Article 286(3) limits tax exemption for essential goods only against later State laws, not pre-existing sales tax provisions.

Article 286(3) was read as disabling only a State law made after a Parliamentary declaration of essential goods from taxing sales of those goods; a pre-existing State sales tax law was therefore not invalidated. Explanation (2) to section 2(k) of the Hyderabad General Sales Tax Act was construed as operating only where Article 286 itself barred taxation, so it did not exclude sales of coarse and medium cloth from the statutory definition of sale. The constitutional and statutory objections to levy were accordingly rejected, and the sales tax assessments were upheld.

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Issues: (i) Whether sales of coarse and medium cloth were exempt from State sales tax by reason of Article 286(3) of the Constitution and the Parliamentary declaration of essential goods; (ii) Whether Explanation (2) to section 2(k) of the Hyderabad General Sales Tax Act, 1950 excluded such sales from the meaning of "sale" so as to prevent taxation.

Issue (i): Whether sales of coarse and medium cloth were exempt from State sales tax by reason of Article 286(3) of the Constitution and the Parliamentary declaration of essential goods.

Analysis: Article 286(3) restricted a State law enacted after a Parliamentary declaration of essential goods from imposing tax on sales or purchases of such goods. The Hyderabad General Sales Tax Act, 1950, as amended in 1952, was enacted before the Parliamentary Act declaring coarse and medium cloth to be essential goods. The constitutional restriction therefore did not invalidate the pre-existing State law or its amendment. The argument based on the earlier Essential Supplies legislation was not pressed and in any event did not assist the appellants.

Conclusion: The sales were not exempt under Article 286(3), and this contention failed.

Issue (ii): Whether Explanation (2) to section 2(k) of the Hyderabad General Sales Tax Act, 1950 excluded such sales from the meaning of "sale" so as to prevent taxation.

Analysis: The explanation applied only to transfers of goods in respect of which no tax could be imposed by reason of Article 286 of the Constitution. Since Article 286(3) only barred State laws made after the Parliamentary declaration, and no such later State law taxed these goods, the explanation did not operate to exclude the transfers of coarse and medium cloth from the statutory definition of sale. The State Act therefore continued to apply.

Conclusion: The explanation did not exempt the transactions from tax, and this contention failed.

Final Conclusion: The constitutional and statutory objections to the levy were rejected, and the sales tax assessments were upheld.

Ratio Decidendi: Article 286(3) disables only a State law made after a Parliamentary declaration of essential goods from imposing tax on such goods, and an interpretative provision tying exemption to Article 286 cannot extend that immunity beyond the constitutional limit.

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