ANDHRA STEEL CORPORATION versus COMMISSIONER OF COMMERCIAL TAXES IN KARNATAKA

Citation: [1990] 2 S.C.R. 253 · Decided: 30-03-1990 · Supreme Court of India · Bench: SABYASACHI MUKHERJI · Disposal: Appeal(s) allowed

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Judgment (excerpt)

ANDHRA STEEL CORPORATION 
A 
v. 
COMMISSIONER OF COMMERCIAL TAXES IN KARNATAKA 
MARCH 30, 1990 
[SABYASACHI MUKHARJI CJ., V. RAMASWAMI AND 
B 
M.M. PUNCHHI, JJ.] 
Karnataka Sales Tax Act, 1957: Section 5(4)-Schedule 4-ltelfl 
2 Explanation Il(As it stood prior to 1.4. 78)-Declared goods-Levy of 
sales tax-Finished goods manufactured out of imported raw mataial 
subject to tai while similar goods manufactured out of locally purchased 
raw materials not taxed-Held discriminatory and violative of Article 
304( a) of Constitution of India. 
Constitution of India, 1950: Article 304(a): Restrictions on trade 
commerce and intercourse among States-Similarity is in the nature of 
quality and kind of goods and not whether they are subject to tax 
already or not-Finished goods-Iron ingots, Steel rounds and tor steel 
manufactured out of locally purchased raw material, iron-scraps, not 
subject to tax-Similar goods manufactured out of raw material 
purchased from outside State subject to tax-Held discriminatory between 
imported goods and goods produced locally. 
The appellant, a registered dealer ·~11der the Karnataka Sales 
Tax Act, 1957, was purchasing iron-scraps from dealers inside and 
outside the State of Karnataka for the purpose of manufacturing iron 
ingots, steel rounds and tor steel. He illed a writ petition in the High 
Court challenging the Constitutional validity of Section 5( 4) of the Act 
c 
D 
E 
in so far as it pertains to item 2 of Schedule IV to the Act read with 
F 
Explanation II thereof in respect of its application prior to 1.4. 78 as 
violative of Article 304(a) Of the Constitution on the ground that it 
discriminates in respect of i;ale of steel ingots manufactured out of raw 
material purchased from outside the State which was subject to tax 
while sale of similar goods manufactured out of locally purchased raw 
material was not subjected to tax. 
G 
The High Court dismissed the writ petition upholding the con-
stitutional validity of the impugned provisions. Hence this appeal by 
special leave-
Setting aside the judgment of the High Court and allowing the 
H 
appeal, this Court, 
253 
A 
B 
c 
b 
E 
254 
SUPREME COURT REPORTS 
[1990] 2 S.C.R. 
HELD: 1. The similarity contemplated by Article 304(a) is in the 
nature of the qnaiily and kind of the goods aod not with respect to 
whether they were snbject to a tax already or not. [262AJ 
2. Section 5(4) of the Act in so far it pertains to item 2 of Schedule 
IV to the Act read with Explaoation II thereof in respect of its applica-
tion for the period prior to 1.4.1978 Is violative of Article 304(a) of the 
Constitution. [255C-D; 272D] 
Firm A. T.B. Mehtab Majid and Co. v. State of Madras and Anr., 
[1%3) Suppl. 2 SCR 435 and A. Hajee Abdul Skakoor and Co. v. State 
of Madras, [ 1964] 8 SCR 217, followed. 
State of Madras v. N.K. Nataraja Muda/iar, [1968] 3 SCR 1129; 
Rattan Lal & Co. v. Assessing Authority, 11969] 2 SCR 544 and 
Associated Tanners v. Commercial Tax Officer, Vizianagaram and Ors., 
[1986] 62 STC 1, explained. 
Mangalore Metal Hol!Se v. State of Kamataka, [1986] 63 STC 
482; State of Bombay v. United Moiors (India) Ltd., [1953] SCR 1069 
and Bengal Immunity Company Ltd. v. State of Bihar, [1955] 2 SCR 
603, referred to. 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1672-
74(NT) of 1990. 
From the Judgment aod Order. dated 10.6.1988 of the Karnataka 
High Court in W.P.Nos. 14255 to 14257 of 1983. 
B. Sen, H. Raghvendra Rao aod Vineet Kumar for the 
-... 
F 
Appellant. 
P.R. Ramasesh for the Respondent. 
The Judgment of the Court was delivered by 
G 
V. RAMASW AMI, J. Special leave granted. 
The appellant is a registered dealer under the Karnataka Sales 
Tax Act (hereinafter called 'the Act'). The appellaot (hereinafter 
referred to 'the assessee') purchases iron scrap from dealers inside aod 
outside the State of Kamataka for the purpose of manufacturing iron 
H 
ingots, steel rounds and tor-steel. These manufactured goods were 
ANDHRA STEEL CORPN. v. COMMR. OF TAXESW. RAMASW AMI, J.] 
255 
sold mostly within the State. In ~ct of the Assessment Years 1972-
73 to 1974-75, accepting the contentions of the assessee that the goods 
sold were manufactured out of tax suffered iron scrap, the Commercial 
Tax Officer exempted the sales tum over of the manufactured goods. 
The Deputy Commissioner of Commercial Taxes in exercise of his 
powers under section 21 of the Act restricted the exemptions but 
otherwise confirmed the assessment order by ·

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