Article 286 sales tax immunity depends on proper factual classification of inter-State transactions before assessment can stand.

Sales tax liability on rubber-sheet sales to customers outside the State depended on the constitutional character of the transactions under Article 286. If the sales were outside the State within clause (1)(a), or fell within the Explanation, they remained immune from tax; if they attracted clause (2), tax liability could arise. Because the facts needed to classify the transactions had not been properly ascertained, the record was insufficient to sustain the assessment order. The assessment was quashed and the matter remitted to the Sales Tax Officer for fresh disposal in accordance with law.

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Issues: Whether the impugned sales were immune from assessment to sales tax under Article 286 of the Constitution of India, and whether the assessment order could be sustained without determining the true nature of the transactions.

Analysis: The transactions related to sales of rubber sheets to customers outside the State. The liability to tax depended on whether the sales were outside the State within clause (1)(a) of Article 286, or fell within the Explanation thereto, in which event they would still be immune from sales tax. If, however, the facts brought the sales within clause (2) of Article 286, tax liability would arise. The facts necessary to place the transactions in the correct constitutional category had not been ascertained, and the record was insufficient to determine whether the assessment was legally sustainable.

Conclusion: The assessment order was quashed and the matter was sent back to the Sales Tax Officer for disposal in accordance with law.

Final Conclusion: The petitioner succeeded in obtaining quashing of the assessment, but the dispute was remitted for fresh consideration on the factual question governing taxability.

Ratio Decidendi: A sales tax assessment cannot be sustained where the constitutional character of the transactions under Article 286 remains undetermined and the matter requires fresh factual examination.

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