JUDGMENT R.L. Gulati, J.
1. This is a reference under Section 11(4) of the U. P. Sales Tax Act (hereinafter referred to as the Act).
2. The dealer is a firm which carries on business at Hapur, District Meerut. During the assessment year 1956-57, the dealer collected gur from various parties in the State of Uttar Pradesh and consigned the same to destinations outside Uttar Pradesh. The railway receipts were made in the name of self. These railway receipts were subsequently sold to local parties. The dealer claimed exemption from tax in respect of the turnover of such transactions amounting to Rs. 1,13,524, on the ground that such sales were exempt from tax under Article 286 of the Constitution. The Sales Tax Officer did not accept this contention. The contention, however, was accepted on appeal by the Assistant Commissioner (Judicial), Sales Tax. According to him, the gur purchased by the dealer had been consigned to places outside U. P. and the railway receipts were sold to local dealers by endorsement who took the delivery of the goods outside the State. In his opinion, such sales were covered by Article 286 of the Constitution. The department went up in revision. The Judge (Revisions) has reversed this finding relying upon a decision of this court in Bansi Lai Ram Swaroop v. Commissioner of Sales Tax, U. P. S.T.R. No. 195 of 1957 decided on 20th November, 1962 (Allahabad High Court) where on similar facts it has been held that sales take place within Uttar Pradesh where property in goods passes to the buyers and there is no element of sale in places outside Uttar Pradesh where the delivery is taken. The Judge (Revisions) has, however, referred the following question of law for the opinion of this court :
Whether, on the facts and circumstances of the case, the sales were outside U. P. and were exempt under Article 286 of the Constitution read with Section 27 of the U. P. Sales Tax Act ?
3. Article 286 of the Constitution, as it stood at the material time, provided :
286. (1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place-
(a) outside the State ; or
(b) in the course of the import of the goods into, or export of the goods out of, the territory of India.
Explanation.-For the purposes of Sub-clause (a), a sale or purchase shall be deemed to have taken place in the State in which the goods have actually been delivered as a direct result of such sale or purchase for the purpose of consumption in that State, notwithstanding the fact that under the general law relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State.
(2) Except in so far as Parliament may by law otherwise provide, no law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of any goods, where such sale or purchase takes place in the course of inter-State trade or commerce :
Provided....
4. In order to give effect to this mandate of the Constitution, Section 27 was added in the U. P. Sales Tax Act. That section reads :
27. (1) Notwithstanding anything contained in this Act-
(a) a tax on the sale or purchase of goods shall not be imposed under this Act-
(1) where such sale or purchase takes place outside the State of U. P.; or
(ii) where such sale or purchase takes place in the course of import of the goods into, or export of the goods out of, the territories of India;
(b) a tax on the sale or purchase of any goods shall not, after the 31st day of March, 1951, be imposed where such sale or purchase takes place in the course of inter-State trade or commerce except in so far as Parliament may by law otherwise provide.
(2) The explanation to Clause (1) of article 286 of the Constitution shall apply for the interpretation of Sub-clause (i) of Clause (a) of subsection (1).
5. Now, in the instant case, goods were admittedly sold inside the State of Uttar Pradesh by transfer of railway receipts to the purchasers. Similarly, there was no export of gur out of the territory of India. Therefore, Clauses (a) and (b) of Sub-section (1) of Section 27 of the U. P. Sales Tax Act will not apply. Clause (b) of Section 27(1) prohibits the charging of tax after 31st March, 1951, on sales which take place during the course of inter-State trade or commerce except in so far as Parliament may by law otherwise provide. The Parliament provided for the imposition of tax on the inter-State sales in 1956 by enacting the Central Sales Tax Act. Obviously, prior to 1956 no tax could be levied on sales which took place during the course of inter-State trade or commerce. When does a sale take place during the course of inter-State trade or commerce has now been defined by Section 3 of the Central Sales Tax Act. This section provides:
3. A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase-
(a) occasions the movement of goods from one State to another ; or
(b) is effected by a transfer of documents of title to the goods during their movement from one State to another.
Explanation 1.-Where goods are delivered to a carrier or other bailee for transmission, the movement of the goods shall, for the purposes of Clause (b), be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee.
Explanation 2....
6. According to this section, a sale shall be deemed to have taken place in the course of inter-State trade if the movement of goods takes place from one State to another as a direct result of such sale or if the sale is effected by transfer of documents of title during their movement from one State to another. It further provides that goods shall be deemed to be in movement when they are delivered to a carrier for transmission. The sales in the instant case fall in the second category of sales covered by Clause (b) of Section 3 inasmuch as goods were entrusted to the railway, a common carrier for transmission to places outside U. P. and the sales were effected by transfer of documents, namely, the railway receipts. If, therefore, such sales had taken place after the coming into force of the Central Sales Tax Act, 1956, these sales would undoubtedly be deemed to be inter-State sales covered by Clause (b) of Section 3 of that Act. The question is as to what will be the position prior to the coming into force of the Central Sales Tax Act. In our opinion, the position prior to the coming into force of the Central Sales Tax Act was precisely the same. It may be mentioned that the definition of "inter-State sale" contained in Section 3 of the Central Sales Tax Act is not an artificial definition inserted by the Parliament on its own. The definition has been culled out from various decisions of the Supreme Court interpreting the phrase "in the course of inter-State trade or commerce" as occurring in Article 286 of the Constitution. This is clear from the decision of the Supreme Court in Cement Marketing Co. of India (Pvt.) Ltd. v. State of Mysore A I.R. 1963 S.C, 980, para 11. In that case, while cataloguing the various decisions of the Supreme Court for determining whether a sale was in the course of export or import or in the course of inter-State trade, this is what their Lordships observed :
In the case of sales in the course of export or import the test laid down was a series of integrated activities commencing from an agreement of sale and ending with the delivery of goods to a common carrier for export by land or by sea: Bombay Co. Ltd. Case, [1952] S.C.R. 1112. 'In the course of was explained to mean a sale taking place not only during the activities directed to the end of the exportation of the goods out of the country but also as part of or connected with such activities and 'integrated activities' was explained in similar language. This court again accepted these tests in Endupuri Narasimham's case [1962] 1 S.C.R 314. In Section 3 of the Central Sales Tax Act (Act 74 of 1956), the legislature has accepted the principle governing inter-State sales as laid down in Mohanlal Hargovind's case [1955] 2 S.C.R. 509. The principles for determining when a sale or purchase of goods takes place in the course of inter-State sale or commerce outside the State are :
'Section 3. A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase-
(a) occasions the movement of goods from one State to another, or
(b) is effected by a transfer of documents of title to the goods during their movement from one State to another.'
7. Clearly the definition of inter-State sale as contained in Clause (b) of Section 3 of the Central Sales Tax Act has been taken from the decision of the Supreme Court rendered prior to the enactment of the Central Sales Tax Act. It follows that Clause (b) of Section 27(1) of the U. P. Sales Tax Act must be given the same meaning. In other words, it has to be held that the sales exempted from tax contemplated by Clause (b) of Section 27(1) of the U. P. Sales Tax Act are the sales as defined in Clauses (a) and (b) of Section 3 of the Central Sales Tax Act. Sales of the kind involved in the instant case, namely, sales taking place by transfer of railway receipts while the goods are in transit from one State to another are clearly covered by Clause (b) of Section 27(1) of the U. P. Sales Tax Act and are exempt from tax.
8. The case of Bansi Lai Ram Swaroop, S.T.R. No. 195 of 1957 decided on 20th November, 1962 (Allahabad High Court) relied upon by the Judge (Revisions) is clearly distinguishable. The facts of that case, no doubt, are similar to the facts of the present case. But there the contention raised by the assessee was that the sales took place outside U. P. This clearly was an untenable contention and this court very rightly repelled that contention. The assessee then tried to raise the question as to whether the sales were exempt under the provisions of Article 286(l)(a) of the Constitution and of Section 27 of the U. P. Sales Tax Act. This question was not allowed to be raised, as the same had not been raised before and decided by the Judge (Revisions).
9. We, accordingly, answer the question by saying that the sales in question were exempt under Article 286 of the Constitution read with Section 27(1 )(b) of the U. P. Sales Tax Act. The assessee is entitled to costs, which we assess at Rs. 100.