judgement:
il Appeals Nos. 751 of 1957 and 10 of 1958.
Appeal from the judgment and order dated December 7, 1956, of the Calcutta High Court in Matters Nos. 29 and 58 of 1956.
M. C. Setalvad, Attorney General of India, C. K. Daphtary, Solicitor General of India, Sukumar Mitra, Sankar Ghosh and B. N. Ghosh, for the appellants in C. A. No 751 of 57.
M. C. Setalvad, Attorney General of India, Sankar Ghosh and D. N. Mukherjee, for the appellants in C. A. No. 10 of 1958.
section M. Bose, Advocate Generalfor the State of West 905 Bengal, B. Sen and P. K. Bose, for the respondents (in both the appeals). 1960.
September 27.
The Judgment of the Court was delivered by HIDAYATULLAH J.
These two appeals on a certificate under article 132(1) of the Constitution have been filed respectively by the Burmah Shell Oil Storage land Distributing Co., of India, Ltd., and the Standard Vacuum Oil Company (in this judgment referred to as the appellant Companies) against a common judgment of the High Court of Calcutta dated December 7, 1956.
The High Court was moved for writs of mandamus, prohibition and certiorari under article 226, but the petition was dismissed by D. N. Sinha, J. The matter arises out of assessment to sales tax on sale of motor spirit for aviation purposes (shortly, aviation spirit) supplied by the appellant Companies to aircraft bound for countries abroad, under the Bengal Motor Spirit Sales Taxation Act, 1941, as amended by section 2(a)(i) of the Bengal Motor Spirit Sales Taxation (Second Amendment) Act, 1954.
The Commercial Tax Officer, the Commissioner of Commercial Taxes and the State of West Bengal have been joined as respondents in this Court, as they had previously been joined in the High Court.
The appellant Companies deal in Petroleum and Petroleum products, and carry on business at Calcutta.
They maintain supply depots at Dum Dum Airport from which aviation spirit is sold and delivered to aircraft proceeding abroad and belonging to several Companies.
It appears that such sales were treated by the sales tax authorities in the State of Bombay as not falling within the taxing Acts in force in the Bombay State by reason of the provisions of article 286 of the Constitution.
The sales tax authorities in West Bengal, however, took a different view of the matter, and after sundry procedure resulting in assessment of tax, presented a demand notice for the tax assessed which was paid under protest by the appellant Companies.
The appellant Companies filed petitions under article 226 of the Constitution in the High 906 Court of Calcutta questioning the legality of the imposition but without success.
They have now filed these appeals after obtaining a certificate, as already stated.
The contentions in this Court, as they were also before the High Court, 'are that such sales are made in the course of export of such aviation spirit out of the territory of India, that they take place outside the State of West Bengal, that inasmuch as aviation spirit is delivered for consumption outside West Bengal, the sales cannot fall within the Explanation to sub cl.
(a) of the first clause of article 286, and that unless they can be said to become "Explanation Sales", the power to tax does not exist.
It is argued in support of the last contention that there is not even an averment in the reply of the respondents before the High Court that aviation spirit is delivered for consumption within West Bengal.
The case in the High Court was restricted to consideration of supplies to aircraft which either proceed to foreign countries directly from Dum Dum Airport, or do so ultimately, though landing en route at some place or places in the Indian territory.
The case has been similarly confined in this Court also, and we are not required to express any opinion about sales of aviation spirit to aircraft flying from one place in West Bengal to another place also within that State, or even to some place in another State in the territory of India.
The facts are fortunately not ' in dispute.
Both parties admitted the procedure for the supply of aviation spirit to aircraft.
Briefly described, it is as follows: Before the arrival of such an aircraft, a representative of the appellant Companies applies to the Airport Customs Officer to depute an Officer to supervise the refuelling of the aircraft.
After the aircraft lands, the captain or the Ground Engineer gives instruction about the quantity of aviation spirit required, and on permission being given by the Customs authorities, the stated quantity is delivered in the presence of the Customs Officer deputed.
Details of the delivery are entered in a delivery receipt, which 907 is signed by the representative of the appellant Companies and the Customs Officer deputed.
Duty drawback shipping bills are also drawn up to show the ' quantity of aviation spirit and are countersigned by them and also by a representative of the aircraft.
Later, claims for refund of customs duty are made, and refund is granted.
In the petition filed in the High Court, it was averred that such aviation spirit is required for consumption during flight and/or outside the territory of India, and is thus delivered for purposes of consumption outside West Bengal and in some cases outside the territorial limits of India as well.
It was also stated that it was sold in the course of export outside the territory of India, and drawback of customs duty was obtained.
In the reply of the respondents, it was stated that the refund of customs duty was an irrele vant fact for the purpose of assessment.
It was further stated in the affidavit of the Commercial Tax Officer as follows : " I further state that a foreign bound aircraft on leaving Dum Dum Airport consumes a portion of the aviation spirit taken in by it at the Airport within the territory of West Bengal before it moves out of the said territory or the territory of India.
I do not admit that the entire quantity is used outside the territorial limits of India as alleged.
I deny that the sale of such aviation spirit takes place outside the State of West Bengal and state that the sale takes place within the State of West Bengal and the purchaser pays its price within the State of West Bengal.
The sale of such aviation spirit is completed by delivery at the Dum Dum Airport in West Bengal.
" We have mentioned this fact, because it was argued that the respondents had not averred clearly that aviation spirit was sold for consumption within West Bengal even though the appellant Companies had denied it.
The respondents pointed out that at least some of the aviation spirit must be consumed in the State, and that this was so stated in the affidavit filed in reply to the petition and quoted by us.
This is 908 hardly a case for a fight on pleadings, especially as the entire procedure of the supply of aviation spirit and the use to which it is put are beyond controversy.
The question that we have to consider is one of principle, and the answer depends upon broad facts and not on technicalities.
Either the whole of the sale is within the taxing power of the State or it is not, and the fact that aviation spirit is consumed in taking off or in flying over the territory of West Bengal before it leaves that territory would make no difference either way to the principles applicable.
Though parties entered into a debate on this part of the case, we do not propose to consider it, because, in our opinion, the question must be considered in substance and not in abstractions.
The liability to sales tax, if any, is attracted when aviation spirit is sold, and immunity can only be claimed, if, as stated in article 286(1)(a) and the Explanation, the sale can be said to take place outside the State or can be regarded under article 286(1)(b) as having taken place " in the course of. export of the goods out of, the territory of India".
Before we take up these two questions, we desire to refer to some provisions of certain Acts, which bear upon the matter.
The Indian , is an Act for the control of the manufacture, possession, use, operation, sale, import and export of aircraft.
Section 16 of this Act provides that the Central Government may, by notification in the Official Gazette, declare that any or all of the provisions of the Sea Customs Act shall, with such modifications and adaptations as may be specified in the notification, apply to the import and export of goods by air Sections 2(3) and (4) define " import" and " export ' respectively as " bringing into India " and " taking out of India ".
A notification issued under the Indian , the rules framed thereunder and the Indian Aircraft Rules, 1920, appointed the Civil Aerodrome, Dum Dum, a Customs Aerodrome, and to that Customs Aerodrome, the provisions of the Sea Customs Act mutatis mutandis were made applicable by r. 63 (Part IX) of the Indian Aircraft Rules, 1920.
As 909 a result, Dum Dum Airport became a Customs Aerodrome, and any aircraft coming into India from foreign countries or leaving for any such country has to comply with ordinary Customs formalities.
Section 42 of the Sea Customs Act, which allows drawback on re export and is applicable mutatis mutandis, provides: " When any goods, capable of being easily identified, which have been imported by sea into any customs port from any foreign port, and upon which duties of customs have been paid on importation, are re exported by sea from such customs port to any foreign port, or as provisions or stores for use on board a ship proceeding to a foreign port seven eighths. of such duties shall, except as otherwise hereinafter provided, be repaid as drawback: ".
(Provisos omitted).
Under section 51, no drawback is allowed unless the claim to receive such drawback is made and established at the time of re export, and under section 52, the person claiming drawback has to make and subscribe to a declaration.
The procedure which is described in an earlier portion of this judgment bears upon these matters.
Coming now to the taxing Acts with which we are concerned, it may be pointed out that the Bengal Motor Spirit Sales Taxation Act, 1941, originally did not contemplate levy of a tax on the sale of aviation spirit.
Motor spirit was defined to mean, " any liquid or admixture of liquids which is ordinarily used directly or indirectly as fuel for any form of motor vehicle or stationary internal combustion engine, and which has a flashing point below 76 degrees Fahrenheit ".
Sub section (4) of section 3, which is the charging section, provided that no tax shall be levied on the sale of any motor spirit for the purpose of aviation.
The Act was amended by the Second Amendment Act, 1954, and sub section
(4) of section 3 was omitted, and the proviso to the first sub section was re enacted, adding one more clause to the following effect 910 the tax on all retail sales of motor spirit for the purpose of aviation, which are effected on or after the date of the commencement of the Bengal Motor Spirit Sales Taxation (Second Amendment) Act, 1954, shall be charged at the rate of three annas per gallon ".
By the Bengal Motor Spirit Sales Taxation (Amendment) Act, 1955, the original Act was further amended.
To the definition of" motor spirit ' quoted by us earlier, an Explanation was retrospectively added, which reads as follows: " Explanation For the avoidance of doubt, it is hereby declared that in this Act, the expression ' vehicle ' means any means of carriage, conveyance or transport, by land, air or water ".
The original Act was again amended by the Bengal Motor Spirit Sales Taxation (Amendment) Act, 1957.
This time, among other amendments involving rates of tax, the words " and which has a flashing point below 76 degrees Fahrenheit " were omitted from the definition of 'motor spirit '.
The result of all these amendments was to make retail sales of aviation spirit liable to sales tax, and 'retail sale ' was defined, at all material times, as a sale " by a retail dealer for the purpose of consumption by the purchaser ".
After the coming into force of the Constitution, section 22, in terms of article 286, was added to the original Act by paragraph 3 of, and the Eleventh Schedule to, the Adaptation of Laws Order, 1950.
It read: " 22(1).
Nothing in this Act shall be construed to impose or authorise the imposition of a tax on the sale or purchase of motor spirit: (a) where the sale or purchase takes place outside the State of West Bengal; (b) where the sale or purchase takes place in the course of the import of such motor spirit into, or export of such motor spirit out of the territory of India; or (c) (omitted).
(2) The Explanation to clause (1) of article 286 of the Constitution shall apply for the interpretation of clause (a) of sub section (1) 911 Clauses (a) and (b) of the first sub section do no more than re enact the prohibition contained in article 286 of the Constitution with modifications to Suit motor spirit, and the Explanation to sub cl.
(a) of cl.
(1) of the said Article in the Constitution has been applied without an attempt to modify or adopt it.
The Explanation to sub cl.
(a) of the first clause of article 286, the meaning of which was much in dispute in this case, may conveniently be quoted here.
It reads: " 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 laws relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State ".
The High Court of Calcutta in its judgment dealt with the points urged, and rejected them.
The reasons of the High Court briefly were as follows: The learned Judge declined to draw any inference from the fact that customs duties were refunded as drawbacks on aviation spirit delivered to the aircraft.
He held that he was not required to decide whether the appellant Companies were entitled to claim and receive drawbacks of customs duty.
He then gave a finding that the sale was physically within the State, because both the buyer and the purchaser were, at the time of sale, within the State of West Bengal even though delivery of aviation spirit was beyond the customs barrier.
He then considered the legal position in the light of article 286 from three points of view.
He first held that it was not an inter State transaction, because both the parties were in the State of West Bengal, and aviation spirit was not delivered outside the State.
Thus, he held that el.
(2) of article 286 did not apply.
In this connection, he relied upon the decision of this Court in the Bengal Immunity Co., Ltd. vs State of Bihar and others (1).
He next considered (1) 912 the matter under the first sub clause, and held that unless the fiction created by the Explanation applied, the sale must be treated as within the State under the law relating to sale of goods.
In his opinion, the sale being completed within the State of West Bengal both as regards contract and delivery, the fiction could not be held applicable, because no " outside " State was involved, even though the aircraft might have to consume some aviation spirit while flying over the " outside " State.
He, therefore, held that the Explanation and article 286(1)(a) which it seeks to explain, were both not applicable.
He then considered the matter from the point of view of article 286(1)(b).
He explained on the authority of the decision of this Court in State Of Travancore Cochin and others vs Shanmugha Vilas Cashewnut Factory and others (2) that the expression " in the course of export out of the territory of India" referred to sales which, by themselves, occasioned the export of goods out of the territory of India and not to sales for the purpose of export, even though the goods ultimately passed the customs barrier.
He pointed out that there was no foreign purchaser to whom the aviation spirit could be said to have been exported, and that aviation spirit, in fact, was consumed en route and never taken to any foreign territory.
He also pointed out that no bills of lading or shipping documents were drawn up, and therefore there was neither an export nor a sale in the course of export out of the territory of India.
The appellant Companies claim that these sales come within the exemption granted the sub cls.
(a) and (b) of the first clause of article 286.
To claim the exemption granted by the first sub clause, they rely upon certain decisions of this Court, and contend that unless the sale can be said to fall within the Explanation, it must be treated as a sale outside the State of West Bengal, and is thus exempt.
With regard to the second sub clause, they contend that there was an export out of the territory of India inasmuch as aviation spirit was taken abroad and any sale by which it is taken abroad is also exempt These (2) ; 913 arguments, as has been shown above, were urged before the High Court, but were not accepted.
These two arguments need to be considered separately, as they have little in common.
Article 286 places restrictions upon the power of the States to tax sales and purchase of goods, and cuts down the amplitude of Entry No. 54 in the Second List of the Seventh Schedule.
Other restrictions are also to be found in Part XIII of the Constitution.
With those we are not concerned in these appeals.
We are also not concerned with the subsequent amendment of article 286, nor with the ban imposed by the second clause of the Article on taxes on sales in the course of inter State trade and commerce.
We are concerned with the first clause only, as it stood before the amendment.
That clause is divided into two sub clauses.
The first sub clause prohibits the imposition of tax on the sale or purchase of goods where the sale or purchase takes place outside the State.
AD Explanation is added to this sub clause, which has been quoted by us earlier.
This Explanation has led to a long controversy in this Court during which somewhat conflicting views have been expressed about its meaning.
This conflict has further been accentuated when the interplay between the two clauses has been considered.
The view now accepted is that the bans imposed by the two clauses are independent and separate and each must separately be got over.
In view of this, we are not required to travel beyond the first clause in this case.
We have heard widely divergent arguments in these appeals.
The learned Attorney General who appeared on behalf of the appellant Companies read to us copious extracts from the earlier decisions of this Court, and contended that unless the sales could be said to fall within the Explanation so as to become 'Explanation sales ', they must be regarded as having taken place outside the State of West Bengal and for that reason, not taxable.
According to him, they could only become 'Explanation sales ' if aviation spirit was delivered for the purpose of consumption within the State of West Bengal.
The learned Advocate General of West Bengal, on the other band, 914 contended that the Explanation did not apply to the facts here, and that the observations in the rulings were not relevant.
The first sub clause in its opening portion says that no law of a State shall impose or authorise the imposition of a tax on the sale or purchase of goods where such sale or purchase takes place outside the State.
It is thus plainly meant that a State is not to tax sales which take place outside that State.
But, where does a sale take place ? Numerous elements go to make a sale, and they may take place in more than one State.
Under the law relating to the sale of goods, property passes on the happening of certain events.
When they happen, the sale is complete.
Now, a contract for the sale of goods may be entirely within one State when all parties are within the State, the offer and acceptance also take place there, and the goods are also within that State, and there, the property in the goods passes and delivery also takes place.
But it may also happen that the constituent elements may be spread over two or more States, some of the elements described above falling within one State and some others falling within one or more other States.
Prior to the Constitution, multiple taxation of a single transaction of sale was possible, and Provincial legislation then existing clearly demonstrates that States having Some connection with the sale because one or more elements took place within those States, treated this as sufficient nexus between the taxing power and the States, authorising them to tax sales even where property passed in another State.
The Constituent Assembly desired to achieve certain objects in the matter of taxation, particularly in relation to sales tax.
Article 286 achieves, among other objects, the avoidance of this multiple taxation.
The first sub clause of the Article is clear in its terms, when it says that a State cannot tax sales which take place outside the State.
The converse is also true, that is to say, that a State can tax a sale of goods which takes place within the State.
By sale here is meant a completed transaction by which property in the goods passes.
Before the property in the 915 goods passes, the contract of sale is only executory, and the buyer has only a chose in action.
" Property in the goods passes either by the fulfilment of the conditions of the contract, if any, or by the operation of the law relating to the sale of goods.
Starting from the basic fact that what is to be taxed under the Constitution is a sale completed by the transference of property in the goods, we have to see at what stage and where this happens.
The taxable event thus cannot be found at any earlier stage when the sale is not completed by the passing of property.
The critical taxable event is the passing of property in the goods as a result of a contract for their sale.
The parties to the contract can agree when that event is to take place, but where it happens may be a matter of some doubt and even of difficulty.
Where the parties have not agreed as to the time of the passing of property, the law relating to the sale of goods furnishes the answer.
There too, there may be the same difficulty as to the place of the passing of property.
The place of physical delivery of the goods does not help to solve this difficulty, because delivery may, precede or follow the passing of property in the goods.
Delivery of goods is, thus, not always an element which determines the completion of a sale, because the sale may be completed both before and after delivery.
The Constitution, however, thinks in. ' terms of a completed sale by the passing of property and not in terms of an executory contract for the sale of goods.
The essence of the matter being thus the passing of property in goods,, there was always a likelihood of more than one State claiming the right to tax the same transaction.
One State might claim that goods in which property passed were in that State, and hence property in the goods passed there.
Another State might claim that the conditions precedent to the passing of property were fulfilled in that State and hence the sale was completed by the passing of property there.
Yet another State might claim that property passed in that State according as one or more events connected with the passing of property took place within that State.
916 It was to avoid this welter of confusion as far as possible that the Explanation was added, and it also avoided multiple taxation.
The Explanation serves two purposes.
It indicates the State where the tax can be levied, and also indicates the State or States where it cannot.
It achieves these two purposes excluding all considerations as to where property the goods can be said to have passed under the law relating to the sale of goods.
The purpose is achieved by the Explanation and particularly by the non obstante clause in the Explanation.
Any State claiming to tax a sale of goods on the ground that it was completed by the passing of property in the goods in that State could not do so, if the goods as a direct result of the sale were delivered for the purpose of consumption in another State.
The Explanation creates a fiction that the sale must be deemed to have taken place in the latter State and not in the State where the sale was completed by reason of passing of property.
It thus discards the test of passing of property and adopts the test of delivery 'as a direct result of such sale for the purpose of consumption in that State '.
Where more than one State is involved, any State claiming to tax the sale by reason of something anterior to the passing of property would not be able to claim that the sale took place there unless it was also the State of delivery, because the sale is complete only on the passing Of property, and till the sale is complete, liability to tax does not arise.
Once the sale is complete, the delivery State gets the right to tax the sale by the fiction introduced.
Now, the Explanation must be ' interpreted according to its own tenor, and it is meant to explain el.
(1)(a) of the Article and not vice versa.
It is an error to explain the Explanation with the aid of the Article, because this reverses their roles.
The Explanation discards the test of passing of property, and adopts the test of delivery as a direct result of the sale for purposes of consumption.
This delivery may be in the State where the passing of property also took place, but then, there is no difficulty.
The sale is then entirely within the State.
The sale is outside 917 the State only when the passing of property takes place in the State, but that is not the State where the goods have been actually delivered as a direct result of the sale for purposes of consumption in that State.
The Constitution has, thus, for certain cases shifted and confined the situs of the taxable event to the State of the delivery of goods; but it must be remembered that this delivery,may precede as well as follow the passing of property.
It is, therefore, plain that no single element of the contract of sale is by itself a decisive factor in determining which State is to tax the sale where there are more States than one involved, except the test of actual delivery of the goods in a State as a direct result of the sale for purposes of consumption in that State, and it is that State and that State only which has the right to tax the sale and none other.
The Explanation is not applicable, unless there are more States than one involved.
It is only a key to find out which of the States is competent to tax and which are not, and is by no means a definition of an 'outside sale '.
It is an Explanation, which determines which State out of those connected with the transaction of sale can tax it.
The interpretation which we have placed upon the first sub clause of article 286(1) is substantially the same, as was placed in the earlier rulings of this Court.
In The State of Bombay and another vs The United Motors (India) Ltd. and others (1), it was pointed out that the Explanation formulated an easily applicable test to find out an 'outside sale ' and this, it was said, was done " by defining an inside sale ".
It was observed further: " Are the goods actually delivered in the taxing State, as a direct result of a sale or purchase, for the purpose of consumption therein ? Then, such sale or purchase shall be deemed to have taken place in that State and outside all other States ".
Certain reasons were given why this test was adopted, and it is these reasons and their effect on the second clause, which led to a re examination of the subclause in The Bengal Immunity Company Limited vs (1) ; 117 918 The State of Bihar and others (1).
The majority in that case touched upon the various grounds which were advanced before this Court, but declined to express "any final opinion upon the matter ".
The case went on to decide that the bans imposed by the two clauses of article 286 were independent, and needed to be separately enforced.
But, on the meaning of the Explanation, no different view was expressed.
Again, in M/8.
Ramnarain Sons Ltd. vs Asst.
Commissioner of Sales Tax and others(2), it was observed as follows: "So far as article 286(1)(a) is concerned, the Explanation determines by the legal fiction created therein the situs of the sale in the case of transactions coming within that category and when a transaction is thus determined to be inside a particular State it necessarily becomes a transaction outside all other States.
The only relevant enquiry for the purposes of article 286(1)(a), therefore, is whether a transaction is outside the State and once it is determined by the application of the Explanation that it is outside the State it follows as a matter of course that the State with reference to which the transaction can thus be predicated to be outside it can never tax the transaction (Italics supplied).
Now, in so far as this case is concerned, the words the Explanation determines by the legal fiction created therein the situs of the sale in the case of transactions coming within that category " in the extract last quoted, become important.
The first question to consider is whether these cases can be governed by the Explanation at all.
The learned Attorney General contends that the power to tax these transactions can only be found if the sales were 'Explanation sales ', in the sense that the goods were delivered as a direct result of the sale for consumption in West Bengal.
In our opinion, the explanation can apply only if more than one State is involved in the same transaction.
When there is no other State in which the goods can be said to be delivered for consumption, apart from the State where the property in the goods passed, the Explanation is not needed as a key.
The (1) (2) ; 492. 919 power to tax in those circumstances which is exercisable by virtue of transfer of title to the property, can only be taken away if there be some other State in ' which the goods as a direct result of the sale were delivered for consumption.
But if there is no such other State, the question does not arise.
In the present cases, there is no such rival State.
Where the purchaser buys goods in West Bengal for his own consumption, the test of an 'inside sale ' is satisfied when the property in the goods passes in the same State and all the elements of the contract of sale also take place inside it.
Where the property in the goods passes to a buyer who is also the 'ultimate ,consumer, the terms of the Explanation are themselves satisfied.
To exclude, thus, the powers of taxation of the State of West Bengal, the appellant Companies must be able to point out some other State where the goods can be said to have been delivered as a direct result of the sale for the purpose of consumption in that other State.
Unless they can do so and they have not so done before us they cannot invoke the Explanation, and the cases, to borrow the language of the last quotation, cannot be said to be "within that category ".
In our opinion, the learned Advocate General of West Bengal was right in his argument (which was accepted by the High Court) that the ban contained in article 286(1)(a) and the Explanation does not apply.
The appellant Companies next rely upon article 286 (1)(b), which provides that: " No law of a State shall impose or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place in the course of the. . export of goods out of, the territory of India ".
The contention is that the sales in question must be regarded as having taken place in circumstances which exempt sales under the sub clause.
This the appellant Companies argue from the following facts that aviation spirit is delivered outside the customs barrier, that aviation spirit is taken out of the territories of India, and that the sales occasion this 920 export.
They rely upon the definition of 'export ' in other Acts to show that the word means no more than 'taking out of the country '.
This clause of the Article has been construed on previous occasions by this Court, and what is meant by the expression " in the course of " has been well.
established.
Indeed, in State of Mysore vs Mysore Spinning and Manufacturing Co. Ltd. (1), this Court observed that the point could no longer be said to be at large.
Fortunately, there is less disagreement on this point than on the interpretation of the Explanation, and it is sufficient to refer to the leading decisions of this Court.
The earliest case on the subject is State of Travancore Cochin and others vs The Bombay Co. Ltd. (2), where four possible meanings of the expression " in the course of " were considered.
It is not necessary to refer to all of them here, and it is sufficient to point out that of the view that the clause is not restricted to the point of time at which goods are exported from India and that the series of transactions which necesssarily precede export of goods also come within the purview of the clause, it was said that it was too wide.
It was observed by this Court that: "A sale by export thus involves a series of integrated activities commencing from the agreement of sale with a foreign buyer and ending with the delivery of the goods to a common carrier for transport out of the country by land or sea.
Such a sale cannot be dissociated from the export without which ' it cannot be effectuated, and the sale and resultant export form parts of a single transaction.
Of these two integrated activities, which together constitute an export sale, whichever first occurs can well be regarded as taking place in the course of the other.
" The meaning of these observations was further explained in State of Travancore Cochin and others vs Shanmugha Vilas Cashew Nut Factory and Others (3).
It was observed (p. 62) that the words "export out of " in this context did not refer to the article or commodity exported, and that the reference to "the (1) A.I.R. 1958 section C. 1002.
(2) ; (3) ; 921 goods " and to the "territory of India " made it clear that the words " export out of " meant the exportation out of the country.
It was then added that, "The word 'course ' etymologically denotes movement from one point to another, and the expression 'in the course of ' not only implies a period of time during which the movement is in progress but postulates also a connected relation.
" This inter connection of the sale sought to be taxed with the course of export was emphasised again in clear terms thus : " The phrase 'integrated activities ' was used in the previous decision to denote that 'such sale ' (i.e., a sale which occasions the export) I cannot be dissociated from the export without which it cannot be effectuated, and the sale and the resultant export form parts of a single transaction '.
It is in that sense that the two activities the sale and export were said to be integrated.
A purchase for the purpose of export like production or manufacture for export, is only an act preparatory to export and cannot, in our opinion, be regarded as an act done I in the course of the export of the goods out of the territory of India ' any more than the other two activities can be so regarded.
" From the views here expressed, it follows that every sale or purchase preceding the export is not necessarily to be regarded as within the course of export.
It must be inextricably bound up with the export, and a sale or purchase unconnected with the ultimate export as an integral part thereof is not within the exemption.
It may thus be taken as settled that sales or purchases for the purpose of export are not protected, unless the sales or purchases themselves occasion the export and are an integral part of it.
The views expressed in these two cases were accepted and applied in State of Madras vs Gurviah Naidu and Co. Ltd. (1), Kailash Nath vs State of U.P. (2), State of Mysore vs Mysore Spinning and Manufacturing Co. Ltd. (3) and Gordhandas Lalji vs B. Banerjee (1) A.I.R. 1956 S.C. 158.
(2) A.I.R. 1057 S.C. 790.
(3) A.I.R. 1958 S.C. 1002.
922 and others (1).
These cases do not advance the matter further, and it is, therefore, not necessary to refer to them in detail.
In the earlier cases, it was not necessary to explain the meaning of the word 'export ', because there was always a foreign buyer to whom the goods were ultimately sent.
In none of the cases the facts found here were present.
Here, the buyer does not export the goods to a foreign country, but purchases them for his own use on the journey of the aircraft to foreign countries.
This difference is vital, and makes the position of the appellant Companies, if anything, weaker.
It is for this reason that the appellant Companies depend on a wide meaning of the word 'export ', which they illustrate from other Acts where the word is tantamount to "taking out of the country '.
We are of opinion that this meaning cannot be given to the word 'export ' in the clause.
The word 'export ' may conceivably be used in more senses than one.
In one sense, 'export ' may mean sending or taking out of the country, but in another sense, it may mean sending goods from one country to another.
Often,, the latter involves a commercial transaction but not necessarily.
The country to which the goods are thus sent is said to import them, and the words 'export ' and import ' in this sense are complementary.
An illustration will express this difference vividly.
Goods cannot be said to be exported if they are ordered by the health authorities to be destroyed by dumping them in the sea, and for that purpose are taken out of the territories of India and beyond the territorial waters and dumped in the open sea.
Conversely, goods put on board a steamer bound for a foreign country but jettisoned can still be said to have been exported ', even though they do not reach their destination.
In the one case, there is no export, and in the other, there is, though in either case the goods go to the bottom of the sea.
The first would not be within the exemption even if a sale was involved, while any sale in the course of the second taking out would be.
In both, the goods were taken out of the country.
The difference lies in (1) A.I.R. 1958 S.C. 1006.
923 the fact that whereas the goods, in the first example, had no foreign destination, the goods, in the second example, had.
It means, therefore, that while all exports involve a taking out of the country, all goods taken out of the country cannot be said to be exported.
The test is that the goods must have a foreign destination where they can be said to be imported.
It matters not that there is no valuable consideration from the receiver at the destination end.
If the goods are ex.
ported and there is sale or purchase in the course of that export and the sale or purchase occasions the export to a foreign destination, the exemption is earn.
Purchases made by philanthropists of goods in the course of export to foreign countries to alleviate distress there, may still be exempted, even though the sending of the goods was a not a commercial venture but a charitable one.
The crucial fact is the sending of the goods to a foreign destination where they would be received as imports.
The two notions of export and import, thus, go in pairs.
Applying these several tests to the cases on hand, it is quite plain that aviation spirit loaded on board an aircraft for consumption, though taken out of the country, is not exported since it has no destination where it can be said to be imported, and so long as it does not satisfy this test, it cannot be said that the sale was in the course of export.
Further, as has already been pointed out, the sales can hardly be said to 'occasion ' the export.
The seller sells aviation spirit for the use of the aircraft, and the sale is not integrally connected with the taking out of aviation spirit.
The sale is not even for the purpose of export, as explained above.
It does not come within the course of export, which requires an even deeper relation.
The sales, thus, do not come within article 286 (1)(b).
These sales must, therefore, be treated as made within the State of West Bengal.
The customs barrier is a barrier for customs purposes, and duty drawback may be admissible if the goods once imported are taken out of the country.
The customs duty drawbacks have nothing to do with the sale of aviation 924 spirit, which takes place in West Bengal.
The cus toms barrier does not set a terminal limit to the territory of West Bengal for sales tax purposes.
The sale beyond the customs barrier is still a sale, in fact, in the State of West Bengal.
Both the buyer and the seller are in that State.
The goods are also there.
All the elements of sale including delivery, payment of price, take place within the State.
The sale is thus completely within the territory of the taxing State.
No outside State is involved where the goods can be said to have been delivered for consumption as a direct result of the sale that takes place.
Article 286(1)(a) and the Explanation are wholly inapplicable, and the sale cannot, even by a fiction, be said to be outside the State of West Bengal.
No doubt, aviation spirit is taken out of the State and also the territory of India, but it cannot be said to have been exported or delivered for consumption in some other State.
The so called export is not occasioned by the sale, and the sale, on the authorities cited, is not in the course of export ', so as to attract article 286(1)(b).
The decision of the High Court was correct.
The appeals fail, and are dismissed with costs.
One hearing fee.
Appeal dismissed.

summary:
The appellant companies which were carrying on business in Calcutta in petroleum and petroleum products maintained supply depots at Dum Dum Airport from which motor spirit for B the purposes of aviation was sold and delivered to aircraft which either proceeded to foreign countries directly from that Airport or did so ultimately, though landing en route at some place or places in the Indian territory.
Dum Dum Airport was a customs aerodrome and all aircraft coming into it or leaving it had to comply with ordinary customs formalities.
The sales tax authorities of West Bengal sought to levy tax on the sales of motor spirit as aforesaid under the provisions of the Bengal Motor Spirit Sales Taxation Act, 1941, as amended.
The appellant companies claimed that the sales were exempted from taxation under both the clauses (a) and (b) of article 286(i) of the Constitution of India on the grounds (i) that the sales in question had taken place outside the State of West Bengal, as they did not .come within the Explanation to article 286(1)(a), (2) that aviation spirit was delivered outside the customs barrier and therefore the sales were outside the State, and (3) that the sales had taken place in the course of export, as aviation spirit was taken out of the territory of India.
Held: (i) that by sale in article 286(i)(a) is meant a completed transaction by which property in the goods passes.
Before property in the goods passes the contract of sale is only executory and the buyer has only a chose in action.
The taxable event is not to be found at an earlier stage because the critical taxable event is the passing of property.
The Explanation to cl.
(1) of article 286 was added to avoid, among other things, multiple taxation of the same transaction.
It indicates the State where the tax can be levied and also the State where it cannot.
It achieves it by excluding from consideration the place where the property in the goods passed according to the law relating to sale of goods.
The non obstante clause establishes this.
By the fiction created by the Explanation a sale is deemed to have taken place in the State where the goods are delivered as a direct result of the sale for purposes of consumption in that State.
Where there are more States than one involved, any State claiming to tax a sale by reason of something anterior to the passing of property would not be able to claim that the sale took place there unless it was also the State of delivery.
The Explanation is meant to explain the Article and must be interpreted according to its tenor and the Explanation is not to be explained with the aid of the Article because that would reverse their roles.
The Explanation is not applicable unless there are more States than one involved.
The State of Bombay vs The United Motors (India) Ltd., , State of Travancore Cochin vs Shanmugha Vilas Cashewnut Factory, ; , Ramnayain Sons Ltd. vs Asst.
904 Commissioner of Sales Tax; , and The Bengal Immunity Company Ltd. vs The State of Bihar, [1955] 2 S.C.P. 603, considered.
(2) that to exclude the power of taxation of the State of West Bengal under article 286(i)(a), read with the Explanation, the appellant companies must be able to point out some other State where the goods could be said to have been delivered as a result of the sale for the purpose of consumption in that other State, and that where, as in the present case, aviation spirit was delivered to the aircraft, there was no such rival State, and therefore, the ban contained in article 286(i)(a) and the Explanation, did not apply.
(3) that in the phrase " in the course of export out of the territory of India " in article 286(i)(b) the word " export " does not merely mean 'taking out of the country '.
Export here means that the goods are being sent to a foreign destination at which the goods can be said to be imported.
In the Article the notions of import and export go in pairs.
State of Travancore Cockin vs The Bombay Co. Ltd., ; and State of Travancore Cochin vs Shanmugha Vilas Cashew Nut Factory, ; , relied on.
(4) that aviation spirit loaded on board the aircraft for consumption, though taken out of the country, was not exported since it had no destination where it could be said to be imported.
The sales in question could not, therefore, be said to have occasioned the export, nor were they in the course of export.
Accordingly, article 286(i)(b) was not applicable.
(5) that the sales must be treated as made within the State of West Bengal.
The customs barrier did not set a terminal limit to the territory of West Bengal for the purposes of sales tax, and the sales, though beyond the customs barrier, were still within the territory of the taxing State.


judgement:
l Appeal No. 135 of 1958.
Appeal from the judgment and order dated 114 394 September 4, 1956, of the Punjab High Court in Civil Writ Case No. 325 of 1965.
N. A. Palkhivala and J. B. Dadachanji, for the appellant.
C. K. Daphtary, Solicitor General of India, K. N. Rajagopal Sastri and D. Gupta, for the respondents.
September 27.
The Judgment of the Court was delivered by HIDAYATULLAH J.
The appellant firm, L. Hazarimal Kuthiala of Kapurthala, moved the High Court of Punjab under article 226 of the Constitution for writs of prohibition, certiorari, quo warranto etc., against the Income tax Officer, Special Circle, Ambala and the Commissioner of Income tax, Punjab (1), Himachal Pradesh, Bilaspur and Simla in respect of reassessment of the income of the firm for the account year, 1945 1946.
The High Court dismissed the petition, but granted a certificate under articles 132 and 133 of the Constitution, and this appeal has been filed on that certificate.
The firm carried on business as forest lessees and timber merchants at Dhilwan in the former Kapurthala State.
In that State, an Income tax law was in force, and prior to the integration of the State, on April 10, 1947, the income of the firm for the account year 1945 1946 (Samvat.
2002) was duly assessed, and the tax was also paid.
Subsequently, political changes took place, Kapurthala integrated into what was known as Pepsu, and the Rajpramukh issued two Ordinances in Samvat.
2005, by which all laws in force in Kapurthala including the Income tax law ceased to be operative from August 20, 1948.
The two Ordinances instead applied laws in force in the Patiala State to the area of the new State which included Kapurthala, and the Patiala Income tax Act, 2001, came into force.
Later still, the Indian Finance Act, 1950 (26 of 1950), applied the Indian Income tax Act to the Part B States, which had emerged as a result of political changes.
Section 13 of the Indian Finance Act, 1950, repealed the Income tax laws obtaining in the area of the Part B States except for the purposes 895 of levy, assessment and collection of income tax and super tax in respect of the period defined therein.
On March 12, 1955, the Income tax Officer, Special Circle, Ambala, issued a notice purporting to be under section 34 of the Patiala Income tax Act of Samvat.
2001 to the appellant firm calling upon it to file a return of its income and total world income, because he had reason to believe that the income had been underassessed.
Previous to this, on November 4, 1953, the Commissioner of Income tax, Punjab (1), Himachal Pradesh, Bilaspur and Simla, purporting to act under section 5, sub sections
(5) and (7A) of the Indian Income tax Act, ordered that the assessment of the appellant firm would be done by the Income tax Officer, Special Circle, Ambala and not by the Income tax Officer, B Ward, Patiala, who ordinarily would be the competent authority under section 64 of the Indian Income tax Act to assess the appellant firm.
The appellant firm raised objections, but failed, and then filed the petition under article 226 of the Constitution, out of which the present appeal arises.
Numerous objections were taken in respect of the competency of the proceedings before the taxing authorities, but some of them are no longer pressed.
An argument under article 14 of the Constitution has now been abandoned, though it figured at earlier stages of the present case.
A second point that the reassessment cannot be made under the Patiala In.
come tax Act is not in dispute, because the respondents before us stated that the reassessment, if any, would have to be done in accordance with the Kapurthala law, as it existed in the assessment year (Samvat. 2002).
A third argument, namely, that the words of section 13 of the Indian Finance Act, 1950, did not include reassessment, has also been abandoned, in view of the decisions of this Court in Lakshmana Shenoy vs The Income, tax Officer, Ernakulam (1) and The Income tax officer, Bangalore vs K. N. Guruswamy (2).
Only one point has been pressed before us, and it is that the Income Tax Officer, Special Circle, Ambala, had no jurisdiction to issue a notice under section 34, and (1) [1959] S.C.R. 751.
(2) ; 896 that only the Income tax Officer, B Ward, Patiala, was the competent authority.
Reliance is placed in this connection upon the provisions of section 64(1) of the Indian Income tax Act, under which the locally situated Income tax Officer would have had jurisdiction in this case.
The transfer of the case by the Commissioner of Income tax by his order dated November 4, 1953, is characterised as ultra vires and incompetent, and it is this argument alone to which we need address ourselves in this appeal.
The Patiala Income tax Act contained provisions almost similar to sections 5(5) and 5(7A) of the Indian Income tax Act.
Sub section (5) differed in this that the Commissioner of Income tax was required to consult the Minister in charge before taking action under that sub section.
The only substantial difference in the latter sub section was that the Explanation which was added to section 5(7A) of the Indian Income tax Act as a result of the decision of this Court in Bidi Supply Co. vs Union of India (1) did not find place in the Patiala Act.
The Commissioner, when he transferred this case, referred not to the Patiala Income tax Act, but to the Indian Income tax Act, and it is contended that if the Patiala Income tax Act was in force for purposes of reassessment, action should have been taken under that Act and not the Indian Income tax Act.
This argument, however, loses point, because the exercise of a power will be referable to a jurisdiction which confers validity upon it and not to a jurisdiction under which it will be nugatory.
This principle is wellsettled.
See Pitamber Vajirshet vs Dhandu Navlapa(2).
The difficulty, however, does not end there.
The Commissioner, in acting under section 5(5) of the Patiala Income tax Act, was required to consult the Minister in charge.
It is contended that the Central Board of Revenue which, under the Indian Finance Act, 1950, takes the place of the Minister in charge was not consulted, and proof against the presumption of regularity of official acts is said to be furnished by the fact that under the Indian law no such consultation was necessary, and the Commissioner, having purported (1) [1056] S.C.R. BOM.
486, 489. 897 to act under the Indian law, could not have felt the need of consultation with any higher authority.
This, perhaps, is correct.
If the Commissioner did not act under the Patiala law at all, which enjoined consultation with the Minister in charge and purported to act only under the Indian law, his mind would not be drawn to the need for 'Consultation with the Central Board of Revenue.
Even so, we do not think that the failure to consult the Central Board of Revenue renders the order of the Commissioner ineffective.
The provision about consultation must be treated as directory, on the principles accepted by this Court in State of U. P. vs Manbodhan Lal Srivastava (1) and K. section Srinivasan vs Union of India (2).
In the former case, this Court dealt with the provisions of article 320 3)(c) of the Constitution, under which consultation with the Union Public Service Commission was necessary.
This Court relied upon the decision of the Privy Council in Montreal Street Railway Company vs Normandin (3), where it was observed as follows: ". .
The question whether provisions in a statute are directory or imperative has very frequently arisen in this country, but it has been said that no general rule can be laid down, and that in every case the object of the statute must be looked at.
The cases on the subject will be found collected in Maxwell on Statutes, 5th Ed., p. 596 and the following pages.
When the provisions of a statute relate to the performance of a public duty and the case is such that to hold null and void acts done in neglect of this duty would work serious general inconvenience, or injustice to persons who have no control over those entrusted with the duty, and at the same time would not promote the main object of the Legislature, it has been the practice to hold such provisions to be directory only, the neglect of them, though punishable, not affecting the validity of the acts done.
" The principle of the Privy Council case was also applied by the Federal Court in Biswanath Khemka vs The King Emperor (4), and there, as pointed out by this (1) [1058] S.C. R. 533.
(3) ; (2) ; , 1321.
(4) 898 Court, the words of the provision were even more emphatic and of a prohibitory character.
The essence of the rule is that where consultation has to be made during the performance of a public duty and an omission to do so occurs, the action cannot be regarded as altogether void, and the direction for consultation may be treated as directory and its neglect, as of no consequence to the result.
In view of what has been said in these cases, the. failure to consult the Central Board of Revenue does not destroy the effectiveness of the order passed by the Commissioner, however wrong it might be from the administrative point of view.
The power which, the Commissioner had, was entrusted to him, and there was only a duty to consult the Central Board of Revenue.
The failure to conform to the duty did not rob the Commissioner of the power which he exercised, and the exercise of the power cannot, therefore, be questioned by the assessee OD the ground of failure to consult the Central Board of Revenue, provision regarding which must be regarded as laying down administrative control and as being directory.
Learned counsel, however, contends that even if all this be decided against him, he is still entitled to show that the transfer of the case can only take place under sub section
(7A) of section 5 and not under sub section
According to him, the former subjection deals with the transfer of individual cases, and that inasmuch as there was no pending case at the time, then, as was ruled by this Court in the Bidi Supply case (1), the transfer could not be valid.
In the absence of an Explanation similar to the one added to the Indian Income tax Act, he contends that a case which was not pending, could not be transferred under sub section
He contends also that sub section
(5) deals not with the transfer of individual cases but with the distribution of work.
The two sub sections of section 5 of the Patiala Income tax Act read as follows: " (5) Income tax officers shall perform their functions in respect of such persons or classes of persons or of such incomes or classes of income or in respect of (1) ; 899 such areas as the Commissioner of Income tax may in consultation with the Minister Incharge direct, and, where such directions have assigned to two or more Income tax Officers, the same persons or classes of persons or the same incomes or classes of income or the same area, in accordance with any orders which the Commissioner of Income tax may in consultation with the Minister Incharge make for the distribution and allocation of work to be performed.
The Minister Incharge may, with the previous approval of the ljlasi Khas, by general or special order in writing, direct that the powers conferred on the Income tax Officer by or under this Act shall, in respect of any specified case or class of cases, be exercised by the Commissioner, and, for the purposes of any case in respect of which such order applies, references in this Act or in any rules made hereunder to the Income tax Officer shall be deemed to be references to the Commissioner.
(7A) The Commissioner of Income tax may transfer any case from one Income tax Officer subordinate to him to another, and the Minister Incharge may transfer any case from any one Income tax Officer to another.
Such transfer may be made at any stage of the proceedings, and shall not render necessary the re issue of any notice already issued by the Income tax Officer from whom the case is transferred.
" There can be no doubt that sub section
(7A) authorises ,the Commissioner to transfer individual cases.
The words " any case from one Income tax Officer subordinate to him to another ", " such transfer may be made at any stage of the proceedings " etc., clearly indicate this.
Sub section (7A) is, however, not applicable here, because in respect of the cognate sub section of the Indian Income tax Act it was ruled by this Court that it could apply to a pending case only.
It was to overcome this lacuna that the Explanation was added by the Indian Parliament.
This amendment came in 1956, and the Patiala Act did not include a similar Explanation, because prior to 1956 the question had not arisen.
There is one other difference between the Patiala Act and the Indian Act.
Whereas sub section
(7A) was introduced in the Indian Act by an 900 amendment, the corresponding sub section was enacted at the same time as the rest of the Patiala Act.
Now, it is quite clear that a case which was not pending at the time of transfer could not be transferred under sub section
(7A) of section 5 of the Patiala Act.
The same reasoning must be applied to that subsection, as it was applied to the Indian Act.
Learned counsel referred us to an affidavit by the Under Secretary, Central Board of Revenue, reproduced in Pannalal Binjraj vs Union of India (1), which stated the reason for the introduction of sub section
It is a little difficult to accept the affidavit as an aid to find out the intention why a particular law or amendment was enacted, more so where the affidavit concerns quite another Act of a different legislature.
It is, however, pertinent to remember that sub section
(7A) expressly gave the power to transfer pending cases, but said nothing about cases which were riot pending.
The power to transfer such cases before they came into being must, therefore, be found in some other enactment.
The Department contends that it would fall within sub section
(5) of section 5, and points out that this Court was not required to consider that sub section, because the transfer of the cases dealt with in the Bidi Supply case (2) was by an authority not named in sub section
(5) and therefore the transfer in those instances could not be held to be under that sub section.
The Department contends that the Commissioner of Income tax is mentioned both in sub section
(5) and sub section
(7A) and could derive his power from one or the other or both.
The short question thus is whether an individual case which was not a pending case could be transferred from one Income tax Officer to another under sub section
(5) of section 5 of the Patiala Act, which was kept alive for assessment and reassessments relating to previous assessment years.
Mr. Palkhivala argues that the words of the sub section " such persons or classes of persons or of such incomes or classes of income or in respect of such areas " denote, by the plural employed, a dealing with a group rather than (1) ; 246.
(2) ; 901 an individual case.
He further contends that if individual cases were held to be included in sub section
(5), then sub section
(7A) would be unnecessary and otiose.
He argues that harmonious construction thus requires that the two sub sections must be taken to cover different situations.
The last argument is hardly open after the decision of this Court adverted to already.
If pending cases alone were within sub section
(7A), those cases which were not pending could not be said to have been provided for, there.
There is thus no overlapping at least in so far as cases not pending were concerned.
An arrangement for their disposal would be a subject of distribution of work and nothing much turns upon the employment of the plural number, because the plural includes the singular.
Indeed, a single case might well be in a class separate from others.
Duplication of powers is sometimes noticeable in statutes, and does not destroy the effectiveness of the powers conferred.
Section 24 of the Civil Procedure Code dealing with transfers of cases and the provisions of the Letters Patent of the High Court are instances in point.
If a particular action is valid under one section, it cannot be rendered invalid because the identical action can also be taken under another section, and it makes no difference if the two empowering provisions are in the same statute.
In any event, sub section
(7A) would cut down sub section
(5) only to the extent the former provides, and it has been held that it was confined to pending cases only.
Sub section (5) was thus available for cases which were not pending, and the case which was 'the subject matter of the Commissioner 's order was not a pending case.
Mr. Palkhivala contends that sub section
(5) merely enables distribution of work, and does not deal with transfers.
But where a case is not pending, an order relating to it may take the form of transfer or an arrangement for its disposal.
There is nothing to prevent the Commissioner, acting under sub section
(5), to arrange that the case of an assessee shall be disposed of by a particular Income tax Officer.
The words of 115 902 sub section
(5) that " Income tax Officers shall perform their functions in respect of such persons as the Commissioner may direct " only show that the Commissioner may direct that one Income tax Officer shall not and another Income tax Officer shall, perform the functions in respect of such and such person or persons.
The plural including the singular, the order of the Commissioner was valid, because he arranged and distributed work, and did not seek to transfer any case.
It is, however, contended that this renders sub section
(7A) otiose.
In our opinion, it does not.
Special provision for transfer of pending cases is all that is provided there, and if such a transfer takes place, the provisions of sub section
(7A) will be invoked.
Those provisions are to be read as not pre judicing the general powers granted by sub section
(5) and vice versa.
For these reasons, the appeal fails, and will be dismissed with costs.
Appeal dismissed.

dataset_name: IN-Abs

summary:
The appellant firm which carried on business as forest lessees and timber merchants in the former Kapurthala State was assessed to, and paid, income tax, for the account year 1945 46 under the Income tax law which was then in force in the said State.
Subsequently Kapurthala State integrated into what was known as Pepsu and the Patiala Income tax Act, 2001, was made applicable and, came into force in the integrated State.
Later still the Indian Finance Act, 1950 (26 of 1930), applied the Indian Income tax Act to Part B States which had emerged as a result of political changes and section 13 Of the Indian Finance Act repealed the Income tax laws obtaining in Part B States except for the purposes of levy assessment and collection of income tax and Super tax relating to the period mentioned therein.
On November 4, 1953, the Commissioner of Income tax, Punjab (i) etc.
purporting to act under section 5, sub sections
(5) and (7A) of the Indian Income tax Act ordered the assessment of the appellant firm to be done by the Income tax Officer, Special Circle, Ambala and not by the Income tax Officer, B Ward, Patiala, who would ordinarily be the competent assessing authority for the firm under section 64 Of the Indian Income tax Act.
On March 12, 1953, the Income tax Officer, Special Circle, Ambala, issued a notice purporting to be under the Patiala Income tax Act of Samvat 2001 to the appellant firm for filing a return of its income and total world income as he believed that the income had been underassessed.
The appellant then filed an application under article 226 of the Constitution in the High Court for writs of prohibition, certiorari, quo warranto etc.
against the Income tax Officer, Special Circle, Ambala, and the Commissioner of Income tax, Punjab (i) etc.
regarding the reassessment of the income of the firm for the account year 1945 46.
The High Court dismissed the said petition and this appeal was filed on a certificate granted by the High Court.
The contentions of the appellant inter alia, were that the Income tax Officer, Special Circle, Ambala, had no jurisdiction to issue a notice under section 34 893 of the Patiala Income tax Act of Samvat 2001, and that only the Income tax Officer, B Ward, Patiala, was the competent authority as he was the locally situated Income tax Officer and would have jurisdiction under section 64(1) of the Income tax Act.
The transfer of the case by the Commissioner of Income tax by his order of November 4, 1954, was characterised as ultra vires and incompetent.
The argument that the words of section 13 Of the Indian Finance Act, 1950, did not include reassessment was abandoned in view of the decisions of this Court in Lakshmana Shenoy vs The Income tax Officer, Ernakulam, [1959] S.C.R. 751.
It was further contended that the Commissioner in acting under section 5(5) of the Patiala Income tax Act was required to consult the Minister in Charge whose place was taken by the Central Board of Revenue under the Indian Finance Act, 1950.
Held, that although the Commissioner of Income tax was required to consult the Central Board of Revenue his failure to do so did not render his order ineffective however wrong it might be from the administrative point of view.
The provision about consultation must be treated as directory and the Commissioner 's power could not be questioned by the assessee on the ground of failure to consult the Central Board of Revenue.
State of U.P. vs Manbodhan Lal Srivastava, [1958] S.C.R. 553, K. section Srinivasan vs Union of India, ; , Montreal Street Railway Company vs Normandin, L.R. 1917 A. C. 170 and Biswanath Khemka vs The King Emperor, , followed.
The Commissioner while transferring the case may have referred to the Indian Income tax Act and not to the Patiala income tax Act but the exercise of the power would be referable to a jurisdiction which conferred validity upon it and not to a jurisdiction under which it would be nugatory.
Pitamber Vajirshet vs Dhandu Navlapa, I.L.R. , followed.
A case which was not pending at the time of transfer could not be transferred under sub section
(7A) of section 5 of the Patiala Act but it could be transferred from one Income tax Officer to another under sub section
(5) Of section 5 of the Patiala Act which was kept alive for assessment and reassessment relating to previous years.
Sub section
(7A) makes special provision for transfer of pending cases and is not prejudicial to the general powers granted by sub section
Bidi Supply Co. vs Union of India, ; , refer red to.


judgement:
ION: Criminal Appeal No. 31 of 1961.
Appeal by special leave from the judgment and order dated October 7, 1958 of the Andhra Pradesh High Court in Criminal Appeal No. 456 of 1957.
Ram Reddy for the appellants.
Ratna Rao and K R. Choudhri, for respondent No 1.
A. Ganganatham Chetty and T.M. Sen. for respondent No.2.
October 5.
The Judgment of the Court was delivered by HIDAYATULLAH, J.
The two appellants who were granted special leave by this Court, appeal against the judgment of the High Court of Andhra Pradesh convicting them, on appeal against acquittal, of an offence under.
380 of the Indian Penal Code and sentencing them to six months ' rigorous imprisonment and a fine Rs. 500/ each, with further rigorous imprisonment for one month in default of payment of fine.
The prosecution case which had a chequered career in the High Court and the two Courts below, is as follows: In Dusi, which is a part of Bhaskararaopuram, there was a Press known as Srinivasa Printing Press at Srinivasa Ashram.
This Press existed for over 17 years.
Pappala Chinna Ramadasu (P.W.4) was admittedly a printer and for some years, the declared keeper of that Press under section 4 of the Press and Registration of Books Act, 1867.
The declarations were made in 1944 (Ex.P.4) and 1947 (Ex.
On November 21, 1955, 10 Pappala Chinna Ramadasu sold this press by a registered document (Ex.P. 1 ) to one Boddepalli Lakshminarayana for Rs 4,000/ , of which Rs.3,500/ were shown to have been paid in advance and the balance was received by Pappala Chinna Ramadasu on January 10, 1956, (Ex.P.2).
Two applications were then made on December 1, 1955, respectively by Chinna Ramadasu and Boddepalli Lakshminarayana before the Collector and District Magistrate for substituting the name of Boddepalli Lakshminarayana in place of that of Pappala Chinna Ramadasu in the declaration.
On December 6, 1955, by exhibit P.11 they were informed that they should apply under the Press and Registration of Books Act (25 of 1867).
Subsequently, on January 11, 1956, a declaration under section 4 of that Act was made by Boddepalli Lakshminarayana and was accepted (Ex.P.3).
The case of the prosecution further is that Boddepalli Lakshminarayana went to Kurnool on March 20, 1956, and in his absence, the two appellants with two others (who were prosecuted but acquitted) removed the Printing Press on the night of March 25, 1956 to Korlakota where the first appellant, Apparao, resides.
A report of the offence (Ex.
P 13), purporting to be written on March 27, 1956, was handed in at the police station house on the following day at 8 P.m.
The police took no action, and a complaint was, therefore, filed on April 4, 1956, by Boddepalli Laksminarayana.
The Judicial Second class Magistrate, Srikakulam, convicted the two appellants of an offence under 8.
380 of the Indian Penal Code, and acquitted the two others, with whom we are not concerned, and sentenced each of the appellants to imprisonment till the rising of the Court and a fine of Rs. 250/ , with simple imprisonment for one month in default.
On appeal, the Additional District and Sessions Judge, Srikakulam, set aside the conviction and acquitted them.
The complainant then obtained special leave of the High Court to file 11 appeal against this acquittal, and the High Court reversed the acquittal, as already indicated above.
In support of the prosecution case, the complainant examined four witnesses, including himself.
Pappala Chinna Ramadasu was examined as P.W.4 to prove that he had sold the Press to Boddepalli Lakshminarayana, and two other witnesses were examined to prove the removal of the Printing Press by the appellants.
The defence of the appellants was as follows: According to them, the Press originally belonged to one Govindachari, and on October 25, 1947 he transferred it to Kuna Appala Naidu by exhibit D 2.
In the registered sale deed then executed, Govindachari was joined formally by Pappala Chinna Ramadasu.
The sale was for Rs. 6,400/ and on the same day, a promissory note was executed by Kuna Appala Naidu in favour of Govindachari, which was attested by Pappala Chinna Ramadasu.
Subsequently, Appala Naidu made payments of certain amounts, and endorsements on tho promissory note showing these payments were signed by Pappala Chinna Ramadasu as a witness.
Kuna Appala Naidu was examined as D.W.1, and he stated that, the name of Pappala Chinna Ramadasu was formally included in the transfer deed, since the declaration stood in his name.
He also stated that the deed, exhibit D.2, was signed as witness by one Akkala Naidu, who died years before the present controversy started.
Kuna Appala Naidu later sold the Press to the second appellant and one Sri K. Sriramda, and the second appellant continued in possession as owner.
Pappala Chinna Ramadas continued as the printer, and his declaration as the keeper of the Press also continued.
In 1953, Pappala Chinna Ramadasu left the Press for good.
The Press was leased out by the second appellant to one Appanna, and this leave continued till 1956.
On March 19, 1956, an agreement for leave was executed in favour of the first appellant, and on March 26, 1956, a registered deed was duly 12 executed.
According to the appellants, the Press WAS removed during the day on March 27 and the lease amount was paid on the 28th.
According to them, the second appellant was the owner, in law and in fact, of the Press and the first appellant was the lessee and had removed the Press in the bona fide exercise of his right as lessee.
The appellants examined eight witnesses in support of their case.
The case of the prosecution hinged upon the evidence of Pappala Chinna Ramadasu, when confronted with exhibit D 2, he denied his signature, and stated evasively that he could not identify the signatures of Govindachari and Appala Naidu.
He admitted, however, that Appanna used to look after the Press after 1953, though he said that he used to visit the Press once in two or three months before he sold it to P.W.1, and that the correspondence used to be made in his name.
He also stated that he had purchased the Press from the Madras Type Foundry Co., for RH.
9,107/ but that the bills were lost, and he added that they were taken away along with the Press, when it was removed.
The case of the appellants rested upon the proof of the signature of Pappala Chinna Ramadasu on Es.
D 2 and additionally the proof of the signature of Akkala Naidu, beoause if Akkala Naidu signed the document in 1947 and died some four years before the present controversy started, there would be good reason to think that a document of this character could not be a fabricated one.
The appellants examined a handwriting expert, Sri B. R. Singh (D.W.8).
He stated categorically that Ex.
D 2 bore tho signature of Pappala Chimla Ramadasu.
The signature of Akkala Naidu was proved by his son, Sri Rangam.
He identified the signature of his father not only on that document but also on exhibit D 3, the promissory Dote.
He also stated that h father had died in 1951.
From this material, the Additional District and Sessions Judge, Srikakulam, found that Ex D 2 13 was not a forged document, as was suggested, but was amply proved as genuine by Pappala Chandrudu (D.W 4) and the combined evidence of Sri Rangam (D. W. 3) and Sri B. R. Singh (D. W. 8).
He therefore, held that Pappala Chinna Ramadasu had no right to sell the Pres in 1955 to Boddepalli Lakshminarayana and that his connection with the Press had effectively ceased from.
1953 even as a mere printer.
It is unnecessary to examine whether this finding or the finding given by the Judicial Second Class Magistrate, Srikakulam, who held otherwise, was the correct inference from the. facts.
The learned Judge of the High Court, who heard the appeal against the acquittal, said nothing about exhibit D 2.
According to him, the removal of the Press amounted to theft, even though the appellants removed it under a bona fide claim of right.
In this statement of the law, the learned Judge was, with respect, clearly in error.
This is what the learned Judge observed: "Further, to a charge of theft, the plea that the property was removed under a bona fide claim of right would not avail.
For example a person who bona fide believes that the fountain pen on his neighbour 's desk is his has no right in law to trespass into the neighbour 's house and snatch away the pen without the latter 's content.
" The first of the statements is certainly not the law.
It is settled law that where a bona fide claim of right exists, it can be a good defence to a prosecution for theft.
An act does not amount to theft, unless there be not only no legal right but no appearance or colour of a legal right.
in 2 East .
659, the law was stated a long time ago thus: "If there be in the prisoner any fair pretence of property of right, or if it be brought into doubt at all, the court will direct an acquittal." 14 And according to I Hale P.C. 509, the best evidence is that the goods were taken quite openly.
The law thus stated by East and Hale has not been altered in modern times.
There are numerous cases in which Courts in India have recognised a bone fide claim of right as a defence to the charge of theft.
See Ratanlal law of Crimes 19th Ed.
p. 933.
We are not concerned in this case with the declaration under the Press and Registration of Books Act.
A declared keeper of the Press is not necessarily the owner thereof so as to be able to confer title to the Press upon another.
The ownership of the Press is a matter of the general law and must follow that law.
Whether Pappala Chinna Ramadasu was not only the declared keeper of the Press but also its owner can only be effectively decided by the Civil Court.
For purposes of Criminal law, the evidence prima facie pointed to a transfer of the Press by Pappala Chinna Ramadasu and Govindachari to Kuna Appala Naidu.
The evidence prima facie also established that the appellants had taken possession of the Press under a bona fide claim of right, and that, in our opinion.
was sufficient to dispose of the present case.
The Additional District and Sessions Judge, Srikakulam, had rightly held that the matter was for the decision of the Civil Court, and that this was not a case of theft under the Indian Penal Code, and had rightly directed the acquittal of the appellants.
The learned Judge of the High Court considered the declaration by Pappala Chinna Ramadasu, which continued Unchanged, as sufficient to prove an offence of theft.
In our opinion, in tho circumstances and in the light of the finding given by the District and Sessions Judge with regard to exhibit D 2, it was necessary to go further to see what right Pappala Chinna Ramadasu had to the Press at all.
If this had been considered, the learned Judge would have seen that there was some doubt the right of Pappala Chinna Ramadasu 15 to transfer the Press in 1955 to Boddepalli Lakshminarayana, and further that the defence that the appellants took possession of the Press under a bona.
fide claim of right was a good defence entitling them to an acquittal.
In the result, this appeal must succeed.
The convictions of the appellants and the sentences passed on them are set aside, they are acquitted and their bail bonds shall stand discharged.
The fines, if realised, are ordered to be remitted.
Appeal allowed.

summary:
On a complaint by one L, the Magistrate convicted the two appellants of an offence under section 380 of the Indian Penal Code for having removed a printing press alleged to have belonged to L to whom it was sold in 1955 by one R once a declared keeper of the said press under section 4 of the Press Act, 1867.
The defence was that the Press originally belonged to one G.
In 1947 transferred it to N by exhibit D 2 wherein R joined formally, as declaration of keeper stood in his name.
N sold the Press to the second appellant and another, but R 's name continued as a printer and keeper of the press In 1956 the second appellant leased out the press to the first appellant.
According to the appellants, the second appellant was the owner in law and fact of the press and the first appellant was the lessee and had removed the press in the bonafide exercise of his right as lessee.
The case of the prosecution hinged upon the evidence of R and that of the appellants rested upon the proof of the signature of R on exhibit D 2 which R denied.
The handwriting expert stated categorically that exhibit D 2 bore the signature of R. The Judge of the High Court who heard the appeal against the acquittal order, passed by the Additional District and Sessions Judge, said nothing about exhibit D 2 and considered the declaration of R under section Of the Press Act which continued unchanged, as sufficient to prove an offence of theft.
According to him, the removal of the Press amounted to theft even though the appellants removed it under a bonafide claim of right.
^ Held, that where a bonafide claim of right exists, it can be a Good defence to a prosecution for theft.
An act does not amount to theft, unless there be not only no legal right but no appearance or colour of a legal right.
For the purpose of criminal law on the present case the evidence prima facia pointed to a transfer of the press by R and to N.
The evidence prima facie also established that the appellants had taken possession of the press under a 9 bonafide claim of right and there was some doubt about the right of R to transfer the press to L and further the defence that the appellants took possession of the press under bonafide claim of right was a good defence entitling them to an acquittal.