LOHARA STEEL INDUSTRIES LTD. AND ANOTHER ETC. versus THE STATE OF ANDHRA PRADESH AND ANOTHER

Citation: [1996] SUPP. 10 S.C.R. 898 · Decided: 20-12-1996 · Supreme Court of India · Bench: A.M. AHMADI · Disposal: Appeal(s) allowed

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Judgment (excerpt)

A 
LOHARA STEEL INDUSTRIES LTD. AND ANOTHER ETC. 
v. 
THE STATE OF ANDHRA PRADESH AND ANOTHER 
DECEMBER 20, 1996 
B 
[AM. AHMADI, CJ. AND SUJATA V. MANOHAR, J.) 
Constitution of India, 1950 : A1ticle 304 (a)-Imposition of tax on 
goods-Notificatiolt-Goods impolted from other state not subject to same 
tax as similar goods manufactured in the State-Whether violative being dis-
. C criminatory--Held, yes-However, only that p01tion of notification which dis-
criminates against goods manufactured outside the State is struck 
down-Doctrine of severability. 
Appellant No. 1, a registered dealer in iron and steel under the 
D Andhra Pradesh General Sales Tax Act, 1957, purchased iron and steel 
scrap and ingots in the state of Andhra Pradesh, and sent them to its 
re-rolling mill in the State of Karnataka. There they were re-rolled into 
rounds and flats and the re-rolled products were brought back to Andhra 
Pradesh to be sold there. 
E 
F 
The iron and steel scrap aud ingots purchased by the appellants are 
subject to tax in the State of Andhra Pradesh under an exemption notifica-
tion, the re-rollt:d finished products of steel sold in Andhr.a Pradesh were 
made exempt from tax provided tax had already been levied on the sale or 
purchase of any of the materials specified in Item 2 of Schedule III to the 
said Act which included the raw-material purchased by the assessee. By 
G.O. MS No. 1373 of 28.8.1981 the original exemption notification G.O. 
MS. No. 88 was amended. By the amendment the words denying the 
exemption to goods manufactured outside the State were expressly and 
specifically added. The result was that exemption under original exemption 
notification became available only to those re-rolled finished products of 
G steel re-rollers which were situated in the State of Andhra Pradesh. Since 
the appellant mills were situated outside Andhra Pradesh the re-rolled 
products of the appellants became ineligible for this exemption which was 
made available to local products. Thereafter, another notification bearirig 
G.O. MS. No. 498, dated 203.1984 was issued which proceeded on the same 
H basis. The appellants have challenged these notifications as being violative 
898 
LOI-IARA STEEL INDS. LTD. v. STATE 
899 
of Article 304(a) of the Constitution of India. 
In appeal to this Court, the appellants contended that there is a clear 
discrimination in the levy of tax between the goods which have been 
manufactured in the State and goods which have been manufactured 
outside the State. It was further contended by appellants that the exemp-
tion notification must be read as a whole and if the exemption notification 
. is found to be violative of Article 304 (a) the entire exemption notification 
will have to be struck d~wn and not just a portion of it which is dis-
criminatory. 
Allowing the appeals, this Court 
HELD : 1.1. Article 304 of the Constitution enables the legislature to 
impose tax on goods manufactured within the State as also goods imported 
from other States .into the State. But in doing so the State cannot dis-
criminate between goods so imported and goods manufactured or 
A 
B 
c 
produced locally. [902-F] 
D 
1.2. In the p:resent case the appellants have purchased the raw 
material in the State of Andhra Pradesh and tax has been paid under the 
· Andhra Pradesh General Sales Tax Act on this ra.w material. There is no 
reason why the finished products from the re-rolled mills which are sold 
in Andhra Pradesh should be subjectd to discrimination on the ground E 
that these products have been manufactured outside the State and not 
inside the State. There is a clear violation of Article 304 (a) in the present 
case. [903-E] 
A. T.B. Mehtab Majid and Co. v. State of Madras and Anr., [1963] 
Supp. 2 SCR 435 and Andhra Steel Corporation v. Commissioner of Com-
mercial Taxes in Kamataka, [1990] Supp. SCC 617, relied on. 
State of Madras v. N.K Nataraja Mudaliar, [1968] 3 SCR 829 and 
Rattan/al and Co. and Anr. v. The Assessing Aurhority and Anr., [1969] 2 
SCR 544, cited. 
F 
G 
2. In the present case the exemption notification as it originally 
stood, exempted all re-rolled finished products sold in the State of Andhra 
Pradesh from tax, provided tax had been paid in the State of Andhra 
Pradesh on the raw material. This exemption is still available to re-rolled 
products which are manufactured within the State. No exception can be H 
900 
SUPREME COURT REPORTS(1996] SUPP.10 S.C.R. 
A taken to this part of 

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