# • COMMISSIONER OF SAI F.S-TAX, INDORE v. M/S. MOHD. HUSSAIN RAHIM BUX, MAIHAR A 11gust 28, 1968

- **Citation:** [1969] 1 S.C.R. 880
- **Court:** Supreme Court of India
- **Decided:** 1969
- **Bench:** J. C. Shah, V. Ramaswami, A. N. Grover
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-sai-f-s-tax-indore-v-m-s-mohd-hussain-rahim-bux-maihar-a-11gust-4535
- **Pages:** 7

## Headnote

Constiru1ion of India, 1950, Art. 264 (before it.r anu·ndnzt'nt by
the
Constitution (Seventh) Amendment Act, 1956), providinf?
that
unless
con:ext othen1:ise required the word ''State' in Part XII would not il'ldude
a Part C State-State in Art. 286 whether 1vould include Pnrt C S1u1e-·
Applicohilitv of Art. 286 to Port C Stmes.
The respondent firm r°'isted imp06ition of sale. tax by the cntwbilc
State of Vindhya Pradesh for the as.'c.'5mcnt
periods between April I,
1950 and March 31, 1951, on the ground that the tax came under the
prohibition contained in Art. 286 of the Constitution.
The
revenue
authorities held that Art. 286 did not apply to Part C States becaUSe Art.
264 (as it wa' before it• amendment in 1956) provided that un1.,.. !lie
context othe.r\•.:ise required the word 'State' in Part XII would not include
a Part C S'.ate. and there.fore the restriction• in Art. 286 applied only to
States other than Part C States.
The Sales Tax Tribunal and the High
Cour1 held in f•1vour df the a.,~c~~ee. The revenue appealed to this Court.
HEW : (i) There are sever.ii articles in Part XII which prec<:de and
follow Art. 286 about which it cannot he confidently said that the word
State used in these Articles would not take in Part C States a., well. Sa.ch
Articles are 275. 276, 277. 280. 282, 287 and 291.
Thus the meaning of
the word 'State' in Art. 286 will have to be dercrmined from the context.
It will he quite leftitimate to nOI only look at the context but also the
purpose and object for which Art. 286 was enacted. (884 F-G]
(ii) The obicct of Arr. 286 was ro prevent impediment and disrourage·
mcnt to the fro.; flow of trade within India regarded as one economic unit
and to pn.,-vcnt commcxiities essential fdr the
life of
the
community
throughout India from being subjected to '"!"" tax.
The
Constitution
contemplated that Part C States could have their own legislature.c;.
There.
was no ground \\·hat.c;oever to differentiate Part C States from Part A and
Part B States in the matter of restrictions put by Art. 286 on the legislative
power of the State.
In this view of the matter a requirement ca.n cectainly he •pelt out from the context of Art. 286 that the word 'Sl&le'
employe~ therein should inchKle Part C States.
(885 D-FJ
Several anomalies \vould result if Pan C States
wt:ke hold to be
immune from 1he f'e6trictions of Art. 286.
'!'here would be
mnltlple
taxation inasmuch as goodc; \\'hich under the Explanation to Art. 286
(as it \\'as at the relevant time) \\.'ere taxable in another State because
they were delivered for consumption there would still he taxable in ttlc
Part C St~ttc.
The Part C State unlike other Statc1; \\'OUl<l he free to tax
inter-Stare c;ales. 'I"hc C,onstitution makers could never have
countenanced
a ~ituation which \vould have brought in such discrimination between Part
C State> and other States. (885 F-886 BJ
Del/ti La"·s Act Case, [1951] S.C.R. 747 and Bengal Immunity Co.
Ltd. v. State of Hi/tar, (1955] 2 S.C.R. 603, referred to.
Civ1t. Arrr.LL\ n
Jt:n1srm; no-i : Civil Appeal' Nos. 60!8
and 629 of 1966.
A
B
c
D
E
F
G
H
•
·.
A
c. s. T. v. RAHIM BUX (Grover, J.)
SS 1
Appeals by special leave from the judgments and orders dated
July 30, 1964 of the Madhya Pradesh High Court in Misc. Civil
Cases Nos: 71 of 1964 and 179 of 1963.
[. N. Shroff for the appellant (in both the appeals).
N. D. Karkhanis and A. G. Ratnaparkhi for the respondent
B
(in both the appeals) •

## Text

•
COMMISSIONER OF SAI..F.S-TAX, INDORE
v.
M/S. MOHD. HUSSAIN RAHIM BUX, MAIHAR
A 11gust 28, 1968
[J. C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.]
Constiru1ion of India, 1950, Art. 264 (before it.r anu·ndnzt'nt by
the
Constitution (Seventh) Amendment Act, 1956), providinf?
that
unless
con:ext othen1:ise required the word ''State' in Part XII would not il'ldude
a Part C State-State in Art. 286 whether 1vould include Pnrt C S1u1e-·
Applicohilitv of Art. 286 to Port C Stmes.
The respondent firm r°'isted imp06ition of sale. tax by the cntwbilc
State of Vindhya Pradesh for the as.'c.'5mcnt
periods between April I,
1950 and March 31, 1951, on the ground that the tax came under the
prohibition contained in Art. 286 of the Constitution.
The
revenue
authorities held that Art. 286 did not apply to Part C States becaUSe Art.
264 (as it wa' before it• amendment in 1956) provided that un1.,.. !lie
context othe.r\•.:ise required the word 'State' in Part XII would not include
a Part C S'.ate. and there.fore the restriction• in Art. 286 applied only to
States other than Part C States.
The Sales Tax Tribunal and the High
Cour1 held in f•1vour df the a.,~c~~ee. The revenue appealed to this Court.
HEW : (i) There are sever.ii articles in Part XII which prec<:de and
follow Art. 286 about which it cannot he confidently said that the word
State used in these Articles would not take in Part C States a., well. Sa.ch
Articles are 275. 276, 277. 280. 282, 287 and 291.
Thus the meaning of
the word 'State' in Art. 286 will have to be dercrmined from the context.
It will he quite leftitimate to nOI only look at the context but also the
purpose and object for which Art. 286 was enacted. (884 F-G]
(ii) The obicct of Arr. 286 was ro prevent impediment and disrourage·
mcnt to the fro.; flow of trade within India regarded as one economic unit
and to pn.,-vcnt commcxiities essential fdr the
life of
the
community
throughout India from being subjected to '"!"" tax.
The
Constitution
contemplated that Part C States could have their own legislature.c;.
There.
was no ground \\·hat.c;oever to differentiate Part C States from Part A and
Part B States in the matter of restrictions put by Art. 286 on the legislative
power of the State.
In this view of the matter a requirement ca.n cectainly he •pelt out from the context of Art. 286 that the word 'Sl&le'
employe~ therein should inchKle Part C States.
(885 D-FJ
Several anomalies \vould result if Pan C States
wt:ke hold to be
immune from 1he f'e6trictions of Art. 286.
'!'here would be
mnltlple
taxation inasmuch as goodc; \\'hich under the Explanation to Art. 286
(as it \\'as at the relevant time) \\.'ere taxable in another State because
they were delivered for consumption there would still he taxable in ttlc
Part C St~ttc.
The Part C State unlike other Statc1; \\'OUl<l he free to tax
inter-Stare c;ales. 'I"hc C,onstitution makers could never have
countenanced
a ~ituation which \vould have brought in such discrimination between Part
C State> and other States. (885 F-886 BJ
Del/ti La"·s Act Case, [1951] S.C.R. 747 and Bengal Immunity Co.
Ltd. v. State of Hi/tar, (1955] 2 S.C.R. 603, referred to.
Civ1t. Arrr.LL\ n
Jt:n1srm; no-i : Civil Appeal' Nos. 60!8
and 629 of 1966.
A
B
c
D
E
F
G
H
•
·.
A
c. s. T. v. RAHIM BUX (Grover, J.)
SS 1
Appeals by special leave from the judgments and orders dated
July 30, 1964 of the Madhya Pradesh High Court in Misc. Civil
Cases Nos: 71 of 1964 and 179 of 1963.
[. N. Shroff for the appellant (in both the appeals).
N. D. Karkhanis and A. G. Ratnaparkhi for the respondent
B
(in both the appeals) •
The Judgment of the Court was delivered by
Grover, 1.
The common question on which the disposal of
these two appeals by special leave depends relates to the applicability of Art. 286 of the Constitution of India read with Art. 264
before the amendments made by the Constitution (VIIth AmendC
ment) Act, 1956 to the erstwhile State of
Vindhya Pradesh
during the relevant assessment period for the purpose of imposition of sales tax.
D
E
F
G
H
The respondent firm manufactures and deals in bidis having
head office at Maihar which was a part of the erstwhile United
States of Vindhya Pradesh.
The Rajpramukh promulgated the
Vindhya Pradesh Sales Tax Ordinance No. II of 1949 for the
levy of a tax on sales of goods in Vindhya Pradesh. After
Vindhya Pradesh had been included in the list of Part C States
in the Schedule in the Constitution the aforesaid Ordinance was
applied to the whole of Vindhya Pradesh with effect from April
1, 1950 by a notification No. 2 of March 28, 1950. The Parliament passed the Part C States (Laws) Act, 1950. Section 2 of
that Act authorised the Central Government to extend any enactment to Part C States, which was in force in Part A States by
a notification in the official gazette with power to repeal and
amend any corresponding law.
In exercise of that power, the
Central Government by a notification .dated December 29, 1950
extended to the State of Vindhya Pradesh the Central Provinces
and Berar Sales Tax Act, 1947 as was in force in the old State
of Madhya Pradesh subject to certain modifications.
By that
notification a new section was added to the C.P. & Berar Sales
Tax Act, 194 7.
The newly added section 29 provided for the
repeal and saving and the Vindhya Pradesh Sales Tax Ordinance
No. II of 1949, was repealed. On March 20, 1951, the Central
Government issued a notification in exercise of the powers conferred under sub-section (3) of s. 1 of the C.P. & Berar Sales
Tax Act, 1947 as extended to the State of Vindhya Pradesh
ordering that, from April 1, 1951, the extended Act would come
into force in the State of Vindhya Pradesh. Thereafter the
Parliament passed the Government of Part C States Act, 1951. In
view of the decision of this Court in Delhi Laws Act case(') the
Porrt C States (Miscellaneous Law Repealing) Act, (Act LXVI
of 1951) was enacted by Parliament on October 31, 1951. By
s. 2 of that Act Laws declared in column 2 of its Schedule were
(1) [1951] S.C.R. 747.
•
•
.88 2
SCPREME COURT REPORTS
[1%9] I SC.R.
repealed or deemed to have been repealed with effect from the
dates specified in the corresponding entry in
wlumn 3 of
that
Schedule.
In the Schedule the Vindhya
Pradesh
Sales
Tax
Ordinance II of 1949 was repealed from December 29,
1950.
The Vindhya Pradesh Legislative Assembly
also
passed
the
Vindhya Pradesh Laws (Validating) Act,
1952 (Act VI of
1952). Section 2 of that Act provided that C.P. & Berar Sales
Tax Act, 1947 would be deemed to be in force in Vindhya Pradesh from April 1, 1951. This entire history of legislation relating to the sales tax in the erstwhile State of Vindhya Pradesh has
been given because the periods of assessments involved in both
the appeals are from April 1, 1950 to June 30. 1950 and July I,
1950 to December 31. 1950 and January 1, 1951 to March 31,
1951.
The relevant facts in C.A. 629/66 need only be stated.
In
respect of the period of assessment from April 1, 1950 to June
30, 1950 the respondent claimed that it was not liable to tax in
respect of the sales of bidis of the value of Rs. 31,059/12 as the
hidis sold were delivered outside the State of Vindhya Pradesh
for consumption and that the transactions of the despatches
of
bidis of the value of Rs. 4,01,255/4 from its head office at Maihar
to its branches in U.P. were not sale transactions but were mcrclv
transfer of goods from the head office to its branches and could
not be assessed to sales tax in view of the provisions of Art. 286
-of the Constitution.
The Assistant Commissioner of Sales "fox
of Rewa rejected the first claim of the assessee. It is unnecessary
to give details of the decisions by the various departmental authorities, but the main controversy before them. as before the Sales
Tax Tribunal which was the Hoard of Revenue. centred on
the
applicabiliry of Art. 286 of the Constitution to the former State
of Vindhya Pradesh. It was held by tl1e Tribunal that Art. 286
was applicable.
In the other appeal i.e. C.A. 628 /66. also the
same question arose.
Certain questions of law were framed in
both the cases and referred to the High Court by the tribunal.
These questions need not be mentioned because in
the present
appeals it is common ground that ·the decision of the appeals
would hinge on the point whether Art. 286 applied to Part C
States.
It may be mentioned that the High Court had
agreed
with the tribunal that the said Article was applicable. If that
view is affim1ed it is not disputed that both the appeals will haw
10 be dismissed.
Article 264 of the Constitution. as it stood before its amcn<iment by the Constitution (Vllth Amendment) Act t 956, which
appeared in Part xn, Chapter I provided :
•
A
B
c
D
E
F
G
H
'·
A
B
c
D
E
F
G
H
c.S.T. v. RAHIM BUX (Grover, I.)
883
1 "In this Part, unless the context otherwise requires :-
Ca) ................. -
( b) 'State' does not include a State specified in
Part C of the First Schedule;
'(a) ................... .
Art. 286 (I) was in the following terms :
"(1) No law of a State shall impose, or authorise
the imposition of, a tax on the sale or purchase of goods
where such sale or purchase takes place-·
(a) outside the State; or
(b) in the course of the import of the goods into, or
export of the goods out of, the territory of
India".
The short argument which was urged before the departmental
authorities and· the High Court and which has been now pressed
before us by the learned counsel for the appellant is that owing
to the express exclusion of Part C State from the definition of
the word "State" in Art. 264 the provisions of Art. 286 could
not possibly be applied as it places an inderdict on the making
of a law by a State of the nature mentioned in the Article. It is
submitted that although Art. 264 says "unless the context otherwise requires", but there is nothing in Art. 28 6 from which any
such requirement can be spelt out which would attract the applicability of Art. 286.
It would be useful at this stage to first refer to Part VIII of
the Constitution which deals with the States of Part C in the First
Schedule.
Article 239 provides "subject to the other provisions
of this Part, a State specified in Part C of the First Schedule shall
be administered by the President acting, to such extent as he
thinks fit, through a Chief Comniissioner or a Lieutenant Governor to be appointed by him or through the Government of a
neighbouring State".
Article 240 laid
down that
Parliament
may by law create or continue for any State specified in Part C
a body, whether nominated, elected or partly nominated and
partly elected, to function as a legislature for the State; or a
Council of Advisers or Ministers. or both with such constitution.
powers and functions, a5 may be specified. The Parliament
under the powers conferred by the Constitution enacted the Part
C States Laws Act, 1950, giving power to the Central Government to extend any enactment in force in Part A to the States in
Part C "with such restrictions and modifications as it thinks fit". -
The validity of the provisions of that Act came up before this
C~urt in Re. the Delhi Laws Act('). We need not, in this case,
(1) [1951] S.C.R. 747.
•
•
884
SUPREME COURT REPORTS
( ! 969] J S.CR.
state the views which were expressed in that special reference.
Parliament, however, after the opinions expressed by this Court
passed the Government of Part C States Act, 1951 in exercise
of its powers under Art. 240 ( 1). By this Act Parliament made
provision for the legislature, Council of Ministers or Advisers for
Part C States.
This Act also contained provisions relating
to
Consolidated Fund for a State which was included in Part C of
the First Schedule.
Turning to Chapter XIl of the Constitution before the amendment of 1956 it has already been noticed that Art. 264 which
relates to interpretation with reference to the provisions contained in this Part provides that unless the context otherwise required
State would not include a State specified in Part C of the First
Schedule. In some of the Articles, however, in spite of he aforesaid definition of a State given in Art. 264 for the purposes of
Part XII Part C States were expressly mentioned.
For instance
Art. 268 which relates to duties levied by the Union but collected
3nd appropriated hy the States provides inter a/ia that in case of
any State specified in Part C of the First Schedule these duties
shall be collected by the Government of India.
Article 269
deals with duties and taxes of tho nature mentioned therein which
shall be levied and collected by the Government of India but
shall be assigned to the States. Such duties and taxes could not
fonn part of the Consolidated Fund of India except insofar as
those proceeds represent proceeds attributable to States specified
in Part C.
Article 270 deals with taxes levied and collected by
the Union and distributed between the Union and the States. Tite
prescribed percentage of the aforesaid taxes shall not form pan
of the Consolidated Fund of India except in the case of proceeds
attributable to States specified in Part C.
Now there are several other Articles in Part XII
which
precede and follow Art. 286 about which even the counsel for
the appellant could not confidently say that the word "State" used
in these Articles would not take in Part C States as well.
Such
Articles are 275, 276, 277, 280, 282, 287 and 291.
Thus the
meaning of the word "State" in Art. 286 will have to be ascertained from the context. lt will be quite legitimate to not only
look at the context but also the purpose and the object for which
Art. 286 was enacted.
In the BenKal Immunity Comparry Ltd. v. The Stair of Bi/tar
& Ors. ( 1) the entire background and the true reasons for
the
enactment of Article 286 have been discussed at pages 636 and
637. It has been observed that the imposition of multiple taxes
on one and the same transaction of sale or purchase was certain~
(I) [1955) 2 S.C.R. 601.
A
B
c
D
E
G
H
A
B
c
C.S.T. v. RAHIM BUX (Grover, J.)
885
calculated to hamper and discourage free flow of trade within
India regarded as one economic unit. By Art. 28 6 the Constitution makers clamped on the legislative power several fetters.
Broadly speaking, the fetters thus placed on the taxing power of
the States are that no law of a State shall impose or authorise the
imposition of a tax on the sale or purchase of goods where such
sale or purchase takes place, (a) outside the State or (b) in the
course of import or. export or ( c) except insofar as Parliament
otherwise provides, in the course of inter-State trade or co=erce
and lastly ( d) that no law made by the legislature of a State imposing or authorising the imposition of a tax on the sale or purchase of any such goods as have been declared by Parliament by
law to be essential for the life of the co=unity shall have effect
unless it has been reserved for the consideration of the President
and has received his assent.
The High Court was fully justified in taking the _view that if
the framers of the Constitution thought it necessary to put restrictions on the legislative powers of the State for preventing impediment and discouragement to the free flow of trade within
D
India regarded as one economic unit and for preventing commodities essential for the life of the community throughout India
from being subjected to sales tax then there could be no ground
whatsoever to differentiate Part C States from Patt A or Part B
States in the matter of restrictions put by Art. 286 on the legislative power of the State. It must be remembered that it was
E
contemplated ·and ·provided by the Constitution that Part C
States could have their own legislatures and even an Act was
passed, as previously mentioned, in which detailed provisions
were made regarding these matters, (The Government of Part C
States Act, 1951 ) . In this view of the matter a requirement can
certainly be spelt out from the context of Art. 286 that the .word
F
"State" employed therein should include Part C States.
Several
anomalies will result if it were to be held that Part C States were
immune from the limitations and restrictions imposed by Art.
286. The Explanation to Art. 286(1) would become ineffective.
For instance, under the Explanation the State in which the goods
have actually been delivered as a direct result of sale or purchase
for purposes of consumption in that State would be competent to
G
impose the sales tax.
Now if the former State of Vindhya Pradesh could also collect sales tax on sales where the delivery was
outside the State and was covered by the Explanation then there
would be multiple taxation on one transaction, one by the State
of Vindhya Pradesh and the other by the State in which the goods
were delivered for consumption. Clause 2 of Art. 286 as it stood
H
at the material time before the Constitutional amendments made
ir,_ 1956 provided 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 took place in the course of inter-State
LI Sup. C. 1./69-10
•
•
886
SUPREME COURT REPORTS
[1969] J s.c.R.
trade or conunerce except insofar as
Parliament by law otherA.
\\ise provided. Now if Art. 286 was not applicable to Part C
States then the sales or purchases talcing place in the course of
inter-State trade and commerce could have bce,n taxed by the
erstwhile State of Vindhya Pradesh. It is difficult to understand
how the Constitution-makers could have ever countenanced such
an anomalous situation which would have even brought in discriB
mination between Part C States and the other States.
Whatever
way the matter is looked at, it is difficult to escape from the conclusion that the context of Art. 286 required that the word "State"
as used therein should include Part C States.
We would accordingly affirm the view of the High Court and
dismiss these appeals with costs.
There will be one hearing fee.
C
G.C.
Appeal dismissed.
•