# COFFEE BOARD, BANGALORE ' v. JOINT COMMERCIAL TAX OFFICER, MADRAS & ANR

- **Citation:** [1970] 3 S.C.R. 147
- **Court:** Supreme Court of India
- **Decided:** 1969-10-29
- **Case number:** Writ Petitions Nos. 216 and 217 of 1969
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/coffee-board-bangalore-v-joint-commercial-tax-officer-madras-anr-4895
- **Pages:** 25

## Headnote

147
A
COFFEE BOARD, BANGALORE
'
v.
JOINT COMMERCIAL TAX OFFICER, MADRAS & ANR.
October 29, 1969
B
(M. HIDAYATULLAH, C.J., S. M. S!KRI, G. K. MITTER, A. N. RAY
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AND P. JAGANMOHAN REDDY, JJ.J
Constitution of India, Arts. 31(1), 32-Corporation not being a citizen
whether can enforce ri"ghrs under Art. 32-Circumstanoes under which taxing statute can be challenged on ground of breach of fundanrental rights
by petition under Art. 32.
Sales T ax~Sales 'in course of export' what are-Sale by coffee Board
constituted under the Coffee Act· 7 of 1942 to registered exporters whether
within protection of Constitution of lndi" Art.
286(1J(h)
and Central
Sales Tax Act 74 of 1956 s. 5(1).
Under Art. 286(l)(b) of the Constitution exemption from imposition
of sales tax is granted in respect of a sale or purchase of goods in the
course of the import of the goods into, or export of the goods out of the
territory of India.
After the 6th Amendment to the Constitution, Parliament passed the Central Sales Tax Act, 1956 and in s. 5(1) thereof laid
do\\-n that a sale of goods is 'in the course of export' out of the territo·ry
of India on1y if the sale or purchase either occasions such export or is
effected by a transfer of documents of title to the goods a'fter the goods.
have crossed the customs frontiers of India. Export of coffee outside India
is controlled under the Coffee Act. 1942, by the Coffee
Board.
Coffee
especially screened and selected is sold to registered
exporters at 'export
auctions'.
Permits are given to such registered exporters to participate at
the auction.
The Coffee Board has prepared a set of rules which incorporate the terms and conditions of sale of Coffee in the course Of ex.port.
Under Condition 26 of the Rules a registered dealer has to give an 'export guarantee' under which export
can be made
only to stipulated or
approved destinations. The buyer at an export auction is free to export the
coffee either by himself or through a forwarding agent. without selling the
goods to the forwarding agent.
Immediately after the export evidence of
the shipping has to be produced before the Chief Marketing Officer, otherw'..se under Condition 30 the permit holder is liable to fine and under Cont.lition 31 the unexpnrted coffee is liable to be seized.
In respect of certain sales of coffee to regis~ered exporters in March
and April 1963 the Coffee Board aforesaid claimed
that as the sales in
question had been made· 'in the course of export' outside the territory of
India they could not be taxed under the Madras General Sales Tax Act,
1959. The taxing authorities however held that the sale3 took place within
Tamil Nadu Slate and were liable to be taxed under the Tamil Nadu Act.
Provisional assessments were made a·nd the tax not already paid was de·
"landed.
The Board thereupon filed petitions under Art. 32 of the Constitution challenging the levy.
The State, however, relying upon this Court's
decision in ihe State Trading Corooration v. The Con1111ercial Tax Officer,
Viw1khavatnan1 & Ors. contended that the Board wa'i a Corporation and
not a citizen and its petition under Art. 32 could not be entertained. On
behalf of the State it was also urged that the petitioners d;d not show any
hreach of fundamental
right justifying
a petition under Art. 32;
the
Board had only claimed exemptions incorporated in the Constitution and
148
SUPREME COURT REPORTS
[1970] 3 S.C.R.
the statute dealing with the levy and collection of sales tax and their
A
grievance could be investigated and
righted by taking recourse to
the
remedies provided in the relevant statute.
HELD:
(Per Hidayatullah, C. J., G. K. Mitter, A. N. Ray and P.
Jaganmohan Reddy, JJ.) (i) The case of the State Trading Corporation
considered the appl,ij;ation of Art. 19(1)(f) & (g) in relation to Corporations and it was held therein that they could not be regarded as citizens
for the purpose Of that Article. The
questi<>n was not cortsidered in
B
relation to Art. 31 ( t) which is not limi

## Text

_Characters 0–39,998 of 66,627. This is a partial read: ask again with offset=39998 for what follows._

147
A
COFFEE BOARD, BANGALORE
'
v.
JOINT COMMERCIAL TAX OFFICER, MADRAS & ANR.
October 29, 1969
B
(M. HIDAYATULLAH, C.J., S. M. S!KRI, G. K. MITTER, A. N. RAY
c
D
E
F
G
H
AND P. JAGANMOHAN REDDY, JJ.J
Constitution of India, Arts. 31(1), 32-Corporation not being a citizen
whether can enforce ri"ghrs under Art. 32-Circumstanoes under which taxing statute can be challenged on ground of breach of fundanrental rights
by petition under Art. 32.
Sales T ax~Sales 'in course of export' what are-Sale by coffee Board
constituted under the Coffee Act· 7 of 1942 to registered exporters whether
within protection of Constitution of lndi" Art.
286(1J(h)
and Central
Sales Tax Act 74 of 1956 s. 5(1).
Under Art. 286(l)(b) of the Constitution exemption from imposition
of sales tax is granted in respect of a sale or purchase of goods in the
course of the import of the goods into, or export of the goods out of the
territory of India.
After the 6th Amendment to the Constitution, Parliament passed the Central Sales Tax Act, 1956 and in s. 5(1) thereof laid
do\\-n that a sale of goods is 'in the course of export' out of the territo·ry
of India on1y if the sale or purchase either occasions such export or is
effected by a transfer of documents of title to the goods a'fter the goods.
have crossed the customs frontiers of India. Export of coffee outside India
is controlled under the Coffee Act. 1942, by the Coffee
Board.
Coffee
especially screened and selected is sold to registered
exporters at 'export
auctions'.
Permits are given to such registered exporters to participate at
the auction.
The Coffee Board has prepared a set of rules which incorporate the terms and conditions of sale of Coffee in the course Of ex.port.
Under Condition 26 of the Rules a registered dealer has to give an 'export guarantee' under which export
can be made
only to stipulated or
approved destinations. The buyer at an export auction is free to export the
coffee either by himself or through a forwarding agent. without selling the
goods to the forwarding agent.
Immediately after the export evidence of
the shipping has to be produced before the Chief Marketing Officer, otherw'..se under Condition 30 the permit holder is liable to fine and under Cont.lition 31 the unexpnrted coffee is liable to be seized.
In respect of certain sales of coffee to regis~ered exporters in March
and April 1963 the Coffee Board aforesaid claimed
that as the sales in
question had been made· 'in the course of export' outside the territory of
India they could not be taxed under the Madras General Sales Tax Act,
1959. The taxing authorities however held that the sale3 took place within
Tamil Nadu Slate and were liable to be taxed under the Tamil Nadu Act.
Provisional assessments were made a·nd the tax not already paid was de·
"landed.
The Board thereupon filed petitions under Art. 32 of the Constitution challenging the levy.
The State, however, relying upon this Court's
decision in ihe State Trading Corooration v. The Con1111ercial Tax Officer,
Viw1khavatnan1 & Ors. contended that the Board wa'i a Corporation and
not a citizen and its petition under Art. 32 could not be entertained. On
behalf of the State it was also urged that the petitioners d;d not show any
hreach of fundamental
right justifying
a petition under Art. 32;
the
Board had only claimed exemptions incorporated in the Constitution and
148
SUPREME COURT REPORTS
[1970] 3 S.C.R.
the statute dealing with the levy and collection of sales tax and their
A
grievance could be investigated and
righted by taking recourse to
the
remedies provided in the relevant statute.
HELD:
(Per Hidayatullah, C. J., G. K. Mitter, A. N. Ray and P.
Jaganmohan Reddy, JJ.) (i) The case of the State Trading Corporation
considered the appl,ij;ation of Art. 19(1)(f) & (g) in relation to Corporations and it was held therein that they could not be regarded as citizens
for the purpose Of that Article. The
questi<>n was not cortsidered in
B
relation to Art. 31 ( t) which is not limited in its operation to citizens. It
m~n.ion 'persons who may be corporations or group of persons. [155 F;
158 G-Hl
State Trading Corporation of India Ltd. v. Commercial Tax Officer,
Visakhapatnam and Ors., [1964] 4 S.C.R. 99, distinguished.
(ii) The majority in Smt. Ujjam Bai's case considered that .i breach
of fundamental right guaranteed by Art. 32( 1) is involved in a demand
for tax which i; not leviable under a valid law.
Therefore a demand of
.tax, not backed by a valid law is a threat to property and gives rise to a
right to move this Court under Art. 32. The petitioner in such circums·
tances is not compelled to wait or go through the lengthy procedure of
.appeals, references etc. He may move the Supreme .Court for the
~flforcement of the fundamental rights so threatened.
This however, is
not an absolute right. This Court will limit the peiitioner to establish·
ing a br~ach of fundamental right.
It 'Nill not allow a petitioner to use
the provisions of Art. 32 to do duty as an appeal.
A clear enough ca~e
as laid down in Ujjam Bai's case must be made out. [158 D-E; 159 C-D]
The propositions settled
by
the Court in Ujjanz Baf's case may be
simply stated thus.
The tuling
recognises
the existence -of a right to
move this Court under Art. 32 when the action is taken under an ultru
vires statute, or where, aithough
the statute is intra vires the action is
without jurisdic:ion, or the principles of
natural justice
are
violated.
Errors ·of lii.w or !fact committerl in the exercise of jurisdiction founded
-0n a valid law do not entitle a person to have them corrected by way qf
petitions under Art. 32.
It is also pointed
ollt that the proper way· to
correct them is to proceed under the provisions of appeal etc. or by \\·ay
of .proceedings under Art. 226 before the High Court. [156G-157A]
Accordingly in the present case
the petitioner could be allowed
to
Taise the question of jurisdiction. [159D·E]
Smt. Ujjam Bai v. Stale of Uttar Pradesh, (1963] S.C.R. 778, applied
and explained.
Ramji/al v. J.T.C. Mohindragarh, [1951] S.C.R. 127,
Laxmanappa
Hanumantappa v. Union of India, [1955] S.C.R. 769,
State Trading
Corporation of India v. Co1n1nercial Tax Officer, [1964] 4 S.C.R. 99, Stau.>
Trading Corporation of India v. State of Mysore, 14 S.T.C.
416 and
Firm A. T. B. Mehtab Majid & Co. v. State of Madras, 14 S.T.C. 355,
referred to.
(iii) The petJtioner Board was not entitled to the exemption c]ain1ed.
The phrase· 'sale in the course of export' comprises in itself three
11!5sentials : (i) that there must be a sale (ii) that goods must actua1ly he
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·exported and (iii) the sale must he a part and parcel of the export. There·
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-'fore· e:ther the sale mμst take place whe.1 the goods are already in the
proce;s of being exported which is established by
their having already
cro:;se::I th~ Customs frontiers, or ihe sale rnu>t occasion the export. The
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COFFEE BOARD V. C. T, 0,
149
v,:ord 'occasion' is used as a verb and means
ito cau.se' or 'to be the
immediate cause of. Read in this way the sale which is to be regarded
as exempt is a sale which causes the export to take place or is the immeJiate cause Of the export. The word 'cause' in the expression 'in the
course of' means 'progres:i or process of', or shortly, 'during'. The phrase
expanded with this meaning reads 'in the progress or process of export'
or 'during export'. Therefore the export from India to a foreign destination must be established and the sale must be a link in the same export
for which the sale is held.. The introduction of an intermediary between
the seller and the importing buyer breaks the link for then there are two
sales one to the intermediary and the other to the importer.
The first
sale is not in the course Of export for the export begins from the intermediary and ends with the importer. [163F-164B]
Therefore the tests are that there must be a single sale which itself
causes the export of is in the process pr progress of export. There is no
room for two or more sales in the course of export. [164 B-Cl
Whether the export is by agreement between the parties or by force
of law, in either case there is. a seller and a buyer who by reason of the
sale also become exporter and importer respectively.
Any other buyer
\Yho is not himself the importer buys 1for export even if export ultimately
results.
It is to bring out these results
that Parliament has recognised
only two cases of sale in the cause of export : (a) where the sale is effected by a transfer of documents of title to goods
after
the goods have
.:rossed the customs frontiers that is to say the goods are already on the
\\·ay to the importer and (b) when the sale
itself causes the export to.
take place that is to say the exporter and importer negotiate and complete a sale which without more would result in a sale Of goods.
No
other sale can qualify for the exemption under s. 5 ( 1) read with Art.
:~6(l)(b). fl64 C-FJ
The sales by the Coffee Board were sales for export and not in the
.:0urse of export. There are two independent sales involved in the export programme.
The first sale is a sale between the Coffee Board as
-,eller to the export promoter. Then there is the sale by the export promoter to a foreign buyer.
Of the latter sale the Coffee Board does not
have any inkling when the first sale takes place. The Coffee Board's sale
i~ not in any way related to the second sale which is in the course of exporr since it causes the movement of goods between an exporter and an
importer. [164 H-165 BJ
The rules compelling export by the registered exports make no difference. The compulsion only compels persons who buy on their own to·
~xport in their O\Vn turn by entering into another
agreement for sale.
Even \vith the compulsion the sale may not result 'for clauses 26, 30 and
-'I vi,;ualise such happenings. [165 E-F]
Tra1·a11core Cochin & Ors. v. The Brnnhnv Co. Ltd.
[1952] S.C.R.
J 112 and Sil/le of Travancore Cochin & Ors. ·v. Shan1nugha Cashew Nut
Factory & Ors. f 1954] S.C.R. 53, applied.
State of Mysore v. Mysore Spinning and Manufacturing Co. A.LR.
1958 S.C.
1002,
Burmah Shell Oil Storage and Distributing Company
C.C .. \1961] l S.C.R. 902 and East India Tohacco Co. v. State of Andhra
Pradesh, (1962) 13 S.T.C. 529,
B. K. Wadar v. Dau/atram Rameshwarla/, [1961] 1 S.C.R. 924 and K. G. Klwsla & Co. v. Dy. Commissioner·
0/ Comme·ciol Taxes. (1966) 17 S.T.C. 473, reforred to.
150
SUPREME COURT REPORTS
[1970] 3 S.C.R.
Ben Gorm Nilgiri P/antptions Campany, Coonoor v. Sales Tax Officer,
lJ 964) 7 S.C.R. 706, distinguished.
.
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Indian Coffee. Board v. Stale of Madras,
(1956) 7 S.T.C.
135;
.approved.
Per Sikri, J. (dissenting) . When a
word bears two
meanin~ the
.context must determine which is the appropriate meaning to be adopted.
The word 'occasion' is an ordinary dictionary word and not a technical
word.
The dictionary meaning· is wider than the .meaning sought to be
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given in the majority judgment which was 'to cause or to be the imme-
.diate cause'. In the context of (a) the need to develop export trade and
(b) the idea. underlying Art. 286 namely, to restrict the power of the
States to levy taxes on sales which might haniper export trade, it is more
appropriate to give the wider meaning to the word 'occasion' in the cOns~
!ruction of s. 5 (I). It would be wrong to say that in the case of the
Bombay Co. Ltd. and in Shanmugha Vilas Cashew Nut Factory's case this
Court accepted the narrower meaning of the world. [166B-G; !67D)
C
Similar expression occurring in ss. 3 and 5(2) of the Act has been in-
·terpreted by this Court on a number of occasions and it is difficult to
appreciate why the same expression bears a different meaning in s. 5 (I),
{168B-CJ
The heart of the matter lies in answering the question whether two
"Sales can occasion an export.
The question must be
answered
in the
affirmative, Two sales can take place in the course of export if they are
effected by the transfer of documents of title to the goods a!fter the goods
have cro3sed the customs frontiers of India and they both will be protected under s. 5 (I) of the Act. Therefore it cannot be assumed that it is the
intention of s. 5(1) that only one sale,can enjoy the protection of s. 5(1).
The Word occasion does not necessarily mean immediately .cause; it also
means "to bring about eSpeciaJly in an incidental or subsidiary manner".
l'f the sale brings about the export in an incidental or subsidiary manner
it can be said to occasion the export. [I 69B-D]
On the facts of the present case the Coffee Board,
the sellers have
concern with the actual export of goods. They have made various provisions to see that the pllrchasers must export. Condition 26 clearly provides that the coffee shall be exported to stipulated or approved destina,
tions and it shall not under any circumstances be diverted to another destination sold or be disposed of or otherwise released in India. If the purchaser commits a default, apart from penalty, it is provided that unexported coffee may be seized. · Thus the Coffee Board retains control over the
goods.
The3e conditions create a bond _between 1he sale and eventual export. The possibility that in a particular case a purchaser might commit
a breach of contract or law and not export does not change the nature of
the transaction [170G-171A]
Case IaW re'ferr_ed to.
ORIGINAL JURISDICTION: Writ Petitions Nos. 216 and 217 of
1969.
Petition under Art. 32 of the Constitution of India for e~force
ment of fundamental rights.
M. C. Seta/vad, K. !. Chandran, B. Datta, !. B. Dadachanji,
:and Ravinder Narain, the petitioner.
S. V. Gupte and A. V. Rangam, for the respondents.
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COFFEE BOARD v. c. T. 0. (Hidayatullah, C.J.)
151
C. K. Daphtary,. B. Datta, J. B. Dadachanji and Ravinder
Narain, for the intervener.
The Judgment of M. HJDAYATULLAH, C.J., G. K. MITTER,
A. N. RAY and P. JAGANMOHAN REDDY JJ. was delivered by
HIDAYATULLAH, C.J. S!KRI, J. gave a. dissenting Opinion.
Hidayalullah, C.J.-These are petitions un?er Art. 3~ of the
Constitution by the Coffee Board, Bangalore directed agamst th_e
Joint Comme;'cial Tax Officer, Madras and the State of Tamil
Nadu que3tioning the demand of Sale; Tax on certain transactions
of sales which the Board claims are sales in the course of export
of Coffee out of India and thus not liable to Sales Tax.
A preliminary objection was taken at the hearing that the petitions do
not lie since no question of a fundamental right is involved.
We
shall deal with the preliminary objection later as the main petition
and the preliminary objection are interlinked. But before we
mention the points in controversy it is necessary to state the facts
more fully.
The petitioner is a statutorily constituted body and functions
under the Coffee Act, 1942 (VII of 1942). This Act was passed
to provide for the development under the control of the Union of
the Coffee Industry. Its main function i3 to constitute a Coffee
Board.
Previously there was an Ordinance intituled the Indian
Coffee Market Expansion Ordinance, 1940 (13 of 1940). A
Board called the Indian Coffee Market Expansion Board was
constituted under the Ordinance.
The same Board now contmues
under the name 'Coffee Board'.
On this Board, all interests are
repre>ented and some Members of Parliament and Officers of
Government have also places.
Sections 4 to 10 of· fhe act are
concerned with the setting up of the Board.
As nothing turns
upon the constitution of the Board, it. is not necessary to give the
gist of those sections here. The Act imposes duties of Customs
and Excise-the former on all Coffee produced in India and
exported from India and the latter on coffee released by the Board
for. sale .in India from its surplus pool.
The Act compels the
reg1stral10n of all owners of Coffee Estates and licensing of curers
and dealers.
The Act next imposes a control on the sale, export
an.d re-import of coffee into India.
In respect of sale, it fixes
.pnces for saJe of coffee either wholesale or retail by registered
owners and hcensed curers for the purpose of sale in the Indian
Market.
The Board fixes internal sale quota for each Estate
owner and the ?wner has to observe this quota and also the price
fixed.
The registered owner may not sell coffee unless it has been
cured by a licensed establishment or it is sold uncured under a
special licence.
The Act next prohibits the export of coffee from
India otherwise than by the Board or under the authorization
granted by the Board.
To this restriction, there are a few minor
152
SUPREME COURT REPORTS
[1970] 3 s.c.R.
except10ns such as coffee in specified quantities may be exported
by taking on board ships or aircrafts intended for consumption of
the crew and the passengers or carried by a passenger for his own
use or exported for special purposes specified by the Central Government. The Government is authorised to secify the total quantity
of coffee to be exorted during any year.
Coffee once exorted
cannot be re-imported into India except under a permit.
The
registered owners are required to furnish periodical returns and to
furnish such information as may be prescribed. Every registered
owner after dealing with the coffee for sale in Indian mark~ts up
to the internal quota fixed for him must hand over to the Board all
surplus coffee to be included in the Board's Surplus Pool.
Similarly, curing establishments are required to surrender to the Board
all surplus coffee.
Small producers may, however, be exempted
from the operation of this condition.
After the coffee is delivered
to the Board, the control of the Board begins.
The Board classifies the coffee and assesses its value based on its quantity, kind
and quality.
Once the coffee is delivered to ihe Board, the registered owner or the licensed curer has no rights over the coffee
except to receive its price in accordance with s. 34 of the Act.
We are not concerned in this petition with any internal sales.
The Board has elected to make monthly returns and in these petitions taxes on sales made in March and April, 1969 are challenged.
Provisional assessments have been made and demand for
taxes held due after allowing credit for taxes already paid, has
been made by the respondents under the Madras General Sales
Tax Act, 1959.
Of these, certain sales are claimed to be exempted from Sales Tax under the Madras Act by reason of those being
in the course of export of coffee out of India.
The Taxing authorities held that those sales took place within Tamil Nadu State and
were' thus liable to sales tax under the Tamil Nadu Act.
The
point of difference arises thus :
The Coffee Board follows a procedure for selling coffee which
is to be exported out of India.
Coffee for export is specially
screened and selected.
It is then exposed in auctions specially
held for the purpose.
These auctions are known
as 'Export
Auctions'.
To be able to bid on these occasions, exporters have
to get themselves registered.
The Board maintains a list of
registered .exporters and gives to each of them a permit which
authorises him to take part in the export auction.
A specimen of
the permit granted with the conditions attaching to it is exhibited
as Annexure 'I'.
The conditions which are imposed by the permit
require a security deposit and a standing deposit from the register~
ed exporter. . The security may be in cash or by a guarantee from
a bank or Life Insurance Corporation of India. It is provided
Iha! the permit is liable to be withdrawn and cancelled by the
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COFFEE BOARD v. c. T. 0. (Hidayatu//ah, C.J.)
153
Chief Coffee Marketing Officer if it is found that the permit holder
has sold or attempted to sell coffee, bought by him at the export
auctions, within the internal market without the written permission
of the Chief Coffee Marketing Officer. Similar cancellation is
liable to take place if some of the other conditions of the permit
are not followed.
The Coffee Board has also prepared a set of rules which incorporate the terms and conditions of sale of Coffee in the course of
export.
These rules have been exhibited as Annexure II and
they deal with the conduct of auctions and the procedure to be
followed therein.
They also provide for additional conditions.
Rule 4 provides that only dealers who have registered themselves
as exporters of coffee with the Coffee Board and who hold permits
from the Chief Coffee Marketing Officer in that behalf will be
permitted to participate in the auctions.
Agents may, however,
participate on behalf of exporters but only for one principal at a
time. Before the auction, the registered dealer or the agent must
show the permit issued to him or have it in his custody for production, if so desired.
Before the auction is held, a catalogue of
lots of coffee to be i;>ut up for auction is issued with the reserve
price fixed by the Chief Coffee Marketing Officer in his discretion.
Samples of Coffee are available for prospective buyers.
An
auction in the usual way takes place but no one is allowed to
retract a bid once made.
The highest bid is ordinarily accepted
but if there are reasons to believe that the highest or any particular
bid is not bona fide or gen~ or is the outcome of concerted
action for the purpose of controlling or manipulating prices or for
other improper purposes or that the bidder is not likely to. fulfil
his contract or is otherwise undesirable, the bid may be rejected.
After the bidding comes to an end and the bids have been accepted, the payment of-price takes place in a particular way.
We are
not concerned with other provisions dealing with failure to fulfil
the obligation as to payment of price etc., objections to quality
and so on.
We are concerned with condition no. 26 which is
headed 'Export Guarantee'. This condition is vital in the consideration of the questions involved in this case and may be
quoted:
"26. It is an essential condition of this Auction that
the coffee sold thereat shall be exported to the destination stipulated in the Catalogue of lots, or to any other
foreign country outside India as may be approved by
the Chief Coffee Marketing Officer, within three months
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from the date of Notice of Tender issued by the Agent
and that it shall not under any circumstances be diverted
to another destination, sold, or be disposed of, or otherwise released in India.
6Sup. C. I. 7~11
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SUPREME COURT REPORTS
[1970] 3 S.C.R.
The aforesaid period may, on application by the
Buyer, be extended by the Chief Coffee Marketing
Officer in his descretion if he is satisfied that there is
good ground to do so, subject nevertheless to the condition that as consideration for such extension, the Buyer
shall pay the following additional amounts to the Board
"
The buyer is fre~ to export the coffee either by himself or
through any Forwarding Agent but the coffee must not be sold to
the Forwarding Agents.
In other words,
the buyer himself
arranges for the export of the coffee he has purchased at the auction and condition 29 imposes an obligation on the buyer to produce immediately after shipping evidence of the export of the
coffee to the Chief Marketing Officer. If such evidence is not
produced within a period of 60 days, after the time allowed to
make the export, the registered exporter is deemed to have committed a default and the provisions of conditions 30 and 31 then
apply to him.
These conditions are as follows :-
"30. If the Buyer fails or neglects to export the
coffee as aforesaid within the prescribed time or within
the period of extension, if any, granted to him, he shall
be liable to pay a penalty calculated at Rs. 50/- per 50
kilos which shall be deductable from out of the amount
payable to him as per Clause 31."
"31. On default by the Buyer to export the coffee
afforesaid within the prescribed time or such extension
thereof as may be granted, it shall be lawful for the
Chief Coffee Marketing Officer, without reference to the
buyer, to seize the unexported coffee and for that purpose to make entry into any building, godown or warehouse where the said coffee may be stored, and take
possession of the same and deal. with it as if it were part
and parcel of Board's coffee held by them in their Pool
Stock.
"
Conditions 33 and 34 provide for inspection of coffee stocks
and accounts and the buyer is required to send weekly returns.
Other conditions need not be noticed here because they have no
bearing upon the rival cases.
'fhe case of the petitioners is that the purchases at the export
auctmns ar~ really sales by the coffee Board in the course ~f
export of coffee out of the territory of India since the sales themselves occasion the export of coffee and coffee so sold is not
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COFFEE BOARD v. c. r. o. (Hidayatullah, C.J.)
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intended for use in India or for sale in the Indian markets.
Th~
case of the Sales Tax Authorities is that these sales are not inextricably bound up with t~e export of. c?ffee and that the sal~s mmt
be treated as sales takmg place w1thm tbe State of Tamil Nadu
which are· liable to sales tax under the Madras General Sales Tax
Act. The dispute is confined to this aspect of the matter on
merits. The preliminary objection to which we referred earlier
is only this that the petitions do not show a breach of a fundamental right.
The petitioners only claim the benefit of the
exemptions incorporated in the Constitution or the statute dealing
with the levy and collection of sales tax, and their grievance can
be investigated and rigJ:ited by taking recourse to the appellate,
revisional and other remedies under the relevant statute. We shall
begin by considering the preliminary objection.
The preliminary objection consists of two parts.
The first
part questions the standing of the petitioner to move this Court
for the enforcement of its so-called fundamental rights.
It is
argued that the petitioner being a Corporation, has no right to
move this Court for the enforcement of fundamental right to hold,
acquire and dispose of property since this right is available only
to individuals who are citizens and a Corporation is not a citizen.
Reliance is placed upon The State Trading Corporation of India
Ltd. and others v. The Commercial Tax Officer, Visakhapatnam
and others('). The second part is that there is ample provision
for remedies under the Sales Tax Act to question the assessment
and a petition under Art. 32 ignoring those provisions should not
be elltertained.
The case of the State Trading Corporation considered the application of Art. 19(1)(0 and (g) in relation to
Corporations.
It was held that Corporations could not be regarded as citizens for the purpose of Art. 19 since that article is concerned with citizens and corporations have not been declared citizens by the Constitution.
The question was not considered in
relation. t.o Art. 31 ( 1). Some other petitions by corporations
complammg of breach of Art. 31 (I) were entertained by this
Court and the petitioner before us relies on those cases as precedents.
The true position may therefore be stated.
Property as a fundamenral right is mentioned in the Constitution in Arts. 19(1)(f), 31, 31(A) and 31(B). In Art. 19(1)
( f) it is provided :
_
"19. Protection of certain rights regarding freedom
of speech, etc.
(!) All citizens shall have the right-
(I) [1964} 4 S.C.R. 99.
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SUPREME COURT REPORTS
( 1970] 3 S.C.R.
(f) to acquire, hold and dispose of property; and
To this sub-clause there is a proviso in cl. (5) which states
that nothing in clause (f) shall affect the operation of any existing
law in so far as it imposes, or prevent the State from making any
Jaw imposing, reasonable restrictions on the exercise of the right
conferred. either in the interests of the general public or for the
protection of the interests of any Scheduled Tribe. The main
clause of the article recognises the institution of private property
with all the concomitants of that institution, namely, the acquisition, holding and disposal of property. The proviso recognises,
in the public interest, restrictions on the right in existing law or
hereafter to be imposed by law.
The institution of property thus
recognised leaves freedom to acquire any kind of property excepi
the one in relation to which there is a restrictive law.
Thus it is
that certain kinds of properties such as Narcotic drugs, explosives,
property in excess of ceiling placed by Jaw etc. cannot be acquired
or held.
This restriction curtails the general right and the curtailment must justify itself as a law in the public interest.
Next
we have Arts. 31, 3l(A) and 3l(B). They occur in a section
of Part lll entitled "Rights to Property".
The first of these three
articles deals with compulsory acquisition of property.
The
second and third deal with saving of Jaws providing for acquisition of Estates etc. and validation of certain Acts and Regulations
declared void by Courts.
Two fundamental concepts in Art. 31
are (a) that no person shall be deprived of his property save by
authority of law, and (b) no property shall be compulsorily
acquired or requisitioned save for a public purpose and save by
authmity of law which itself fixes the amount of compensation or
specifies the principles on which compensation is to be determined
and given and the manner thereof.
Other provisions either restrict or amplify the operation of these two fundamental concepts.
In Smt. Uiiam Bai's(') case the question was whether assessment
of Saks Tax under a valid Act was open to challenge under Art.
Ji on the ground of misconstruction of the Act or a notification
under it.
It was held that the answer was in the negative. That
case has given some trouble in view of the different opinion expressed in it.
It is therefore necessary to state simply the propositio,ns which are settled by this Cou1t.
The ruling recognizes the
existence of a right to move this Court under .Art. 32 where the
ac~ion is taken under an ultra vires statute. or where, although the
statute is intra l'ires, the action is without jurisdiction or the principles of natural justice are violated. Errors of law or fact cominitted in the exercise of jurisdiction founded on a valid law do
not entitle a person to have them corrected by way of petiti~1s
(I) 1963] S.C.R. 77e.
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COFFEE BOARD v. c. T. 0. (Hidayatul/ah, C.J.)
157
under Art. 32.
It is also pointed out that the proper way to correct them is to proceed under the provisions for appeal etc. or by
way of proceedings under Art. 226 before the High Court.
In Ramji/a/ v. l.T.O.,. Mohindragarh(') and in Laxmanappa
Hanumantappa v. Union of India, (2), taxation laws were unsuccessfully challenged with the aid of Art. 31 (I) read with Art.
265 in petitions purporting to be under Art. 32. In the former
case it was observed as follows :
"In our opinion. the protection against the imposition and collection of taxes save by authority of the law
directly comes from articles 265 and is not secured
by Clause (I) of article 31.
Article 265 not being in
Chapter Ill of the Constitution, its protection is not a
fundamental right which can be imposed by an application to this Court under Article 32.
It is not our purpose to say that the right secured by article 265 may not
be enforced.
It may certainly be enforced by adopting
proper proceedings.
All that we wish to state is that
this application in so far as it purports to be founded
on article 32 read with 31 (I) to this Court is misconceived and must fail".
These propositions were not accepted by
•h·.'
majority
in
Ujjam Bai's(") case.
It was observed at p. 941 ac fot:ows :-
"If by these observations it is meant to convey that
the protection under Art. 265 cannot be sought by a
petition under Art. 32, I entirely agree.
But if it is
meant to convey that a taxing law which is opposed to
fundamental rights must be tested only under Art. 265,
I find it difficult to agree.
Articles 31 (I) and 265
speak of the same condition.
A comparison of these
two articles shows this :
Art. 31 (1 )-"No person shall be deprived of his
property save by authority of law".
Ari. 265-No tax shall be levied or collected except
by authority of law.
.
"This Chapter on Fundamental Rights hardly stands
m need of support from Art. 265. If the law is void
under that Chapter, and property is seized to recover a
tax which is void, I do not see why Art. 32 cannot be
• (I) [1951] S.C.R. 127.
(2) [19S5] S.C.R. 76
~ .
(3) [1963) S.C.R. 778.
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SUPREME COURT REPORTS
[1970] 3 s.c.R.
invoked ........ It is not possible to circumscribe Art
32 by making the remedy depend only upon Art.265."
The position was summed up thus :
"From this, it is clear that laws which do not offend
Part Ill and are not otherwise ultra vires are protec!ed
from any challenge whether under Art. 265 or under the
Chapter on Fundamental Rights.
Where the laws are
ultra vires but do not per se offend fundamental rights
(to distinguish the two kinds of defects), they are capable of a challenge under Art. 32.
Where they are
intra vires otherwise but void being opposed to fundamental rights, they can be challenged under Art. 265 and
also Art. 32."
Das, J. (Sarkar, J. concurring) put the same thing differently.
He observed that "if a quasi-judicial authority acts without
jurisdiction or wrongly assumes jurisdiction by committing an
error as to a collateral fact and the resultant action threatens or
violates a fundamental right, the question of enforcement of that
right arises and a petition under Art. 32 will lie".
He added that
"where a statute is intra vires but the action taken is without
jurisdiction, then a petition under Art. 32 would be competent".
Similar observations are to be found in the opinion of Kapur J.
Therefore, the majority view considered that a breach of fundamental right guaranteed by Art. 32(1) is involved in a demand
for tax which is not leviable under a valid law.
The application
nf these principles finds ample recognition in the following cases
of the Supreme Court : (I) State Trading Corporation of India
v. The Cummercial Tax Officer(') (2) State Trading Corporation
of India v. The State of Mysore( 2 ) (3) Firm A. T. B. Me/ital>
Majid & Co. v. State of Madras(').
It will be noticed that they are all cases of Corporations and
have been considered under Art. 32.
The ruling in the State
Trading Corporation case referred to earlier did not render these
petitions incompetent because Art. 31 (1) is not limited in its
operation to citizens. It mentions "persons" who may be Corporations and group of persons.
In Indo China Steam Navigation Co. v. Jasjit Singh(') there
are some observations that in petitions under Art. 32, no claim of
a fundamental right can be made under Art. 31 ( 1) if the statute
under which action is taken is valid for then Art. 19(l)(f) doe<>
(!) [1964] 4 S.C.R. 99.
(3) 14 S.T.C. 355.
(2) 14 S.T.C.
416.
(4) [1%4] 6 S.C.R. 594.
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COFFEE BOARD v. c. T. 0. (Hidayatullah, C.l.)
159
not apply.
These observations run counter to Ujjam Bai's(')
case which is binding on us.
The first part of the preliminary
objection fails.
The second part need not detail us.
We have already held
that demand of a tax, not backed by a valid law, is a· threat to
property and thus gives rise to a right to move this Court under
Art. 32.
The petitioner in such circumstances is not compelled
to wait or go through the lengthy procedure of appeals, references
etc.
He may move the Supreme Court for the enforcement of the
fundamental rights so threatened
This, however, is not an absolute right.
This Court will limit the petitioner to establishing a
breach of fundamental right.
It will not allow a petitioner to use
the provisions of Art. 32 to do duty as an appeal.
A clear enough
case as laid down in Ujjam Bai's( 1) case, analysed by us here.
must be made out.
A threat to property unbacked by a valid law
or a want of jurisdiction or a breach of the principles of natural
justice must.be clearly made out, to entitle one to the assistance of
this Court. If that is successfully done then the provisions for
other remedies do not stand in the way.
We accordingly allowed
the petitioner to raise the point of jurisdiction before us.
We are concerned in these petitions with the exemption granted by Art. 286(l)(b) of the Constitution which reads:
"286. Restrictions as to imposition of tax on the
sale or purchase of goods.
( 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)
(b) in the course of the import of the goods
into, or export of the goods out of, the
territory of India."
Before the 6th Amendment, the Constitution did not containG
any difinition of the phrase 'in the course of export'.
By that
Amendment Parliament has been given the power to indicate the
principles on which that phrase is to be construed. In s. 5 (1) of
the Central Sales Tax Act, 1956 Parliament has given a legislative meaning of the ph~ase 'in .the c.ourse of export' of goods out
of the territory of India. It runs thus :
H
"S (1) A sale or purchase of goods shall be deemed
to take place in the course of the export of the goods out
(l) [1963] S.C.R. 778.
160
SUPREME COURT REPORTS
[ 1970]3 s.c.R.
of the territory of India only if the sale or purchase
either occasions such export or is effected by a transfer
of documents of title to the goods after the goods have
crossed the customs fronti.ers of India."
The word 'only' in the sub-section shows that there are only two
transactions which can come within the exception.
In the case
of sales to registered exporters, the second part does not apply
and the matter must, therefore, be judged under the first part.
Before the enactment of the Central Sales Tax Act, two rulings of
this Court had construed the expression and as the legislative
definition gives effect to what was laid down in those two cases a
rderence to them appears necessary.
In the State of Travancore-Cochin and ors. v. The Bombay
Co. Ltd.(') four meanings were considered and sales in the course
of export were equated to sales which occasioned the export. This
Court said :
"A sale by export thus involves a series of integrated activities commencing from the agreement of sale
with a foreign buyer and ending with the delivery of the
goods to a common carrier for transport out of the
country by land or sea.
Such a sale cannot be dissociated f•·()m the export without which it cannot be
effcctu~te-~ "nd the sale and resultant export form parts
of a single transaction.
Of these two integrated activities which together constitute an export sale, whichever
first occurs can well be regarded as taking place in tht>
course of the other".
. ..\gain,
'"We are not much impressed with the contention
that no sale or purchase can be said to take place "in
the course of" export or import lljuless the property in
the goods is transferred to the buyer during their actual
movement, as for
instance, where the shipping documents are cleared on payment,
or on acceptance, by
seller to a local agent of the foreign buyer after the
goods have been actually shipped, or where such documents are cleared on payment, or on acceptaince, by
the Indian buyer before the arrival of the goods within
the State.
This view, which lays undue stress on the
etymology of the word "course"
and formulates
a
mechanical test for the application of clause (b), places,
---
(I) [1952] S.C.R. 1112.
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COFFEE BOARD v. c. T. 0. (Hidayatu/lah, C.J.)
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in our opinion, too narrow a construction upon that
clause, in so far as it seeks to limit its operation only to
sales and purchases effected during the transit of the
goods, and would, if accepted, rob the exemption of
much of its usefulness".
In the State of Travancore-Cochin & Ors. v. Shanmugha Vilas
Cashew Nut Factory" & Ors.(') it was again emphasised that sales
and purchases which themselves occasion the export of the goods
came within the exemption of Art.