Sales tax on first sale upheld where levy was in substance tax on sale, not duty of excise.

A levy imposed on the first sale of goods manufactured or produced in India was upheld as a tax on the sale of goods, not a duty of excise. The court applied the pith and substance test and treated the two imposts as legally distinct: sales tax attached to the sale transaction, while excise attached to manufacture or production. Mere overlap in incidence or administrative convenience did not alter the constitutional character of the levy. The provincial entry was therefore not displaced, and the challenge to the Madras General Sales Tax Act, 1939 failed.

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Issues: Whether the Madras General Sales Tax Act, 1939 was ultra vires in so far as it levied tax on first sales of goods manufactured or produced in India, on the ground that the levy was in substance a duty of excise and therefore within the exclusive federal field.

Analysis: The levy was examined by its real nature and not by its label. On that footing, it was held to be a tax on the sale of goods falling within the provincial entry, while a duty of excise was described as a levy on the manufacture or production of goods. The two imposts were separate and distinct in law, even if they could overlap in point of incidence or administrative convenience. The constitutional entries were capable of reconciliation without reading words into the provincial entry or expanding the federal entry beyond its proper scope.

Conclusion: The Act, in so far as it taxed first sales, was within provincial competence and not invalid as an encroachment on the federal power of excise; the challenge failed.

Ratio Decidendi: In a federal distribution of taxing powers, a sales tax remains valid if, in pith and substance, it is a tax on sale and not a duty of excise, and mere overlap in incidence does not make the levy unconstitutional.

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