JUDGMENT

VENKTARAMIAH J.:—The petitioners in then two batches of petitions filed under Art. 32 of the Constitution have questioned the constitutional validity of sub-section (2-A) of S. 9 of the Central Sales Tax Act, 1956 (Act No. 74 of 1956) (hereinafter referred to as the Act) as amended by the Central Sales Tax (Amendment) Act, 1976 (Act No. 103 of 1976) (hereinafter referred to as the Amending Act) and S. 9 of the Amending Act validating the levy of penalties under the Act with retrospective effect.

2. The petitioners are dealers under the Act having their places of business in the States of Maharashtra, Haryana etc.

3. For the purpose of understanding the points of dispute raised in these cases, it is necessary to deal with the history of the legislation relating to taxes on inter-State sales and purchases of goods during the post-Constitution period. Under Entry 54 of List II of the Seventh Schedule to the Constitution, the power to levy tax on sale or purchase of goods other than newspapers was assigned to the State Legislature. The power to levy taxes on the sale or purchase of newspapers and on advertisements published therein was, however, assigned to Parliament under Entry 92 of List I of the Seventh Schedule to the Constitution. Article 286 (as it was originally enacted) of the Constitution which imposed certain restrictions on a State in the matter of levy of tax on the sale or purchase of goods read as follows.:

"286. (1) No law of a State shall impose. or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place -

(a) outside the State; or

(b) in the course of the import of the goods into, or export of the goods out of the territory of India.

Explanation.- For the purposes of sub clause (a), a sale or purchase shall be deemed to have taken place in the State in which the goods have actually been delivered as a direct result of such sale or purchase for the purpose of consumption in that State, notwithstanding the fact that under the general law relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State.

(2) Except in so far as Parliament may by law otherwise provide, no law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of any goods where such sale or purchase takes place in the course of inter-State trade or commerce:

Provided that the President may by order direct that any tax on the sale or purchase of goods which was being lawfully levied by the Government of any State immediately before the commencement of this Consolution shall notwithstanding that the imposition of such tax is contrary to the provisions of this clause, continue to be levied until the thirty first day of March, 1951.

(3) No law made by the Legislature of a State imposing, or authorising the imposition of, a tax on the sale or purchase of any such goods as have been declared by Parliament by law to be essential for the life of the community shall have effect unless it has been reserved for the consideration of the President and has received his assent."

4. The true effect of the above Article on inter-State sales and purchases of goods was considered by this Court in the State of Bombay v. The United Motors (India) Ltd., 1953 SCR 1069. in that case this Court held that Art 286 (1) (a) of the Constitution read with the Explanation thereto and construed in the light of Art. 301 and Art. 304 of the Constitution prohibited the taxation of sales or purchases involving inter-State elements by all States except the State in which the goods were delivered for the purpose of consumption therein. In other words it was held that in the case of inter-State sales, the importing State alone was competent to levy tax on transactions of sale under its sales tax law on persons who were resident outside its territory provided the goods were delivered in the importing State for the purpose of consumption therein, The result