Continuance order under Article 286(2) cannot validate sales tax on transactions not lawfully taxed before the Constitution commenced.

A continuance order under Article 286(2) could preserve only a sales tax that was lawfully levied on the relevant class of transactions immediately before the Constitution commenced. The Supreme Court held that the assessee's sales between 26 January 1950 and 31 March 1951 were not within the Bihar Sales Tax Act, 1947, before 26 January 1950, because they did not fall within the Act's definition of sale and were not covered by section 33 for a pre-Constitution levy. As no lawful pre-Constitution tax existed on that class of sales, the continuance order could not validate the later levy, and Bihar sales tax on those transactions was invalid.

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Issues: Whether the sales effected by the assessee during 26 January 1950 to 31 March 1951 were covered by the Sales Tax Continuance Order, 1950, so as to remain liable to Bihar sales tax notwithstanding Article 286(2) of the Constitution of India.

Analysis: The relevant constitutional proviso permitted continuance only of a tax that was being lawfully levied by a State immediately before commencement of the Constitution. The Court held that the assessee's sales were not taxed by the Bihar Sales Tax Act, 1947, before 26 January 1950, because they did not fall within the Act's definition of sale and were not brought in by section 33 for the purpose of a pre-Constitution levy. Since the continuance order could preserve only an existing lawful levy, it could not validate a tax that had not been imposed on this class of sales before the Constitution came into force.

Conclusion: The continuance order did not cover the assessee's sales for the period 26 January 1950 to 31 March 1951, and the levy of Bihar sales tax on those sales was invalid.

Ratio Decidendi: A continuance order under Article 286(2) can preserve only a tax that was lawfully levied on the relevant class of sales immediately before the commencement of the Constitution, and it cannot be used to validate a levy on transactions that were not then subject to such tax.

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