Single-point levy scheme and Explanation II were upheld as non-discriminatory under Article 304(a) in Karnataka sales tax law.

Section 5(4) of the Karnataka Sales Tax Act, read with item 2 of the Fourth Schedule and Explanation II, was analysed as part of a single-point levy scheme for declared goods. Explanation II was treated as an exemption mechanism that granted relief only where tax had already been borne at an earlier stage on the relevant raw material. The court reasoned that any differing burden between goods manufactured from locally purchased raw material and imported raw material arose from the operation of the scheme and tax incidence at different stages, not from direct discrimination in the levy. The provision was therefore not held violative of article 304(a) and was upheld.

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Issues: Whether section 5(4) of the Karnataka Sales Tax Act, read with item 2 of the Fourth Schedule and Explanation II thereto, was unconstitutional for the period prior to 1 April 1978 as violative of article 304(a) of the Constitution of India on the ground that the provision discriminated between goods manufactured from locally purchased raw material and goods manufactured from imported raw material.

Analysis: Explanation II operated as an exemption mechanism within the single-point levy scheme and did not create a discriminatory rate of tax. The scheme treated iron and steel as declared goods liable at a single point, and relief was available only where tax had already been suffered at an earlier stage on the relevant raw material. Any difference in burden arose from the working of the taxation scheme on different dealers and from the quantum of tax at different stages, not from any direct or immediate discrimination in the levy itself. The reasoning was consistent with the later understanding of similar schemes under article 304(a), and the earlier authorities relied upon by the petitioners did not compel a different result on the facts of this provision.

Conclusion: The challenged provision was not violative of article 304(a) and was upheld.

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