Discriminatory sales tax concession for local goods was unconstitutional; exemption notifications for imported competition were struck down.

A State sales tax scheme that imposed a higher burden on imported television sets and other electronic goods while granting a lower rate to locally manufactured goods violated the freedom of trade under Article 301 and the non-discrimination rule in Article 303(1). The concession was not saved by Article 304(a) because the tax distinction depended on place of manufacture and favoured local goods. As the discrimination arose from the exemption notifications rather than the general statutory rate, the proper relief was to quash the concessional notifications for local manufacturers, leaving the normal levy intact.

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Issues: (i) Whether the lower rate of sales tax granted to locally manufactured television sets and other electronic goods, while goods imported from outside the State were taxed at a higher rate, offended the constitutional guarantee of free trade and the prohibition against discriminatory State taxation. (ii) Whether, on granting relief, the higher rate imposed on the petitioners should be quashed or the notifications granting the lower rate to local manufacturers should be struck down.

Issue (i): Whether the lower rate of sales tax granted to locally manufactured television sets and other electronic goods, while goods imported from outside the State were taxed at a higher rate, offended the constitutional guarantee of free trade and the prohibition against discriminatory State taxation.

Analysis: Article 301 guarantees freedom of trade, commerce and intercourse throughout India, and article 303(1) prohibits State preference or discrimination. Article 304(a) permits a State to tax imported goods only if similar goods manufactured or produced in the State are also taxed similarly, without discrimination. The higher levy on imported goods and the concessional rate for locally manufactured goods created a tax distinction based on place of manufacture. The asserted object of encouraging local industry could not override the constitutional requirement of non-discrimination, and the exception under article 304(a) was not satisfied.

Conclusion: The discriminatory rate structure was unconstitutional and had to be struck down in favour of the petitioners.

Issue (ii): Whether, on granting relief, the higher rate imposed on the petitioners should be quashed or the notifications granting the lower rate to local manufacturers should be struck down.

Analysis: The grievance arose from the preferential concession granted to local manufacturers, not from the general statutory rate applicable to the petitioners. The higher rate represented the normal levy under section 7 of the Act, whereas the lower rate was an exception created through the exemption power under sub-section (2) of section 49. To give effect to the statutory scheme and the relief actually sought, the proper course was to remove the concessional notifications rather than disturb the general rate.

Conclusion: The notifications granting the lower rate to local manufacturers were quashed in favour of the petitioners.

Final Conclusion: The State's discriminatory sales tax concession for locally manufactured goods was invalid, and the impugned exemption notifications were set aside with costs.

Ratio Decidendi: A State tax that subjects imported goods to a higher burden than similar locally manufactured goods is unconstitutional unless it satisfies article 304(a); where the concession is the source of discrimination, the proper relief is to strike down the discriminatory exemption.

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