Discriminatory tax classification on identical goods fails constitutional equality and free trade protections, requiring the lower uniform rate

A tax classification that imposed a higher rate on atta, ravva and maida made from wheat not previously taxed in the State was treated as discriminatory because the finished goods were identical and the distinction depended only on the tax history of the raw material. The challenged entry was therefore incompatible with equality and free trade protections under the Constitution and could not justify the higher levy. The competing clause applying the lower rate to the same goods was taken as the proper basis for taxation, and relief was granted by directing reassessment at that uniform lower rate.

---

---

Issues: Whether entry 60(a) of the First Schedule to the Andhra Pradesh General Sales Tax Act, 1957, insofar as it levied a higher rate of tax on atta, ravva and maida manufactured from wheat not suffering tax under the Act, was discriminatory and violative of the Constitution, and whether the petitioner was entitled to be taxed uniformly at the lower rate under entry 60(b).

Analysis: The classification in the schedule turned solely on whether the raw material had suffered tax in the State, though the finished products were the same. Such a distinction was treated as an artificial and discriminatory basis for taxation. The Court followed the principle that a higher levy on identical goods merely because the input had not suffered local tax offends the guarantees of equality and free trade under the Constitution, and the challenged entry could not stand when compared with the lower rate applicable to the same goods under the other clause.

Conclusion: Entry 60(a) was held illegal, ultra vires and violative of Articles 14 and 301 to 304 of the Constitution of India, and the petitioner was entitled to reassessment and levy at the lower rate applicable under entry 60(b).

Final Conclusion: The tax classification was invalidated, and the assessee obtained relief by securing taxation at the uniform lower rate for the relevant assessment years.

Ratio Decidendi: A tax classification based only on whether the raw material has suffered local tax, when the finished goods are identical, is an unreasonable and discriminatory distinction that violates equality and freedom of trade protections.

---