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1986 (3) TMI 296 - SC - VAT and Sales TaxRestrictions on trade, commerce and intercourse among States - Held that - Appeal dismissed. The prohibition was not on the Parliament. But in the view we have taken on the first aspect of the matter and in view of the decisions of this Court in the cases of State of Madras v. N.K. Nataraja Mudaliar 1968 (4) TMI 61 - SUPREME COURT OF INDIA and Rattan Lal & Co. v. Assessing Authority 1968 (10) TMI 89 - SUPREME COURT OF INDIA it is not necessary for us to discuss this aspect any further.
Issues Involved:
1. Constitutionality of item 9(b) of Schedule III of the Andhra Pradesh General Sales Tax Act, 1957. 2. Levy of tax under the Central Sales Tax Act on inter-State sales of tanned hides which have already suffered tax at the untanned stage. 3. Alleged discrimination under Article 304(a) of the Constitution. 4. Impact of differing tax rates on inter-State trade and commerce. Issue-wise Detailed Analysis: 1. Constitutionality of item 9(b) of Schedule III of the Andhra Pradesh General Sales Tax Act, 1957: The appellant challenged the constitutionality of item 9(b) of Schedule III of the State Act, arguing that it discriminated between hides and skins imported from outside the State and those manufactured or produced within the State. The appellant contended that item 9(b) levied a tax on the sale of hides and skins brought from outside the State and tanned inside the State, whereas if raw hides and skins were locally purchased and tanned, no tax was leviable on the tanned hides and skins. The High Court, however, dismissed this contention, stating that the rate of tax was the same for both imported and local goods, and thus, there was no direct discrimination that would violate Article 304(a) of the Constitution. 2. Levy of tax under the Central Sales Tax Act on inter-State sales of tanned hides which have already suffered tax at the untanned stage: The appellant sought a declaration that no tax could be levied under the Central Sales Tax Act on inter-State sales of tanned hides that had already been taxed at the untanned stage. The High Court did not find merit in this argument, maintaining that the imposition of tax on inter-State sales was consistent with the provisions of the Central Sales Tax Act and did not constitute double taxation or an unconstitutional act. 3. Alleged discrimination under Article 304(a) of the Constitution: The appellant argued that the taxation scheme under item 9(b) of Schedule III discriminated against the import of raw hides and skins, thereby violating Article 304(a) of the Constitution. The High Court, after reviewing relevant case laws, held that Article 304(a) would only be offended if there was direct and immediate discrimination arising out of the taxing provisions themselves. The Court concluded that the rate of tax was the same for both imported and local goods, and any indirect effect or resultant inequality did not constitute a violation of Article 304(a). 4. Impact of differing tax rates on inter-State trade and commerce: The Court referred to previous judgments, including the State of Madras v. N.K. Nataraja Mudaliar and Rattan Lal & Co. v. Assessing Authority, to emphasize that differing tax rates in different States, as adopted by the Central Sales Tax Act, did not necessarily impede inter-State trade or commerce. The Court reiterated that as long as the rate of tax was the same for both imported and local goods, Article 304(a) was satisfied, and any resultant inequality due to differing conditions in various States did not amount to unconstitutional discrimination. Conclusion: The Supreme Court upheld the High Court's decision, stating that the rate of tax under item 9(b) of Schedule III of the Andhra Pradesh General Sales Tax Act was the same for both imported and local goods, and thus, did not violate Article 304(a) of the Constitution. The appeal was dismissed with costs, affirming that the imposition of tax on inter-State sales of tanned hides, which had already been taxed at the untanned stage, was consistent with the Central Sales Tax Act and did not constitute unconstitutional discrimination.
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