Validation of State sales tax levy sustained cotton purchase turnover despite Article 286(2) objection.

Cotton purchase turnover of a spinning mill was held taxable under the Madras General Sales Tax Act because the charging scheme, read with the statutory definition of sale and the rules, brought the purchases within the purchase-point levy. The constitutional objection under Article 286(2) did not defeat the levy, as section 22 had already adapted the State law to the constitutional restrictions and the Sales Tax Laws Validation Ordinance, III of 1956 retrospectively removed the inter-State trade impediment for the relevant period. On the facts, the cotton was delivered in the State for consumption there, so the validated levy applied and the challenge failed.

---

---

Issues: Whether the turnover arising from cotton purchases by the spinning mill was liable to sales tax under the Madras General Sales Tax Act and whether that levy was saved by the Sales Tax Laws Validation Ordinance, III of 1956 in the light of Article 286 of the Constitution of India.

Analysis: The charging scheme of the Madras General Sales Tax Act taxed a dealer's total turnover, and the statutory definition of sale, read with the relevant rules, made cotton purchased by a spinning mill taxable at the purchase point. The constitutional objection was that the transactions had an inter-State element and therefore attracted the restriction in Article 286(2) of the Constitution of India. However, the Act had already been adapted by section 22, which incorporated the constitutional restrictions into the State taxing law and left the levy in place for transactions otherwise within the Act. The Court held that where the State law already imposed or authorised the tax and the only impediment was Article 286(2), the Sales Tax Laws Validation Ordinance, III of 1956 removed that impediment for the relevant period. On the facts, the cotton was delivered in the State for consumption there, and the levy fell within the category of transactions validated by the Ordinance.

Conclusion: The cotton purchase turnover was validly taxable and the challenge to the levy failed.

Final Conclusion: The revision was dismissed because the disputed turnover remained assessable under the State Act and the constitutional objection was cured by the validating Ordinance for the relevant period.

Ratio Decidendi: Where a State sales tax law already imposes or authorises a levy on a transaction and the only obstacle to enforcement is the inter-State trade restriction in Article 286(2), a subsequent validating Ordinance may retrospectively remove that constitutional impediment and sustain the levy for the covered period.

---