Discriminatory turnover tax exemption struck down for singling out consignment and branch transfer goods under Part XIII

A turnover tax exemption notification was held unconstitutional because it exempted turnover tax generally while denying that benefit to goods received on consignment or branch transfer. The court treated the notification as law for constitutional scrutiny and found the classification discriminatory under Part XIII, especially Article 304(a), because it singled out a comparable class for adverse treatment without a valid constitutional basis. The distinction that such goods were not taxed at the place of origin was held irrelevant. The exception was therefore invalid under Article 304, while the exemption otherwise remained undisturbed.

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Issues: Whether the impugned notification, by exempting turnover tax generally but excluding goods received on consignment or branch transfer, created unconstitutional discrimination and violated Part XIII of the Constitution, particularly Articles 301 and 304.

Analysis: The turnover tax exemption notification was treated as law for constitutional scrutiny. The decisive question was not merely whether different rates were prescribed, but whether the notification created a discriminatory fiscal classification that singled out consignment and branch transfer goods while granting exemption to all others. The constitutional scheme under Articles 301 to 304 permits freedom of trade subject to limited exceptions, but a State measure that operates as hostile or unequal taxation against comparable goods offends Article 304(a), and any restriction claimed under Article 304(b) must satisfy the requirements of public interest and the constitutional safeguard of presidential sanction. The notification was found to create a worse form of discrimination than a mere rate difference, because it denied the benefit of exemption to only one class while freeing the remainder from turnover tax. The distinction drawn on the footing that consignment and branch transfer goods were not taxed at the place of origin was held irrelevant.

Conclusion: The notification was unconstitutional and invalid to the extent of the exception carved out for goods received on consignment or branch transfer. It was struck down as contrary to Article 304 of the Constitution of India.

Final Conclusion: The petitions succeeded, and the challenged exception in the exemption notification was quashed, leaving the exemption otherwise undisturbed.

Ratio Decidendi: A State fiscal notification that grants exemption generally but withholds it from a singled-out comparable class of goods creates impermissible discriminatory taxation under Part XIII and cannot survive constitutional scrutiny merely because it is styled as an exemption measure.

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