Retrospective validation of State sales tax laws upheld, but only levy proceedings begun within the cut-off period were protected.

Parliament could retrospectively remove the Article 286(2) restriction on State taxation of inter-State sales and purchases, because the power to "otherwise provide" included retrospective validation of State sales tax laws. The validating enactment was treated as restoring State competence rather than re-enacting a void law, so the constitutional challenge failed. However, the Court construed "levy and collection" to cover the commencement of proceedings to determine liability, not a later assessment alone, and held that only levy proceedings begun within the stipulated period were protected. Proceedings first initiated after the cut-off date were not saved by the Act.

---

---

Issues: (i) whether Parliament was competent under Article 286(2) of the Constitution of India to remove retrospectively the restriction on State taxation of inter-State sales and purchases and thereby validate State sales tax laws for the past period; (ii) whether the expression "levy and collection" in the validating Act was confined to tax proceedings initiated within the specified period so as to exclude assessments commenced later.

Issue (i): whether Parliament was competent under Article 286(2) of the Constitution of India to remove retrospectively the restriction on State taxation of inter-State sales and purchases and thereby validate State sales tax laws for the past period

Analysis: Article 286 imposed a restriction on State taxing power, but the restriction in clause (2) was capable of removal by Parliament by law. The validating enactment was not treated as an exercise of State taxing power, but as an exercise of the Parliamentary power to lift the constitutional ban and restore the State's competence. The Court held that the word "provide" in Article 286(2) was not confined to prospective operation and could include retrospective legislation. The contention that a void State law had to be re-enacted was rejected, since the defect was only the absence of Parliamentary removal of the restriction, not unconstitutionality in the sense of a dead law. The charging provisions of the State Acts, read with the validating Act, were therefore capable of operating on inter-State transactions.

Conclusion: Parliament was competent to validate retrospectively the State sales tax laws in respect of inter-State sales and purchases, and the validating Act was effective in removing the constitutional restriction.

Issue (ii): whether the expression "levy and collection" in the validating Act was confined to tax proceedings initiated within the specified period so as to exclude assessments commenced later

Analysis: The Court construed "levy" in the taxing context as comprising the initiation of proceedings to determine liability and to bring about collection, not merely the formal assessment order. Reading the validating Act as a taxing measure, ambiguity had to be resolved in favour of the subject, but the language still required that some step in the process of levy should have occurred within the specified period. Proceedings started for the first time after the cut-off date would not answer the description of tax "levied" within the validating period. On that construction, an assessment initiated only after the period was outside the protection of the validating clause.

Conclusion: The validating Act protected only levy proceedings already initiated within the stipulated period, and a tax first levied after the cut-off date was not saved by the Act.

Final Conclusion: The constitutional challenge failed and the petition was dismissed, though the Court restricted the reach of the validating enactment on the meaning of "levy" to proceedings commenced within the specified period.

Ratio Decidendi: Where the Constitution authorises Parliament to "by law otherwise provide", Parliament may retrospectively remove the restriction on State taxing power, and in a taxing validation provision the term "levy" denotes the commencement of proceedings to determine tax liability, not merely the making of a later assessment order.

---