.April 10

SUPREME COURT REPORTS [1964]

BEN GORM NILGIRI PLANTATIONS COMPANY,

COONOOR AND ORS . v.

SALES TAX OFFICER, SPECIAL CIRCLE, ERNAKU-

LAM AND ORS.

[P. B. GAJENDRAGADKAR, C.J., K. N. WANCHOO, J. c. SHAH,

N. RAJAGOPALA AYYANGAR AND S. M. S!KRI, JJ.)

Sales Tax-Sale of tea to local agents of Foreign buyers- Sales whether exempt under Art. 286(l)(b) of the Constitution-Constitution of India, Art. 286(1) (b)-Central Sales Tax Act, 1956, s. 5.

The appellants were carrying on the business o'f growing and manufacturing tea in their estates. The sellers of tea were the appellants; the purchasers were local agents of Foreign buyers. The sales were by public auction at Fort Cochin. They were conducted by brokers of tea. The sales were in conformity with the provisions of Tea Act of 1953.

The Sales-tax Officer assessed the appellants to pay sales tax on transactions of sale of tea chests at the auctions held at Fort Cochin in the years 1956-57 to 1958-59. Against the orders of assessment the appellants filed petitions before the High

Court for writs of certiorari and for writs of prohibition restraining the Sales-tax Officer from proceeding with the collection of sales tax. The petitions were dismissed by the High Court. With special leave the appellants appealed to this c., urt.

It was the common case of all the appellants that the purchases by the local agent of foreign buyers were with a view to export the goods to their principals abroad and that the goods were in fact exported out of India.

It was contended on behalf of the appellants that the sales of tea were "in the course of export 0ut of the territory of India", and thus exempt from taxation under Art. 286(l)(b) of the Constitution.'

Held: (per Gajendragadkar, C. J., Shah and Sikri, JJ.)

(i) A transaction of sale which occasions export, or which is effected by a transfer of documents of title after the goods have crossed the customs frontiers, is exempt under Art. 286(l)(b) of the Constitution from sales tax levied under any

State legislation. A transaction of sale which is a preliminary to expert of the commodity sold may be regarded as a sale for export, but is not necessarily to be regarded as one i'l the course of export, unless the sale occasions export. Etymologieally the expression "in the course of expert'', contemplates an integral relation or bond between the sale and th~ export.

In general where 4 sale is effected by the seller, and the seller is not connected with the export which actually takes place, it is a sale for export. Where the export is the result of sale, the export being inextricably linked up with •ale so that the bond cannot be dissociated without a breach of the obligations arising by statute. contract of mutual understanding between the parties arising from the nature of the transaction the sale is in the course of export. -

(ii) A sale in the course of export predicates a connection 1964 between the sale and export, the two activities being so integrated that the connection between the two cannot be volun- . ~· q.,,,. . tarily interrupted, without a breach of the contract or the gz.P"'t"..:::: co"lpulsion arising from the nature of the transaction. In the alld1lithra present casr there was between the sale and the export no v. such bond as would justify the inference that the sale and the Baka Ta:c OJ!i<a export formed parts of a single transaction or that the sale Bp<eiol Oirck, ' and export were integrally connected. The appellants were Ernolwlam aw4 not concerned with the actual exportation of the goods, and OU..ra the sales were intended to be complete without the export, and as such it cannot be said that the said sales occasioned export. The sales were rtherefore for export .and not in the course of export. Therefore the sales by the appellant to the agents of foreign buyers do not come with the purview of Art. 286(i)(b) of the Constitution.

State of Travancore.Cochin v. Bombay Company Ltd. [1952] S.C.R. 1112, distinguished.

State of Trav:incore-Cochin v. Shanmugha Vilas Cashew N "t Factory. [1954] S.C.R. 53, State of Madras v. Gurviah N'aidu and Company Ltd. A.LR. 1956 S.C. 158, State of Mysore

v. Mysore Shipping and Manufacturing Co. Ltd. 13 S.T.C. 529 and B.K. Wadear v. M/s. Daulatram Rameshwarlal fl951] 1 S.C.R. 924, relied on.

M. R. K. Abdul Salem and Company v. Government of Madras, 13 S.T.C. 629, explained.

Per Ayyangar, J. In the present case the sale and the export being related to each other in the sense of one leading to the other are therefore within Art. 286(l)(b) of the Constitution. There could be no difference in legal effect betw-een a salo to a Foreign buyer present in India to take delivery of the goods for transport to his country and a sale to his resident agent for that purpose. The buyer was an agent, who was not free to deal with th~ tea purchased by effecting a local sale, but was under an obligation to his Foreign principal to export the goods purchased to a Foreign destination.

The goods purchased were in fact exported from this country.

It was with such a buyer that the appellants entered into the transaction of sale. In other words it was a part of understanding between the seller and the buyer, inferrable from all the circumstances attendant on these transactions that the buyer was bound to export.

State o.f Travancore-Cochin v. Shanmugha Vilas Cashew [1954] S.C.R. 53, State of Madras v. Gurviah Naidu and Co.

Ltd. A.LR. 1956 S.C. 158, State of Mysore v. Mysore Spinning and Manufacturing Co. Ltd. A.I.R. 191!6 S.C. 1002 and East India Tobacco Co. v. The State of Andhra Pradesh, f1963] 1 S.C.R. 404, referrP<l to.

(ii) Even though the Tea Act does not in terms prohibit internal sale of tea purchased alongwith export quota rights this could be explained by the circumstance that the rights t~ export tea is considered a privilege which secures an economic ad~ vantage to the exporter and hence there was no need for any statutorv compulsion to do so.

L'P(D)ISCI-2~(o)

1964 CIVIL APPELLATE JuRJSDICTION: Civil Appeals Nos.

Ben IJon• 396-413 of 1963. Appeals by special leave from the judgx;1g;,; Plantation• ment and order dated October 26, 1961 of the Kerala High Com!.', i"!'i, f::-'' Court in Writ Appeals Nos. 104--106, 107, 109, 112, 108,

v. 113, 114, 111, 115, 116, 119, 120, 123, 124 and 122 of 1964.

Salea Tax Officer,

Special Circle,

ErMhlam aad Otkera

BAall, J.

M. C. Setalvad, I. B. Dadachanji, 0. C. Mathur and Ravinder Narain, for the appellants (in all the appeals).

V. P. Gopa/an Nambiar, Advocate-Genera/, Kera/a and V. A. Seyid Muhammed, for the respondent (in all the appeals).

April 10, 1964. The judgment of GAJENDRAGADKAR, C.J .• SHAH AND SIKRJ JJ. was delivered by SHAH J. The dissenting Opinion of WANCHOO and AYYANGAR JJ. was delivered by AYYANGAR J.

SHAH. J .-The Sales-tax Officer, Special Circle Ernakulam assessed the appellants under the Travancore- Cochin General Sales Tax Act XI of 1125 M.E., to pay sales-tax on transactions of sale of tea chests at the auctions held at Fort Cochin in the years 1956-57 to 1958-59, rejeeting their contention that 'the sales were exempted from tax by virtue of Art. 286(l)(b) of the Constitution. The appellants then petitioned the High Court of Kerala for writs of certiorari quashing the orders of assessment and for writs of prohibition restraining the Sales-tax Officer from proceeding with the collection of tax in pursuance of the orders of assessment. Vaidialingam J., rejected the petitions and his order was confirmed in appeal by a Division Bench of the High Court of Kerala. With special leave, the appellants have appealed to this Court.

The transactions of sale sought to be taxed by the Revenue authorities are in tea, wpich is a controlled commodity.

The Parliament enacted the tea Act (19 of 1953) to provide for the control by the Union of the tea industry, including the control of cultivation of tea in. and of export of tea from, lndia and for that purpose to establish a Tea Board and to levy customs duty cin tea exported from India. By s. 3(f) "export" is defined as taking out of India by land. sea or air to any place outside India other than a country or territory notified in that behalf by the Central Government by notification in the Official Gazette. "Exp01t allotment" is defined by s. 3(g) as the total quantity of tea which may be exported during any one financial year. Section 17(1) places an embargo upon exportation of tea unless covered by a licence issued by or on behalf of the Board.

Section 18 provides that no consignment of tea shall be shipped or water-borne to be shipped for export or shall be exported until the owner has delivered to the Customs.Collector a valid export licence or special export licence or a

valid permit issued by or on behalf of the Board or the 1964 Ccntial Goverih"ne:1t a:s the case may be~ covernig the Ben. Gom quantity to be shipped. Section 19 authorises the Central Nilgiri Pla1'lalioM Government to declare export allotments of tea for ead1 Oomn~:"""'

financial year, and by s. 20 it is provided that any tea estate a v. shall, subject to conditions as may be prescribed, have the 8't' Ti0 '?~·· fight to receive under the Act an export quota for each ~m financial year. Section 21 provides that the owner of a tea and O!Au1 estate to which an export quota has been allotted for any financial year shall have the right to obtain at any time export licences during that year to cover the export of tea upto the amount of the unexhausted balance of the quota.

The export quota right is, by cl. (2) of s. 21. transferable, subject to such conditions as may be prescribed and the transferee of such right may again transfer the whole or any part of his right provided that nothing in the sub-section shall operate to restrict the issue of licences for the export of tea expressed to be sold with export rights. The other provisions are not material in deciding this group of appeals.

Trade in tea in the State of Kerala-intemal as well as export-is carried on through certain defined channels.

A manufacturer of tea applies for and obtains from the Tea Board allotment of export quota rights on payment of the necessary licence fee. The manufactured tea in chests is then sent to Mis. T. Stanes & Company Ltd. who warehouse the chests at Willingdon Island. Chests of tea are then sold by public auction through brokers at Fort Cochin. With the chests of tea for which export quota rights are obtained, export quota rights are sold by the auctioneer. At the auction sale, bids for tea chests with export quota rights are given by the agents or intermediaries in Cochin of foreign buyers.

Tea chests are delivered at the warehouses by MI s. T.

Stanes & Company Ltd. to the purchasers whose bids are accepted. The agents or intermediaries of the foreign buyers then obtain licences from the Central Government for export of tea chests under the export quota rights vested in them under the purchases made at the auction sales.

Tea cannot therefore be exported otherwise than under a licence: such a licence may be issued to a manufacturer or to the purchaser of the quota granted by the Central Government to the manufacturer when tea is sold with export rights. When auctions of tea with the export rights are held at Fort Cochin, it is in this group of appeals common ground, sellers on whose behalf the auctioneer acts as the agent know that bids are offered by the buyers of tea for the purpose of export. It is also known that the bidder is an agent . or an intermediary of a foreign buyer.

81wA, J.

11161 !~ t!:e ~!!!e. hy !!!!C!!~!! to the agent or intermediary of Be.• 11onr& the foreign buyer, in 'the course of export wiihin foe mean- ~~~~ ing of Art. 286(1) of the Constitution? If the sale is in the ..,.. 0t1o<r°":""' course of export out of the territory of India, any State law

v. which imposes or authorises the imposition of a tax on such ~.i'c~' sale is, because of Art. 286(1)(b), invalid. Before the Consti- ' tution was amended by the Constitution (Sixth Amendment> a..i ou.u.

Act, 1956, there was no legislative guidance as to what were

J transactions of sale in the course of export out of the terri-

BW. • tory of India. But by the Constitution (Sixth Amendment> Act, cl. (2) of Art. 286 was substituted for the original clauses, and thereby the Parliament was authorised to formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in cl ()).

The Parliament has under the Central Sales Tax Act (74 of

1956) enacted by s. 5 that "a sale or purchase of goods shall 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 p_urchase 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 was legislative recognition of what was said by this Court in the .State of Travancore-Cochin and others v. The Bombay Company Ltd(') and State of Travancore-Cochin and others v. Shanmugha Vilas Cashew Nut Factory and others(') about the true connotation of the expression "in the course of the export of tlie goods out of the territory of India" in Art. 286(1) (b)., A transaction of sale which occasions export, or which is effected by a transfer of documents of title after the goods have crossed the customs frontiers, is therefore exempt from sales-tax levied under any State legislation.

The appellants set out in their respective petitions the manner in which sales tax of tea chests were conducted at Fort Cochin and in certain petitions affidavits in rep)y even were not filed by the State of Kerala. In the remaining petitions in which affidavits in reply were filed it was contend-· . ed that the export of goods was made. by the purchasers who had taken delivery of the goods from the manufacturers in Travancore-Cochin and in pursuance of the export licences obtained by the purchasers goods were exported_ but such subsequent export by the purchasers did not affect the character of the sales by the manufacturers to the purchasers. It is true that there is no finding by the Sales-tax authorities that the respective purchasers at the auction were agents of foreign buyers, but the Advocate appearing on behalf of the State argued the case before the High Court on the footing that the bids were offered at the auctions by

(') [1952] S.C.R. 1112.

(') [1954] S.C.R. 53.

the agcnt5 or intermediaries or foreign buyers, and the Court 1964 proceeded to dispose of the case before it on that footing.

Ben Garno Vaidialingam J., held that transactions of sale were g;~;,:,:; 1•;/:!;:; complete when bids for purchase of tea together with the and bu,.,, export quota rights were accepted, and the sellers had no B<Uu T;;;. Oifi-,

concern with the actual export which was effected by the Special Oirck, auction purchasers to their foreign principals. It could not, ErnakulaM therefore, in the view of the learned Judge, be held that and OtMra the sales in question had as an integral part thereof occas1u.i., J. sioned export; that is, , the sales preceded the export and were not in the course of export. The High Court in appeal held that the ban imposd by Art. 286(l)(b) predicated a casual connection between the sale and the export-a connection which is intimate and real. The sale, it was said, must inextricably be bound up with the export and form an integral part thereof, so that without export the sale is not effectuated; but as the sale imposed or involved no obligation to export, there was no movement under 'the contract of sale and exemption claimed was not admissible. Correctness of this view is chaJlenged in this appeal.

To constitute a sale in the course of export of goods out of the territory of India, common intention of the parties to the transaction to export the goods followed by actual export of the goods, to a foreign destination is necessary.

But intention to export and actual exportation are not sufficient to POnstitute a sale in the course of export, for a sale by export "involves a series of integrated activities commencing from the agreement of sale with a foreign buyer and ending with the delivery of the goods to a common carrier or transport out of the country by land or sea. Such a sale cannot be dissociated from the export without which it cannot be effectuated, and the sale and resultant export form parts of a single transaction": State of Travancore- Cochin and others v. The Bombay Company Ltd.('). A sale in the course of export predicates a connection between the sale and export. the two activities being so integrated that the connection between the two cannot be voluntarily interrupted, without a breach of the contract or the compulsion arising from the nature of the transaction. In this sense to constitute a sale in the course of export it may be said that there must be an intention on the part of both the buyer and the seller to export, there must be obligation to export, and there must be an actual export. The obligation may arise by reason of statute, contract between the parties, or from mutual understanding or agreement between them, or even . from the nature of the transaction which links the sale to export. A transaction of sale which is a preliminary to exp:lrt of the commodity sold may be regarded as a sale for

(') (1952] S.C.R. 1112,

1964 export, but is not necessarily to be regarded as one in the Ben GoNn course of export, unless the sale occasions export. And to Nilgiri Plantation• occasion export there must exist such a bond between the

O°"'!.d"lftoonoor contract of sale and the actual exportation, that each link

a v. " is inextricably connected with the one immediately precedsai.. Tax Olflcer, ing it. Without such a bond, a transaction of sale cannot be

~~·· called a sale in the course of export of goods out of the

and Dlh<r• territory of India. There are a variety of transactions in which

Shah, J. the sale of a commodity is followed by export thereof. At one end are transactions in which there is a sale of goods in India and the purchaser immediate or remote exports the goods out of India for foreign consumption. For instance, the foreign purchaser either by himself or through his agent purchases goods within the territory of India and exports the goods and even if the seller has the knowledge that the goods are intended by the purchasers to be exported, such a transaction is not in the course of export, for the seller does not export the goods, and it is not his concern as to l;!ow the purchaser deals with the goods. Such a transaction 'Vithout more cannot be regarded as one in the course of export because etymologically, "in the course of export", contemplates an integral relation or bond between the sale and the export. At the other end is a transaction under a contract of sale with a foreign buyer under which the goods may under the contract be delivered by the seller to a common carrier for transporting them to the purchaser. Such a sale' would indisputably be one for export, whether the contract and delivery to the common carrier are effected directly or through agents. But in between lie a variety of transactions in which the question whether the sale is one for export or is one in the course of export i.e., it is a transaction which has occasioned the export, may have to be determined on a correct appraisal of all the facts. No single test can be laid as decisive for -determining that question. Each case must depend upon its facts. But that is not to say that the distinction between transactions which may be called sales for export and sales in the course of export is not real. In general where the sale is effected by the seller, and he is not connected with the export which actually takes place, it is a sale for export. Where the export is the result of sale, the export being inextricably linked up with the sale so that the bond cannot be dissociated without a breach of the obligation arising by statute, contract or mutual understanding between the parties arising from the nature of the transaction, the sale is in the course of export.

. It may be conceded that when chests of tea out of the export quota are sold together with the export rights, the goods are earmarked for export, and knowledge that the goods were purchased by the bidders for exporting them to

7 S.C.R.

SUPREl\'IE COURT REPORTS 713

the foreign principals of the bidders must clearly be attri-

J.9G4 butable to them. Does the co-existence of these circumstances, Ben Gorm impress upon the transactions of sale with the character of N(ilgiri Plan0tatio ..

f h . f .ompan11. oonoor a transaction in the course of export out o t e terntory o and 'other• India? We are unable to hold that it does. That the tea , v. h Id h h ht t k ales 'l'e"O"ii:ir, c ests are so toget er wit export ng s 1mpu_.es no~- Special cfrc1e. ledge to the seller that the goods are purchased with the m- Ernal-ulam tention of exporting. But there is nothing in the transaction and Othm from which springs a bond between the sale and the in- Shah, J, tended export linking them up as part of the same transaction. Knowledge that the goods purchased are intendd to be exported does not make the sale and export parts of the same transaction, nor does the sale of the quota with 'the sale of the goods lead to that result. There is no statutory obligation upon the purchaser to export the chests of tea purchased by him with tile export rights. The export quota merely enables the purchaser to obtain export licence, which he may or may not obtain. There is nothing in Jaw or in the contract between the parties, or even in the nature of the transaction which prohibits diversion of the goods for internal consumption. The sellers have no concern with the actual export of the goods, once the goods are sold. They have no control over the goods. There is therefore no direct connection between the sale and export of the goods which would make them parts of an integrated transaction of sale in the c011rse of export.

Decided cases on which reliance was placed at the Bar have mainly been of cases in which the benefit of the exemption of Art. 286~1 )(b) was claimed in respect of sales preceding the export sale. Such a sale preceding the export could not, it was held, without doing violence to the language of Art. 286(1)(b), be given the benefit of the exemption from tax imposed by State legislation merely because of its historical connection with the export sale. In a majority of the cases to be presently referred there were at least two salessale under which goods were procured followed by a sale

uner which the goods so procured were exported, and the

claim of the Revenue to tax the first transaction was upheld.

It may be regarded as therefore settled law that where there are two sales leading to export-the first under which goods are procured for sale and the property in the goods passes with_in the territory ?f I1:1dia, and the second by the buyer to a foreign party_ resultmg m export-the first cannot be regarded as a sale m the course of export, for a sale in the course of export must be directly and integrally connected with the

expor~. It cannt also be predkted that every sale which results m export 1s !o be regarded as sale in the course of export. We may bnefly refer td the cases whidh have come before this Court. Justification for 'citation of the cases is

1964 not to evolve a pinciple from the actual decisions, but t<> Btm Gorm highlight the grounds on which the decisions were rendered.

Nilgiri PZanta1iona The first case which came before this Court in which Art.

0""'!; d"og,,"°:""' 286(l)(b) fell to be construed was the State of Tmvancorev.

Cochin and others v. The Bombay Company Ltd.('). The Sa1u Ta:. Ofoo,-, ;;;;;~;;;;~ who had exported coir products to foreign purcha- Bp"ial Circle, Brnaktl/a"' sers claimed exemption from sales-tax relying upon Art. an4 OU....1 286(l)(b). The Revenue authorities held that property in 8haA the goods having passed within the State, the transactions

' J. were liable to tax. The High Court disagreed with that view, holding that a sale in the course of export was not merely a sale when the goods had crossed the customs frontiers, but included a transaction which precede export. This Cou.rt agreed with the High Court. In appeal Patanjali Sastri C.J., speaking for the Court observed that sales which occasioned export were within the scope of the exemption under Art. 286(1)(b). But that was a case in which on the facts found there could be no dispute that the sale by the assessee occa- .. sioned export, for in pursuance of the contract the assessee had exported the goods sold.

The next case which came before this Court was the State of Travancore-Cochin and others v. Shanmugha Vilas Cashew Nut Factory and others('). It was held by this Court that purchases in the State made by the exporters for the purpose of export are not v1ithin the exemption , granted by Art. 286(1)(b) of the Constitution. Patanjali Sastri C.J., speaking for the majority of the Court observed: . "The word 'course' etymologically denotes movement from one point to another, and the expression 'in the couhe of' not only implies a period of time during which the movement is in progress but postulates also a connected relation. • • • • A siile in the course of export out of the country should similarly be understood in the context of clause (!)(b) as meaning a sale taking place not only during the activities directed to the end of exportation of the goods out of the country but also as part of or connected with such activities." He further observed that the phrase "integrated activities' cannot be dissociated from the export without which it cannot be effectuated, and the sale and the resultant export form parts of a single transaction. It is in that sense that the two activities-the sale and the export-were said to be integrated. But a purchase for the purpose of . export like production or manufacture for export, being only an act

(') [1952] S.C.R. 1112. (') h954] S.C.R. 53.

preparatory to export could not be regarded as an act done 1964 "in tJ...- -·-.... _,.. ... ._ ____ ..,._.. ... , .. 1.~ n .... .. -~, t r.& .. i. ... terr't --- .. u"' ~Ulo>C UL i.UC eApu11. \.11. Lil" C'-'VU~ Vw. .. ...,1. LlJV 1 ory Ben Gorm of India".

Nilgiri Planta1io ..

Company, OOMtOOr In the State of Madras v. Gurviah Naidu and Company an<i 01/Nr• Ltd.('), S. R Das, Actg. C.J., observed that an assessee who sa1u'1'",;,,0lfar, goes about purchasing goods after securing orders from Sl"<ial Oircla. foreign purchasers is not exempt from liability to pay tax by !::= virtue of Art. 286(1)(b) of the Constitution in respect of the purchases made by him because those purchases do not them- ShaA, J. selves occasion the export. Goods were undoubtedly bought for the purpose of export, but the purchase did not occasion the export within the meaning of Art. 286(1)(b) of the Constitution.

Jn State of Mysore and another v. Mysore Shipping and Manufacturing Co. Ltd. and others('), it was held that where goods were sold to a Jicenced exporter by the assessee and the licenced exporter sold the goods to a foreign purchaser it could not be said that the first was in the course of export. The licenced exporter was not an agent of the lissessee

and the two sales could not have both occasioned the export : it was only the second sale which did that, and the assessec not being a party to it either directly or through the exporter or through his agents, the first sale with which alone the assessee was associated did not "Occasion the export. .If it did not, then it hardly matters whether the goods were exported through the instrumentality of the exporter or not, because all sales that precede the one that occasioned the export were taxable. In this case the Court expressed the opinion that for the sale to be one which occasions the export it must directly concern the assessee as an exporter.

In East India Tobacco Company v. The State of Andhra Pradesh and another(') this Court held that only the sale under which the export is made that is protectea by Art. 286(!)(b) of the Constitution and a purchase made locally by a firm doing business of exporting tobacco, which preceded the export sale did not fall within its purview though it is made for the purpose of or with a view to export.

One more judgment of this Court may be .noticed: B. K. Wadeyar v. Mis. Daulatram Rameshwarlal('). The assessees in that case sold goods to an Indian purchaser, who had .ag£ee<!, to sell them to a foreign buyer. The sales by the

asssees were on F.O.B. conttacts under which they

(') A.LR. (1956) S.C. 158.

(') A.I.R. (1958) S.C. 1002.

(') [1963] 1 S.C.R. 404.

' 1961 continued to be the owners" till the goods crossed the cus- Ben Gorm toms barrier, and entered the export stream. It was heid by Nilgiri Plantations this Court that since the goods remained the property of the

Cof.'itflth~'::," 00 ' assessees till they reached the export stream, the sales were v. exempt from tax imposed by a State under Art. 286{1)(a). &! .. T"" Officer, This was undoubtedly a case of two sales resulting in ex- Special Circle,

Ernakulam port, and the first sale was 'held immune from State taxaand OU.era tion: but that was so because the property in the goods had passed to the Indian purchaser when the goods were in the

BW, J. . export stream. The first sale itself was so inextricably connected with the export that it was regarded as a sale in the course of export.

Mr. Setalvad on behalf of the appellants placed strong reliance upon the judgment of the Madras High Court in M. R. K. Abdul Salam and Company v. 'The Government of Madras('). That was a case in which a dealer in the State of Madras in hides and skins after purchasing raw hides tanned them and sent them to Kovai Tanned Leather Co.

Madras who acted as the dealer's agent for sale. Kovai Tanned Leather Company sold the goods to Dharamsee Parpia . who acted as an agent of Srivan Brothers <Eastern) Ltd .•

London. There was another transaction between Kovai Tanned Leather Co. and Gordon Woodrolle and Company Ltd. who acted as agents for a foreign principal. The Salestax Tribunal refused to accept the transaction to Dharamsi Parpia as an export sale on the ground that Kovai Tanned Leather Company delivered the goods to the exporter- Dharamsi Parpia-and thereafter the xporter obtained the bills of lading, and that the sale became complete in the Madras State before shipment, and it was on that account not a sale in the course of export. The High Court disagreed with that view. Jagadisan J .. speaking for the Court observed.:

"Where there is. privity of contract between the

foreign buyer and the seller in the taxing territory and the concluded sale between them occasions the export even if the property in the goods sold passes within the territory the transaction is nevertheless one in respect of which Article 286 imposes a ban on the State to levy tax." We are not concerned to decide whether there was evidence in that case on which the High Court could come to the conclusion that the sale occasioned the export. But Mr.

Setalvad relied upon the observation in support of the proposition that in all cases where there is a contract for purchase of goods in the taxing territory, between a local merchant and a foreign buyer acting through his agent, and the

(')13 S.T.C. 629.

goods are after purchasing the same exported by the agent,

I961 the transaction must be deemed to be one in the course of Ben Gorm export. We are unable to accept that contention. We do notNi!giri Plantations read the judgment as laying down any such proposition, and

00 ":!,.'d"bih~;:noor none such is legitimately deducible. The second transaction v. in'favour of Gordon Woodrolfe & Co. was found to be one Sal8 "T.ax 0 0r. h" h th ods ed be d th to pecia! '"1'• m w 1c property m e go pass yon e cus ms Erna1:o,1a,. frontier. Such a transaction would indisputably be a sale and Otliera in the course of export.

In our view the transactions of sale in the present case did not occasion the export of the goods, even though the appellants knew that the buyers in offering the bids for chests of tea and the export quotas were acting on behalf of foreign principals, and that the buyers intended to export the goods. There was between the sale and the export no such bond as would justify the inference that the sale and the export "formed parts of a single transaction or that the sale and export were integrally connected. The appellants were not concerned with the actual exportation of the goods. and the sales were intended to be complete without the export, and as such it cannot be said that the said sales occasioned export. The sales were therefore for export, and not in the course of export.

The appeals therefore fail and are dismissed with costs.

One hearing fee.

Slla/1, J.

AYYANGAR, J.-We regret our inability to concur in Ayyangar, J. the order that these appeals should be dismissed. We are clearly of the opinion that the appeals should be allowed.

This batch of 18 appeals which have been heard together are directed against a common judgment of the High Court of Kerala and are before this Court by virtue of special leave granted to the appellants. The appellants filed writ petitions in the High Court which were dismissed by the learned Single Judge whose judgment was affirmed on appeal by a Bench of the High Court. It is from this judgment that these appeals have been brought.

The appeHants. are 18 tea estates wn1cn llft: carrywg on the busi; iess f jlfOwing and manuracmnng rea m 1nm estates. Thelf clallll IS that the teas grown by them have i:>een sold by them "in the course of the export of goods out of the territory of IRdia" within Art. 286(1)(b) of the Constitution and they, therefore, claim that the State of Travancorhin in which these sales took place was not entitled to impose sales tax upon these sales.

The question for consideration is whether these sales effected by the fpella.nts are, as they claim, sales "in the course of export . It is common ground that the tea sold

1964 under the transactions involved in these appeals was actual-

B•~ Gorm ly exported out of the territory of India. Doubtless, this cir- N;/giri PlamaJio•• cumstance would not per se render the sales which preceded

Company Coonoor the export "sales in the course of export" but the argument

and Ut11e'8 b . d . d" ti d v. su 1111tte to us 1s that these exports are so rrec y an 1m- Sales Tax O.tfiur, mediately linked up with the sales effected by the appellants

8 PE,~!f,,'{.';;;· and so integrated with them that the two form part of the and Others same transaction as to render the sales "sales in the course of export".

Ayyarigar, J.

It was presented in this form, relying on the decision of this Court in State of Travancore-Cochin v. Shanmugha Vilas Nut Factory(') where the learned Chief Justice observed:

"The word 'course' etymologically denotes movement from one point to another and the expression 'in the course of' not only implies a period of time during which the movement is in progress but postulates also a connected relation ... . . .. . .. . . A sale in the course of export out of the country should be understood in the context of Art. 2860 )(b) as meaning a sale taking place 'not only during the activities directed to the end of exportation of the goods out of the country, but also as part of or connected with such activities.' ............ The previous decision ............ emphasised the integral relation between the two where the contract of sale itself occasioned the export as the ground for holding that such a sale was one taking place in the course of export."

It is this integrality that is involved in the concept which is expressed by the words that "the sale that occasions the export" is "a sale in the course of export".

The details of the sales on which tax is sought to be levied by the respondent, together with the facts relating thereto, as well as the several contentions urged before us and the decisions on which reliance is placed on either side have all been narrated in the judgment just now pronounced and we do not think it necessary to restate them. Similarly, the provisions of the Tea Act, 1953 and the rules framed thereunder so far they are relevant for the decision of the question involved in these appeals have also been set out and so we are not repeating them either. We shall confine ourselves to the very restricted area of our disagreement with our learned brethren which has occasioned this separate judgment.

( ') [1954] S.C.R. 53.

As preliminary to the discussion of the question involved, we shall put aside certain types of transactions as reg!l!ds . ft Gorm • which there is no dispute that they clearly fall on one side ilgiri P~ of the line of the other. On the one side of the line would °"!'d"~':" be the case where a seller in pursuance of a contract of sale v. with a foreign buyer puts the goods sold on board a ship 8'J/;:.:f.f0'/!!:: •

bound for a foreign destination. Such a sale would be an Emahlam "export sale" which would undoubtedly be within the conand Other• stitutional protection of Art. 286(l)(b). In regard to this type,

AW""''"· J. however, we would make this observation. In such a case we consider that it would be immaterial whether or not with reference to the provisions of the Sale of Goods Act, read in conjunction with the terms and stipulations of any particular contract, the property in the goods passes to the buyer on the Indian side of the customs frontier or beyond it. In either event the sale would have occasioned the export, for the sale and the export form one continuous series of trans- . actions, the one leading to the other-not merely in point of time but integrated by reason of a common intention which is given effect to. In such a case it would be seen that there is but one sale-to the foreign buyer "which occasions the export", and which is implemented in accordance with the terms of the contract by an actual export which is the sine qua non of "a sale in the course of export".

A case on the other side of the line would be one where the sale is e.ffected to a resident purchaser who effects the export by sale of the goods purchased to a foreign buyer.

Here the first sale to the buyer who enters into the export sale would not be a "sale in the coutse of export" for it would not be the particular sale which occasions the export, notwithstanding that the purchase might have been made with a view to effect the export sale, or to implement a contract of sale already entered into with a foreign buyer.

That such a sale is not one "in the course of export" has been repeatedly held by this Court (See State of Travancore- Cochin v. Shanmugha Vilas Cashew Nut Factory('), State of Madras v. Gurviah Naidu and Co. Ltd.('), State of Mysore

v. Mysore Spinning and Manufacturing Co. Ltd.(') and East India Tobacco Co. v. The State of Andhra Pradesh(').

This second type of case involves two sales-one to a resident purchaser who purchases it with a view to effect an export and the second, the export sale or sale in the course of export. by the purchaser to a foreign buyer. The existence of the two sales and the consequent dissociation between the

(') [1954] S.C.R. 5a.

(')A.LR. 1956 S.C. 158 = 6 S.T.C. 717.

(')A.LR. 1958 S.C. 1002.

l9ii4 first sale and the export causes a hiatus between that sale Ben Gorm . and the export and destroys the integrality of the two events Nitgiri J'/,.n/a1fo,., or transactions viz., the sale and the factual export.

Company, Q•mnoor

 and C/l"rs The sales involved in the present appeals are not of the v, 2nd type for here there is a single sale 'direct to a foreign Sale'3 Tr1.x Officr>r,

Bpecinl Circle, buyer, the contract being concluded with and the goods sold Er""""""" delivered to his agent. It is hardly necessary to add that for and Otltm purposes relevant to the decision of the question before us

Ayyanga,-, J. there could be no difference in legal effec~ between a saie to a foreign buyer present in India to take delivery pf the goods for transport to his country and a sale to his resident agent for that purpose. Pausing here we should mention that there is no dispute (!) that the persons who bid at the auction at Fort Cochin and purchased the teas of the assessees were agents of foreign buyers or (2) regarding their having made these purchases under the dire'Ctions of their foreign principals in order to despatch the goods to the latter-a contractual obligation that they admittedly fulfill ed.

Under the sales here involved, though to foreig)l buyers and intended for export, the goods were not under the terms of the contract of sale placed by the seller on board the ship in the course of its outward voyage and that is the only reason why they do not conform strictly to the first type <>f an export sale which we have described earlier.

But the question is, do. not these sales also "occasion the export" and in that.sense sales "in the course of export".

The test which has been laid down by this Court for determining the proximity of the connection between the sale and the export so as to bring the sale within the constitutional exemption in Art. 286(J)(b) is the integrality of the two events-the sale and the export. The question to be answered is therefore whether the sales now under consideration do not form part and parcel of a single integrated transaction with the export or are they distinct, distant and mediate, the sale and the export being r.elated to each other only in sense of one leading to the other or the one succeeding the other merely in point of time. If the former, the sales are within Art. 286(1)(b), but if the connection between the two is as described later, they are outside the exemption.

What then are the facts of the present case. Before restating them for their being examined in the light of the criteria we have. just specified, it is necessary to emphasise certain matters. When the assessees sought an opportunity to adduce evidence as to the facts which they offered to prove to establish their claim to the constitutional protection, the assessing authorities accepted their statements as correct and did not desire them to adduce evidence and so

no detailed evidence was led. If therefore on an examination 1964 of the legal position it is now found that there is any lacunae Ben Gorm in the statement of facts or in the evidence whose existence Nilgiri Plant-Olio•• would have brought the sales within the exemption, it ap- Ccm:::; Yog;:,"'ior pears to us that the appellant-assessees should in fairness v. be afforded an opportunity to adduce evidence to establish Sales Tax OJfiw,

I I b .

Id b Special Circle, their case. We say so particu ar y ecause 1t cou y no Ernal..Jam means be said that the law was clear as to the facts necesand Others sary to be proved to claim exemption in the case of sales of the type now before us. ·

To proceed with the facts, the assessees had applied for and obtained export quotas with a view to effect exports of a quantity of tea grown and processed by them. The sales at Fort Cochin were effected along with the export 'rights granted to the Appellant estates, the contract being that the purchaser at the auction would obtain a transfer of the export quota right of that estate whose tea he purchased to the extent needed to effect export of the tea purchased. The purchases were thus made only on the basis that the export rights of the seller would be transferred to the buyer and on the basis of these transfers the purchasers obtained export licences from Government for exporting the tea and effected the exports. The purchases were made by agents of foreign principals and it was part of the contractual duty of these agents vis-a-vis the principals to consign the goods purchased to them without avoidable delay. There was proof by the certificates produced that these agents had fulfilled their obligations to their principals and had shipped the goods bought as early as practicable to foreign destinations.

The principal contention urged by the learned Advocate-General of Kerala to persuade us to hold that the sales did not "occasion the export" was based on two circumstances: (!) that it was not part of the contract between the assessees and their buyers that the goods shall only be exported and not sold in the local market. In other words., it was urged that in the absence of such a specific term of contract it would have been open to the . buyers to have diverted the goods from being exported and to have sold them locally. This was so far as the contractual relationship between the assessee-sellers and the buyers from them under the sale was concerned, (2) dealing next with the effect of the provisions of the Tea Act, 1953 and the rules framed thereunder on the sales effected by the assessees, the submission was that s. 21 and other provisions of the Tea Act, 1953 merely enabled an export to be effected and did not require the goods in regard tci which they were issued to be exported. In other words, it was stressed that the Tea Act did not impose any obligation on the quota holder or his transferee

AyYangar, J.

BenGorm Nilgiri Plantations Company, Ooonoor

tind Otlier1J

Balu Tax Ojficer,

Special Circle,

Efflllkulam

and Othf'rs

Alf!lllngar; J.

to export the goods covered by the quota and that consequently the buyer-even after taking a transfer of the export quota rights alongwith his purchase was not compelled by law to exp?rt and was not precluded from failing to export and sellmg the goods locally, On this reasoning the argument was that here was a purchase under which the purchaser was free to export or not to export and the mere fact that he chose to export would not render the sale to him one which occasioned the export or one "in the course of export".

We consider that these arguments do not sufficiently take into account the actualities of the situation, but proceed on investing on formal requirements a significance which is not warranted.

When learned counsel says that there was no term in the contract between the seller and the buyer that the goods purchased were not to be sold locally but have to be exported, he is right only in the sense that it is not any express term of the contract. But could it be said that that was not the implicit common understanding on which the entire transaction was concluded. The buyer was not interested in the purchase except on terms of the export quota rights being transferred to him and that was why the transfer of the export right was effected or contracted to be effected as part and parcel of the sale of the goods. Again, the buyer was an agent, who as we have stated earlier was not free to deal with the tea purchased by effecting a loGal sale, but was under an obligation to his foreign principal to export the goods purchased to a foreign destination. It was with such a buyr that the assessee entered into the transaction of sale.

On these facts we are satisfied that it was part of the understanding between the selle~ and the buyer, inferrable from all the circumstances attendant on the transaction that the buyer was, bound to export. Pausing here, we would add that, we understand that importance is attached in this context to the need of a term in the sale contract laying an obligation on the part of the buyer to export only for the purpose of demonstrating the intimate connection between the sale and the export for establishing that it was the sale that occasioned the export. If we are right, then what is of significance is the real and common intention of the two parties to the transaction-whether they contemplated the good~ purchased being sold locally, or whether they intended the goods sold being only exported and not whether there is such a term in the contract between the parties.

Coming next to the contention that the Tea Act does not compel export of goods covered by the quotas granted, we might mention that no evidence was led as to the prices

' •

7 S.C.R.

SUPHEME COURT REPORTS 723

prevailing in the local market as compared to that in the 1964 foreign countries where the principals of the resident buyers Ben Gorm resided, which would have disclosed whether a local sale of Nilgiri Plantations

the tea bought ostensibly fo"r export was in a commercial Company, Coonoor

. . h b d f 'b'I' h h 'f "nd Othm sense w1thm t e oun s o poss1 11ty, t oug 1 one went v, by the rationale underlying the provisions of the Tea Act Sales Tax Officer, and in particular ss. 17. 21 and 22, one gets the impression s~~~:i,,,?'~ 1 '• that export quota rights were considered to have a considerand 011, rs able value in the market which would be some indication that a buyer with an export quota would never sell in the Ayyangar, J. local market. Thus it might be that even though the statute does not in terms prohibit internal sale of tea purchased alongwith export quota rights, this could be explained by the circumstance that the right to export tea is considered a privilege which secures economic advantages to the exporter and hence there was no need for any statutory compulsion to do so. We are making this observation because Parlianient and the Central Government are keen on promoting exports and in the case of some commodities like sugar where the external price is lower than the local price. the regulations framed in that behalf require exports to be effected under compulsion. We consider therefore that the absence of a compulsive provision in the Tea Act requiring export of the quantity allotted to the estates, is not very material and that Parliament might well have left it optional with the estate owners• to export seeing that economic factors provided the requisite compulsion.

If there was a contract or understanding between the buyer and seller by which the latter was to export the goods bought, it is conceded the sale of the assessee did occasion the export and in our view on the facts established, we consider this condition satisfied.

We would therefore allow the appeals and set aside the assessment in so far as they included the sales involved in these appeals.

ORDER

In accor.dace wit!i the opinion of the majority, the appeals are d1Sm1ssed with costs. One hearing fee.

Appeal dismissed.

SALES TAX OFFICER, SPECIAL CIRCLE, ERNAKULAM AND ORS

P. B. GAJENDRAGADKAR, C.J.

K. N. WANCHOO, J.

c. SHAH

N. RAJAGOPALA AYYANGAR

Art. 286(l)(b)

Constitution of India

Art. 286(1)

Central Sales Tax Act, 1956

s. 5

Fort Cochin

Tea Act

India

Art. 286(l)(b)

Gajendragadkar

Shah

Sikri

Art. 286(l)(b)

Art. 286(i)(b)

Ayyangar

Art. 286(l)(b)

1963] 1 S.C.R. 404

Even though the Tea Act

Salea Tax Officer

BAall

M. C. Setalvad

I. B. Dadachanji

C. Mathur

Ravinder Narain

V. P. Gopa

an Nambiar

V. A. Seyid Muhammed

GAJENDRAGADKAR

SHAH

SIKRJ

WANCHOO

AYYANGAR

Art. 286(l)(b)

High Court of Kerala

Vaidialingam

Parliament

tea Act

s. 3(f)

Central Government

s. 3(g)

Section 17(1)

Section 18

Section 19

Central Nilgiri Pla1'lalioM Government

s. 20

Section 21

s. 21

Kerala-intemal

Mis. T. Stanes & Company Ltd.

Willingdon Island

Cochin

MI s. T.

Stanes & Company Ltd.

Art. 286(1)

Art. 286(1)(b)

Art. 286

Central Sales Tax Act

s. 5

Art. 286(1)

Kerala

Travancore-Cochin

Ben Garno Vaidialingam

Art. 286(l)(b)

Ben Gorm

s 1

Art. 286

Art. 286(1)(b)

Nilgiri PZanta1iona

Art.

0

Patanjali Sastri

Art. 286(1)(b)

Art. 286(1)(b)

Ben Gorm of India

Nilgiri Planta1io

S. R Das

Art. 286(1)(b)

Art. 286(1)(b)

Art. 286(!)(b)

[1963] 1 S.C.R. 404

Art. 286

Setalvad

Madras High Court

Madras

Kovai Tanned Leather Co.

Madras

Kovai Tanned Leather Company

Dharamsee Parpia

Srivan Brothers <Eastern) Ltd

Kovai Tanned Leather Co.

Gordon Woodrolle and Company Ltd.

Dharamsi Parpia

Jagadisan

Article 286

Gordon Woodrolfe & Co.

Art. 286(1)(b)

State of Travancorhin

Ayyarigar

Art. 2860

Tea Act, 1953

Art. 286(l)(b)

Sale of Goods Act

Nitgiri

Ayyanga,-

Art. 286(J)(b)

Art. 286(1)(b)

Tea Act, 1953

s. 21

Tea Act, 1953

Tea Act

AyYangar

Nilgiri Plantations

Coonoor

Tea Act

ss. 17

Parlianient


March 6

SUPREME COURT REPORTS [1964]

SUNIL KUMAR PAUL

STATE OF WEST BENGAL

(K. SUBBA RAO, K. C. DAS GUPTA AND RAGHUBAR DAYAL, JJ.f

Criminal Law-Offence under s. 409 I.P.C.-Case allotted for trial to Special Court-Special Judge appointed under the Criminal Law Amendment Act, if could try offences under Criminal Procedure Code, at the same trial-Alteration of conviction by High Court to one under s. 420-Legality thereof- Absence of charge under s. 420-Indian Penal Code 1860 (45. of 1860), ss. 409, 420-Code of Criminal Procedure, 1898 (Act 5 of 1898), ss. 236, 231-West Bengal Criminal Law Amendment (Special Courts) Act, 1949 (XXI of 1949) s. 4(2).

The appellant was tried and convicted by the Special Judge for an offence under s. 409 I.P.C. and sentenced to rigorous imprisonment for two years and to pay a fine of Rs. 2,000. On appeal, the High Court altered his conviction from an offence under s. 409 to one under s. 420 I.P.C. for cheating the employees of the State Bank, by representing a bll! as a genuine bill drawn by the Sub-Divisional Health Officer, and thereby dishonestly inducing the Bank's Staff to make over the sum of Rs. 1,763-6-0 to hlin and sentenced him to rigorous imprisonment for one year and to a fine of Rs. 2,000.

On appeal by certificate the appellant mainly contended

(i) that a case under s. 420 I.P.C. could not be allotted for 'trial to a Special Court by the Government when such an offence was not committed by a public servant while purporting to act as such public servant; (ii\ that the Special Court could not take recourse to the provision of s. 237 Code of Criminal Procedure and if it could, the requirements of s. 237 Code of Criminal Procedure were not satisfied and .consequently the High Court could not have altered the conviction from s. 409 I.P.C. to one under s. 420 and (iii) that the accused had been prejudiced on account of the absence of a charge under s. 420

I.P.C.

Held (i) that on the facts proved it must be held that the offence under s. 420 committed by the appellant would be committed by him as a public servant purporting to act as such, and that a case involving this offence also could have been allotted to the Special Court by the Government for trial. The Special Court was, therefore, competent to try the accused for this offence if the facts proved established it. Besides, the appellant could be tried by the Special Court for this offence in view of the proviso to s. 4 of the West Bengal Criminal Law Amendment Act.

Bhajahari Monda! v. State of West Bengal, [1959] S.C.R. 1276, distinguished.

(ii) that at the trial of the appellant for an offence under s. 409 I.P.C., in this case, the appellant could have also been charged for an offence under s. 420 l.P.C., in view of s. 236 of the Code of Criminal Procedure.

7 S.C.R.

SUPRE:\IE COURT REPORTS 71

1n view of the proviso to sub-s. (I) of s. 4 of the Act, the 1964 Special Court could have tried the appellant for the offence .1 Kp 1 under s. 420 I.P.C. It did not actually try him for that offence. ' ""' ; mar au It was however, open to it and to the appellate court to con-state of w; st Ben9'JI vict him of the offence under s. 420 l.P.C., when trying for an - offence under s. 409 I.P.C., in view of s. 237 of the Code of Criminal Procedure.

(iii) that fin the present case the appellant could not be said to be prejudiced in his conviction under s. 420 I.P.C. on account of the non-framing of the charge, and consequent nontrial, under s. 420 I.P.C. In fact, no question of i!Tegularity in the trial arises. The framing of the charge under s. 420 I.P.C. was not essential and s. 237 Code of Criminal Procedure itself justifies his conviction of the offence under s. 420 if that be proved on the findings on the record.

Case Law discussed.

CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 156 of 1961.

Appeal from the judgment and order dated June 15,

1961. of the Calcutta High Court in Criminal Appeal No. 745 of 1959.

D. N. Mukherjee, for the appellant.

P. K. Chakraborty and P. K. Bose, for the respondent.

March 6, 1964. The Judgment of the Court was deliver ed by

RAGHUBAR DAYAL, J.-Sunil Kumar Paul has pre RaghubarD.1yat, I ferred this appeal, after obtaining a certificate from the Calcutta High Court under Art. 134(l)(c) of the Constitution.

The facts leading to the appeal are these.

The appellant was a clerk in the office of the Sub-Divisional Health Officer at Barrackpore in 1955-56. He used to prepare bills of the establishment, to present them at the Sub-treasury and later present them at the State Bank at Barrackpore, to receive payment in cash and to make over that amount to the Sub-Divisional Health Officer. Certain bills were drawn under the heading '38-Medical'. Certain bills were to be drawn under the heading '39-Public Health'.

Some other bills were drawn under other headings.

On October 5. 1956, the appellant presented a bill for Rs. 1.769 out of which a sum of Rs. 5-10-0 was to be credited in the Postal Life Insurance Ledger and the balance of Rs. 1,763-6-0 was to be received in cash. This bill was duly passed by the Sub-Treasury and was subsequently presented to the Bank on October, 6, 1956 for payment of Rs. 1,763-6-0.

The Bank paid this amount to the appellant. The amount was

1964 not paid to the Sub-Divisional Health Officer. In fact, the &nil Kumar Paul records of the Office of ~~ Sl!b-Divisional Health Ocer did v. not refer to any such bill bemg prepared and submitted to 81a1e of Ww Bengal the Sub-Treasury and the Ban~ for payment. .

BagAubar Dayal, J.

A bill for practically the same items which were mentioned in the bill cashed on October 6, was however presented on October I, 1956. It was for an amount of Rs. 1,767 out of which Rs. 5-10-0 were to be credited to the PLI account ledger and the balance of Rs. 1,761-6-0 were to be paid in cash. The amount of this bill was received on October 1, and was duly handed over to the Sub-Divisional Health.

Officer. It may be mentioned that this bill cashed on October 1, 1956 was at first prepared for Rs. 1,769 and the amount to be received in cash was to be Rs. 1.763-6-0 but prior to this encashment, a correction was made at some stage, and the bill was reduced by Rs. 2 in the total amount and consequently in the amount to be paid in cash.

The fact of the presentation of a bill for its encashment of Rs. 1,763-6-0 on October 6, 1956 came to the notice of the Sub-Divisional Health Officer a.t the instance of the Accoul)tant General and on enquiry it was found that no such bill had been actually presented by his office for encashment and that rio such amount was received by him. This led to a complaint and further enquiries and investigation which ended in the prosecution of the appellant.

The case was made over to the Special Judge by the Government in view of the provisions of the West Bengal Criminal Law Amendment (Special Courts) Act, 1949 (W. B. Act XXI of 1949), hereinafter called the Act, as it involved an offence punishable under s. 409 I.P.C. The Special Judge tried the appellant for that offence and convicted him and sentenced him to rigorous imprisonment for two years and to pay a fine of Rs. 2,000. The appellant went in appeal to the High Court of Calcutta. The High Court agreed with the appellant's contenion that no offence under s. 409 l.P.C. had been made out, but held that he was proved to have committed an. offence under s. 420 I.P.C. It accordingly altered his conviction from an offence under s. 409 l.P.C. to one under s. 420 l.P.C., for cheating the employees of the State Bank, Barrackpore, by representing that the bill for Rs. 1,769 gross and Rs. 1.763-6-0 cash drawn on October 6, 1956, was a genuine bill drawn by the Sub-Divisional Health Offieer, and thereby dishonestly inducing the Bank's staff to make over the sum of Rs. 1,763-6-0 to him and sentenced him to rigorous imprisonment for one year and to a fine of Rs. 2,000. It is against this order that this appeal ha.s been preferred.

The facts found by the High Court are sufficient to 1964 justify the finding that the appellant committed the offence Suni! Kumar Pa.J

under s. 420 l.P.C. Learned counsel for the appellant has 811 ,, wY't 8 1 I h f II , . aeo, " maa 'llrgec t e o owing pomts: __

(I) A case involving an offence unde1 s. 420 l.P.C. cannot be allotted for trial to a Special Court by the State Government when such an offence is not committed by a public servant while purporting to act as such public servant.

(2) The Special Court could not take recourse to the provisions of s. 237 Cr. P.C., and if it could, the requirements of s. 237 Cr. P.C. were not satisfied in the present case, and that consequently the High Court could not have altered the conviction of the appellant from ari. offence under ' s. 409 l.P.C. to one under s. 420.

(3) The ingredients of an offence under s. 420 I.P.C.

ere neither lleged nor proved by the prosecution. \

(4) The accused has 'been prejudiced on account of the absence of the necessary allegations and the omission to frame a charge for an offence under s. 420 l.P.C. and therefore the provisions of s. 537 Cr. P. C. would not cure this defect in trial.

To appreciate the first contention, reference may be made to the relevant provisions of the Act. They are:

"4(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1898, or in any other law, the offences specified in the Schedule shall be triable by Special Courts only:

Provided that when trying any case, a Special Court may also try any offence other than an offence specified in the Schedule. with which the accused may under the Code of Criminal Procedure, 1898, be charged at the same trial.

(2) The distribution amongst Special Courts of cases involving offences specified in the Schedule, to be tried by them, shall be made by the State Government

Raghubar Dayal, J.

19Gl 5.

tt; unil Kumar Paul

Slate of U' est lJen.g{(l

(2) Save as provided in sub-section (I) ......... the provi- Rauhubar Dayal, J, sions the Code of Criminal Procedure, 1898, shall, so far as they are not inconsistent with this Act, apply to the proceedings of a Special Court; and for the purposes of the said provisions, a Special Court shall be deemed to be a Court of Session trying cases without a Jury, and a person conducting a proseC1Jtion before a Special Court snail be deemed to be a Public Prosecutor."

THE SCHEDULE • • • * •

2. An offence punishable under section 409 of the Indian Penal Code, if committed by a public servant or by a person dealing with property helonging to Government as an agent of Government in respect 9f propertywith which he is entrusted, or over which he has dominion

in his capacity of a public servant or in the way of his business as such agent.

3. An offence punishable under section 417 or section 420 of the Indian Penal Code, if committed by a public servant or by a person dealing with property belonging to Government as an agent of Government, while purporting to act as such public servant or agent.

• ' The Government notification allotting the present case to the Special Court is not on the record and therefore what its actual contents were cannot be stated with any precision.

It may however be assumed that it mentioned the offence involved in the case to be that under s. 409 I.P.C., and, possibly, did not state the various facts which went to establish that offence against the appellant.

Section 409 1.P.C. is mentioned in the Schedule referred to in sub-s. (2) of s. 4 of the Act. The State Government was therefore competent to allot the case involving that offence to the Special Court. In fact it had ((JI allot the case to the Special Court in view of the provision of sub-s. (!) of s. 4 to the effect that the offences specified in the Schedule shall be triable by Special Courts only. The question therefore really is whether the Special Court could try the appellant

- ' ·.,. '

7 S.C.R. ... SUPRfilIE COURT REPORTS 75

for the offence uder s'. 420 I.P.C. An -offence under s. 420 196l l.P.C. when committed in certain circumstances is also mensunil Kumar Paul tioned in the Schedule. It has to be tried by Special Courts v. 1 only when it is committed by a public servant while purport- 81"" a/ West Benga ing to act as such. There is no doubt that the appellant is a Raghubar Dayal, J. pub!ic servant. This has not been disputed.

Learned counsel for the appellant, Mr. Mukherjee, has urged that the expression 'while purporting to act as such public servant' be construed to mean 'while purporting to act in the discharge of official duties' and that presentation of a false bill could not be in the discharge of official duty.

Such presentation may not be in the discharge of official duty, but the question is different and is as to whether the presentation of a false bill was made by the public servant purporting to do so in the discharge of his duties. The appellant did present the false bill purporting to present it in the discharge of his duties as a clerk of the Office of the Sub-

Divisional Health Officer who was duly authorised to present bills and cash them.

Reliance is placed on the case reported as Bhajahari Monda! v. The State or West Bengal(') in support of the contention that the appellant should not have been tried by the Special Court of the offence under s. 420 _ I.P.C. when the case was allotted as one involving an offence under s. 409 I.P.C. The facts of that case were very different. The order allotting the case mentioned the offence of which the accused was to be tried to be an offence under s. 161 read withs. 116 I.P.C. The order was made on November 27, 1952. Prior to this date, on July 28, 1952, abetment of an offence under s. 161 I.P.C. was made a distinct offence under s. 165-A I.P.C. by the Criminal Law Amendment Act XLVI of 1952.

An offence under s. l 65A was not mentioned in the Schedule to the Act as it stood on November 27, 1952. This Court held that the notification of the Government making over the case to the Special Court was bad as the case made over related to no existing offence. Such cannot be said of the Government notification allotting the case in the present appeal to the Special Court, as on the date of such notification there existed an offence under s. 409 I.P.C. and it was included in the Schedule to the Act.

On the facts proved, it is not to be doubted that the appellant presented the bill for Rs. 1,763-6-0 at the State Bank on October' 6, purporting to act -as the clerk of the Sub-Divisional Health Officer. The bill presented was on behalf of that officer. The Bank made the payment to him as

(') [1959] S.C.R 1276.

·-~-:'J/./\"_'": ; \

- ( ' ' >, I

',".,) \'.'k-' ' '"· ~-~'-.- ('~-~:."; . \ ·>t" ,· . \ . ' .76 \''. • . SUPREME COtJR~ REPORTS [1964

~.\ '----o-~---- " . '1954 . the messenger of that officer duly authorised to receive pay- SunilK;;;;;;,. Paul ment in cash. It follo-ws that the offence under s. 420 com-

.· v. mitted by the appellant would be committed by him as a State of IV est Be1VJal public servant purporting to act as such, and that a case in-

Raghubar Dayal, J. volving this olfence also could have been allotted to the

Special Court by the State Government for trial. The Special Court was therefore competent to try the accused for "this offence if the facts proved established it.

Apart from the consideration that the offence of cheating of which the appellant-accused has been convicted fell within the offences mentioned in the Schedule, the appellant could be tried by the Special Court for this offence in view of the proviso to s. 4. The proviso authorizes the Special Court, when trying a case involving an offence specified in the Schedule to try any offence other than that offence with which the accused may be charged at the same trial in accordance with the provisions of the Code of Criminal Procedure.

The accused could be charged with an offence under s. 420 I.P.C. if he could be tried for this offence at the trial for an offence under s. 409 I.P.C. He could be so tried in view of ss. 236 and 237 Cr. P. C.

It is urged for the appellant that the prov1S1ons of s. 236 Cr. P. C. would apply only to those cases where there be no doubt about the facts which can be proved and a doubt arises as to which of the several offences had been committed on the proved facts. Sections 236 and 237 read:

"236. If a single act or series of acts is of such a nature that it is doubtful which of several offences the facts which can be proved will constitute, the accused may be charged with having committed all or any of such offences, and any number of such charges may be tried at once; or he may be charged in the alternative with having committed some one of the said offences.

Illustrations

(a) A is accused of an act which may amount to theft; or receiving stolen property, or criminal breach

df trust or chea.ting.

He may be charged with theft, receiving stolen property, criminal breach of trust and cheating, or he may be charged with having committed theft, or receiving stolen property, or criminal breach of trust or cheating .

7 S.C.R.

SUPREME COURT REPOR'I'S 77

237. If. in the case mentioned in section 236, the 1964

accused is charged with one offence, and it s..,.il Kumar Pam appears in evidence that he committed a different Staie of ;;;,,1 Bengal offence for which he might have been charged - under the provisions of that section, he may be h.OOr Dayal, J. convicted of the offence' which he is shown to have committed, although he was not charged with it.

Illustration

A is charged with theft. It appears that he committed the offence of criminal breach of trust, or that of receiving stolen goods. He may be convicted of criminal breach of trust or of receiving stolen goods (as the case may be) though he was not charged with such offence."

The framing of a charge under s. 236 is, in the nature of things, earlier than the stage when it can be said what facts have been proved, a stage which is reached when the court delivers its judgment. The power of the Court to frame various charges contemplated by s. 236 Cr. P. C. therefore arises when it cannot be said with any definiteness, either by the prosecutor or by the Court, that such and such facts would be proved. The Court has at the time of framing the

char; es, therefore to consider what different offences could be-made out on the basis of the allegations made by the prosecution in the complaint or in the charge submitted by the investigating agency or by the allegations made by the various prosecution witnesses examined prior to the framing of the charge. All such possible offences could be charged in view of the provisions of s. 236 Cr. P. C. as it can be reasonably said that it was doubtful asto which of the offences the facts which could be ultimately proved would constitute. The facts which must have been alleged prior to the stage of the framing of the charge in the present case must have been what had been stated in the charge-sheet submitted by the Investigating Officer, 24-Parg'anas, which is printed at p. 3 of the appeal record. This charge-sheet narrates in the column meant for the name of offences and circumstances connected with it:

"that on the 6th October 1956 Sunil Kumar Paul, a

Public servant in the employment of the office of the Sub-Divisional Health Officer. Barrackpore i.e., (clerk) dishonestly drew Rs. 1,763-6-0 excluding Postal Life Insurance deduction of Rs. 5-10-0 from the State Bank of India, Barrackpore Branch by submitting a false duplicate Estt. Pay Bill

Bunil Kumar Paul ...

Stale of WeBI Bengal

under head 39 for the month of September 1956 for the office of the said S.D.H.O., Barrackpore.

The money drawn was not credited to the office of the Sub-Divisional Health Officer, Barrackpore."

llO(IAul>ar Dayal, J. I .

. II . h f h h . . t 1s practlca y on t ese acts t at t e conviction of the appellant for an offence under s. 420 I.P.C. has been founded. It follows that the Special Court could therefore have framed a charge under s. 420 I.P.C. at the relevant time if it had been of the opinion that it was doubtful whether these facts constitute an offence under s. 409 I.P.C. as stated in the charge-sheet or an offence under s. 420 I.P.C.

When a charge under s. 420 I.P.C. could have been framed by the trial Court by virtue of s. 236 Cr. P.C. that Court or the appellate Court can, in law, convict the appellant of this offence instead of an offence under s. 409 I.P.C. if it be of the view that the offence of cheating had been established. This would be in accordance with the provisions of s. 237 Cr. P. C.

In Begu v. The King Emperor(') ss. 236 and 237 were construed by Viscount Haldane thus:

"The illustration makes the meaning of these wore.ls

quite plain. A man may be convicted of an offence, although there has been no charge in respect of it, if the evidence is such as to establish a charge that might have been made. That is what happened here. The three men who 'were sentenced to rigorous imprisonment were convicted of making away with the evidence of the crime by assisting in taking away the body. They were not charged with that formally, but they were tried on evidence which brings the case under s. 237."

This was approved by this Court in Ramaswamy Nadar

v. The State of Madras('). In this case, the accused, acquitted of an offence under s. 420 1.P.C. was convicted by the High Court of an offence under s. 403 J.P.C. This Court held that the High Court could do so. On facts, however, this Court did not find the offence under s. 403, proved.

In the State of A ndhra Pradesh v. Kandimalla Subbaiah(') it was held that while a Special Judge appointed under s. 6 of the Criminal Law Amendment Act (XL VI of 1952) had jurisdiction to try cases under s. 5 of the Prevention of Corruption Act, he could, under s. 7(3) of the Criminal Law Amendment

(') 52 I.A. 191.

(') [1958] S.C.R. 739.

(') [1962] 1 S.C.R. 194, 203.

7 S.C.R.

SUPREi\IE COURT REPORTS 79

Act try other offences under the Code of C:riminal Pro- 1964 cedure if the accused could be charged with them atsunil Kumar Paul the same trial and that therefore the accused could be tried 8

v. B al at the trial for an offence under s. 5 of the Preventale of West ""!! tion of Corruption Act for an offence under s. 120B read R09hu!>ar Dayal, J. with ss. 466, 467: 420 I.P.C. and that the other accused who had abetted the commission of these offences could also be tried. Sub-s. (3) of s. 7 of the Criminal Law Amendment Act provided that when trying any case a Special Judge might also try any offence other than an offence specified in • s. 6 with which the accused might, under the Code of Criminal Procedure, 1898, be charged at the same trial.

In support of his contentions, learned counsel for the appellant referred to the case reported as Nanak Chand v.

The State of Punjab(') wherein it was stated at p. 1212: . "The provisions of section 236 can apply only in cases where there is no doubt about the facts which can be proved but a doubt arises as to which of several offences have been committed on the proved facts in which case any number of charges can be framed and tried or alternative charges can be framed .............. .In the present case there is no doubt about the facts and if the allegation against the appellant that he had caused the injuries to the deceased with takwa was established by evidence, then there could be no doubt that the offence of murder had been committed." This does not help the appellant's contention as the allegations in that case if proved could establish, according to the Court, the offence of murder only and therefore there was no room for any doubt about the nature of offence committed and for the application of s. 236 Cr. P. C. In that case, the appellant was tried along with others for an offence under s. 302 read with s. 149 I.P.C. The Sessions Judge convicted the appellant and a few others under s. 302 read with s. 34 I.P.C. The High Court acquitted the others and altered the conviction of the appellant to the offence under s. 302 I.P.C. It was, in this setting, that this Court held that on the basis of the specific allegation that the appellant had struck the deceased with a takwa, there could be no doubt of that fact constituting an offence under s. 302 and not an offence under s. 302 read with s. 149 I.P.C.

We therefore hold thatiit the trial of the appellant for an offence under s. 409 I.P.C., in this case, the appellant could have also been charged for an offence under s. 420 I. P. C. in view of s. 236 of the Code of Criminal Procedure.

1984 It is then urged for the appellant that under the proviso Su .. il Kumar Paul to s. 4 of the Act, the Special Court can try any other offence s1a1e of ;;,1 Be al only when the accused is spifically charged with that . _ ng offence. The language of the proviso does not lead to such a /laglobar Dayal, J. conclusion. It provides for the trial of the accused for any other offence provided the accused could be charged with that offence at the san.e trial under the provisions of the Code of Criminal Procedure. The proviso does not say that the charge must be framed, though of course, if the trial Court itself tries the accused for a certain offence, it will ordinarily frame a charge. The proviso empowers a Court to try the accused for that offence and has nothing to do with the power of the trial court or of the appellate Court to record a conviction for any other offence when an accused is being tried with respect to an offence mentioned in the Sch.edule. The Court's power to take recourse to the provisions which empower it to record a conviction for an offence not actually charged, depends on other provisions of the Code and the Act.

Section 5(2) of the Act provides that the provisions of the Code of Criminal Procedure so far as they are not inconsistent with the Act, would apply to the proceedings of the Special Court and for the purposes of _these provisions, the Special Court could be 4eemed to be a Court of Sessions.

There is nothing in the provisions of s. 237 of the Code of Criminal Procedure which is inconsistent with the provisions of the Act. Section 237 simply empowers the Court to convict an accused of the offence with which he could have been charged under s. 236, even when he had not been charged with it. Section 237 really deals with the final orders which the Court can pass on a trial of an accused for a certain offence. In view of the proviso to sub-s. (!) of s. 4, the Special Court could have tried the appellant for the offence under s. 420 I.P.C. It did not actually try him for that offence .. It was however open to it and to the appellate Court to convict him of the offence under s. 420 I.P.C. when trying for an offence under s. 409 l.P.C. in view of s. 237 of the Code.

It has also been urged for the appellant that the proviso to s. 4 does not give any power to the Special Court to try an offence which be independent of the offence mentioned in the allotment order. That -is to say, the Special Court, in this case, could have tried the appellant only for such offences which will be ill' some way related to the offence under s. 409 I.P.C. It is further urged that the in'gredients of the offence under s. 420 I.P .C. are absolutely different from the ingredients of the offence under s. 409 I.P.C.

The ingredients of two offences must be different fom 1964 one another and it is therefore not necessary to consider Sunil Kumar Paul whether the ingredients of the two offences are in any way 8 .r wv.

B 1 late oJ es~ enJ, Ja related. The Court has to see, for the purpose of the proviso, _ whether the accused could be charged with any offenceRaghubar Dayal, J. other than the one referred to in the allotment order, in view of the provisions of the Code. There is nothing in the proviso which could lead to the construction that any limitations other than those laid down by the provisions of the Code of Criminal Procedure were to affect the nature of the offence which could be tried by the Special Court.

We are theref9re of opinion that the Special Court could try the appellant for the offence under s. 420 I.P.C. and that therefore the High Court was right in altering his conviction from that under s. 409 to s. 420 1.P.C.

We have already referred to the statement in the chargesheet that the appellant presented a false bill to the State Bank and cashed it. This allegation is sufficient for the purpose of the offence under s. 420 I.P.C. It was not necessary to allege or to prove that the appellant himself had prepared the false bill. Such an allegation could not be made in the present case in particular, as the bill which was cashed on October 6, could not be traced. The presentation of the bill for encashment carries with it the representation that it is a genuine bill and therefore the allegations in the case attri buted misrepresentation to the appellant at the time he presented the bill.

It may be mentioned here that if the bill had been a genuine bill, the offence made out in the present case would have been an offence under s. 409 f P.C. In the circumstances, therefore, the appellant cannot be said to be prejudiced in his conviction under s. 420 l.P.C. on account bf the non-framing of the charge, and consequent non-trial, under s. 42~ I.P.C. In fact, in the circumstances of the case, no questwn of irregularity in the trial arises. The framing of the charge under s. 420 I.P.C. was not essential and s 237 Cr. P. C. itself justifies his conviction of the offence nder s. 420 if that be proved on the findings on the record.

The last contention for the appellant was that the sentnce is evee. We do not consider a sentence of I year's ngorous 1mpnsonment and a fine of Rs. 2,000 severe.

The appeal therefore fails and is dismissed.

Appeal dismissed.

SUNIL KUMAR PAUL

STATE OF WEST BENGAL

K. SUBBA RAO

K. C. DAS GUPTA

RAGHUBAR DAYAL, JJ

s. 409

I.P.C

Criminal Law Amendment Act

Criminal Procedure Code

s. 420

s. 420

Indian Penal Code 1860

ss. 409, 420

Code of Criminal Procedure, 1898

ss. 236, 231

s. 4(2)

s. 409

I.P.C

s. 409

s. 420

I.P.C

s. 420

I.P.C

s. 237

Code of Criminal Procedure

s. 237

Code of Criminal Procedure

s. 409

I.P.C

s. 420

s. 420

I.P.C

s. 420

s. 4

Criminal Law Amendment Act

s. 409

I.P.C

s. 420

s. 236

Code of Criminal Procedure

s. 4

s. 420

I.P.C

s. 420

s. 409

I.P.C

s. 237

Code of Criminal Procedure

s. 420

I.P.C

s. 420

I.P.C

s. 420

I.P.C

s. 237

Code of Criminal Procedure

s. 420

D. N. Mukherjee

P. K. Chakraborty

P. K. Bose

Calcutta High Court

Art. 134(l)(c)

Barrackpore

October 5. 1956

October, 6, 1956

nil Kumar Paul

BagAubar Dayal

October I, 1956

October 1, 1956

October 6, 1956

s. 409

I.P.C

s. 409

s. 420

I.P.C

s. 409

s. 420

6, 1956

Suni! Kumar Pa.

s. 420

s. 420

s. 237

s. 237

s. 409

s. 420

s. 420

I.P.C

s. 420

s. 537

Code of Criminal Procedure, 1898

Code of Criminal Procedure, 1898

Raghubar Dayal

Rauhubar Dayal

Code of Criminal Procedure, 1898

section 409

Indian Penal Code

section 417

section 420

Indian Penal Code

s. 409

I.P.C

Section 409

s. 4

s. 4

I.P.C

s. 420

Mukherjee

s. 420

I.P.C

s. 409

I.P.C

s. 161

I.P.C

November 27, 1952

July 28, 1952

s. 161

I.P.C

s. 165

I.P.C

Amendment Act XLVI of 1952

s. 409

I.P.C

s. 420

s. 4

Code of Criminal Procedure

s. 420

I.P.C

s. 409

I.P.C

ss. 236 and 237

s. 236

Sections 236 and 237

S 77

section 236

Dayal

s. 236

s. 236

s. 236

6th October 1956

Sunil Kumar Paul

State Bank of India, Barrackpore

Bunil Kumar Paul

llO(IAul>ar Dayal

s. 420

I.P.C

s. 420

I.P.C

s. 409

I.P.C

s. 420

I.P.C

s. 420

I.P.C

s. 236

s. 409

I.P.C

s. 237

ss. 236 and 237

Viscount Haldane

s. 237

s. 420

s. 403

s. 403

s. 6

Criminal Law Amendment Act

s. 5

Prevention of Corruption Act

s. 7(3)

[1962] 1 S.C.R. 194

s. 5

s. 120B

ss. 466, 467

I.P.C

s. 7

Criminal Law Amendment Act

s. 6

Code of Criminal Procedure, 1898

section 236

s. 236

s. 302

s. 149

I.P.C

s. 302

s. 34

I.P.C

s. 302

I.P.C

s. 302

s. 302

s. 149

I.P.C

s. 409

I.P.C

s. 420

s. 236

Code of Criminal Procedure

s. 4

/laglobar Dayal

Code of Criminal Procedure

Section 5(2)

Code of Criminal Procedure

s. 237

Code of Criminal Procedure

Section 237

s. 236

Section 237

s. 4

s. 420

I.P.C

s. 420

I.P.C

s. 409

s. 237

s. 4

s. 409

I.P.C

s. 420

s. 409

I.P.C

offenceRaghubar Dayal

Code of Criminal Procedure

s. 420

I.P.C

s. 409

s. 420

s. 420

I.P.C

October 6,

s. 409

s. 420

s. 42

I.P.C

s. 420

I.P.C

s 237

s. 420