SRI DOKI CHINA GURUVULU SON & CO. AND ANR.versusGOVT. OF ANDHRA PRADESH AND ANR.

      SRI DOKI CHINA GURUVULU SON & CO. AND ANR.
A
                          v.
           GOVT. OF ANDHRA PRADESH AND ANR.

                            DECEMBER 7, 1989

B          [SABYASACHI MUKHARJI AND B:C. RAY, JJ.]

         Andhra Pradesh Sales Tax Act, 1957 (As amended by Act 19 of
    1986): First Schedule Item 170/Second Schedule Item 14-Tamarind
    obtained from outside the State-Taxation of-At a stage different from
    tamarind produced in the State-Whether results in double taxation-
    Whether discriminatory and violative of Articles 304(a) and 14 of the
c   Constitution.
           Constitution of India, 1950: Articles 14 and 304: State sales tax
    law-- Taxing commodity obtained from outside the State at a stage diffe-
    rent from commodity produced in the State-Whether discriminatory
    and unconstitutional.
D
           Under item 14 of Second·Schedule to the Andhra Pradesh General
    Sales Tax Act, 1957 tamarind was subjected to sales tax at the point of
    first purchase in the State irrespective of whether it was purchased
    within the State or outside the State. However, by virtue of an amend-
    ment to the Act by Act 19 of 1986 tamarind which is purchased within
E   the State was retained in Second Schedule, while tamarind purchased
    outside the State was transferred to First Schedule as item 170, making
    it taxable at the same rate at the point of first sale in the State.

          The appellants had purchased tamarind from the State of Orissa
    paying tax there and incurred expenditure in bringing it to Andhra
F   Pradesh for sale. They challenged the said amendment modifying the
    point of taxability as discriminatory between tamarind produced and
    purchased within the State and the tamarind produced and purchased
    outside the State and as such, violative of Articles 304(a) and 14 of the
    Constitution. The submission was that imported tamarind which had
    suffered tax at the first sale point will again be taxed at the purchase
G   point when purchased within the State, which would amount to double
    taxation, and that tax in case of imported tamarind would be more
    because its price will include freight charges and other State taxes.

          The High Court found that there was no discrimination.
          Dismissing the appeal by special leave, the Court,
H

                                      422
                        D.C. GURUVULU v. GOVT. OF. A.P .                      423
.•
           HELD: When a taxing State is not imposing rates of tax on
                                                                                     A
     imported goods different from rates of tax on goods manufactured or
     produced, Article 304 of the Constitution has no application. In the
     instant case, both tamarind purchased within, and outside, the State
     was taxed uniformly. There was. therefore, no infraction of clause (a) of
     Article 304 '.'fthe Constitution. [429D-E; 426A; 425G-H]
                                                                                     B
           Rattan Lal & Co. & Anr. v. The Assessing Authority & Anr.,
     [1969] 2 SCR 544, applied.

           Firm A. T.B. Mehtao Majid & Co. v. The State of Madras, 14
     STC 355 and Indian Cement Ltd. & Ors. v. State of /,ndhra Pradesh &
     Ors., 69 STC 305, distinguished.
                                                                                     c
           It may be that when the rate is applied the resulting tax in respect of
     imported tamarind may he somewhat higher because its price will
     include freight charges and other State taxes. But that cannot be said to
     be the effect of what law has amended. Tamarind will he imported only
     when it can be sold in the market at the same price as the tamarind             D
     produced within the State. Only when after hearing the other State
     taxes and freight charges, if it is able to compete with the locally pro-
     duced tamarind it will normally be imported from outside the State. If
     there is any difference in prices because of market conditions and other
     factors, that cannot be said to be due to discrimination prohibited by
     clause (a) of Article 304. [429E; 427D-E]                                       E

          Mis Associated Tanners, Vizianagaram, A.P. v. C. T.O., Viziana-
     garam, A.P. & Ors., [1986] 2 SCC 479, referred to.

          Weston Electroniks & Anr. v. State of Gujarat & Anr., [1988] 3
     SCR 768, distinguished.                                                         F

           Once the imported tamarind is taxed at the first sale point under
     the First Schedule there is no occasion for taxing it over again at the sale
     point under the Second Schedule. The idea of both the Schedules is to
     tax only at one point, though the point of taxability is different in both
     the cases. In case of tamarind purchased within the State, i.e., pro-           G
     duced within the State, the tax is levied at the point of first purchase
     under the Second Schedule, and in case of imported tamarind i.e.,
     purchased outside the State, the tax is levied at the point of first sale in
     the State under the First Schedule. It could not therefore, be said that
     taxing the imported tamarind at the point of first sale in the State would
     amount to double taxation. [427H; 428A; 427B-C; 427G]                           H
    424         SUPREME COURT REPORTS               [ 1989] Supp. 2 S.C.R.

A        In the facts and circumstances of the case, there was, therefore,
    no ground to complain about the breach of Article 14 of the
    Constitution [429E-F J

          CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4879
    of 1989.
B
         From the Judgment and Order dated 12.11.1986 of the Andhra
    Pradesh High Court in W.P. No. 16535 of 1986

          P. Rama Reddy and A.V.V. Nair for the Appellants.

C         C. Sitaramaiah, Jagan Rao, D.R.K. Reddy and T.V.S.N. Chari
    for the Respondents.

          The Judgment of the Court was delivered by

          SABY ASA CHI MUKHARJI, J. Leave granted.
D
           This is an appeal from the judgment and order of the High Court
    of Andhra Pradesh dated 12th November, 1986. The appellants chal-
    lenged the validity of an amendment to the Schedule to the Andhra
    Pradesh General Sales Tax Act, 1957 (hereinafter called 'the Act').
    The appellants are dealers in tamarind in Parvathipuram in Srikaku-
E   lam district, a border district in Andhra Pradesh. They had purchased
    tamarind from the State of Orissa paying tax there and incurring
    expenditure in bringing the said goods to Andhra Pradesh for the
    purpose of sale. Under the Act, tamarind was item 14 of Second
    Schedule and was subjected to sales tax at the point of first purchase in
    the State irrespective of whether it was purchased within the State or
p   outside the State. The subject-matter of challenge in this application
    under Art. 226 of the Constitution before the Andhra ·Pradesh High
    Court, was the validity of an amendment to the Schedule to the Act
    modifying the point of taxability of tamarind in question. Prior to the
    amendment tamarind was taxable as mentioned hereinbefore at the
    first purchase point, being item No. 14 in Schedule II to the Act. The
G   entry therein read as follows:
    "Description of                Point of levy            Rate of tax
    the goods

    14.   Tamarind (2014)         At the point of           4 paise in
                                  first purchase            the rupee.
H                                 in the State."
         D.C. GURUVULU v. GOVT. OF. A.P. [MUKHARJI, J.]              425

       By virtue of the amendment, the said entry was amended.
Tamarind which is purchased within the State, was retained in Ilnd         A
Schedule while tamarind purchased outside the State was transferred
to Ist Schedule. After the amendment, item No. 14 in Schedule II and
item 170 in Schedule I stood as follows:

                       "SECOND SCHEDULE                                    B

S. No. Description of goods         Point of levy      Rate of tax

14.     Tamarind when pur,          At the point of    4 paise in
        chased within the           first purchase     the rupee.
        State.                      in the State.
                                                                           c

                         FIRST SCHEDULE

S.No.   Description of Goods        Point oflevy       Rate of tax         D

170     Tamarind when               At the point       4 paise in
        obtained from out-          of first sale      the rupee.
        side the State.             in the State."

                                                                           E
      It appears that the result of the said amendment was that
tamarind purchased outside the State, was taxable at the point of first
sale in the State. It was contended before the High Court that the said
amendment brought about a discrimination between tamarind pur-
chased within the State i.e. one produced within the State, and the
tamarind purchased outside the State i.e. produced in other States;        F
and that the incidence of tax was more on the tamarind purchased
outside the State. It was contended that it violated clause (a) of Art.
304 as also Art; 14 ofthe Constitution.

      Clause (a) of Art. 304 states that notwithstanding anything con-
tained .in Art. 301 or Art, 303, the legislature of State may by law       G
impose on goods imported from other States or the Union Territories
any tax to which similar goods manufactured or produced in the State
are subject, so,-however, -as not to discriminate between goods so
imported and goods so manufactured or produced. The question is
whether as a result of the said amendment, there has been any infrac-
tion of clause (a) of Art. 304 of the Constitution. We are unable to       H
    426         SUPREME COURT REPORTS               I 1989] Supp. 2 S.C.R.

A   accept the contention that there was any such discrimination. The
    High Court in the judgment under appeal has so held. We are of the
    opinion that the High Court was right. Both the tamarind purchased
    within, and outside, the State is taxed uniform Iv.

        On behalf of the appellants, reliance was placed on Firm A. T.B.
B Mehtao Majid and Co. v. The State of Madras, 14 STC 355, wherein on
  an analysis of the relevant provisions it was held that the provisions of
  rule 16(2) of the Madras General Sales Tax [Turnover and Assess-
  ment] Rules, 1939 (substituted in the place of the old rule w.e.f. 1st
  April, 1955) discriminate between hides and skins imported from out-
  side the State and those manufactured or produced inside the State
  and as such contravened the provisions of Art. 304(a) of the Constitu-
c tion, and therefore were invalid. It was reiterated by this Court that
  taxing laws can be restrictions on trade, commerce and intercourse, if
  they hamp'-r the flow of trade and if these are not compensatory taxes
  or regulatory measures. It was further held that sales tax on hides and
  skins imposed under the Madras General Sales Tax Act, 1939 and the
D rules framed thereunder could not be said to be a measure regulating
  any trade or compensatory tax levied for the use of trading facilities.
  The similarity contemplated by Art. 304(a) is in the nature of the
  quality and kind of the goods and not with respect to whether they           ,
  were already the subject of tax or not. There this Court was dealing
  with rule 16 of the relevant. Madras rules. Sub-rule (a) of rule 16
E provides that in case of untanned (raw) hides and/or skins, the tax u/s
  3( 1) of the Act was to be levied from the dealer who is the last pur-
  chaser in the State. Sub-rule (2) which was in two parts, dealt with
  tanned hides and skins. Clause (i) of sub-rule (2) provided that in case
  of hides and skins tanned outside the State, tax shall be levied upon
  the dealer who in the State is the first dealer. Clause (ii) provided that
F in case of tanned hides and skins which have been tanned within the
  State, the tax u/s 3( I) shall be levied upon a p.yson who is the first
  dealer in such hides or skins. The proviso, however, declared that if
   the dealer proved that he had already been taxed under sub-rule ( 1) on
   the untanned hides and skins, he shall not be subjected to tax under
  sub-rule (2). It was held by this Court that this rule inevitably brought
G about a discrimination in the quantum of tax because while the tanned
  hides and skins which were imported from outside the State and were
  sold within the State, were taxed at a higher rate, the hides and skins
  tanned within the State and sold within the State, are taxed at a lower
  rate by virtue of the proviso. It was, indeed, found that there was a
  substantial variation between thP prices of tanned and untanned
H goods. This Court pointed out that by virtue of the proviso, the tax on
          D.C. GURUVULU v. GOVT. OF. A.P. IMUKHARJI, J.l               427

the latter category was, in fact, on the purchase prico of the untanned
                                                                              A
hides and skins-though ostensibly the rate of tax under >ab-rule (2)
was the same Hence, the mischief of discrimination was brought
about by the proviso which said that if hides and skins are taxed within
the State at raw (untanned) stage, they shall not be taxed again at the
tanned stage. But in view of the facts involved in the instant case, we
are unable to accept that the principles of the said decision have any        B
scope of application to the facts of instant case. In the instant case the
tamarind purchased within the State and outside the State, are taxed at
the same rate. But the point of taxability has necessarily to be different
in both the cases. In case of tamarind purchased within the State i.e.
produced within the State, the tax is levied at the point of first pur-
chase, and i;: ~~~e of imported tamarind i.e. purchased outside the
State, the tax is levied at the point of first sale in the State.
                                                                              c
       It was contended by Mr. P. Rama Reddy, learned advocate for
the appellants, that tax in case of imported tamarind would be more
because its price will include freight charge and other State taxes.
Hence, it was submitted that the sales tax will also be more. That may        D
be so but it cannot be said to be the effect of what law has amended.
Tamarind will be imported only when it can be sold in the market here
at the same price as the tamarind produced within the State. Only
when after bearing the other State tax and freight charges, if it is able
to compete with the locally produced tamarind, it wiU normally be
imported from outside the State. If there is any difference in prices         E
because of market conditions and other factors, that cannot be said to
be due to discrimination prohibited by clause (a) of Art. 304 of the
Constitution. In order to ensure this, it would be necessary that
imported goods must always be taxed at a lower rate than the cor-
responding goods within the State because of freight and other
charges. That cannot be so. The High Court observed that tamarind is          F
an agricultural produce and that is why it was put in Second Schedule
i.e. to say, purchase point, but where it was imported and sold within
the State, there was no reason to tax it at the sak point. We.are of the
opinion that the High Court was right.

      It was contended on behalf of the appellants before the High            G
Court that imported tamarind which had suffered tax at the first sale
point, will again be taxed at the purchase point when purchased within
the State, which would amount to double taxation. Once the imported
tamarind is taxed at the first sale pomt under the First Scheduie, there is
no occas10n for taxing it over again at the sale point under the Second
Schedule. The idea of both the Schedules is to tax only at one point          H
     428         SUPREME COURT REPORTS                [1989] Supp. 2 S.C.R.

     though the point of taxability may be different under different
A    Schedules.

            Our attention was drawn on behalf of the appellants to a decision
     of this Court in Indian Cement Ltd. & Ors. v. State of Andhra Pradesh
     & 0 rs., 69 STC 305. There this Court was concerned with Andhra
B    Pradesh General Sales Tax Act. It appears that in exercise of its
     powers u/s 9( 1) of the Act, the State Government had passed a notifi-
     cation on January 27, 1987 reducing the rate of sales tax on sale of
     cement from 13. 75% to 4% in respect of .cement manufactured by
     cement factories situated in the State and sold to manufacturing units
     situated within the State for the purpose of manufacture of cement
     products such as cement sheets, asbestos sheets, cement flooring
c    stones, cement concrete pipes, cement water and sanitary fittings, con-
     crete poles etc. On the same day the State Govt. had passed another
     notification u/s 8(5) of the Central Sales Tax Act, 1956 reducing the
     rate ,of tax on inter-State sale of cement to 2% with or without Form C.
     On February 28, 1987 the State of Kamataka passed a similar notifka-
D    tion reducing the rate of tax on inter-State sale of cement from 15% to
     2 % . The petitioners, of whom some were manufacturers of cement
     having their manufacturing units in. Tamil Nadu and others, were
     stockists having places of business in the States of Karnataka, Kerala
     and Tamil Nadu, filed writ petitions before this Court challenging the
     validity of these notifications on the ground that these created trade
E    barriers and directly impinged upon the freedom of trade, commerce
     and intercourse provided for in Art. 301 of the Constitution of India. It
     was held that the variations in the rates of local and inter-State sales
     tax affected free trade and commerce and created a local preference,
     which was contrary to the scheme of Part XIII of the Constitution of
     India; and as such the notification were bad.
F
          This decision was rendered in the peculiar facts of that case.
    While the principle enunciated by the Court in the said .decision there
    can be no dispute that taxation was a deterrent in some cases, against
    free flow of trade, and as ·a result of favourable or unfavourable treat-
    ment by way of taxation, the course of flow of trade gets regulated
G either adversely or favourably, and that if the scheme of Part XIII
    guarantees has to be preserved in the national interest, it is imperative
    that the provisions of Art. 301 must be strictly complied with, we are of
    the opinion that the ratio of the said decision in the facts and circums-
    tances of this case would not be relevant. In our opinion, the provi-
    sions of the Constitution should be strictly complied with not only with
H . the letter but also with their spirit. Part XIII of the Constitution has to
.             D.C. GURUVULU v. GOVT. OF. A.P. [MUKHARJI, J.J

    be dealt with the other provisions of the Constitution. Our attention
                                                                         429

                                                                                A
    was drawn to the observatiohs of this Court in Mis Associated Tanners,
    Vizianagaram, A.P. v. C.T.O., Vizianagaram. A.P. & Ors., [1986] 2
    sec 479. It was reiterated there that the effect of an imposition of tax
    may work differently upon different dealers, namely, those who
    import goods and those who purchase the goods locally. That effect
    cannot be said to arise directly or as an immediate effect of the imposi-   B
    tion of tax. It cannot be said that there was any violation of clause (a)
    of Art. 304 of the Constitution.

          We are of the opinion that in the instant case the differencdn
    rates, if any, between the imported tamarind and locally prodllced
    tamarind is not as an immediate or direct result of the imposition of       c
    tax. The decision of this Court in Weston Electroniks & Anr. v. State of
    Gujarat & Anr., I 1988] 3 SCR 768 dealt, in our opinion, with an
    entirely different situation and for the purpose of the instant contro-
    versy, cannot be of any assistance.

          Mr. C. S.itaramiah, appearing for the respondents, drew our D
    attention to Rattan Lal & Co. & Anr. v. The Assessing Authority &
    Anr., I 1969] 2 SCR 544 wherein this Court had reiterated that when a
    taxing State is not imposing rates of tax on imported goods different
    from rates of tax on goods manufactured or produced, Art. 304 has no
     application. So long as the rate is the same Art. 304 is satisfied. In the
    instant case the tax is at the same rate and, hence, tax cannot be said to E
    be higher in the case of imported goods. When the rate is applied the
    resulting tax may be somewhat higher but that does not contravene the .
    equality contemplated by Art. 304 of the Constitution. In the facts and
    the circumstances of the case, there is no ground to complain about the
    breach of Art. 14 of the Constitution.
                                                                                F
          In the aforesaid view of the matter, we are of the opinion that the
    High Court was right in the view it took and this appeal must fail. The
    appeal is accordingly dismissed. In the facts and the circumstances of
    the case, however, we make no order as to costs.

    P.S.S.                                                Appeal dismissed.     G