TaxTMI 
TaxTMI 
1974 (8) TMI 97
X X X X Extracts X X X X
X X X X Extracts X X X X
.... those made from paper purchased within Uttar Pradesh. The petitioners' grievance is that these notifications violate article 301 of the Constitution and are not saved by article 304. It is also pleaded that the impugned notifications violate article 14 of the Constitution. Each of the petitioners buys and sells paper manufactured inside as well as outside Uttar Pradesh. The petitioners import paper from outside Uttar Pradesh in the course of their business. They manufacture and sell exercise books made out of paper purchased inside Uttar Pradesh as well as imported from outside the State. The petitioners also import exercise books manufactured outside the State of Uttar Pradesh and sell them inside this State. By virtue of the notifi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce and intercourse throughout the territory of India shall be free. Article 304 provides: "304. Restrictions on trade, commerce and intercourse among States.Notwithstanding anything in article 301 or article 303, the Legislature of a State may by law- (a) impose on goods imported from other States or the Union territories any tax to which similar goods manufactured or produced in that State are subject, so, however, as not to discriminate between goods so imported and goods so manufactured or produced; and..........." These provisions have come up for consideration before the Supreme Court in several decisions. After considering the decisions in Atiabari Tea Co. Ltd. v. State of AssamA.I.R. 1961 S.C. 232. and in Automobile Transpor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ds imported from outside is that they become subject to a higher tax, then the tax is discriminatory and unconstitutional." These principles were reiterated in the State of Madras v. N.K. Nataraja Mudaliar[1968] 22 S.T.C. 376 (S.C.); A.I.R. 1969 S.C. 147. The imposition of tax on sale of goods coming from other States will be valid if similar goods manufactured and produced inside the State are also taxed in the same measure and manner. Exercise books are goods which are commercially different from paper which is a commercially known article by itself. An exercise book made from paper purchased within Uttar Pradesh would be an article of the same kind as an exercise book made from paper purchased outside the State. The fact ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t-State-that they import ready-made exercise books from outside the State for sale in the State. The imposition of tax on such exercise books being per se violative of article 301, the illegality will not be saved merely because the locally manufactured exercise books from paper which has at some stage been imported from outside the State may be exempt. It may be said that a dealer can purchase paper inside the State, send it outside for manufacture of exercise books therefrom, and after importing such exercise books may sell them inside the State. Such sale would be exempt from tax. Theoretically this may be possible, but no practical businessman is ever likely to indulge in this kind of venture, because the cost of transport of paper a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tax on the sale of exercise books manufactured by him from paper imported from outside the State. Such a manufacturer of exercise books is also not in an adverse position in comparison to a manufacturer of paper inside Uttar Pradesh manufacturing exercise books from his own paper. Such person would not have to pay sales tax on paper. But he would not be entitled to the exemption granted by Notification No. 6623 on the sale of exercise books made by him from paper manufactured by himself, because such exemption is available only to such exercise books as are made from paper purchased within Uttar Pradesh. Since a manufacturer does not purchase paper, he will not be exempt and will be liable to pay sales tax at 5 per cent under Notificatio....