Judgment

B. P. JEEVAN REDDY, J.

( 1 ) LEAVE granted in the special Leave Petitions.

( 2 ) THE Constitution (Sixth Amendment) Act, 1956 recast Article 286 of the Constitution almost in its entirety. It inserted sub-clause (g) in clause (1) of Article 269 and introduced clause (3) in Article 269. The Constitution (Forty-sixth Amendment) Act, 1982 substituted clause (3) of Article 286. As amended by Sixty and Forty-sixth Amendment Acts,article 286 reads :"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, (2) Parliament may be law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1 ). (3) Any law of a State shall, insofar as it imposes, or authorises the imposition of,- (A) a tax on the sale or purchase of goods declared by Parliament by law to be of special importance in inter-State trade or commerce; or (B) a tax on the sale or purchase of goods, being a tax of the nature referred to in sub-clause (b), sub-clause (c) or sub-clause (d) of clause (29a) of Article 366. BE subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify".

( 3 ) CLAUSE (1) places a restriction upon the power of the State Legislatures to levy taxes on sale or purchase of goods; a State cannot levy tax on a sale which takes place outside that State nor can it tax a sale or purchase taking place in the course of import into or export out of India. Clause (2) empowers the Parliament to formulate principles for determining when a sale takes place outside a State or in the course of import or export, as the case may be. Clause (3) places certain restrictions on the State Legislatures in the matter of system of levy and rate etc. in respect of certain goods and transactions.

( 4 ) ARTICLE 269 specifies the duties and taxes levied and collected by the Government of India but assigned to the States in the manner provided therein. Among the several duties and taxes specified in clause (1) is the tax mentioned under sub-clause (g) - "taxes on the sale or purchase of goods other than newspapers where such sale or purchase takes place in the course of inter-State trade or commerce". Clause (2) of Article 269 provides that the net proceeds in any financial year of any such duty or tax "shall be assigned to the States within which that duty or tax is leviable in that year and shall be distributed among those States in accordance with such principals of distribution, as may be formulated by Parliament by law". Clause (3) empowers the Parliament to formulate principles for determining when a sale or purchase of goods takes place in the course of inter-state trade or commerce. By Constitution (Forty-sixth Amendment) Act, the words "or consignment of" were added in clause (3 ). Clause (3) now reads :"parliament may by law formulate principles for determining when a sale or purchase of, or consignment of goods, takes place in the course of inter-State trade or commerce. "

( 5 ) SOON after the commencement of the Sixtyeth Amendment Act, the Parliament enacted the Central Sales Tax Act. 1956 (the Act) to effectuate the provisions of Articles 286 and 269. The Preamble to the Act reads :"an Act to formulate principles for determining when a sale or purchase of goods takes place in the courser of inter-State trade or commerce or outside a State or in the course of import into or export from India,to provide for the levy, collection and distribution of taxes on sales of goods in the course of inter-State trade or commerce and to declare certain goods to be of special importance in the inter-State trade or commerce and specify the restrictions and conditions to which State laws imposing taxes on