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Issues: (i) whether sales of petrol moved from Punjab to Jammu and Kashmir under the contract of sale were liable to tax as inter-State sales under Article 286 of the Constitution of India; (ii) whether Section 3 of the Jammu and Kashmir Motor Spirit (Taxation of Sales) Act, 2005 applied to sales made between 1 January 1955 and 6 September 1955 in view of the Sales Tax Laws Validation Act, 1956; (iii) whether a composite assessment covering both taxable and non-taxable periods was wholly invalid.
Issue (i): whether sales of petrol moved from Punjab to Jammu and Kashmir under the contract of sale were liable to tax as inter-State sales under Article 286 of the Constitution of India.
Analysis: The goods moved from one State to another under the contract of sale, and the transaction satisfied the conditions of a sale in the course of inter-State trade. The constitutional ban under Article 286(2), as it then stood, prevented State taxation on such sales except to the extent later lifted by parliamentary validation.
Conclusion: The sales were inter-State sales within the meaning of Article 286, and State taxation was barred for the period when the constitutional prohibition remained operative.
Issue (ii): whether Section 3 of the Jammu and Kashmir Motor Spirit (Taxation of Sales) Act, 2005 applied to sales made between 1 January 1955 and 6 September 1955 in view of the Sales Tax Laws Validation Act, 1956.
Analysis: The Validation Act removed the constitutional ban retrospectively for the specified period, and Section 3 was a charging provision wide enough to tax retail sales of motor spirit without requiring the assessee to maintain a place of business or storage depot in the State. Sections 6 and 7 dealt only with licensing machinery and did not limit the charge created by Section 3. On the facts, the sale was completed within the State when title passed there, bringing the transactions within the charging provision for the validated period.
Conclusion: Section 3 validly applied to the respondent's sales between 1 January 1955 and 6 September 1955, and tax was lawfully leviable for that period.
Issue (iii): whether a composite assessment covering both taxable and non-taxable periods was wholly invalid.
Analysis: Although a single assessment order covered the entire period, the assessment was capable of severance by separating taxable from non-taxable sales. A partial defect did not infect the whole assessment where the valid and invalid items could be distinctly identified and treated separately.
Conclusion: The assessment was not wholly invalid and could be sustained for the taxable period while being restrained for the exempt period.
Final Conclusion: The challenge succeeded only for the later period when the constitutional prohibition continued to operate, but the tax demand for the validated earlier period was upheld, leaving the assessment partly sustained and partly restrained.
Ratio Decidendi: Where a constitutional bar on State sales tax is retrospectively lifted for a defined period, the State charging provision applies to sales within that period if its language is wide enough, and a composite assessment may be severed so that the valid portion survives.
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