Imported fur fabric denied sales tax exemption as India-manufacture upheld and tax classification found reasonable.

Imported artificial fur fabric did not qualify for sales tax exemption because the Third Schedule restricted item 16 to knitted or crocheted fabrics produced or manufactured in India. The declared-goods argument also failed, as the relevant Central Sales Tax and excise references applied to goods manufactured in India and liable to excise, whereas the imported goods had only borne customs duty. The distinction between locally manufactured and imported goods was treated as a reasonable basis for tax classification, so the article 14 challenge to the impugned entries was rejected and the exemption restriction was upheld as valid.

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Issues: Whether imported synthetic fabric of artificial fur was entitled to exemption under section 8 of the Tamil Nadu General Sales Tax Act, 1959 read with the Third Schedule and whether it could be treated as declared goods so as to limit the levy to 4 per cent; whether entry 22-A of Part E of the First Schedule and entry 67 of Part D of the First Schedule read with item 16 of Part A of the Third Schedule were unconstitutional for discriminating against imported goods.

Analysis: The exemption under section 8 operates only in respect of goods specified in the Third Schedule, and item 16 of Part A of that Schedule expressly confines the exemption to knitted or crocheted fabrics produced or manufactured in India. The petitioner's imported fur fabric, being foreign-origin material and not produced or manufactured in India, therefore did not fall within the exempted category. The contention based on declared goods also failed because section 14(vii) of the Central Sales Tax Act, 1956 and the corresponding reference to the Central Excise Tariff contemplate goods manufactured in India and liable to excise, whereas the imported goods had only suffered customs duty. The classification between locally manufactured goods and imported goods was held to be a rational basis for tax differentiation, and the exemption restriction was found to be a valid legislative choice. The challenge under article 14 was rejected because the State was entitled to classify goods for taxation purposes on a reasonable basis.

Conclusion: The imported artificial fur was not exempt from sales tax, could not claim declared-goods treatment, and the impugned entries were held valid and constitutional.

Ratio Decidendi: Where a sales tax exemption is expressly confined to goods produced or manufactured in India, imported goods of the same description cannot claim that exemption, and such a classification is a constitutionally permissible basis for taxation.

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