1986 (3) TMI 312 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to notifications under Kerala General Sales Tax Act, 1963 regarding exemption for carbon black manufacturers within and outside the State. Allegation of discrimination and violation of articles 301 and 304(a) of the Constitution of India.

Analysis:
The petitioners sought to quash notifications exempting sales tax for carbon black manufacturers within Kerala. The notifications exempted newly established manufacturers for a specified period, leading to alleged unfair competition. The petitioners contended that the notifications favored a specific manufacturer, violating constitutional provisions.

The Court examined the legality of the notifications in light of articles 301 and 304(a) of the Constitution. Article 301 ensures free trade and commerce throughout India, while article 304(a) permits countervailing duties on imported goods to ensure parity with locally produced goods. The Court analyzed whether the notifications discriminated against manufacturers outside Kerala.

The Court found that the challenged notification, exhibit P3, superseded a previous notification and was applicable to all carbon black manufacturers, irrespective of their location. The benefit was not limited to manufacturers within Kerala, thus not violating constitutional provisions. The Court rejected the argument of discriminatory treatment towards the petitioners.

Regarding another notification, exhibit P1, the Court held it violated article 301 by exempting sales tax for locally produced carbon black. Citing Supreme Court precedents, the Court emphasized the prohibition of discrimination in favor of locally produced goods. Consequently, exhibit P1 was quashed in relation to carbon black.

In conclusion, the Court partially allowed the petitions by quashing exhibit P1 concerning carbon black but rejected the challenge against exhibits P2 and P3. The petitions were allowed to a limited extent, and costs were not awarded.