Report No. 30
29. Constitutional Amendment of 1956.-
Because (1) one of the difficulty created is regard to the interpretation of what were called "inter-State sales" and of the applicability of Explanation to Article 286
(1) and particularly, in view of the decisions of the Supreme Court in State of Bombay v. United Motors Ltd., 1953 SCR 1069: AIR 1953 SC 252: 4 STC 133.., and in Bengal Immunity Co. v. State of Bihar, (1955) 2 SCR 603: AIR 1955 SC 661: 6 STC 446.', (which were referred to in the Statement of Objects and Reasons of the Constitution Amendment Bill relating to Article 286) and what was stated in 12. Ram Narain Sons Ltd. v. Assistant Commissioner, Sales Tax, (1955) 2 SCR 483 (504) : AIR 1955 SC 765 (773) : 6 STC 627. and
(2) pursuant to the recommendations of the Taxation Enquiry Commission, amendments were made in both Article 269 and Article 286 by the Constitution (Sixth Amendment) Act, 1956, and an additional Entry 92A-was introduced in the Union List and Entry 54 in the State List was suitably amended.
In Article 269, sub-clause (g) was added to clause (1), giving power of taxation of sale or purchase of goods in the course of inter-State trade or commerce. By addition of clause (3) of Article 269, Parliament was authorised to formulate principles for determining when a sale or purchase of goods takes place in the course of inter-State trade or commerce.
In Article 286 of the Constitution, the Explanation to clause (1) was omitted, and new clauses (2) and (3) were substituted, in place of the two clauses in the old Article clauses (2) and (3)1.
1. Explanation to clause (1) was deleted by the Constitution (Sixth Amendment) Act, 1956.
30. The relevant articles and entries of the Constitution, both before and after the Amendment, read as follows.-
Article 286 of The Constitution Before and After Amendment
Before 11-9-65 |
After 11-9-56 |
||
| 286. (i) No law of a State shall | 286. (i) No law of a State shall | ||
| Restrictions as to imposition of tax on the sale or purchase of goods. | Impose, or authorise the imposition of, a tax on the sale or purchase of goods. | Restrictions as to imposition of tax on the sale or purchase of goods. | Impose, or authorise the imposition of, a tax on the sale or purchase of goods. |
| where such sale or purchase takes place:- | Where such sale or purchase takes place.- | ||
| (a) outside the State; or | (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. | (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 direct result of such sale or purchased for the purposes 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 otherwise 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: | (2)1Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1). | ||
| Provided that the president may by order direct that tax any on the sale or purchase of goods which was being lawfully levied by the Government of any State immediately before the commencement of this Constitution 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 he President and has received his assent. | (3)2 Any law of a State shall, in so far as it imposes, or authorises the imposition of, 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, be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of tax as Parliament may by law specify. | ||
1. Clause (2) and (3) were submitted by the Constitution (Sixth Amendment) Act, 1956.
2. Clause (3) was substituted by the Constitution (Sixth Amendment) Act, 1956.
Article 269 of the Constitution Before or After Amendment
Before 11-9-1956 |
Before 11-9-1956 |
||
| 286(1) The following duties and | 269(1) The following duties and | ||
| Taxes levied and collected by the union but assigned to the States. | tax shall be levied and collected by the Government of India but shall be assigned to the State in the manner provided in clause (2), namely.- | Taxes levied and collected by the union but assigned to the States. | taxes shall be levied and collected by the Government of India but shall be assigned to the State in the manner provided in clause (2), namely.- |
| (a) duties in respect of succession to property other than agricultural land; | (a) duties in respect of succession to property other than agricultural land; | ||
| (b) estate duty in respect of property other than agricultural land; | (b) estate duty in respect of property other than agricultural land; | ||
| (c) terminal taxes on goods or passengers carried by railway, sea or air; | (c) terminal taxes on goods or passengers carried by railway, sea or air; | ||
| (d) taxes on railway fares and freights; | (d) taxes on railway fares and freights; | ||
| (e) taxes other than stamp duties or transactions in stock exchanges and future markets; | (e) taxes other than stamp duties or transactions in stock exchanges and future markets; | ||
| (f) taxes on the sale or purchase of newspapers and on advertisement published therein. | (f) taxes on the sale or purchase of newspapers and on advertisement published therein. | ||
| (g) taxes on the sales or purchase of goods other than newspaper, when such sale or purchase takes place in the course of inter State trade or commerce. | |||
| (2) The net proceeds in any financial year of any such duty or tax, except in so far as those proceeds represent proceed attributable to States specified in Part C of the First Schedule shall not form part of the Consolidated Fund of India but 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 principles of distribution as may be formulated by Parliament by law. | (2) The net proceeds in any financial year of any such duty or tax, except in so far as those proceeds represent proceed attributable to States specified in Part C of the First Schedule shall not form part of the Consolidated Fund of India but 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 principles of distribution as may be formulated by Parliament by law. | ||
| (3) Parliament may by law formulate Principles for determining when a sale or purchase of goods takes place in the course of inter-State trade or commerce. | |||
Entry 54, State list Before and After 1956 Amendment
Before 1956 |
After 1956 |
| 92.A (New) Taxes on sale or purchase of goods other than newspaper, where such sales or purchase takes place in the course of inter-State trade or commerce. |
Entry 92A, Union List Inserted by the 1956 Amendment
Before 11-9-1956 |
After 11-9-1956 |
| 92.A (New) Taxes on sale or purchase of goods other than newspaper, where such sales or purchase takes place in the course of inter-State trade or commerce |
