State sales tax levy invalid where broad turnover language reaches transactions beyond constitutional taxing competence.

Section 5-C of the Karnataka Sales Tax Act was held unconstitutional insofar as its use of "total turnover" brought within the tax base transactions in inter-State trade, outside the State, and in the course of import or export. The court reasoned that the State's taxing power under entry 54 of List II is restricted by article 286 and cannot extend to transactions beyond legislative competence. It also noted that the shift from "taxable turnover" to "total turnover" widened the levy unlawfully, and that a taxing provision must be tested by its text, not by contrary administrative understanding.

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Issues: Whether section 5-C of the Karnataka Sales Tax Act, 1957, which levied tax on the total turnover in respect of transfer of the right to use goods, was constitutionally valid when its operation extended to transactions in the course of inter-State trade or commerce, outside the State, and in the course of import or export.

Analysis: The power of the State to levy tax under entry 54 of List II is confined by article 286 of the Constitution of India and cannot extend to sales or purchases taking place outside the State or in the course of import or export. The provision under challenge used the expression "total turnover" and, read with the statutory definitions of turnover, brought within the tax base transactions which the State had no competence to tax. The scheme of the Act and the legislative history showed that the Legislature deliberately shifted from "taxable turnover" to "total turnover", thereby widening the incidence of tax to include transactions protected by constitutional limitations. A taxing provision must be tested on its own ambit and cannot be saved by administrative understanding contrary to its text.

Conclusion: Section 5-C was unconstitutional and void insofar as it authorised tax on transactions beyond the State's legislative competence, and the petitions were allowed.

Ratio Decidendi: A State taxing provision is invalid if, by the breadth of its charging language and tax base, it authorises levy on transactions falling outside the State's competence under article 286 of the Constitution of India.

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