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Report No. 30

52. Object of constitutional provision-protection of foreign trade.-

The Constitution of India, by means of the various devices in the legislative, economic and executive fields, has endeavoured to preserve the unity of India. It has also demarcated the legislative and taxing powers of the Union and the States, and has canalised these powers in well defined channels. One of these provisions deals with the power of the States to impose sales tax, and another-Article 286-lays down the various bans on these powers so as to prevent the States from trespassing on the federal field of international trade.

53. In the State of Travancore-Cochin v. Bombay Co. Ltd., 1952 SCR 1112: AIR 1952 SC 366: 3 STC 434., the Chief Justice, after referring to Boddu Paidanna & Sons case,1 said.-

"Lest similar reasoning should lead to the imposition of such cumulative burden on the export-import trade of this country which is of great importance to the nation's economy, the Constituent Assembly may well have thought it necessary to exempt in terms sales by export and purchases by import from sales-tax by inserting Article 286(1)(b) in the Constitution."

1. Province of Madras v. Boddu Paidanna Sons, 1942 FCR 90: AIR 1942 FC 33.

54. In the Second Travancore-Cochin case1, the Chief Justice pointed out.-

"The foreign trade of this country thus already enjoys immunity from double tax burden and suffers only one tax, namely, the export or import duty as the case may be.".

Mr. Justice Das, as he then was, said3 that the purpose of the constitutional provision was to foster foreign trade and to preserve Union revenues. The Constitution had imposed a ban on the State Legislature preventing it from impinging upon the Union field of foreign trade and from imposing a tax on sales or purchases made in the source of import or export. Again, he said.-

"The object of our Constitution apparent from the distribution of legislative powers and from Article 286, is to place our inter-State trade and our foreign trade beyond the taxing power of the State.".

1. State of Travancore-Cochin v. Shanmugha Vilasa Cashew Nut Factory, 1954 SCR 53: AIR 1953 SC 333: 4 STC 205.

2. 1954 SCR 53 (54).

3. 1954 SCR 53 (91).

4. 1954 SCR 53 (105).

55. Again, in the Bengal Immunity case1, Acting Chief Justice Das, as he then was, pointed out that the dominant if not the sole purpose of Article 286 was to place restrictions on the legislative powers of the States, and, with that end in view, Article 286 imposed several bans on the taxing powers of the States.

1. Bengal Immunity Co. v. State of Bihar, (1955) 2 SCR 603 (648): AIR 1955 SC 661: 6 STC 446.

Section 5 of the Central Sales Tax Act, 1956 - Taxation by the States of Sales in the Course of Import Back

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