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18. In Hoechst Pharmaceuticals Ltd. (supra), this Court held: -

The words “notwithstanding anything contained in clauses (2) and (3)” in Article 246(1) and the words “subject to clauses (1) and (2)” in Article 246(3) lay down the principle of federal supremacy viz. that in case of inevitable conflict between Union and State powers, the Union power as enumerated in List I shall prevail over the State power as enumerated in Lists II and III, and in case of overlapping between Lists II and III, the former shall prevail. But the principle of federal supremacy laid down in Article 246 of the Constitution cannot be resorted to unless there is an “irreconcilable” conflict between the entries in the Union and  State Lists. In the case of a seeming conflict between the entries in the two Lists, the entries should be read together without giving a narrow and restricted sense to either of them. Secondly, an attempt should be made to see whether the two entries cannot be reconciled so as to avoid a conflict of jurisdiction. It should be considered whether a fair reconciliation can be achieved by giving to the language of the Union Legislative List a meaning which, if less wide than it might in another context bear, is yet one that can properly be given to it and equally giving to the language of the State Legislative List a meaning which it can properly bear. The non obstante clause in Article 246(1) must operate only if such reconciliation should prove impossible. Thirdly, no question of conflict between the two Lists will arise if the impugned legislation, by the application of the doctrine of ‘pith and substance’ appears to fall exclusively under one list, and the encroachment upon another list is only incidental.

clause (3). Under clause (3) the State Legislatures have been given exclusive powers to make laws in respect of matters enumerated in List II in the Seventh Schedule described as the “State List” but subject to clauses (1) and (2). The three lists while enumerating in detail the legislative subjects carefully distribute the areas of legislative authority between Parliament (List I) and the State (List II). The supremacy of Parliament has been provided for by the non obstante clause in Article 246(1) and the words “subject to” in Articles 246(2) and (3). Therefore, under Article 246(1) if any of the entries in the three lists overlap, the entry in List I  will prevail. Additionally, some of the entries in the State List have been made expressly subject to the power of Parliament to legislate either under List I or under List III. Entries in the lists of the Seventh Schedule have been liberally interpreted; nevertheless courts have been wary of upsetting this balance by a process of interpretation so as to deprive any entry of its content and reduce it to “useless lumber”. The use of the word “exclusive” in clause (3) denotes that within the legislative fields contained in List II, the State Legislatures exercise authority as plenary and ample as Parliament's.

(Emphasis supplied)

22. In State of W.B. v. Committee for Protection of Democratic Rights, (2010) 3 SCC 571, this Court held:

25. The non obstante clause in Article 246(1) contemplates the predominance or supremacy of the Union Legislature.

This power is not encumbered by anything contained in clauses (2) and (3) for these clauses themselves are expressly limited and made subject to the non obstante clause in Article 246(1). The State Legislature 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 and it also has the power to make laws with respect to any matters enumerated in List III (Concurrent List). The exclusive power of the State Legislature to legislate with respect to any of the matters enumerated in List II has to be exercised subject to clause (1) i.e. the exclusive power of Parliament to legislate with respect to matters enumerated in List I. As a consequence, if there is a conflict between an entry in List I and an entry in List II, which is not capable of reconciliation, the power of Parliament to legislate with respect to a matter enumerated in List II must supersede pro tanto the exercise of power of the State Legislature.

 26. Both Parliament and the State Legislature have concurrent powers of legislation with respect to any of the matters enumerated in List III. The words “notwithstanding anything contained in clauses (2) and (3)” in Article 246(1) and the words “subject to clauses (1) and (2)” in Article 246(3) lay down the principle of federal supremacy viz. that in case of inevitable conflict between the Union and State powers, the Union power as enumerated in List I shall prevail over the State power as enumerated in Lists II and III and in case of an overlapping between Lists II and III, the latter shall prevail.