Outside sales protection under Article 286(1)(a) bars Madras tax on goods delivered for consumption in other States.

Sales delivered outside Madras State for consumption in the delivery States were treated as outside sales protected by Article 286(1)(a) of the Constitution, because the lower appellate tribunal had specifically found that the goods were in fact delivered outside Madras for use in those States. That constitutional prohibition barred taxation by Madras State even though the goods were located in Madras when the contract was made. Reliance on Ashok Leyland was rejected, as that decision was understood to concern Article 286(2), not the separate protection for outside sales under Article 286(1)(a). Section 2(h) of the Sales Tax Act, 1939, could not override the constitutional ban.

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Issues: Whether the sales, being deliveries outside the Madras State for consumption in the delivery States, were outside sales protected by Article 286(1)(a) of the Constitution and therefore not taxable in Madras notwithstanding the location of the goods in Madras at the time of the contract.

Analysis: A specific finding of the lower Appellate Tribunal showed that the goods were delivered to buyers outside Madras State for consumption in the delivery States. That finding attracted the constitutional ban under Article 286(1)(a) against taxation by Madras State. The attempted reliance on the Supreme Court decision in Ashok Leyland was rejected because that decision was understood as dealing with the scope of Article 286(2), whereas an outside sale within Article 286(1)(a) remained protected by the constitutional prohibition. On that reasoning, the statutory provision in section 2(h) of the Sales Tax Act of 1939 did not render the sales taxable in Madras.

Conclusion: The sales were outside sales protected by Article 286(1)(a) and were not liable to tax in Madras State.

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