A) ABSTRACT / HEADNOTE

This landmark case, Himmatlal Harilal Mehta v. The State of Madhya Pradesh & Ors., decided by a Constitution Bench of the Hon’ble Supreme Court of India, analyzed the scope and limits of State legislative power to levy sales tax under the Constitution of India, particularly in light of Articles 19(1)(g) and 286(1)(a). The case revolved around the constitutional validity of Explanation II to Section 2(g) of the Central Provinces and Berar Sales Tax Act, 1947, as amended in 1949. The Supreme Court held that the impugned provision was ultra vires the State Legislature. It further observed that even a threat to realize tax under an unconstitutional provision infringed the petitioner’s fundamental right under Article 19(1)(g) and justified the invocation of Article 226 of the Constitution. Importantly, the Court highlighted that the existence of an onerous alternative remedy under the statute does not bar relief under Article 226 when fundamental rights are at stake. This decision remains a milestone in Indian constitutional jurisprudence on the protection of trade freedom and State tax jurisdiction under the constitutional scheme.

Keywords: Sales Tax, Fundamental Rights, Article 226, Ultra Vires, Article 286, Tax Jurisdiction

B) CASE DETAILS

i) Judgement Cause Title:
Himmatlal Harilal Mehta v. The State of Madhya Pradesh and Others

ii) Case Number:
Civil Appeal No. 20 of 1952

iii) Judgement Date:
16 March 1954

iv) Court:
Hon’ble Supreme Court of India

v) Quorum:
Mehr Chand Mahajan C.J., Mukherjea J., S.R. Das J., Vivian Bose J., and Ghulam Hasan J.

vi) Author:
Chief Justice Mehr Chand Mahajan

vii) Citation:
AIR 1954 SC 403; [1954] SCR 1122

viii) Legal Provisions Involved:

• Article 19(1)(g) of the Constitution of India

• Article 226 of the Constitution of India

• Article 286(1)(a) of the Constitution of India

• Central Provinces and Berar Sales Tax Act, 1947, Section 2(g) and Explanation II (as amended by Act XVI of 1949)

ix) Judgments overruled by the Case (if any):
None explicitly overruled

x) Case is Related to which Law Subjects:
Constitutional Law, Taxation Law, Administrative Law, Commercial Law

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The appellant, representing C. Parakh and Co. (India) Ltd., challenged the constitutional validity of Explanation II to Section 2(g) of the Central Provinces and Berar Sales Tax Act, 1947. The controversy arose due to the imposition of sales tax by the Madhya Pradesh State on transactions where goods were neither delivered nor consumed within the State but merely originated from there. The High Court had earlier agreed on the unconstitutionality of the provision but denied relief under Article 226. This appeal challenged that denial. This case provided a crucial interpretative foundation on the interplay between Articles 286 and 19(1)(g) and the limits of a State’s legislative competence in taxing inter-State transactions, directly impacting the economic freedom guaranteed by the Constitution.

D) FACTS OF THE CASE

The appellant was the representative of a company engaged primarily in cotton trade with its head office in Bombay and branches in Madhya Pradesh. The sales in question were transactions where the head office sold cotton bales to mills and buyers outside Madhya Pradesh. Despite the fact that the contract of sale and delivery occurred outside the State, the Sales Tax Department of Madhya Pradesh sought to levy tax under Explanation II to Section 2(g). The provision sought to deem sales to have taken place within the State merely because the goods were physically present there at the time the contract was made, regardless of the place of delivery or consumption. Initially, the appellant complied and paid tax, but later refused to pay, considering the provision ultra vires post-Constitution. Fearing coercive recovery measures, the appellant sought relief under Article 226, which was dismissed by the Nagpur High Court.

E) LEGAL ISSUES RAISED

i) Whether Explanation II to Section 2(g) of the Central Provinces and Berar Sales Tax Act, 1947, as amended, is ultra vires the State Legislature under Article 286(1)(a) of the Constitution.

ii) Whether the threat of recovery under the impugned provision violates the fundamental right to trade under Article 19(1)(g).

iii) Whether the presence of an alternative statutory remedy bars the invocation of Article 226.

F) PETITIONER/APPELLANT’S ARGUMENTS

i) The counsels for Petitioner / Appellant submitted that the impugned Explanation II deeming sales to occur within Madhya Pradesh was violative of Article 286(1)(a), which prohibits a State from taxing sales occurring in the course of inter-State trade unless the goods are delivered for consumption within the State. They relied on the precedent set in The State of Bombay v. United Motors (India) Ltd., [1953] SCR 1069, which declared that a State cannot tax sales unless the goods are delivered for consumption within it[1]. They also argued that the impugned law was incompatible with the Sale of Goods Act, 1930, and altered fundamental principles of appropriation and transfer without proper legislative competence, rendering it void. The appellant contended that a mere presence of goods at the time of sale does not imply the occurrence of a taxable event within the State and hence the tax demand lacked authority of law[2]. They further asserted that the threat to recover tax under an unconstitutional provision constitutes an infringement of the right to trade under Article 19(1)(g)[3], and is thus actionable under Article 226, regardless of the presence of alternative remedies under the statute.

G) RESPONDENT’S ARGUMENTS

i) The counsels for Respondent submitted that the State was empowered to tax sales under its taxing powers and relied on the amended definition of “sale” to justify jurisdiction. They argued that the appellant had not yet filed returns, and there was no actual recovery process underway, thus the writ petition was premature. The State also invoked the principle in Raleigh Investment Co. v. Governor-General-in-Council, 74 I.A. 50, stating that where the statute provides a mechanism to challenge assessments, it must be followed[4]. The Advocate General contended that fiscal statutes should not be interfered with via writ jurisdiction unless actual violation or persecution is evident. They further argued that writ jurisdiction under Article 226 should not be used to challenge laws on hypothetical or anticipatory grounds, especially when the statute provides remedies[5].

H) RELATED LEGAL PROVISIONS

i) Article 286(1)(a) of the Constitution prohibits States from imposing sales tax on sales that take place outside the State or during inter-State trade, except where goods are delivered for consumption within the State.

ii) Article 19(1)(g) guarantees citizens the fundamental right to practice any profession or carry on any trade, business or occupation.

iii) Article 226 empowers High Courts to issue writs to enforce fundamental rights or for any other purpose.

iv) Section 2(g), Explanation II of the Central Provinces and Berar Sales Tax Act, 1947 (as amended by Act XVI of 1949) attempted to deem sales to occur in Madhya Pradesh if goods were physically present there, irrespective of delivery and consumption.

I) JUDGEMENT

a. RATIO DECIDENDI

i) The Hon’ble Supreme Court held that Explanation II to Section 2(g) was clearly ultra vires the powers of the State Legislature under Article 286(1)(a). It declared that only the State where goods are delivered for consumption can tax such sales. The deeming fiction that location of goods at the time of contract constituted a sale within the State was inconsistent with the Constitution and hence invalid[6]. It also ruled that mere threat of action under an unconstitutional provision amounts to infringement of Article 19(1)(g), thus entitling the petitioner to writ relief under Article 226 without being barred by alternative remedies.

b. OBITER DICTA 

i) The Court observed that the constitutional guarantee of trade freedom is not merely a theoretical right but must be protected in practice, even against anticipated violations. The Court clarified that writ jurisdiction is broad enough to prevent potential unconstitutional actions that threaten fundamental rights[7].

c. GUIDELINES

• A State cannot impose sales tax unless goods are delivered for consumption within the State.

• An unconstitutional statutory provision cannot justify coercive tax collection measures.

• Relief under Article 226 is available even without exhaustion of statutory remedies if fundamental rights are at stake.

• Writ jurisdiction may be invoked to prevent likely or potential violations, not only actual ones.

J) CONCLUSION & COMMENTS

The judgment sets a powerful precedent affirming the supremacy of constitutional protections over statutory procedures. It reinforces the doctrine that no authority can impose taxes outside its jurisdiction, and that the presence of an alternative remedy does not bar judicial intervention when fundamental rights are imperiled. The Supreme Court adopted a proactive approach in protecting trade freedom and clarified the scope of Article 226 to include preemptive relief. The ruling has since been cited in multiple decisions dealing with the interplay of trade rights, fiscal legislation, and constitutional safeguards, including Mohd. Yasin v. Town Area Committee [1952] SCR 572. It remains a cornerstone in Indian tax and constitutional jurisprudence.

K) REFERENCES

a. Important Cases Referred

[1] The State of Bombay v. The United Motors (India) Ltd., [1953] SCR 1069
[2] Raleigh Investment Co. v. Governor-General-in-Council, (1947) 74 I.A. 50
[3] Mohd. Yasin v. The Town Area Committee, [1952] SCR 572

b. Important Statutes Referred

• The Constitution of India, Article 19(1)(g), Article 226, Article 286(1)(a)

• Central Provinces and Berar Sales Tax Act, 1947, Section 2(g) and Explanation II

• Sale of Goods Act, 1930