 the constitution (tenth amendment) bill, 1956(as intboduobd in lox sa:bha)  the constitution (tenth amendment) bill, 1956 (as introduced in lok sabha) a biijfurther to amend the constitution of india be it enacted by parliament in the seventh year of the repubuc of india as follows:-1 this act may be called the constitution (tenth amendment) short dtle act, 1956 10 2 in the seventh schedule to the constitution,-amendment of the seventh (a) in the union list, after entry 92, the following entry schedule shall be inserted, namely:-"92a 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 (b) in the state list, for entry 54, the following entry shall be substituted, nam!=!ly:-"54 taxes on the sale or purchase of goods other taan newspapers, subject to the provisions of entry 92a of list i" is 3 in article 269 of th~onstitution,-~drtimeldt 0-- c (a) in clause (1), after sub-clause (f), the followinglub-clause a69 shall be inserted, namely:-"(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 20 (b) after clause (2), the following clause shall be inserted, namely:-"(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" s  4 in article 286 of the constitution,-amendment of article 386 (a) in clause (1), the explanation shall be omitted; and (b) for clauses (2) and (3), the following clauses shtll be substituted, namely:-"(2) perliament may by law formulate principles for 10 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, in so far as it imposes, or authorises the i~position of, a' tax on the sale or purchase of goods declared by parliament by law to be of special is 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 the tax as parliament may by law specify"  -  'statement of objects and reasonswhile "taxes on the sale or purchase of goods other than newspapers" is an entry in the state list, article 286 of the constitution subjects the states' power to impose such taxes to four restrictions, of which two are total and two are par~al under clause (1) of the article, a state is debarred from imposing such a tax when the sale or purchase takes place outside the state or in the course of import into, or export from, the country with regard to the first restriction, namely, the non-taxability of sales outside the state, an explanation is given in the clause that "a sale or purchase shall be deemed to have taken place in the state in which goods have actually been delivered as a direct result of such sale or purchas~ for the purpose cf consumption in that state" then, under clause (2), a state is debarred from imposing the tax on inter-state sales except in so far as parliament may otherwise provide lastly, under clause (3), parliament is authorised to declare the goods which are essential to the life of the cqmmunity, a!ld when such a declaration has been made, any law made by a state legislature imposing a tax on the sale or purchase of those goods has to receive the president's assent in order to be effective jvgh judicial authorities have found the interpretation of the article a difficult task and expressed divergent views as to th~ scope and effect, in particular, of the explanation in clause (1) and of clause (2) the majority view of the supreme court in the state of bombay v the united motots (india) ltd, (1953) scr 1069, was that sub-clause (a) and the explanation in clause (1) prohibited the taxation of a sale involving inter-state elements by all state" except the state in which the goods are delivered for the purpose of consumption therein, and furthermore, that clause (2) did not  affect the power of that state to tax the inter-state sale even though parlia-ment had not made a law removing the ban imposed by that clause this resulted in dealers resident in one state being subjected to the sales tax jurisdiction and procedure of several other sti1tes with which they had dealings in the normal course of their business two-and-a-half years later, the second part of this decision was reversed by the supreme court in the bengal immunity company ltd v the state of bihar (1955) sca 1140 but here too the court was not unanimous in pursuance of clause (3) of the article, parliament passed" an act in 1952 declaring a number of goods like foodstuffs of various kinds, cloth, raw cotton, cattle feeds, iron and steel, coal, etc to be e~ntial to the life of the community since this declaration could not affect pre-existing state laws imposing sales tax on these ~oods, " the result was a wide disparity from state to states, not'only in the range of exempted goods, but also in the rates applicable to them the taxation enquiry commission, after examining the problem with great care and thoroughness, have made certain recommendations which may be summarised as follows in essence, sales tax must continue to be a sta~ source of revenue and its levy and administration must substantially pertain to the state govel'nments the sphere of power and responsibility of the state may, however, be said to end, and that of the union to begin, when the sales tax of one state impinges, administratively on the dealers, and fiscally on the consumers, of another stat~ broadly, therefore, inter-state sales should be the concern of the union, but the responsi'bilities pertaining to the union could be exercised through the state govemnlents, and in any case, the revenue should appropriately devolve on them intra-state sales, on the oth~r hand, should be left to the states, but with one important exception where, for instance, raw material produced in a state is important from the point of view of tb8 consumer or the industry of another state, certain restriction; have to be placed on the taxing pov{er of the state government as oth~ wise it can effect an increase in the cost of the manufactured article; whether lsuch manufacture ta~es place in the state which produces the raw material, or in another statel which imports the material from that state in either ca~e, to the extent that the finished 8bods are consumed in a state other than the one which taxes the raw material, the increase in cost on account of the tax is a matter of direct concern to the consumer of another state such cases of intra-state sales should appropriately be brought under the full control of the union these recommendations of the commission have been generally accepted by all the state governments the object of this bill is to give effect to the recommendations of the commission as regards the amendment of the constitutional provisions relating to sales tax - in clause 2, it is proposed to add a new entry 92a in the union' list placing taxes on inter-state sales and purchases within the exclusive legislative and executive power of the union, and to make entry 54 of the state list "subject to the provisions" of this new entry in clause 3, it is propose~ to add these taxes to the list given' in cl,lluse (1) of article 269, so that, although they will be levied and collected· in accordance with an act of parliament, they will net, form part of the consolidated fund of india, but will accrue to the states themselves in accordance with such principles of distribution as may be fol'mulated by parliament by law a further provision ij proposed in article 269 expressly empowering parliament to formulate by law principles for determining when a sale or purchase of goods takes pla{'e in the course of inter-state trade or commerce it is proposed in clause 4 to omit from caluse (1) of article 286 the explanation which has given risc to a great deal of legal controversy and practical difficulty in view of the centralisation of inter-state sales tax proposed in clause 2 of this bill, clause (2) of article 286 in its present form vtill cease to be appropriate in its place it is proposed to idsert a provision empowering parliament to fonllulate principles for determining when a sale or purchase of g'jocts takes place (a) outside a state, or (b) in the course of import of the goods - into'the territory of fmdia or (c) in the course of export of the goods out of thtj territory of india it is fui ther proposed to replace clause (3) of article 286 by a new clause on the lines recommended by the taxation enquiry commission under this revised clause parliament will have th~ power to cieolanby  law the goods which are of special importance in inter-state trade or commerce and also to specify the restricuons and condi·tiona to which aziy state law (whether made before or after the parliamentary law) will be subject in reglu'd to the system of levy, ratep and {lther incidents of the tax on the·sale or purchase of those goods!  manilal shah kew deuajthe 30th aj?ril 1956 -                  -                                -          part xu                                               -  finance property contracts and suits •chapter i-finance - - - - • - - distribution of revenues between the union and the states -  - - - tues levied 269 (1) the following duties and taxes shall be levied and collectand collected ed by the government of india but shall be assigned to the states itnion ~:t in the manner provided in clause (2), namely:-ili!il~~8 to (a) duties in respect of succession to 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; - (d) taxes on railway fares and freights; (e) taxes other than stamp duties on transactions in stockexchanges and futures markets; (f) taxes on the sale or purchase of newspapers and on advertisements published therein (2) the net proceeds in any fim:ncial year of any such duty or tax, except in so far as those proceeds r~present proceeds attributable to states specified in part c of the first schedule shall not form part of the consolidated fund of india, but shall 'he assigned to the sta,tes within which that duty or tal' 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 -  - - - miscellaneous financial provisions - - - - - restrictions 286 (1) no law of a state shall impose, or authorise the imposlas to impo- tion of, a tax on the sale or purchase of goods where such sale or sition of tax purchase takes placeon the isle or purchase (a) outside the state; or of goods , - (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 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 the president and has received his assent -  - - - -   list d-state list - 54 taxes on the sale or purchase of goods other than newspapers  -  - - - tax, and trni aslij the ' re as sit on or of a bill further to amend the constitution of india tax and by unf ani, the ':1 (shri m c shah, minister of r8fjf1iue and cifjil &potditure) , re al sit od or of 