Discriminatory entry tax on imported motor vehicles violates free trade and equality of taxation under the Constitution.

Section 4-B of the Karnataka Tax on Entry of Goods Act, 1979 was discriminatory because it imposed entry tax only on motor vehicles brought from outside the State, while similar locally produced vehicles were not subjected to the same levy at the point of entry. That differential treatment created a direct burden on inter-State trade and offended the protection under articles 301 and 304(a) of the Constitution. The impugned provision and notification were therefore held ultra vires and invalid, and the entry tax levy on imported motor vehicles was struck down.

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Issues: Whether section 4-B of the Karnataka Tax on Entry of Goods Act, 1979 and the notification issued thereunder were unconstitutional as discriminatory against motor vehicles brought from outside the State and violative of articles 301 and 304(a) of the Constitution of India.

Analysis: The charging provision levied entry tax only on an importer who brought a motor vehicle into a local area from a place outside the State, while locally manufactured motor vehicles moved within Karnataka were not subjected to the same levy. The scheme therefore created a distinction at the point of entry between imported goods and goods produced within the State. Part XIII of the Constitution prohibits direct and immediate impediments to the free flow of trade and forbids discriminatory taxation between imported goods and similar local goods. Although a State may levy entry tax under its legislative competence, such levy must satisfy the mandate of article 304(a) and must not discriminate against goods imported from other States. The court held that the impugned provision failed this test because the tax burden was fastened only on imported motor vehicles, without corresponding liability on similar locally produced vehicles at the point of entry.

Conclusion: Section 4-B of the Karnataka Tax on Entry of Goods Act, 1979 and the notification issued thereunder were held ultra vires articles 301 and 304(a) of the Constitution of India and invalid.

Final Conclusion: The petitions succeeded and the impugned entry tax levy on imported motor vehicles was struck down for unconstitutional discrimination in inter-State trade.

Ratio Decidendi: A State entry tax that levies a charge only on goods brought from outside the State, while exempting similar locally produced goods at the point of entry, is discriminatory and violates articles 301 and 304(a) of the Constitution of India.

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