Madras High Court: Bar On Levying Of Differential Rates Under Article 304 Constitution Not Applicable To Goods Imported From Other Countries

The Madras High Court has held that restriction on imposition of differential rates under Article 304 of the Constitution of India doesn't apply to goods imported from other countries.

The Court was considering an Appeal filed under Clause 15 of the Letters Patent against the dismissal of Writ Petition filed claiming that on goods imported by him, tax cannot be levied at a differential rates.

The division bench of Chief Justice K.R. Shriram and Justice Mohammed Shaffiq observed, "Article 304 of the Constitution of India is of no help because that applies only to goods imported from other States or Union Territories and not to goods imported from outside India."

The Appellant was represented by Advocate V. Sundareswaran while the Respondent was represented by Additional Advocate General Haja Nazurudeen.

Facts of the Case

Appellant, a dealer in Calcutta, registered with the Commercial Tax Officer stated that it has been importing from the Kingdom of Bhutan food products like Sherbet, which falls under Part B, Item 4(vi) of the First Schedule and do not fall under Parts D and E of the First Schedule, along with other goods such as mixed fruit juice, orange juice, etc.

Counsel for the Appellant submitted that the goods are imported free of duty as per the agreement on Trade and Commerce between the Government of Kingdom of Bhutan and the Government of the Republic of India. He submitted that the Appellant would fall under Section 3(2-C) of the Tamil Nadu General Sales Tax (Seventh Amendment) Act, 2002 and the goods are covered by the Eleventh Schedule, Serial No.9 of which provides that for imported cigarettes, medium density fibre boards, textiles and other items falling in Parts D and E of the First Schedule, at the point of first sale, tax at the rate of 20% is levied

The Counsel submitted that so far as non-imported goods covered under Eleventh Schedule, Parts D and E of the First Schedule are concerned, tax at the rate of 12% or 16% is levied at the point of first sale which is discrimination because imported goods tax at the rate of 20% is levied, whereas for local goods tax at the rate of 12% or 16% is levied and Appellant is deprived of a level playing field. He submitted that in view of Article-I read with Article-V of the said Trade agreement, for goods imported by Appellant, tax cannot be levied at a differential rate.

Reasoning By Court

The Court at the outset observed that the Appellant's submission relying on Article-V that the goods include sale of lottery also, itself falls flat for being non-applicable at all to the case at hand.

Analyzing the Supreme Court's judgement in State of Kerala and others v. Fr. William Fernandez and other, the Court stated that the goods imported after having been released from customs barriers are not immune from any kind of State taxation and the States are free to levy taxes on goods imported into the State.

It further rejected the Counsel for Appellant's reliance upon Article 304 of the Constitution of India to suggest that this kind of differential rates cannot be levied.

The Appeal was accordingly rejected.

Cause Title: Tai Industries Ltd. vs. The State of Tamil Nadu

Appearances:

Appellant- Advocate V. Sundareswaran

Respondent- Additional Advocate General Haja Nazurudeen, Additional Advocate General TNC Kaushik, Advocate G.Babu

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