Article 286 sales tax rules: deliveries for consumption may be treated as intra-State sales, depending on the constitutional Explanation.

Article 286 was read as restricting State tax on sales outside the State, while the Explanation to Article 286(1)(a) created a legal fiction treating certain deliveries for consumption in the destination State as sales within that State. The earlier Supreme Court ruling in State of Bombay v. United Motors (India) Ltd. was treated as binding authority for that position, and Travancore-Cochin was not taken to have overruled it. Sales falling within the Explanation would be exempt; sales not satisfying it would remain taxable under Article 286(2) subject to the constitutional exception preserved by the proviso and the President's Order.

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Issues: Whether sales of goods delivered outside the State could be taxed under the Madras General Sales Tax Act in the light of Article 286 of the Constitution, and whether the explanation to Article 286(1)(a) excluded such transactions from Article 286(2) so as to make the proviso to Article 286(2) applicable only if the Explanation did not apply.

Analysis: The constitutional scheme was read as preventing a State from taxing sales that fall outside the State, while the explanation to Article 286(1)(a) created a legal fiction treating certain deliveries for consumption in the destination State as sales within that State. The earlier Supreme Court ruling in State of Bombay v. United Motors (India) Ltd. was treated as binding authority that the Explanation could invest an inter-State transaction with an intra-State character for the taxing State of delivery. The later Travancore-Cochin decision was not read as overruling that position, since the issue now under discussion had not been directly argued there and there was no express departure from the earlier rule. On that footing, if the assessees established facts bringing the sales within the Explanation to Article 286(1)(a), the sales would be exempt; otherwise, they would fall within Article 286(2) and remain taxable under the proviso and the President's Order.

Conclusion: The earlier binding interpretation of Article 286(1)(a) remained operative, and the matter was sent back so that evidence could be taken on whether the sales satisfied the Explanation and were therefore exempt.

Final Conclusion: The legal position on Article 286 was affirmed, but the petitions were not finally decided on the taxability of the disputed turnovers because factual inquiry was still required on the applicability of the constitutional Explanation.

Ratio Decidendi: Where a sale is shown on facts to fall within the Explanation to Article 286(1)(a), the taxing State of delivery may treat it as an intra-State sale and the ban in Article 286(2) does not apply; otherwise, inter-State sales remain subject only to the constitutional exception preserved by the proviso to Article 286(2).

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