Declared goods taxation limits barred a multi-point levy on iron and steel under constitutional and statutory restrictions.

Declared goods such as iron and steel remain subject to constitutional and statutory limits on State taxation. Article 286(3)(a) and section 15(a) of the Central Sales Tax Act require that tax on such goods inside a State must not exceed four per cent and must be levied at no more than one stage. The Kerala amendment imposed a value-added, multi-point levy on iron and steel under section 5(1)(vi) and the Sixth Schedule, and the set-off mechanism did not change the fact that the goods were taxed at successive points. The scheme therefore breached both the stage and rate restrictions and exceeded the State Legislature's taxing competence.

---

---

Issues: Whether the amended provisions of the Kerala General Sales Tax Act, 1963, applying tax on iron and steel at all points of sale and in a manner exceeding the statutory ceiling, were contrary to Article 286(3)(a) of the Constitution of India and Sections 14 and 15(a) of the Central Sales Tax Act, 1956, and therefore unconstitutional and void.

Analysis: Iron and steel are declared goods of special importance in inter-State trade and commerce. Under Article 286(3)(a) of the Constitution of India, the State's taxing power in respect of such goods is subject to the restrictions laid down by Parliament. Section 15(a) of the Central Sales Tax Act, 1956 mandates that tax on declared goods inside the State shall not exceed four per cent and shall not be levied at more than one stage. The amended scheme under Section 5(1)(vi) of the Kerala General Sales Tax Act, 1963 and the Sixth Schedule imposed a value-added, multi-point levy on iron and steel. The proviso permitting set-off of tax already suffered at earlier stages did not alter the character of the levy, because the commodity remained taxable at successive points of sale. The result was that both the stage restriction and the rate restriction under the Central Sales Tax Act, 1956 were breached, and the State Legislature had transgressed the limits of its competence under Entry 54 of List II.

Conclusion: The amended provisions, insofar as they related to levy of tax on declared goods iron and steel, were held unconstitutional, ultra vires and void.

---