Separate constitutional bans on inter-State sales taxation and inseverable composite assessments led to remand for fresh assessment.

Article 286(1)(a) and Article 286(2) were treated as operating in distinct constitutional fields: the proviso to Article 286(2) and the Presidential order under it were held not to lift the separate ban on taxing sales fictionally taken outside the State under Article 286(1)(a) and its Explanation, so the post-Constitution levy was unsustainable. The assessment was also composite and inseverable, covering pre-Constitution and post-Constitution periods in one demand; once part of the levy failed, the entire assessment was set aside and the matters remitted for fresh assessment in accordance with law.

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Issues: (i) Whether the proviso to Article 286(2) of the Constitution and the Presidential order issued under it lifted the ban under Article 286(1)(a) read with the Explanation to that clause in respect of sales of goods delivered for consumption outside the State. (ii) Whether a composite sales tax assessment covering both pre-Constitution and post-Constitution periods was liable to be set aside in toto where part of the levy was unsustainable.

Issue (i): Whether the proviso to Article 286(2) of the Constitution and the Presidential order issued under it lifted the ban under Article 286(1)(a) read with the Explanation to that clause in respect of sales of goods delivered for consumption outside the State.

Analysis: The majority held that the bans in Article 286 operate independently and from different viewpoints. Article 286(1)(a), read with its Explanation, determines the situs of the sale and prohibits taxation by the State to which the transaction is fictionally taken outside the State. Article 286(2) addresses a different field, namely inter-State trade or commerce. The proviso to Article 286(2), by its own language and non obstante clause, is confined to lifting the ban created by that clause alone and cannot be projected into Article 286(1)(a). A contrary view would require rewriting the constitutional text and would risk multiple taxation.

Conclusion: The Presidential order did not save transactions hit by Article 286(1)(a) and the Explanation thereto. The levy for the post-Constitution period was unsustainable against the assessee.

Issue (ii): Whether a composite sales tax assessment covering both pre-Constitution and post-Constitution periods was liable to be set aside in toto where part of the levy was unsustainable.

Analysis: The assessment was a single undivided one covering both periods. Once the post-Constitution component was found invalid, the entire assessment was infected because the tax demand was not severable into distinct assessed components. On that footing, the matter had to go back for a fresh assessment in accordance with law, leaving the parties free to urge all available legal and factual contentions before the assessing authority.

Conclusion: The composite assessments were set aside and the matters were remanded for reassessment.

Final Conclusion: The decision held that the Presidential order under Article 286(2) could not override the ban in Article 286(1)(a), and because the impugned assessments were composite and inseverable, the affected matters were remitted for fresh assessment.

Ratio Decidendi: A proviso confined to one constitutional restriction cannot be construed to lift a distinct and independent restriction elsewhere in the same Article; where a composite tax assessment includes an unsustainable component and is not severable, the assessment fails as a whole.

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