Inter-State sales tax limitation under Article 286(1)(a) controlled post-Constitution assessment, while pre-Constitution levy remained valid.

Sales tax on goods delivered outside Bihar was treated differently across the pre- and post-Constitution periods. For 1 April 1949 to 25 January 1950, the levy was governed by the Bihar Sales Tax Act as upheld for that regime, so the tax was held lawfully imposed and no refund was due. For 26 January 1950 to 31 March 1950, Article 286(1)(a) and its Explanation restricted State taxation of inter-State sales unless delivery and consumption in the State of first destination were shown. Because the taxing authorities had made no finding on that requirement, the assessment could not stand and was set aside for reassessment, with any excess tax refundable after fresh determination.

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Issues: (i) Whether sales tax levied on sales of goods delivered outside Bihar for the period from 1 April 1949 to 25 January 1950 was constitutionally valid and refundable. (ii) Whether sales tax levied on similar transactions for the period from 26 January 1950 to 31 March 1950 was barred by Article 286(1)(a) of the Constitution and liable to be refunded or reassessed.

Issue (i): Whether sales tax levied on sales of goods delivered outside Bihar for the period from 1 April 1949 to 25 January 1950 was constitutionally valid and refundable.

Analysis: For the pre-Constitution period, the validity of the levy was governed by the Bihar Sales Tax Act as amended, and the earlier Division Bench ruling upheld the constitutional validity of section 2(g) of that Act for such transactions. On that footing, sales tax collected on sales of goods delivered outside Bihar during that period was held to have been lawfully imposed.

Conclusion: The levy for the period from 1 April 1949 to 25 January 1950 was valid and the assessee was not entitled to refund.

Issue (ii): Whether sales tax levied on similar transactions for the period from 26 January 1950 to 31 March 1950 was barred by Article 286(1)(a) of the Constitution and liable to be refunded or reassessed.

Analysis: For the post-Constitution period, Article 286(1)(a) with its Explanation controlled the taxing power of the States in respect of inter-State sales. The governing principle was that tax could not be imposed unless the goods were delivered and consumed in the State of first destination, and no exemption could be claimed where the goods were re-exported to other States. Since the sales tax authorities had recorded no finding on whether the assessee had established delivery and consumption in the State of first destination, the assessment could not stand as finally framed.

Conclusion: The assessment for the period from 26 January 1950 to 31 March 1950 was set aside and the matter was remitted for reassessment according to law, with refund of any excess tax after reassessment.

Final Conclusion: The assessee succeeded in part: the pre-Constitution levy was upheld, while the post-Constitution assessment was quashed and sent back for fresh determination under the constitutional limitation on inter-State sales tax.

Ratio Decidendi: Where a tax on sales involves inter-State elements, Article 286(1)(a) and its Explanation prohibit State taxation unless the goods are shown to have been delivered and consumed in the State of first destination; for the pre-Constitution period, however, the levy remains governed by the validating provisions of the applicable State sales tax law as upheld for that regime.

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