Discriminatory tax on declared goods was unconstitutional where imported iron and steel faced a higher rate than local goods.

Entry 6(b) of the notification was found unconstitutional to the extent it imposed a higher tax rate on imported iron and steel than on corresponding locally manufactured iron and steel made from taxed raw material. As iron and steel are declared goods, the State could not subject imported goods to a greater tax burden without a special and valid justification. The classification between entry 6(a) and 6(b) was held to be discriminatory and repugnant to Articles 301 to 304 of the Constitution. The assessment order applying the higher rate was liable to be set aside to that extent, while the question of refund was left for the assessing authority to examine according to law.

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Issues: Whether entry 6(b) of the impugned notification, by imposing a higher rate of tax on iron and steel imported from outside the State than on iron and steel manufactured within the State from taxed raw material, violated Articles 301 to 304 of the Constitution of India and whether the assessment order levying tax at the higher rate could stand.

Analysis: Iron and steel are declared goods under section 14 of the Central Sales Tax Act, 1956 and tax on such goods is subject to the constitutional and statutory limitations applicable to declared goods. The impugned classification in entry 6(a) and 6(b) was examined against the settled principle that a State cannot impose a higher tax burden on imported goods merely because local goods have already borne tax, unless a valid and special justification exists. The Court applied the principle recognised in the earlier decision dealing with a similar discriminatory rate structure and found that the impugned entry treated imported iron and steel less favourably than locally manufactured iron and steel without sufficient justification.

Conclusion: Entry 6(b) of the notification was held to be violative of Articles 301 to 304 of the Constitution of India to the extent it imposed a higher rate of tax on imported iron and steel. The imported goods could not be taxed above the rate prescribed for the corresponding local goods, and the assessment order was liable to be set aside to that extent.

Final Conclusion: The writ petition succeeded on the constitutional challenge to the higher rate of tax, while the question of refund was left to be examined by the assessing authority in accordance with law.

Ratio Decidendi: A State tax classification that subjects imported declared goods to a higher rate than similar local goods, without a special and valid justification, is unconstitutional as being repugnant to the freedom of trade, commerce and intercourse guaranteed by Articles 301 to 304 of the Constitution of India.

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