# SINGARENI COLLIERIES CO. LTD v. STATE OF ANDHRA PRADESH AND OTHERS

- **Citation:** [1966] 2 S.C.R. 190
- **Court:** Supreme Court of India
- **Decided:** 1965-10-12
- **Case number:** Civil Appeal Nos. 950-952 of 1963
- **Bench:** P. B. Gajendragadkar, K. N. Wanchoo, M. Hidayatullah, J. C. Shah, S. M. Sikri
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/singareni-collieries-co-ltd-v-state-of-andhra-pradesh-and-others-3695
- **Pages:** 14

## Headnote

Hyderabad General Sales Tax Act, 1950, s. 2(k)--Supply of coal to
consumers outside State pursuant to allotment orders under Colliery Control
Order, 1945-Whether allotment order covenant or incident of contract
of sale-Whether sales tax under State Act leviab/e-Or whether exempt
under Explanation to Art. 286(J)(a) or as inter-State sales.
lbe appellant company carried on the business of mining coal from its
collieries and supplying it to consumers both wilhin and outside the State.
In proceedings for assessment to Sales tax, the company claimed that
it was not liable to pay sales tax under the Hyderabad General Sales
Tax Act, 1950, on the price of coal supplied to al!ottees outside the
taxing State pursuant to the directions of the Coal Commissioner issued
under the Colliery Control Order, 1945.
This claim was rejected by
the Sales Tax Officer on the ground that the coal in question was sold
F.O.R. colliery siding and was actually delivered to the consumers within
the State when it was loaded on their account in Railway Wagons at
the colliery siding.
The appeals against that decision to the appellate ·
authorities as well as to the High Court were dismissed.
On appeal to this Court,
HELD : The sales in question were not liable to be taxed under the
Hyderabad General Sales Tax Act, 1950. [203 DJ
Sales of coal between April, 1, 1954 and September 6, 1955, for
delivery to consumers outside the State could not be taxed under the
Hyderabad Act because they were covered by the explanation to Art.
286(l)(a) before it was amended. [201 F]
Under the Colliery Control Order, supply, use and disposal of coal
were regulated from the. stage of production till
consumption.
Coal
supplied was meant for consumption by the allottee; therefore when the
allottee was outside the State, it was supplied for the purpose of consumption in the State in which the allottee resided or carried on business.
The expression "actually delivered" used in Explanation to Art. 286(1) (a)
does _not include mere symbolical or notional delivery e.g. by entrusting
goods to a common carrier, or by delivery of documents of title like
railway receipts. [194 H, 196 B, 200 F]
Shree Bajrang Jute Mills v. The State of Andhra Pradesh, 15 S.T.C.
430, followed.
Similar Sales during the period September 7, 1955 to September 10,
1956 were also exempt because the Explanation continued to remain in
force. till the latter date and furthermore during that period the State
had no power to levy tax on inter-State sales. [201 G-H]
lJengal Immunity Co. Ltd. v. State of Bihar, [1955] 2 S.C.R 603,
referred to.
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SINGARENI COLLIERIES v. STATE (Shah, J.)
191
For the period September 11, 1956 to January 4, 1957 although
Art. 286(2) stood repealed, there was no power in the State to tax
inter-state sales; and from January 5, 1957 to March 31,
1957 the
power to tax inter-state sales rested exclusively with the Central Government under the Central Sales Tax Act, 1956. Coal was transported
from the colliery of the company to consumers outside the taxing State
as a result of a convenant or incident of the contract of sale and therefore the sale must be regarded as an inter-State sale within the meaning
of s. 3(a) of the Central Act and not liable to be taxed under the
I;Iyderabad Act. [202 D, 203 B]
Tata Iron & Steel Co.. Ltd. v. S. R. Sarkar, [1961] I S.C.R. 379, State
Trading Corporation of India Ltd. v. State of Mysore, 14 S.T.C. 188 and
Cement Marketing Co. of India v. State of Mysore, 14 S.T.C. 1751, referred to.

## Text

SINGARENI COLLIERIES CO. LTD.
v.
STATE OF ANDHRA PRADESH AND OTHERS
October 12, 1965
[P. B. GAJENDRAGADKAR, C.J., K. N. WANCHOO,
M. HIDAYATULLAH, J. C. SHAH AND S. M. SIKRI, JJ.]
Hyderabad General Sales Tax Act, 1950, s. 2(k)--Supply of coal to
consumers outside State pursuant to allotment orders under Colliery Control
Order, 1945-Whether allotment order covenant or incident of contract
of sale-Whether sales tax under State Act leviab/e-Or whether exempt
under Explanation to Art. 286(J)(a) or as inter-State sales.
lbe appellant company carried on the business of mining coal from its
collieries and supplying it to consumers both wilhin and outside the State.
In proceedings for assessment to Sales tax, the company claimed that
it was not liable to pay sales tax under the Hyderabad General Sales
Tax Act, 1950, on the price of coal supplied to al!ottees outside the
taxing State pursuant to the directions of the Coal Commissioner issued
under the Colliery Control Order, 1945.
This claim was rejected by
the Sales Tax Officer on the ground that the coal in question was sold
F.O.R. colliery siding and was actually delivered to the consumers within
the State when it was loaded on their account in Railway Wagons at
the colliery siding.
The appeals against that decision to the appellate ·
authorities as well as to the High Court were dismissed.
On appeal to this Court,
HELD : The sales in question were not liable to be taxed under the
Hyderabad General Sales Tax Act, 1950. [203 DJ
Sales of coal between April, 1, 1954 and September 6, 1955, for
delivery to consumers outside the State could not be taxed under the
Hyderabad Act because they were covered by the explanation to Art.
286(l)(a) before it was amended. [201 F]
Under the Colliery Control Order, supply, use and disposal of coal
were regulated from the. stage of production till
consumption.
Coal
supplied was meant for consumption by the allottee; therefore when the
allottee was outside the State, it was supplied for the purpose of consumption in the State in which the allottee resided or carried on business.
The expression "actually delivered" used in Explanation to Art. 286(1) (a)
does _not include mere symbolical or notional delivery e.g. by entrusting
goods to a common carrier, or by delivery of documents of title like
railway receipts. [194 H, 196 B, 200 F]
Shree Bajrang Jute Mills v. The State of Andhra Pradesh, 15 S.T.C.
430, followed.
Similar Sales during the period September 7, 1955 to September 10,
1956 were also exempt because the Explanation continued to remain in
force. till the latter date and furthermore during that period the State
had no power to levy tax on inter-State sales. [201 G-H]
lJengal Immunity Co. Ltd. v. State of Bihar, [1955] 2 S.C.R 603,
referred to.
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SINGARENI COLLIERIES v. STATE (Shah, J.)
191
For the period September 11, 1956 to January 4, 1957 although
Art. 286(2) stood repealed, there was no power in the State to tax
inter-state sales; and from January 5, 1957 to March 31,
1957 the
power to tax inter-state sales rested exclusively with the Central Government under the Central Sales Tax Act, 1956. Coal was transported
from the colliery of the company to consumers outside the taxing State
as a result of a convenant or incident of the contract of sale and therefore the sale must be regarded as an inter-State sale within the meaning
of s. 3(a) of the Central Act and not liable to be taxed under the
I;Iyderabad Act. [202 D, 203 B]
Tata Iron & Steel Co.. Ltd. v. S. R. Sarkar, [1961] I S.C.R. 379, State
Trading Corporation of India Ltd. v. State of Mysore, 14 S.T.C. 188 and
Cement Marketing Co. of India v. State of Mysore, 14 S.T.C. 1751, referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 950-952
of 1963.
Appeals from the judgment dated the November 15, 1960
of the Andhra Pradesh High Court in T.R.C. No. 17 of 1960
and dated the July 25, 1961 in Special Appeals Nos. 1 & 2 of
1961.
N. A. Palkhivala, S. N. Andley, Rameshwar Nath, P. L. Vohra
and Mohinder Narain, for the appellant.
D. Munikanniah and T. V. R. Tatachari, for the respondents.
M. Adhikari, Advocate-General, Madhya Pradesh and I. N.
E Shroff, for intervener no. 1.
M. C. Seta/vad, N. A. Palkhivala, A. P. Sen, R. K. P.
Shankardass,
J. B. Dadachanji, 0. C. Mathur and Ravinder
Narain, for intervener no. 2.
·
N. A. Palkhivala, A. P. Sen, R. K. P. Shankardass, J. B.
F
Dadachanji, 0. C. Mathur and Ravinder Narain, for intervener
no. 3.
G
J. B. Dadachanji, for intervener no. 4.
S. V. Gupte, Solicitor-General and R. N. Sachthey, for interintervener no. 5.
The Judgment of the Court was delivered by
Shah, J.
The question which falls to be determined in these
appeals is "whether the appellant Company is liable to pay salestax assessed under the Hyderabad General Sales Tax Act, 1950 on
the price of coal supplied to allottees outside the taxing State purH
suant to directions of the Coal Commissioner issued under the Colliery Control Order, 1945". The Company which has its registered
office at Hyderabad in the former Part 'B' State of Hyderabad, and
192
SUPREME
COURT REPORTS
[1966) 2 S.C.R.
now in the State of Andhra Pradesh, carried on the business of A
mining coal from its collieries and supplying it to consumers within
and outside the State of Hyderabad.
These appeals relate to three financial years 1954-55, 1955-56
and 1956-57, during which coal was a controlled commodity, and
its disposal and use could be made only under orders issued by the
B. .
appropriate authority under the Colliery Control Order, 1945. The
Company clauned that Rs. 1,75,67,286/1/2 in the year 1954-55,
Rs.
1,17,39,636/11/8
in
the
year
1955-56,
and
Rs. 1,55,18,937/6/5 in the year 1956-57 were not liable to be in-
"!$;;
eluded in the taxable turnover for levying sales tax under the
Hyderabad General Sales Tax Act, 1950, because the State Legislac
ture which enacted that Act was, by Art. 286 of the Constitution,
prohibited from imposing tax on transactions of supply of coal outside the limits of the State under orders of the Coal Commissioner.
The Commercial Tax Officer, Hyderabad, admitted the claim of
the Company for the years 1954-55 and 1955-56 for exemption
from liability. The claim of the Company for the year 1956-57 was
D
however rejected.
The Company appealed to the Deputy Commis~ioner of Commercial Taxes and to the Sales-tax Appellate Tribunal, Hyderabad, against the order of assessment for the year 195657, but without success. The Company then applied to the High
Court of Andhra Pradesh in its revisional 1"urisdiction, and submitE
ted in support of its claim that a part of its turnover was exempt
from liability to sales-tax under the Hyderabad General Sales Tax
Act because the turnover was in respect of sales, (a) which had taken
place outside the State within the meaning of.Art. 286(1)(a) read
with the Explanation thereto, and (b) which were effected in the
course of inter-State trade or commerce, and the Parliament had F
not by law removed the ban against imposition of tax on such sales
by the State Legislature. The High Court rejected these contentions. In the meanwhile the Commissioner of Commercial Taxes
issued notices to the Company to show cause why the orders of
assessment for the years 1954-55 and 1955-56 should. not be reopened and why the sales which were exempted by the order of the
Commercial Tax Officer should not be charged to tax, and by his
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orders respectively dated February 8, 1961 and November 16, 1960
for the two years 1954-55 and 1955-56 brought to tax the turnover
which was previously treated as exempt. The orders were carried to
the High Court in appeal and the same grounds which were set up
in the revision application relating to the assessment year 1956-57
were set up, beside the ground that the action for re-opening the
assessments by the Commissioner of Commercial Taxes was barred
by limitation and was therefore incompetent.
The High Court
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SINGAREN! COLLIERIES V. STATE (Shah, J.)
193
A rejected these contentions. With certificate granted by the High
Court, these appeals are preferred by the Company.
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At the material time, by s. 2(k) of the Hyderabad General Sales
Tax Act, 1950, the expression "sale" was defined as under:
" 'Sale' with all its grammatical variations and cognat~ expressions means every transfer of property in goods
by one person to another in the course of trade of business
for cash or for deferred payment or other valuable consideration and includes also a transfer of property in
goods involved in the execution of a works contract, but
does not include a mortgage, hypothecation, charge or
pledge.
Explanation 2. -Notwithstanding anything to the
contrary in any other law for the time being in force, a
transfer of goods, in respect of which no tax can be
imposed by reason of the provisions contained in Article
286 of the Constitution, shall not be deemed to be 'sale'
within the meaning of this clause."
The Explanation was evidently introduced into the definition with a
view to avoid its operation on transactions which are outside the
taxing power of the States by virtue of Art. 286 of the Constitution.
E
In these appeals, the Company submitted in the first instance
that within the meaning of the Hyderabad General Sales Tax Act,
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there was no sale of coal which was supplied to the consumers pursuant to directions issued by the Coal Commissioner and therefore
the taxing provisions of the Act were not attracted, and placed
reliance in support thereof on the judgment of this Court in New
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India Sugar Mills Ltd. v. Commissioner of Sales Tax, Bihar( 1 ).
But this contention was never raised at any stage before the taxing
authorities or even before the High Court, and on the view we take
on the other contentions raised in these appeals, we need not consider this contention. We proceed to deal with these appeals on
the footing that the transactions under which coal was supplied by
G the Company to the consumers as directed by the Coal Commissioner were sales under the general law of sale of goods.
H
Two questions arise for determination :
(1) Whether the transactions of sale were "Explanation sales" and on that account hit by Art. 286(1 )(a)
of the Constitution, before it was amended by the Constitution (Sixth Amendment) Act, 1956; and
(I} 14 S.T.C. 316.
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SUPREME COURT REPORTS
[1966] 2 S.C.R.
(2) whether those transactions were sales which took
place in tho course of inter-State trade or commerce.
It is urged that for a part of the period to which these appeals
relate, the sales are hit by both the legislative bans contained in
Art. 286(1)(a) and Art. 2.86(2), and for the rest by one or the
other of such bans.
It is necessary in the first instance to summar~se the provisions
of the Colliery Control Order, 1945, and to set out the manner in
which coal was supplied by the Company to its constituents'- The
Central Government was authorised by notification to fix the price
A
B
of coal or different prices for different grades of coal which may be
sold by colliery owners (cl. 4). The colliery owners and their agents
C
were prohibited from selling, or offering for sale coal at a price
different from the prices fixed in that behalf under cl. 4, and from
granting or agreeing to grant any commission, rebate or such other
concession in any form having the effect of reducing either directly
or indirectly the said price (cl. 5). A colliery owner could with the
consent of the Deputy Coal Commissioner sell coal at the price
D
fixed under cl. 4 direct to a consumer, if an allotment was made
by the Deputy Coal Commissioner to the consumer for such direct
sale. (cl. 6).
The Central Government could issue directions to
any colliery owner regulating the disposal of his stocks of coal or
of the expected output of coal in the colliery during any period (cl.
8); and notwithstanding any contract to the contrary, every colliery E
owner to whom a direction was given under cl. 8 had to dispose of
<:oal in accordance therewith and could not dispose of coal in contravention thereof (cl. 9). The Coal Commissioner could order that
<:oal despatched by any colliery owner to any person which was
in transit (terminii whereof were defined by the Explanation) shall
subject to terms and conditions if any imposed by the Coal ComF
mi~sioner be diverted and delivered to another person specified in
the order [cl. 10-A(I)]. As soon as an order was made under subd. (1), all the rights of the consignee, the owner of the colliery, or
other person in that consignment of'coal were, subject to the terms
<>f the order, to devolve upon and vest in the person to whom the
coal was to be delivered under the order [cl. 10-A(2)]. An allottee
G
of coal could not use it otherwise than in accordance with the conditions of the order of allotment, nor divert or transfer any such
coal to any other person except under a written authority from the
Central Government (cl. 12-B): and no person could acquire or
purchase or agree to acquire or purchase coal from a colliery, and .H
no colliery owner could despatch or agree to despatch or transport
any coal from the colliery except under the authority and in accordance with the authority of the Central Government (cl. 12-E).
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SINGARBNI COLLIERIES v. STATE (Shah, J.)
195
A
Broadly speaking the scheme of the Colliery Control Order was
that no person could acquire or purchase or agree to acquire or purchase any coal from a colliery and no colliery owner could sell or
agree to sell or despatch coal from the colliery, except under the
authority and in accordance with the conditions prescribed by the
Coal Commissioner, and that the persori to whom coal was supB plied also could not utilise it for a purpose other than the purpose
for which it was supplied, nor could he dispose of coal supplied to
him. Supply, use and disposal of coal were therefore regulated from
the stage of production till consumption.
The manner in which the Colliery Control Order was adminisC
tered is illustrated by certain decuments on the record. The Coal
Commissioner addressed a letter to a colliery authorising it to despatch on the request of the specified consumers coal not exceeding
the quantities mentioned during certain months and according to the
schedule appended. In the Schedule appended to the letter were
set out the names of the concerns to whom coal was to be supplied.
D Intimation of the despatch instructions was given to the consumers
individually. Acting upon this intimation, the consumer addressed
a letter to the colliery requesting that the quantities of coal allotted
may be despatched to him by train and gave instructions regarding
booking, the name of the person to whom coal may be consigned,
and also about the collection of price of coal supplied. The colliery
E then loaded coal in railway wagons making out a "sale note" mentioning the cost per ton F.0.R. Colliery with "freight to pay" and
despatched the same by rail to the consumer at the destination requested. In the "sale note" were set out the name of the buyer,
grade and quantity of coal allotted, the terms of sale, cost per ton
F.O.R. Colliery, other charges, and particulars of despatch, such as
F , the name of the Railway Station to which the coal should be booked
and the name of the consignee. The sale note was subject to conditions of sale, that the colliery shall not be responsible for non-delivery of coal or for any loss occasioned in consequence of fire,
snow, heat, flood, strikes, lockouts, shortage of wagons, restrictions
on booking, accidental losses, etc. that any taxes, export duty, cess
G
or other charges not in force imposed by the Government after the
date of the sale note shall be borne by the purchaser; that the colliery
reserved the right to dsmand payment in advance and to have a
right of lien on all coal despatched until it was paid for : that the
sale note was subject to the quantity allotted by the Deputy Coal
Commissioner for buyers outside the State. and in the event of the
H Deputy Coal Commissioner cancelling the whole or any part of the
said allotment, such cancellation shall be deemed to apply equally
to the sale note.
196
SUPREME
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REPORTS
[1966] 2 S.C.R.
· Under the terms of the "sale note" the property in the coal conA
signed passed, so far as the colliery was concerned, to the allottee--
original or substituted-when the goods were loaded into the railway
wagons for conveyance, and thereafter all losses and any new taxes
imposed were to be borne by the purchaser, the colliery having only
"
a right of lien on coal not paid for. Coal supplied was meant for
consumption by the allottee : therefore when the allottee was outB
side the State, it was supplied for the purpose of consumption in the
State in which the allottee resided or carried on business.
In view of the legislative developments which we will presently
notice, the period of the three assessment years may be divided into
four sub-periods. They are: April l, 1954 to September 6, 1955; c
September 7, 1955 to September 10, 1956; September 11, 1956 to
January 4, 1957 and January 5, 1957 to March 31, 1957. In
making this sub-division we have not taken into account the application of the States Reorganisation Act as a result of which on
November 1, 1956, the Part 'B' State of Hyderabad ceased to exist
and the State of Andhra Pradesh came into existence by merger of D
certain areas including parts of the State of Hyderabad. The effect
of the Reorganisation Act had a bearing only on the territorial
operation of the constitutional prohibitions under Art. 286.
Under the Government of India Act, 1935, it was open to every
Provincial Legislature to enact legislation authorising the levy of E
tax on sale of goods in respect of transactions whether within or
outside the Province, provided the Province had a territorial nexus
with one or more elements constituting the sale. This resulted in
levy of sales tax by many Provinces in respect of the same transaction-each Province fixing upon one or more elements constituting
the sale with which it had a territorial nexus. The Constitution with
F
a view to prevent imposition of manifold taxes on the same transsaction of sale imposed by Art. 286 restrictions on the levy of sale
and purchase taxes on certain classes of transactions. Article 286,
as it was originally enacted, read as follows :
"(1) No law of a State shall impose, or authorise the
imposition of, a tax on the sale or purchase of goods where
G
such sale or purchase takes place-
·
(a) outside the State; or
(b) in the course of the import of the goods into, or
export of the goods out of, the territory of India.
Explanation.-For the purposes of sub-clause (a), a
sale or purchase shall be deemed to have taken place in
the State in which the goods have actually been delivered
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SINGAREN! COLLIERIES V. STATE (Shah, J.)
as a direct result of such sale or purchase for the purpose
of consumption in that State, notwithstanding the fact that
under the general law relating .to sale of goods the property in the goods has by reason of such sale or purchase
passed in another State.
(2) Except in so far as Parliament may by Jaw otherwise provide, no Jaw of a State shall impose, or authorise
the imposition of, a tax on the sale or purchase of any
goods where such sale or purchase takes place in the
course of inter-State trade or commerce :
Provided that the President may by order direct that
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 this Constitution ·shall,
notwithstanding that the imposition of such tax is contrary to the provisions of this clause, continue to be levied
until the thirty-first day of March, 1951.
(3) 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 community shall have effect unless it has been reserved for the
consideration of the President and has received his
assent.''
197'
Article 286 thus imposed qua sales four bans upon legislative power
of the States. Clause (1) prohibitetl every State from imposing or
authorising. the imposition of, a tax on outside sales and on sales
in the course of import into or export outside the territory of India.
F By cl. (2) the State was prohibited from imposing tax on the sale
of goods where such sale took place in the course of inter-State
trade or commerce. But the ban could be removed by the legislation made by the Parliament. By cl. (3) the Legislature of a State
was incompetent to impose or authorise imposition of a tax on the
sale or purchase of any goods declared by the Parliament by law
G to be essential for the life of the community, unless the legislation
was reserved for the consideration of the President and had received his assent.
This Court in The Bengal Immunity Company Ltd. v. State of
Bihar(') held that the operative provisions of the several pans of
H
Art. 286, namely cl. (l)(a), cI: (l)(b), cl. (2) and cl. (3), are intended to deal with different topics and one cannot be projected or read
(I} [19551 2 S.C.R. 603.
198
SUPREME
COURT
REPORTS
(1966] 2 $.C.R.
into another, and therefore the Explanation in cl. (l)(a) cannot
A
legitimately be extended to cl. (2) either as an exception or as a
proviso thereto or read as currailing or limiting the ambit of cl. (2).
This Court further held that until the Parliament by law made in
exercise of the powers vested in it by cl. (2) of Art. 286 provides
otherwise, no State may impose or authorise the imposition of any
tax on sales or purchases of goods when such sales or purchases
B
take place in the course of inter-State trade or commerce, and
therefore the State Legislature could not charge inter-State sales or
purchases until the Parliament had otherwise provided. The judgment in The Bengal Immunity Company's case(') was delivered on
September 6, 1955. The President then issued the Sales Tax Laws
Validation Ordinance, 1956,. on January 30, 1956, the provisions
of which were later embodied in the Sales Tax Laws Validation
Act, 1956. By this Act notwithstanding any judgment, decree or
order of any Court, no law of a State imposing, or authorising 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 trade or
commerce during the period between the 1st day of April, 1951
and the 6th day of September, 1955, shall be deemed to be invalid
or ever to have been invalid merely by reason of the fact that such
sale or purchase took place in the course of inter-State trade or
commerce; ·and all such taxes levied or collected or purported to
have been levied or collected during the aforesaid period shall be
deemed always to have been validly levfod or collected in accordance with law.
The Parliament thereby removed the ban contained in Art. 286(2) of the Constitution retrospectively but limited
only to the period between Aprill, 1951 and September 6, 1955.
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All transactions of sale, even though they were inter-State could for
that period be lawfully charged to tax. But Art. 286(2) remained
F
operative after September 6, '1955 till the Constitution was amended
by the Constitution (Sixth Amendment) Act, i.e., September 11,
1956. By the amendment, the Explanation to cl. (1) of Art. 286
was deleted and for els. (2) & (3) the following clauses were substituted :
"(2) Parliament may by law formulate principles for
determining when a sale or purchase of goods takes place
in any of the ways mentioned in clause (1).
(3) Any law of a State shall, in so far as it imposes,
or authorises the imposition of, a tax on the sale or purchase of goods "declared by Parliament by law to be of
special importance in inter-State trade or commerce, be
subject to such restrictions and conditions in regard to the
(1) [1955] 2 S.C.R. 603.
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S!NGARENI COLLIERIES V. STATE (Shah, J.)
199•
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system of levy, rates and other incidents of the tax as
Parliament may by law specify.'; ·
By cl. (2) of Art. 286 as amended, the Parliament was authorised
to formulate principle for determining when a sale or purchase of
B goods takes place in any of the ways mentioned in cl. (!), namely,
outside the State or in the course of the import into, or export out
of the territory of India. By the Constitution (Sixth Amendment)
Act, the Parliament was entrusted with power under Art. 269(3)
to formulate principles for determining when a sale or purchase of
goods takes place in the course of inter-State trade or commerce;.
c and to effectuate the conferment of that power in the Seventh
Schedule, Entry 92A was added in the First List and Entry 54 in
the Second List was amended. The Parliament enacted, in exercise of that power, the Central Sales Tax Act 74 of 1956 (which
became operative as from January 5, 1957) to formulate principles
for determining when a sale or purchase of goods takes place in
n the course of inter-State trade or commerce or outside a State or
in the course of import into or export from India, and to provide
for the levy, collection and distribution of taxes on sales of goods
in the course of inter-State trade or commerce and to declare·certain
goods to be of special importance in inter-State trade or commerce
etc.
E
For the period April 1, 1954 to September 6, 1955 therefore
transactions which were inter-State were deemed, because of the
Sales Tax Laws Validation Act, taxable by the States-the bar
contained in Art. 286(2) having been retrospectively removed. For
the period September 7, 1955 to September 10, 1956 Art. 286(2)
F having remained in operation and the Sales Tax Laws Validation
Act, 1956, not having been extended to cover that period, interstate sales could not be taxed by the 'State Legislature. During the
period September 11, 1956 to January 4, 1957 Art. 286(2) ~toad'
repealed by the Constitution (Sixth Amendment) Act, 1956, but
the Parliament had assumed to itself the power under Entry 92A
G of the First List in the Seventh Schedule to tax sale or purchase
of goods where such sale or purchase takes place in the course of
inter-State trade or commerce. In exercise of the power to formulate principles for determining when a sale or purchase of goods
takes place in the· course of inter-State trade or commerce. the·
Parliament enacted the Central Sales Tax Act, 1956 which was
H brought into force on January 5, 1957, and after that date interState sales could be taxed under the provisions of the Central
Sales Tax Act.
200
SUPREME COURT
REPORTS
[1966) 2 S.C.R.
The Company claims that the transactions which are sought to
A
be charged for the period between April 1, 1954 to September 6,
1955 are not taxable, because they were covered by Explanation to
cl. (l)(a) of Art. 286 of the Constitution, before it was amended.
For the period between September 7, 1955 and September 10, 1956,
it is claimed that the transactions are not taxable, because they are
covered by the Explanation to Art. 286(1) and also because they
B
are inter-State sales. For the period September 11, 1956 to January 4, 1957 the transactions are not taxable, because they are intcrState sales not chargeable under any statutf'r---State or Parliamentary-and for the period January 5, 1957 to March 31, 1957, the
transactions are not chargeable by the State, because they are interstate and are chargeable under the Central Sales Tax Act alone.
C
The true effect of Explanation to Art. 286(1) and Art. 286(2)
gave rise to conflicting opinions, but it is unnecessary to enter upon
a discussion of the earlier cases, for the principles applicable thereto
have now been settled by decisions of this Court as to what transactions are covered by the Explanation to cl. (1) of Art. 286 before
D
it was amended.
In Shree Bajrang Jute Mills Ltd. Guntur v. The State of Andhra
Pradesh (1), it was held by this Court that a sale falls within the
E{i'.planation to Art. 286(l)(a) if goods have actually been delivered
. as a direct result of the sale for the purpose of consumption in the
State in which they are delivered, and the expression "actually deE
livered" in the context in which it occurs can only mean physical
delivery of the goods, or such other action as puts the goods in the
possession of the purchaser. The expression "actually delivered"
does not include mere symbolical or notional delivery e.g. by entrusting the goods to a common carrier, or even by delivery of documents of title like railway receipts. It was said that the rule contained in s. 39(1) of the Indian Sale of Goods Act, 1930 has no
application in dealing with a constitutional provision which while
imposing a restriction upon the legislative power of the States entrusts exclusive power to levy sales tax to the State in which the
goods have been actually delivered for the purpose of consumption.
G
The Court also held that if the goods were actually delivered for
consumption in another State it was immaterial whether the property
in the goods passed in the State from which they were despatched. I
F
Counsel for the State of Andhra Pradesh contended that in the
present case coal despatched from the territory of the taxing State
H
to purchasers in other States was actually delivered within the tax-
(!) 15 S.T.C. 430.
•
•
•
•
•
A
B
c
SINGARENI COLLIERIES V. STATE (Shah, J.)
201
ing State and therefore the principle of Shree Bajrang Jute Mills'
case(') did not apply to those transactions.
That contention has
however no force. The Explanation defines the State in which the
goods have actually been delivered for consumption, as the State
in which for the purpose of cl. (l)(a) of Art. 286 the sale shall be
deemed to have taken place. That State alone in which the sale is
deemed to take place has the power to tax the sale, and for this
purpose it is immaterial that· property in the goods has under/
the general law relating to sale of goods passed in another State in
which the allottee resided or carried on business. Delivery of coal
to the Railway Administration may amount to delivery to the allottee for the purpose of the general law relating to sale of goods, but
thereby coal cannot be said to be "actually delivered" within the
meaning of the Explanation to Art. 286(l)(a). It is also true that
under the terms of the sale-note under which coal was despatched
on terms F.O.R. Singareni the Company was not responsible for
loss or damage to the consignment after it was loaded in the wagons,
that may indicate that the Company had no property in the goods
D
after it was in transit. But determination of the State in which sale
shall be deemed to have taken place is artificially determined not
by terms of the contract of sale, nor by the legal concept of pa~sing
of property in the goods sold by the delivery for the purpose of consumption.
As observed by Das Ag. C.J. in the Bengal Immunity
E
Company's case(2 ) :
F
G
H
"The shifting of situs of a sale or purchase from its
actual 'situs' under the general law to a fictional 'situs'
under the Explanation takes the sale or purchase out of
the taxing power of all States other than the State where
the 'situs' is fictionally fixed."
Sales-tax under the Hyderabad General Sales Tax Act on transactions of coal delivered to the Railway or other carrier for carriage
to places outside the taxing State and for delivery for consumption
therein is therefore not leviable to be taxed by virtue of the Explanation to Art. 286(1).
For the period September 7, 1955 to September 10, 1956,
the turnover from sale of coal actually delivered outside the State
of Andhra for consumption in those States would also be exempt
from liability, because the Explanation continued to remain in
for~e till September 10, 1956.
The Company would also be
entitled to exemption from liability to tax because the State had
during that period no power to levy tax on inter-State sales.
As
(1} 15 S.T.C 430.
(2) [1955] 2 S.C.R. 603.
202
SUPREME COURT REPORTS
[1966] 2 S.C.R.
pointed out by Venkatarama Ayyar, J., in the Bengal Immunity A
Company case (1) :
"A sale could be said to begin the course of interState trade only if two conditions concur : ( 1) A sale
of goods, and (2) a transport of those goods from one
State to another under the contract of sale.
Unless
both these conditions are satisfied, there can be no sale
·in the course of inter-State trade."
B
In these transactions relating to supply of coal, which we have
assumed are sales, coal was transported in pursuance of the allotment orders to other States. We have also assumed for the purpose of· this argument, that compliance with allotment orders C
resulted in a contract of sale.
The transactions were unquestionably in the course of inter-State trade.
For the period September 11, 1956 to January 4, 1957, Art.
286(2) stood repealed and there was no power in the State to
tax an inter-State sale.
For the period between January 5, 1957 D
and Match 31, 1957 the power to tax inter-State sales was
governed by the Central Sales Tax Act, 1956. By the Constitution (Sixth Amendment) Act amending Art. 286\2) and
incorporating Entry 92A in List I of the Seventh Schedule read
with Art. 269 ( 3) the power to tax sales in the course of interstate trade or commerce rested with the Central Government.
E
Sales-tax for the period from January 5, 1957 to March 31, 1957,
has not been levied under the Central Sales Tax Act, 1956, and
if the transactions by the Company were taxable under that Act,
the State of Andhra Pradesh had no power to tax those transactions.
As transactions of sale in the course of inter-State trade
or commerce within the meaning of s. 3, they could not be taxed F
under the Hyderabad General Sales Tax Act, 1950.
Section 3
of the Central Sales Tax Act, 1956 provides that "a sale .
. of
goods shall be deemed to take place in the course of inter-State
trade or commerce if the sale .
. occasions the movement of
goods from one State to another or is effected by a transfer of docuG
ments of title to the goods during their movement from one State to
another". In Tata Iron and Steel Company Ltd. v. S. R. Sarkar( 2 )
this Court held that cl. (a) of s. 3 covers sales in which the movement of goods from one State to another is the result of a covenant
or incident of the contract of sale, and property in the goods
passes in either State.
That view was reaffirmed in The State H
Trading Corporation of India Ltd. & Another v. The State of
(!)" [1955] 2 S.C.R. 603.
(2) [1961] l S.C.R. 379.
•
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;;.'
SINGARENI (:OLL!ERIES V. STATE (Shah, J.)
203
A
Mysore and Another(') and Cement Marketing Company of
India v. State of Mysore(").
Coal in the appeals under review was transported from the
colliery of the Company to the consumers outside the taxing State,
as a result of the covenant or incident of the contract of sale and
B
therefore the sale must be regarded as an inter-State sale and not
liable to be taxed under the Hyderabad General Sales Tax Act,
1950. The High Court was, in our view, in error in holding that
the turnover of the ~ompany in which coal was loaded in railway
wagons for conveyance to places outside the taxing State was
taxable under the Hyderabad General Sales Tax Act. In that
c view we do not think it necessary to decide whether the Commissioner of Commercial Taxes was right in re-opening the assessments
for the years 1954-55 and 1955-56 in the manner he has purported to do.
The appeals arc allowed and the order passed by the High Court
D is set aside.
It is declared that the turnover of the Company
amounting to Rs. 1,75,67,286/1/2 for the year 1954-55;
Rs.
1,17,39,636/11/8
for
the
year
1955-56
and
Rs. 1,55,18,957 /6/5 for the year 1956-57 was exempt from
liability to sales tax under the Hyderabad General Sales Tax Act,
1950.
The Company will be entitled to its costs in the appeals
E
in this Court and the High Court. There will be one hearing
fee.
Appeals allowed.
(!) 14 S.T.C. 188.
(2) 14 S.T.C 175.
L!Sup.CI/66-14