Discriminatory tax on imported exercise books offends free trade where similar local goods remain exempt

A State notification that taxed imported exercise books while exempting similar exercise books made from paper purchased within Uttar Pradesh was held to discriminate against inter-State goods and burden their movement, offending Article 301. The fact that the paper used as raw material was purchased inside or outside the State did not change the identity of the finished exercise books. Because the distinction was not supported by Article 304(a), the importer-based part of the notification was severable and unenforceable, while the rest of the notification could stand. Relief was therefore available to the petitioners.

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Issues: Whether the notification taxing imported exercise books while exempting exercise books made from paper purchased within Uttar Pradesh violated the freedom of trade under Article 301 of the Constitution and was not protected by Article 304(a).

Analysis: Exercise books were treated as the relevant commercial goods, and the fact that the paper used as raw material was purchased inside or outside the State did not alter the identity of the finished article. The impugned notifications created a distinction between locally exempt exercise books and imported exercise books subjected to tax, thereby placing a burden only on inter-State movement of the goods. A tax that discriminates against goods imported from another State and results in a higher burden on such goods offends the constitutional guarantee of free trade unless it is supported by Article 304(a). The distinction drawn in the notification was held severable, so the offending part could be struck down without disturbing the rest.

Conclusion: The levy on imported exercise books was unconstitutional, the importer-based portion of the notification was unenforceable, and the petitioners were entitled to relief.

Ratio Decidendi: A State tax that discriminates against imported goods by exempting similar local goods directly restricts free trade under Article 301 and is invalid unless the imported and local goods are similarly taxed within the meaning of Article 304(a).

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