SHREE MAHAVIR OIL MILLS AND ANR. versus STATE OF JAMMU AND KASHMIR AND ORS.

Citation: [1996] SUPP. 9 S.C.R. 356 · Decided: 29-11-1996 · Supreme Court of India · Bench: B.P. JEEVAN REDDY · Disposal: Appeal(s) allowed

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Judgment (excerpt)

A 
B 
SHREE MAHA VIR OIL MILLS AND ANR. 
v. 
STATE OF JAMMU AND KASHMIR AND ORS. 
NOVEMBER 29, 1996 
[~P. JEE.VAN REDDY AND S.C. SEN, JJ.] 
Constitution of India, 1951>-Part XIII, Articles 301 & 304 (aT-f'ree 
movement of Trade-Discriminatory taxation-Between imported goods from 
C other states and similar goods manufactured within the stat,,_P/ea that it is 
in order to promote th'e growth of industries within state-field, Article 304 
(a) deals with prohibition of discrimination by means of taxation and not 
beyond it-17ierefore states are free to promote the establishment and growth 
of industries within their states only by appropriate authority and in ap~ 
propriate mannel'-/3ut in that process, it cannot bring about discrimination 
D by means of taxation. 
E 
Articles 14, 301 & 304 (a}-Principle of Classification-Whether ap-
plicable to Article 301 & 304 (a}-ffeld, the concept of classification.cannot 
be read into clause (a) of Article 304 to undo the precise object and purpose 
underlying the clause. 
Article 301 & 304 (aHnterT'elation between-Article 304 (a) is not an 
exception to Article 301, but a restatement of a fact of the very freedom 
guarallteed by Article 301. 
• 
F 
,, - Article 304 (a rPurpose of-The idea b~hind the Article was not really 
to empower the State legislature to levy tax on imported goods, but to prohibit 
the State from creating tax baniers. 
The· State of Jammu & Kashmir, with a view to protect edible oil 
industry of the State, exempted the manufacturers totally from levy of sales 
G tax for a period of 5 years which was further extended by 5 years, while the 
out State industries were to pay the tax at the rate of 4%. Further the rate 
of tax was raised to 8% against which the out State manufactures including 
the appellant filed writ petition before High Court, which was dismissed. 
The writ appeal against the judgment of Single Judge was also dismissed 
H relying in Video Electronics case. 
356 
SHREEMAHAVIROILMILLSv. STATE 
357 
' 
In appeal to this Court, the appellant contended that the order of A 
the Government exempting edible oil industries unconditionally, amounts 
to discriminating against outside manufacturers, which is prohibited by 
Article 301 & 304 of the Constitution, and that Part XIII of the Constitu-
tion prohibits raising fiscal barriers and such barriers are bound to 
interfere with free movement of trade and commerce. The State Govern-
ment contended that the exemption was justified as it was in order to 
protect the local manufacturers. The appellant cannot be allowed to ques-
tion exemption when the rate of tax was raised to 8%, as they bad not 
attacked the exemption when the rate of tax was 4%; that the exemption 
had really not hurt the appellant as the volume of their turnover continues 
B 
to rise despite the exemption; that the principle of classification under C 
Article 14 is equally applicable under Article 301 and 304 (a). [376-B] 
Allowing the appeal, this Court 
HELD : 1.1. The exemption granted to local manufac-
turers/producers of edible oil is violative of the provisions contained in D 
Articles 301 and 304 (a). [376-A-Bl 
1.2. That by exempting unconditionally the edible oil produced within 
the State of Jammu and Kashmir altogether from Sales tax, even if it is 
for period of 10 years, while subjecting the edible oil produced in other E 
State of Sales tax at eight percent, the State of Jammu and Kashmir has 
brought about discrimination by taxation prohibited by Article 304 (a) of 
the Constitution. [375-A-B] 
1.3. The States are certainly free to exercise the power to levy taxes 
on goods imported from other States/Union territories but this freedom, or F 
power, shall not be exercised as to bring about a discrimination between 
the imported goods and the similar goods manufactured or produced in 
that State. Clause (a) of Article 304 deals only with discrimination by 
means of taxation ; it prohibits it. The prohibition cannot be extended 
beyond the power of taxation. It means in the immediate context that States G 
means are free to encourage and promote the establishment and growth of 
industries within their States by all such means as they think proper but 
they cannot, in that process subject the goods imported from other States 
to a discriminatory rate of taxation, i.e., a higher rate of sales tax vis-a-vis 
similar goods manufactured/produced within that State and sold within 
that State. Prohibition is against discriminatory 

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