1998 (6) TMI 556 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of entry 22 of Part "S" of the Second Schedule of the Karnataka Sales Tax Act, 1957.
2. Violation of Article 304(a) of the Constitution.
3. Violation of Article 301 of the Constitution.
4. Discrimination against imported goods under Article 14 of the Constitution.

Issue-wise Detailed Analysis:

1. Validity of Entry 22 of Part "S" of the Second Schedule of the Karnataka Sales Tax Act, 1957
The petitioner challenged the validity of entry 22, which levied a 4% tax on raw silk and silk yarn imported from outside the country, while entry 38-A in the Fifth Schedule exempted all other raw silk and silk yarn. The court held that the tax on imported raw silk and silk yarn constituted a different class from locally manufactured commodities. The classification was deemed reasonable and aimed at protecting local industries. Thus, the legislation was not considered arbitrary or suffering from the vice of Article 14 of the Constitution.

2. Violation of Article 304(a) of the Constitution
The petitioner argued that the tax was discriminatory against imported goods and violated Article 304(a), which prohibits states from imposing taxes on goods imported from other states if similar goods manufactured within the state are not taxed. The court clarified that Article 304(a) applies to goods imported from other states within India, not from foreign countries. Since the tax in question was on goods imported from outside the country, Article 304(a) was not applicable. Therefore, the court found no violation of Article 304(a).

3. Violation of Article 301 of the Constitution
The petitioner contended that the tax impeded the free flow of trade, violating Article 301, which guarantees freedom of trade, commerce, and intercourse throughout India. The court noted that tax laws are within the purview of Article 301 but only those taxes that directly and immediately restrict trade. The levy did not affect the movement of goods within the state or between states and was not considered a direct or immediate restriction on trade. Hence, the court ruled that the tax did not violate Article 301 and did not require the President's assent.

4. Discrimination Against Imported Goods Under Article 14 of the Constitution
The petitioner argued that the tax was discriminatory and violated Article 14, which ensures equality before the law. The court stated that differential treatment is not per se violative of Article 14 if there is a reasonable basis for differentiation. The court found that the tax aimed to protect local industries and did not constitute hostile discrimination or deliberate intention to create discrimination. The classification was deemed reasonable, and the legislation was not considered arbitrary or violating Article 14.

Conclusion:
The court dismissed the writ petition, concluding that the tax on imported raw silk and silk yarn was neither discriminatory nor violative of Articles 14, 301, or 304(a) of the Constitution. The legislation aimed to protect local industries and did not impede the free flow of trade within the country. The writ petition was dismissed with no costs.