Article 304(a) anti-discrimination in sales tax: local manufacturing preference under a concessional notification was invalidated.

A State sales tax notification granting a lower rate to goods manufactured within the State and sold to specified local entities was discriminatory under Article 304(a). The court applied the constitutional rule that similar imported goods cannot be taxed differently from locally produced goods, and held that a fiscal purpose or administrative justification does not cure such preference for local manufacture. Relying on the binding Supreme Court principle for an in pari materia notification, the concession was held to discriminate against comparable goods from outside the State. The notification was quashed as violative of Article 304(a), and tax was directed to be collected at the uniform higher rate, with past transactions left unaffected.

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Issues: Whether the concessional sales tax notification granting a lower rate to locally manufactured goods sold to specified local entities was discriminatory and violative of Article 304(a) of the Constitution of India.

Analysis: The notification conferred a lower tax rate on goods manufactured or produced within the State and sold to identified departments, undertakings, Government companies, and local authorities. The controlling constitutional principle was that Article 304(a) prohibits a State from imposing a tax on imported goods different from the tax on similar goods manufactured or produced in the State, so as not to discriminate between them. The Court applied the binding rule that differential treatment by the same State between locally produced goods and similar imported goods amounts to discrimination within the meaning of Article 304(a), and that the existence of a fiscal purpose or administrative justification does not save a discriminatory executive notification. In view of the earlier Supreme Court ruling on an in pari materia notification, the impugned concession was held to give a preference to local manufacture and to discriminate against comparable goods coming from outside the State.

Conclusion: The notification was held to be violative of Article 304(a) and was quashed.

Final Conclusion: The writ petition succeeded, the impugned concessional notification was invalidated, and tax was directed to be collected at the uniform higher rate, with past transactions left unaffected.

Ratio Decidendi: A State notification that grants a lower sales tax rate to locally manufactured goods while denying the same benefit to similar goods from outside the State is constitutionally invalid as discriminatory under Article 304(a).

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