1959 (11) TMI 46 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to sales tax on imported "bura sugar" under Article 226 of the Constitution of India for being discriminatory, illegal, and ultra vires the Constitution.

Analysis:
The petitioner, a partnership firm, imported "bura sugar" into Madhya Bharat and sold it in Bhind. The Sales Tax Authorities claimed sales tax on these sales under the Madhya Bharat Sales Tax Act, 1950. The relevant entry in the Act imposed tax on imported "bura sugar" but exempted locally manufactured "bura sugar," leading to discrimination. This discrimination was challenged under Article 304(a) of the Constitution, which allows taxing imported goods as long as there is no discrimination against them compared to locally produced goods.

The judgment referred to the principle of freedom of inter-State trade and commerce under Article 301, stating that States can tax imported goods as long as there is no discrimination in favor of local goods. By not levying sales tax on locally manufactured "bura sugar" while taxing imported "bura sugar," discrimination was evident, putting the imported product at a disadvantage in the local market. The judgment also cited Section 92 of the Constitution of Australia, emphasizing the importance of free trade among states.

Referring to a case in Western Australia, the judgment highlighted that imposing disabilities or burdens on products from other states, not imposed on local products, goes against the constitutional principles of non-discrimination. The judgment emphasized that any tax or burden on goods, whether local or imported, must be general and equal to comply with constitutional provisions.

Drawing parallels with American jurisprudence, the judgment concluded that the provision in the Madhya Bharat Sales Tax Act allowing sales tax on imported "bura sugar" was discriminatory and unconstitutional. Consequently, the court issued a writ prohibiting the respondents from levying or recovering any sales tax on the sale of "bura sugar" by the petitioner. The petition was allowed with costs, including counsel fees.