STATE OF MADRAS vs A.HABIBUR REHMAN SONS (With Connected Appeals)

The Supreme Court held that under Article 286(1)(a) of the Constitution, states cannot impose taxes on outside sales, and this prohibition remains effective despite the Sales Tax Laws Validation Act, 1956, which lifted the ban on inter-State sales for a specific period. The Court clarified that the restrictions in Article 286 are cumulative, and the legislative power of states to tax sales is contingent upon compliance with these restrictions. The High Court's ruling that the sales were outside sales and not subject to state tax was upheld.