# STATE OF JAMMU & KASHMIR AND OTHERS v. CAI,TEX INDIA (LTD.)

- **Citation:** [1966] 3 S.C.R. 149
- **Court:** Supreme Court of India
- **Decided:** 1965-12-17
- **Bench:** P. B. Gajendragadkar, K. N. Wanchoo, M. Hidayatullah, V. Ramaswami, P. Satyanarayana Raju
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-of-jammu-kashmir-and-others-v-cai-tex-india-ltd-3682
- **Pages:** 12

## Headnote

Sales Tax-Petrol sent under
contract from
Punjab to Jammu &
Kashmir-Sa/es whether inter-State in
character-Chargeability
under
Jammu & Kashmir Motor Spirit (Taxation of Sales) Act 2005, '· 3Sales Tax Laws Validation Act, 1956, effect of-Constitution of India
Art. 286(2).
Petrol and allied products were supplied by the respondent company
from its depot in Punjab to the State Mechamzed Farm at Nandpur in
Jammu & Kashmir State under a contract with the Director-General of
Supplies, Delhi.
The sales were taxed
under the . Jammu & Kashmir
Motor Spirit (Taxation of Sales) Act, 2005 for the period January 1955
to May 1959 by a single assessment order. The assessment was challenged by the respondent by a writ petition filed in the High Court, as being
beyond the taxing power of the State owing to the ban impooed by Art.
286 ( 2) as interpreted by this Court in the Bengal Immunity c..,e, as also
the provisions of the Central Sales Tax Act. 1956 passed by Parliament
after the amendment of Art. 286 by the Constituticn Sixth Amendment
Act, 1956. The respondent's plea
was accepted by a single judge of
the High Court as regards the period after September 6, 1955; as regards
the period before and upto that date the learned Judge held that the
sales were taxable because
the ban
on taxation of inter-State sales in
Art. 286(2) was lifted in respect of that period by the Sales Tax Laws
Validation Act, 1956. In Letters Patent Appeal the Division Bench held
that the assessment order for the whole
period from January 1955 to
May 1959 was one composite whole and being bad in part was infected
throughout and must be treated as wholly
invalid. The State appealed'
to this Court by special leave.
HELD : (i) The sales in question were inter-State sales as both the
conditions laid down in the Bengal Immunity -:ase
for a sale to be
an·
inter-State sale that ( 1) there should be a sale of goods and (2)
the
G
goods must be transported under the contract oi sale from one State to
another, were fully satisfied in the present case.
The sales could not
therefore be taxed for the period not covered by the Sales Tax Laws
Validation Act, 1956. [156 C-D]
H
Bengal Immunity Co. Ltd. v. State of Bihar, [1955] 2 S.C.R. 603, referred to.
(ii) The last mentioned Act however validated the State Jaws which
levied tax on inter~State sales for the period before September 6, 1955.
Hence the sales before that date could be validly taxed as held by the
single Judge, [159 Fl
150
SUPREME COURT
REPORTS
[1966) 3 S.C.R.
.
(iii) The f_act th.at the respondent had no place of business or stora~c
A
in Ja.mmu & Ka()hm1r \\';i."' not material hecausc it \l.'as not a condition for
taxation under the Jammu & Kashmir ti.fotor Spirit
(Taxation of S<ile::.)
Act that there ~hould he such a place of bu..;incss or . ..ioragc.
Scc1ion 3
~f the Act purports 10. tax. all •·retail ~ales". Nor
i'i the holJing of a
'
hccnce under ~. 6 \\·hich 1s a m3ch:ncry
section only, a condition of
liabilliy lo pa~ "i,dcs-1.t\ u11dcr '.he ;\ct
f J 'iS C'-DJ
(iv) ThL~ Division Bench \\'JS ,,,.rl1ng \\'hen it held 1h:it becaut;.c there
B
was one a'>sc..;sment order for the \\·hole
period from Janu;1n.· 19.<i) 10
May 1959. the \i.•holc of :1 \Vas vitiated.
Salc:-1-tax is in ullimaie analysis
•
impo .• cd on receipt~ fron1 inJi\"idu;ll
sale~ or purchase~ of goodc:. and it
v.·as possihlc to separate 1hc assessment of rcccipls derived from the ~ales
for rhc period up 10 Seprcmber 6. 1955 and 10 allow the !axing aulh<>-
rities to enforce the statuh: \\'ith respect to 1he sales taking plac·~ during
this period and also prevent them by grant of a \vrit from in1po..;ing the
lax \\'i!h reg:1trd to
:o.1tle~ for th-.. • excn1ptcd pi.:rlo<l. [159 G-160 EJ
C
State of Bo111hay '" t'niu'd Afotor.,· lndia Ltd. r1953l S.C.R.
1069,
relied on.
8tnne11 & JVliire (Calgary) Ltd. v. ,\f11nf(ipal Districr of S11gar Cit.\'
No. 5. [ 1951] A.C. 786. disringuished.
CIVIL APPELLATE JURISDICTIOS : Civil Appeal No. 864 of
D
1964.
Appeal from the

## Text

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STATE OF JAMMU & KASHMIR AND OTHERS:
B
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F
v.
CAI,TEX INDIA (LTD.)
December 17, 1965
[P. B. GAJENDRAGADKAR, C.J., K. N. WANCHOO,
M. HIDAYATULLAH, V. RAMASWAMI, AND
P. SATYANARAYANA RAJU, JJ.]
Sales Tax-Petrol sent under
contract from
Punjab to Jammu &
Kashmir-Sa/es whether inter-State in
character-Chargeability
under
Jammu & Kashmir Motor Spirit (Taxation of Sales) Act 2005, '· 3Sales Tax Laws Validation Act, 1956, effect of-Constitution of India
Art. 286(2).
Petrol and allied products were supplied by the respondent company
from its depot in Punjab to the State Mechamzed Farm at Nandpur in
Jammu & Kashmir State under a contract with the Director-General of
Supplies, Delhi.
The sales were taxed
under the . Jammu & Kashmir
Motor Spirit (Taxation of Sales) Act, 2005 for the period January 1955
to May 1959 by a single assessment order. The assessment was challenged by the respondent by a writ petition filed in the High Court, as being
beyond the taxing power of the State owing to the ban impooed by Art.
286 ( 2) as interpreted by this Court in the Bengal Immunity c..,e, as also
the provisions of the Central Sales Tax Act. 1956 passed by Parliament
after the amendment of Art. 286 by the Constituticn Sixth Amendment
Act, 1956. The respondent's plea
was accepted by a single judge of
the High Court as regards the period after September 6, 1955; as regards
the period before and upto that date the learned Judge held that the
sales were taxable because
the ban
on taxation of inter-State sales in
Art. 286(2) was lifted in respect of that period by the Sales Tax Laws
Validation Act, 1956. In Letters Patent Appeal the Division Bench held
that the assessment order for the whole
period from January 1955 to
May 1959 was one composite whole and being bad in part was infected
throughout and must be treated as wholly
invalid. The State appealed'
to this Court by special leave.
HELD : (i) The sales in question were inter-State sales as both the
conditions laid down in the Bengal Immunity -:ase
for a sale to be
an·
inter-State sale that ( 1) there should be a sale of goods and (2)
the
G
goods must be transported under the contract oi sale from one State to
another, were fully satisfied in the present case.
The sales could not
therefore be taxed for the period not covered by the Sales Tax Laws
Validation Act, 1956. [156 C-D]
H
Bengal Immunity Co. Ltd. v. State of Bihar, [1955] 2 S.C.R. 603, referred to.
(ii) The last mentioned Act however validated the State Jaws which
levied tax on inter~State sales for the period before September 6, 1955.
Hence the sales before that date could be validly taxed as held by the
single Judge, [159 Fl
150
SUPREME COURT
REPORTS
[1966) 3 S.C.R.
.
(iii) The f_act th.at the respondent had no place of business or stora~c
A
in Ja.mmu & Ka()hm1r \\';i."' not material hecausc it \l.'as not a condition for
taxation under the Jammu & Kashmir ti.fotor Spirit
(Taxation of S<ile::.)
Act that there ~hould he such a place of bu..;incss or . ..ioragc.
Scc1ion 3
~f the Act purports 10. tax. all •·retail ~ales". Nor
i'i the holJing of a
'
hccnce under ~. 6 \\·hich 1s a m3ch:ncry
section only, a condition of
liabilliy lo pa~ "i,dcs-1.t\ u11dcr '.he ;\ct
f J 'iS C'-DJ
(iv) ThL~ Division Bench \\'JS ,,,.rl1ng \\'hen it held 1h:it becaut;.c there
B
was one a'>sc..;sment order for the \\·hole
period from Janu;1n.· 19.<i) 10
May 1959. the \i.•holc of :1 \Vas vitiated.
Salc:-1-tax is in ullimaie analysis
•
impo .• cd on receipt~ fron1 inJi\"idu;ll
sale~ or purchase~ of goodc:. and it
v.·as possihlc to separate 1hc assessment of rcccipls derived from the ~ales
for rhc period up 10 Seprcmber 6. 1955 and 10 allow the !axing aulh<>-
rities to enforce the statuh: \\'ith respect to 1he sales taking plac·~ during
this period and also prevent them by grant of a \vrit from in1po..;ing the
lax \\'i!h reg:1trd to
:o.1tle~ for th-.. • excn1ptcd pi.:rlo<l. [159 G-160 EJ
C
State of Bo111hay '" t'niu'd Afotor.,· lndia Ltd. r1953l S.C.R.
1069,
relied on.
8tnne11 & JVliire (Calgary) Ltd. v. ,\f11nf(ipal Districr of S11gar Cit.\'
No. 5. [ 1951] A.C. 786. disringuished.
CIVIL APPELLATE JURISDICTIOS : Civil Appeal No. 864 of
D
1964.
Appeal from the judgment and order, dated July 10, 1 %2 of
Ihe Jammu & Kashmir High Court in L. P. Appeal No. 4 of 1962.
S. V. G11ptc, Solicitor-Genera!, Raja Jaswanr Singh, Adrncate-General for the State of Jammu and Kashmir, N. S. Bindra.
E
R. H. Dhebar, and R. N. Sachthey, for the appellants Nos. 1 and
2.
M. C. Setalvad, and D. N. Gupta, for the respondent.
The Judgment of the Court was delivered by
Ramaswami, J.
Thi.; appeal is brought on a certificate
against the judgment of the Division Bench of th~ High Court
of Jam mu & Kashmir at Srinagar, dated July I 0, 1962 holding
that the respondent is not liable to pay sales tax for the period
from January, 1955 to May, 1959 under the Jammu & Kashmir
Motor Spirit (Taxation of Sales)- Act, 2005 (1948 A.D.).
The Director-General of Supplies, Delhi entered into a contract with General Manager, Caltcx India (Ltd.) at Bombay
(hereinafter called the respondent) for the supply of petrol, HSD
F .
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and Power Kero to the State Mechanized
Farm
at Nandpur
located in the State of Jammu & Kashmir.
In pursuance of this
H
contract the respondent directed its depot at Pathankot situated
in the Punjab State to supply petrol
to
the Nandpur
Farm.
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J. & K. STATE v. CALTEX (Ramaswami. J.)
151
The procedure adopted was as follows.
The Officer in charge
of the Nandpur farm placed indents with the Pathankot depot for
supply of specified quantities of petrol to the farm and on receipt
of the indents, the Pathankot depot transported the petrol in its own
tank-lorries to Nandpur and delivered the petrol.to the farm.
The
petrol was measured by means of dipping rods and approved by the
indenting officer at N andpur farm and thereafter the petrol was
delivered to the Nandpur farm through pumps which belonged to
the respondent.
The price of petrol so supplied was paid to the
respondent at Delhi by the Director-General of Supplies.
The
Petrol Taxation Officer at Srinagar considered ihat the sales of
petrol to Nandpur farm were liable to be taxed under the .Tammu
& Kashmir Motor Spirit (Taxation of Sales) Act, 2005 and called
upon the respondent to furnish returns of sales between 1952 to
1959.
The respondent, however, furnished returns only for the
period January, 1955 to May, 1959.
On the basis of the returns
the Petrol Taxation Officer assessed the respondent to pay sales tax
to the extent of Rs. 39,619.75 in respect of sales of petrol from
January, 1955 to May, 1959.
The respondent thereafter moved
the High Court under s. 103 of the Constitution of Jammu and
Kashmir for grant of a writ to quash the assessment of sales· tax
and to restrain the State of Jamniu and Kashmir and the Petrol
Taxation authorities (hereinafter called the
appellants)
from
levying the tax.
It was contended on behalf of the respondent
that the sales tax could not be imposed as the sales took place in
the course of inter-State trade and commerce.
Syed Murtaza Faz!
Aii, J. held that the respondent was liable to pay sales tax in
respect of the sales which took place during the period January,
1955 to September, 1955.
Regarding the rest of the period of
assessment, the learned Judge held that the appellants were not
entitled to levy tax and accordingly issued a writ restraining the
appellants from levying the tax for the period from October, 1955
to May, 1959. The appellants took the matter in Letters Patent
appeal and the respondent also filed Cross-objection with regard
to the liability to tax for the period from
January,,
1955 to
September, 1955.
The Division Bench dismissed the appeal in
Letters Patent and allowed the cross-objection of the respondent,
holding that the appellants were not entitled to levy sales tax for
the entire period from January, 1955 to May, 1959 and accordingly quashed the assessment of sales tax, dated October 3, 1960.
It is necessary, at this stage, to indicate the legislative development in the State of Jammu and Kashmir which provides the
set:ting for the questions to be investigated in this case.
152
SUPREME COURT
llEPORTS
[1966] 3 SC.R.
Article 286 of the Constitution, as it was originally enacted,
read as follows :
"(l) No law of a State shall impose, or authorise
the imposition of, a tax on the sll!e 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.
Explanation.-For the purpose 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 as a direct result of such sale or purchase for
the purpose of consumption in that Stale, notwithstanding the fact that under the general law relating to sale
of goods the properly in the goods has by reason of such
sale or purchase passed in another State.
(2) Except in so far as Parliament •nay by law
otherwise provide, no law of a State shall impose, or
authorise the imposition of, a tax on the sab or purchase of any goods where such sale or purchase takes
place in the cours~ of inter-State trade or commerce :
Provided that the President may be 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 cc'l1mencement 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 hy 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 ha~
received his assent."
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Article 286 therefore imposes four bans upon the legislative power
of the States.
Clause (I) prohibited every State from imposing
H
or authorising the imposition of, a tax on outside sales and on
sales in the course of import into or export outside the territory
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J. & K. STATE v. CALTEX (Rama1Swami, J.)
153
of India.
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 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 of any goods declared by the Parliament by
B law 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. But Art. 286 of the Constitution did not
apply to the State of Jammu & Kashmir till May 14, 1954, because the Constitution (Application to
Jammu
& Kashmir)
Order 1950 made by the President of India on January 26, 1950
excepted Art. 286 from its applicability to the State of Jammu &
Kashmir.
Reference, in this connection, may be made to the
Second Schedule to the Constitution (Application to Jammu &
Kashmir) Order 1950, relevant excerpt from which is reproduced
below:
E
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H
Provisions of the
constitution appli·
cable.
Part XII
"THE SECOND SCHEDULE
(See paragraph 3)
Exceptions
Modifications
-
Articles 264 and 265
L Articks 266 shall rpply only
Clause (2) of Art. 261,
in so far as it relates to the
Articles 268 to 281
Consolidat•.!d Fund of India
Clause (2) of Art.
and ti1c public account of
283, Articles 286 to
India.
291, 293, 295, 296 and
297.
2. Articles 282 and 284 shall
apply only in so far as they
relate to the Union or tho
public account of Indla.
3. Articles 298, 299 and 3JO
shall apply only in so far as
they relate to the Union or
the Govt. of India."
But Art. 286 was applied to the State of Jammu & Kashmir by
the Constitution (Application to Jammu & Kashmir) Order, 1954
which came into force on 14th day of May,
1954.
In The
Bengal Immunity Company Dd. v. State of Bihar(;) this Court
held that the operative provisions of the several parts of Art. 286,
namely cl. (l)(a), cl. (l)(b), cl. (2) and cl. (3), were intended
to deal with different topics and one cannot be projected or read
(1) [1955) 2 S.C.R. 603.
L9 Sup. CI/66-11
154
SUPREME COURT REPORTS
(1966] 3 S.C.R.
int~ _another, and therefore the Explanation in cl. (I )(a) cannot
lcg1u_mately be extended to cl. (2) either as an exception or as a
proviso thereto or read as curtailing 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 impositio'.I of any tax on sales or purchases of goods when such sales or
purchases take place in the course of inter-State trade or commerce, and therefore the State Legislature could not charge interState sales or purchases until the Parliament had otherwise provided.
The judgment of the Court in the
Bentral
Immunity
Company's case( 1), was delivered on September 6, 1955. The
President 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.
Ry 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 !st day of April, 1951 and the 6th day of
September, 1955, shall be deemed to be 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
levied or collected in accordance with law.
The Parliament thus
removed the ban contained in Art. 286(2) of the Constitution
retrospectively but limited only to the period between April l,
1951 and September 6, 1955.
All transactions of sale, even
though they were inter-State could for that period be lawfully
charged to tax.
But Art. 286(2)
remained operative
after
September 6, 1955 till the Constitution was amended
by
the
Constitution (Sixth Amendment) Ac!, i.e., September 11, 1936.
By the amendment, the explanation to cl. (I) of Art. 286 was
deleted and for els. (2) and (3) the following clause$ 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
(I) (1955) 2 S.C.R. 603.
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J. & K. STATE v. CALTEX (Ramaswami, !.)
!SS
of special importance in inter-State trade or commerce,
be subject to such restrictions and conditions in regard
to the system of levy, rates and other incidents of the
tax as Parliament may by law specify."
By cl. (2) of Art. 286 as amended, Parliament was aut~orised to
formulate principles for- determining when a sale or purchase of
goods takes place in any of the ways mentioned in cl. ( 1), 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, 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; 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 to formulate principles for determining when a sale or
D purchase of goods takes place in 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
E
importance in inter-State trade or commerce etc.
Article 286,
as amended by the Constitution Sixth Amendment Act, 1956,
was applied to the State of Jammu & Kashmir on 16th January
1958 by the Constitution (Application to Jammu & Kashmir)
Amendment Order 1958. The Central Sales Tax Act (Act 74
of 1956) was enacted by Parliament on December 21, 1956 but
F
it was applied to the State of Jammu & Kashmir on March 23,
l 958 by Act 5 of 1958.
The questions presented for determination in this appeal are :
( 1) whether sales tax could be imposed on the respondent. for
the period from October, 1955 to May, 1959 in view of the
G
P~.ohibition contained in Art. 286(2) of the Constitution as it
stood before its amendment, (2) whether sales tax
could be
validly levied on sales taking place between January l, 1955 to
September 6, 1955 in view of the provisions of Sales Tax Validation Act, 1956 (Act 7 of 1956).
H
As regards the first question, it is admitted by the parties that
petrol was transported from Pathankot in the State of Punjab to
Nandpur in the State of Jammu & Kashmir under the contract of
sale.
The pe1tol was kept in storage at a depot of the respondent
156
SUPREME COURT REPORTS
(1966] 3 s.c.R.
at Pathankot and it was carried in the trucks of the respondent
from Pathankot and delivered to the Nandpur farm in the State
of Jammu & Kashmir.
The price of the petrol supplied was paid
tu the respondent at Delhi by the Director-General of Supplies.
Upon these facts it is manifest that there was movement of goods
from the State of Punjab to the State of Jammu & Kashmir under
the contract of sale and there was completion of sale by the passing
of property and the delivery of the goods to the purchaser. As
poin1ed out by Venkatarama Ayyar, J. in the Bengal Jmnumily
Company case ( 1) :
"A sale could be said to begin the course of interStatc trade only if two conditions concur : (I) A sale
of goods, and (2) a transport of those goods from one
State to another under the contract of sale.
Unless hoth
these conditions arc satisfied. there can be no sale in
the course of inter-State trade."
In the present case, both these conditions have been satisfied and
the transactions of sale made between the parties were unquestionably in the course of inter-State trade.
Indeed, the SolicitorGeneral on behalf of the appellants did not seriously challenge
the finding of the High ( 'ourt on his point.
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We proceed to consider the next question, viz .. whether the
respondent was liable to pay sales tax
for
the
period
from
E
Janu~ry I, 1955 to September 6, 1955 in view of the lifting of
the finding of the High Court on this roint.
On behalf of the respondent Mr. Setalvad put forward the
argument that the Sales Tax Validation Act by itself did not
empower any State to levy any tax on sales or purchases in the
l'
course of inter-State trade but it merely liberated Sales Tax Acts
of. several States from the fetter imposed by cl. (2) of Art. 286
of the Constitution and left the State Act to operate in i!s own
terms.
It was submitted that if there was no law in a State
empowering the levy of a tax on sales or purchases in the cou'se
of inter-State trade or commerce, the State could not derive any
G
advantage from the Sales Tax Validation Act.
It was contended
that the Explanation to Art. 286(1 )(a) of the Constitution did
not confer any taxing power on any State Legi<lature.
On the
contrary, it was intended to place a limitation on the State taxing
power and therefore the mere lifting of the ban under cl. (2) of
Art. 286 did not enable the; State to imoose the tax on sales in
H
the course of inter-State trade and such levy of tax could be made
(I) (1955] 2 S.C.R. 6U3.
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J. & K. STATE v. CALTEX (Ramaiiwami, /.)
157
only when the taxing statute of the State expressly provides for
it.
In our opinion, the argument of Mr. Setalvad is well-founded.
The question, therefore, arises whether the Jammu & Kashmir
Motor Spirit (Taxation of Sales) Act, 2005 (hereinafter called
the Act) applies to the sale of petrol made by the respondent
between January 1, 1955 to September 6, 1955 and whether the
appellants can
validly assess the respondent to sales tax
with
regard to these transactions.
The preamble of the Act states that it is expedient to provide
for the levy of a tax on the retail sale of motor spirit.
Section 2
( g) of the Act defines "retail sale" to mean a sale by a retail
dealer of any motor spirit to a consumer or to any other person
for any purpose other than resale.
Section 2 (f) defines "retail
dealer" to mean any person who, on commission or otherwise,
sells any motor spirit to a consumer or to any other person for
any purpose other than re-sale or keeps any motor spirit for sale
to consumers or to any other persons for purposes other than
resale.
Under s. 2(h) of the Act the words "sale" and "sell"
include exchange barter and also the consumution of motor spirit
by the retail dealer himself.
Section 3 deals with the imposition
of tax and reads as follows :
"3. There shall be levied and paid to the Government on all retail sales of motor spirit a tax at the rate
of four annas for each imperial gallon of motor spirit or
at such other rate as the Government may prescribe
from time to time."
Section 6 of the Act deals with the licensing of the retail dealers
and states that after the expiry of a period of two months from
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the commencement of the Act no person shall carry on business
as a retail dealer unless he is in possession of a valid license.
Section 7 relates to the procedure for grant of licence.
Section
7 ( 4) states as follows :
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"No license under this Act shall be granted to any
person who does not hold a license for the storage of
dangerous petroleum under the Petroleum Act, 1998,
and if any such license granted under that Act is cancelled, suspended or is not renewed any license granted
under this Act to the holder thereof shall be deemed to
be cancelled, suspended or not renewed, as the case may
be."
It was contended on beho.lf of the respondent that no tax could
be levied under the Act unless the assessee has his place of business
158
SUPREME
COURT
REPORTS
[1966] 3 S.C.R.
or storage of motor spirit within the State of Jammu & Kaslunir.
It was pointed out that no retail dealer was permitted to carry on
business as a retail dealer of motor spirit unless he holds a license
for storage of petroleum under the State Petroleum Act.
It is
admitted that the respondent had no storage depot or place of
business within the State of Jam mu & Kashmir at the material
time.
It is also conceded that the respondent did not hold any
licence for storage of petrol within
the State.
Mr. Setalvad
therefore contended that the appellants were not authorised to
levy sales-tax under the provisions of the Act.
We are unable to
accept this contention as correct.
The charging section-s. 3authorises the Government to levy tax on "all retail sales of motor
spirit" at the rate of four annas for each imperial gallon of motor
spirit or at such other rate as the Government may prescribe from
time to time.
The charging section does not require that for the
purpose of assessment of tax the assessee should have his place of
business or his storage depot within the State of Jam.nm &
Kashmir.
Nor is it a requirement of the section that the assessee
should hold a licence of a retail dealer under the Act.
The provisions in regard to licence contained in ss. 6 and 7 deal with the
machinery of collection and it is not permissible, in our opinion,
to construe the language of s. 3 of the Act with reference to ss. 6
and 7 or to place any restriction on the scope and effect of the
charge of tax in the context of these sections.
We may, in this
context, refer to the provisions of s. 10 of the Act which states :
"I 0. Whoever contravenes the provisions of section
6 shall be punishable with fine which may extend to one
thousand rupees or to a sum double the amount of tax
due in respect of the sale of any motor spirit conducted
by 01 on behalf of such person, whichever is greater."
It is evident from the section that a person who trades in petrol
without taking out a licence under s. 6 of the Act is liable to
pay double the amount of tax due from him.
In other words,
the requirement of s. 6 is only a matter of machinery and does
not affect the liability of the person who trades in petrol to pay
tax in accordance with the charging section.
It follow• therefore that the respondent will be liable to pay sales-tax if it is
shown that. it has made retail sales of motor spirit within the
meaning of s. 3 of the Act.
This takes m to
the
q11cstion
whcthc; the transactions of sale hctwccn hnunry 1, 10';) to
Septcmher 6, 1955 were "retail s:1les of motor spirit" within the
meanin? of s. 3 of 1:1c Act.
As ohscrv.,d earlier, the proc·~clure
for suprly of petrol was that the officer in-charge of the Nandpur
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J. & K. STATE V. CALTEX (Ramllifwami, J.)
159
farm placed indents on the Pathankot depot of the respondent for
supplies of specified quantities of petrol to the farm.
On receipt
of the indent the Pathankot depot transported the petrol in its
own tank-lorries to Nandpur within the State of. Jammu and
Kashmir and decanted the petrol in its own underground tanks
where it was measured by means of dipping rods and approved
by the indenting officer and was then delivered to Nandpur farm .
In this state of facts it was contended by the Solicitor-General that
the property in the petrol passed to Nandpur farm inside the State
of Jammu & Kashmir.
It was submitted that the sales were,
therefore, liable to be taxed under s. 3 of the Act for the period
from January 1, 1955 to September 6, 1955 when the ban was
removed.
On behalf of the respondent Mr. Setalvad said that
there was appropriation of the goods to the contract at the bulk
depot of the respondent at Pathankot and therefore the property
of the goods passed to the Nandpur farm at Pathankot outside the
State of Jammu & Kashmir.
No such argument appears to have
been advanced on behalf of the respondent before the High Court
which decided the case on the assumption that there was appropriation of the goods to the contract at Srinagar when the petrol
was transferred from the tank-lorries of the respondent for delivery
to Nandpur farm and measured by means of dipping rods and
approved by the indenting officer. The question as to passing of
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title of goods is essentially a question of fact and we must deal
with the present case on the same basis as the High Court has
done, viz., that there was passing of title inside the State of
Jammu & Kashmir.
We accordingly hold that s. 3 of the Act
applies to transactions of sale of petrol made by the respondent
for the period from January 1, 1955 to September 6, 1955 and
F assessment of sales-tax made by the taxing authorities for this
period is legally valid.
H
It was lastly contended by the Solicitor-General that the High
Court was in error in taking the view that the taxing authorities
were not entitled to levy sales-tax for the period from January 1,
1955 to September 6, 1955, because the assessment was one
composite whole relating to the entire period from January 1,
1955 to May, 1959, and the assessment which was bad in part
was infected throughout and must be treated as invalid.
In our
opinion, the criticism of the Solicitor-General on this point is
well-founded and must be accepted as correct. It is true that
there was one order of assessment for the period from .January 1,
1955 to May, 1959 but the assessment can be easily split up and
dissected and the items of sale can be separated and taxed for differ-
180
SUPREME COURT REPORTS
[1966] 3 S.C.R.
ent periods.
In reaching the conclusion that the entire assessA
ment was invalid the High Court has relied on the decision of
the Judicial Committee in Ben11ett & White (Calgary) Ltd. v.
Municipal District of Sugar City No. 5(') in which Lord Reid
observed as follows at page 816 of the Report :
"When an assessment is not for an entire sum, but
for separate sums, dissected and earmarked each of
them to a separate assessable item, a court can sever the
items and cut out one or more along with the sum
attributed to it, while affirming the residue. But where
the assessment consists of a single undivided sum in
respect of the totality of property treated as assessable,
and when one component
(not
dismissible
as "de
minimis") is on any view not assessable and wrongly
included, it would seem clear that such a procedure
is barred, and the assessment is bad wholly."
But the principle has no application in the present case because
the sales-tax is imposed, in ultimate analysis, on receipts from
individuals sales or purchases of goods effected during the entire
period and it is possible to separate the assessment of the receipts
derived from the sales for the period from January I, 1955 to
September 6, 1955 and to allow the taxing authorities to enforce
the statute with respect to the sales taking place in this period and
also prevent them by grant of a writ from imposing the tax with
regard to sales for the exempted period.
In other words, the
assessment for the period from January I, 1955 to September 6,
1955 can be separated and dissected from the assessment of the
rest of the period and the High Court was in error in holding
that the assessment for the entire period was invalid in roro. The
view that we have expressed is borne out by the decision of this
Court in The State of Bombay v. Tlze United Motors (India)
Ltd.( 2 ).
For these reasons we allow this appeal in part and order that
the respondent should be granted a writ in the nature of mandamus
directing the appellants not to realise sales-tax with regard to
transactions of sale between the period from September 7, 1955
to May, 1959 but the respondent will not be entitled to any writ
with regard to transactions of sale between January I, 1955 to
September 6, 1955.
The appeal is accordingly allowed to this
extent but the parties will bear their own costs.
Appeal allowed in part.
(1) (19~1) A.C. 786.
(2) [1953) S.C.R. 1069 al p. 1097.
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