Court bars Bihar from imposing sales tax on out-of-State dealers for inter-State sales pending Parliament's action.

The Court allowed the appeal, directing the State of Bihar to refrain from imposing sales tax on out-of-State dealers for inter-State sales, even if the goods were delivered for consumption in Bihar, until Parliament legislates otherwise. The decision reaffirmed principles laid down in a previous case and clarified the scope and application of Article 286 and its Explanation.

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Issues Involved:
1. Maintainability of the writ of prohibition.
2. Authority of the State Legislature under the Explanation to Article 286(1)(a).
3. Interaction between the Explanation to Article 286(1)(a) and Article 286(2).
4. Extra-territorial operation and validity of the Bihar Sales Tax Act, 1947.
5. Specific application of the Explanation to Article 286(1)(a) to the appellant's case.

Detailed Analysis:

1. Maintainability of the Writ of Prohibition:
The appellant argued that the Bihar Sales Tax Act, 1947, was ultra vires and unconstitutional, and thus, the proceedings under Section 13(5) of the Act were without jurisdiction. The Court held that the existence of another remedy under the Act did not preclude the issuance of a writ of prohibition when the statute itself was challenged as ultra vires. The Court emphasized that if the statute was void, the proceedings under it would be without jurisdiction, making a writ of prohibition appropriate.

2. Authority of the State Legislature under the Explanation to Article 286(1)(a):
The Explanation to Article 286(1)(a) was designed to fix the situs of a sale for taxation purposes to avoid multiple taxation. The Court concluded that the Explanation was positive in character and conferred authority on the delivery State to tax sales when goods were delivered for consumption within that State. This interpretation was necessary to achieve the object of avoiding multiple taxation and provided a clear basis for the delivery State to impose sales tax under Entry 54 in List II.

3. Interaction between the Explanation to Article 286(1)(a) and Article 286(2):
Three views were considered:
- The majority view held that the Explanation converted inter-State sales into intra-State sales, thus taking them out of the purview of Article 286(2).
- Bhagwati, J., opined that the Explanation, being a special provision, prevailed over the general provision of Article 286(2).
- Bose, J., and Das, J., argued that the Explanation was controlled by Article 286(2) and could only operate when the ban under Article 286(2) was lifted by Parliamentary legislation.

The Court ultimately held that the Explanation and Article 286(2) related to different subjects, with the former dealing with intra-State sales and the latter with inter-State trade, thus avoiding any conflict.

4. Extra-territorial Operation and Validity of the Bihar Sales Tax Act, 1947:
The Court examined whether the Act was ultra vires on the ground of extra-territorial operation. It held that under Articles 245(1) and 246 of the Constitution, the State Legislature had plenary powers to enact laws for its territory even if they had extra-territorial impact, provided there was sufficient territorial connection. The Court rejected the contention that the Act was invalid on this ground, emphasizing that the power to tax sales included the power to tax either the seller or the purchaser, irrespective of their location.

5. Specific Application of the Explanation to Article 286(1)(a) to the Appellant's Case:
The appellant argued that the Explanation did not authorize the imposition of tax on non-resident sellers and that the goods were delivered in Bengal, not Bihar. The Court held that the Explanation applied to all sales where goods were delivered for consumption within the State, regardless of the seller's location. It also clarified that "actual delivery" referred to physical delivery to the purchaser, not to the common carrier. Thus, the sales in question were deemed to have taken place in Bihar, making them taxable under the Bihar Sales Tax Act, 1947.

Conclusion:
The Court allowed the appeal, directing the State of Bihar to refrain from imposing sales tax on out-of-State dealers for inter-State sales, even if the goods were delivered for consumption in Bihar, until Parliament legislates otherwise. The decision reaffirmed the principles laid down in The State of Bombay v. The United Motors (India) Ltd. and clarified the scope and application of Article 286 and its Explanation.

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