Inter-State sale depends on contractual movement across a State boundary, while validation law can revive a suspended sales tax levy.

A sale is in the course of inter-State trade or commerce when the contract itself contemplates movement of goods across a State boundary; the place of physical delivery is not conclusive. On that reasoning, wagon sales manufactured in West Bengal for the Western Railway were treated as inter-State sales and initially fell within the Article 286 prohibition then in force. The validation legislation was said to retrospectively remove that constitutional bar for the relevant period, thereby restoring the enforceability of the State sales tax provision and sustaining the levy on those transactions.

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Issues: (i) Whether the sale and delivery of railway wagons manufactured in West Bengal for the Western Railway constituted a sale in the course of inter-State trade or commerce and was therefore outside the State's taxing power under Article 286 of the Constitution; (ii) whether, assuming the transactions were inter-State sales, the levy of sales tax for the period 1 April 1951 to 6 September 1955 was saved by the Sales Tax Laws Validation Act, 1956.

Issue (i): Whether the sale and delivery of railway wagons manufactured in West Bengal for the Western Railway constituted a sale in the course of inter-State trade or commerce and was therefore outside the State's taxing power under Article 286 of the Constitution.

Analysis: The contract contemplated manufacture of wagons in West Bengal for a purchaser outside the State, with the goods ultimately earmarked for the Western Railway. The mere fact that delivery was stipulated at the manufacturer's siding in West Bengal did not determine the character of the transaction. The decisive feature was that the contract, read with the surrounding course of dealing and the known destination of the wagons, necessarily involved movement of goods beyond the State boundary. A sale is in the course of inter-State trade or commerce when the contract contemplates such movement, and the location of physical delivery is not conclusive where the transaction is part of an inter-State commercial flow.

Conclusion: The transactions were inter-State sales and not intra-State sales; they fell within the constitutional prohibition in Article 286(2) as it then stood.

Issue (ii): Whether, assuming the transactions were inter-State sales, the levy of sales tax for the period 1 April 1951 to 6 September 1955 was saved by the Sales Tax Laws Validation Act, 1956.

Analysis: The restriction imposed by Article 286(2) did not destroy the State law's competence to tax sales of this nature; it merely suspended its operation during the constitutionally prohibited period. Section 27 of the Bengal Finance (Sales Tax) Act was a validating provision aligned with the constitutional ban, and the Sales Tax Laws Validation Act, 1956 retrospectively removed that ban for the specified period. The effect of the validating legislation, as authoritatively settled, was to revive the enforceability of the State taxing provision for sales taking place in the relevant period, including transactions that were otherwise inter-State in character.

Conclusion: The validation statute applied and sustained the levy for the period in question.

Final Conclusion: The impugned assessment and tax demand were sustained, and the challenge to the levy failed.

Ratio Decidendi: A sale is in the course of inter-State trade or commerce when the contract itself contemplates movement of goods across a State boundary, and a validating enactment may retrospectively restore the enforceability of a State taxing provision that had been suspended, but not extinguished, by the constitutional ban.

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