State tax on inter-State consignment-like despatches cannot stand where Parliament has exclusive competence.

The article explains that, after the Forty-sixth Amendment, tax on consignment of goods in the course of inter-State trade or commerce falls within Parliament's exclusive legislative field under article 269(1)(h) and Entry 92-B of List I. It states that despatch of manufactured goods by a manufacturer to its own branches or depots outside the State, where not by way of sale, is treated as commercially and legally equivalent to consignment. On that basis, a State cannot sustain purchase tax on such despatch merely by describing the levy as one on despatch, because the substance of the charge is a consignment transaction outside State competence under Entry 54 of List II.

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Issues: Whether the despatch of manufactured goods by a manufacturer to its own branches or depots outside the State is synonymous with consignment of goods in the course of inter-State trade or commerce, and whether the State Legislature had competence to levy purchase tax on such despatch under the amended provision of the Haryana General Sales Tax Act.

Analysis: The constitutional scheme after the Forty-sixth Amendment inserted article 269(1)(h) and Entry 92-B in List I to place tax on consignment of goods in the course of inter-State trade or commerce within the exclusive legislative field of Parliament. The Court held that despatch of goods to a place outside the State, when not by way of sale, is commercially and legally synonymous with consignment of goods to oneself or another person, and the State could not avoid the constitutional bar by describing the levy as one on despatch. The charging provision in section 9(1)(b), in substance, sought to tax the very consignment transaction and its ancillary incidents, which were outside State competence and could not be sustained under Entry 54 of List II.

Conclusion: The amended provision was beyond the legislative competence of the State and was unconstitutional. The validation of the notification and all consequential actions were also quashed, and the writ petitions were allowed.

Ratio Decidendi: A State cannot levy tax on a transaction which, in substance, is consignment of goods in the course of inter-State trade or commerce by merely describing it as despatch of manufactured goods outside the State, because such taxation falls exclusively within Parliament's competence under article 269(1)(h) and Entry 92-B of List I.

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