New Delhi, April 24 : New Delhi, April 24: In a landmark ruling that is in tune with the principles of a market economy and 'free flow of trade', a five-member full constitution bench of the Supreme Court has held that a state government cannot levy any tax on power producer generating electricity that they sell in another state. The bench, presided by Chief Justice S.P. Bharucha, ruled that if the argument that both the states could levy tax was accepted, then the "state where the dealer supplying the electricity is located and the electricity originates for sale, as also the states in which the purchaser of electricity is located and it is delivered, shall both subject the electrical energy to taxation, by relying on the theory of territorial nexus". The judges said such an anomalous situation existed with respect to sales tax before the Constitution of India came into force and "led to complications and difficulties in administration of sales tax legislation" which was eventually resolved by the Sixth Amendment. "Such multiple taxation would result in hampering free movement of electricity between the states and, therefore, would be prejudicial to freedom of trade, commerce and intercourse throughout the territory of India, and for the unity and integrity of the country. That would give rise to the same situation which was sought to be remedied by the Constitution and the Sixth Amendment," the bench ruled. The ruling comes as a shot in the arm for all power generators in power-surplus states that export electricity to power-deficit ones. It will especially benefit National Thermal Power Corporation (NTPC) which has multiple agreements with states under which it supplies electricity across the country. The issue came before the Supreme Court because of two cases involving NTPC which generates power in Andhra Pradesh and Madhya Pradesh and sells it in Chhattisgarh and other states. Both Andhra and Madhya Pradesh had wanted to levy tax on the corporation which NTPC had contested. The apex court said the line of reasoning advanced by Andhra and Madhya Pradesh "run counter to the scheme of constitutional provision and specially the Sixth Amendment." Article 286 of the Constitution provides that "no law of a State shall impose a tax on the sale or purchase of goods outside the state." The apex court said levying tax by the state on power generated within its territorial jurisdiction would be "ultra vires of Articles 286 and 269 of the Constitution." Article 269 relates to "taxes levied and collected by the union but assigned to the states". These items comprise estate duty, terminal taxes on goods or passengers carried by railway, sea or air. The apex court said no state law could convert "an inter-state sale into an intra-state sale or create a territorial nexus to an inter-state sale". "When the generation takes place in one state from where it is supplied and it is received in another state where it is consumed, the entire transaction is one and can be nothing else excepting an inter-state sale on account of instantaneous movement of goods from one state to another occasioned by the sale or purchase of goods squarely covered by section 3 of the Central Sales Tax Act," the judges said. "In the case of electricity, the events of sale and consumption are inseparable. Any state legislation levying duty on sale of electricity, by artificially or fictionally assuming that the events of sale and consumption have taken place in two states, would be vitiated because of extra territorial operation of state legislation," the judges said.