Constitutional limits on state sales tax barred Bihar from taxing sales delivered outside the State after 26 January 1950.

Article 286 limited Bihar's power to tax sales that took place outside the State or in the course of inter-State trade, subject only to the constitutional saving then in force. The amended definition of sale in section 2(g), which deemed certain transactions to occur in Bihar even when delivery or contract happened elsewhere, could operate only to the extent it did not conflict with that constitutional restriction. Sales of goods delivered outside Bihar after 26 January 1950 were therefore not taxable under the Act, and the amendment was ultra vires to that extent.

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Issues: Whether the amended definition of sale in section 2(g) of the Bihar Sales Tax Act was ultra vires to the extent it conflicted with Article 286 of the Constitution of India, and whether sales of goods delivered outside Bihar after 26 January 1950 could be taxed under the Act.

Analysis: The reference turned on the effect of Article 286, which prohibits a State from taxing sales that take place outside the State or in the course of inter-State trade or commerce, subject to the constitutional saving then available under the President's Sales Tax Continuance Order of 1950. The amended definition in section 2(g) deemed certain sales to have taken place in Bihar even where delivery or the contract occurred elsewhere, and the assessment sought to bring outside-Bihar deliveries within the State's taxing power. In view of the controlling Supreme Court decisions relied upon, the challenged definition could operate only so far as it did not contravene Article 286, and sales of goods delivered outside the State after the commencement of the Constitution could not be subjected to Bihar sales tax.

Conclusion: The amended definition of sale was ultra vires to the extent it contravened Article 286 of the Constitution of India, and the assessee was not liable to tax on sales of goods delivered outside Bihar after 26 January 1950.

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