Tax on local goods and goods from other States must be same :
Local Sales Tax rate (i.e. Sales tax payable under State sales tax laws) must be same both for local goods and goods brought from other States. e.g. assume that if a product is manufactured in M.P. the sales tax rate is 6%. In that case, same rate will apply in case of goods brought from other State on stock transfer and sold within the State of M.P.
Imposition of tax at different rates on * goods manufactured outside the State and sold within the State and * those manufactured and sold within the State, are violative of Article 301, as it affects free flow of trade – Weston Electroniks v. State of Gujarat – (1988) 70 STC 52 (SC) = AIR 1988 SC 2038 = (1988) 2 SCC 568 * West Bengal Hosiery Association v. State of Bihar – (1988) 71 STC 298 (SC) = AIR 1988 SC 1814 * Indian Cement Ltd. v. State of AP – (1988) 69 STC 305 = (1988) 1 SCC 743 = AIR 1988 SC 567 * Firm ATB Mehatab Majid v. State of Madras 14 STC 355 = (1963) Supp 2 SCR 435 = AIR 1963
SC 928 (SC 5 member Constitution bench) * Shree Mahavir Oil Mills v. State of J&K (1997) 104 STC 148 (SC) = (1996) 11 SCC 39* Loharn Steel Industries Ltd. v. State of AP 1997 AIR SCW 817 = AIR 1997 SC 1694 = (1997) 105 STC 30 (SC) * Nand Kishore v. State of Punjab (2008) 17 VST 108 (P&H HC) * State of Uttar Pradesh v. Jaiprakash Associates (2014) 4 SCC 720 = 42 GST 113 = 39 44 = 65 VST 423 (SC).
In Thressiamma L Chirayil v. State of Kerala (2007) 7 VST 293 (Ker HC DB), entry tax was levied only on persons bringing goods from outside the State. It was held that tax is discriminatory and hence invalid.
In Anand Commercial Agencies v. CTO 107 STC 586 (SC) = AIR 1998 SC 113 = 1997 AIR SCW 4067, levy of tax on oil imported from Karnataka at higher rate than the rate at which oil manufactured in Andhra Pradesh was held as discriminatory and violative of dealer’s right of freedom of trade and commerce throughout India.
In H Anraj v. Govt of Tamilnadu – (1986) 61 STC 165 (SC) = (1986) 1 SCC 414 = AIR 1986 SC 63, decision to levy sales tax on sale of lottery tickets of other states while exempting its own lottery tickets was held discriminatory under Article 304.
In Aashirwad Films v. UOI (2007) 6 SCC 624 = 7 VST 714 (SC), entertainment tax was 10% on Telugu films and 24% on films in other languages. This was held as discriminatory and hence invalid – same view in P Sankara Narayan v. State of Tamilnadu (2007) 9 VST 401 (Mad HC DB) * Cauvery Theatre v. UOI (2009) 26 VST 81 (Karn HC).
In Bharat Earth Movers v. State of Karnataka (2007) 8 VST 69 (Karn HC), imposition of entry tax only on goods imported from out of the State was held as discriminatory and hence violative of Article 304(a) of Constitution of India.
In L&T Case Equipment v. State of Karnataka (2010) 27 VST 447 (Karn HC), entry tax was payable on motor vehicles brought from outside the State while there was no tax on motor vehicles manufactured within the State. It was held that this is discriminatory and the levy was struck down.
In Maruthi Constructions v. Government of Andhra Pradesh (2007) 10 VST 362 (AP HC DB), the provision in respect of works contract provided that composition scheme is not available if goods are purchased from outside the State. The State Government did not give any reason for such sub-classification Hence, it was held as violative of Article 14 of Constitution.