STATE OF KERALA vs SOUTH INDIA CORPORATION(P) LTD.

The Supreme Court held that under Article 277 of the Constitution, taxes lawfully levied by a State before the Constitution's commencement may continue until Parliament provides otherwise. However, the imposition of sales tax on works contracts was deemed beyond State competence due to Article 278, which established an agreement preventing such taxation. The Court concluded that the agreement broke the continuity of the levy, thus no sales tax could be imposed after January 26, 1960, as the agreement's expiration did not resuscitate the tax imposition.