Ultra vires sales tax levy and Article 226 relief where unlawful recovery would infringe business rights.

Explanation II to Section 2(g) of the Central Provinces and Berar Sales Tax Act, 1947 was treated as enlarging the taxing nexus beyond constitutional limits for sales with inter-State elements, so it was ultra vires and could not sustain the tax demand. The enforcement of that unlawful levy through the Act's coercive machinery was also held to infringe the right to carry on business, and the existence of a statutory remedy did not bar relief under Article 226 where the levy was without authority of law and the remedy required prior deposit. Mandamus was therefore available to prevent recovery.

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Issues: (i) Whether Explanation II to Section 2(g) of the Central Provinces and Berar Sales Tax Act, 1947 was invalid and could not support the levy of sales tax on the transactions in question. (ii) Whether the existence of a statutory remedy barred relief under Article 226 of the Constitution when the levy was alleged to be without authority of law and infringed fundamental rights.

Issue (i): Whether Explanation II to Section 2(g) of the Central Provinces and Berar Sales Tax Act, 1947 was invalid and could not support the levy of sales tax on the transactions in question.

Analysis: The impugned Explanation treated sales of goods actually in the Province at the time of contract as sales taking place in the Province, and its validity had already been negatived in principle by the constitutional limitation on taxing sales with inter-State elements. A State cannot tax such sales except in the State where the goods are delivered for consumption, and a provision which enlarges the taxing nexus beyond that limit is beyond legislative competence.

Conclusion: Explanation II was ultra vires and could not justify the tax demand against the appellant.

Issue (ii): Whether the existence of a statutory remedy barred relief under Article 226 of the Constitution when the levy was alleged to be without authority of law and infringed fundamental rights.

Analysis: The threatened enforcement of an unlawful tax by the coercive machinery of the Act was held to infringe the appellant's fundamental right to carry on business. In such a case, the rule against resort to prerogative relief where an alternative remedy exists does not apply, especially when the alleged levy is without authority of law and the statutory remedy is onerous, requiring prior deposit of the tax.

Conclusion: The appellant was entitled to a writ of mandamus under Article 226 notwithstanding the alternative remedy.

Final Conclusion: The appeal succeeded, the impugned levy could not be enforced against the appellant, and constitutional relief was granted against recovery under the invalid explanation.

Ratio Decidendi: Where a taxing provision is ultra vires and its enforcement would infringe a fundamental right, the existence of a statutory remedy does not bar relief under Article 226, and mandamus may issue to prevent unlawful recovery.

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