Territorial nexus and validated inter-State sales upheld, confirming State power to tax the transactions in question.

State taxation of the second category of inter-State sales was upheld because the levy was supported by the President's Sales Tax Continuance Order, 1950 and section 2 of the Sales Tax Laws Validation Act, 1956, which validated such taxation for the relevant period. Article 286(2) was treated as distinct from the restriction in Article 286(1)(a), so the earlier prohibition on outside sales did not control these transactions. Territorial nexus was also found to exist because the goods were manufactured at Monghyr, title passed there, the orders were received there, and the sale price was credited there. The levy was therefore legally valid, and no refund or mandamus was available.

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Issues: Whether the petitioner was entitled to refund of sales tax collected on the second category of inter-State sales, and whether the State's levy on those transactions was invalid for want of territorial nexus or because of Article 286 of the Constitution.

Analysis: The levy on the second category of sales was held to be supported by the President's Sales Tax Continuance Order, 1950 and by section 2 of the Sales Tax Laws Validation Act, 1956, which validated State taxation of inter-State sales for the relevant period. The ban under Article 286(2) was treated as distinct from the restriction under Article 286(1)(a), and the earlier constitutional prohibition governing outside sales was held not to govern the second category of transactions. The Court also held that there was sufficient territorial nexus because the goods were manufactured at Monghyr, title passed there, the orders were received there, and the sale price was credited there. On that basis, the taxing power of the State under Article 246(3) read with Entry 54 of List II was held to extend to the transactions in question.

Conclusion: The levy on the second category of sales was held to be legally valid, and the petitioner was not entitled to a refund or to a writ of mandamus.

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