Discriminatory entry tax on imported motor vehicles violates free trade and equality principles, and the levy was struck down.

Sections 4B and 4BB of the Karnataka Entry Tax Act, together with the related notification on motor vehicles, were found to impose a discriminatory entry levy on goods imported from outside the State. The court reasoned that article 304(a) requires comparison within the same tax levy, so a reduction for tax paid under a different enactment did not remove the discrimination against imported vehicles. The levy was also held not to be compensatory or regulatory and to impede free trade and commerce under article 301. The impugned provisions and notification were therefore unconstitutional and liable to be quashed, with consequential refund of amounts collected.

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Issues: Whether sections 4B and 4BB of the Karnataka Tax on Entry of Goods into Local Areas Act, 1979, and the consequential notification prescribing entry tax on motor vehicles, were violative of articles 301 and 304(a) of the Constitution of India on the ground of discriminatory levy against goods imported from outside the State.

Analysis: The levy operated only on motor vehicles brought from outside the State, while similar vehicles dealt with within the State were not subjected to the same burden at the point of entry. The reduction mechanism in section 4BB was linked to tax paid under the Karnataka Sales Tax Act, 1957 or Central sales tax in another legal regime, but that did not remove the discrimination inherent in the impugned levy itself. For article 304(a), the relevant comparison is between the same tax imposed on imported goods and locally manufactured goods; a set-off against a different tax under a different enactment does not cure a discriminatory entry tax. The levy was neither compensatory nor regulatory, and it directly impeded the free flow of trade and commerce protected by article 301. The notification issued under the impugned provisions also fell with the invalid provisions.

Conclusion: The impugned sections 4B and 4BB and the notification issued under them were held to be unconstitutional and liable to be quashed, with consequential refund of amounts collected.

Ratio Decidendi: A State levy that singles out imported goods for entry tax, while leaving locally available goods outside the same burden, violates article 304(a); the defect is not cured by allowing adjustment or reduction of tax paid under a different statute, because discrimination must be tested within the same tax levy.

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