vil Appeal No. 6202 (NT) of 1983.

From the Judgment and Order dated 3.2.

1981 of the Punjab and Haryana High Court in L.P.A. No. 128of 1981.

Raja Ram Aggarwal, Arvind Minocha, H.K. Singh, S.K. Bagga, S.C. Patel and S.K. Gambhir for the Appellants.

Kapil Sibal, Additional Solicitor General, S.P. Goel, A. Subba Rao, C.V.S. Rao, Mahabir Singh, Bishambher Lal and K.C. Dua for the Respondents.

The Judgment of the Court was delivered by RANGANATHAN, J.

All these appeals and writ petitions raise a common question regarding the interpretation of s 9(1) of the Haryana Sales Tax Act, 1973 (hereinafter re ferred to as 'the Act ').

Counsel state that the facts in all these appeals are identical and that the only facts neces sary (or, atleast, on record before us), on the basis of which the issue us is to be decided, are these: Each of the appellants/ petitioners (hereinafter referred to compendi ously as 'assessees '), is a registered dealer in the State of Haryana.

He purchased certain raw materials in the State without paying tax thereon, in view of the provision con tained in section 24 of the Act.

He then manufactured certain goods in the State with the aid of said raw materials.

He then sold the manufactured goods to dealers who, in turn, exported those goods out of India.

On these facts, it is claimed, the assessee is not liable to pay the purchase tax on the raw materials imposed under section 9(1) of the Act.

This claim has been rejected by the taxing authorities and the High Court and hence these appeals.

The writ petitions have been filed directly in this Court in view of a learned single Judge of the High Court having decided the issue against the assessees as early as 25.11.

1980 in C.W.P. 1227/80, which was also affirmed by a Division Bench later 2.

The Act is a much amended one and Some of its provi sions have been recently amended with retrospective effect from 27th May, 1971 a point of time when actually a prede cessor Act (the Punjab General Sales Tax Act, 1948) had been in force.

The provisions of the statute, relevant for our purpose, and their relevant amendments may be noticed first: 347 1.

Section 2(e) (a) Originally section 2(e) defined 'export ' to mean "the taking out of goods from the State to any place outside it otherwise than by way of sale in the course of inter State trade or commerce.

" (b) Act 44 of 1976, added, at the end of the above definition, the following words w.e.f.

1.4.1976: "or in the course of export out of the territory of India.

Section 2(p) (a) section 2(p) defined the expression 'turnover ' as includ ing "the aggregate of the amounts of the sales and purchases . . made by any dealer" in any capacity during a given period.

Explanation 2 to the second defini tion provided: "(2) The proceeds of the sale of any goods on the purchase of which tax is leviable under this Act or the purchase value of any goods on the sales of which tax is leviable under this Act, shall not be included in the turnover, but the purchase value of the goods liable to tax under section 9 shall be included.

" (b) Act 13 of 1989 amended the Explanation by inserting, in it, after the words "section 9", the words "or section 24".

(c) Act 1 of 1990 has amended the above Explanation retrospectively to say that the words "but the purchase value of the goods liable to tax under section 9 or section 24 shall be included" shall be omitted and shall be deemed always to have been omitted with effect from 27.5.

So we have to proceed on the basis that the underlined words never were there in el.

(p) of section 2.

The 1990 Act also inserted an Explanation 6 to the clause w.e.f. 31.3.

1983 which reads: "(6) The purchase of barley or of goods used in the manufac ture of guar gum, scientific goods, utensils and metal handicrafts shall not form part of the turnover of a dealer for the period he is entitled to purchase the goods on the authority of his certificate of registration without payment of sales tax under section 24, provided these are used exclusively for the specified purposes.

" 348 111.

Section 6 Section 6, the charging section, read as under: "6.

Incidence of taxation (1) Subject to other provisions of this Act, every dealer whose gross turnover during the year immediately preceding the commencement of this Act exceeded the taxable quantum, Defined in section 7, shall be liable to pay tax under this Act on all sales and purchases effected after the coming into force of this Act.

Provided that this section shall not apply to a dealer who deals exclusively in goods specified in Schedule B. Goods on which no tax is leviable: section 6 read with section 15.

(2) Every dealer to whom sub section (1) does not apply shall, subject to other provisions of this Act, be liable to pay tax under this Act on the expiry of thirty days after the date on which his gross turnover during any year first exceeds the taxable quantum; Provided that this sub section shall not apply to a dealer who deals exclusively in goods specified in Schedule B. Provided further that . .

XXX XXX XXX Explanation For the purposes of sub section (1) and (2) "purchased" shall mean the purchase of declared (As defined in section 2(c) of the ) goods speci fied in Schedule C and goods falling under section 9.

(b) section 6 was amended by Act I of 1990 to read as follows with retrospective effect from 27.5.

1971: "section 6 Incidence of taxation (1) Every dealer whose gross turnover during the year immediately preceding the coming into force of the provisions of this section exceeded the taxable quantum shall be liable to pay tax on all sales and purchases effected after the coming into force of the provi sions of this section.

349 Provided that this sub section shall not apply to a dealer who deals exclusively in goods specified in Schedule B. (2) Every dealer to whom sub section (1) does not apply shall be liable to pay tax on all sales and purchases effected on the expiry of thirty days after the date on which his gross turnover during any year first exceeds the taxable quantum.

Provided that this sub section shall not apply to a dealer who deals exclusively in goods specified in Schedule B: Provided further that . .

XXX XXX XXX The earlier Explanation, however, is omitted with the same retrospective effect.

Section 9 (a) section 9(1) has undergone several amendments: by Act 44 of of of of of 1986 and Act 1 of of 1990 has also an impact, as we shall indicate later.

The section originally read thus: "section 9 Liability to pay purchase tax Where a dealer pur chases goods other than those specified in the Schedule B from any source in the State and (a) uses them in the State in the manufacture of (i) goods specified in Schedule B; or (ii) any other goods and disposes of the manufac tured goods in any manner otherwise than by way of sale whether within the State or in the course of inter State trade or commerce or in the course of export out of the territory of India; 350 (b) exports them in the circumstances in which no tax is payable under any other provision of this Act, there shall be levied, subject to the provisions of section 17, a tax on the purchase of such goods at such rate as may be notified under section 15.

" (b) Act 44 of 1976 made two amendments to this sub section.

The first amendment was to insert, after the open ing words, "where a dealer", the words "liable to pay tax under this Act".

The second amendment, which is crucial for the purposes of this case, is the addition at the end of sub clause (ii) of clause (a) above, the words: "within the meaning of sub section (1) of section 5 of the .

" These amendments were effective from 1.4.1976.

(c) Act 11 of 1979 redrafted the above provision, ex cluded milk from clause (b) and added clause (c).

After this amendment, effective from 9.4.1979, the provision read thus: "9(1) Where a dealer liable to pay tax under this Act, (a) purchases goods, other than those specified in Schedule B, from any source in the State and uses them in the State in the manufacture of goods specified in Schedule B; or (b) purchases goods, other than those specified in Schedule B except milk, from any source in the State and uses them in the State in the manufacture of any other goods and disposes of the manufactured goods in any manner otherwise than by way of sale whether within the State or in the course of inter State trade or commerce or in the course of export out of the territory of India within the meaning of sub section (1) of section 5 of the ; or (c) purchases goods, other than those specified in Schedule B, from any source in the State and exports them, in the circumstances in which no tax is payable under any 351 other provision of this Act, there shall be levied, subject to the provisions of section 17, a tax on the purchase of such goods at such rate as may be notified under section 15." (d) A doubt had arisen whether the words "disposes of" used in clause (a)(ii) later, clause (b) above was compre hensive enough to include cases of despatches by a dealer of the manufactured goods otherwise than by way of sale as, for example, by way of stock transfer.

The State Government had issued a notification dated 19.7.74 (even before the 1976 amendment) clarifying the position with an answer to the question in the affirmative but this notification as well as the interpretation favoured by it were quashed by a decision of the High Court reported as Goodyear India Ltd. vs State, [1982] 53 STC 163.

This led to the amendment of section 9(1) by Act 3 of 1983.

This amendment substituted a new clause (b) for the earlier one w.e.f.

27.5.71,inserted a new clause (bb) w.e.f.

9.4.79 and added a proviso.

Actually clauses (b) and (bb) are identical, except that the latter excludes milk from Its purview w.e.f. 9.4.79.

However, to avoid confusion both the clauses may be set out here: (b) purchases goods, other than those specified in Schedule B, from any source in the State and uses them in the State in the manufacture of any other goods and either disposes of the manufactured goods in any manner otherwise than by way of sale in the State or despatches the manufactured goods to a place outside the State in any manner otherwise than by way of sale in the course of inter State trade or commerce or in the course of export outside the territory of India within the meaning of subsection (1) of section 5 of the Central Sales Tax Act, 1956;or; (bb) purchases goods, other than those specified in Schedule B except milk, from any source in the State and uses them in the State in the manufacture of any other goods and either disposes of the manufactured goods in any manner otherwise than by way of sale in the State or despatches the manufac tured goods to a place outside the State in any manner otherwise than by way of sale in the course of inter State trade or commerce or in the course of export outside the territory of India within the meaning of sub section (1) of section 5 of the ; or".

352 The proviso added was in the following terms: "Provided that no tax shall be leviable under this section on scientific goods and guar gum, manufactured in the State and sold by him in the course of export outside the territo ry of India within the meaning of sub section (3) of section 5 of the ." (e) Act 11 of 1984 effected no material change.

The exclusion of milk was decided to be dropped and so all that this amendment did was to roll both clauses (b) and (bb) into one clause, reading thus: "4.

Amendment of section 9 of Haryana Act 20 of 197.3 For clauses (b) and (bb) of sub section (1) of section 9 of the principal Act, the following clause shall be substituted, namely: "(b) purchases goods, other than those specified in Schedule B. from any source in the State and uses them in the State in the manufacture of any other goods and either disposes of the manufactured goods in any manner otherwise than by way of sale in the State or dispatches the manufactured goods to a place outside the State in any manner otherwise than by way of sale in the course of inter State trade or commerce or in the course of export outside the territory of India within the meaning of subsection (1) of section 5 of the Central Sales Tax Act, 1956;or.

(f) Amendment Act 8 of 1986 substituted, in the proviso to section 9( 1 ), the words "scientific goods, guar gum, uten sils and handicrafts" in place of "scientific goods and guar gum" w.e.f. 26.2.86.

The amendment to section 9(1) by Act 16 of 1986 is not relevant for our purposes and we pass on to the two relevant amendments effected by Act 1 of 1988.

The first was to change the marginal heading of the section to read thus: "9(1) Liability to pay tax on purchase value of goods".

The second was to omit the words "sub section (1) of" at the end of clause (b).

The relevant part of clause (b), as thus amended, will, therefore, read: "despatches the manufactured goods to a place outside the State in any manner otherwise than by way of sale . . in 353 the course of export outside the territory of India within the meaning of section 5 of the ;" These amendments became effective from 31.12.

V. Section 24 section 24 is the next section relevant for our purposes.

After its amendment by Act 44 of 1976, it read thus, w.e.f. 28.11.76: "24.

Rights of registered dealer Every dealer registered under this Act shall be entitled to purchase, without pay ment of sales tax, the following goods within the State, on the authority of his certificate of registration by giving to the dealer, from whom the goods are purchased, a declara tion, duly filled and signed by him, containing such partic ulars, on such form, obtained from such authority, as may be prescribed, and in case such form is not available with such authority, in such manner as may be prescribed, (a) any goods, other than those leviable to tax at first stage of sale under section 17 or section 13, for the purpose of (i) resale in the State; or (ii) sale in the course of inter State trade or commerce; (b) containers and packing materials and other goods (excluding those liable to tax at the first stage of sale under section 17 or section 18), specified in his certificate of registration for use by him in the manufac ture, in the State, of any goods other than those specified in Schedule B, for the purpose of (i) sale in the State; or (ii) sale in the course of inter State trade or commerce; or (iii) sale in the course of export out of the territory of 354 India within the meaning of sub section (1) of section 5 of the .

" (b) Act 3 of 1983 renumbered the above as section 24(1) and added, with effect from 31.3.83, a proviso each, to clauses (a) and (b).

These provisions read thus.

The proviso to clause (a) was: "Provided that a dealer registered under this Act, shall also be entitled to purchase barley, without payment of sales tax on the authority of his certificate of registra tion, on furnishing to the selling registered dealer, a declaration referred to above, for sale by him in the course of export outside the territory of India within the meaning of section 5 of the ." and that to clause (b) read: "Provided that a dealer registered under this Act, shall also be entitled to purchase, without payment of sales tax, on the authority of his certificate of registration, goods mentioned in clause (b) above, on furnishing to the selling registered dealer a declaration referred to above, for use by him in the manufacture, in the State, of scientific goods and guar gum for the purpose of sale by him in the course of export outside the territory of India within the meaning of sub section (3) of section 5 of the ." It also inserted, with retrospective effect from 1.4.76, the following sub section. "(2) Notwithstanding anything contained in form S.T. 15 or the certificate of registration issued under this Act or the Rules made thereunder, no dealer shall be entitled to claim the right envisaged in sub section (1) so renumbered, for the period from the first day of April, 1976, to the third day of September, 1979 in contravention of the provisions of sub section (1) so renumbered." The Act also contained a section (section 8) validating the notification issued under section 9 read with section 15 and also validating all levy, assessment and collection of taxes under section 9 notwithstanding any judgment, decree or order of any court or other authority.

355 (c) Act 11 of 1984 changed the marginal heading of the section as "Rights and liabilities of registered dealers".

It added a clause (c) to sub section (1) relating to use of the goods in the execution of works contract in the State, with which we are not concerned.

However, it added a new sub section (3) with retrospective effect from 27.5.

1971, to the following effect: "(3) Notwithstanding any other provisions of this Act or any judgment decree or order of any court or other authority to the contrary, if a dealer who purchases goods, without payment of tax, under sub section (1) and fails to use the goods so purchased for the purposes specified therein, he shall be liable to pay tax, on the purchase value of such goods, at the rates notified under section 15, without prejudice to the provisions of section 50; Provided that the tax shall not be levied where tax is payable on such goods under any other provision of this Act.

" (d) An amendment of 1986 expanded the proviso to section 24(I)(b) by adding "utensils and metal handicrafts" to "scientific goods and guar gum", as in section 9(1) proviso.

(e) Act 1 of 1988, affecting from 31.12.1987, omitted the words "sub section (1) of" in section 24(I)(b)(ii).

It also omitted the proviso to the said clause.

Section 27 Section 27, which defines "taxable turnover" is not quite relevant for our purposes.

We should only like to mention that the provisoes to section 27(a)(iV), section 27(b)(iii) and section 27(c)(ii) inserted by Act 44 of 1976 w.e.f. 1.4.76 all make specific reference to sales "in the course of export out of the territory of India within the meaning of sub section (1) of section 5 of the ".

The provisoes to section 27(a)(iv), in particular, make a clear contrast between sales falling under sub section (3) and those failing under sub section (1) of section 5 of the C.S.T. Act.

Validation provision Act 1 of 1990 effected no amendments to section 24 or 27.

But section 14 of 356 this Act (which is a validation section on the same lines as those contained in the earlier amendment Acts) has been referred to in the course of the arguments before us and can be usefully extracted.

It reads: "14.

Notwithstanding any judgment, decree or order of any court or tribunal or other authority to the contrary, any levy, assessment, re assessment or collection of any amount by way of tax made or purporting to have been made and any action taken or things done or purporting to have been taken or done before the commencement of the Haryana General Sales Tax (Amendment and Validation) Act, 1990, in relation to such levy, assessment, re assessment or collection made under the provisions of section 9 or subsection (3) of secton 24 of this Act shall be deemed to be as valid and effective as if such levy, assessment, re assessment or collection had been made or action taken or things done under the provisions of clause (p) of section 2, section 6, section 15 A, section 17, section 27 and Schedule D appended to this Act and as amended by the provisions of the Haryana General Sales Tax (Amendment and Validation) Act, 1990 and shall not be called in question in any court or tribunal or other authority and accordingly (i) all acts, proceedings or things done or action taken by the State Government or by any officer of the State Government or by any authority, in connection with the levy, assessment, re assessment or collection of such a tax shall, for all purposes be deemed to be, and to have always been done or taken in accordance with law; (ii) no suit or other proceedings shall be main tained or continued in any court or before any authority for the refund of any such tax so collected; and (iii) no court or authority shall enforce a decree or order directing the refund of any such tax so collected.

These, then, are the relevant provisions of the Act.

Before turning to the question posed for our considera tion, it is necessary to refer to section 5(1) of the .

Thus sub section read as follows: 357 "5.

When is a sale or purchase of goods said to take place in the course of import or export (1) A sale or purchase of goods shah be deemed to take place in the course of the export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India.

" This sub section came up for the consideration of this Court in Mohammed Sirajuddin vs State, [1975] Supp. 1 S.C.R. 169.

In that case the appellant 's goods were exported out of India.

The course of the transaction was that the appellant sold goods to the State Trading Corporation (S.T.C.) but, to the knowledge of both these parties, the goods were to be exported to fulfill contracts entered into by the S.T.C. with foreign buyers, the terms of such contracts between the foreign buyers and the S.T.C. being referred to in, and part of, the appellant 's contracts with the S.T.C.

The apppellant claimed its sales to be "sales in the course of export" and hence exempt under section 5 of the C.S.T. Act.

This Court, Khanna, J. dissenting, held that the sales of the appellant were not exempt u/s 5(1).

The appellant had agreed to sell his goods only to the S.T.C. and there was no provity of contract between him and the foreign buyer.

The court held that the movement of goods outside India was occasioned by the contract between the S.T.C. and the foreign buyer and not by that between the appellant and the S.T.C.

The deci sion caused several practical difficulties and called for an amendment of the C.S.T. Act.

The object and reasons of the C.S.T. (Amendment) Act (Act 103 of 1976), may be usefully extracted.

It said: "According to section 5(1) of the , a sale or purchase of goods can qualify as a sale in the course of export of the goods out of the territory of India only if the sale or purchase has occasioned such export or is by a transfer of documents of title to the goods after gods have crossed the customs frontiers of India.

The Su preme Court had held (vide: Mohd. Serajuddin vs State of Orissa, 36 S.T.C. 136 that the sale by an Indian exporter from India to a foreign importer alone qualifies 'as a sale which has occasioned the export of the goods.

According to the Export Control Orders, exports of certain goods can be made only by specified agencies such as the State Trading Corporation.

In other cases also, manufacturers of goods, particularly in the small scale and medium sectors, have to 358 depend on some experienced export house for exporting the goods because special expertise is needed for carrying on export trade.

A sale of goods made to an export canalising agency such as the State Trading Corporation or to an export house to enable such agency or export house to export those goods in compliance with an existing contract or order is inextricably connected with the export of the goods.

Fur ther, if such sales do not qualify as sales in the course of export, they would be liable to State sales tax and there would be a corresponding increase in the price of the goods.

This would make our exports incompetitive in the fiercely competitive markets.

It is, therefore, proposed to amend, with effect from the beginning of the current financial year, section 5 of the to provide that the last sale or purchase of any goods preceding the sale or purchase occasioning export of those goods out of the terri tory of India shall also be deemed to be in the course of such export if such last sale or purchase took place after and was for the purpose of complying with the agreement or order for, or in relation to, such export." section 5(3), inserted by the above Amendment Act w.e.f. 1.4.1976, reads thus: "(3) Notwithstanding anything contained in sub section (1), the last sale or purchase of any goods preceding the sale or purchase occasioning the export of those goods out of the territory of India shall also be deemed to be in the course of such export, if such last sale or purchase ' took place after, and was for the purpose of complying with, the ' agreement or order for or in relation to such export." Now, coming to the facts of the present case, the asses sees purchased raw materials inside the State of Haryana but paid no tax thereon, as they were registered dealers and furnished the declaration forms prescribed under section 24.

Their sales of the manufactured goods are to persons who have exported the goods outside India and so, they claim, they are not liable to pay the tax sought to be imposed on them under section 9(1).

The department, however, has denied the relief on the short ground that the sales effected by the appellants are not sales in the course of export outside India within the meaning of section 5(I) of the C.S.T. Act.

They are only "penultimate" sales; they may be deemd to be 'e xport sales ' because of the fiction created under section 5(3) of the 359 C.S.T. Act but that is not enough to escape from the Clutch es of the charge in section 9(1).

Sri Rajaram Agarwal, learned counsel for the assessees, contended that the effect of section 5(3) of the C.S.T. Act is to expand the scope of section 5(1) and include within the concept of sales in the course of export outside India also the 'penultimate ' sales dealt with in Mohd. Sirafuddin 's case (supra), A reference to, and the meaning of, section 5(1) cannot be understood without a reference to section 5(3).

As a result of section 5(3), such penultimate sales become export sales falling beyond the purview and competence of State legislatures.

The provisions in section 9(1) of the Act need to be interpreted harmoniously and consistently with the con stitutional scheme.

section 9(1) is a charging section.

Purchases of raw materials in the State used in the manufacture of goods inside the State attract the tax under section 9(1) unless those manufactured goods are dealt with in one of three ways: (1) disposed of by way of sale inside the State; (2) despatched to a place outside the State but by way of a sale in the course of inter State trade or commerce; or (3) despatched to a place outside the State but by way of sale in the course of export outside the territory of India.

He submitted that the transactions in the present case fail under category (3) above.

In the alternative, he submitted that, clearly, as the assessees had sold goods to other parties in India, those sales must be either local sales falling under category (1) or inter State sales failing under category (2).

In any view of the matter, therefore, the assessee 's purchases of raw materials would not attract tax under section 9(1).

On the other hand, Sri Gupta, learned counsel for the State.

submitted that there were no facts on record to substantiate the claim on behalf of the assessee that the sales in question fulfilled the conditions set out in section 5(3) of the C.S.T. Act, as claimed.

He submitted that even if the claim were to be accepted, the assessees would be in no better position.

He fully supported the reasoning of the High Court and urged that full effect should be given to the words "within the meaning of sub section (I) of section 5" which found a place in section 9(1)(b) till they were dropped by Act 1 of 1988.

If due regard be given to these words, he pointed out, the assessees would be entitled to an exemption from the impugned purchase tax only if their sales 360 were export sales within the meaning of section 5(1) of the C.S.T. Act which they, admittedly were not.

He submitted that the argument that, to levy the tax imposed by section 9(1) in cases covered by section 5(3) but not section 5(1) of the C.S.T. Act would violate Article 286 of the Constitution.

was misplaced and overlooks the vital circumstances that what section 9(1)(b) taxes are the purchases of raw materials and not the manufactured goods that were eventually exported.

Alterna tively, he submits, section 9(1)(b) has been declared unconstitu tional by this Court in the Goodyear case ; and, therefore,, the assessees can seek no implied exemption from its language.

If section 9 is left out, he says, the lan guage of section 6 (as amended) which brings to charge all pur chases and sales in the State would be attracted and so the impugned taxation of the purchases would be in order.

For these reasons, he submits that the writ petitions were rightly rejected by the.

High Court and that the appeals as well as writ petitions before us deserve to be dismissed.

It will be convenient first to dispose of the contention dealt with by the High Court.

For the purposes of this argument we shall assume that the sales made by the asses sees were 'penultimate sales ' which would fall within the purview of section 5(3) of the C.S.T. Act.

The argument on behalf of the Revenue, which has found favour with the High Court is that section 9(1) exempts only sales made in the course of export within the meaning of section 5(1) of the C.S.T. Act but not those under section 5(3) of the said Act.

After careful consideration we think that this argument was rightly accepted by the High Court.

In the first place there is no dispute before us that section 5(3) covers a category of cases which would not otherwise have come within the purview of section 5(1), as explained in Mohd. Sirajuddin 's case.

The language of section 9(1)(a)(ii) later 9(1)(b) using the words "within the meaning of sub section (1) of section 5 of the " have to be given full meaning; in other words, the exemption under section 9(1) has to be restricted only to export sales falling within the scope of section 5(1).

It seems clear, from the circumstances referred to below, that the legisla ture deliberately used these words and intended to give a restricted operation to section 9(1)(a)(ii)(b).

These cir cumstances are: (1) Section 9(1)(a)(ii), as originally framed, merely uses the words "in the course of export outside the territo ry of India".

Clause 9(1)(b) referred to cases where raw materials were purchased and exported and the word 'export ' was defined in section 2(c) as meaning "the taking out of the goods from the 361 State to any place outside it otherwise than by way of sale in the course of inter State trade or commerce." Act 44 of 1976 amended the definition of 'export ' in section 2(c) by adding the wide words "or in the course of export out of the territory 01 ' India" w.e.f. 1.4.

But the same Act narrowed down the scope of clause (a)(ii) by adding the restrictive words at the end of the clause.

(2) If a reference is made to section 24, one finds that section 24(1)(iii) refers again to sub section (1) of section 5 of the only.

However, the language of the two provisoes simultaneously introduced in section 24(1)(a) and (b) by Act 3 of 1983 makes interesting reading.

The proviso to clause (a) refers only to "sale by him in the course of export outside the territory of India within the meaning of section 5 of the ", whereas the proviso to clause (b) refers to "sale by him in the course of export outside the territory of India within the meaning of sub section 3 of section 5 of the ".

Thus the statute, within the same provision, has made a distinction between a sale in the course of export within the meaning of section 5 and such a sale within the ' meaning of section 5(3).

(3) When we turn to section 27 next, we find two provisoes introduced in section 27(1)(iv)(a) by Act 44 of 1976, the same amending Act that introduced the extra words at the end of section 9(1)(a)(ii).

These provisoes make a marked contrast between sates failing under sub sections (1) and those falling under subsection (3) of section 5 of the C.S.T. Act.

(4) As will be seen from the extract of the legisla tive amendments set out earlier the legislature has subse quently deleted the reference to sub section 3 of section 5 in section 9(1)(b).

However, this amendment, which has been made both in section 9 and in section 24 by Act 1 of 1988 has not been given any retrospective effect.

Considering that the legislation is replete with instances of retrospec tive effect (in some cases even to as early as a date as 7.9.1955), the failure or omission to give any retrospective effect to the amendment to section 9 in this regard is an eloquent pointer to the intention of the legislature.

In view of the circumstances outlined above, we are of the opinion that the High Court was right in concluding that the assessee 362 was not entitled to the exemption under section 9because the sales made by him were not sates in the course of export outside the territory of India within the meaning of section 5(1) of the .

Shri Rajaram Agarwal, learned counsel for the assessees raised a new contention before us, which we have already referred to as an alternative contention.

This contention which really seems to be unanswerable appears to have been missed at the stage of the High Court but this contention is purely one of law and merits consideration.

The point made by him was this.

There is no dispute that the assessees have transferred the manufactured goods by way of sale and that these goods have been despatched to various ports of India.

The exact terms of despatch are not clear and there are no facts on record which will help us to understand the course of transactions in the several cases before us.

But Shri Agarwal submitted that the sales made by the assessees can only fall within one of three categories.

They are either local sales or inter State sales or export sales.

Each of the assessee have sold its goods to another dealer, If that dealer is also a resident of Haryana and has taken delivery of the goods in Haryana and exported them thereafter, the assessees ' sales would be local sales.

If the purchaser dealer of the manufactured goods is in some other State and the goods have been moved out of Haryana in pursuance of that sale, they would be inter State sales.

The goods which have been sold by the assessee must have been delivered to the dealer in pursuance of the sale either within the State or outside the State in India.

In either event, it would be a sale covered by the exceptions in section 9(1).

It would be a local sale or inter State sale.

The only third possi bility is that assessee sold the goods to a dealer outside India and exported the goods in pursuance of that sale in which event it would be a sale within the meaning of section 5(1) of the .

We think Shri Agarwal is right in saying that any sale effected by the assessees in the circumstances, which have been set out by us earlier, must fall in one of three cate gories.

We are unable to conceive of a fourth category of sale, which could be neither a local sale nor an inter State sale nor an export sale.

Shri Gupta, on behalf of the State, contended that the goods might have been directly moved by the assessee to a port for shipment abroad in pursuance of an export contract entered into by the dealer who purchased from the assessee.

Even in such a case if the transport of goods from the assessee 's place of business to the port is in pursuance of the terms of the sale, the movement of the goods would be occasioned by the sale made by the assessee and would be an inter State sale.

If, on the other hand, the goods were sent 363 to the port by the assessee subsequent to and independent of the sale made by him, then, for the purpose of that trans port, the assessee.

would only be an agent of the purchaser and the movement of the goods in pursuance of the contract of sale entered into by the purchaser and would be one in the course of export within the meaning of section 5(1) of the C.S.T. Act.

As pointed out by Sri Agarwal, even in Mohd. Sirajuddin 's case (supra), although the exemption claimed for the sales as export sales was denied, the conclusion of the High Court that the sales to S.T.C. were inter State sales chargeable under section 5(1) of the C.S.T. Act was upheld.

We are, therefore, of the opinion that this alternative contention urged by the learned counsel for the assessee has to be accepted and it has to be held that, since the sales effected by the assessees fall within one of the three exempted categories set out in section 9(1)(b), there can be no levy of purchase tax under section 9(1) of the Act.

Faced with this situation, Shri Gupta, for the State, contended that this argument will not avail the assessees as, according to him, section 9(1)(b) of the Act has been de clared unconstitutional by this Court and is, therefore, non est.

It is somewhat curious that such contention should come from the department which has charged the assessees on the basis of section 9(1)(b).

Nevertheless, we proceed to consider this contention, as Sri Gupta says he can support the as sessments, alternatively, under section 6 of the Act, without any aid from section 9 at all.

This contention, it seems to us, proceeds on a misconception of the issue before, and the ratio of the decision of this Court in the Goodyear case ; That was a case in which certain dealers, having purchased raw materials and manufactured goods inside the State despatched those goods outside the State otherwise than by way of sale.

The State levied a purchase tax on the raw materials u/s 9(1).

Thereupon the assessee contended that the levy of tax in the circumstances was in truth and substance the levy of a tax on the manufactured goods on the event of their consignment outside the State otherwise then by way of sale and that the State legislature was not compe tent to levy such a tax.

This contention was accepted by this Court.

What was declared unconstitutional by this Court was, therefore, only the levy of a tax where raw materials are purchased and used inside the State for the manufacture of finished goods which are then simply and without any sale despatched rather, consigned outside the State.

There is, however, nothing unconstitutional about the two other consequences that flow on the language of the clause: one express and the other implied; one in favour of the Revenue and the other in favour of the assessee viz. 364 (1) that there will be a tax on the purchase of the raw materials if the manufactured goods are disposed of in the State itself otherwise than by way of sale; and (2) that there will be no tax on the purchase of the raw materials if the manufactured goods are despatched from the State consequent on a (i) local sale; (ii) inter State sale; or (iii) a sale in the course of export.

It seems that these two aspects of section 9(1)(b) survive even after the judgment of this Court in the Goodyear case ; Shri Gupta, however, drew our attention to certain sentences in the headnote as well as the body of the above decision where certain wider expressions have been used, such as :"s. 9(1)(b) was ultra vires" "section 9(1) and 24(3) are constitutionally invalid" "section 9(1)(c) is ultra vires" and" . . the latter part of section 9(1)(b) is ultra vires and void".

As pointed out above, section 9(1) is both a charging and exempting section.

Even after the decision the charge under a part of clause (b) still survives and so also the exemption provided in the latter part of clause (b).

But let us examine what the position would be if we hold, as con tended by Shri Gupta, that the effect of the decision is that the words "or despatches the manufactured goods to a place outside the State in any manner otherwise than by way of sale in the course of inter State trade or commerce or in the course of export outside the territory of India within the meaning of sub section (1) of section 5 of the Central Sales tax Act, 1956" in section 9(1)(b) should be deemed to have been deleted from the statute.

Shri Gupta contends that, if section 9(1) is left out of account for this reason, the pur chases of raw materials by the assessee would be liable to tax under section 6 of the Act.

This argument will now be consid ered.

The contention of Shri Gupta on this aspect proceeds thus: section 6, which is the charging section, both originally and after its retrospective amendment in 1990, imposes a tax on all sales and purchases effected by a dealer.

In the original section, there was an Explanation which restricted the meaning of purchases for the purposes of the section.

It provided that only purchases of declared goods, goods speci fied in 365 Schedule C and goods falling under section 9 would be part of the 'turnover '.

In other words purchases which did not fall under section 9 i.e. which could not be taxed under section 9, could not be taxed then under section 6 either.

But the 1990 amendment has omitted this Explanation retrospectively.

The result is that all purchases are now taxable in the State.

This contention is an interesting one but it overlooks the effect of section 2(p) read with section 15 of the Act.

Though section 6, as amended, purports to make dealers liable to pay tax on their sales as well as purchases, the actual charge of tax, under section 15, is only imposed on the sales and purchases that form part of his taxable turnover.

To ascertain what this one has to turn to section 2(p) of the Act.

This definition includes, within the definition of 'turnover ' the purchase value of goods liable to tax under section 9 but, the goods presently in question are not laible to tax under section 9, not only as contended for the assessees and held by us above but also on the hypothesis as to the invalidity of section 9(1)(b) on which the present argument on behalf of the Revenue pro ceeds.

The, definition also excludes from its purview "the sale proceeds of goods on which purchase tax is leviable under this Act" and "the purchase value of any goods on the sales of which tax is leviable under this Act".

There can be no dispute that a tax is leviable under the Act on the goods in question when they are sold by a dealer and, indeed, the assessees would have had to pay tax on the sales made to the purchases effected by them but for a claim for exemption under section 24.

The definition of 'turnover ' clearly postulates that goods are either to be taxed at the point of purchase or sale and the same transaction cannot be taxed as a sale in the hands of the dealer who sells to the assessees and as a purchase in the hands of the assessees.

The only exception was the limited class of goods covered by section 9 but even this exception has been left out with complete retro spective effect.

We do not, therefore, think that Sri Gupta is right in arguing that the purchase tax on the raw materi als can be upheld under section 6 itself even if the charge under section 9 fails.

Explanation 6, inserted in section 2(p) read, with the provisoes inserted in section 24(1) w.e.f.

31.3.1983 and their amendment in 1986 have also a bearing in the cases of raw materials purchased for manufacture of guar gum and utensils where the purchase is exempt even if purchased by a registered dealer for the purpose of export within the meaning of section 5(3) of the C.S.T. Act, 1956 and some of the assessees before us are such manufacturers out we leave these amendments out of account as they are relevant only for purposes of later assessment years.

The raw materials purchased by the assessees are goods on the sales of which tax is leviable under the Act though the assessees are 366 exempt from payment of such tax by reason of section 24(1).

The value of the purchases cannot, therefore, be included Within the definition of "turnover" and, consequently, section 6 will not come to the aid of the Revenue to support the levy of the impugned sales.

We may also make a reference to sub section (3) of s, 24, inserted with retrospective effect from 27.5.1971, which taxes the purchase of raw materials, when the dealer who purchases them had claimed exemption under section 24(1) but is found not to have used the goods for the purposes speci fied therein i.e. for the manufacture of goods for the purpose of (a) local sale; (b) inter State sale; or (c) sale in the course of export outside the territory of India within the meaning of sub section (1) of section 5 of the C.S.T. Act.

This provision will not help the Revenue for two reasons: (i) As held earlier, while discussing the alternative con tention of Shri Agarwal,sales in the course of export within the meaning of section 5(1) of the C.S.T. Act, 1956.

It may be pointed out that, after Act I of 1988, this provision does not tax purchases even in cases where the manufactured goods are disposed of only by way of 'penultimate sales falling under section 5(3) but not under section 5(1) of the C.S.T. Act, 1956, but this amendment came later and will have to be left out of account for the purpose of these cases; (ii) This provi sion has been held to be ultra vires in the Goodyear case (supra).

We have, therefore, reached the conclusion that the purchases of raw materials by the assessees are not charge able to tax either u/s 9(1) or section 6 or section 24(3).

The appeals and petitions are, therefore, allowed.

The relevant assess ments to tax will be computed/modified accordingly.

We, however, make no order regarding costs.

R.S.S. Appeals & Petitions allowed.

Summary: Each of the appellants/petitioners is a registered dealer in the State of Haryana.

Summary: He purchased certain raw materials in the State without paying purchase tax thereon, in view of the provision contained in section 24 of the Haryana Sales Tax Act, 1973.

Summary: He manufactured certain goods in the State with the aid of the said raw materials.

Summary: He then sold the manufactured goods to dealers who, in turn, export ed those goods out of India.

Summary: On these facts the assessee claimed that he was not liable to pay the purchase tax on the raw materials, imposed under section 9(1) of the Sales Tax Act.

Summary: The Department denied the relief on the short ground that the sales effected by the appellants were not sales in the course of export outside India within the meaning of section 5(1) of the .

Summary: Ac cording to the Department, they were only "penultimate" sales, which may be deemed to be 'export sales ' because of the fiction created under section 5(3) of the C.S. Act 1956, but that was not enough to escape from the clutches of the charge in section 9(1).

Summary: Accordingly, the claim of the asses see was rejected by the taxing authorities.

Summary: The High Court also rejected the assessee 's petition.

Summary: Before this Court, it was contended on behalf of the assessees that the effect of section 5(3) of the C.S.T. Act was to expand the scope of section 5(1) and include within the concept of sales in the course of export outside India also the 'penultimate ' sales; that a reference to, and the meaning of, section 5(1) could not be understood without a reference to section 5(3); and that as a result of section 5(3), such penultimate sales became export sales falling beyond the purview and competence of State legislature.

Summary: It was further submitted that purchases of 344 raw material used in the manufacture of goods inside the State attracted the tax under section 9(1) unless those manufactured goods were dealt with in one of three ways; (1) disposed of by way of sale inside the State; (2) despatched to a place outside the State but by way of a sale in the course of inter State trade or commerce; or (3) despatched to a place outside the State but by way of sale in the course of export outside the territory of India.

Summary: In the alternative, it was contended that as the asses see had sold goods to other parties in India, those sales must be either local sales or inter state sales; and that in any view of the matter, it would be a sale covered by the exceptions in section 9(1), and the assessee 's purchases of raw material would not attract tax under section 9(1).

Summary: On the other hand, on behalf of the State it was, inter alia contended that there were no facts on record to sub stantiate the claim on behalf of the assessee that the sales in question fulfilled the conditions set out in section 5(3) of the C.S.T. Act.

Summary: It was submitted that the assessees would be entitled to an exemption from the impugned purchase tax only if their sales were export Sales within the meaning of section 5(1) of the C.S.T. Act, which they admittedly were not.

Summary: Alternatively, it was submitted that section 9(1)(b) had been declared unconstitutional by this Court in the Goodyear case ; and the assessee could seek no implied exemption from its language.

Summary: Therefore, if section 9 was left out, the language of section 6 ( as amended) which brought to charge all purchases and sales in the State would be attracted and so the impugned taxation of purchases would be in order.

Summary: Allowing the appeals and the petitions, this Court, HELD: (1) The language of section 9(1)(a)(ii) later section 9(1) (b) using the words "within the meaning of sub section (1) of section 5 of the " have to be given full meaning; in other words, the exemption under section 9(1) has to be restricted only to export sales failing within the scope of section 5(1).

Summary: [360F G] Mohammed Sirajuddin vs State, [1975] Supp. 1 SCR 169, re ferred to.

Summary: (2) The language of the two provisions simultaneously introduced in section 24(1)(a) and (b) makes interesting reading.

Summary: The proviso to 345 clause (a) refers only to "sale by him in the course of export outside the territory of India within the meaning of section 5 of the " whereas the proviso to clause (b) refers to "sale by him in the course of export outside the territory of India within the meaning of sub section (3) of section 5 of the ".

Summary: Thus, the statute, within the same provision, has made a distinction between a sale in the course of export within the meaning of section 5 and such a sale within the meaning of section 5(3).

Summary: [361C D] (3) The High Court was right in concluding that the assessee was not entitled to the exemption under section 9 because the sales made by him were not sales in the course of export outside the territory of India within the meaning of section 5(1) of the .

Summary: [362A] (4) What was declared unconstitutional by this Court when it declared section 9(1)(b) of the Act unconstitutional in Goodyear case was only the levy of a tax where raw mate rials were purchased and used inside the State for the manufacture of finished goods which were then simply and without any sale despatched rather, consigned outside the State.

Summary: There is, however, nothing unconstitutional about the two other consequences that flow on the language of the clause: one express and the other implied; one in favour of the Revenue and the other in favour of the assessee, viz. (1) that there will be a tax on the purchase of the raw materials if the manufactured goods are disposed of in the State itself otherwise than by way of sale; and (2) that there will be no tax on the purchase of the raw materials if the manufactured goods are despatched from the State conse quent on a (i) local sale; (ii) inter State sale; or (iii) a sale in the course of export.

Summary: These two aspects of section 9(1)(b) survive even after the judgment of this Court in the Goodyear case.

Summary: [363G H; 364A C] Goodyear, case ; , explained.

Summary: (5) Section 9(1) is both a charging and exempting sec tion.

Summary: Even after the decision in Goodyear case the charge under a part of clause (b) still survives and so also the exemption provided in the latter part of clause (b).

Summary: [364E; C] (6) Since the sales effected by the assessee fail within one of the three exempted categories set out in section 9(1)(b), there can be no levy of purchase tax under section 9(1) of the Sales Tax Act.

Summary: [363C] (7) The purchase of raw materials by the assessees are not 346 chargeable to tax either under section 9(1)or section 6 or section 24(3).


Appeals Nos. 45 and 46 of 1959.

Appeal by special leave from the judgment and order dated March 25, 1957, of the former Bombay High Court in Appeal No. 16 of 1957.

Q. K. Daphtary, Solicitor General of India, H. J. Umrigar and D. Gupta, for the Apellant (In C. A. No. 45 of 59) and Respondent (In C. Appeal No. 46 of 59).

H. N. Sanyal, Additional Solicitor General of India, section N. Andley and J. B. Dadachanji, for the respondents (in C. A. No. 45 of 59) and Appellants (In C. A. No. 46/59).

926 1960.

September 27.

The Judgment of the Court was delivered by DAS GUPTA J.

M/s.

Daulatram Rameshwarlal, a firm registered under the Indian Partnership Act (referred to later in this judgment as "sellers ") are registered dealers under section 11 of the Bombay Sales Tax Act.

In their return of turnover for the period from April 1, 1954 to March 31, 1955, they claimed exemption from Sales Tax in respect of sales of cotton of the total value of Rs. 68,493 2 6 and sales of castor oil of the total value of Rs. 6,47,509 1 6 on the ground that these sales were oil FOB contracts, under which they continued to be the owners of the goods till the goods had crossed the customs barrier and thus entered the export stream, and so no tax was realisable on these sales in view of the provisions of article 286 (1)(b).

The Sales Tax Officer rejected this claim for exemption and assessed them to sales tax on a taxable turnover including these sales.

He also assessed them to purchase tax under section 10(b) of the Bombay Sales Tax Act on their purchase of castor oil which they later sold for the sum of Rs. 6,47,509 1 6 as mentioned above.

The notice of demand for the total sales tax and the purchase tax assessed was served on the sellers on September 30, 1956.

The sellers thereupon moved the Bombay High Court under article 226 of the Constitu tion for the issue of appropriate writs for quashing the order of assessment and the notice of demand and for prohibiting the Sales Tax Officer from taking any steps pursuant to the order or the notice.

The learned Judge who heard the petition rejected the sellers ' contention that the goods remained their property till these crossed the customs frontier and therefore held that the sellers were not entitled to the benefit of article 286(1)(b) of the Constitution.

As regards the assessment to purchase tax also he rejected the sellers ' contention that the assessment in question was illegal.

In this view the learned Judge dismissed the application under article 226.

Against this decision the sellers appealed.

The 927 learned Judges who heard the appeal held, disagreeing with the Trial Judge, that the goods remained the sellers ' property till the goods had been brought on board the ship and so the sales were exempted from tax under article 286(1)(b) of the Constitution.

They however agreed with the Trial Judger that the sellers were liable to pay purchase tax under section 10(b) of the Bombay Sales Tax Act.

Accordingly they directed the Sales Tax Officer not to enforce the demand for payment of sales tax with regard to the sales of cotton for Rs. 68,493 2 6 and sale of castor oil of the total value of Rs. 6,47,509 1 6.

The Sales Tax Officer has, on the strength of special leave granted by this Court, preferred the appeal which has been numbered as Civil Appeal No. 45 of 1959 against the appellate court 's order directing him not to realise the sales tax in respect of sales of cotton and castor oil.

Civil Appeal No. 46 of 1959 has been preferred by the sellers against the appellate court 's judgment in so far as it upheld the assessment of purchase tax under section 10(b).

The only "question for our decision in the appeal by the Sales Tax Officer is whether property in the goods passed on shipment or at some point of time before shipment.

The law is now well settled that if the property in the goods passes to the buyer after they have for the purpose of export to a foreign country crossed the customs frontier the sale has taken place "in course of the export" out of the territory of India.

If therefore in the present sales the property in the goods passed to the buyers on shipment, that is, after they had crossed the customs frontier the sales must be held to have taken place "in the course of export" and the exemption under article 286(1)(b) will come into operation.

The sellers ' case is that these were sales on FOB contracts.

Though the learned Solicitor General appearing on behalf of the Sales Tax Officer tried to convince us that these were not really FOB contract sales, it appears that the averment in Paras.

11 and 13 of the writ petition that these sales were made on FOB basis were not denied in the counter affidavit sworn by the Sales Tax Officer.

It is also 928 worth noticing that in the assessment order itself the Sale Tax Officer referred to these sales as sales on FOB basis.

The specimen contract produced also used the words " FOB delivered ".

There can be no doubt therefore that these were sales under FOB contracts. ' The normal rule in FOB contracts is that the property is intended to pass and does pass on the shipment of the goods.

In certain circumstances, e.g., if the seller takes the bill of , lading to his own order and parts with it to a third person the property in the goods, it has been held, does not pass to the buyer even on shipment.

We are not concerned here with the question whether the passing of property in the goods was postponed even after shipment.

The correctness of the proposition that in the absence of special agreement the property in the goods does not pass in the case of a FOB contract until the goods are actually put on board is not disputed before us.

As has however been rightly stressed by the learned Solicitor General it is always open to the parties to come to a different agreement as to when the Dropert in the goods shall pass.

The question whether there was such a different agreement has to be decided on a consideration of all the surrounding circumstances.

He relies on three circumstances to convince us that the sellers and their buyers agreed in these sales that the property will pass to the buyer even before shipment.

The first circumstance on which he relies is that the bill of lading was taken in the name of the buyer.

Along with this fact we have to consider however the fact that the bill of lading was retained by the sellers, the contract being that payment will be made on the presentation of the bill of lading.

It is not disputed that the term in the contract for "payment at Bombay against presentation of documents " means this.

It was the sellers who received the bills of lading and it was on the presentation of these bills of lading along with the invoices that the buyer paid the price.

When the bills of lading though made out as if the goods were shipped by the buyer, were actually obtained and retained by the sellers, that fact itself would ordinarily indicate an intention of 929 the parties that the property in the goods would not pass till after payment.

The second circumstance to which our attention has been drawn is that the export was under the contract to be under the buyer 's export licence.

This, in our opinion, shows nothing.

The ordinary rule in FOB contracts is that it is the duty of the buyer to obtain the necessary export licence.

That was laid down in Brandt 's case (1) and though in a later case in Hardy vs Pound (2) the Court of Appeal in England held that the judgment in Brandt 's case (1) does not cover every FOB contract and that in the special facts of the particular case before them it was for the sellers to obtain the licence and this view was approved by the House of Lords , it is in our opinion correct to state that the presumption in FOB contracts is that it is the duty of the buyers to obtain export licence, though in the circumstances of a particular case this duty may fall on the sellers.

The third circumstance on which reliance is placed on behalf of the Sales Tax Officer is that the Export Control Order, 1954, which was passed in the exercise of powers conferred by Import & Export Control Act, 1947, contained a provision in its clause 5(2) in these words: " It shall be deemed to be a condition of that licence. . . that the goods for the export of which licence is granted shall be the property of the licensee at the time of the export ".

It has been strenuously contended by the learned Solicitor General that it will be reasonable to think that the parties to the contract intended to comply with this condition and to agree as between themselves that the goods shall be the property of the licensee, that is, the buyer, at the time of the export.

It is argued that the time of the export should be interpreted as the time when the customs frontier is crossed and that we must proceed on the basis that the buyer and the sellers intended that the goods shall be the buyer 's property at the point of time when they crossed this frontier.

We see however no justification for thinking that in this clause "the time of the export " means the time (1) (2) 930 when the goods cross the customs frontier.

Export has been defined in the Import & Export (Control) Act, 1947, as " taking out of India by sea, land or air ".

In the Exports (Control) Order, 1954, the word must be taken to have the same meaning as in the Act.

On that definition the time of the export is the time when the goods go out of the territorial limits of India.

These territorial limits would include the territorial waters of India.

Consequently the time of the export is when the ship with the goods goes be yond the territorial limits.

At any rate, the export of the goods cannot be considered to have commenced before the ship carrying goods leaves the port.

The intention of the parties that in compliance with the requirements of cl.

5(2) of the Exports (Control) Order the goods shall be the property of the licensee at the time of the export would therefore mean nothing more than that the property in the goods shall pass immediately before the ship goes beyond the territorial waters of the country, or at the earliest when the ship leaves the port.

Whichever view is taken there is nothing to indicate that the intention to comply with the requirements of el.

5(2) of the Exports (Control) Order carries with it an intention that the property should pass to the buyer at the time the goods cross the customs frontier.

It is true that in the United Motor '8 Case (1) and in other cases it has been held by this Court that the course of export commences to run when the goods cross the customs barrier.

What the court had to consider in these cases was not however when export commences within the meaning of the Exports (Control) Order but when the course of export commences for the purpose of article 286(1)(b) of the Constitution.

For the reasons which need not be detailed here it was decided that the course of export commences at the time when the goods cross the customs barrier.

These decisions as regards the commencement of the course of export are of no assistance in deciding about the point of time when the export proper commences.

As we have already pointed out when export has been defined in the Import & Export (1) (1953) 4 S.T.C. 133. 931 (Control) Act, 1947, as "taking out of India by land, sea, or air ", export in the Export Control Order, cannot be held to have commenced till at least the ship carrying the goods has left the port, though it may in some contexts be more correct to say that it does not commence till the ship has passed beyond the territorial waters.

We have therefore come to the conclusion that there is no circumstance which would justify a conclusion that the parties came to a special agreement that though the sales were on FOB contracts property in the goods would pass to the buyer at some point of time before shipment.

We think that the learned judges who heard the appeal in the Bombay High Court were right in their conclusion that the goods remained the sellers ' property till the goods had been brought and loaded on board the ship and so the sales were exempted from tax under article 286(1)(b) of the Constitution.

In Civil Appeal No. 46 of 1959 the appellants ' contention is that on a correct interpretation of the provisions of section 10(b) of the Bombay Sales Tax Act no purchase tax was leviable from them.

Section 10(b) provides for the levy of a purchase tax on the turnover of purchase of goods specified in column I of Schedule B, at the rates, if any, specified against such goods in column 4 of the said schedule, "where a certificate under cl.

(b) of section 8 has been furnished in respect of such goods and the purchasing dealer does not show to the satisfaction of the Collector that the goods have been despatched by him or by a person to whom he has sold the goods to an address outside the State of Bombay within a period of six months from the date of purchase by the dealer furnishing such certificate ".

Section 8(b) provides for the deduction from the turnover, of sale of goods to a dealer who holds an authorisation and furnishes to the selling dealer a certificate in the prescribed form declaring inter alia that the goods so sold to him are intended for being despatched by him or by registered dealers to whom he sells the goods to an address outside the State of Bombay.

Admittedly such a certificate was furnished by 932 M/s. Daulatram Rameshwarlal in respect of the castor oil which they sold to others and that in respect of these sales to them their sellers were allowed deductions.

It is equally undisputed that the persons to whom M/s. Daulatram Rameshwarlal sold the goods were sent to an address outside the State of Bombay within a period of six months from the date of purchase by M/s. Daulatram Rameshwarlal.

These persons are however not registered dealers.

The Sales Tax Officer as also the High Court of Bombay has held that the " person to whom he has sold the goods " in section 10(b) means " a registered dealer to whom he has sold the goods ".

It is contended before us on behalf of the appellant dealers that the word " a person " is wide enough to include a registered dealer and an unregistered dealer.

It is urged that the use of the word it a person " instead of the words " a registered dealer " is deliberate and that it was the intention of the Legislature to levy purchase tax on a person who has given such certificate under section 8(b) only if the goods were not 'despatched outside the State of Bombay within the prescribed period by anybody.

It is therefore contended that " a person " in section 8(b) should be interpreted to include a registered dealer or anybody else.

We are unable to agree.

A close examination of sections 8 and 10 justifies the conclusion that the Legislature was anxious to secure that the declaration as regards intention of the goods being despatched outside the State of Bombay should be carried out by despatch by " a registered dealer " to whom he sells the goods.

If such despatch outside the State of Bombay is by a person to whom the certifying dealer has sold the goods but who is not a registered dealer the certificate has not been complied with.

It will be in our opinion unreasonable to think that though the Legislature insisted that the certificate should declare the goods purchased were intended 11 for being despatched by him or by a registered dealer to whom he sells the goods outside the State of Bombay ", the Legislature would be content to accept actual despatch outside the State of Bombay by one who is not a registered dealer as sufficient.

Mr. Sanyal contended that the certificate 933 has to declare only an intention and that if ultimately the actual despatch is made by some person who is not a registered dealer, it cannot strictly be said that the declaration has not been carried out.

It might very well be that if at the time a declaration of intention is made in the certificate the purchasing dealer had the intention as stated and ultimately he sells to a person who is not a registered dealer for despatch of the goods outside the State of Bombay, the purchasing dealer may not be liable for having made a false declaration ".

Even though he has not made a false declaration of his intention, the fact remains that the intention declared has not been carried out.

The scheme of the Legislature clearly is that where the intention as declared has not been carried out purchase tax should be levied.

To hold otherwise would be to make the declaration of the intention useless.

Our conclusion therefore is that the courts below have rightly interpreted the words " a person " in section 10(b) of the Bombay Sales Tax Act as a " registered dealer " and that the purchasing dealers have rightly been assessed to purchase tax under section 10(b).

In the result, both the appeals are dismissed with costs.

Appeals dismissed.

Summary: The respondents firm claimed exemption from Sales Tax under article 286(i)(b) of the Constitution in respect of sales 925 made by them of cotton and castor oil on the ground that the sales were on F.O.B. contracts under which they continued to be the owners of the goods till those crossed the custom barrier and entered the export stream.

Summary: They also contested the purchase tax to which they were assessed under section 10(b) of the Bombay Sales Tax Act.

Summary: The High Court upheld the contention of the respondents regarding the Sales Tax but held that they were liable to pay purchase tax.

Summary: On appeal by both the parties Held, that the goods remained the seller 's property till those had been brought and loaded on board the ship and so the sales were exempted from tax under article 286(i) of the Constitution.

Summary: The word " a person " in section 10(b) of the Bombay Sales Tax Act had been correctly interpreted as " a registered dealer " and the purchasing dealers had been rightly assessed to purchase tax.

Summary: The normal rule in F. 0.

Summary: B. contracts was that the property was intended to pass and did pass on the shipment of the goods.

Summary: The presumption in F. 0.

Summary: B. contracts was that it was the duty of the buyer to obtain the necessary export licence, though in the circumstances of a particular case that duty might fall on the seller.

Summary: H.O. Brandt & Co. vs H. N. Morris & Co. Ltd., [1917] 2 K.B. 784 and M. W. Hardy & Co. vs A. V. Pound & Co., Ltd., (1953) 1.Q.B. 499, considered.

Summary: "Export " under the Import and Export Control Act having been defined as " taking out of India by land, sea or air " it could not, under the Export Control Order, be held to have commenced till the ship carrying the goods left the port or in some cases passed the territorial waters.

Summary: The State of Bombay vs The United Motors (India) Ltd., (1953) 4 S.T.C. 133, held inapplicable.


N: Criminal Appeal No. 332 of 1977.

Appeal by Special Leave from the Judgment and order dated 20 10 75 of the Bombay High Court in Criminal Application No. 1 379/75.

77 M. C. Bhandare, A. N. Karkhanis, Miss Malini Panduval and Mrs. section Bhandare for the Appellant.

G. L. Sanghi and A. K. Verma for Respondent No. 1.

M. N. Shroff for Respondent No. 2.

The Judgment of the Court was delivered by A Prefatory statement KRISHNA IYER, J.

In this appeal, by special leave, we are called upon to interpret a benign provision enacted to ameliorate the economic condition of neglected wives and discarded divorcees, namely.

s 125.

P.C. Welfare laws must be so read as to be effective delivery systems of the salutary objects sought to be served by the Legislature and when the beneficiaries are the weaker sections, like destitute women, this spirit of article 15(3) of the Constitution must belight the meaning of the Section.

The Constitution is a pervasive omnipresence brooding over the meaning and transforming the values of every measure.

So, section 125 and sister clauses must receive a compassionate expansion of sense that the words used permit.

The Brief Facts The respondent (husband) married the appellant (wife) as a second wife, way back in 1956, and a few years later had a son by her.

15 The initial warmth vanished and the jealousies of a triangular situation erupted, marring mutual affection.

The respondent divorced the appellant around July 1962.

A suit relating to a flat in which the husband had housed the wife resulted in a consent decree which also settled the marital disputes.

For instance, it recited that this respondent had transferred the suit premises, namely, a flat in Bombay, to the appellant and also the shares of the Cooperative Housing Society which built the flat concerned.

There was a reference to mehar money (Rs. 5,000/ and 'iddat ' money, Rs. 180/ ) which was also stated to have been adjusted by the compromise terms.

There was a clause in the compromise: G "The plaintiff declares that she has now no claim or right whatsoever against the defendant or against the estate and the properties of the defendant.

" And another term in the settlement was that the appellant had by virtue of the compromise become the absolute owner of the flat and various deposits in respect of the said flat made with the cooperative housing society.

78 For some time there was flickering improvement in the relations between the quondum husband and the quondum wife and they lived together.

Thereafter, again they separated, became entranged.

The appellant, finding herself in financial straits and unable to maintain herself, moved the magistrate under section 125 of the Criminal Procedure Code, 1973, for a monthly allowance for the maintenance of herself and her child.

She proceeded on the footing that she was still a wife while the respondent rejected this status and asserted that she was a divorce and therefore ineligible for maintenance.

The Magistrate who tried the petition for maintenance held that the appellant was a subsisting wife and awarded monthly maintenance of Rs. 300/ for the son and Rs. 400/ for the mother for their subsistence, taking due note of the fact that the cost of living in Bombay, where the parties lived, was high, and that the respondent had provided residential accommodation to the appellant.

This order was challenged before the sessions Judge by the aggrieved husband, who on a strange view of the law that the court, under section 125, had no jurisdication to consider whether the applicant was a wife, dismissed the petition in allowance of the appeal.

The High Court deigned to bestow little attention on the matter and summarily dismissed a revision petition.

This protracted and fluctuating litigation misfortune has leu to the appeal, by special leave, before this Court.

The Questions Mooted Shri Bhandare appearing for the appellant contended that the Courts below had surprisingly forgotten the plain provision in the Explanation (b) to section 125(1) of the Code, which reads: "wife ' includes a woman who has been divorced by.

or has obtained a divorce from, her husband and has not remarried.

On this foundation, he urged that accepting the contention of the respondent that the appellant was a divorcee? his client was still entitled to an allowance.

This is obviously beyond dispute or.

a simple reading of the sub section and it is curious how this innovative and sensitive provision with a benignant disposition towards destitute divorcees has been overlooked by all the courts below.

We hold that every divorce otherwise eligible, is entitled to the benefit of maintenance allowance and the dissolution of the marriage makes no difference to this right under the current Code.

In the normal course, an order for maintenance must follow, the quantum having been determined by the learned Magistrate at the trial level.

79 However, Shri Sanghi, appearing for the respondent, sought sustain the order in his favour on three grounds They arc of pubic importance since the affected party in such a fact situation is the neglected divorcee.

He first argued that section 125(4) would apply in the absence of proof that the lady was not living separately by mutual consent.

His next plea was that there must be proof of neglect to maintain to attract s.125 and his third contention was that there was a settlement by consent decree in 1962 whereby the mehar money had been paid and all claims adjusted, and so no claim for maintenance could survive.

The third contention is apparently based upon contractual arrangement in the consent decree read with section 127(3) (b) which reads: C "(b) the woman has been divorced by her husband and that she has received, whether before or after the date of the said order, the whole of the sum which, under any customary or personal law applicable to the parties, was payable on such divorce cancel such order, (i) in the case where such sum was paid before such order, from the date on which such order was made.

(ii) in any other case, from the date of expiry of the period, if any, for which maintenance has been actually paid by the husband to the woman; We must state, however, that there was no specific plea, based upon the latter provision, set up anywhere in the courts below or urged before us.

But if one were to locate a legal ground to raise The contention That the liability to pay maintenance had ceased on account of the payment of mehar, it is section 127(3) of the Code.

So we must deal with the dual sub heads of the third ground.

The meaning of meanings is! derived from values in a given society and its legal system.

Art.15(3) has compelling, compassionate relevance in the context of section 125 and the benefit of doubt.

If any in statutory interpretation belongs to the ill used wife and the derelict divorcee.

This social perspective granted, the resolution of all the disputes projected is easy.

Surely, Parliament, in keeping with article 15(3) and deliberate by design, made a special provision to help women in distress cast away by divorce.

Protection against moral and material abandonment manifest in article 39 is part of social and economic justice, specificated in article 38, fulfilment of which is fundamental to the governance of the country (Art.37).

From this coign of vantage we must view the printed text of the particular Code.

80 section 125 requires, as a sine qua non for its application, neglect by husband or father.

The magistrate 's order proceeds on neglect to maintain; the sessions judge has spoken nothing to the contrary; and The High Court has not spoken at all.

Moreover, the husband has not examined himself to prove that he has been giving allowances to the divorced wife.

His case, on the contrary, is that she has forfeited her claim because of divorce and the consent decree.

Obviously, he has no case of non neglect.

His plea is his right to ignore.

So the basic condition of neglect to maintain is satisfied.

In this generous jurisdiction, a broader perception and appreciation of the facts and their bearing must govern the verdict not chopping little logic or tinkering with burden of proof.

The next submission is that the absence of mutual consent to live separately must be made out if the hurdle of section 125(4) is to be over come.

We see hardly any force in this plea.

The compulsive conclusion from a divorce by a husband and his provision of a separate residence as evidenced by the consent decree fills the bill.

Do divorcees have to 1) prove mutual consent to live apart? Divorce painfully implies that the husband orders her out of the conjugal home.

If law has nexus with life this argument is still born.

The last defence, based on mehar payment, merits more serious attention.

The contractual limb of the contention must easily fail.

The consent decree of 1962 resolved all disputes and settled all claims then available But here is a new statutory right created as a projection of public policy by the Code of 1973, which could not have been in the contemplation of the parties when in 1962, they entered into a contract to adjust their then mutual rights.

No settlement of claims which does not have the special statutory right of the divorcee under section 125 can operate to negate that claim.

Nor can s.127 rescue the respondent from his obligation.

Payment of mehar money, as a customary discharge, is within the cognisance of that provision.

But what was the amount of mehar ? Rs. 5000/ , interest from which could not keep the woman 's body and soul together for a day, even in that city where 40% of the population are reported to live on pavements, unless she was ready to sell her body and give up her soul ? The point must be clearly under stood that the scheme of the complex of provisions in Chapter IX has a social purpose.

Ill used wives and desparate divorcees shall not be driven to material and moral dereliction to seek sanctuary in the streets.

This traumatic horror animates the amplitude of s.127.

Where the husband, by customary payment at the time of divorce, has adequately provided for the divorce, a subsequent series of recurrent does is 81 contra indicated and the husband liberated.

This is the teleological A interpretation, the sociological decoding of the text of s.127.

The keynote thought is adequacy of payment which will take reasonable care of her maintenance.

The payment of illusory amounts by way of customary or personal law requirement will be considered in the reduction of maintenance rate but cannot annihilate that rate unless it is a reasonable substitute.

No construction which leads to frustration of the statutory project can secure validation if the court is to pay true homage to the Constitution.

The only just construction of the section is that Parliament intended divorcees should not derive a double benefit.

If the first payment by way of mehar or ordained by custom has a reasonable relation to the object and is a capitalised substitute for the order under section 125 not mathematically but fairly then section 127(3) (b) subserves the goal and relieves; the obligor, not pro tanto but wholly.

The purpose of the payment 'under any customary or personal law ' must be to obviate destitution of the divorcee and to provide her with wherewithal to maintain herself.

The whole scheme of section 127(3) (b) is manifestly to recognise the substitute maintenance arrangement by lump sum payment organised by the custom of the community or the personal law of the parties.

There must be a rational relation between the sum so paid and its potential as provision for maintenance.

To interpret otherwise is to stultify the project.

Law is dynamic and its meaning cannot he pedantic but purposeful.

The proposition, therefore, is that no husband can claim under section 127(3)(b) absolution from this obligation under section 125 towards a divorced wife except on proof of payment of a sum stipulated by customary or personal law whose quantum is more or less sufficient to do duty for maintenance allowance.

The conclusion that we therefore reach is that the appeal should be allowed and it is hereby allowed, and the order of the trial court restored.

P.B.R. Appeal allowed.

Summary: Explanation (b) to section 125(1) of the Code of Criminal Procedure, 1973 provides that "wife" includes a woman who has been divorced by or has obtained a divorce from her husband and has not re married.

Summary: Section 127(3) (b) provides that where any order has been made under section 125 in favour of a woman who has been divorced by or has obtained a divorce from her husband, the Magistrate shall if he is satisfied that the woman has been divorced by her husband and has received, whether before or after the date of the said order, the whole of the sum which under any customary or personal law applicable to the parties, was payable on such divorce cancel such order in the circumstances stated therein.

Summary: The respondent (husband) married the appellant (wife) and had a son by her.

Summary: A few years later the respondent divorced his wife.

Summary: By a consent decree, in the suit filed by the wife, he transferred to her the flat in which she was living and agreed to pay mehar money.

Summary: The compromise stated that the "plaintiff declares that she has now no claim or right whatsoever against the defendant".

Summary: For some time thereafter they lived together but again separated.

Summary: The wife moved the magistrate under section 125 Cr.P. for grant of maintenance to her and her son.

Summary: This was granted.

Summary: On appeal the Sessions Judge held mat the Court had no jurisdiction under section 125.

Summary: The High Court dismissed the wife 's appeal.

Summary: On further appeal to this Court it was contended on behalf of the respondent that (i) section 125(4) would apply in the absence of proof that the wife was not living separately by mutual consent; (ii) to attract section 125 there must be proof of neglect to maintain the wife and (iii) no claim for maintenance in this case can survive in the face of the consent decree whereby mehar money had been paid and all claims adjusted.

Summary: Allowing the appeal the Court, G ^ HELD: Every divorcee, otherwise eligible, is entitled to the benefit of maintenance allowance and the dissolution of the marriage makes no difference to this right under the current Code.

Summary: [78H] 1.

Summary: There is no force in the argument that the absence of mutual consent to live separately must be made out if the hurdle of section 125(4) is to be overcome.

Summary: Divorce plainfully implies that the husband orders.

Summary: the wife out of the conjugal home.

Summary: [80D] 76 2.

Summary: The husband 's plea is his right to ignore.

Summary: So the basic condition of neglect to maintain is satisfied.

Summary: In this generous jurisdiction the broader perception and appreciation of the facts and their bearing must govern the verdict not chopping little logic or tinkering with burden of proof.

Summary: [80C] 3.

Summary: (a) The consent decree resolved all disputes and settled all claims then available.

Summary: The new statutory right which could not have been in the contemplation of the parties when they entered into the consent decree in 1962 had been created by the Code of 1973.

Summary: No settlement of claim which does not have the special statutory right of the divorcee under section 125 can operate to negate that claim.

Summary: [80F] (b) No husband can claim under section 127(3)(b) absolution from his obligation under section 125 towards a divorced wife except on proof of payment of a sum stipulated by customary or personal law whose quantum is more or less sufficient to do duty for maintenance allowance.

Summary: [81F] (c) Section 127 cannot rescue the husband from his obligation.

Summary: The scheme of Chapter IX has a social purpose.

Summary: Ill used wives and desperate divorcees shall not be driven to material and moral dereliction to seek sanctuary in the streets.

Summary: Where the husband, by customary payment at the time of divorce, has adequately provided for the divorcee.

Summary: a subsequent series of recurrent doles is contra indicated and the husband liberated.

Summary: The key note thought is adequacy of payment which will take reasonable care of the wife 's maintenance.

Summary: [80H] (d) The payment of illusory amounts by way of customary or personal law requirement will be considered in the reduction of maintenance rate but cannot annihilate that rate unless it is a reasonable substitute The legal sanctity of the payment is certified by the fulfilment of the social obligation, not by a ritual exercise rooted in custom.

Summary: No construction which leads to frustration of the statutory project can secure validation if the Court is to pay true homage to the Constitution.

Summary: The only just construction of the section is that Parliament intended divorcees should not derive a double benefit If the first payment by way of mehar or ordained by custom has a reasonable relation to the object and is a capitalised substitute for the order under section 125 then section 127(3) (b) subserves the goal and relieves the obligor.

Summary: not pro tanto but wholly the purpose of the payment "under any customary or personal law" must be to obviate destitution of the divorcee and to provide her with wherewithal to maintain herself There must be a rational relation between the cum so paid and its potential as provision for maintenance.

Summary: [81B C] 4.

Summary: Welfare laws must be so read as to be effective delivery systems of the salutary objects sought to be served by the Legislature and when the beneficiaries are the weaker sections, like destitute women, the spirit of article 15(3) must belight the meaning of the section.

Summary: The Constitution is a pervasive omnipresence brooding over the meaning and transforming the values of every measure.


ivil Appeal No. 4031 of 1988.

From the Judgment and Order dated 14.4.1988 of the Patna High PG NO 867 PG NO 868 Court in C.W.J.C. No. 1923 of 1988.

R.K. Jain, R.P.Singh and Y.D.Chandrachud for the Appellant.

U.S. Prasad for the Respondents.

The Judgment of the Court was delivered by SABYASACHI MUKHARJI, J.

Special leave granted.

The order dated 25th March, 1988 of the Collector is under challenge in this appeal.

The same reads as follows: "Shri Raghu Nath Thakur S/o Late Gorakh Thakur, Village Repura, P.S. Puksha, District Samastipur had bid for Rs.11,900 (Rupees eleven thousands only) per month Dak in an auction of Beni Country liquor shop held on 27.3.88 and he as given the shop of Beni Country liquor but after signing in Bandobasti Register he did not deposit dak amount.

The name of Shri Raghu Nath Thakur S/o Late Gorakh Nath Village Repura, P.S. Pusa, Distt.

Samastipur is therefore placed in the black list for future under the orders passed by the Collector, Samastipur.

" This order was passed pursuant to the order of the Collector.

The letter dated 25th March, 1988, states as follows: "The Collector of the district after perusal of the said office note passed order on 25.3.88 which is produced in verbatim below: Ist bidder chunki defaulter hai atah security prapt kar len tatha bhavishya ke liae Black list karen.

" Indisputably, no notice had been given to the appellant of the proposal of black listing the appellant.

It was contended on behalf of the State Government that there was no requirement in the rule of giving any prior notice before black listing any person.

In so far as the contention that there is no requirement specifically of giving any notice is concerned, the respondent is right.

But it is an implied principle of the rule of law that any order having civil consequence should be passed only after following the PG NO 869 principles of natural justice.

It has to be realised that black listing any person in respect of business ventures has civil consequence for the future business of the person concerned in any event.

Even if the rules do not express so, it is an elementary principle of natural justice that parties affected by any order should have right of being heard and making representations against the order.

In that view of the matter, the last portion of the order in so far as it directs black listing of the appellant in respect of future contracts, cannot be sustained in law.

In the premises, that portion of the order directing that the appellant be placed in the black list in respect of future contracts under the Collector is set aside.

So far as the cancellation of the bid of the appellant is concerned, that is not affected.

This order will, however, not prevent the State Government or the appropriate authorities from taking any future steps for blacklisting the appellant if the Government is so entitled to do so in accordance with law, i.e. giving the appellant due notice and an opportunity of making representation.

After hearing the appellant, the State Government will be at liberty to pass any order in accordance with law indicating the reasons therefor.

We, however, make it quite clear that we are not expressing any opinion on the correctness or otherwise of the allegations made against the appellant.

The appeal is thus disposed of.

Appeal disposed of.

Summary: The appellant has bid in an auction of Beni Country Liquor Shop in the District of Samastipur and was given the shop being the highest bidder but he failed to deposit the bid money in time.

Summary: The Collector, Samastipur by an order cancelled the bid and black listed the appellant.

Summary: He then moved the High Court against the order of the Collector.

Summary: The High Court upheld the order of the Collector.

Summary: The appellant appealed to this Court by special leave.

Summary: Disposing of the appeal, the Court, HELD: 1.

Summary: It is an implied principle of the rule of law that any order having civil consequences should be passed only after following the principles of natural justice.

Summary: Black listing any person in respect of business ventures has civil consequences for the future business of the person concerned in any event.

Summary: [868H; 869A] 2.

Summary: [869B] In the instant case, that portion of the order directing that the appellant be placed in the black list in respect of future contracts under the Collector is set aside.

Summary: [869B C]