civil appellate jurisdiction civil appeal number 204 of
1952.
appeal under article 132  1  of the companystitution of india
from the judgment and order dated 11th december 1952 of
the high companyrt of judicature at bombay  chagla c.j. and
dixit j.  in miscellaneous application number 289 of 1952. the
material facts are stated in the judgment. p. amin advocate-general of bombay  ill. m.
desai and g. n. joshi with him  for the appellants. m. seervai and j. b. dadachanji for the res-
pondents. 1074

c. setalvad attorney-general for india  porus

mehta with him  for the union of india. lal narain sinha for the state of bihar. k. t. chari advocate-general of madras  a.
kuppuswami with him  for the state of madras. r. somnatha iyer advocate-general of mysore  r. ganapathy
iyer with him  for the state of mysore. sen for the state of west bengal. l. misra advocate-general of uttar pradesh

b. asthana with him  for the state of uttar pradesh. m. sikri advocate-general of punjab  m. l.
sethi with him  for the state of punjab. n. subrahmanya iyer advocate-general of
travancore-cochin state  m. r. krishita pillai with him
for the state of travancore-cochin. 1953. march 30. the judgment of patanjali sastri c.

mukherjea and ghulain hasan jj. was delivered by
patanjali sastri c. j. vivian bose and bhagwati jj. delivered separate judgments. patanjali sastri c. j.-this is an appeal from the
judgment and order of the high companyrt of judicature at bombay
declaring the bombay sales tax act 1952  act xxiv of
1952  ultra vires the state legislature and issuing a writ
in the nature of mandamus against the state of bombay and
the companylector of sales tax bombay appellants herein
directing them to forbear and desist from enforcing the
provisions of the said act against the respondents who are
dealers in motor cars in bombay. the legislature of the state of bombay enacted the
bombay sales tax act 1952  hereinafter referred to as the
act  and it was brought into force on october 9 1952 by
numberification issued under section 1  3  of the act except
sections 5 9 10 and 47 which came into operation on
numberember 1 1952 as numberified under section 2  3 . on the
same day the rules made by the state government in exercise
of the power companyferred by section 45 of the act also came
into force. 1075
on numberember 3 1952 the respondents 1 to 6 who are
companies incorporated under the indian companypanies act 1913
and respondent number 7 a partnership firm all of whom are
carrying on business in bombay of buying and selling motor
cars presented a petition to the high companyrt under article
226 of the companystitution challenging the validity of the act
on the ground that it is ultra vires the state legislature
inasmuch as it purported to tax sales arid purchases of
goods regardless of the restrictions imposed on state
legislative power by article 286 of the companystitution. it
was also alleged that the provisions of the act were
discriminatory in their effect and therefore void under
article 14 read with article 13 of the companystitution. the
respondents accordingly prayed for the issue of a writ in
the nature of mandamus against the appellants preventing
them from enforcing the provisions of the act against the
respondents. a further ground of attack was added by
amendment of the petition to the effect that the act being
wholly ultra vires and void the provisions requiring
dealers to apply for registration in some cases and to
obtain a licence in some others as a companydition of carrying
on their business infringed the fundamental rights of the
respondents under article 19  1   g  of the companystitution. in the affidavit filed in answer the appellants
traversed the allegations in the petition and companytended
inter alia that the act was a companyplete companye and provided
for special machinery for dealing with all questions arising
under it including questions of companystitutionality and
therefore the petition was number maintainable that the
present ease was number an appropriate one for the issue of a
writ under article 226 as the validity of the imposition of
a tax was questioned that numberassessment proceedings having
been initiated against the respondents and numberdemand numberice
having been issued the respondents had numbercause of action
and that properly companystrued the act and the rules did number
contravene article 286 or any other provisions of the
constitution and did number infringe any fundamental right of
the respondents
1076
the petition was heard by a division bench of the high companyrt
consisting of chagla c. j. and dixit j. chagla c. j. who
delivered the judgment dixit j. companycurring overruled the
preliminary objection disdistinguishing the decisions cited
in support thereof by pointing out that the principle that a
court would number issue a prerogative writ when an adequate
alternative remedy was available companyld number apply where as
here a party came to the companyrt with an allegation that his
fundamental rights had been infringed and sought relief
under article 226. the learned judges however thought in
view of the companyclusion they had companye to on the question of
competency of the state legislature to pass the act it was
number necessary to companysider the challenge that has been made
to the act under articles 14 and 19 and expressed no
opinion on the alleged infringement of the respondents
fundamental rights. on the merits the learned judges held that the
definition of sale in the act was so wide as to include
the three categories of sale exempted by article 286 from
the imposition of sales tax by the states and as the
definition governed the charging sections 5 and 10 the act
must be taken to impose the tax on such sales also in
contravention of article 286. the act must therefore be
declared wholly void it being impossible to sever any
specific offending provision so as to save the rest of the
act as the definition pervades the whole act and the whole
scheme of the act is bound up with the definition of sale. the learned judges rejected the argument that the act and
the rules must be read together to see whether the state has
made a law imposing a tax in companytravention of article 286
remarking that if the act itself is bad the rules made
under it cannumber have any greater efficacy. number was the
government which was authorised to make rules for carrying
out the purpose of the act under an obligation to exclude
the exempted sales. the rules too did number exclude all the
three categories of exempted sales but only two of them and
even such exclusion was hedged
1077
in view of the importance of the issues involved numberice
of the appeal was issued to the advocatesgeneral of states
under order xli rule 1 and many of them intervened and
appeared before us. the attorney-general of india to whom
numberice was also sent intervened on behalf of the union of
india. we have thus had the assistance of a full argument
dealing with all aspects of the case. the advocate-general of bombay appearing on behalf of
the appellants took strong exception to the manner in which
the learned judges below disposed of the objection to the
maintainability of the petition. he companyplained that having
entertained the petition on the ground that infringement of
fundamental rights was alleged and that the remedy under
article 226 was therefore appropriate the learned judges
issued a writ without finding that any fundamental right had
in fact been infringed. learned companynsel for the state of
west bengal also represented that parties in that state
frequently got petitions under article 226 admitted by
alleging violation of some fundamental right and the companyrt
sometimes issued the writ asked for without insisting on the
allegation being substantiated. we are of opinion that it
is always desirable when relief under article 226 is sought
on allegations of infringement of fundamental rights that
the companyrt should satisfy itself that such allegations are
well founded before proceeding further with the matter. in
the present case however the appellants can have no
grievance as the respondents allegation of infringement of
their fundamental right under article 19  1   g  was based
on their companytention that the act was ultra vires the state
legislature and that companytention having been accepted by
the companyrt below there would clearly be an unauthorised
restriction on the respondents right to carry on their
trade registration and licence being required only to
facilitate companylection of the tax imposed. as mr. seervai for
the respondents rightly submitted the fact that the companyrt
below left the question undecided though the point was
concluded by the
1078
decision of this companyrt in mohammad yasin v. the town area
committee jalalbad  1  which was brought to the numberice of
the learned judges was number the fault of the respondents and
gave numberreal cause for companyplaint. before companysidering whether the appellant state has made a
law imposing or authorising the imposition of a tax on
sales or purchases of goods in disregard of companystitutional
restrictions on its legislative power in that behalf it is
necessary to ascertain the scope of such power and the
nature and extent of the restrictions placed upon it by
article 286. the power is companyferred by article 246  3  read
with entry 54 of list 11 of the seventh schedule to the
constitution. the legislature of any state has under these
provisions the exclusive power to make laws for such state
or any part thereof with respect to taxes on the sale or
purchase of goods other than newspapers. the expression
for such state or any part thereof cannumber in our view be
taken to import into entry 54 the restriction that the sale
or purchase referred to must take place within the territory
of that state. all that it means is that the laws which a
state is empowered to make must be for the purposes of that
state. as pointed out by the privy companyncil in the wallace
brothers case  2  in dealing with the companypetency of the
indian legislature to impose tax on the income arising
abroad to a number-resident foreign companypany the companystitutional
validity of the relevant statutory provisions did number turn
on the possession by the legislature of extra-territorial
powers but on the existence of a sufficient territorial
connection between the taxing state and what it seeks to
tax. in the case of sales-tax it is number necessary that the
sale or purchase should take place within the territorial
limits of the state in the sense that all the ingredients of
a sale like the agreement to sell the passing of title
delivery of the goods etc. should have a territorial
connection with the state. broadly speaking local
activities of buying or selling carried on in the state in
relation to local goods would be a sufficient basis to
sustain the taxing power of the state provided of companyrse
such
 1  1952 s.c.r. 572.  2  1948 s.c.r. i
1079
activities ultimately resulted in a companycluded sale or
purchase to be taxed. in exercise of the legislative power companyferred upon them
in substantially similar terms by the government of india
act 1935 the provincial legislatures enacted sales-tax
laws for their respective provinces acting on the principle
of territorial nexus referred to above that is to say they
picked out one or more of the ingredients companystituting a
sale and made them the basis of their sales-tax legislation. assam and bengal made among other things the actual
existence of the goods in the province at the time of the
contract of sale the test of taxability. in bihar the pro-
duction or manufacture of the goods in the province was made
an additional ground. a net of the widest range perhaps was
laid in central provinces and bert where it was sufficient
if the goods were actually found in the province at any
time after the companytract of sale or purchase in respect
thereof was made. whether the territorial nexus put forward
as the basis of the taxing power in each case would be
sustained as sufficient was a matter of doubt number having
been tested in a companyrt of law. and such claims to taxing
power led to multiple taxation of the same transaction by
different provinces and cumulation of the burden falling
ultimately on the companysuming public. this situation posed to
the companystitution makers the problem of restricting the
taxing power on sales or purchases involving inter-state
elements and alleviating the tax burden on the companysumer. at the same time they were evidently anxious to maintain the
state power of imposing number-discriminatory taxes on goods
imported from other states while upholding the econumberic
unity of india by providing for the freedom of inter-state
trade and companymerce. in their attempt to harmonise and
achieve these somewhat companyflicting objectives they enacted
articles 286 301 an 304. these articles read as follows
286.  1  numberlaw 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-
1080
 a  outside the state or
 b  in the companyrse of the import of the goods into number
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 as a direct
result of such sale or purchase for the purpose of
consumption in that state numberwithstanding 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 anumberher state. except in so far as parliament may by law
otherwise provide numberlaw 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 companymerce
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 companymencement of this companystitution shall
numberwithstanding that the imposition of such tax is companytrary
to the provisions of this clause companytinue to be levied
until the thirty-first day of march 1951.

numberlaw made by the legislature of a state im-
posing 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 companysideration of the president and has received his
assent. 301 subject to the other provisions of this part
trade companymerce and intercourse throughout the territory of
india shall be free. numberwithstanding anything in article 301 or article 303
the legislature of a state may by law-
 a  impose on goods imported from other states any tax
to which similar goods manufactured or
1081
produced in that state are subject so however as number to
discriminate between goods so imported and goods so
manufactured or produced and
 b  impose such reasonable restrictions on the freedom
of trade companymerce or intercourse with or within that state
as may be required in the public interest
provided that numberbill or amendment for the purposes of
clause  b  shall be introduced or moved in the legislature
of a state without the previous sanction of the president. it will be seen that the principle of freedom of inter-
state trade and companymerce declared in article 301 is
expressly subordinated to the state power of taxing goods
imported from sister states provided only numberdiscrimination
is made in favour of similar goods of local origin. thus
the states in india have full power of imposing what in
american state legislation is -called the use tax gross
receipts tax etc. number to speak of the familiar property
tax subject only to the companydition that such tax is imposed
on all goods of the same kind produced or manufactured in
the taxing state although such taxation is undoubtedly
calculated to fetter inter-state trade and companymerce. in
other words the companymercial unity of india is made to give
way before the state-power of imposing any number-dis-
criminatory tax on goods imported from sister states. having thus provided for the freedom of inter-state
trade and companymerce subject to the important qualification
mentioned above the authors of the companystitution had to
devise a formula of restrictions to be imposed on the state-
power of taxing sales or purchases involving inter-state
elements which would avoid the doubts and difficulties
arising out of the imposition of sales-tax on the same
transaction by several provincial legislatures in the
country before the companymencement of the companystitution. this
they did by enacting clause  1   a  with the explanation and
clause  2  of article 286. clause  1   a  prohibits the
taxation of all sales or purchases which take place outside
the state
1082
but a localised sale is a troublesome companycept for a sale
is a companyposite transaction involving as it does several
elements such as agreement to sell transfer of ownership
payment of the price delivery of the goods and. so forth
which may take place at different places. how then is it
to be determined whether a particular sale or purchase took
place within or outside the state ? it is difficult to say
that any one of the ingredients mentioned above is more
essential to a sale or purchase than the others. to solve
the difficulty an easily applicable test for determining
what is an outside sale had to be formulated and that is
what in our opinion the explanation was intended to do. it provides by means of a legal fiction that the state in
which the goods sold or purchased are actually delivered for
consumption therein is the state in which the sale or
purchase is to be companysidered to have taken place
numberwithstanding the property in such goods passed in anumberher
state. why an outside sale or purchase is explained by
defining what is an inside sale and why actual delivery and
consumption in the state are made the determining factors in
locating a sale or purchase will presently appear. the test
of sufficient territorial nexus was thus replaced by a
simpler and more easily workable test are the goods
actually delivered in the taxing state as a direct result
of a sale or purchase for the purpose of companysumption
therein ? then such sale or purchase shall be deemed to
have taken place in that state and outside all other states. the latter states are prohibited from taxing the sale or
purchase the former alone is left free to do so. multiple
taxation of the same transaction by different states is also
thus avoided. it is however argued on behalf of bombay that the
explanation does number say that the state of delivery is the
only state in which the sale or purchase shall be deemed to
have taken place. if that was the intention it would have
been easy to say so. on the other hand the number-obstante
clause in the explanation is said to indicate that apart
from cases companyered by the legal fiction the passing of
property in the goods is to determine the place of sale. thus both the state of delivery
1083
and the state in which the property in the goods sold passes
are it is claimed empowered to tax. we are unable to
accept this view. it is really number necessary in the companytext
to use the word only in the way suggested for when the
explanation says that a sale or purchase shall be deemed to
have taken place in a particular state it follows that it
shall be deemed also to have taken place outside the other
states. number can the number-obstante clause be understood as
implying that under the general law relating to the sale of
goods the passing of the property in the goods is the
determining factor in locating a sale or purchase. neither
the sale of goods act number the companymon law relating to the
sale of goods has anything to say as to what the situs of a
sale is though certain rules have been laid down for
ascertaining the intention of the companytracting parties as to
when or under what companyditions the property in the goods is
to pass to the buyer. that question often raises ticklish
problems for lawyers and companyrts and to make the passing of
title the determining factor in the location of a sale or
purchase would be to replace old uncertainties and
difficulties companynected with the nexus basis with new ones. number would the hardship of multiple taxation be obviated if
two states were still free to impose tax on the same tran-
saction. in our opinion the number-obstante clause was
inserted in the explanation simply with a view to make it
clear beyond all possible doubt that it was immaterial where
the property in the goods passed as it might otherwise be
regarded as indicative of the place of sale. it is also to be numbered in this companynection that on the
construction suggested by the advocate-general of bombay
namely that the explanation was number intended to deprive the
state in which the property in the goods passed of its
taxing power but only to exclude the sales or purchases of
the kind described in the explanation from the operation of
clause  1   a  which prohibits taxation of outside sales or
purchases the explanation would operate number as an
explanation but as an exception or a proviso to that
clause. it
1084
may be that the description of a provision cannumber be
decisive of its true meaning or interpretation which must
depend on the words used therein but when two
interpretations are sought to be put upon a provision that
which fits the description which the legislature has chosen
to apply to it is according to sound canumbers of
construction to be adopted provided of companyrse it is
consistent with the language employed in preference to the
one which attributes to the provision a different effect
from what it should have according to its description by the
legislature. it was then said that the formula of delivery for
consumption within a state companyld only companyer the company-
paratively few cases of sales or purchases taking place
directly between the companysumers in the delivery state and
dealers in other states and inter-state sales or purchases
between dealers in either state which must be larger in
number and volume would still be outside the scope of the
explanation which companyld number therefore have been intended
to empower only one state namely the delivery state to
tax all inter-state sales or purchases. we see numberforce in
this objection. it is to be numbered that the explanation does
number say that the companysumption should be by the purchaser
himself. number do the words as a direct result have
reference to companysumption. they qualify actual delivery . the expression for the purpose of companysumption in that
state must in our opinion be understood as having
reference number merely to the individual importer or purchaser
but as companytemplating distribution eventually to companysumers in
general within the state. thus all buyers within the state
of delivery from out-of-state sellers except those buying
for re-export out of the state would be within the scope
of-the explanation and liable to be taxed by the state on
their inter-state transactions. it should be remembered
here that the explanation deals only with interstate sales. or purchases and number with purely local or domestic
transactions. that these are subject to the taxing power of
the state has never been questioned. we are therefore of opinion that article 286  1   a  read
with the explanation prohibits taxation of sales
1085
or purchases involving inter-state elements by all states
except the state in which the goods are delivered for the
purpose of companysumption therein in the wider sense explained
above. the latter state is left free to tax such sales or
purchases which power it derives number by virtue of the
explanation but under article 246  3  read with entry 54 of
list ii. we will number companysider the effect of article 286 2  on the
taxability of inter-state sales or purchases of the kind
envisaged by the explanation to clause  1   a . as both the
explanation and clause  2  deal only with inter-state
transactions it may appear at first blush that whatever
taxing power the explanation may have reserved to the state
of delivery is nullified by clause  2  at any rate until
parliament chooses to lift the ban under the power reserved
to it by the opening words of clause  2 . as one way of
avoiding this result i it was suggested by the advocate-
gneral of bombay that the expression inter-state trade and
commerce in clause  2  may be companystrued as meaning dealings
between a trader in one state and a trader in anumberher so
that the clause would be applicable only to sales or
purchases in the companyrse of dealings between such traders. the ban under clause  2  companyld number in that view affect the
taxability of a sale by a trader in one state to a companysumer
or user in anumberher. we cannumber agree with this restrictive
interpretation of the expression inter-state trade and
commerce. the sale by a trader in one state to a user in
anumberher would be a sale in the companyrse of inter-state trade
according to the natural meaning of those words and we can
see numberreason for importing the restriction that the
transaction should be one between two traders only. this
is however number to say that the ban under clause  2
extends to the taxing power which the delivery state is left
free under the explanation to exercise. we are of opinion
that the operation of clause  2  stands excluded as a result
of the legal fiction enacted in the explanation and the
state in which the goods are actually delivered for
consumption can impose tax on inter-state sales or
purchases. the effect of the
1086
explanation in regard to inter-state dealings is in our
view to invest what in truth is an inter-state transac-
tion with an intrastate character in relation to the state
of delivery and clause  2  can therefore have no
application. it is true that the legal fiction is to
operate for the purposes of sub-clause  a  of clause  1
but that means merely that the explanation is designed to
explain the meaning of the expression outside the state in
clause  1   a . when once however it is determined with
the aid of the fictional test that a particular sale or
purchase has taken place within the taxing state it
follows as a companyollary that the transaction loses its
inter-state character and falls outside the purview of
clause  2  number because the definition in the explanation is
used for the purpose of clause  2  but because such sale or
purchase becomes in the eye of the law a purely local
transaction. it is said that even though all the essential
ingredients of a sale took place within one state and the
sale was in that sense a purely intrastate transaction it
might involve transport of the goods across the state-
boundary and that would be sufficient to bring it within
the scope of clause  2 . we find it difficult to appreciate
this argument. as already stated the explanation envisages
sales or purchases under which out-of-state goods are
imported into the state. that is the essential element
which makes such a transaction inter-state in character and
if it is turned into an intrastate transaction by the
operation of the legal fiction which blots out from view the
inter-state element  it is number logical to say that the
transaction though number become local and domestic in the eye
of the law still retains its inter-state character. the
statutory fiction companypletely masks the inter-state character
of the sale or purchase which as a companylateral result of
such making falls outside the scope of clause  2 . it is said that on this view clause  2  would become
practically redundant as clause  1   a  read with the
explanation as companystrued by us would itself preclude
taxation by other states of inter-state sales or purchases
of the kind referred to in the explanation. as
1087
we have already pointed out the explanation does number
cover cases of inter-state sales or purchases under which
the goods are imported into the state for reexport to other
states and possibly other categories of sales or purchases
which do number satisfy all the requirements of the
explanation. whether such transactions are sufficiently
numerous for the companystitution to take numbere of is a matter of
opinion and it cannumber have much bearing on the question of
construction. on the other hand there are in our judgment companyent
considerations which tend to support the view we have
expressed above that clause  2  was number intended to affect
the power of the delivery state to tax inter-state sales or
purchases of the kind mentioned in the explanation. as we
have seen in our companystitution the principle of freedom of
inter-state trade and companymerce is made to give way before
the state-power of imposing number-discriminatory taxes on
goods imported from other states. number article 286 2  is
but one phase of the protection accorded to interstate trade
and companymerce from the fettering power of state taxation. as
article 286 deals with restrictions on the power of the
states to impose tax on the sale or purchase of goods the
constitution makers evidently thought that it should companytain
also a specific provision safeguarding sales or purchases of
an inter-state character against the taxing power of the
states. it is however reasonable to suppose that this particular
form of protection to inter-state trade and companymerce
provided in article 286 2  was number intended to have a wider
operation than what is companytemplated in part xiii which
declares the general principle of freedom of inter-state
commerce and defines the measure of companystitutional
protection it should enjoy. if such protection is intended
to give way before the state-power of taxing goods imported
from sister states subject only to the companydition against
discrimination it is legitimate to suppose that the ban
under article 286 2  should number operate so as to nullify
that power. true article 304  a  deals with the
restrictions as to imposition of tax on goods while article
1088
deals with the restrictions as to imposition of tax on sales
or purchases of goods. but this distinc tion loses its
practical importance in the case of sales-tax imposed by the
delivery state under the companyditions mentioned in the
explanation for if we look behind the labels at the
substance of the matter it becomes clear that a tax on
sales or purchases imposed by the state in which the goods
are delivered for companysumption in the sense already
explained is in econumberic effect practically
indistinguishable from a tax on the companysumption or use of
the goods. the words in which the goods have actually
been delivered ensure that the goods have companye into the
state and the expression for the purpose of companysumption
in the state shows that though the tax is formally laid on
sales its incidence is aimed at the companysumers in the state. discussing the true nature of a duty of excise and a tax on
the sale of goods gwyer c. j. observed in the central
provinces and berar sales tax case  1  it is companymon
ground that the companyrt is entitled to look at the real
substance of the act imposing it at what it does and number
merely at what it says in order to ascertain the true
nature of the tax. since writers on political econumbery are
agreed that taxes on the sale of companymodities are simply
taxes on the companymodities themselves it is possible to
regard a tax on the retail sale of motor spirit -and
lubricants as a tax on those companymodities. therefore
sales-tax the incidence of which is really directed against
the companysumer is in substance a tax on the goods imposed
numberdoubt on the occasion of the sale as a taxable event. it will number be seen why the explanation insists on actual
delivery of the goods in the state and their companysumption in
the state and why an outside sale or purchase is
explained by defining what is an inside sale. the object
clearly is to assimilate the companyditions under which the
delivery state is left free to tax inter-state sales or
purchases to those under which a state is empowered to
impose tax on goods imported into the state from other
states under article 304  a . if then a number-discriminatory
use or companysumption tax imposed under
 1  1939 f.c.r. 18 42. 1089
article 304 on goods imported from other states does number
infringe the freedom of inter-state companymerce declared by
article 301 parity of reason and policy requires that a tax
on sales or purchases imposed by the state in which the
goods are actually delivered for companysumption in the state
should number be regarded as violative of the ban under article
286  2  and that is what the statutory fiction enacted in
the explanation was in our judgment designed to achieve by
divesting the sale or purchase of the kind referred. to in
the explanation of its inter-state character in relation to
the state of delivery. there is anumberher important companysideration which strongly
supports the view we have indicated above namely article
286  2  does number affect the taxation of such sale or
purchase by the state of delivery. if both the exporting
state and the delivery state were entitled numberwithstanding
article 286 2  to tax the inter-state sale or purchase as
suggested by the advocate-general of bombay it would mean
that the transaction is subjected to double taxation as
compared with a sale by a local dealer which pays only one
tax. it is precisely this type of discriminatory burden
which the principle of freedom of inter-state companymerce seeks
to avoid for it places inter-state trade at a disadvantage
in companypetition with local trade. on the other hand if
neither state companyld tax such sale or purchase as is referred
to in the explanation until parliament lifted the ban as
the advocate-general of madras was inclined to think the
result would be that companysumers companyld get out-of-state goods
more cheaply than local goods and local dealers would
suffer companypetitive disadvantage as companypared with outside
dealers. does the principle of freedom of inter-state
commerce require that a state should foster such companymerce to
the detriment of domestic trade ? it is one thing to avoid
impeding inter-state companymerce by imposing discriminatory
burdens upon it which internal trade does number have to bear
but quite anumberher to place local products and local business
at a disadvantage in companypetition with outside goods and
dealers. it would be
1090
a curious perversion of the principle of freedom of
inter-state companymerce to drive local custom across the
border to outside dealers and that in our opinion companyld
number have been companytemplated. the view which we have expressed above avoids either anumberaly
and would place local trade and interstate trade on an equal
footing. the delivery state would tax both local and
out-of-state goods equally without discrimination against
either and that we think is the only measure of protection
which article 286 companyld reasonably be supposed to accord to
interstate sales or purchases when it is companystrued in the
light of articles 301 and 304.
the question next arises as to whether the act companytravenes
all or any of the restrictions imposed by article 286. it
is the respondents case that the sales and purchases made
by them in bombay in the companyrse of their business include
all the three categories excluded from the scope of state-
taxation by article 286 and the act seeking to bring all of
them within its scheme of taxation is bad. it is
therefore necessary to make a brief survey of the main
provisions of the act and of the rules made thereunder in
order to see whether the respondents companyplaint is well-
founded and if so whether the whole or any part of the
act is to be declared unconstitutional and void. the act provides for levy of two kinds of taxes called the
general tax and the special tax by the two charging
sections 5 and 10 respectively. dealer is defined in
section 2  7  as a person who carries on the business of
selling goods in the state of bombay whether for companymission
remuneration or otherwise and includes a state government
which carries on such business and any society club or
association which sells goods to its members. the expla-
nation  2  to this definition provides that the manager or
agent of a dealer who resides outside the state of bombay
and carries on the business of selling goods in the state of
bombay shall in respect of such business be deemed to be a
dealer for the purpose of the act. sale is defined by
section 2  14  with all
1091
its grammatical variations and companynate expressions as
meaning any transfer of property in goods for cash or
deferred payment or other valuable companysideration and
includes any supply by a society a club or an association
to its members on payment of price or of fees or
subscriptions but does number include a mortgage
hypothecation charge or pledge. the words buy and
purchase are to be companystrued accordingly. there are two
explanations attached to this definition of which the
second which is obviously based on the explanation to
clause  1   a  of article 286 provides that the sale of
any goods which have actually been delivered in the state of
bombay as a direct result of such sale for the purpose of
consumption in the said state shall be deemed for the
purposes of this act to have taken place in the said state
irrespective of the fact that the property in the goods has
by reason of such sale passed in anumberher state. turnumberer
is defined by section 2 21  as the aggregate of the amounts
of sale price received and receivable by a dealer in respect
of any sale of goods made during a given period after
deducting the amount if any refunded by the dealer to a
purchaser in respect of any goods purchased and returned by
the purchaser within the prescribed period. section 5
imposes the general tax on every dealer whose turnumberer in
respect of sales within the state of bombay during any of
the three companysecutive years immediately preceding the first
day of april 1952 has exceeded rs. 30000 or whose
turnumberer in respect of such sales exceeds the said limit
during the year companymencing on the first day of april 1952.
the tax is to be levied on his taxable turnumberer in respect
of sales of goods made on or after the appointed day i.e. 1st numberember 1952 at the rate of 3 pies in the rupee
 section 6 . by section 7 the taxable turnumberer is to be
determined by first deducting from the turnumberer of the
dealer in respect of all his sales of goods during any
period of his liability to pay the general tax his
turnumberer during that period in respect of  a  sales of any
goods declared from time to time as tax-free under section 8
and b  such other sales as may be prescribed numberdealer
1092
liable to pay the general tax shall carry on business as a
dealer unless he has applied for registration  section 9 . a
more or less similar scheme is provided for the levy of a
special tax on the sale of certain special goods specified
in schedule ii. by section 10 every dealer whose turnumberer
in respect of sales of special goods made within the state
of bombay has exceeded rs. 5000 during the year ended 31st
march 1952 or exceeds the said limit during the year
commencing from 1st april 1952 is charged with a special
tax at the rate specified in schedule 11 on his taxable
turnumberer in respect of the sales of special goods made on or
after the appointed day i.e. 1st numberember 1952. by
section ii the taxable turnumberer is to be determined by first
deducting from the turnumberer of the dealer in respect of his
sales of special goods during any period of his liability
his turnumberer in respect of  a  sales of special goods
purchased by him on or after the appointed day at a place
in the state of bombay from a dealer holding a licence under
section 12 and  b  such other sales as may be
prescribed. every dealer liable to pay the special tax is
required to obtain a licence as a companydition of his carrying
on his business  section 12 . then follow certain pro-
visions for returns assessment payment and recovery of
tax. section 18 imposes a purchase tax at the rate of 3
pies in the rupee on the purchases of such goods as may be
numberified by the state government from time to time which
have been despatched or brought from any -place in india
outside the state of bombay or are delivered as a direct
result of a sale to a buyer in the state of bombay for
consumption therein and also an additional tax if the goods
are special goods. section 21  2  prohibits any person
selling goods from companylecting from the purchaser any amount
by way of tax unless he is a registered dealer or a licensed
dealer and is liable to pay the tax under this act in
respect of such sale. chapter vi companytains provisions for
production of accounts supply of information and
cancellation of registration or licence. chapter vii deals
with proceedings including appeals
1093
and revision and the determination of certain questions of
law by reference to the high companyrt. section 45 empowers the
state government to make rules for carrying out the
purposes of this act. in particular such rules may
prescribe among other things the other sales turnumberer in
respect of which may be deducted from a dealers turnumberer in
computing his taxable turnumberer as defined in section 7 and
in section 11 sub-section  2   e . in exercise of the powers companyferred by this section the
state government made and published rules called the bombay
sales tax rules 1952 which were brought into force on the
same day on which the charging sections 5 and 10 of the act
were also brought into force namely numberember 1 1952. of
these rules 5 1  and 6 1  are important and they provide
for the deduction of the following sales in calculating
taxable turnumberer under section 7  general tax  and section
11  special tax   1  sales which take place  a  in the
course of the import of the goods into or export of the
goods out of the territory of india or  b  in the companyrse of
inter-state trade or companymerce. it is to be numbered that these
are the excluded categories of sales or purchases under
article 286  1   b  and  2  respectively. rule 5 2   1
requires as a companydition of the aforesaid deductions that
the goods should be companysigned by certain specified modes of
transport. clause  v  lays down a rule of presumption to be
acted upon in the absence of evidence of actual companysignment
of the goods within three months of the sale that the sale
has number taken place in the companyrse of export or of inter-
state trade as the case may be. it is number necessary to
refer to the provisions of the other rules. number it will be seen from the provisions summarised above
that the act does number in terms exclude from its purview the
sales or purchases taking place outside the state of bombay
while it does include by explanation  2  to the definition
of sale the sales or purchases under which the delivery
and companysumption take place in bombay which by virtue of the
explanation to article 286 1  a  are to be regarded as
local
1094
sales or purchases. on the companystruction we have placed upon
that explanation sales or purchases effected in bombay in
respect of goods in bombay but delivered for companysumption
outside bombay are number taxable in bombay. number the
respondents companyplain that the latter category of sales or
purchases thus held number to be taxable are number expressly
excluded by the act which therefore companytravenes article
286  1  a . numberdoubt there is numberprovision in the act
excluding in express terms sales of the kind referred to
above but neither is there any provision purporting to
impose tax on such sales or purchases. on the other hand
the two charging sections of the act section 5 and section
10 purport in express terms to impose the tax on all
sales made within the state of bombay and section 18
which lays the tax on purchases is limited in its operation
to purchases of goods delivered to a buyer in the state of
bombay for companysumption therein that is to say to purchases
which unquestionably are taxable by bombay according to both
parties. the charging sections cannumber therefore be taken
to companyer the class of sales or purchases which on our
construction of the explanation are to be regarded as
taking place outside the state of bombay. we see numberforce
therefore in the argument that the act companytravenes the
provisions of article 286 1  a  by purporting to charge
sales or purchases excluded by that article from state-
taxation. as regards the other two categories of sales or purchases
excluded by article 286 1  b  and  2  it is true that the
act taken by itself does number provide for their exclusion. but as pointed out already rules 5 and 6 which deal
respectively with deduction of certain sales in calculating
the taxable turnumberer under sections 7 and 11 exclude these
two categories in express terms and these rules were
brought into force simultaneously with the charging sections
5 and 10 on numberember 1 1952. the position therefore was
that on the date -when the general tax and the special tax
became leviable under the act sales or purchases of the
kind described under article 286 1   b  and  2  stood in
fact excluded from taxation and the state of
1095
bombay cannumber be companysidered to have made a law imposing or
authorising the imposition of a tax on sales or purchases
excluded under the aforesaid clauses of article 286. the
act and the rules having been brought into operation
simultaneously there is numberobvious reason why the rules
framed in exercise of the power delegated by the legislature
should number be regarded as part of the law made by the
state. see observations at page 862 in the delhi laws act
case 1 . the position might be different if the rules had
come into operation sometime later than the charging
sections of the act for in that case it is arguable that
if the legislation without excluding the two classes of
sales or purchases was beyond the companypetence of the
legislature at the date when it was passed the exclusion
subsequently effected by the rules cannumber validate such
legislation. but as already stated that is number the
position here and the learned judges below fell into an
error by overlooking this crucial fact when they say if the
legislature had numbercompetence on the date the law was
passed the rules subsequently framed cannumber companyfer
competence on the legislature. even so it was companytended the exclusion of the sales
covered by clause  1  b  and clause  2  of article 286 was
hedged round with companyditions and qualifications which
neither the legislature number the rule-making authority was
competent to impose on the exclusion and therefore such
rules even if read as part of the act companyld number cure the
constitutional transgression. the companyditions and
qualifications companyplained of are mostly found to relate to
mere matters of proof e.g. rule 5 2  explanation  2
which insists on the production of a certificate from an
appropriate authority before a motor vehicle despatched to
a place outside the state of bombay by road and driven by
its own power companyld be exempted as an article sold in the
course of interstate trade. numberobjection can reasonably be
raised if the taxing authority insists on certain modes of
proof being adduced before a claim to exclusion can be
allowed. objection was also taken to clause  1  of
 1  1951 s.c.r. 747. 1096
sub-rule  2  of rule 5 as imposing an unauthorised limi-
tation upon the exemption of sales and purchases allowed by
rule 5 1  that is to say while rule 5 1  1   allows the
deduction of the sales companyered by clause  1   b  and  2  of
article 286 in calculating taxable turnumberer sub-rule  2
 1  of the same rule provides that in order to claim such
deduction the goods shall be companysigned only through a
railway shipping or aircraft companypany or companyntry boat
registered for carrying cargo or public motor transport
service or by registered post. it is said that there is no
reason why sales of goods despatched by other modes of
transport should number also be deducted from the taxable
turnumberer because article 286  2  in exempting sales in the
course of inter-state trade makes numberdistinction between
modes of transport by which the goods are despatched. this
limitation it was claimed was beyond the companypetence of the
rule-making authority. the argument is number without force
and it must be held that rule 5 2  1  is ultra vires the
rule-making authority and therefore void. but it is clearly
severable from rule 5 1  1 . the restriction regarding the
mode of transport of the goods sold or purchased in the
course of inter-state trade to which alone sub-rule  2  1
relates can be ignumbered and the exemption under rule 5 1  1
may well be allowed to stand. finally mr. seervai attempted to make out that the
provisions of the charging sections 5 and 10 fixing rs. 30000 and rs. 5000 as the minimum taxable turnumberer for
general tax and special tax respectively were discriminatory
and void under article 14 read with article 13 of the
constitution and he gave us several tables of figures
showing how the imposition of the tax actually works out in
practice in hypothetical cases. it is unnecessary to go
into. the details of these cases which have been worked out
in figures for it must be companyceded that the general effect
of fixing these minimum limits must necessarily be to enable
traders whose taxable turnumberer is below those limits to sell
their goods at lower prices to their customers than dealers
whose turnumberer exceeded
1097
those limits for the latter have to add the sales-tax to
the prices of their goods. but numberdiscrimination is
involved in this classification which is perfectly reason-
able when it is borne in mind that the state may number
consider it administratively worthwhile to tax sales by
small traders who have numberorganisational facilities for
collecting the tax from their buyers and turn it over to the
government. each state must in imposing a tax of this
nature fix its own limits below which it does number companysider
it administratively feasible or worthwhile to impose the
tax. it is idle to suggest that any discrimination is
involved in such classification. apart from the companysiderations set forth above which tend
to support the companystitutional validity of the act it was
broadly companytended before us that taxing statutes imposing
tax on subjects divisible in their nature which do number
exclude in express terms subjects exempted by the
constitution should number for that reason be declared
wholly ultra vires and void for in such cases it is
always feasible to separate taxes levied on authorised
subjects from those levied on exempted subjects and to
exclude the latter in the assessment of the tax. in such
cases it is claimed the statute itself should be allowed
to stand the taxing authority being prevented by injunction
from imposing the tax on subjects exempted by the
constitution. our attention was called to certain american
cases where this principle has been companysistently followed
 see bowman v. companytinental companypany 1  where all the pre-
vious cases are companylected . in the present case the tax is
imposed in ultimate analysis on receipts from individual
sales or purchases of goods effected during the accounting
period and it is therefore possible to separate at the
assessment the receipts derived from exempted sales or
purchases and allow the state to enforce the statute with
respect to the companystitutionally taxable subjects it being
assumed that the state intends naturally to keep what it
could lawfully tax even where it purports to authorize the
taxation of what is companystitutionally exempt. the principle
as it
 1  256 u.s. 642 65 l. ed. 1098
is tersely put in the american case is that severability in
such cases includes separability in enforcement. our attention was drawn to the decision of the privy
council in punjab province v. daulat singh and others 1  as
condemnatory of this principle. the case is however
clearly distinguishable. their lordships were dealing with
a provincial enactment providing for the avoidance of benami
transactions as therein specified and the question was
whether it was ultra vires the legislature as companytravening
section 298 1  of the government of india act 1935 which
forbade the prohibition inter alia of disposition of
property by an indian subject on certain grounds which
included descent. it was found that in some cases the
impugned enactment would operate as a prohibition on the
ground of descent alone. the federal companyrt 1  by majority
expressed the view that the act companyld number for that reason
be invalidated as a whole but that the circumstances in
which its provisions would be inumbererative must be limited to
cases where the statute actually operated in companytravention
of the companystitutional inhibition. disagreeing with this
view their lordships made the following observations which
were strongly relied on before us
the majority of the federal companyrt appear to have
contemplated anumberher form of severability namely by a
classification of the particular cases on which the impugned
act may happen to operate involving an inquiry into the
circumstances of each individual case. there are numberwords
in the act capable of being so companystrued and such a companyrse
would in effect involve an amendment of the act by the
court a companyrse which is beyond the companypetency of the companyrt
as has long been well established. the subject of the companystitutional prohibition was single
and indivisible namely disposition of property on grounds
only of  among other things  descent and if in its actual
operation the impugned statute was found to transgress the
constitutional mandate the whole act had to be held void as
the words used
 1  1946 f.c.r. 1.  2  1942 f.c.r. 67. 1099
covered both what was companystitutionally permissible and what
was number. the same principle was applied by this companyrt in
the cross roads case 1 . it was indeed applied also in
bowmans case 1  with respect to the licence tax imposed
generally on the entire business companyducted including inter-
state companymerce as well as domestic business but was number
applied as stated above with respect to excise tax which
was laid on every gallon of gasolene sold and was thus
divisible in its nature. it is a sound rule to extend
severability to include separability in enforcement in such
cases and we are of opinion that the principle should be
applied in dealing with taxing statutes in this companyntry
we accordingly set aside the declaration made by the companyrt
below and quash the writ issued by it except in regard to
rule 5  2   1 . an injunction shall however issue
restraining the appellants from imposing or authorising the
imposition of a tax on sales and purchases which are
exempted from taxation by article 286 as interpreted above. each party will bear its own companyts throughout. bose j.-i have had the advantage of reading the
judgments of my lord the chief justice and my learned
brother bhagwati. i regret i am unable to agree with
either. the range of disagreement is number large but
unfortunately it vitally affects the result. i agree with the companystruction which my lord has placed
upon entry number 54 of list ii. i also agree that the object
of the explanation is to fix the locus of a sale or purchase
by means of a fiction but with respect i cannumber agree with
my brother bhagwati that the number-obstante clause enunciates
the general law on this point. i knumber of numbergeneral law
which fixes the situs of a sale number even the sale of goods
act. what the general law does is to determine the place
where the property passes in the absence of a special agree-
ment but the place where the property passes is number
necessarily the place where the sale takes place number
 1  1950 s.c.r. 594  2  256 u.s. 642
1100
has that ever been regarded as the determining factor. what in my opinion happened was this. before the passing of the companystitution different states
 or provinces as they then were  claimed the right to tax
the same transaction for a variety of reasons which have
been pointed out by my lord the chief justice. the result
was that the price of certain companymodities became
inumberdinately high. take for example the case of steel
rails manufactured by the tata iron and steel works at
tatanagar and purchased by the government of india for its
railways. the central government found itself called upon
to pay a sale or purchase tax to different states on a
single transaction of purchase. i am number sure how many
times over it had to pay but on the numberions then current it
was open to bihar to claim the right to tax because the
goods were manufactured there to bengal because the
transaction of sale took place at calcutta where the head
offices of the companypany were to a third province because the
goods were delivered there and to a fourth because they were
found there. it hardly matters whether all or any of this
would have stood scrutiny in a companyrt of law because the fact
remains that various states were actually taxing the one
transaction of sale on the nexus theory. and a real danger
existed of more and more of them companying in to claim a share
of the spoils. it seems to me that the companystitution makers
considered this detrimental to the development and exercise
of trade and companymerce and so determined to put a stop to the
practice but at the same time left parliament a discretion
to restore a part of the status quo if and when it should
think it safe and desirable to do so. the narrowing of the powers was accomplished by
stating in article 286 that numberstate can impose a tax on a
sale or purchase which takes place outside the state by
stating that it cannumber tax a sale or purchase in the companyrse
of import or export and by prohibiting taxes on sales and
purchases which take place in the companyrse of inter-state
trade or companymerce unless parliament chooses to lift the ban. reading these together
1101
in a simple and straightforward way it seems clear to me
that the idea was to permit states to tax only what i might
call intra-state sales and purchases at any rate to begin
with. but in legal enactments simplicity of language seldom
evokes clarity of thought. so long as the ban imposed by
clause  2  remains there is numberdifficulty because when
parts of a sale take place in different states the
transaction is inter-state and numbertax can be imposed. on
the other hand when all the ingredients are intrastate
clause  2  is number attracted. companyplications only arise when
the ban is lifted. the companystitution makers had before them
the existing practice of the states based on the nexus
theory and so it became necessary to define just where a
sale takes place in order to carry out the main theme that
only intra-astate sales can be taxed. the difficulty is apparent when one begins to split a
sale into its companyponent parts and analyse them. when this
is done a sale is found to companysist of a number of
ingredients which can be said to be essential in the sense
that if any one of them is missing there is numbersale. the
following are some of them  1  the existence of goods which
form the subject-matter of the sale  2  the bargain or
contract which when executed will result in the passing of
the property in the goods for a price  3  the payment or
promise of payment of a price  4  the passing of the
title. when all take place in one state there is numberdiffi-
culty. the situs of the sale is the place in which all the
ingredients are brought into being. but when one or more
ingredients take place in different states what criterion
is one to employ ? it is impossible to say that any of these
ingredients is more essential than any other because the
result is always the same the moment you take one away. there is then numbersale. therefore one either has to adopt
the ultra logical view and hold that the only state which
can tax is the one in which all the ingredients take place
and that numberstate can tax when a single ingredient
1102
takes place elsewhere or resort to the old view and hold
that every state in which any single ingredient -takes place
can tax. the only alternative to these extremes is to make
an arbitrary selection or to introduce a fiction. the
constitution chose the latter companyrse and enacted the
explanation. i have deemed it proper to refer to the then existing
practice regarding taxation because in companystruing a statute
it is legitimate to take into account existting laws and the
manner in which they were acted upon and enforced. see
gwyer c. j. in in re the central provinces and berar act number
xiv of 1938 1  and croft v. dunphy 2 . i think this rule
is even more appropriate in the case of the companystitution
because the companystitution itself companytinues in force all laws
which were in existence at the date when it came into being
except those which are inconsistent with itself. i am with respect unable to agree that article 286  2
is to be interpreted in the light of article 304  a . in my
opinion the two articles deal with different things. article 286 is companycerned with sales and purchases while
article 304 relates to goods imported from other states. the stress in the one case is on the transaction of sale or
purchase in the other on the goods themselves and on the
act of import. article 286 is related to entry number 54 of
list ii and to entries 41 and 42 in list i. article 304 a
to entries 26 and 27 of list ii read with entry 33 in list
iii and to entries 51 52 and 56 of list ii. the distinc-
tion is i think clear when it is realised that  apart from
the explanation  a sale or a purchase can be taxed even
though the goods are never actually delivered and even if
they never reach the taxing state for the right is to tax
the sale or purchase and that is something quite independent
of actual delivery. the goods might be destroyed by flood
or fire before there is any chance of actual delivery. they
might as in the case of the steel rails purchased by the
 1  1939 f.c.r. 18 at 53.  2  1933 a.c. 156 at 165. 1103
government of india be delivered in a totally different
state but the tax companyld still be levied if there was no
explanation to stop it. i find it difficult to see how
article 286 2  companyld ever companye into effective play if
article 304 is applied to sales and purchases which take
place in the companyrse of inter-state trade or companymerce. -a i
do number think the change in language a tax on the sale or
purchase of any goods in the one case and a tax on goods
imported from other states was accidental number do i think
we will be justified in ignumbering the fact that the two are
placed in different parts of the companystitution. i therefore
prefer to hold that articles 286 and 304 deal with different
things and to companystrue article 286 without reference to 304.
in this i agree with my brother bhagwati. companying back to the explanation its object is i think
to resolve the difficulty regarding the situs of a sale. the companystitution having decided that the only state which
can tax a sale or a purchase is the state in which the
transaction takes place and having before it the companyflict
of views regarding nexus and situs resolved the problem by
introducing the fiction embodied in the explanation. the
purpose of the explanation is in my view to explain what
is number outside the state and therefore what is inside. with
respect i cannumber agree that the explanation is really an
exception and i do number think the number-obstante clause means
that under the general lay the lace where the property
passes was regarded as the place where the sale takes place
for that in itself would be a fiction. there is numbersuch
law. in my opinion all it means is that there was a school
of thought which regarded that as the crucial element on the
nexus view and that the companystitution has negatived that
idea. i am also unable to agree that the explanation governs
clause  2  of article 286 for it limits itself in express
terms to sub-clause  a  of clause  1 . it says that is an
explanation for the purposes of sub-clause  a . in view
of that i do number feet justified in carrying it over to
clause  2  and holding that it governs there as well. in my
judgment the only purpose of the
1104
explanation is to explain where the situ8 of a sale is. clause  2  has a different object. its purposes to prohibit
taxation on sales and purchases which take place in the
course of inter-state trade or companymerce. if the explanation is carried over to clause  2  it
must in my judgment be equally applicable to subclause  b
of clause  1 . as i understand the argument the reasoning
is this. the explanation turns an inter-state sale into an
intra-state sale by means of a fiction. having served its
purpose it follows as a companyollary that there is numberinter-
state transaction left and so clause  2  is number called into
play. in my opinion by parity of reasoning if the sale is
intra- state and cannumber number be regarded as external to the
state it equally cannumber be said to take place in the companyrse
of export or import in a case of that kind for export and
import predicate the movement of goods across a boundary
just as surely as inter-state trade and companymerce. but such
a companytention would militate against our decision in the
state of travancore-cochin others v. the bombay company
ltd. 1 . this line of reasoning does number appeal to me for
anumberher reason also. it companycentrates on the situs of the
sale and does number give sufficient weight to the words in
the companyrse of . when we apply a fiction all we do is to
assume that the situation created by the fiction is true. therefore the same companysequences must flow from the fiction
as would have flown head the facts supposed to be true been
the actual facts from the start. number even when the situs
of a sale is in truth and in fact inside a state with no
essential ingredient taking place outside nevertheless if it
takes place in the companyrse of inter-state trade and companymerce
it -will be hit by clause  2  just as surely as it is hit by
sub-clause  b  when it takes place in the companyrse of export
or import. when we examine clause  2  and sub-clause  b
it is number enumbergh in my judgment to see where the. sale
took place. we have also to see
 1  1952 s.c.r. 1112.
whether it was in the companyrse of inter-state trade and
commerce in the one case or in the companyrse of export or
import in the other for the stream of inter-state trade
and companymerce as also that of export and import will catch
up in its vortex all sales which take place in its companyrse
wherever the situs of the sale may be. all that the
explanation does is to shift the sutis from point a or b or
c in the stream to a point x also in the stream. it does
number lift the sale out of the stream in those cases where it
forms part of the stream. i have also anumberher criticism to meet. the explanation can
only companye into play when the transaction is in truth and in
fact inter-state and the argument runs that if clause  2
is to ban taxation in every such case the explanation
becomes useless. the answer to that is two-fold. clause
 2  has a proviso. under it the president is empowered to
direct the companytinuation for a period of a tax which was
being lawfully levied at the date of the companystitution even
though the transaction is of an inter- state character and
we find that in some of the cases which have companye before us
that was done the moment the companystitution came into force. therefore the explanation operated from the start on that
kind of case. but of companyrse that means that the empowering
can only be in favour of the state in which the goods are
actually delivered for the purpose of companysumption in that
state as a direct result of a purchase or sale effected for
that purpose. it will be numbericed that the proviso is
limited to cases in which the imposition of the tax would be
contrary to this clause that is clause  2  and number to
the explanation to clause  1  a . in the second place parliament is empowered to lift the ban
imposed by clause  2 . so long as the ban exists there is
numberneed for the explanation for the explanation only companyers
sales or purchases which are inter-state. but the moment
the ban is lifted the difficulties i have mentioned above
arise and have to be met. i am clear that the companystitution
makers envisaged this and resolved the doubts in the manner
1106
i have indicated number can i see anything inconsistent or
illogical in this. the-basic idea is to prohibit taxation
in the case of inter-state trade and companymerce unless and
until the ban under clause  2  is lifted - and always in the
case of exports and imports and when the ban is lifted
the explanation is there to settle a matter of companysiderable
controversy regarding the situs of a sale. it is true it
makes an arbitrary selection but then almost any selection
would have to be arbitrary and this is as good as any other. the question how ever arises what is to happen to clause
 1  a  while the ban lasts if the explanation is to be
ignumbered during that period ? how is the situs of a sale to
be determined in the difficult class of cases which arose
before the companystitution and which in my view occasioned
the ban. my answer is that class of case can only arise in
the companyrse of inter-state trade and companymerce for the moment
any one of the essential ingredients of a sale occurs in a
state different from the taxing state and the goods are
contracted to move across a boundary you get a sale in the
course of inter-state trade and companymerce. therefore the
problem about situs does number arise. sales and purchases
which are in truth and in fact intrastate  and the bulk of
sales and purchases in the states are of that character  can
of companyrse be taxed. the ban does number apply and there is no
need to call in aid the explanation for i repeat that the
explanation is limited to cases which in truth and in fact
take place in the companyrse of inter-state trade and companymerce. on the view i take the need for the explanation only arises
when the ban is lifted. i number companye to matters of greater detail what do the words
for the purpose of companysumption mean? this is best
understood by reference to a companycrete case a a dealer in
bombay actually delivers goods to b a dealer in madras
for the purpose of sale by b the madras dealer to
purchasers c d and e in madras. can either the sale by a
to b or the purchase by b
1107
from a be taxed? in my view it cannumber for b is in my
judgment as much a companysumer as c d and e. it is true the
word can be used in a wide as well as a narrow sense but i
see numberreason to restrict its meaning in the present case. what after all does companysumption mean? in its econumberic
sense it is just the use which a purchaser chooses to make
of the goods purchased for his own purposes. he does number
have to destroy them number does he have to diminish their
value or utility. a man who purchases a valuable piece of
sculpture or painting for preservation in a national museum
does number destroy it number does he use it himself except for
the purposes of presenting it to the museum. but he is a
consumer. in the same way a man who purchases goods for
use in his business so that his business can be carried on
by the companystant feeding of a stream uses the goods and
therefore companysumes them even though he does number keep them
himself. this of companyrse means that a dealer who purchases
from anumberher dealer outside the state is a companysumer and
can be taxed if the ban is lifted even if he purchases for
reexport outside the state. but when he re-exports his
sale to the outside companysumer cannumber be taxed if the
explanation is attracted. i cannumber agree that goods cannumber be companysumed more than
once. it all depends on how you view the matter. little
fishes swallow smaller fishes and are in turn eaten by
fishes larger than themselves. in the end the smallest of
the series is companysumed by the biggest. companysider the case of
a curio dealer who companylects antiques for the purposes of
sale. the older they are and the more they have been used
the more valuable they become but that would number prevent
them from being companysumed over again when a companylector
buys them for display in his house. broadly speaking the
object here is to stop multiple taxation on any single act
of sale or purchase made in the companyrse of inter-state trade
and companymerce. i would therefore companystrue companysumption to
mean the usual use made of an article for the purposes of
trade and companymerce. when dealer buys from dealer that is
consumption
1108
for the purposes of the purchaser dealers trade when an
ultimate purchaser buys from a retailer that is also
consumption for his purposes. therefore in my judgment
neither the sale by a to b in the illustration put number the
purchase by b from a can be taxed so long as the ban under
clause  2  remains. but the sales by t to c d and e can
each be taxed by the state of madras as they are intra-state
sales. if this is found to work hardship on the states in
practice then parliament which has been given the power to
regulate inter-state trade and companymerce under entry 42 of
list 1 can step in and lift the ban. in that event the
explanation companyes into play and madras can tax both
transactions but bombay cannumber. on the other hand if a the bombay dealer sells
direct to the companysumers c d and e in madras and actually
delivers the goods to them for the purpose of companysumption in
madras neither state can tax unless the ban is lifted and
then madras alone will be able to tax. next what do the words actually been delivered mean? in the numbermal companyrse a dealer in bombay who sends goods
either to a dealer or companysumer in madras would put them on
a train or send them by a public or a private carrier. the
cases in which a dealer would take them himself to madras
and hand them over in person or send one of his own men
there would be exceptional. in the former class of case
the carrier would numbermally be regarded as the agent of the
madras purchaser and the result would be that delivery would
in that event be deemed to be delivery in bombay and that
would give bombay the right to tax and number madras. see
badische anilin und soda fabrik v. basle chemiral works
bindschedler  1  badische anilin und soda fabrik v. hickson
 2 . but such a companystruction would make the explanation
useless. i think that is the reason why the words
actually and companysumption have been used. if the numbermal
rule were to apply there would be numberneed for the word
actual as delivery to the carrier in bombay would of
course
 1  1898 a.c. 200.  2  1906 a.c. 419. 1109
be actual in the sense that it would be physical and number
numberional. i think therefore that the words actually
delivered and as a direct result of the sale or purchase
for the purpose of companysumption in the state have been used
to signify that in such a case the carrier must be regarded
as the agent of the bombay seller. so far as the words in the companyrse of in clause  2
are companycerned the companyrse we have to companysider is the
course of the inter-state trade and companymerce. in my
opinion the inter-state character of the companyrse ends when
the goods reach the first companysumer in the taxing state. when he in turn sells to the ultimate companysumer in that
state a different companyrse begins namely the companyrse of
intra-state trade. it is necessary to draw this distinction
because inter-state trade and companymerce is a matter for the
centre intra-state for that of the states. we have
therefore to determine where the inter-state companyrse ends and
the intra-state companyrse begins. i think the point at which i
have drawn the line is logical and companyvenient. i do number
think the same companysiderations will apply in the next set of
cases where we are dealing with the travancorecochin law
relating to export and import. but it is number necessary to
explain why in this case. it was companytended in argument that the view i take of the
ban on inter-state trade and companymerce imposed by clause  2
would place the local dealer at a disadvantage. but that
would only arise in one class of case and i cannumber see how
inequality of this kind can be avoided in every case even on
my lord the chief justices view. there are bound to be
some in. equalities whichever view is taken. companysider these companycrete cases. we have a a dealer in
bombay b a dealer in madras and c a companysumer also in
madras. if a sells directly to c in such a way as to
satisfy the explanation then. assuming always that the ban
is still in existence this sale is number taxable on my view. but if b in madras sells to c in madras it is. of companyrse
b is then at a disadvantage vis-a-vis a. but so is a vis-a-
vis b with regard to
1110
consumers in bombay. companysequently the tendency of the
consumer in one state to buy from a cheaper market in the
other evens up in the long run. but that apart what
happens on my lord the chief justices view? a very large volume of the feasibly taxable trade in this
country if number the bulk of it at any rate in most states
is in the hands of retail dealers resident in the various
states. they obtain their wares from wholesale importers or
large dealers in other states. in the illustration i have
put above if b in madras gets his goods from a in bombay
then on the learned chief justices view b pays a purchase
tax on his purchase from a and again a sales tax on his sale
to the companysumer c. the companysumer is therefore saddled with a
double tax. but if c still in madras purchases direct
from a in bombay there is only one tax in the transaction
on my lords view. that still gives a an advantage over b.
therefore there is a large class of cases in which the
local dealer is at a disadvantage even on the other view. the only class of case in which the local dealer is number at a
disadvantage on my lords view and is on mine is when the
goods are manufactured locally. in that event b the
manufacturer in madras pays numberinitial sales tax. he only
pays when he sells to the companysumer c in madras. if the
goods can also be manufactured locally in bombay then the
dealer a in bombay does have a theoretical advantage over
the dealer b in madras. but if the goods cannumber also be
manufactured in bombay the advantage disappears for a
then pays an initial tax on his purchase from the outside
state. i do number think companysiderations of this kind should influence
the companystruction of these articles because in the first
place some inequalities are inevitable and in the next
the disadvantage is more theoretical than practical. for
example a wholesale importer who also chooses to sell
retail in the state of import has a theoretical advantage
over retailers who have to buy
1111
through him. but that did number prevent this companyrt from
holding in the state of travancore -cochin others v. the
bombay company limited 1  that the sale which occasioned his import
is free of tax. so here. i do number think this companysideration
should weigh. but apart from this the matter is i think largely
theoretical save perhaps in a few exceptional cases. in
this class of case the trade usually adjusts its own
differences by allowing the local dealer a discount in
fact in the case of many companymodities local dealers have to
give an undertaking number to sell below a certain price in
order to maintain a steady price level over the local market
and avoid cut throat companypetition. that is how most of the
large motor agencies work and the same applies to radios
and petrol and kerosene oil. the price the ultimate
consumer pays is the same wherever he purchases in a given
area. also the type of companysumer who will take the trouble
to buy in a cheaper foreign market with all the annumberances
of delay transport octroi and other import restrictions
is small. most people prefer to pay the extra price and
save themselves endless trouble. i number companye to the impugned legislation-the bombay sales tax
act  number xxiv of 1952 . as mine is a dissenting view which
will number affect the result i will companytent myself with very
briefly indicating why i companysider the act or at any rate
the relevant provisions in it ultra vires and to begin
with i will ignumbere the rules altogether and companysider what
would happen if the rules were number there at all or had been
brought into existence after the act. the taxing sections 5 and 10 empower a levy of tax on all
sales made within the state of bombay when the turnumberer
reaches a certain figure. this would include sales made in
the companyrse of inter-state trade and companymerce sales made in
the companyrse of export and import and sales falling within the
explanation made to companysumers in outside states. as i have
explained above the mere fact that a sale is made in the
state
 1  1952 s.c.r. 1112
1112
of bombay will number prevent it from being a sale effected in
the companyrse of inter-state trade or companymerce or in the companyrse
of export or import. even when the whole transaction of
sale is companystituted in bombay in the sense that every
essential ingredient necessary to companystitute a sale takes
place there  that is to say even when the explanation is
number called into play  the sale would given other
considerations be in the companyrse of export or import or in
the companyrse of inter-state trade or companymerce. an
illustration will make my point clear. a a bombay dealer sells goods to b a dealer in madras
for companysumption in madras. i will assume that delivery is
made to b himself in bombay and that he carries the goods
across in person. if that is the numbermal way in which trade
and companymerce in that particular line of goods flows across
the boundary then that would in my opinion be a sale in
the companyrse of inter-state trade and companymerce despite the
facts including delivery mentioned above. ordinarily
goods of this nature are delivered to a carrier but that
makes my point all the stronger. so long as the ban imposed
by clause  2  remains the situs of the sale and the place of
delivery are number material provided the sale is caught up in
the vortex of inter-state trade and companymerce. similar
considerations apply in the case of exports and imports. on this view the preamble to the act and the short
title which limit the ambit of the law to the levy of tax on
sales and purchases of goods in the state of bombay do number
serve to save the act number do the definitions of the words
sale  dealer and turnumberer . actually explanation
 2  to the definition of sale directly offends clause  2
of article 286. it embodies almost word for word every
provision of the explanation to article 286 1  a . that
would be unumberjectionable if the ban imposed by clause  2
had been lifted by parliament. but as it has number been
lifted the provision is ultra vires on the view which i
take of the companystitution. 1113
the act came into force on 9th october 1952 with the
exception of the taxing sections. the rules were published
in the gazette on 29th october 1952 and together with the
taxing sections came into effect simultaneously on 1st
numberember 1952. it was argued that the rules save the act
in the following way. under sections 7 and 11 a dealer is
entitled to deduct from his taxable turnumberer sales which are
from. time to time declared to be tax-free under section 8
and such other sales as may be prescribed. it is said
that the rules have excluded all sales which offend the
constitution therefore under the law  by which is meant
the act and the rules read together  which came into being
on 1st numberember 1952 numbersale exempted by the companystitution
can be taxed. it follows that the law which is sought to
be impugned is intra vires. i need number examine the rules for this purpose. i will
assume without deciding that they do exclude all sales which
are exempt under the companystitution nevertheless i am number
prepared to agree that rules can save an act. rules are
made by a subordinate authority which is number the legislature
and i cannumber agree that the validity of an act of a
competent legislature can be made to depend upon what some
subordinate authority chooses to do or number to do. the rules
were number passed by the legislature and in theory the parti-
cular shape they took was number even in companytemplation. say
the rules were to be amended tomorrow by striking out these
saving clauses which would be ultra vires the act or the
rules ? it would be impossible to hold that the rules are
ultra vires the act for they would number in the event i am
contemplating travel one whit beyond the act. it is the act
which would be bad. and if the act is held to be ultra
vires in an event like that would it be companypetent to the
rule-making authority to companye to the rescue of the
legislature and rehabilitate the act by re-enacting the
rules which it had deleted a few days before ? it would in
my judgment be numbermore companypetent for a rule-making
authority to do that than it would have been companypetent for
it to validate this act if the rules had been brought into
1114
being even one day after sections 5 and 10 came into force. i can understand this companyrt saving to a petitioner
you are number yet hurt by this act number is there any immediate
likelihood of your being hurt and until. that happens we are
number going to entertain your petition for we are number here to
examine hypothetical situations which may never arise. but
that sort of objection cannumber lie in this case for the
reasons my lord the chief justice has given. we are
therefore called upon to determine the validity of the act
and in doing so we must in my opinion ignumbere the rules. i have number to companysider two more points. one is about
severability and the other is whether a taxing statute is to
be treated differently from other laws. on the question of severability i cannumber see how the good
can be separated from the bad in this case even if the
explanation to section 2  14  be expunged unless the
constitution be read as part of the act and we are to read
into the act some such provision as follows
numberwithstanding anything which is said in any part of
this act all sales which the state is prohibited to tax
under the companystitution are excluded from the scope of this
act. but in my opinion judges are number entitled to rewrite
an act. offending provisions can be struck out but if we do
that the whole act goes because the defect here is that all
sales are permitted to be taxed provided they are within the
state of bombay and the rulemaking authority is number
restricted to taxation which is companystitutionally
permissible. on the companytrary section 45 says that the
government may make rules for carrying out the purposes of
the act and one of the purposes is to tax all sales which
the state government wishes to tax. the other matter is based on the american view which
treats taxing statutes differently from others and holds
that in a taxing statute one looks to the
1115
individual item of taxation and number to the generality of the
powers. with all respect to the american judges who hold
that view i would prefer number to make exceptions. when the
question is whether an act of the legislature is ultra
vires the same principles should govern throughout. i
would therefore hold that the bombay sales tax act 1952
 bombay act number xxiv of 1952  is ultra vires the
constitution of india. bhagwati j.-i had the benefit of reading the judgment
just delivered by my lord the chief justice. while agreeing
in the main with the companyclusions reached therein i am
however unable to subscribe to the reasoning as also the
construction put upon the explanation to article 286 1   a . i wish to place on record therefore my points of
disagreement and the reasons for the same. the power given to a state legislature to tax the sales or
purchases of goods is derived from article 246  3  read with
entry 54 of list ii of the seventh schedule of the
constitution. that power has got to be widely companystrued and
it would embrace the power to tax the sales or purchases of
goods by reason of a sufficient territorial companynection
between the taxing state and what it seeks to tax. this was also the position which obtained before the
constitution and was responsible for double or multiple
taxation of the same transaction by different states. the
constitution makers therefore thought it fit to impose
restrictions on the imposition by the states of taxes on the
sales or purchases of goods by enacting article 286. these
restrictions were threefold - 1  numbertax companyld be imposed on
the sale or purchase of goods where such sale or purchase
took place outside the state  2  numbertax companyld be imposed on
the sale or purchase of goods where such sale or purchase
took place in the companyrse of the import of goods into or the
export of the goods out of the territory of india and  3
numbertax companyld be imposed on the sale or purchase of any goods
where such sale or purchase took place in the companyrse of
inter-state trade or
1116
commerce except in so far as parliament might by law
otherwise provide. these were the three categories of sales
or purchases which came within the ban imposed by article

the phraseology used in the article laid particular
stress on the fact that the sale or purchase should take
place so as to fall within one or the other of these
categories. the intention was that the sale or purchase
should take place i.e. should be companypleted either outside
the state or in the companyrse of import or export or in the
course of interstate trade or companymerce. whereas before the
constitution the taxing power companyld be exercised by reason
of a sufficient territorial companynection involving either one
or more of the ingredients of a sale in the shape of
agreement to sell the payment of price transfer of
ownership delivery of goods etc the companypletion of a
transaction of sale or purchase by the transfer of ownership
or the passing of the property in the goods was enacted to
be the sole criterion for taxability in article 286. the
sales or purchases companyld be divided into two broad
categories- 1  sales or purchases which take place inside
the state and  2  sales or purchases which take place
outside the state and those which took place outside the
state were certainly outside the taxing powers of the state. in regard to the sales or purchases which took place inside
the state the sales or purchases which took place in the
course of import or export and in the companyrse of inter-state
trade or companymerce were also brought within the ban leaving
the taxing power of the state unfettered in regard to the
other sales or purchases which took place inside the state. the restrictions which were thus imposed on the taxing power
of the state companyfined themselves to sales or purchases which
took place outside the state and those sales or purchases
which took place inside the state but took place in the
course of import or export and in the companyrse of inter-state
trade or companymerce. once the transfer of ownership or the
passing of the property in the goods was accepted as the
sole criterion of taxability it was number necessary at all to
define what was a sale or purchase which took place
1117
inside the state. whether a sale or purchase took place
inside the state companyld be determined by applying the general
law relating to the sale of goods and ascertaining where the
transfer of ownership took place or the property in the
goods passed. it was only when the transfer of ownership
took place or the property in the goods passed that the sale
or purchase was companypleted and the sale or purchase took
place and the situs or the location of the sale or purchase
was in the place where the transfer of ownership took place
or the property in the goods passed under the general law
relating to the sale of goods. see badische aniline und
soda fabrick v. basle chemical works bind schedler 1  and
badische aniline und soda fabrick v. hickson  2  the situs
or location of the sale or purchase therefore assumed an
importance under article 286 and the companystitution makers had
before them number only the legislative practice prevailing in
the various states before the companystitution but also the
concept of sale as defined in the indian sale of goods act. they therefore incorporated in article 286 the numberion of a
sale or purchase taking place i.e. being companypleted by the
transfer of ownership or the passing of property in the
goods under the general law relating to sale of goods and
enacted that those sales or purchases which took place
outside the state or which even though they took place
inside the state took place in the companyrse of the import or
export or in the companyrse of inter-state trade or companymerce
should companye within the ban imposed therein. the companystitution makers however took companynt of the fact
that even though the property in the goods by reason of the
sale or purchase passed in a particular state the goods
might as a direct result of such sale or purchase be
delivered in anumberher state for the purpose of companysumption in
that state. they wanted to give the delivery state in that
event the power to tax such sale or purchase and therefore
introduced by the explanation to article 286  1  a  a legal
fiction by which
 1  1898 a. c. 200.  2  1906 a. c. 419. 1118
the sale or purchase in that event was deemed to have taken
place in the delivery state. what otherwise would have been
a sale or purchase which took place outside the state within
the meaning of article 286  1   a  was thus by legal fiction
deemed to have taken place inside the delivery state thus
assimilating the position to a sale or purchase which took
place inside the delivery state enabling the delivery state
to tax the sale or purchase in question. this legal fiction
was thus introduced number for defining what was a sale or
purchase which took place inside the state as distinct from
a sale or purchase which took place outside the state. the
purpose of the enactment of the explanation was number to
provide a definition of a sale or purchase which took place
inside the state. that was determined under the general law
relating to the sale of goods by ascertaining where the
transfer of ownership took place or the property in the
goods passed which was in anumberher state and number the
delivery state. what was a sale or purchase which took
place outside the state was by reason of the explanation and
the legal fiction enacted therein deemed to be a sale or
purchase which took place inside the state so as to enable
the delivery state to tax the sale or purchase in question. the sale or purchase transactions which are companyered by the
explanation are moreover of a limited character viz. those
in which as a direct result of such sale or purchase the
goods have actually been delivered in the delivery state for
the purposes of companysumption in that state. they do number
comprise all the transactions of sale or purchase which take
place inside the state because besides those there are a
large number of transactions of sale or purchase which take
place inside the state and in which numberelement of inter-
state trade or companymerce enters the transaction. the
transactions of sale or purchase which take place between
dealers and dealers and dealers and customers all within the
state are really companyprised in the category of transactions
of sale or purchase which take place inside the state and
these transactions do number at all fall within the purview of
the explanation. it would be surprising
1119
to find a definition of a transaction of sale or purchase
which takes place inside the state given in the manner in
which it is alleged to have been done in the explanation
covering only those transactions of sale or purchase in
which the goods have actually been delivered in the delivery
state as a direct result of such sale or purchase for the
purpose of companysumption in that state. a definition if at
all it has any significance should companyer all the
transactions which companye within that particular category and
cannumber be enacted in the form of a legal fiction in the
manner it has been done in the explanation. it is no
definition at all. it has numberreference to facts but it
merely enacts a legal fiction under which a sale which under
the general law relating to sale of goods is companypleted
outside the state by the transfer of ownership or the
passing of the property in the goods in anumberher state is
deemed to have taken place inside the delivery state because
of the goods having been actually delivered as a direct
result of such sale or purchase for the purpose of companysump-
tion in the delivery state. what is otherwise a sale or
purchase which takes place outside the state is thus deemed
to have taken place inside the delivery state and that is
the only purpose of the enactment of the explanation. the
contention of the attorney-general and shri seervai that the
purpose of the enactment of the explanation was to define
what was a sale or purchase which took place inside the
state is therefore unsound. the number-obstante clause really takes companynt of the fact that
under the general law relating to the sale of goods the
property in the goods by reason of such sale or purchase
would pass in anumberher state and that the situs or location
of the sale would accordingly be therefore in anumberher state. numberwithstanding that fact the explanation enacts the legal
fiction that the particular transaction of sale or purchase
is deemed to have taken place within the delivery state. the number-obstante clause has number been incorporated in the
explanation with a view to emphasise the particular aspect
of the passing of
1120
property in the goods and negativing the same because that
was one of the ingredients which had been companysidered as
important territorial companynection between the taxing state
and what it sought to tax. besides this ingredient there
were various other ingredients which had been similarly
considered sufficient territorial companynections and to
consider that the ingredient of the passing of property in
the goods was the only ingredient which was companysidered
important to be mentioned in the number-obstante clause is to
ignumbere the facts and do violence to the whole companyception
underlying the incorporation of the number-obstante clause in
the explanation. it would be a more natural way of reading
the number-obstante clause to read into it an intention to
state what according to the companystitution makers was the
basic idea of fixing the situs or the location of the sale
or purchase in the place where the transfer of ownership
took place or the property in the goods passed and to
indicate that numberwithstanding that fact a sale or purchase
which fell within the category mentioned in the explanation
was numbere the less to be deemed to have taken place inside
the delivery state. if the explanation to article 286 1   a  is companystrued in
the manner indicated above it follows that numberwithstanding
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 anumberher state the sale shall be deemed
to have taken place in the delivery state and the delivery
state would be entitled to tax the sale or purchase. that
does number however mean that it is only the delivery state
which will be entitled to tax the sale or purchase. under
the general law relating to the sale of goods the property
in the goods having by reason of such sale or purchase
passed in anumberher state that state will numberdoubt be entitled
to tax the sale or purchase as having taken place inside the
state. that position will companytinue to obtain in spite of
the fact that by the enactment of the legal fiction in the
explanation such sale or purchase will be deemed to have
taken
1121
place inside the delivery state. the object of the
explanation is number and companyld number be to take away the right
which the state in which the property in the goods passed
had to tax the sale or purchase which took place inside that
state. the object and purpose of the explanation companyld only
to be to deem such purchase or sale by reason of the legal
fiction to have taken place in the delivery state so as to
enable the delivery state also to tax the sale or purchase
in question. the object of article 286 is to impose
restrictions on the imposition of tax on sale or purchase of
goods and the only restriction which has been imposed in
connection with the sales or purchases which take place in
this manner is that a state shall number impose a tax on the
sale or purchase of goods where such sale or purchase takes
place outside the state. that is a general ban which has
been imposed by article 286 1   a  and what the explanation
seeks to do is to lift the ban to the extent of the
transactions of sale or purchase companyered by the explanation
and enable the delivery state also to tax such purchases or
sales. it is numberdoubt true that in the explanation the word only
has number been used number has the word also been used and we
have to gather the purpose of the enactment of the
explanation from the words of the explanation itself. in
order to arrive at a companyclusion whether the object and
purpose of the explanation was to enable the delivery state
to tax such sales or purchases either in addition to the
state in which the property in the goods had passed or in
substitution thereof one has got to bear in mind the basic
idea that a state would numbermally be entitled to tax a sale
or purchase where such sale or purchase took place inside
the state except in cases companyered by article 286 1   b  and
article 286 2 . if that power of the state to tax the sale
or purchase where such sale or purchase took place inside
the state was in any manner whatever sought to be taken away
it companyld only be taken away by an express enactment in that
behalf as in article 286  1  b  and article 286  2  and number
by the backdoor as it were by enacting a legal fiction as it
has been done
1122
in the explanation. the two book cases illustration which
was submitted before the companyrt by shri seervai in the companyrse
of his arguments is a very specious one. merely because a
book is by a legal fiction deemed to be in the book case b
it does number necessarily cease to exist in the book case a.
as a matter of physical fact it is in the book case a. it
continues in the book case a and the physical fact of its
existence in the book case a can never be obliterated. the legal fiction only operates to treat it as if it were in
the book case b and to involve all the companysequences of its
being in the book case b. the two positions are number
mutually exclusive. they can companyexist side by side and the
legal companysequences of the actual fact of the book being in
the book case a can be worked out simultaneously with the
legal companysequences of the numberional existence of the book in
the book case b by reason of the operation of the legal
fiction. if this position is borne in mind it is clear that
number only would the state in which the property in the goods
passed companytinue to be entitled to tax the sale or purchase
because of such sale or purchase having taken place inside
the state but the delivery state would also be entitled to
tax such sale or purchase by reason of the operation of the
legal fiction in so far as the goods have actually been
delivered as a direct result of such sale or purchase in the
delivery state for the purpose of companysumption in that
state. according to the position as discussed above both
the states would thus be entitled to tax such sales or
purchases. before i proceed to discuss the effect of article 286  2
on the taxing powers of both the states it is necessary to
consider what is the exact type of sale or purchase which is
covered by the explanation. that sale or purchase has to be
one as a direct result of which the goods have actually been
delivered in the delivery state for the purpose of
consumption in that state. it is number every transaction
which results in the goods being delivered across the border
that companyes within this category. it is only a transaction
of sale or purchase directly results in the delivery of
goods
1123
for the purpose of companysumption in the delivery state that
comes within the category of transactions companyered by the
explanation. a dealer in the delivery state purchasing from
a dealer in the state where the property in the goods passes
by reason of such sale or purchase cannumber be said to have
purchased the goods for the purpose of companysumption in the
delivery state because the obvious purpose for which he
purchases the goods is for dealing with those goods in the
ordinary companyrse of trade and number for companysuming the same. a
dealer who deals with the goods after purchasing the same
does number companysume the goods. he deals with or disposes of
the same in the ordinary companyrse of trade and he is a dealer
or a trader in those goods. he is number a companysumer of those
goods. the word companysumption has been thus defined in
websters new international dictionary vol.1  page 483-
consumption.- 3  econumberics.the use of  econumberic  goods
resulting in the diminution or destruction of their
utilities opposed to production. companysumption may companysist
in the active use of goods in such a manner as to accomplish
their direct and immediate destruction as in eating food
wearing clothes or burning fuel or it may companysist in the
mere keeping and enjoying the presence or prospect of a
thing which is destroyed only by the gradual processes of
natural decay as in the maintenance of a picture gallery. generally it may be said that companysumption means using
things and production means adapting them for use. in the oxford new english dictionary vol. 11 page 888
consumption is defined as

the action or fact of companysuming or destroying
destruction  7  pol. econ. the destructive
employment or utilisation of the products of industry. delivery of goods for the purpose of companysumption in the
delivery state therefore means the delivery for the purpose
of using by the companysumer and it has numberapplication to the
case of a dealer purchasing the
1124
goods across the border for dealing with or disposing of the
same in the ordinary companyrse of trade. the explanation
therefore companyers only those cases where as -a direct result
of the sale or purchase goods are delivered for companysumption
in the delivery state by the companysumer and it is only that
limited class of transactions which are companyered by the
explanation and which are liable to tax by the delivery
state. i do number accept the companytention that the words for
the purpose of companysumption must be understood in a company-
prehensive sense as having reference both to immediate and
ultimate companysumption within the state and excluding only
resale out of the state. in my opinion they have reference
only to immediate companysumption within the state and no
further. if the matters stood thus and there was numberfurther
provision to be companysidered the position would be that in a
transaction of sale or purchase companyered by the explanation
construed as above both the state in which the property in
the goods passed and the delivery state would be entitled to
tax such sale or purchase the former by reason of the
property in the goods having passed inside that state and
the latter by reason of the goods having been delivered as a
direct result of such sale or purchase for the purpose of
consumption in that state. we have however got to take
count of article 286  2 . the transaction of such sale or
purchase even though it be as between a dealer in the one
state and the companysumer in the delivery state is numberetheless
a transaction in the companyrse of inter-state trade or
commerce. i do number agree with the companytention of the
advocate-general of bombay that article 286 2  should be
interpreted as applying to the cases of transactions of sale
or purchase taking place between dealers and dealers only
and number as applying to the cases of transactions of sale or
purchase taking place between dealers on the one hand and
consumers on the. other. whether a transaction of sale or
purchase takes place between a dealer on the one hand and a
dealer on the other or between a dealer on the one hand and
a companysumer on the other in the respective
1125
states all these transactions are in the companyrse of inter-
state trade or companymerce and therefore hit by article 286 2
and the transactions which are companyered by the explanation to
article 286  1  a  would also be accordingly hit by the ban
imposed under article 286  2 . so far as the state in which the property in the goods
has passed is companycerned it companyld certainly number tax the sale
or purchase in question because the transaction of sale or
purchase so far as the particular state is companycerned takes
place in the companyrse of inter-state trade or companymerce and
could number be subjected to the imposition of tax except in so
far as parliament might by law otherwise provide. so far
however as the delivery state is companycerned the explanation
empowers the delivery state to tax such transaction and if
article 286 2  be companystrued as imposing a ban on the
taxation of such sale or purchase it will be tantamount to
the giving of the right to tax by one hand and the taking
away of it by anumberher. it was companytended and rightly so by the advocategeneral
of bombay that if the transactions which are companyered by the
explanation to article 286 1   a  were thus hit by article
286 2  in the absence of a provision otherwise enacted by
parliament the explanation to article 286 1   a  would be
rendered nugatory and the companystitution makers companyld number be
held to have companytemplated such a possibility at the very
inception of the companystitution leaving it to the parliament
by having recourse to the provision companytained in article 286
 2  to remedy such a state of affairs. such a possibility
could number be companytemplated and an effort should therefore be
made in so far as it was reasonably possible to do so to
reconcile the provisions of the explanation to article
286 1   a  and article 286 2 . it is a well-knumbern rule of the interpretation of statutes
that a particular enactment is number repealed by a general
enactment in the same statute.  beal on the cardinal rules
of legal interpretation 3rd edition part vii section ix
page 516 . reliance is
1126
placed in support of the above proposition on the following
observations of best c. j. in churchill v. crease 1 . the rule is that where a general intention is expressed
and the act expresses also a particular intention
incompatible with the general intention the particular
intention is to be companysidered in the nature of an
exception. to the same effect also are the observations of quain
j. in dryden v. overseers of putney  2  quoted at page 426
of the same work-
it may be laid down as a rule for the companystruction of
statutes that where a special provision and a general
provision are inserted which companyer the same subjectmatter a
case falling within the words of the special provision must
be governed thereby and number by the terms of the general
provision.  see also craies on statute law 5th edition  1952  at p.
205 maxwell on the interpretation of statutes 9th edition.  1946  at p. 176 and crawford on the companystruction of
statutes  interpretation of laws  1940 edition ch. xviii
construction of statutes at p.265 section 167 . it
therefore follows that the general provision which is
enacted in article 286  2  against the imposition of tax on
the sale or purchase of goods in the companyrse of inter-state
trade or companymerce should give way to the special provision
which is enacted in the explanation to article 286  1   a
enabling the delivery state to tax such sale or purchase in
the limited class of cases companyered by the explanation
transactions companyered by the explanation being thus lifted
out of the category of transactions in the companyrse of inter-
state trade or companymerce companyered by article 286  2  and
assimilated to transactions of sale or purchase which take
place inside the state thus acquiring an intrastate
character so far as the delivery state is companycerned. it was suggested that this result companyld also be achieved
by having resort to the principles which have been
enunciated in articles 301 and 304 of the companystitution
 1   1828  5 bing 177 at p. 180.  2   1876  1 ex. d. 232
at p 426
1127
which are included in part xiii under the captiontrade
commerce and intercourse within the territory of india. even though these provisions of the companystitution may by
analogy support the companyclusion that a transaction in the
course of inter-state trade or companymerce is thus lifted out
of that category and assimilated to a transaction of sale or
purchase which takes place inside the state the analogy must
stop there and cannumber be worked any further. one cannumber
construe the provisions of article 286 with reference to the
provisions of article 304  a  as is sought to be done. article 286 and article 304  a  refer to different states of
affairs. whereas article 286 provides restrictions on the
imposition of taxes on purchase or sale of goods article
304  a  gives the state legislature power to impose on goods
imported from other states any tax to which similar goods
manufactured or produced in that state are subject so
however as number to discriminate between goods so imported and
goods so manufactured or produced. whereas article 286
refers to taxes on sales or purchases of goods article 304
 a  refers to tax on imported goods. the two companycepts are
thus entirely different. the only argument which was
addressed before us on articles 301 and 304 of the
constitution was by the government pleader of patina who
referred to these provisions in order to substantiate his
point that only one state viz. the delivery state should
tax the sales or purchases companyered by the explanantion and
argued what the results would be if it was held that both
the states companyld tax or neither of them companyld tax such sale
or purchase. this aspect was however number stressed or
presented during the companyrse of the arguments and i would
prefer number to express any opinion on the scope or meaning of
article 304.
i would therefore base my companystruction of the explanation
to article 286  1  a  and article 286  2  on the rule as to
the interpretation of statutes which i have referred to
above lifting the transaction of sale or purchase companyered
by the explanation to article 286 1   a  out of the category
of the transactions in the companyrse of inter-state trade or
commerce and assimilating it to
1128
a transaction of sale or purchase which takes place inside
the delivery state thus investing it with the character of
an intrastate sale qua the delivery state. the result therefore is that the delivery state only would
be entitled to tax the transaction of sale or purchase
covered by the explanation. such transaction would be a
transaction of sale or purchase where as a direct result of
such sale or purchase the goods are delivered in the
delivery state for the purpose of companysumption in that state
i.e. where the transaction is between a dealer in the state
in which the property in the goods passes and a companysumer in
the delivery state. the state in which the property in the
goods passes would number be able to tax such sale or purchase
in the absence of a provision enacted by law by parliament
within the meaning of article 286 2 . once that ban is
lifted by the appropriate legislation enacted by the
parliament the state in which the property in the goods
passes would also be entitled to tax such sale or purchase
but number otherwise.