Completed sale doctrine limits sales tax reach; forward contracts and agreements to sell fall outside the taxing entry.

The constitutional expression "sale of goods" under Entry 48 of List II was understood to cover only a completed sale involving transfer of property, not forward contracts or agreements to sell. On that construction, sales tax could arise only when the seller became entitled to recover the price after transfer of property, so a mere contractual arrangement to sell was outside the taxing entry. The commentary further states that the U.P. Sales Tax Act could not validly deem forward contracts to be sales or tax turnover where goods were not actually delivered, because the State could not enlarge the constitutional meaning of sale by legislation.

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Issues: (i) Whether the expression "sale of goods" in Entry 48 in List II of the Seventh Schedule to the Government of India Act, 1935 authorises a tax only on a completed sale involving transfer of property, or also extends to forward contracts and agreements to sell; (ii) Whether Section 2(h), Explanation III to Section 2(h), and Section 3B of the U.P. Sales Tax Act, 1948 are ultra vires to the extent they treat forward contracts as sales for sales tax purposes.

Issue (i): Whether the expression "sale of goods" in Entry 48 in List II of the Seventh Schedule to the Government of India Act, 1935 authorises a tax only on a completed sale involving transfer of property, or also extends to forward contracts and agreements to sell.

Analysis: The legal distinction between a sale and an agreement to sell is material. A sale involves transfer of property in the goods, whereas an agreement to sell does not. The Court applied the settled meaning of sale under the sale of goods law and the surrounding statutory context to hold that the taxing entry contemplated the completed sale stage only. Since sales tax is levied on turnover representing the proceeds of sale, the levy can arise only when the seller becomes entitled to recover the price, which presupposes transfer of property.

Conclusion: The taxing entry covers only a completed sale and does not extend to forward contracts or mere agreements to sell.

Issue (ii): Whether Section 2(h), Explanation III to Section 2(h), and Section 3B of the U.P. Sales Tax Act, 1948 are ultra vires to the extent they treat forward contracts as sales for sales tax purposes.

Analysis: The State Legislature could not enlarge the constitutional meaning of "sale" by deeming forward contracts to be sales or by treating transactions without actual transfer of property as completed sales. Provisions that deem forward contracts completed on an agreed date, or tax turnover arising from such transactions when goods are not actually delivered, were beyond the legislative competence conferred by the constitutional entry.

Conclusion: Section 2(h), Explanation III to Section 2(h), and Section 3B of the U.P. Sales Tax Act, 1948 are ultra vires to the extent they apply to forward contracts not amounting to completed sales.

Final Conclusion: The High Court's quashing of the assessment orders and prohibition against further assessment on forward contracts was upheld, and the State's appeal failed.

Ratio Decidendi: For sales tax under the constitutional entry, only a completed sale involving transfer of property can be taxed, and the Legislature cannot validly deem agreements to sell or forward contracts to be sales for that purpose.

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