Inter-State sale of electrical energy cannot be taxed by a State where the constitutional scheme assigns such transactions to Parliament.

Electrical energy was treated as goods for sales tax purposes, so a State levy on its sale had to conform to the constitutional allocation governing inter-State sales. Where electricity generated in Andhra Pradesh moved to other States under contracts of sale, the transactions answered the statutory test of inter-State sale and fell within Parliament's exclusive taxing domain. The absence of an express restrictive phrase in the electricity entry did not preserve State power to tax the same inter-State transaction. The levy on inter-State sales of electrical energy was therefore invalid, and refund followed according to law.

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Issues: Whether the State Legislature was competent to levy electricity duty on sales of electrical energy generated in Andhra Pradesh and supplied by NTPC to Electricity Boards of other States in pursuance of contracts resulting in inter-State movement.

Analysis: Electrical energy was treated as goods for the purpose of sales tax legislation, and the State enactment levying duty on its sale was held to be referable not only to the entry dealing with taxes on consumption or sale of electricity, but also to the entry dealing with taxes on sale or purchase of goods. Once that position was accepted, the constitutional scheme governing inter-State sales became applicable. The restrictive constitutional allocation of taxing power in respect of inter-State trade placed such transactions within the exclusive domain of Parliament, and the definition of inter-State sale under the Central sales tax law furnished the governing test. The agreements showed movement of electricity from Andhra Pradesh to other States pursuant to contracts of sale, and the transactions answered that description. The absence of an express restrictive phrase in the electricity entry did not save the levy, because the constitutional distribution of legislative power could not permit competing State taxation of the same inter-State transaction.

Conclusion: The State of Andhra Pradesh had no competence to levy duty on the inter-State sales of electrical energy to the purchasing States, and the levy was invalid.

Final Conclusion: The writ petition succeeded, the impugned levy was declared unauthorized, and refund followed in accordance with law.

Ratio Decidendi: A State cannot levy a tax on inter-State sales of electrical energy where the constitutional scheme assigns such transactions to Parliament, and electricity, being goods, falls within that inter-State taxing framework.

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