LexSTATE OF TAMIL NADU, ETC versus SITALAKSHMI MILLS, ETC .
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STATE OF. TAMIL NADU, ETC.
v.
sr~ALAKSHMI MILLS, ETC .
December 21, 1973
[A.,N. RAY, C. 1., H. R; Kl!A.''NA, K. K. MATHEW, A. ALAGIRISWAMI,
AND P. N. BllAGWATI, JJ.) .
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Central Sales Tax A<t-S, 8(2)(b}-lfviolatire of arts. 30I, 302 and 303(1) of
the Constitution.
Clause (b) of s. 8(2) of the Central Saks-tax Act, 1956 enacts that in the case
of goods other· -than declared - goods sold to persons other than- registered
dealers or eovcmment, sates-tax shall be cak:ulated at the rate of 10 per
cent or at the rate applicable to the sale or purchase of such goods inside the appro-
priate State. whichever is higher. Art. 301 pro\ddcs that, subject to the other pro-
\"ision.s of Part XIII, trade, commerce and intercourse throughout the
territory
· of India shall be free.
Article 302 provides that Parliament may. by Jaw,.
impose such restrictions on the freedom of trade, commerce or intcrcourso
bern·een one State and another or within any part of the territory of_ India as
may be required in the public interest. Art. 303. (1) provides that notv.ithstandin:
aD)'thin: in art. 302 neither Parliament nor the Legislature of a State shall have po\ver
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to make any Jaw gh··ing or authorizing the giving of any preference to one State
o\·er another or making or authorizing the making of, any discrimination. between
one State and another by virtue of any entry re1atin: to trade and commerce in
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any of the Lists in the Seventh Schcdnk.
The respondents claimCd (i) that they weCe not liable to be taxed at the higher
rate prescribed ins. 8 (2)(b) of the Central Sales-tax Act, 1956 on the turnover
of their
sales
in . the
course. of interstate
trade
to goyernmcnt
on the ground that s.8(2)(b) is \'iolativc of arts. 301 and 303{1) of the Constitution
and, therefore void ; (ii) that there "'ill be varying rates of tax on interstate sales in
different States depending upon their ·rates of sales·tax for intra.-state sales and
· that that m11 lead to the imposition of dissimilar tax on the sale of the same or
similar commodities and so the section. i! violative of art. 303{1).
The High Court allowed the writ petitions.
Allo'Yini the appeaIS to this Court by the State,
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HELD : (I) (a) There is no reason to hold that s. 8(2)(b) is bad for the reason
that it \iolates art. 301. ·If Prevention of evasion of tax is a measure in the public
intercst there can be no doubt that Parliament is competent to make a provision for
that purpose under art.. 302 even if the provision would impose restrictions on the
interstate trade or commerce. [7 A, DJ
(b) it canflot be presur;;d !hat bcCausc the rate of tax ~as 10 pcr·cc~t at the
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material time on this class of transactions or the rate fixed by the appropriate State
in respoct of intra·Statc sales, whichever is higher, the imposition of this rate was
not in the public . interest. (7 q
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Therefore, in any view of the matter, Parliament was competent to enacts. 8(2)(b)
of the Act.-
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(2) There is no merit in the contention that s.8(2)(b) of. the Act offend:;
the provisions of art. 303(1). In N. K. J;ataraja },Juda/jar's case the coui:t held that
the existence of dHfcrcnt rates of tax on the sale of the same or similar commodity
in different States by itself would not be discrim,inatory as the flow of trade docs not
nccess.irily depend upon the rates of sales·tax ; it depends upon a variety of factor
such as the source of supply, place of consumption~ existence of trade channels~ the
rate of freight, trade faciliti~ availability of efficient transport and other facilities
for carrying on the. trad~. (7_ ~
Star. of Madras v. N. K. Nataraja Muda/iar, [1968] 3 S.C.R. 829 followed.
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos .. 2547-2549
of 1969. ·
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Z-'.\U5~ Sup Cl/74
SUPREME COURT REPORTS
l 19741 3 s.c.R.
From the judgment and order dated the 1st March_ 1968 of tile
~Iadras High Court at .Madras in Writ Petition Nos. S-4 and 2356 of
1967 aotl Tax Xo. 228 of 1964.
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CIVJJ. APPEAL Nos. 105·106 'op 1970.
From :he Judgment ·.and. Order, dated the 1st March, and 1st
April 1968 of the .Madras. High O>urt in Writ Petition Nos. 983 and
687 of 1967.
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. S. V. Gupte and A. V. Rangam, for th" appellants (in C.A. Nos.
2457-49/69 and 105 & 106170)
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_ B. Sen, S. D. Sharma and S. P. Nayar, for respondent No. 2 (in
2547/69 105 & 106170) and respondent no. 3 (in 105/70) •
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