STATE OF TRAVANCORE-COCHIN AND OTHERS versus SHANMUGHA VILAS CASHEW NUT FACTORY AND OTHERS.

Citation: [1954] 1 S.C.R. 53 · Decided: 08-05-1953 · Supreme Court of India · Bench: M. PATANJALI SASTRI, BIJAN KUMAR MUKHERJEA, SUDHI RANJAN DAS, VIVIAN BOSE, GHULAM HASAN

Judgment (excerpt)

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... 
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s.C.R. 
53 
this extent and with the deepest regret I express my 
respectful dissent. 
1953 
Ktdar Nath 
Bajoria 
v. 
In my view, the convictions cannot be upheld and 
there should be a retrial in the normal way. 
Appeals dismissed. 
'l'he State of West 
Bengal. 
Agent for the appellant in C.A. No. 84: Sukwmar 
Ghose. 
Agent for the appellant in C.A. :No. 85: R.R. 
Biswas. 
Agent for the respondent: G. H. Rajadhyaksha. 
STATE OF TRAVANCORE-COCHIN AND OTHERS 
1963 
v. 
SHANMUGHA VILAS CASHEW NUT FACTORY 
AND OTHERS. 
[PATANJALI SASTRI c. J., MUKHERJEA, s. R. DAS, 
VIVIAN BosE AND GHULAM HASAN JJ.] 
Constitiition of India, 1950, cirt. 286 (1) (a), (1) (b) and (2)-
Tax on scile or p11rchase of goods-Sales "oittside the State "-Sales 
"·in the cmirse of" import or export-Sales "in the coiirse of inter-
State trade orco1mnerce "-Nat-nre and incidents of-State's power 
to fox-Scope of constitutional limitations. 
Held, by (PATANJALI SASTRI 0.J., lVIUKHERJEA, 
VIVIAN 
BOSE and GHULAM HASAN JJ.)-(i) Sales and purchases which 
themselves .occasion the export or import of the goods, as the 
case may be, out of, or into, the territory of India come within 
art. 286 (1) (b) and are exempt from State taxation. (ii) Purchases 
in the State by the exporter for the purpose of export as well as 
sales in the State by the importer after the goods have crossed the 
customs barrier are not within the exemption. 
(iii) Sales in the 
State by the exporter or importer by transfer of shipping docu-
ments while the goods are beyond the customs barrier are within '" 
the exemption, assuming that the State power of taxation extends 
to such transactions. 
The word "course" etymologically denotes movement from 
one point to another and the expression "in the course of" in art. 
286 (1) (b) not only implies a period of time during which the 
movement is in prngress but postulates also a connected 'relation. 
Consequently, a sale in the course of export out of the country 
May8. 
• 
1963 
State of 
Travancore· 
' 
Oochin 
and Others 
v. 
Shanmuuha 
Vilas 
Cashew 
Nut Factory, 
and Others. 
54 
SUPREME COURT REPORTS 
(1954) 
should be understood in the context of art. 286 (1) (b) as meaning 
a sale taking place not only d~tring the activities directed to the 
end of exportation of the goods out of the country, but also as 1Ja1·t 
of or connected with such activities. But a purchase of goods for 
the purpose of export is only an act preparatory to their export 
and not an act done in the course of the export of the goods. 
The respondents purchased ra'v cashew nuts within the State 
of Travancore-Cochin, from the neighbouring States and also im-
ported such nuts from Africa, for the purpose of refining them and 
exporting them to America. 
Imports from Africa were made in 
the following ways: 
(a) puxchases were made through inter-
mediaries doing business as comm.ission agents at Bombay who 
acted as agents for the respondents charging commission ; (b) the 
commission agents at BombaY indented the goods on their O\Vn ac-
count and they sold the goods as principals to the respondents. In 
either case the goods were shipped direct from Africa to a port in 
the Travancore·Cochin State. It was found as a fact that the pro-
cess of the factory was such that the goods were not the same 
goods commercially after refinement: 
Held 1 (i) as regards purchases made in the local inarkets of the 
State they were not exempted under art. 286 (1) (b); (ii) as regards 
purchases made in the neighbouring States, if the purchases \Vere 
effected and delivery was taken by the respondents' servants out-
side the Travancore-Oochin State, they \vould be exempt under 
art. 286, cl. (i) (a), and if the purchases were effected by employ· 
ing firms doing commission business outside the State and deli-
veries were made through normal commercial channels the tran· 
sactions \vould be of an inter-State character and would fall under 
cl. (2) but they would be taxable under the Sales Tax Continuance 
Order (No. 7 of 1950) issued hy the President under cl. (2) as such 
tax \Vas being levied before the Oonstitut~on. (iii) A.s regards im-
ports froin Africa, where the Bombay merchants merely acted as 
a.gents1 the t1:ansactions would be purchases which occasioned the 
import and would he exempt under art. 286 (1) (b), but where the 
Bombay merchants did not act as agents for the respondents, pur-
chases from them \vould be on the same footing as local purchases 

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