State sales tax competence limited by Article 286 where the statute swept in constitutionally barred sales.

The article examines whether the Bombay Sales Tax Act, 1952 exceeded the State Legislature's taxing power because its wide definition of "sale" and connected machinery provisions treated constitutionally prohibited transactions as taxable turnover. It explains that Article 286 limits State taxation of sales outside the State, in the course of import or export, and in inter-State trade or commerce, and that the explanation to Article 286(1)(a) deems a sale to be inside only the State of actual delivery for consumption. On that construction, the Act did not exclude barred sales, the rules could not cure the defect, and severance was not possible; the Act was therefore concluded to be ultra vires and invalid in entirety.

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Issues: Whether the Bombay Sales Tax Act, 1952 was within the legislative competence of the State Legislature in view of the restrictions imposed by Article 286 of the Constitution, and whether the Act, as framed, authorised taxation of sales which the Constitution placed beyond the State's taxing power.

Analysis: The Act defined "sale" in the widest terms and its charging and machinery provisions were framed on the assumption that all sales falling within that definition could enter the turnover for tax, registration, licence, assessment and penalty purposes. Article 245 and entry 54 of List II gave the State Legislature taxing power over sales of goods, but that power was subject to Article 286, which prohibited taxation of sales outside the State, in the course of import or export, and in the course of inter-State trade or commerce. The explanation to Article 286(1)(a) was construed as creating a deeming rule that a sale is inside the State only in the State where goods are actually delivered for consumption, and therefore outside all other States. On that construction, the Act's definition and scheme did not exclude constitutionally prohibited sales; the rules framed under the Act could not cure the lack of competence, nor could the definition be rewritten by judicial construction. Since the invalid assumption of power permeated the whole Act, severance was not possible.

Conclusion: The Act was held ultra vires the State Legislature and invalid in its entirety.

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