The court clarifies the conditions under which sales are taxable and addresses inter-State sales exemptions under the General Sales Tax Act.

1 These seven writ Petitions are against the provisional assessment orders under the General Sales Tax Act, No. XI of 1125, and the grounds, on which the petitioners seek to vacate them, are two in number. The first is that the assessment orders, based on the notification under S. 5(vii) of the General Sales Tax Act, are notwithstanding the validation by the General Sales Tax (Amendment) Act, No. III of 1960, defective and inadequate to levy the sales tax on the petitioners. The Amendment Act has been passed because of Abu v. State of Kerala (1960 KLJ 457), wherein a Division Bench of this Court has held that the aforesaid notification due to non compliance with the provisions of S. 24 of the General Sales Tax Act, which Section provided how the Rules are to be framed under the Act, would not justify the last purchaser of the commodities mentioned in the notification being made liable to sales tax, even though the notification be mentioned in R.4(2) under the Act. Thereafter, the enacting authorities have passed the General Sales Tax (Amendment) Ordinance, 1960 (No. 1 of 1960), which has repealed and was followed by the General Sales Tax (Amendment) Act, No. III of 1960. Thereunder, old S.5(vii) has been amended and S.3 provided for validation of earlier assessment proceedings. It is obvious that should we find the second ground raised against the provisional assessment orders to be of substance, the decision on the first ground stated above would be obiter. That apart, we are not impressed with the soundness of the objection and we have, in a different batch of writ petitions, which were heard with these petitions assigned more fully our reasons for not accepting the objection. We would, therefore, examine the arguments urged by the petitioners' learned Advocates in support of the second ground.

2 The petitioners claim that the several sales provisionally assessed are inter State and, therefore, exempt from levy under S.26(1)(b) of the General Sales Tax Act, 1125, which reads as follows:-
S.26(1) "Notwithstanding anything contained in this Act  * *
(b) tax on the sale or purchase of any goods shall not, after the 31st day of March 1951, be imposed where such sale or purchase takes place in the course of inter State trade or commerce".

3 They complain that the assessing authorities have provisionally assessed them without satisfactorily adjudicating on the objections raised by the petitioners concerning the transactions being exempted. For the better appreciation of the complaint, it is necessary to emphasise that the authorisation to tax sales of goods is subject to certain limitations, one of which arises from the circumscribed territorial jurisdiction of the taxing authorities, and the other from the freedom of trade, commerce and inter course specially conferred by the Constitution. We feel it necessary to emphasise the limitations, because taxing authorities are apt to overlook them when applying the provisions under which they are authorised to levy the tax. Both the limitations are to be found in Art.286, which firstly excludes outside sales from being taxed, and next occurs exemption of sales in the course of import or export. The freedom of commerce and trade has been in 1956, clarified further by the Sixth Amendment of the Constitution. Thereunder, Art.269 and 286 have been amended, and a new item 92A been added to List I of the Seventh Schedule. The amendment to Art.269 is by adding the following two clauses to the Article.
"In Art.269(1) * * * * * *
(1) (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";
and  * * * * * * * *
(3) Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in the course of inier-State trade or commerce".
The Amendment of Art.286 is by the Explanation in Clause (1) being omitted and the following new clauses (2) and (3) being substituted;
"(2) Parli