Retrospective validation of inter-State sales tax upheld for Explanation sales; hardship alone did not invalidate the levy.

Explanation sales delivered in West Bengal for consumption there were treated as inter-State transactions within the constitutional Explanation to Article 286(1), but State sales tax was sustained for the period covered by the Sales Tax Laws Validation Act, 1956 because Parliament validly validated the earlier levy. The retrospective validation was upheld as a lawful measure to protect public revenues and did not amount to an unreasonable restriction on trade under Article 19(1)(g). Mere hardship from retrospective tax legislation was insufficient to invalidate the Act.

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Issues: (i) whether Explanation sales delivered in West Bengal for consumption there could be taxed by the State during the period covered by the Sales Tax Laws Validation Act, 1956; (ii) whether the Validation Act was invalid as imposing an unreasonable restriction on the right to carry on trade or business under Article 19(1)(g) of the Constitution of India.

Issue (i): whether Explanation sales delivered in West Bengal for consumption there could be taxed by the State during the period covered by the Sales Tax Laws Validation Act, 1956.

Analysis: The sales were inter-State transactions falling within the Explanation to Article 286(1) of the Constitution of India and the corresponding Explanation in the Bengal Finance (Sales Tax) Act, 1941. The earlier view in United Motors had permitted State taxation of such sales, but Bengal Immunity later held that, except where Parliament otherwise provided, States could not tax inter-State sales merely because they fell within the Explanation. Parliament thereafter enacted the Sales Tax Laws Validation Act, 1956 to validate taxes levied during the specified period. Applying the reasoning accepted in the later Supreme Court decision on validation of similar sales tax provisions, the State law was treated as containing an existing taxing provision whose operation had been validated for the relevant period.

Conclusion: The Explanation sales were validly subjected to State sales tax for the period covered by the Validation Act.

Issue (ii): whether the Validation Act was invalid as imposing an unreasonable restriction on the right to carry on trade or business under Article 19(1)(g) of the Constitution of India.

Analysis: The challenge rested on the retrospective character of the levy and the alleged hardship caused to dealers. The Court held that the factual premise of the challenge was unsound because, during the interval between the earlier and later Supreme Court decisions, the governing legal position had proceeded on the basis that such taxes were payable. The retrospective validation was directed to sustaining taxes already collected or levied under that understanding and was justified as a measure to protect public revenues. Mere hardship in tax legislation was insufficient to establish an unconstitutional restriction.

Conclusion: The Validation Act was not invalid under Article 19(1)(g).

Final Conclusion: The challenge to the State's power to levy and validate tax on the disputed Explanation sales failed, and the petitions were dismissed.

Ratio Decidendi: Where Parliament validly removes the constitutional bar on taxation of inter-State sales for a defined past period, the State levy on Explanation sales for that period is sustained, and retrospective tax validation does not become unconstitutional merely because it causes hardship to dealers.

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