VARALAKSHMI SILK HOUSE v. STATE OF KARNATAKA. — 1998 DIGILAW 301 (KAR)

ORDER V. K. SINGHAL, J. - The validity of entry 22 of Part "S" of the Second Schedule of the Karnataka Sales Tax Act, 1957 substituted by section 2(24) (xxi) of the Karnataka Taxation Laws (Amendment) Act, 1994 is challenged in this writ petition. The said entry has levied tax on raw silk and silk yarn imported from outside the country at 4 per cent. while entry 38-A in the Fifth Schedule of the Act has given exemption to all other raw silk and silk yarn. 2. The arguments of the learned counsel for the petitioner are that there is violation of the provisions of article 304(a) of the Constitution as the tax is sought to be levied on the imported goods alone. It is also stated that the free-flow of trade in the course of inter-State trade as well as intra-State trade is also affected by such levy and thus the provisions of article 301 of the Constitution are violated and the assent of the President has not been taken in the matter. It is also submitted that the levy is discriminatory inasmuch as the silk manufactured out of the country is subject to tax, whereas silk manufactured in India is not subjected to tax. 3. The learned counsel for the petitioner has relied on the decision in Atiabari Tea Co. Ltd. v. State of Assam AIR 1961 SC 232 more particularly the following observations : "It is in the background of these facts and circumstances that we have to determine the ambit of the freedom contemplated by article 301. That article envisages freedom of trade and commerce with reference to different parts of India as also freedom of movement of individuals in relation to their trade and other activities. That article envisages freedom of trade and commerce with reference to different parts of India as also freedom of movement of individuals in relation to their trade and other activities. Hence, article 301 has reference not only to trade and commerce, as ordinarily understood in common parlance, but also in relation to individuals who have to move with their goods and commodities throughout the length and breadth of the country." It was further observed : "The provision contained in article 301 guaranteeing the freedom of trade, commerce and intercourse is not a declaration of a mere platitude, or the expression of a pious hope of a declaratory character; it is not also a mere statement of a directive principle of State policy; it embodies and enshrines a principle of paramount importance that the economic unity of the country will provide the main sustaining force for the stability and progress of the political and cultural unity of the country. ............. If the words used in article 301 receive the widest interpretation as contended by the appellants it would obviously mean that the State Legislatures would not be able to legislate on several entries in the said lists without adopting the procedure prescribed by article 304(b). In fact it would be unreasonable to impose such a limitation on the legislative power of the State Legislatures and thereby affect their freedom of action. Whilst appreciating this argument it may be pertinent to observe that what appears as a curtailment of, or limitation on, the powers of the State Legislatures prescribed by article 304(b) may, from the point of view of national economy, be characterised as a safeguard deliberately evolved to protect the economic unity of the country; even so it may be assumed that in interpreting the provisions of article 301 and determining the scope and effect of Part XIII we should bear in mind the effect of our decision in the legislative power of the States and also of Parliament. Having thus referred to some general considerations let us now proceed to examine the question as to whether tax laws are wholly outside the purview of Part XIII. Having thus referred to some general considerations let us now proceed to examine the question as to whether tax laws are wholly outside the purview of Part XIII. In support of the argument that Part XIII does not apply to tax laws the learned Attomey-General has emphasised the fact that the power to levy a tax is an essential part of sovereignty itself, and he has suggested that this power is not subject to judicial review and never has been held to be so. In this connection he has invited our attention to the observations made in Cooley's 'Constitutional Limitations' on the power of taxation. 'The power to impose taxes', says the author, 'is one so unlimited in force and so searching in extent, that the courts scarcely venture to declare that it is subject to any restriction whatever, except such as rest in the discretion of the authority which exercises it' (Cooley's 'Constitutional Limitations', Vol. 2, 8th Ed., P. 986). The author then has cited the observations of Marshall, C.J., in McCullock v. Maryland (1879) 4 Wheat 316 at p. 428 : 4 Law Ed 579 at p. 607 where the learned Chief Justice has stated that : 'the power of taxing the people and their property is essential to the very existence of the Government, and may be legitimately exercised on the objects to which it is applicable to the utmost extent to which the Government may choose to carry it. The only security against the abuse of this power is found in the structure of the Government itself." Basing himself on this character of the taxing power of the State the learned Attorney-General has asked us to hold that Part XIII can have no application to any statute imposing a tax. In our opinion this contention is not well founded. The only security against the abuse of this power is found in the structure of the Government itself." Basing himself on this character of the taxing power of the State the learned Attorney-General has asked us to hold that Part XIII can have no application to any statute imposing a tax. In our opinion this contention is not well founded. The statement of the law on which reliance has been placed is itself expressed to be subject to the relevant provisions of the Constitution; for instance, the same author has observed : 'It is also believed that that provision in the Constitution of the United States which declares that the citizens of each State shall be entitled to all the privileges and immunities of the citizens of the several States will preclude any State from imposing upon the property which citizens of other States may own, or the business which they may carry on within its limits, any higher burdens by way of taxation than are imposed upon corresponding property or business of its own citizens' (p. 1016). Putting the same propositions in terms of our Constitution it cannot be suggested that the power of taxation can, for instance, violate the equality before the law guaranteed by article 14 of the Constitution. Therefore the true position appears to be that, though the power of levying tax is essential for the very existence of the Government, its exercise must inevitably be controlled by the constitutional provisions made in that behalf. It cannot be said that the power of taxation per se is outside the purview of any constitutional limitations." It was further observed : "On the other hand, the opening words of article 301 are very significant. The doctrine of the freedom of trade, commerce and intercourse enunciated by article 301 is not subject to the other provisions of the Constitution but is made subject only to the other provisions of Part XIII; that means that once the width and amplitude of the freedom enshrined in article 301 are determined they cannot be controlled by any provision outside Part XIII. This position incidentally brings out in bold relief the important part which the Constitution makers wanted the doctrine of freedom of trade to play in the future of the country. This position incidentally brings out in bold relief the important part which the Constitution makers wanted the doctrine of freedom of trade to play in the future of the country. It is obvious that whatever may be the content of the said freedom it is not intended to be an absolute freedom; absolute freedom in matters of trade, commerce and intercourse would lead to economic confusion, if not chaos and anarchy; and so the freedom guaranteed by article 30i is made subject to the exceptions provided by the other articles in Part XIII. The freedom guaranteed is limited in the manner specified by the said articles but it is not limited by any other provisions of the Constitution outside Part XIII. That is why it seems to us that article 301, read in its proper context and subject to the limitations prescribed by the other relevant articles in Part XIII, must be regarded as imposing a constitutional limitation on the legislative power of Parliament and the Legislatures of the States. What entries in the legislative lists will attract the provisions of article 301 is another matter; that will depend upon the content of the freedom guaranteed; but wherever it is held that article 301 applies, the legislative competence of the Legislature in question will have to be judged in the light of the relevant articles of Part XIII; this position appears to us to be inescapable." Following observations of para 43 are also relied on : "That takes us to the question as to whether article 301 operates only in respect of the entries relating to trade and commerce already specified. Before answering this question it would be necessary to examine the scheme of Part XIII, and construe the relevant articles in it. It is clear that article 301 applies not only to inter-State trade, commerce and intercourse but also intra-State trade, commerce and intercourse. The words 'throughout the territory of India' clearly indicate that trade and commerce whose freedom is guaranteed has to move freely also from one place to another in the same State. This conclusion is further supported by articles 302 and 304(b) as we will presently point out. The words 'throughout the territory of India' clearly indicate that trade and commerce whose freedom is guaranteed has to move freely also from one place to another in the same State. This conclusion is further supported by articles 302 and 304(b) as we will presently point out. There is no doubt that the sweep of the concept of trade, commerce and intercourse is very wide; but in the present case we are concerned with trade, and so we will leave out of consideration commerce and intercourse. Even as to trade it is really not necessary to discuss or determine what trade exactly means; for it is common ground that the activity carried on by the appellants amounts to trade, and it is not disputed that transport of goods or merchandise from one place to another is so essential to trade that it can be regarded as its integral part. Stated briefly trade even in a narrow sense would include all activities in relation to buying and selling, or the interchange or exchange of commodities and that movement from place to place is the very soul of such trading activities. When article 301 refers to the freedom of trade it is necessary to enquire what freedom means. Freedom from what ? Is the obvious question which falls to be determined in the context. At this stage we would content ourselves with the statement that the freedom of trade guaranteed by article 301 is freedom from all restrictions except those which are provided by the other articles in Part XIII. What these 5-112-13 restrictions denote may raise a larger issue, but in the present case we will confine our decision to that aspect of the matter which arises from the provisions of the Act under scrutiny. It is hardly necessary to emphasise that in dealing with constitutional questions courts should be slow to embark upon an unnecessarily wide or general enquiry and should confine their decision as far as may be reasonably practicable within the narrow limits of the controversy arising between the parties in the particular case. We will come back again to article 301 after examining the other articles in Part XIII. ............ We will come back again to article 301 after examining the other articles in Part XIII. ............ Thus considered we think it would be reasonable and proper to hold that restrictions freedom from which is guaranteed by article 301, would be such restrictions as directly and immediately restrict or impede the free-flow or movement of trade. Taxes may and do amount to restrictions; but it is only such taxes as directly and immediately restrict trade that would fall within the purview of article 301. The argument that all taxes should be governed by article 301 whether or not their impact on trade is immediate or mediate, direct or remote, adopts, in our opinion, an extreme approach which cannot be upheld. If the said argument is accepted it would mean, for instance, that even a legislative enactment prescribing the minimum wages to industrial employees may fall under Part XIII because in an economic sense an additional wage bill may indirectly affect trade or commerce. We are, therefore, satisfied that in determining the limits of the width and amplitude of the freedom guaranteed by article 301 a rational and workable test to apply would be : Does the impugned restriction operate directly or immediately on trade or its movement ? It is in the light of this test that we propose to examine the validity of the Act under scrutiny in the present proceedings." Reliance is also placed on the following observations : The Supreme Court (a Constitution Bench) in the case of Firm A. T. B. Mehtab Majid & Co. v. State of Madras [1963] 14 STC 355; AIR 1963 SC 928 while dealing with articles 301 and 304(a) of the Constitution of India observed : "It is well-settled that taxing laws can be restrictions on trade, commerce and intercourse, if they hamper the flow of trade and if they are not what can be termed to be compensatory taxes or regulatory measures. Sales tax on the import of tanned or untanned hides or skins cannot be said to be a measure regulating any trade or a compensatory tax levied for the use of trading facilities. Sales tax, which has the effect of discriminating between goods of one State and goods of another, may affect the free-flow of trade and it will then offend against article 301 and will be valid only if it comes within the terms of article 304(a). Sales tax, which has the effect of discriminating between goods of one State and goods of another, may affect the free-flow of trade and it will then offend against article 301 and will be valid only if it comes within the terms of article 304(a). AIR 1961 SC 232 and AIR 1962 SC 1406 , relied on. Article 304(a) enables the Legislature of a State to make laws affecting trade, commerce and intercourse. It enables the imposition of taxes on goods from other States if similar goods in the State are subjected to similar taxes, so as not to discriminate between the goods manufactured or produced in that State and the goods which are imported from other States. This means that if the effect of the sales tax on tanned hides or skins imported from outside is that the latter becomes subject to a higher tax by the application of the proviso to sub-rule (2) of rule 16 of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, then the tax is discriminatory and unconstitutional and must be struck down. The contention that article 304(a) is attracted only when the impost is at the border, i.e., when the goods enter the State on crossing the border of the State, is not sound. Article 304(a) allows the Legislature of a State to impose taxes on goods imported from other States and does not support the contention that the imposition must be at the point of entry only. ............. sub-rule (1) of rule 16 of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, deals with the sale of raw hides and skins. The tax is levied from the dealer who is the last purchaser in the State. Clause. (i) of sub-rule (2) provides for the levying of tax on the sale of hides and skins which had been tanned outside the State. The tax is levied from the dealer who, in the State, is the first seller of such hides or skins. Clause (ii) of this sub-rule is in identical terms with respect to the sale of tanned hides or skins which have been tanned within the State. The tax is to be levied from the person who is the first dealer in such hides or skins and is levied on the amount for which they are sold. Clause (ii) of this sub-rule is in identical terms with respect to the sale of tanned hides or skins which have been tanned within the State. The tax is to be levied from the person who is the first dealer in such hides or skins and is levied on the amount for which they are sold. The discrimination comes in on account of the proviso to this sub-clause (ii). If the quantum of tax had been the same, there might have been no case for grievance by the dealer of the tanned hides and skins which had been tanned outside the State. The grievance arises on account of the amount of tax levied being different on account of the existence of a substantial disparity in the price of the raw hides or skins and of those hides or skins after they had been tanned, though the rate is the same under section 3(1) (b) of the Act. If the dealer has purchased the raw hide or skin in the State, he does not pay on the sale price of the tanned hides or skins; he pays on the purchase price only. If the dealer purchases raw hides or skins from outside the State and tans them within the State, he will be liable to pay sales tax on the sale price of the tanned hides or skins. He too will have to pay more for tax even though the hides and skins are tanned within the State, merely on account of his having imported the hides and skins from outside, and having not therefore paid any tax under sub-rule (1). The mere circumstance of a tax having been paid on the sale of such hides or skins in their raw condition does not justify their forming goods of a different kind from the tanned hides or skins which had been imported from outside. At the time of sale of those hides or skins in the tanned state, there is no difference between them as goods and the hides or skins tanned outside the State as goods. The similarity contemplated by article 304(a) is in the nature of the quality and kind of the goods and not with respect to whether they were subject of a tax already or not. The similarity contemplated by article 304(a) is in the nature of the quality and kind of the goods and not with respect to whether they were subject of a tax already or not. The provisions of rule 16(2) thus discriminate against the imported hides or skins which had been purchased or tanned outside the State and therefore they contravene the provisions of article 304(a) of the Constitution." 4. The decision in the State of Mysore v. H. Sanjeeviah AIR 1967 SC 1189 is also relied which reads thus : "Article 304 which is an exception to article 301 has no application to provisos to rule 2 of the Rules framed under section 37 of the Mysore Forest Act (11 of 1900) for regulating transit of timber, firewood, etc., because that article saves certain laws from the operation of article 301 if the law is passed by the Legislature of a State. The provisos to rule 2 are not made by the Legislature of the State; they are made by the executive Government in exercise of delegated authority. The rules have the force of law, but when made did not become part of the Act : (see section 77 of the Mysore Forest Act). Again article 304(b) exempts from the operation of article 301 reasonable restrictions on the freedom of trade, commerce and intercourse with or within the State as may be required in the public interest but for this case is to be made out that they are reasonable restrictions on the freedom of trade, commerce and intercourse imposed in the public interest. Article 301 in terms prohibits the imposition of any restriction on trade, commerce and intercourse throughout the territory of India, and by the enactment of the two provisos clearly a restriction is imposed upon the freedom of trade. The provisos to the rule enacted by the State Government must, therefore, be deemed to be invalid as infringing the guarantee under article 301 on the freedom of trade, commerce and intercourse." 5. The provisos to the rule enacted by the State Government must, therefore, be deemed to be invalid as infringing the guarantee under article 301 on the freedom of trade, commerce and intercourse." 5. Much reliance is placed on the decision of Kalyani Stores v. State of Orissa AIR 1966 SC 1686 reads thus : "Article 304 is in terms prospective : it authorises the State Government to legislate notwithstanding anything in article 301 or 303 to impose on goods imported from other States any tax to which similar goods manufactured or produced in that State are subject, so, however, as not to discriminate between imported and goods manufactured or produced or to impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest. The notification levying duty at the enhanced rate is purely a fiscal measure and cannot be said to be a reasonable restriction on the freedom of trade in the public interest. Article 301 has declared freedom of trade, commerce and intercourse throughout the territory of India, and restriction on that freedom may only be justified if it falls within article 304. Reasonableness of the restriction would have to be adjudged in the light of the purpose for which the restriction is imposed, that is, 'as may be required in the public interest'. Without entering upon an exhaustive categorization of what may be deemed 'required in the public interest', it may be said that restrictions which may validly be imposed under article 304(b) are those which seek to protect public heart safety, morals and property within the territory. Exercise of the power under article 304(a) can only be effective if the tax or duty imposed on goods imported from other States and the tax or duty imposed on similar goods manufactured or produced in that State are such that there is no discrimination against imported goods. As no foreign liquor is produced or manufactured in the State of Orissa the power to legislate given by article 304 is not available and the restriction which is declared on the freedom of trade, commerce or intercourse by article 304 of the Constitution remains unfettered." 6. As no foreign liquor is produced or manufactured in the State of Orissa the power to legislate given by article 304 is not available and the restriction which is declared on the freedom of trade, commerce or intercourse by article 304 of the Constitution remains unfettered." 6. The decision of this Court in the case of Jyothi Home Industries v. State of Karnataka [1987] 64 STC 254 (App), is also relied upon wherein it was observed : "The statute in question is a taxing statute. Taxation laws are not outside Part XIII of the Constitution. The words of article 301, are so wide and unambiguous that a taxing law which impedes the free-flow of trade and commerce clearly falls within it." At paragraph No. 72, it was observed thus : "So far as the contention that the freedom under article 301 is from the point of view of trade and commerce as a whole and not from the individual point of view, it is necessary to recall what Supreme Court said in Automobile Transport (Rajasthan) Ltd. v. Slate of Rajasthan AIR 1962 SC 1406 : '.................. Another distinction which has been drawn is that article 19 looks at the right from the point of view of an individual, whereas article 301 looks at the matter from the point of view of freedom of the general volume of trade, commerce and intercourse. We do not think that this distinction, if any such distinction at all exists, is material in the present cases, because an individual trader may complain of a violation of his freedom guaranteed under article 19(1) (g) and he may also complain if the freedom assured by article 301 has been violated. In a particular set of circumstances the two freedoms need not be the same or need not coalesce. In some of the Australian decisions a distinction was sought to be drawn between the free-flow of the same volume of inter-State trade and the individual's right to carry on his trade in more than one State and it was argued that section 92 of the Australian Constitution related to the free-flow of the volume of trade as distinguished from an individual's right to carry on his trade. Such a distinction was negatived and the Privy Council pointed out that the redoubtable Mr. Such a distinction was negatived and the Privy Council pointed out that the redoubtable Mr. James who fought many a battle for the freedom of his trade and occupation was after all an individual .............." Following observations in Syed Ahmed Aga v. State of Mysore AIR 1975 SC 1443 is also relied : "'............. No doubt the restrictions contemplated by article 304(b) may be of a character different from those on an individual citizen's rights to trade but it cannot be denied that their impact on individual rights if often very direct .......' It appears that if the imposition of this tax, which affects the movement of goods in the course of inter-State or intra-State commerce, on three items of goods and in a specifically defined 'local area' constitutes - as indeed it has been held to - a restriction on the freedom of trade and commerce from the special point of view of article 301, then, logically, the imposition of the tax in other areas not originally defined and on a number of new and different items would constitute additional restrictions also within the special meaning of article 301. '.......... It is only an additional "restriction" from the special point of view of article 304(b) which requires Presidential sanction'. (vide para 24). The Schedule to the principal Act did not contain a residuary entry, to the effect the State could bring to tax such other goods as it may from time to time notify. In regard to the 'local area' also the principal Act did not confer power on the State Government to extend the provisions of the law to such other local areas as the Government may notify from time to time. We cannot accept Sri Achar's contention that the earlier Presidential assent is some kind of a blanket sanction enabling the expansion of the scope of the restrictions, and the inclusion of new or additional 13 items in its Schedule. The position might have been different if the principal Act had so defined the expression 'local area' as to include such other areas as the State Government may notify from time to time and the Schedule had contained a residuary generic entry. ................. ........ The position might have been different if the principal Act had so defined the expression 'local area' as to include such other areas as the State Government may notify from time to time and the Schedule had contained a residuary generic entry. ................. ........ We are, therefore, of the opinion that provisions of section 7(1) (a) and 7(15) of the amending Act 13 of 1982 impose additional restrictions on the freedom of trade and commerce under article 301 and even if these additional restrictions can be held to be reasonable and in public interest the legislative measure would attract and require compliance with article 304(b). .................. Accordingly, our conclusions on point No. (xiv) are : (a) that the amendment to section 2(5) of the principal Act brought about by section 7(1) (a) of the amending Act 13 of 1982, and the introduction of 13 new items to the Schedule to the principal Act by section 7(15) of the amending Act 13 of 1982 impose additional restrictions on the freedom conferred by article 301 of the Constitution; (b) that those additional restrictions are reasonable and in public interest; (c) that the legislative measure imposing the additional restrictions, viz., section 7(1) (a) of the amending Act 13 of 1982 required compliance with proviso to article 304(b) or article 255 of the Constitution; (d) that there having been no such compliance with article 304(b) of the Constitution and the provisions of section 7(1) (a) and 7(15) of the amending Act 13 of 1982 are unenforceable until such compliance is shown." 7. The various contentions raised by the petitioner are summarised and discussed as under : (1) Whether the provisions of section 2(24) (xxi) of the Karnataka Taxation Laws (Amendment) Act, 1994 inserting entry 38-A in the Fifth Schedule of the Act giving exemption to the indigenous raw silk and silk yarn imported from outside the country at the rate of 4 per cent. is discriminatory and violative of article 14 of the Constitution of India. Article 14 of the Constitution of India provided that the State shall not deny to any person equality before the law or the equal protection of laws within the territory of India. It may be observed that differential treatment per se is not violative of article 14 if there is a reasonable basis for differentiation. The provisions of article 14 are applicable to taxation law as well. It may be observed that differential treatment per se is not violative of article 14 if there is a reasonable basis for differentiation. The provisions of article 14 are applicable to taxation law as well. The only thing which has to be seen whether there is a reasonable basis for such a classification or that the Act of the State to cause such a discrimination is with a deliberate intention causing discrimination. Greater latitude has to be given to the Legislature in the matter of classification. The statute may divide the object of tax into groups or categories so that equality and unity is retained in each of such group. Even in the matter of exemption or the rate of tax, the policy could be there to make different classification in a group. The Legislature is free with regard to the choice of articles which are to be taxed or the rate of tax or in granting the exemption to different categories of persons, transactions or object. The wide discretion for classification for tax purposes is the prerogative of the Legislature. The tax which is to be levied on raw silk and silk yarn which is imported from outside the country constitute a different class than the locally manufactured such commodities. There is no hostile discrimination or a deliberate intention to create discrimination. Exemption to the locally indigenous manufactured items is with the object to protect the local industries of the country. The legislation cannot be considered arbitrary or suffering from the vice of article 14 of the Constitution. The classification is reasonable. This contention has no force. (2) Whether the above provision of law is violative of article 301 of the Constitution of India which imposes a limitation upon the exercise of legislative power in respect of free trade, commerce and intercourse throughout the territory of India. This article of the Constitution provides the freedom of trade not only in the inter-State but also intra-State movement. Tax laws are within the purview of this article, but it is only those taxes which directly and immediately restrict the trade which can be considered differential against this article. This article of the Constitution provides the freedom of trade not only in the inter-State but also intra-State movement. Tax laws are within the purview of this article, but it is only those taxes which directly and immediately restrict the trade which can be considered differential against this article. If the levy of tax does not affect the movement of the goods then it cannot be considered to be violative of article 301 of the Constitution; discriminating the goods of one State with the other will offend the provisions of article 301 of the Constitution unless it is saved by article 304(a) of the Constitution. The State cannot levy tax on the goods imported from other States higher than the tax levied on similar goods manufactured in that State. Levy of tax excessive or prohibition rates unpaid the very flow of trade unless it is by way of regulatory measure or is compensatory in nature. This article of the Constitution guaranteeing the freedom of trade, commerce or intercourse is for the economic unity of the country for stability and progress of political and cultural unity of the country. The various decisions relied upon by the learned counsel for the petitioner on this point are not applicable because they were not in respect of goods imported from foreign countries or movement of such goods from foreign country to India or after importation from foreign country their movement in different States of India. So far as the raw silk and silk yarn imported from other States is concerned, or even movement in this State, i.e., in the course of inter-State trade or commerce or intra-State or by way of transfer from other State it is equally treated. Imported raw silk and silk yarn have been considered to be a separate category than the indigenous manufactured raw silk and silk yarn. There is no notification prohibiting the movement of the goods. The tax which has been levied on the imported material cannot be considered as affecting the free-flow of trade or the guarantee which has been given in the Constitution of India for free movement from one place to other in the same State or in inter-State trade or commerce; it does not directly and immediately restrict or impede the free-flow or movement of trade. The levy, therefore, cannot be considered as violative of article 301 of the Constitution of India for even requiring the assent of the President of India for such legislation. (3) The main argument which is being raised is that the levy of tax on the imported raw silk and silk yarn is violative of article 304 of the Constitution of India. Article 304 has placed restrictions on the power of Legislature of a State not to impose on goods imported from other State or the Union territories any tax which similar goods manufactured or produced in that State are subject, so however as not to discriminate between the goods so imported and goods so manufactured and/are produced. Article 304(b) of the Constitution has contemplated reasonable restrictions on the freedom of trade, commerce or intercourse in or within the State as may be required in the public interest. This restriction could be by moving the bill or amendment with the previous sanction of the President. This article 304 has placed restriction for creating the discrimination between the goods which are imported from other State and the goods locally manufactured. The word "imported" has to be interpreted as import from other State of the country and this import has no connection with the import from foreign countries. If there is exemption with the locally manufacturing goods and the tax on the goods manufactured in the other State or the rate of tax of the goods imported from other States is more than the locally manufactured goods then it may be hit by the provisions of article 304(a) of the Constitution of India. Exemption to the locally manufactured goods in under-developed areas could be the exception to the general rule; while examining the discrimination, it is immaterial whether the goods are actually manufactured or produced in that State or not. But casting a higher burden of tax on the goods which are manufactured and produced in other State is directly hit by this provision. Article 304(a) of the Constitution enables the imposition of tax on goods from other States if similar goods in the State are subjected to similar tax so as not to discriminate between the goods manufactured or produced in that State and the goods which are imported from other States. Article 304(a) of the Constitution enables the imposition of tax on goods from other States if similar goods in the State are subjected to similar tax so as not to discriminate between the goods manufactured or produced in that State and the goods which are imported from other States. The similarity contemplated under article 304(a) is in the nature of the quality and kind of goods and not with respect to whether they were subjected to tax already or not. In public interest reasonable restrictions could be imposed. The various judgments including the judgment in the case of Kalyani Stores AIR 1966 SC 1686 has no application to the facts of the present case because the discrimination there was between the goods manufactured in the State and those imported from other States. Those were not the cases where the goods were imported from foreign countries. No protection under the Constitution of India is given of similar treatment to the goods which are imported from foreign countries, that they have to be kept at par with those goods manufactured in the country and thus there is no violation of article 304 of the Constitution of India. This contention has also no force. The writ petition is accordingly dismissed with no costs. Writ petition dismissed.