Attorney-General of India and C. K.
Daphtary, Solicitor-General
6f India (A. P. Sen, /. B.
Dadachanji and Rajinder Narain,
with them) for the
petitioner in Petition No. 567 of 1954.
T. L. Shevde, Advocate-General of Madhya Pradesh
(M. Adhikari,
Deputy Advocate-General
of Madhya
Pradesh
and I. N. Shroff, with him) for respondents.
/. B. Dadachanji,
R. M. Hajarnavis and
Rajinder
.Narain, for the Intervener.
1955.
Septembe:-
20.
The judgment of
S. R.
Das, Acting Chief Justice, Bhagwati, Jafer Imam and
Chandrasekhara Aiyar JJ. was delivered by Bhagwati
J.
Jagannadhadas
J.
delivered a separate
judgment·
Civil Appeals Nos. 132, 133 and 137 of 1955
BHAGWATI J.-These 3 appeals with
certificate under
article 132(1) of the Constitution involve
the interpetition of the proviso to
articl~ 286(2) and raise a
common question as to whether that
proviso also saves
2S.C.R.
SUPREME COURT REPORTS
487
the transactions 0£ sale or purchase
covered
by
the
Explanation to article 286(1) (a) from the ban imposed
therein.
The Appellants in Civil Appeal No. 132 of 1955 are
Messrs Ramnarain Sons Ltd., a firm registered
as a
"dealer" under the Central Provinces and Berar
Sales
Tax Act, 1947, and carrying on business at Amravati
and at other places in
Madhya Pradesh.
After the
Cotton Control Order, 1949, came into force on the
12th
September, 1949, the Appellants entered
into
Agreements with several mills situated outside Madhya
Pradesh by which they undertook to purchase kapas
in the various markets in Madhya Pradesh as
their
agents on their account and
on their behalf.
The
kapas after purchase was to be ginned and pressed
into bales and sent to the mills. All the expenses involved in the process
were
to be borne by the mills
which were also to be credited with the sale proceeds
of the cotton seeds and the Appellants were only entitled to commission on a percentage basis.
The Appellants worked
as
such agents for the period 1st
October, 1949 to 30th September, 1950. By his order
dated the 30th June, 1953 the Assistant Commissioner
of Sales Tax, Amravati, Respondent No. I, included
the transactions valued at Rs. 72,86,454-5-10 with the
said mills in the
Appellants' turnover and ordered
the Appellants to pay Rs.
1,13,850-13-6
as
sales
tax
on the said transactions.
The Appellants filed an
appeal to the Commissioner of Sales Tax, Madhya
Pradesh, Respondent No. 2, on the 30th July,
1953.
The appeal was, however, entertained by the Deputy
C',ommissioner of Sales Tax, Madhya Pradesh,
Respondent No.
3, who ordered the Appellants to pay
Rs. 25,000/-
by the 31st August, 1953.
The Appellants thereupon filed a petition under Article 226,
being Misc. Petition No. 265 of 1953, in the High Court
of Judicature at Nagpur, asking inter alia for the
quashing of the order of 30th June,
1953, passed by
Respondent No. 1 and for consequential reliefs.
The
Respondents filed
a return denying the contentions
of the Appellants and praying for the dismissal of the
petition with costs.
1955
M/s. Ram Narain
Sons Lid.
v.
Asst. Commissiont'f'
of Salts Taxan.1
others
Bhagwati J.
1955
M/s. Ram Narain
Sons Ltd.
v.
Asst. Commissiontr
rJj Salts Tax an:!
others
Rhagwali J.
488
SUPREME COURT REPORTS
[1955}
The Appellants in Civil Appeal No. 133 of 1955 arc
the Eastern Cotton Company, a firm registered
as a
"dealer"
under the Central
Provinces and
Berar
Sales Tax Act,
1947 and carrying on business at
Amravati and at
other places in Madhya Pradesh.
They also,
during
the period
1st October, 1949 to
30th September,
1950, worKed
as agents of certain
mills
situated
outside
Madhya . Pradesh,
procured
kapas for them in Madhya Pradesh and sent it to the
mills for consumption outside the State.
By his order
dated the 9th September, 1953, the Respondent No. 1
included the transactions
valued at Rs. 33,47,405-5-0
with the said mills in the Appellants'
turn-over
and
ordered the Appellants to pay Rs. 52,303-4-0 as tax on
the said transactions.
These Appellants
also field a
petition under article
226,
being Misc. · Petition No.
348 of 1953, fo the High Court of Judicature at
Nagpur for quashing the order dated the 9th September, 1953, passed by Respondent No.
1 and
for
consequential reliefs.
The Respondents filed a return
denying their contentions.
The Appellants in Civil Appeal No. 137 of 1955 arc
the firm, Ramdas Khimji Brothers, Bombay, registered
as a "dealer" under the Central Provinces and Berar
Sales Tax Act, 1947, and carrying on busine·ss
as
cotton dealers in Madhya Pradesh. During the period
1st October, 1950 to 30th September, 1951, the Appellants
sold cotton worth Rs.
6,01,949-1-9
to various
persons out side Madhya
Pradesh.
The
cotton was
delivered to the buyers
for consumption
outside
Madhya Pradesh as a direct result of such sales.
By
his order dated the 29th December, 1952, the Sales
Tax Officer,
Amravati, in
the
assessment,
of the
Appellants
for
the same period, included
the said
transactions in the Appellants' turn-over
and assessed
sales
tax thereon.
The Appellants
filed an appeal
to Respondent No.
l but the same was dismissed by an
order dated the 10th July, 1953. The Appellants filed on
22nd August, 1953, a revision before the Commissioner
of Sales
Tax, Madhya Pradesh.
The Appellants also
filed a petition under Article 226,
being Misc. Petition
No. 274 of 1953, in the High Court of Judicature at
2S.C.R.
SUPREME COURT REPORTS
489
Nagpur, asking for a writ of certiorari quashing the
order
of Respondent
No. 1 passed by him in Sales
Tax Appeal No. 13-A dated the 10th July, 1953, and
for
consequential reliefs.
The
Respondents filed a
return denying the contentions of the Appellants and
asking that
the petition be dismissed with costs.
These petitions came
up for hearing and final disposal before the High Court of Judicature at Nagpur
along with Misc. Petitions No. 288 of 1953 and No.
132 of 1954.
A considered judgment was delivered in
Miscellaneous Petition No. 132 of 1954 and the reasoning contained therein
governed the decision in the
connected Petitions
Nos. 265, 274
and 348 of 1953.
The High Court held that the Explanation II to section 2(g) of the Central Provinces and
Berar Sales
Tax Act, 1947, as amended
by the Central Provinces
and Berar Act XVI of 1949 having been declared invalid from its inception by the High Court in Messrs
Shriram Gulabdas
v. Board of Revenue
(I.L.R. 1953
Nagpur 332)
and by this
Court in 1954 S.C.R. 1122,
the original Explanation remained in force until the
1st April, 1951, when it was amended by the Madhya
Pradesh
Act IV of 1951.
Explanation II originally
enacted was in the terms following:-
"Notwithstanding anything
to the
contrary
in
the Indian
Sale of Goods Act, 1930, the sale of any
goods which are actually in the Central Provinces and
Berar at the time when the contract of sale as defined
in that Act in respect thereof is made, shall wherever
the said contract
of sale is made,
be deemed for the
purpose of this Act to have taken place in the Central
Provinces and Berar".
The
Appellants
contended
that this
Explanation
offended article 286(1)(a) read with the
Explanation
to
the same and the State. of Madhya Pradesh was,
therefore, not entitled to tax the transactions of sale
in which goods had actually been delivered as a direct
result of such sale
for the purpose of
consumption
outside Madhya Pradesh.
The Respondents, on the
other hand, contended that the said Explanation was
protected until
the 31st March, l951, by the Sales Tax
Continuation Order No. 7
of 1950
issued by the
13-83 S. C. India/59.
1955
M/•. R21nNami11
Sonr lJti.
v.
Asst. Commis.;iontr
of Saks Tax anti
othlrs
Bhagwati ].
,
1955
M/1. Ram NaraU.
Sons Lid.
v.
~ sst. CommP"Sionnof Saks T """""
olhns
Bliagwali].
490
SUPREME COURT REPORTS
[1955]
President
on
the
26th January,
1950, under
the
proviso to article 286(2).
The High Court was of the opinion that the original
Explanation was validly enacted as the assent
of the
Governor-General
to
the enactment was given on the
23rd May, 1947,
and that under that Explanation the
ta.x prior to the commencement of the Constitution was
lawfully levied on the sales of goods wherever the contracts of sale took place if the goods were actually in
the State at the time of contracts of sale were made.
This power could be exercised
by the State even if the
sales took place
during the course of inter-State trade
or commerce and the goods were delivered as a direct
result of the sales for the purpose of consumption outside the State. This was because the situs of the goods
constituted
a sufficient
nexus between
the transactions and the taxing State which was the foundation
for taxation
prior to the commencement of the Constitution.
This
positio~ continued until
the
com-
.mencement of
the Constitution
and on the 26th
January, 1950, the President
issued the
Sales Tax
Continuation Order No. 7 of 1950 in exercise of the
powers conferred·
by the proviso
to article 286(2).
The sales in question had taken place in the course of
inter-State trade
or commerce
and accordingly
they
were covered by article 286(2) and would,
therefore,
·be liable to tax even after the commencement of the
·Constitution Ly virtue of the President's order.
Reliance was further placed on the majority judgment of
this Court in The State of Bdmbay v. The United Motors
(India)
Ltd. (1953 S.C.R. 1069) where it was held that
the transaction vis-a.vis
the
delivery State lost its
inter-State character if it fell within the
Explanation
to article 286(1) (a) and was accordingly made liable
to taxation by the delivery State.
So
far, however,
as the exporting State
was concerned,
it retained its
character of
an inter-State
transaction
and would
not, therefore,
be liable to taxation
by that State,
vide
article 286(2).
The President's order, however,
removed
this ban
and the
exporting
State was
entitled to tax the transaction by virtue of the power
derived
by it from
the same. On a construction of
2S.C.R.
SUPREME COURT REPORTS
491
the relevant
provisions of article 286(1) and article
286(2) the High Court was
of the opinion that it
would be
making the
proviso to
article
286(2)
nugatory if it was held that
article 286(1)
overrides
it and takes away the taxing power
of all
States in
inter-State trade
or commerce except the
delivery
State.
The High Court accordingly dismissed the petitions with costs.
The learned Attorney-General appearing for the
Appellants before us contended that so far as the
post-Constitution period is concerned, the position is
governed by our judgment in The Bengal Immunity
Co. Ltd.
v.
The State of Bihar delivered on the 6th
September,
1955.
He urged
that the bans in1posed
on the powers of the State Legislatures to levy taxes
on the sale or purchase of goods in the several clauses
of article 286 are independent and
separate and
that
the transactions of sale or purchase referred to in the
various clauses must be looked. at from different viewpoints.
Even if a transaction might fall within the
category of inter-State sale or purchase and the President's order under the proviso to article 286(2)
might
enable the State to levy any tax on such sale or pUTchase which was being lawfully levied by the State
immediately before
the commencement of the Constitution, such transaction had also to surmount the
ban imposed under article 286(1) (a) and the Explanation thereto so that, if, as a direct result of such sale,
the goods were actually delivered for the purpose of
consumption
in
another
State, the exporting
State
(to use the phraseology of the Nagpur High Court) or
the title-State
(to use
the phraseology
adopted
in
some of the judgments in The Bengal Immunity Co.'s
Appeal) would not be entitled to levy a ta.~ on sud~
sale the transaction being fictionally outside the State
by reason of the Explanation
and therefore
coming
within the ban of article 286(1) (a).
It was, however, urged on behalf of the State of
Madhya Pradesh
that the President's order not only
saved the· transactions from the ban of article
286(2)
but also from the ban of article 286 (1) (a), because the
transactions covered
by
the Explanation
to article
1955
M/s. Ram Narain
Sons Ltd.
v.
Asst. Commilsiolltl'
of Sales T 41< and
others
Bhagwati].
1955
M/s. Ram Narain
Sons LJd.
v.
.4.rst. C<mJmissiontr
of Sales Ta. and
othtrs
Bhagwati].
492
SUPREME COURT REPORTS
[1955]
286 ( 1 )(a) were of the same category as
transactions
coveted by article 286(2)
and were all in the course
of inter-State trade or commerce.
It was
further
urged that if the transactions
covered
by the Explanation to article 286(1) (a) were
not saved from the
ban by
the President's order, the whole intention of
the
Constitution-makers in maintaining
the status
quo qua the taxes on sales or purchases of goods
which were being lawfully levied
by the State immediately before the commencement of the Constitution
would be
frustrated,
because the
transactions
covered by the Explanation to article 286( 1 )(a) being
necessarily in the course .of inter-State trade or
commerce the
President's order would be rendered nugatory and the exporting State or the title State would
be restrained from levying
tax on such
transactions
in spite of the ban having been lifted by the president's order.
We are unable to
ac<;.ept this contention. As held
by the majority Judges
in The Bengal Immunity Co.'s
Appeal, the bans
imposed
by article 286 on the taxing
powers
of the States are independent and separate and each one of them has to be got over before a
State Legislature. can impose tax on transactions of
sale or purchase
of goods.
These bans have been
imposed
from different view-points, and, even though
the transactions of sale or purchase may in conceivable cases overlap
so far
as these
different viewpoints are
~oncerned,
each of those bans is opentive
and has to be enforced.
So far as article 286( 1) (a) is
concerned, the Explanation . determines by the legal
fiction created therein the situs of the sale in the case
of transactions
coming within that category and when
a transaction is thus determined to be inside a particl1lar State it necessarily becomes a
transaction outside all other States.
The only relevant enquiry
for
the purposts of article 286(1)(a), therefore, is whether
a transaction is outside the State and once it is determined
by the application
of
the Explanation that it
is outside the State it follows as a matter of course
that
the
St~te with reference
to which the transaction can thus be predicated
to be outside it can never
2 S.C.R.
SUPREME COURT REPORTS
493
tax the transaction. This ban is effective independently
of the fact that the transaction may also
have taken
place
in the course
of inter-State
trade or commerce
or with
reference to goods as have been declared by
Parliament
by law
to be essential for the life of the
community.
The ban imposed under article
286 (2)
is an independent
and separate
one and looks at the
transactions. entirely from the point of view of their
having taken place in the course of inter-State trade
or commerce. Even if such transactions may also fall
within
the category of transactions covered
by
article 286(1) (a) and the Explanation
thereto or article
286(3), the moment
article
286(2)
is attracted by
reason of the transactions being in the course of interState trade or commerce, tpe ban under article 286
(2)
operates and such
transactions can never be subjected to
tax
at
the instance of a State Legislatur.::
except in so far as Parliament by law may otherwise
provide or such power of taxation is saved by
the
President's order
contemplated in
the proviso.
The
ban under article 286(2) may be saved by the President's order but
that does not affect or lift the ban
undQ" article 286 ( 1) (a) read with the
Explanation.
Apart
from the construction thus put upon the
several clauses of article 286 by the majority of the
Judges
in
The Bengal
Immunity Co.'s Appeal as
above, the terms of the proviso itself make it abundantly clear
that the proviso is meant only to lift
the
ban under article 286(2) and no other. It is a cardinal
rule of interpretation that a proviso to a
particular
provision of a statute
only embraces
the field which
is covered
by the main provision.
It carves
out an
exception to the main provision to which it has been
enacted as a proviso and
to no other.
Even if the
non-obi-tante.
clause:
"Notwithstanding
that
the
impos1t1on
of
such tax is contrary to the provisions
of this clause":
had not been enacted in the proviso,
the proviso could only have been construed as operating upon the field
enacted in article 286(2) and could
not be extended to any of the other provisions of
article
286.
The
non-obstante
clause,
however,
makes it abundantly and further clear and states in
1955
M/1. Ram Narain
Sons Ltd.
v.
Asst. Commissionn
of Saks T OJt an4
.,,,,,,,
Bhagwali].
/
1955
M/s. Rom Narain
Sons IJd.
v.
bst. Commissionn
ef Sale1 T .. and
Ot/rns -
Bhapati J.
494
SUPREME COURT REPORTS
[1955J
explicit terms that it is ·enacted only with reference
to "this clause", i.e., article 286(2).
The President's
order may direct
tha~ any tax _on the sale or purchase
of goods which was being lawfully levied by the Government of any State immediately before the commencement of the Constitution was to continue to be
levied until 31st March,
1951, but the effect of that
order was to raise the ban in so far as it was imposed
by the provisions of "this clause".
The President's
order, therefore, only lifted the ban in so far as the
transactions
took place
in the course of
inter-State
trade or commerce and could not be projected into
the sphere of any other clause of article 286. It had,
therefore, not the effect of lifting the ban which was
imposed by article 286(1) (a) and the Explanation
thereto, even though the transactions covered by the
Explanation to article 286(1) (a)
by and large fell
within the category of transactions which took place
in the rourse of inter-State trade or commerce. The
ban imposed by article 286(1)(a) was independent and
separate and
could. not be lifted by the President's
order which had operation only in regard to the intcrState- character of the transactions.
The moment it
was determined that the transactions were outside
the State by virtue of the Explanation to
article
286(1) (a)
the
ban
imposed by article 286(1)(a)
attached to the same and could not be lifted by the
President's order which operated only on the interState
character
of the transactions and saved only
those inter-State transactions which did not
come
within the Explanation.
If the contention urged on behalf of the State of
Madhya
Pradesh is accepted
it would mean that we
should re-write or amend the proviso to article 286(2)
in order to effectuate the supposed intention of the
Constitution-makers.
The supposed intention of the
Constitution-makers was alleged
to be to preserve to
the States all the taxes on sale or purchase of goods
which were being la".l'fully levied by them immediately_ before the commencement of the Constitution
by having resort to the territorial
connection
or
nexus theory.
We have no evidence before us of this
_,
2 S.C.R.
SUPREME COURT REPORTS
495
supposed intention of the Constitution-makers. Whatever their intention was can only be gathered from
the language which they have used and where the
language is plain there is no scope whatever for
speculation in that behalf.
When
the Constitutionmakers
themselves used
the words "Notwithstanding
that the imposition of such a tax is contrary to the
provisions of this clause" it would not be legitimate
for us to go behind the plain words and try to read
into the proviso something which would involve either
a deletion of the non-obstante clause or a re-writing
thereof as suggested.
Whatever be the effect of our
judgment on the treasuries of the exporting or titleStates
we
cannot assist them
by reading something
into the proviso which is not warranted by any canon
of construction.
The proviso has reference only to
article 286(2)
and cannot be projected into any other
clause of article 286.
The untenability of the contentions of the Respondents will be clear from the following illustration:-
Suppose the goods are in the State of Madhya
Pradesh at the time the contracts of sale of those
goods are made in, say,
the State of Bombay. Suppose further that the property in the goods has by
reason of such sales passed in the State of Bombay
but the goods as a direct result of such sales have
been
delivered for consumption
in the State of Madras.
According to the Respondents, the President's
order made under the proviso to article 286(2)
saves
the transactioqs from the ban of article 286(1)(a) read
with the Explanation. Then the State of Madras will
be able to tax by virtue of article 286(1) (a) read with
the Explanation or on the nexus theory by reason of
the goods being delivered there for consumption; the
State of Bombay will be able to tax because the title
to the goods passed there; and the State of Madhya
Pradesh will
also be able to tax under the Explanation . II to section 2(g) of the Act because the goods
were in the State of Madhya Pradesh at the time
when the contracts of sale were made in the State of
Bombay. Nobody will
say that
the
Constitution.
makers intended to perpetuate multiple taxation of
1955
M/s. Ram Naraia
Sons .lid.
....
..bst. Commissionu
of Salts T OJI and
others
BhagwatiJ.
1955
Mf•· Ram NMain
Son1 l.Jt!.
v.
Asst. Commissionlr
of Sak• T .. and
otlins
Bhagwati].
496
SUPREME COURT REPORTS
[1955]
this kind and yet that will be the result if we were to
accede
to the arguments
advanced
by
the Respon--
dents.
The result, therefore, is that so far as the Post-Constitution period is concerned the ban which is imposed
by article 286(1)(a) and the Explanation thereto cannot be removed
by the President's order which was
issued under the proviso to article 286(2) and the High
Court was in error when it construed the proviso to
article 286(2)
as projecting into the field of article
286(1) (a) and lifting the ban imposed therein.
On .. the above reasoning, Civil Appeal No. 137 of
1955 filed
by the firm of Ramdas Khimji Brothers,
Bombay, which
relates only to the post-Constitution
period will be allowed and the order of assessment
dated the 29th December, 1952, will be set aside. The
Respondents will pay the costs of the Appellants
here
as well .as in the Court below.
As regards Civil Appeals Nos. 132 of 1955 and 133
of 1955, however, the assessments therein relate not
only to the post-Constitution period but also the preConstitution period to which different considerations
would apply.
The validity of the assessment in regard to the same would have to be canvassed having
regard
to the various
contentions of law
and fact
which could be urged
against the same by the Appellants.
There are two Ol!tstanding questions which
have be~n mooted before us
by the learned AttorneyGeneral in regard to this period, viz., (1)
a question
of fact, as to whether the Appellants were agents of
the various miils in regard to the transactions which
were the subject-matter of the assessment,
and (2) a
question of law, whether the law under which the tax
was levied, viz., Explanation II to section 2(g) of the
Act was
validly
enacted.
Both these
contentions,
though they are also relevant
to the Post-Constitution period were not specifically pressed before
us
because the argument based on the proviso to article
286(2) was considered sufficient to set aside the
assessment for that period.
They would, however, appropriately arise
and be urged by the
appellants
when
the liability
to assessment
for
the
pre-Constitution
2 S.C.R.
SUPREME COURT REPORTS
period is to be determined and if we were to determine that liability we would have tc deal with the
same.
The necessity for doing so is, however, obviated by reason of the fact that the assessment is
one composite whole relating
to
the
pre-Constitution
as well as the post-Constitution periods and is invalid
in toto.
There is authority for the proposition that
when an assessment
consists of a single undivided
sum in respect of the totality of the property treated
as assessable, the wrongful inclusion in it of certain
items of property which by
virtue of a provision of
law were expressly c:xempted from taxation renders
the assessment invalid in toto.
The Privy Council
have observed in Bennett & White (Calgary) Ld. And
Municipal
District of Sugar
City No. 5 (1951 Appeal
Cases, 786 at page 816) :-
"When an assessment is not
for an entire sum,
but for separate sums, dissected and earmarked each
of them to a separate assessable
item, a court can
sever the: items and cut out one or more along with
the sum attributed to it, while affirming the residue.
But where the assessment consists of a single· undivided
sum in
respect
of the totality of property
treated as assessable, and when one component (not
dismissible as "de minimis") is on any view not assessable and wrongly included, it would seem clear that
such a procedure is barred, and the assessment
is
bad wholly.
That matter is covered by authority.
In Montreal Light, Heat & Power Consolidated v. City
of Westmount ((1926) S.C.R.
(Can.) 515 the court
(see especially per Anglin, C. J.) in these conditions
held that an assessment which was bad in part was
infected throughout, and treated it as invalid.
Herc
their Lordships are of opinion, by parity of reasoning,
that the assessment was invalid in toto".
It was, therefore, urged that on the facts of this case
the assessment was invalid in toto and that it should
be set aside.
The learned Deputy Advocate-General
of Madhya Pradesh did not seriously contest this
position and the result, therefore, is that the order of
assessment dated , the 30th June, 1953, in Civil Appeal
No. 132 of 1955 and the order of assessment dated the
1955
M/s. Ram Narain
Suns LJd.
v.
Asst. Commission#
of Salts Tax and
others
Rhagwati].
1955
M/1, Ram Narain
Son' Ltd.
••
.AsJt. Commissioner
of Saler Ta. and
otlurs
Bhagwatij.
498
SUPREME COURT REPORTS
[1955]
9th September, 1953, in Civil Appeal No. 133 of 1955
are liable to be set aside.
The appeals will
therefore
be allowed the orders of assessment will be set aside
and the matters will go back to the Assessment Officer for re-assessment of the Appellants in
accordance
with law.
The Appellants will be at liberty to urge
before the Assessment Officer the contentions of law
and fact available to them in the fresh assessment proceedings including those
adverted
to above.
The
Respondents will pay the costs of these Appellants
here as well as in the Court below.
Petition No. 567 of 1954·
BHAGWATI
J.-This petition under article 32 of the
Constitution . also
involves
the interpretation of the
proviso to article 286(2) and raises the same question
as to the meaning, scope and operation of the proviso
as was raised in the Civil Appeals Nos. 132, 133 and
137 of 1955 just disposed of.
The facts giving rise to this Petition may be shortly stated. The
petitioners are a partnership firm
carrying on business of manufacturing bidis at
Jabal·
pur and registered as a "dealer"
under the Central
Provinces and Berar Sales
Tax Act, 1947. The petitioners had
their branches at
Lucknow,
Kanpur,
Faizabad, Agra, Bombay and Bhopal.
They had also
their selling agents at various places in Uttar Pradesh
and elsewhere outside the State of Madhya Pradesh.
Thev also entered into transactions direct with mercha~ts in U ttar Pradesh.
The transactions in question which were the subject-matter of assessment at
the instance of the Sales Tax authorities were
for the
period of assessment 21st October, 1949 to 9th November, 1950, and ~pread over two periods, viz., ( 1) the
period between 21st October,
1949,
to 25th January,
1950, which may be called the pre-Constitution period,
and (2) the period subsequent to the inauguration of
the Constitution on the 26th January, 1950, up to the
9th November, 1950, which
may
be called
the postConstitution period. The petitioned gross
turn-over
was
determined
to
be
Rs.
49,40,140-6-9
and
the
2S.C.R.
SUPREME COURT REPORTS
amount of Sales Tax assessed on the transactions was
Rs.
1,51,291-13-0 as per . the order of the
Deputy
Commissioner,
Sales Tax, Madhya Pradesh,
Respondent No. 3, dated the 14th July, 1954, in Sales Tax
Appeal No. 6/ A-1.6.54.
The petitioners preferred a
second appeal to the Respondent No. 2 against the
said order.
The Respondent No. 2, however, refused
to admit or register the appeal unless the amount of
tax assessed was paid up.
The petitioners paid about
Rs. 91,000/- towards the amount of tax assessed but
finding it difficult to pay the balance filed this Petition against the State of Madhya Pradesh, Respondent No. 1, the Commissioner of Sales Tai, Madhya
Pradesh, Respondent No. 2, and the Deputy
Commissioner of Sales Tax, Madhya Pradesh,
Respondent No. 3, for a wm of certiorari quashing the said
order dated the 14th July, 1954, made by Respondent No. 3 and for consequential reliefs. The
Respondents filed a return denying the contentions of the
petitioners and maintaining that the Sales Tax was
lawfully assessed by them against the petitioners.
The position
as regards the petitioners' turn-over
for the period OE assessment was as stated below :-
Nature of tht Parties.
Sales Prices of goods
Rs.
(a) Direct to seliing agents
on orders. .......... .....
6,15,236- 3- o
(b) Direct to merchants on
orders.
3,99,450- 2- o
( c) Direct to destinations
other than branches or
depots but accounted
for against branches
and depots.
6,20,996- 14- o
(d) Direct to Stations or
destinations
having
branches or depots
owned by the proprietors of this registered
firm-Kanpur, Bombay, Luck:iow and
Faizabad. .........
31,06,739-13- o
1955
M/1. Ram Narain
SonsUd.
v.
Alst. Commission#
of Saks T aJt and
otlurs
Bhagwati].
1955
M/s. Ram Narain
Son1 Lltf.
v.
Assl. Commissionnof Saks Tax and
others
Bhagwati].
500
SUPREME COURT REPORTS
[1955]
The Sales Tax authorities treated
all
these
transactions as transactions of sale coming within the deli·
nition contained in Explanation II to section 2(g) of
the Act and assessed the petitioners to sales
tax in
respect of the same,
negativing the contentions of
the petitioners that they were in any event
sales
effected
by them outside the State of Madhya Pradesh and that the State
of Madhya Pradesh was
therefore, not entitled to impose a tax on those transactions by
virtue
of
the provisions of article 286(1)
(a) and the Explanation thereto.
The learned Attorney-General
who
·appeared for
the petitioners contended that
the bidis manufactured by the petitioners were all actually delivered as
a direct result of the transactions of sale for the purpose
of consumption in the State of Uttar Pradesh
and
that
after
the inauguration of the Constitution
on the 26th January,
1950, it was only
the State of
Uttar Pradesh which was the delivery State
that
alone had the right to impose the tax on these transactions
notwithstanding the fact
that under
the
general
law
relating to the sale of goods the property
in the goods might have passed in the State of Madhya
Pradesh.