Valid taxation of imported vanaspati through commission agents upheld as non-discriminatory and within rule-making power.

A commission agent selling vanaspati imported from outside Uttar Pradesh could validly be treated as an "importer" for sales tax purposes because the classification reflected a real difference and was designed to secure collection where the outside-State manufacturer could not conveniently be taxed. The levy was held consistent with Articles 301 and 304 since similar locally manufactured vanaspati was also taxed and the differential incidence did not amount to discrimination. Rule 2(d-1) of the U.P. Sales Tax Rules was further treated as intra vires, as it supported the charging scheme of the Act and fell within the rule-making power.

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Issues: (i) whether treating a commission agent selling vanaspati imported from outside Uttar Pradesh as an "importer" for sales tax purposes amounted to hostile discrimination under Article 14; (ii) whether the levy offended Articles 301 and 304 of the Constitution of India; and (iii) whether rule 2(d-1) of the U.P. Sales Tax Rules was ultra vires the rule-making power under the U.P. Sales Tax Act.

Issue (i): whether treating a commission agent selling vanaspati imported from outside Uttar Pradesh as an "importer" for sales tax purposes amounted to hostile discrimination under Article 14.

Analysis: The classification between a commission agent dealing with goods manufactured in Uttar Pradesh and a commission agent dealing with goods manufactured outside Uttar Pradesh rested on a real difference. Where the manufacturer was outside the State, the tax could not conveniently be collected from the non-resident manufacturer, and the first seller in Uttar Pradesh was made liable so that the sale did not escape taxation. Persons similarly situated were not treated differently.

Conclusion: The classification was valid and there was no hostile discrimination; the contention under Article 14 failed.

Issue (ii): whether the levy offended Articles 301 and 304 of the Constitution of India.

Analysis: Article 304 permits a State to impose tax on imported goods if similar goods manufactured or produced in the State are also taxed and there is no discriminatory treatment. Vanaspati manufactured in Uttar Pradesh was taxable, and imported vanaspati was subjected to a similar levy. Mere difference in incidence did not amount to discrimination.

Conclusion: The levy did not violate Articles 301 and 304.

Issue (iii): whether rule 2(d-1) of the U.P. Sales Tax Rules was ultra vires the rule-making power under the U.P. Sales Tax Act.

Analysis: The rule created an artificial definition of "importer" to ensure that sales of imported goods through commission agents in Uttar Pradesh were taxed. This supported, rather than enlarged, the charging scheme of the Act. The State could also have achieved the same result through the notification issued under section 3-A, and the rule was within the power conferred by section 24.

Conclusion: Rule 2(d-1) was intra vires and valid.

Final Conclusion: The assessment was upheld and no refund was payable, as the tax was lawfully levied on the petitioner.

Ratio Decidendi: A State may validly classify commission agents dealing with imported goods separately for tax purposes to ensure effective collection of a tax already applicable to similar local goods, and a rule that gives effect to that levy within the statutory scheme is not ultra vires.

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