Uniform sales tax on declared goods and anti-cascading deduction do not violate constitutional non-discrimination.

A statutory deduction intended to prevent cascading tax on declared goods was treated as a mechanism for avoiding repeated taxation, not as a preferential rate for locally manufactured goods. The Kerala High Court held that the Karnataka Sales Tax Act maintained a uniform 4% levy at a single point for declared goods, with no discrimination between goods manufactured within the State and goods brought from outside the State. Because the reduced effective burden arose from the deduction scheme rather than a different tax rate, the provision did not violate Article 304(a) of the Constitution, and the constitutional challenge failed.

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Issues: Whether section 5(4) read with item 2 of the Fourth Schedule and Explanation II thereto of the Karnataka Sales Tax Act is violative of Article 304(a) of the Constitution of India.

Analysis: The levy on declared goods under the State Act was held to operate at a uniform rate of 4% at a single point, in conformity with the restriction under section 15 of the Central Sales Tax Act, 1956. The deduction provided under Explanation II was treated as a mechanism to avoid repetitive taxation where one declared good is manufactured out of another declared good on which tax had already been paid, and not as a preferential rate for locally manufactured goods. The Court held that there was no discrimination in the rate of tax between goods manufactured within the State and goods brought from outside the State, and that the reduced effective burden resulting from the deduction did not amount to a different rate of tax. The later Supreme Court decisions recognising that equal rates on declared goods do not offend Article 304(a) if the statutory scheme does not create a rate difference were applied.

Conclusion: The provision was held not to be violative of Article 304(a) of the Constitution of India, and the challenge failed.

Final Conclusion: The writ petitions were rejected, and the constitutional challenge to the impugned sales tax provision was negatived.

Ratio Decidendi: A statutory deduction designed to prevent cascading tax on declared goods does not amount to discrimination under Article 304(a) where the rate of tax remains uniformly the same for goods manufactured within the State and goods imported from outside the State.

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