Article 246 which states (1) Notwithstanding anything in clauses (2) and (3), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution referred to as the “Union List”).

(2) Notwithstanding anything in clause (3), Parliament, and, subject to clause (1), the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as the “Concurrent List”).

(3) Subject to clauses (1) and (2), the Legislature of any State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule (in this Constitution referred to as the “State List”).

(4) Parliament has power to make laws with respect to any matter for any part of the territory of India not included in a State notwithstanding that such matter is a matter enumerated in the State List.

The opening words of Article 246(1) “Notwithstanding anything in clause (2) and (3)”, and the opening words of clause (3),” Subject to the clause (1) and (2); leave no doubt that the effect of these words is that if the legislative powers of the Union and State Legislature, which are enumerated in Lists I and Lists II of Schedule VII, cannot fairly be reconciled, the later must give way to the former. Thus, if a subject happens to be included in List II and List III, the Union shall prevail because in the opening words of Clause, (2)” Notwithstanding anything in the clause (3)” makes it clear that the union power shall prevail in case of conflict between List II and List III

In the case of Union of India vs. H.S Dhillon (1971) 2 SCC 779, The Supreme Court held that Parliament has the exclusive power to make laws dealing with subjects of List I, notwithstanding anything in clause(2) and (3) of Article 246 whereas State legislature has the exclusive powers of make laws dealing with the subjects of List II but this is subject to clause (1) and (2) of Article 246; the underlying object being to make parliamentary legislation on matters of Lists I and List II paramount.

Doctrine of Pith and substance: the doctrine of ‘pith and substance’ is applied when the legislative competence of a legislature with regard to a particular enactment is challenged with reference to entries in different legislative lists, because a law dealing with a subject in one list within the competence of the legislature concerned is also touching on a subject in another list not within the competence of that legislature. In such a case, what has to be ascertained is the pith and substance of the enactment.

The doctrine holds that the state and federal legislatures are superior within their own areas, and that none should trespass on the other’s.

The courts will apply the Doctrine of Pith and Substance if one of the states or the Centre intrudes on the sphere of the other.

If the true object of the legislation, i.e., the pith and substance of the legislation, pertains to a subject within the legislative competence of the legislature that enacted it, it should be considered intra vires, even if it may inadvertently encroach on matters not within the legislature’s competence.

In Profulla Kumar Mukherjee v Bank of Khulna, the Privy Council applied this concept.

The Bengal Money Lenders Act of 1946, which was established by the State Legislature, was challenged in this case on the grounds that parts of it dealt with promissory notes, which was a central subject.

The Privy Council, in maintaining the constitutionality of the challenged statute, ruled that the Bengal Money Lenders Act was, in essence, a law pertaining to money lenders and money lending – a state topic – notwithstanding the fact that it intersected with the essential subject of promissory notes.

The Bombay Prohibition Act was challenged in State of Bombay v FN Balsara on the grounds that it inadvertently encroaches on the import and export of liquor across customs borders – a central issue. While upholding the challenged legislation, the court stated that the Act was in essence a state issue, despite the fact that it encroached on a central subject.

Article 254 of the constitution states Inconsistency between laws made by Parliament and laws made by the Legislatures of States

1) If any provision of a law made by the Legislature of a State is repugnant to any provision of a law made by Parliament which Parliament is competent to enact, or to any provision of an existing law with respect to one of the matters enumerated in the Concurrent List, then, subject to the provisions of clause ( 2 ), the law made by Parliament, whether passed before or after the law made by the Legislature of such State, or, as the case may be, the existing law, shall prevail and the law made by the Legislature of the State shall, to the extent of the repugnancy, be void

2) Where a law made by the Legislature of a State with respect to one of the matters enumerated in the concurrent List contains any provision repugnant to the provisions of an earlier law made by Parliament or an existing law with respect to that matter, then, the law so made by the Legislature of such State shall, if it has been reserved for the consideration of the President and has received his assent, prevail in that State: Provided that nothing in this clause shall prevent Parliament from enacting at any time any law with respect to the same matter including a law adding to, amending, varying or repealing the law so made by the Legislature of the State.

In the case of State of W.B v. Kesoram Industries Ltd, (2004) 10 SCC 201, the court stated that if there is repugnancy due to overlapping found between List II on the one side and List I and List III on the other side, the State law will be ultra vires and shall give way to the Union law.

Thus, when there is conflict between Union and State, The Union law will prevail.