M.P. V. Sundararamier & Co. Vs. The State of Andhra Pradesh & ANR [1958] INSC 19 (11 March 1958)
AIYYAR, T.L. VENKATARAMA BOSE, VIVIAN DAS, SUDHI RANJAN (CJ) DAS, S.K.
SARKAR, A.K.
CITATION: 1958 AIR 468 1958 SCR 1422
ACT:
Sales Tax-Inter-State sales--Sale outside State but goods delivered for consumption within StateCompetence of States to levy tax-Conditional legislation--Power of Parliament to authorise such taxation-President's Adaptation Order-Scope of--Nature of Retrospective operation-Enactment unconstitutional in Part-Effect -Madras General Sales Tax Act, 1939 (Mad. 9 of 1939), as adapted to Andhra, SS. 2(h), 22-Sales Tax Laws Validation Act, 1956 (7 of 1956), S. 2Constitution of India, Arts. 246, 286, 301, 372, Sch. VIl, List 1, Entry 42, List 11, Entry 54.
HEADNOTE:
The petitioners were dealers carrying on business in the City of Madras in the sale and purchase of yarn. The dealers in the State of Andhra used to place orders for the purchase of yarn with the petitioners in Madras, where the contracts were concluded and the goods were delivered exgodown at Madras and thereafter despatched to the purchasers who would take delivery of them within their State. The present dispute related to sales in which property in the goods sold passed outside the State of 1423 Andhra, but the goods themselves were actually delivered as a result of the sale for consumption within that State.
After the coming into force of the Constitution of India the President in the exercise of the powers conferred by Art. 372(2) made Adaptation Orders with reference to the Sales Tax Laws of all the States, and as regards the Madras General Sales Tax Act, 1939, he issued an Amendment inserting a new section, S. 22 in that Act, which was a verbatim reproduction of the Explanation to Art. 286 (i)(a) of the Constitution. Oil July 13, 1954, the Board of Revenue (Commercial Taxes) in the State of Andhra, acting on the decision in The State of Bombay and another v. The United Motors (India) Ltd., and others, [1953] S.C.R. 1069, called upon dealers in the State of Madras to submit returns of their turnover of sales in which goods were delivered in the State of Andhra for consumption. Thereupon they filed the present petitions under Art. 32 Of the Constitution challenging the demand on the grounds, inter alia, that the sales proposed to be taxed were inter-State sales and that they were immune from taxation under Art. 286(2) Of the Constitution. While the petitions were pending the Supreme Court pronounced on September 6, 1955, its judgment in The Be gal Immunity Company Limited v. The State of Bihar and others, [1055] 2 S.C.R. 603, according to which the petitioners were not liable to be taxed. But before final orders were passed on the petitions Parliament passed Sales Tax Laws Validation Act, 1956, S. 2 whereof provided that no law of a State imposing or authorising the imposition of tax on inter-State sales during the period between April 1, 1951, and September 6, 1955, shall be deemed to be invalid or ever to have been invalid merely by reason of the fact that the sales took place in the course of the inter-State trade.
That section further provided that taxes levied or collected on such sales during the aforesaid period shall be deemed to have been validly levied or collected. It was the contention of the State of Andhra that by reason of the aforesaid provision it had the right to impose tax on inter State sales during the aforesaid period. On the other hand the petitioners contended, inter alia, that (I) S. 22 Of the Madras General Sales Tax Laws Validation Act, 1956, which gave validity to laws which imposed a tax, did not authorise the imposition, (2) the Sales Tax Laws Validation Act was ultra vires Art. 286(2), (3) S. 22 of the Madras Act was not a "law of a State" within Art. 286(2) and S. 2 of the impugned Act, (4) the impugned Act only validated levies already made and did not authorise the initiation of fresh proceedings for imposing tax, (5) S. 22 having been unconstitutional when it was enacted and therefore void, no proceedings could be taken there under on the basis of the Validation Act, as the effect of unconstitutionality of the law was to efface it out of the statute book, and (6) the proposed levy was bad as infringing the Rule which provided that the sale of yarn could be taxed only at one point. It was also contended that under the Constitution it was only the Parliament that has the competence to impose tax on inter-State sales and that the Sales Tax Laws Validation Act 1424 was bad in that it gave validity, to the laws of the State to impose the tax :
Held (Sarkar J. dissenting), that S. 22 of the Madras General Sales Tax Act, 1939, did in fact impose a tax on the class of sales covered by the Explanation to Art. 286(1)(a) but that it was conditional on the ban enacted on Art.
286(2) being lifted by law of Parliament as provided therein, and that it was therefore validated by S. 2 of the Sales Tax Laws Validation Act, 1956.
The construction put upon the Explanation to Art. 286(1)(a) of the Constitution in The Bengal Immunity Company case that it merely prohibited the outside States from imposing a tax on the class of sales falling within the Explanation and did not confer on the delivery State any power to impose a tax on such sales has no application to a taxing statute of a State the object of which was primarily to confer power on the State to levy and collect tax.
Section 22 and S. 2(h) of the Madras General Sales Tax Act must be read together as' defining the sales which are taxable under the Act.
Mettur Industries Ltd. v. State of Madras, A.I.R. 1957 Mad.
362, The Mysore Spinning and Manufacturing Co. Ltd. v. Deputy Commercial Tax Officer, Madras, A.I.R. 1957 Mad. 368 and Dial Das v. P. S. Talwalkay, A.I.R. 1957 Bom. 71, approved.
Mathew v. Travancore-Cochin Board of Revenue, A.I.R. 1957 T.
C. 300, Cochin Coal Co. Ltd. v. The State of Travancore Cochin, (1956) 7 Sales Tax Cases 731 and The Government of Andhra v. Nooney Govindarajulu, (1957) 8 Sales Tax Cases 297, disapproved.
Queen v. Burah, (1878) 5 I.A. 178 and In Ye The Delhi Laws Act, 1912, etc. [1951] S.C.R. 747, relied on :
Held (Per S. R. Das, C. J., Venkatarama Aiyar, S. K. Das and Vivian Bose, JJ.) that (i) the Sales Tax Laws Validation Act, 1956, is in substance one lifting the ban on taxation of interState sales and is within the authority conferred on Parliament tinder Art. 2 6(2) and further that under that provision it was competent to Parliament to enact a law with retrospective operation.
Punjab Province v. Daulat Singh, (1946) L.R. 73 I.A. 59, distinguished.
The United Province v. Atiqa Bcgum, [1940] F.C.R. 110, (2) the Adaptation Order made by the President under Art.
372(2) is valid and is not open to attack on the ground that it goes beyond the limits contemplated by that Article.
(3)the expression " law of a State " in Art. 286(2) and S. 2 of the Sales Tax Laws Validation Act means whatever operates as law in the State, and that S. 22 of the Madras General Sales Tax Act is a law within those enactments.
1425 (4) s. 2 of the Sales Tax Laws Validation Act validates not only the levies already collected but also authorises the imposition of tax on sales falling within the Explanation which had taken place during the period specified in S. 2.
The Act is not a temporary Act though its operation is limited to sales taking place within a specified period.
Dial Das v. P. S. Talwalkay, A.I.R. 1937 Bom. 71, in so far as it held that it was not competent to the State to start fresh proceedings for assessment, disapproved.
(5) though S. 22 of the Madras General Sales Tax Act was unconstitutional when enacted the effect of the unconstitutionality was not to efface it out of the statute book.
Unconstitutionality might arise either because the law is in respect of a matter not within the competence of the legislature or because the matter itself being within the competence, its provisions offend some constitutional restrictions. Which a law which is not within the competence of the legislature is a nullity a law on a topic within its competence but repugnant to any constitutional prohibition is only unenforceable. In the latter class of legislation when once the constitutional prohibition is removed the law becomes enforceable without re-enactment.
Where an enactment is unconstitutional in part but valid as to the rest, assuming that the two portions are severable, it cannot be held to have been wiped out of the statute book, as admittedly it must remain there for the purpose of enforcement of the valid portion. Moreover in the view that the impugned law is conditional legislation it cannot be held to have become non est.
Behram Khurshed Pesikaka v. The State of Bombay, [1955] I S.C.R. 6I3 and A. V. Fernandez v. State of Kerala, [1957] S.C.R. 837, distinguished.
Bhikaji Narayan Dhakras and others v. The State of Madhya Pradesh and a other, [1955] 2 S.C.R. 589, relied on.
(6) under Entry 42 in List 1, Sch. VII of the Constitution, legislation with respect to inter-State trade and commerce is exclusively within the competence of Parliament. Under Entry 54, List 11, taxes on sale of goods is within the exclusive competence of the State Legislature, and reading the two Entries together Entry 42 must be construed as excluding the power to tax sale of goods. The scheme of the Entries in the Lists is that taxation is regarded as a distinct matter and is separately set out.
Entry 42, List 1, must therefore be construed as not including the power to impose tax on inter-State sales.
(7) the proposed imposition does not infringe the rule that the sales of yarns should be subject to taxation at a single point because the proposed levy is by the State of Andhra and the rule in question prohibits only multiple taxation in the same State.
Per Sarkar J.-The Sales Tax Act does not authorise the taxation of a sale under which goods are delivered in the State of 1426 Andhra but the property in them passes outside that State.
The Explanation in S. 22 of the Act only contemplates a State other than Andhra as the State inside which a sale shall be deemed to have taken place. The words " for the purposes of clause (a)(i) " have the same meaning in the Explanation in Art. 286(1) as in the Explanation in S. 22 of the Act, and the present case is not distinguishable from the decision in The Bengal Immunity Company Limited v. The State of Bihar and others, [1955] 2 S.C.R. 603.
ORIGINAL JURISDICTION: Petitions Nos. 220, 222, 240 and 380 to 395 of 1955.
Petitions under Article 32 of the Constitution of India for the enforcement of Fundamental Rights.
1957. Dec. 10, 11, 12, 13, 17, 18, 19. 1958. Jan. 7, 8, 9.
D. Narsa Raju, Advocate-General for the State of Andhra Pradesh and T. M. Sen, for the respondent. The petitions are premature and incompetent as the facts of each transaction of sale are yet to be investigated and it is not possible to know the character of each sale, nor can it be determined which sales can be and which cannot be taxed by Andhra Pradesh.
[CHIEF JUSTICE. You should be reasonably satisfied that the sales are of such a nature that you can levy tax on them before you issue a notice.
BOSE J. You must state the facts on which you think you can tax the sales.] S. K. DAS J. Your stand is that all transactions could be taxed by the delivery State.] D. Narsa Raju. My State is taxing under the decision of this Court in the United Motors case ( [1953]S. C. R. 1069).
[ Upon the counsel for the petitioners stating that he would confine his arguments to the imposition of tax on Explanation sales only, which some of the transactions indisputably were, the Court indicated that it would hear the petitions. ] K. S. Krishnaswami Iyengar, N. Srinivasan and R. Ganapathy Iyer, for the petitioners. The Andhra (Madras) Act does not seek to tax Explanation sales 1427 at all. It talks of " property passing " only and as such Andhra can tax only such sales where property passes in Andhra. See Poppatlal Shah v. State of' Madras, ( [1953] S. C. R. 677). Section 22 does not enlarge the definition of sales; it only restricts the power of the State to tax. The explanation to s. 22, like the explanation to Art. 236(1), is merely for the purpose of defining what is an outside sale and not for determining what is an inside sale. See Bengal Immunity Company case ( [1955] 2 S. C. R. 603 at 640). The power of the President under Art. 372(2) being merely to bring the State laws into conformity with Art.
286, s. 22, which was introduced by the Presidential Adaptation Order under Art. 372(2), cannot be construed as permitting the imposition of tax on Explanation sales which was prohibited by Art. 286. If s. 22 was construed to permit such imposition it was unconstitutional, illegal and void and must be deemed to be non est. See Bengal Immunity Company case ( [1955] 2 S. C. R. 603 at 667). What did not exist could not be validated.
The Sales Tax Laws (Validation) Act, 1956, was not valid legislation under Art. 286(2). Article 286(2) only empowers Parliament to lift the ban on the imposition of tax on inter-State -ales and after it has lifted the ban the State legislature may impose the tax. Parliament is not competent to impose sales tax; such power is vested only in the State legislatures. Article 286(2) does not give Parliament power to validate or ratify laws of the State legislatures. The power under Art. 286(2) can be exercised only once and finally and fully, not partially. Parliament can only lift the ban as from the day the power is exercised and riot retrospectively. Punjab Province v. Daulat Singh, (73 I. A. 59); Behram Khurshed Pesikaka v. The State of Bombay ( [ 1955 ] I S. C. R. 613, 654 and 655). The case of Dialdas v.
Talwalkar (A. 1. R. 1957 Bom. 71) has been wrongly decided.
But even this decision helps the petitioners in so far as it lays down that where tax had neither been collected nor levied the Validation Act did not confer power to assess or levy. The whole 181 1428 policy of the Validation Act was to save the State from disgorging the, tax illegally collected. Both levy and collection must be within the period specified in s. 2 of the, Act. Mettur Industries Ltd. v. The State of Madras (A. 1. R. 1957 Mad. 362) and Mysore Spinning and Manufacturing Co. Ltd. v. Deputy Commercial Tax Officer (A. 1. R. 1957 Mad. 368) are against the petitioners.
R. Ganapathy Iyer followed. Section 22 of the Andhra (Madras) Act did riot enlarge the powers of taxation. Mathew v. Travancore-Cochin Board of Reventue (A. 1. R. 1957 T. C. 300). The validation being for a temporary period which expired on September 6, 1.955, no action can be taken after that date under the validated laws. Kesavan Madhava Menon v. The State of Bombay, ( [1951] S. C. R. 228, 234, 235), S. Krishnan v. The State of Madras, ( [1951]S. C. R. 62 1, and State of Punjab v. Mohar Singh,[1955 ] I S. C. R. 893). The tax being a sinole pointtax under the Act, and the petitioners having already paid the tax at the time of the purchase of the yarn from the Mills, no second tax was payable. The Andhra (Madras) Act being a new Act the tax on yarn is hit by the Essential Commodities Act (52 of 1952) read with Art. 286(3) of the Constitution. Petitioners are not dealers in Andhra Pradesh and cannot be assessed. There are no sales in Andhra; all sales being in Madras.
V.L. Narasimhamoorthy, J. B. Dadachanji and Rameshtvar Nath, for the Mysore Spinning & Mfg. Co., Ltd., and Minerva Mills Ltd., (Interveners), supported the petitioners.
Section 22 does not authorise the imposition of tax on Explanation sales. It could not have been the intention of the President to allow the State to add a new category of sales the Explanation Sales -to be taxed. The language of Art. 286(2) indicates that the lifting of the ban is a condition precedent to legislation by the States imposing tax on inter-State sales. Alternatively, the power to tax inter-State sales is with Parliament under Entry 97 of List I of Schedule VII of the Constitution. Section 22 was wiped out and obliterated by the judgment in the 1429 Bengal Immunity Company case. See Behram Khurshed Pesikaka v. The State of Bombay, ([1955] 1 S. C. R. 613); Newberry v. United States, (65 L. Ed. 913). The same interpretation must be given to the explanation to s. 22 as has been given to the explanation to Art. 286(1)(a). The non-obstante clause in s. 22 has only the effectof subtracting something from the power to tax andriot of adding to it. Ram Narain Sons Ltd. v. Asst. Commissioner of Sales Tax ([1955] 2 S.C..R. 483); Aswini Kumar Ghosh v. Arbinda Bose ([1953] S.C.R. 1, 22, 24); A. V. Fernandez v. The State of Kerala, ([1957] S. C. R. 837).
N. A. Palkhiwala, J. B. Dadachanji and Rameshwar Nath, for Tata Iron & Steel Co., Ltd., (Intervener). There must be a factual levy before Parliament can validate it. Section 22(ii) removes inter-State sales from the purview of the Act. Fernandez's case supports this contention. On a proper construction of Art. 286(2), according to the decision in the Bengal Immunity Company case, there was no levy on interState sales and there was nothing for Parliament to lift the ban for. ( [ 1955 ] 2 S. C. R. 603, 621, 662, 667).
There is a vital difference between retrospective and retroactive operation. There is no power in Parliament to validate ex post facto a violation of Art. 286(2).
Parliament must first lift the ban and then the State legislation may come imposing tax on inter-State sales.
Parliament is competent to prevent what otherwise would have been a violation of the Constitution, but it is not competent to condone an accomplished violation. Section 2 of the Validating Act will operate only where taxes have already been collected or have been finally assessed.
P. N. Bhagwati and .1. N. Shroff, for Pashebbhai Patel & Co., Ltd., (Intervener) supported the petitioners.
D. Narsa Raju, Advocate-General of Andhra Pradesh and T. M. Sen, for the respondents. Article 372(2) must take regard of the provision of the Constitution to bring the State laws into conformity with which the power of adaptation is to be exercised. That provision 1430 is Art. 286. Implicit in Art. 286(1) is the recognition that the delivery State alone may tax. The -President would be acting within his power to enable the delivery State to tax -Such power is in accordance with the provisions of the Constitution. The power of the legislature to bring the laws in accordance with the Constitution is conferred upon the President. Consequently, the explanation to s. 22 can be read along with the definition of sale and it does add to that definition by bringing Explanation sales within it.
K. V. Subramania Iyer, D. N. Mukherjee and B. N. Ghosh, for Madura Mills Co., Ltd., (Intervener). The Adaptation Order made by tile President is not 'law of a State' within the meaning of the Validating Act. 'Law of a State' in the Validating Act must mean the same thing as in Art. 286(2).
The President exercising power under Art. 372(2) is not controlled by Art. 286; he exercises a power which belongs to the President and not a power on behalf of the State.
Section 22 of the Andhra (Madras) Act is not law made by the State Legislature and is not validated by the Validating Act. The power of imposition of sales tax on inter-State sales was taken away from the States. The bail under Art.
286(2) is only in respect of existing laws; there is no power in the States to enact laws imposing tax on interstate sales. The power to impose tax on inter-State sales is within the exclusive domain of Parliament under Entry 42 of List I of the Seventh Schedule of the Constitution and Entry 54 of List 11 must be construed as not including such power.
A reference to Art. 301 reinforces this interpretation. The freedom under Art. 301 includes freedom from sales tax. See The Commonwealth v. The State of South Australia, (38 C. L.
R. 408). The Validation Act is not legislation within Entry 42. See Bank of N. S. W. v. The Commonwealth, (76 C. L. R. 1, 381); Robbins v. Taxing District of Shelby County ((1877) 30 L. Ed. 694); McLeod v. Dilworth Co. ((1944) 88 L. Ed. 1304).
C. K. Daphtary, Solicitor-General of India, G. N. 1431 Joshi and T. M. Sen, for the Union of India (Intervener).
The Sales Tax Laws Validation Act, 1956, is valid legislation tinder Art. 286(2). In effect and in substance the Validation Act is a law which removes the ban imposed by Art. 286(2), and is not really a Validating Act. Article 286(2), in respect of existing laws, merely said that they should not be effective or operative. It did not take away the competency of the legislatures to make laws providing for taxes oil inter-State sales. Such a law may be against the provision of the Constitution, but that does not repeal or obliterate it. It is only in abeyance. See Bhikaji Narain Dhakra,s and others v. The State Of Madhya Pradesh and another, ([ 1955] 2 S.C.R. 589, 600). Legislative power generally includes the power to legislate retrospectively.
There is no limitation in Art. 286(2) as respects retrospective legislation. Parliament could, therefore, lift the ban retrospectively. Section 22 is a piece of conditional legislation. As soon as the ban under Art.
286(2) was lifted by Parliament it came into operation. The Validation Act is not a temporary statute. A temporary statute is one which says that it is to be effective for a particular period. The Validating Act operates even now and is effective, though it is in respect of sales of a particular period. It is open to the States to initiate proceedings now for taxing the Explanation sales made during the period mentioned in s. 2 even though no such proceedings had been taken during that period. Entry 42 of List I which reads: " Inter-State trade and commerce " does not confer any power of taxation on Parliament. In the scheme of our Constitution a general Entry does not include the power of taxation. Taxes, duties, etc., are enumerated in a separate group in Entries 82-92 in List I.
V. K. T. Chari, Advocate-General for the State of Madras, B. R. Gopalakrishnan and T. M. Sen for the State of Madras (Intervener). In construing s. 22 of the Andhra (Madras) Act regard must be had to the law as it stood till September 6, 1955, when judgment was delivered in the Bengal Immunity Company case. In view of the decision in the United Motors 1432 case ([1953] S. C. R. 1069, 1085, 1086, 1093, 1094), Explanation sales were regarded as 'inside sales' in the delivery State, and the delivery State was entitled to tax sales. The law of a State which imposed tax on Explanation sales would remain on the statute book, in spite of the decision in The Bengal Immunity Company case, but could not be enforced. See Bhikaji Narain Dhakras and others v. The State of Madhya Pradesh and another ([1955] 2 S.C.R. 589);
Ulster Transport Authority v. James Brown & Sons Ltd. ((1953) Northern Ireland Reports 79). Section 2 of the Validating Act refers to such a law.
Mahabir Prasad, Advocate-General for the State of Bihar, Rajeshwar Prasad and S. P. Varma, for the State of Bihar (Intervener); G. C. Mathur and C. P. Lal, for the State of Uttar Pradesh (Intervener) supported the respondents and the Union of India.
R. Ganapathy Iyer, for the petitioners, replied.
K. V. Subramania Iyer, for Madura Mills Co., Ltd., (Intervener), also replied with the permission of the Court.
1958. March II. The judgment of Das C. J., Venkatarama Aiyar, S. K. Das and Vivian Bose, JJ. was delivered by Venkatarama Aiyar J. Sarkar J. delivered a separate judgment.
VENKATARAMA AIYAR J.-The petitioners are dealers carrying on business in the City of Madras in the sale and purchase of yarn, and they have filed the present applications under Art. 32 of the Constitution for the issue of a writ of prohibition or other appropriate writ restraining the State of Andhra from taking proceedings for imposing tax on certain sales effected by them in favour of merchants who are residing or carrying on business in what is now the State of Andhra Pradesh, on the ground, inter alia, that the said sales were made in the course of inter-State trade, and that no tax could be levied on them by reason of the prohibition contained in Art. 286(2) of the Constitution.
The course of dealings between the parties resulting 1433 in the above sales has been set out in para. 5 in Petition No. 220 of 1955. It is therein stated that the dealers in Andhra would place orders for the purchase of yarn with the petitioners in Madras, that the contracts would be concluded at Madras, that the goods would be delivered ex-godown at Madras and would thereafter be despatched to the purchasers either by lorries or by rail as might be directed by them, that when the goods were sent by rail, the railway receipts would be taken either in the name of the consignees, and sent to them by post or in the name of the consignor and endorsed to the purchasers and delivered to them in Madras or sent to them by post endorsed in favour of a bank and the purchasers would take delivery of those receipts after payment to the bank. It is said that in all cases price of the goods was paid in Madras.
On the above allegations, it is manifest that the sales mentioned therein are not all of the same kind, and in point of law, the incidents attaching to them might be different.
A consideration of the validity of the imposition with reference to the several classes of sales mentioned above would he wholly airy and pointless without a determination of the facts relating to them, which, however, have not been investigated. Counsel for the petitioners, however, concedes that the, dispute in these proceedings is confined to the proposed imposition of tax, in so far as it relates to sales of the character mentioned in the Explanation to Art. 286(1)(a), that is to say, sales in which the property in the goods sold passed outside the State of Andhra but the goods themselves were actually delivered as a result of the sale for consumption within that State. These sales have been referred to in the arguments before us as "Explanation sales ", and it will be convenient to adopt that expression in referring to them in this judgment.
It will be seen that the above sales would all of them have been intrastate, so long as the Andhra State formed part of the composite State of Madras, and questions of the character now agitated before us could not then have arisen.
On September 14, 1953, 1434 Parliament enacted the Andhra State Act (30 of 1953), whereby a separate State called the State of Andhra was constituted incorporating therein territories which had previously thereto formed part of the State of Madras, and this Act came into force on October 1, 1953. Under s. 53 of the Andhra State Act, the laws in force in the territories in the Andhra State prior to its constitution are to continue to be in force even thereafter, and one of those laws is the Madras General Sales Tax Act (Madras 9 of 1939), hereinafter referred to as the Madras Act. Section 54 of the Andhra State Act conferred on the Government a power to adapt laws for the purpose of facilitating the application of any law previously made, and in exercise of the power conferred by this section, an Adaptation Order was passed on November 12, 1953, whereby the word " Andhra " was substituted for the word "Madras" in the Madras Act. We shall hereafter refer to the Madras Act as continued and applied in the State of Andhra as the Andhra (Madras) Act.
It will be convenient at this stage to refer to the relevant provisions of this Act. The preamble to the Act states that " it is expedient to provide for the levy of a general tax on the sale of goods in the State of Madras". "Sale" is defined in s. 2(h), omitting what is not material, as meaning " every transfer of the property in goods by one person to another in the course of trade or business for cash or for deferred payment or other valuable consideration." Section 2(i) defines " turnover " as " the aggregate amount for which goods are either bought by or sold by a dealer, whether for cash or for deferred payment or other valuable consideration ". Section 3 is the charging section and provides that every dealer shall pay for each year tax on his total turnover for such year. By the Madras General Sales Tax (Amendment) Act No. 25 of 1947, a new Explanation was added to the definition of " sale ", and it is as follows:
Explanation 2: " Notwithstanding anything to the contrary in the Indian Sale of (Goods Act, 1930, the sale or purchase of any goods shall be deemed, for 1435 the purposes of this Act, to have taken place in this Province, wherever the contract of sale or purchase might have been made(a) if the goods were actually in this Province at the time when the contract of sale or purchase in respect thereof was made, or (b) in case the contract was for the sale or purchase of future goods by description, then, if the goods are actually produced in this Province at any time after the contract of sale or purchase in respect thereof was made." This amendment came into force on January 1, 1948.
In Poppatlal Shah v. The State of Madras (1), this Court had to consider the scope of the definition of " sale " in s. 2(h) and of Explanation 2, and it was therein held that though the power to tax a sale was really a power to tax a transaction of sale and a law imposing such tax would be competent if any of the ingredients of sale had taken place within the State, the Madras Act had, by its definition of " sale " in s. 2(h) prior to the enactment of Explanation 2, imposed a tax only when the property in the goods passed within the State, and that in respect of sales which had taken place prior to the amendment, the tax would be unauthorised if the property in the goods passed outside the State of Madras. It was also observed that after the amendment came into force, a tax on a sale which came within Explanation 2 would be valid. That was the position in law under the Madras Act prior to the enactment of the Constitution.
It is now necessary to refer to the changes effected in the law by the Constitution. Article 286, which is relevant for the present purpose, is as follows:
286(1). " No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place(a) outside the State; or (b) in the course of the import, of the goods into, or export of the goods out of, the territory of India.
(1) [1953] S.C.R. 677.
182 1436 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, notwithstanding the fact that under the general law relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State.
(2) Except in so far as Parliament may by law otherwise provide, no law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of any goods where such sale or purchase take,,; place in the course of interstate trade or commerce:
Provided that the President may by order direct that any tax on the sale or purchase of goods which was being lawfully levied by the Government of any State immediately before the commencement of this Constitution shall, notwithstanding that the imposition of such tax is contrary to the provisions of this clause, continue to be levied until the, thirty-first day of March, 1951.
(3) No law made by the Legislature of a State imposing, or authorising the imposition of, a tax on the sale or purchase of any such goods as have been declared by Parliament by law to be essential for the life of the community shall have effect unless it has been reserved for the consideration of the President and has received his assent." Article 372(2) enacts that, " For the purpose of bringing the provisions of any law in force in the territory of India into accord with the provisions of this Constitution, the President may by order make such adaptations and modifications of such law, whether by way of repeal or amendment, as may be necessary or expedient, and provide that the law shall, as from such date as may be specified in the order, have effect subject to the adaptations and modifications so made, and any such adaptation or modification shall not be questioned in any court of law." In exercise of the power conferred by this provision, 1437 the President made Adaptation Orders with reference to the Sales Tax Laws of all the States, and as regards the Madras Act, he issued on July 2, 1952, the Fourth, Amendment inserting a new section, s. 22 in that Act. It runs as follows:
" Nothing contained in this Act shall be deemed to impose or authorise the imposition of a tax on the sale or purchase of any goods where such sale or purchase takes place(a) (i) outside the State of Madras, or (ii)in the course of import of the goods into the territory of India or of the export of the goods out of such territory, or (b) except in so far as Parliament may by law otherwise provide, after the 31st March, 1951, in the course of interState trade or commerce, and the provisions of this Act shall be read and construed accordingly.
Explanation:-For the purposes of cl. (a) (i) 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, notwithstanding the fact that under the general law relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State." It will be noticed that the Explanation to Art. 286 (1) (a) is reproduced verbatim in s. 22 of the Madras Act. The true meaning and scope of this Explanation came up for consideration before this Court in The State of Bombay and another v. The United Motors India Ltd., and others (1).
Therein, it was held by a majority that though the sales falling within the Explanation would, in fact, be in the course of inter State trade, they became, by reason of the fiction introduced therein, invested with the character of intra-State sales, and would be liable to be taxed by the State within which the goods were delivered for consumption.
Acting on this judgment, the Board of Revenue (Commercial Taxes) Andhra State, issued a (1) [1953] S.C.R. 1069.
1438 notification on July 13, 1954, calling upon dealers to submit returns of their turnover of sales in which goods were delivered in the Andhra State for consumption, and a copy thereof was sent to the Madras Yarn Merchants' Association, of which the petitioners are members. The Association disputed the liability of the Madras dealers to pay any tax in respect of the sales to the Andhra dealers, and after some correspondence, the Andhra State finally issued on June 30, 1955, notices to the petitioners to send their returns of turnover by July 15, 1955, failing which it was stated that assessments would be made on the best judgment basis, and that, further, the dealers would be liable to the penalties prescribed by the law (Vide Annexure H to the petition). Thereupon, the petitioner a have filed the present petitions challenging the validity of the demand made by the Andhra State on the ground, inter alia, that the sales proposed to be taxed were inter-State sales, and that they were immune from taxation under Art. 286(2). These petitions were filed on various dates in July and August, 1955.
While they were pending, the question of the true scope of the Explanation to Art. 286 (1) (a) came up again for consideration before this Court in The Bengal Immunity Company Limited v. The State of Bihar and others (1). By its judgment dated September 6, 1955, this Court held, again by a majority, that the sales falling within the Explanation being inter-State in character, could not be taxed by reason of Art. 286(2), unless Parliament lifted the ban, that the Explanation to Art. 286 (1) (a) controlled only that clause and did not limit the operation of Art. 286 (2), and that the law had not been correctly laid down in The United Motors case (2). On the decision in The Bengal Immunity Company case(1) it cannot be doubted that the claim of the Andhra State to tax Explanation sales would be unconstitutional, and indeed, that was admitted by the State in a statement filed on October 21, 1955, wherein it was stated that having regard (1) [1955]2 S.C.R. 603.
(2) [1953] S.C.R. 1069.
1439 to the decision aforesaid, the petitions might be allowed but without costs. Before final orders were passed on the petitions, however, the Sales Tax Validation Ordinance No.
III of 1956, was promulgated on January 30, 1956, and that was later replaced by the Sales Tax Laws Validation Act (7 of 1956) and that came into force on March 21, 1956.
Section 2 of this Act runs as follows:
" Notwithstanding any judgment, decree or order of any court no law of a State imposing, or authorising the imposition of, a tax on the sale or purchase of any goods where such sale or purchase took place in the course of inter-State trade or commerce during the period between the 1st day of April, 1951, and the 6th day of September, 1955, shall be deemed to be invalid or ever to have been invalid merely by reason of the fact that such sale or purchase took place in the course of interstate trade or commerce; and all such taxes levied or collected or purporting to have been levied or collected during the aforesaid period shall be deemed always to have been validly levied or collected in accordance with law." On February 19, 1957, the Andhra State which had become the State of Andhra Pradesh under s. 3 (1) of the States Reorganisation Act (37 of 1956) filed a fresh statement that by reason of the Validation Act the State was entitled to impose a tax on the Explanation sales, which had taken place during the period between the 1st day of April, 1951, and the 6th day of September, 1955 (which will hereinafter be referred to as the specified period), and that the petitions should therefore be dismissed.
The petitioners challenge the correctness of this position.
They contend that the Andhra (Madras) Act does not, in fact, impose a tax oh the Explanation sales, and that, in consequence, the Validation Act can have no effect on it;
that the Validation Act is itself unconstitutional and void;
that the Act even if valid, does not validate s. 22 of the Andhra (Madras) Act; that it validates only levies and collections of tax already made, and does not authorise the initiation 1440 of fresh proceedings for assessment of tax or for realisation of the same; that even if the Act authorised fresh imposition of taxes, that could not be done without further legislation pursuant thereto by the State, and that no action could be taken on the basis of s. 22 of the Andhra (Madras) Act, as, being unconstitutional when enacted, it was for all purposes non est ; that tax on the sale of yarn could under the Act be levied only at a single point and the State of Madras having imposed a tax on the sale of goods now proposed to be taxed, the Andhra State could not impose a tax once again on the sale of the self-same goods, and that, further, the tax on yarn would, so far as the Andhra State is concerned, be bad as being hit by the Essential Commodities Act (52 of 1952), read with Art. 286 (3).
It must be mentioned that similar to the Adaptation Order which enacted s. 22 in the Madras Act, there were Adaptation Orders by the President with reference to the Sales Tax Laws in all the States, and provisions similar to s. 22 were enacted therein. As any decision by this Court on the questions raised in the petitions must conclude similar questions under the laws of other States, those States applied for and obtained permission to intervene in these proceedings, and we have heard the Advocates-General of Madras, Uttar Pradesh and Bihar on the questions. As the main point for determination is the vires of the Sales Tax Laws Validation Act (which will hereinafter be referred to as the impugned Act), the Union of India has intervened, and the learned Solicitor-General has addressed us on the questions relating to the validity of that Act. Certain assessees who are interested in the decision of the above questions also applied for and obtained permission to intervene, and they are the Mysore Spinning and Manufacturing Co., the Minerva Mills, Ltd., the Tata Iron and Steel Co. Ltd., and the Madura Mills Co. Ltd., and counsel appearing for them have, in general, supported the petitioners.
Counsel for the Madura Mills Co. Ltd., raised a further contention different from and inconsistent with 1441 the position taken by the petitioners and other inter.
veners, and that is that under Entry 42 in List I of the Seventh Schedule to the Constitution, inter-State trade and commerce is the exclusive domain of the Union Legislature, that tax on inter-State sales is comprised therein, that the States have accordingly no power to tax such sales, and that Parliament is not competent to authorise them to impose such a tax, and that, accordingly, the impugned Act is wholly misconceived and inoperative.
On these contentions, the questions that arise for our determination are:
(I) Whether the Andhra (Madras) Act, in fact, imposes a tax on the class of sales falling within the Explanation to Art.
286 (1) (a);
(II)Whether the impugned Act is ultra vires the ground that it is not authorised by the terms of Art. 286(2);
(III) (a) Whether s. 22 of the Andhra (Madras) Act is within the protection of the impugned Act, and (III)(b) Whether the impugned Act validates only levies and collections made during the specified period, or whether it authorises the imposition and collection of taxes on such sales in future;
(IV)Whether s. 22 of the Madras Act was null and void on the ground that it was in contravention of Art. 286 (2), and whether the proceedings sought to be taken thereunder on the strength of the impugned Act are incompetent;
(V) Whether tax on inter-State sales is within the exclusive competence of Parliament, and whether the impugned Act is, in consequence, bad as authorising the States to levy tax ;
(VI)Whether the proposed imposition of tax is illegal on the ground that successive sales of yarn are subject under the law to be taxed at only one point, and as the State of Madras has already taxed the present sales, the State of Andhra cannot again levy a tax on them ; and (VII)Whether the proposed imposition of tax on yarn by the Andhra State is hit by the Essential Commodities Act, read with Art. 286(3), and is illegal? 1442 (1):The first question that falls to be determined is whether the Andhra (Madras) Act, in fact, imposes a tax on the Explanation sales. Only if it does that, would the further questions as to the vires and the operation of the impugned Act arise for consideration. We have already referred to the relevant provisions of the Madras Act and to the decision of this Court in Poppatlal Shah v. The State of Madras (1), wherein it was held that under the definition of " sale " in s. 2(h) of that Act and apart from the Explanations to it which are not material for the present discussion, power had been taken by the Province of Madras to tax only sales in which property in the goods passed inside the State. It must, therefore, be taken that under the Act, as it stood prior to the Constitution, the State of Madras had no power to impose a tax on sales of the kind mentioned in the Explanation to Art. 286 (1)(a). Now, the question is whether the Adaptation Order of the President (Fourth Amendment) dated July 2, 1952, has, by the insertion of s. 22 in the Madras Act, altered the position. The contention of the respondent is that it has, because it has bodily incorporated the Explanation to Art. 286 (1) (a) in the section itself, and as under that Explanation, all sales falling within its ambit would be sales inside the State of Madras, they became taxable as sales within the definition in s. 2 (h) of the Madras Act; and that accordingly under s. 22 of the Andhra (Madras) Act the Explanation sales become taxable by the Andra State as sales within that State.
The petitioners dispute this position, and contend that that is not the true effect of the Explanation, and that properly construed, it does not authorise the in position of any tax which was not leviable under the provisions of the Act, prior to its enactment. It is argued that the object of Art. 286 of the Constitution was merely to impose restrictions on the power which the States had under Entry 54 in List 11 to enact laws imposing tax on sales, and that, in that context, the true scope of the Explanation to Art.
286 (1) (a) was that it merely took away from the State its power to (1) [1953] S.C.R. 677.
1443 tax a sale in which the property passed inside it if the goods were actually delivered under the sale for consumption in another State and not to confer on the delivery State a power to tax such a sale, and that the Explanation in s. 22 which is, word for word, a reproduction of the Explanation to Art. 286 (1) (a) must be construed as having the same import. Reliance is placed in support of this contention on the following observations of this Court in The Bengal Immunity Company case(1) at p. 640:
" In clause (1) (a) the Constitution makers have placed a ban on the taxing power of the States with respect to sales or purchases which take place outside the State. If the matter had been left there the ban would have been imperfect, for the argument would have still remained as to where a particular -,ale or purchase took place. Does a sale or purchase take place at the place where the contract of sale is made, or where the property in the goods passes or where the goods are delivered ? These questions are answered by the Explanation. That Explanation is 'for the purposes of sub-clause (a)', i.e., for the purpose of explaining which sale or purchase is to be regarded as having taken place outside a State. By saying that a Particular sale or purchase is to be deemed to take in a particular State the Explanation only indicates that such sale or purchase has taken place outside all other States.
The Explanation is neither an Exception nor a Proviso but only explains what is an outside sale referred to in sub clause (a). This it does by creating a fiction. That fiction is only for the purposes of sub clause (a) and cannot be extended to any other purpose. It should be limited to its avowed purpose. To say that this Explanation confers legislative power on what for the sake of brevity has been called the delivery State is to use it for a collateral purpose which is not permissible. .Further, it is utterly illogical and untenable to say that article 286 which was introduced in the Constitution to place restrictions on the legislative powers of the States, by a side wind, as it were, (1) [1955] 2 S.C.R. 603.
183 1444 gave enlarged legislative powers to the State of delivery by an explanation sandwiched between two restrictions. This construction runs counter to the entire scheme of the article and the explanation and one may see no justification for imputing such indirect and oblique purpose to this article." Now, the contention of the petitioners is that these observations are decisive of the present controversy, because the same provision expressed in ipsissima verba cannot have one meaning in Art. 286(1) (a) and quite a different one in s. 22 of the Madras Act; and on the construction put by this Court on the Explanation to Art.
286(1) (a), the Explanation to s. 22 of the, Andhra (Madras) Act must be interpreted as prohibiting States other than Andhra from taxing sales under which goods are delivered for consumption outside those States, even though property passed inside them and not as authorising the State of Andhra to tax sales in which goods are delivered therein for consumption , even though property in the goods passed outside that State. It is argued that this conclusion is reinforced by the opening words of s. 22, viz., "Nothing contained in this Act shall be deemed to impose or authorise the imposition of a tax on the sale or purchase of any goods". The effect of this, it is said, is to impose a restriction on the power which the State previously possessed, of taxing sales coming within the definition in s. 2 (h) and not to enlarge it. The decision in Government of Andhra v. Nooney Govindarajulu (1) is cited in support of these contentions.
The error in this argument lies in this that it focuses attention exclusively on the terms in which the Explanations are couched in Art. 286(1) (a) and in s. 22 and completely overlooks the fundamental difference in the context and setting of these two enactments. The scope and purpose of Art. 286 have been considered at length in the decisions of this Court in The United Motors case (2) as also in The Bengal Immunity Company case (3), and it is sufficient to briefly recapitulate them. Under Entry 48 in List 11 of the (1) (1957) 8 Sales Tax Cases 297. (2) [1953] S.C.R, 1069.
(3) [1955] 2 S.C.R. 603.
1445 Seventh Schedule to the Government of India Act, 1935, the Provincial Legislature had the exclusive competence to enact a law imposing a tax on the sale of goods, and under s. 99 (1), such a law could be made " for the Province or for any part thereof ". In Wallace Brothers & Co. Ltd. v. Income-tax Commissioner (1), the question arose as to the validity of certain provisions of the Indian Income-tax Act, which sought to tax non-resident foreigners in respect of their foreign income. The Indian Legislature had under Entry 54 in List I of the Government of India Act power to enact laws imposing tax on income other than agricultural income, and under s. 99(1) the law could be made " for the whole of :British India or for any part thereof ". It was held by the Privy Council that the requirements of s. 99 were satisfied if there was sufficient territorial connection between the State imposing the tax and the person who was sought to be taxed, and the receipt of income by the assessees in British India furnished sufficient nexus to give validity to the legislation imposing tax on their foreign income. If this doctrine of nexus is applicable to laws imposing tax on sales-and it was applied by this Court to those laws in the United Motors case (2) at p. 1079 and in Poppatlal Shah's case (3) at pp. 682-683-then it would be competent to the State to enact a law imposing a tax on sales not merely when the property in the goods passed within the State but even when it (lid not, if there was sufficient connection between the State and the transaction of sale, such as the presence of the goods in the State at the date of the agreement, as was held recently by this Court in Tata Iron & Steel Co. Ltd. v. State of Bihar (4). In fact, acting on the nexus theory the Legislatures of the States enacted Sales Tax Laws adopting one or more of the nexi as the basis of taxation.
This resulted in multiple taxation, as a consequence of which the free flow of commerce between the States became obstructed and the larger economic interests of the country suffered. It was to repair this mischief that the Constitution, while (1) (1948) L.R. 75 I.A. 86.
(2) [1953] S.C.R. 1069.
(3) [1953] S.C.R. 677.
(4) [1958] S.C.R. 1355.
1446 retaining the power in the States to tax sales under Entry 54 in List II sought to impose certain restrictions on that power in Art. 286. One of those restrictions is contained in Art. 286(1)(a) which prohibits a State from taxing outside sales. The Explanation now under consideration is attached to this provision, and it is in this context, viz., in its setting in an Article, the object of which was to impose fetters on the legislative powers of the States, that this Court observed that though positive in form, it was in substance negative in character, and that its true purpose was not to confer any fresh power of taxation on the State but to restrict the power which it previously had under Entry 54.
These considerations will clearly be in apposite in construing a taxing statute like the Madras Act, the object of which is primarily to confer power on the State to levy and collect tax. When we find in such a statute a provision containing a prohibition followed by an Explanation which is positive in its terms, the true interpretation to be put on it is that while the prohibition is intended to prevent taxation of outside sales on the basis of the nexus doctrine, the Explanation is intended to authorise taxation of sales falling within its purview, subject of course to the other provisions of the Constitution, such as Art. 286 (2). It should be remembered that unlike the Constitution, the law of a State can speak only within its own territories. It cannot operate either to invest another State with a power which it does not possess, or divest it of a power which it does possess under the Constitution.
Its mandates can run only within its own borders. That being the position, what purpose would the Explanation serve in s. 22 of the Madras Act, if it merely meant that when goods are delivered under a contract of sale for consumption in the State of Madras, the outside State in which property in the goods passes has no power to tax the sale ? That is not the concern of the State of Madras, and indeed, the Legislature of Madras would be incompetent to enact such a law. In its context and setting, therefore, the Explanation to s. 22 must mean that it 1447 authorises the State of Madras to impose a tax on sales falling within its purview. Thus, while in the context of Art. 286 (1) (a) the Explanation thereto could be construed as purely negative in character though positive in form, it cannot be so construed in its setting in s. 22 of the Madras Act, where it must have a positive content.
Nor is there much force in the contention that the non obstante clause in s. 22 has only the effect of substracting something from the power to tax conferred on the State by the charging section, s. 3, read with s. 2 (h) and not of adding to it. In Aswini Kumar Ghosh and another v. Arabinda Bose and another (1), It was observed by this Court that " the enacting part of a statute must, where it is clear, be taken to control the non-obstante clause where both cannot be read harmoniously ". Now, as the Explanation lays down in clear and unambiguous terms that the sales of the character mentioned therein are to be deemed to have taken place inside the State in which goods are delivered for consumption, full effect must be given to it, and its operation cannot be cut down by reference to the non obstante clause. It cannot be put against this construction that it renders the non-obstante clause ineffective and useless. According to the definition in s. 2 (h), a sale in which property passes inside the State of Madras will be liable to be taxed, even though the goods are delivered for consumption outside that State, but under the Explanation such a sale will be deemed to have taken place in the outside State in which goods are delivered for consumption, and therefore the State of Madras will have no power to tax it:
The purpose which the non-obstante clause serves is to render the Explanation effective against the definition in s. 2 (h) and not to render it ineffective in its own sphere, as determined on its terms.
But it is contended that in order to reach this result it was necessary that the Explanation to s. 22 should have been made a part of the definition of " sale " under s. 2 (h), because under s. 3, which is the charging (1) [1953] S.C.R. 1, 24.
1448 section, it is the turnover of sales that is subject to tax, that sale for the purpose of that section is only what is defined as " sale " under s. 2 (h), and that the Explanation sales not having been brought within that definition, no charge could be imposed thereon. The Explanation in s. 22, it is argued, cannot override s. 2 (h), and if its object was to confer on the State a power to tax sales falling within its ambit, that has not, in fact, been achieved. It is pointed out by way of contrast that in the Sales Tax Laws of some other States, such as Bihar and Uttar Pradesh, the Explanation has been added to the definition of sale. Now, a contention that what the Legislature intended to bring about it has failed to do by reason of defective draftsmanship is one which can only be accepted in the last resort, when there is no avenue left for escape from that conclusion. But that clearly is not the position here.
Section 22 opens with the words " Nothing contained in this Act ", and that means that that section is to be read as controlling, inter alia, the definition of sale in s. 2 (h).
Otherwise, sales in which property passes in Madras but delivery is outside that State would be taxable under s. 2 (h) and under s. 3, even though they are within the prohibition enacted in s. 22. If the provisions of s. 22 are effective for the purpose of limiting the operation of s. 2 (h), we do not see any difficulty in construing the Explanation therein as equally effective for the purpose of enlarging it. Again, it is a rule of construction well established that the several sections forming part of a statute should be read, unless there are compelling reasons contra, as constituting a single scheme and construed in such manner as would give effect to all of them. On this principle, s. 2 (h) and s. 22 must be read together as defining what are sales, which are taxable under the Act and what are not, and so read, the Explanation really means that in sales in which goods are delivered for consumption in the State of Madras, the property therein shall be deemed to have passed inside that State, notwithstanding that it has, under the Sale of Goods Act, passed outside that State. On this construction, those 1449 sales will fall within the definition in s. 2 (h) and will be taxable. The contention of the petitioners highly technical and based oil the non-insertion of the Explanation in s. 2 (h) must, in our opinion, be rejected as unsound.
It is next contended that the power of the President under Art,. 372 (2) is merely to bring the provisions of the State laws into conformity with Art. 286, and that having regard to the interpretation put on that Article in The Bengal Immunity Company case (1), the Explanation in s. 22 would be valid in so far as it prohibits the State of Madras from imposing a tax on sales in which goods are delivered outside Madras, though property therein passed inside that State, but that in so far as it makes taxable sales in which property passes outside the State of Madras but the goods themselves are delivered for consumption in Madras, it is much more than bringing the. ,State law into conformity with Art. 286, and is, in consequence, unauthorised and bad. It is argued that such a provision could be enacted by the Legislature of Madras, as was in fact, done by the legislatures of many of the States, but the President could not do it in exercise of the special and limited power conferred on him by Art. 372(2). That power is merely, it is contended, to take the definition of " sale " in s. 2(h) of the Madras Act, strike out there from whatever is repugnant to Art. 286, such as sales in which goods are delivered for consumption outside Madras, and leave it there and not to add to it.
We are not satisfied that that is a correct view to take of the powers of the President under Art. 372(2). It is to be observed that Art. 286(1)(a) and the Explanation thereto form, in their setting in a taxing statute, integral parts of and different facets of the same concept. Sales in which property passes outside the State of Madras but delivery for consumption is inside Madras are at once inside sales for Madras and outside sales for the other States. Now, if in exercise of the power to adapt, the enactment of the Explanation is requisite to give effect to one aspect of that (1) [1955] 2 S.C.R. 603.
1450 concept, that is, for prohibiting the State of Madras from taxing sales when goods are delivered outside, we fail to see why it should not operate to give effect to the other aspect of the concept which is so integrally connected with it, viz., taxing of sales in which goods are delivered for consumption in the State of Madras, if its language is comprehensive and wide enough to include such sales. We find it difficult to hold that the self-same Explanation is intra vires the powers of the President in so far as it prohibits the State from taxing gales, in which goods are delivered Outside the State but is ultra vires in so far as it authorises that State to tax sales in which goods are delivered inside it.
It should be remembered in this connection that the power which the President has under Art. 372(2) to adapt is the legislative power of the State whose law is adapted, and that includes the power to repeal and amend any provision.
Provided that the law as adapted is within the legislative competence of the State and its enactment is in the process of bringing the State law into conformity with Art. 286, it seems to us that it is within the ambit of the power conferred by Art. 372(2). The question, however, is of academic interest, because of the concluding words of Art.
372(2), which enact that no adaptation order made under that provision shall be liable to be questioned. It was suggested for the -petitioners that these words would have no application when the adaptation order went beyond the terms of Art. 372(2), and that it was open to them to challenge its validity on the ground that it amounted to more than bringing the existing law into conformity with Art. 286. We are unable to agree. If the adaptation order is within the scope of Art. 372(2), then it is valid of its own force, and does not require the aid of a clause such as is contained in the concluding portions thereof. It is only when the adaptation amounts to something more than merely bringing the State law into conformity with the Constitutional provisions that there can arise a need for such a clause. In our opinion, the effect of the concluding words of Art. 372(2) is to 1451 render the question of the validity of the adaptation non-
