WEST BENGAL HOSIERY ASSOCIATION & ORS. versus STATE OF BIHAR & ANR.

Citation: [1988] SUPP. 2 S.C.R. 378 · Decided: 11-08-1988 · Supreme Court of India · Bench: R.S. PATHAK · Disposal: Directions issued

Judgment (excerpt)

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WEST BENGAL HOSIERY ASSOCIATION & ORS. 
v. 
STATE OF BIHAR & ANR. 
AUGUST 11, 1988 
[R.S. PATHAK, CJ AND M.H. KANIA, J.) 
Constitution of India, 1950: Articles 30 I and 304-Levy of sales-
tax by State-Discrimination between goods imported from other States 
and goods manufactured and sold in that State-Validity of. 
Bihar Finance A ct, 1981: Levy of sales-tax on hosiery goods-
Exempting hosiery goods manufactured and sold in that State from such 
levy-Whether discriminatory and violative of Articles 301 and 304 of 
the Constitution. 
The Bihar Government imposed sales-tax at 5% ad valorem on all 
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hosiery goods sold within the State irrespective of the place of 
manufacture of such goods, effective from October l, 1983. However, 
by virtue of a notification dated August l, 1984, it exempted from such 
levy, the hosiery goods manufactured by hosiery industries in Bihar. 
This exemption was sought to be given as an incentive to hosiery 
industries in Bihar. 
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The petitioners have approached this Court by way of a writ 
petition, contending that there has been discrimination between hosiery 
goods imported into the State of Bihar and hosiery goods manufactured 
in that State in the levy of sales-tax. They prayed for the issue of a writ 
of mandamus to the Respondents to rescind the notification dated 
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August 1, 1984, and for a direction to the Respondents to forebear 
from levying or collecting sales-tax on sale of hosiery goods imported 
into the State of Bihar from other States, and for refund of the sales-tax 
already levied and collected. The petitioners contended that such dis· 
crimination violated Art. 30 l of the Constitution of India, and that such 
discrimination could never be made by a notification. 
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Allowing the writ petition and quashing the notification in ques-
tion, this Court 
HELD: 1.1. A perusal of the Notifications would show that 
prima facie a clear discrimination is made against hosiery goods 
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manufactured outside the State of Bihar and sold in the State of Bihar 
378 
W. BENGAL HOSIERY ASSN. v. STATE OF BIHAR 
379 
as the sales of such goods are subjected to the levy of sales-tax at the rate 
of 5 per cent whereas the sales of similar goods manufactured by 
hosiery industries in the State of Bihar are exempted from sales tax. 
From a commercial or .normal point of view, such a discriminatory levy 
of sales-tax is bound to affect the free flow of hosiery goods from outside 
States into the State of Bihar and would, therefore, amount to hamper-
ing the free flow of trade and commerce. The State of Bihar did not 
file any counter to the petition to justify this discriminatory levy as a 
regulatory measure or as a compensatory tax. The result is that the 
discrimination made must be regarded as violating the provisions of 
Article 301 read with Article 304(b) of the Constitution. [382H; 383A-CI 
I.2. The general rate of sales-tax on hosiery goods was 5 per cent 
and it was the exemption for locally manufactured hosiery goods, 
granted by the said Notification dated August 1, 1984 which constituted 
the departure. It is, therefore, really this Notification which is dis-
criminatory and which must be struck down. [384A, Bl 
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H. Anraj etc. v. Government of Tamil Nadu etc. [1985] Suppl. 3 D 
5CR 342; Firm A. T.B. Mehtab Majid & Co. v. State of Madras & Anr., 
[1963] Suppl. 2 SCR 435; The Indian Cement & Ors. v. The State 
of Andhra Pradesh & Ors., [1988] 1 SCC 743; Weston Electroniks and 
Anr. v. State of Gujarat & Ors., [1988] 2 SCC 568, referred 
to. 
[This Court directed that since there might be undue hardship to 
the dealers in the State of Bihar who might have sold locally 
manufactured goods without taking into consideration the liability to 
sales-tax in view of the exemption granted by the notification dated 
August 1, 1984, the arrears of sales-tax payable by them should not be 
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collected.] 
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CIViL ORIGINAL JURISDICTION: Writ Petition (Civil) No. 
611of1986: 
(Under Article 32 of the Constitution of India). 
H.K. Puri for the Petitioners. 
M.P. Jha for the Respondents. 
The Judgment of the Court was delivered by 
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380 
SUPREME COURT REPORTS 
[1988] Supp. 2 S.C.R. 
KANIA, J. This writ petition is filed under Article 32 of the 
Constitution of India by the West Bengal Hosiery Association and 
certain Hosiery manufacturers and dealers in tlie State of West Bengal 
against the State of Bihar and the Commissioner of Commercial 
Taxes-cum-

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