Article 286 sales tax limits: only direct export or import transactions gain immunity, while actual delivery for consumption supports taxation.

Sales tax immunity under Article 286 was confined to transactions directly in the actual course of export or import, so antecedent purchases made before export were not exempt. The Explanation to Article 286(1)(a) was treated as enlarging taxing power by deeming a sale to occur where goods are actually delivered for consumption; physical delivery, not constructive delivery, controlled. Purchases concluded outside Madras but actually delivered in Madras were therefore taxable. The Court also rejected the claim that the turnover and assessment rules were void in full merely because some applications became unconstitutional, sustaining the levy to the extent authorised by law.

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Issues: (i) whether purchases made before the commencement of export, or purchases of goods subsequently brought from another territory into Madras, were immune from sales tax under Article 286(1)(b); (ii) whether purchases concluded outside Madras but goods actually delivered in Madras were taxable under Article 286(1)(a) and its Explanation; (iii) whether the turnover and assessment rules were invalid because they allegedly mixed taxable and non-taxable transactions.

Issue (i): whether purchases made before the commencement of export, or purchases of goods subsequently brought from another territory into Madras, were immune from sales tax under Article 286(1)(b).

Analysis: The constitutional phrase "in the course of export" was read as referring to transactions directly connected with the actual process of exportation, not to earlier purchases made merely for the purpose or with the expectation of export. The same restrictive meaning was applied to import. The Court distinguished authorities dealing with the export and import clauses and the commerce clause in American law, holding that intention to export, preparatory purchase, or a chain of antecedent dealings does not by itself attract immunity. Only the goods actually entering the export or import stream, or the transaction directly related to them, are protected.

Conclusion: Such antecedent purchases were not exempt under Article 286(1)(b). The purchase in Dacca was not a purchase in the course of import, though the particular tax assessment on that item was unsustainable because the purchase was completed outside Madras.

Issue (ii): whether purchases concluded outside Madras but goods actually delivered in Madras were taxable under Article 286(1)(a) and its Explanation.

Analysis: The Explanation to Article 286(1)(a) was treated as enlarging, rather than restricting, the State's taxing power by deeming a sale to take place in the State where the goods are actually delivered for consumption. The Court held that "actual delivery" means physical delivery, not constructive delivery by transfer of documents of title. Where the contract is concluded outside Madras but the goods are actually delivered in Madras for consumption, the Madras taxing authority may levy tax under the constitutional Explanation as incorporated into the State law.

Conclusion: The purchases made in Calcutta and Cawnpore were taxable if the goods were actually delivered in Madras for consumption; the challenge to tax on that basis failed.

Issue (iii): whether the turnover and assessment rules were invalid because they allegedly mixed taxable and non-taxable transactions.

Analysis: The Court rejected the argument that the rules had to fall in their entirety merely because some transactions had become non-taxable after the Constitution. The proper course was to excise the unconstitutional application and sustain the levy to the extent authorised by law. The existence of some invalid applications did not destroy the whole taxing scheme.

Conclusion: The rules were not void in their entirety on this ground.

Final Conclusion: The assessment was set aside only to the extent of the Dacca purchases, and the remaining turnover relating to purchases in Calcutta, Cawnpore and locally remained liable to tax.

Ratio Decidendi: Immunity from sales tax under Article 286 attaches only to transactions directly taking place in the actual course of export or import, while the Explanation to Article 286(1)(a) permits taxation where goods are actually delivered in the taxing State for consumption, even if the contract was concluded elsewhere.

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